PostNL N.V. (PNL) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for holding, and welcome to PostNL Q4 2020 Analyst Call. [Operator Instructions] I would like to hand over the conference to Mr. Jochem van de Laarschot. Go ahead, please.

Thank you, operator. Good morning, everyone. Thank you for joining us this morning. With me here in the room, Herna Verhagen, our CEO; and Pim Berendsen, our CFO. As usual, we will start with our presentation going through the slides that are available on our website, and after that, we will open up for Q&A. Herna, over to you.

Thanks a lot. And we'll start on Slide #2, where we have an overview of what we will do today. Of course, we will dive into the details of 2020, business performance as well as financial performance, then step over to PostNL strategy. Part of the strategy is very well-known because it's our Parcel and Mail strategy, but we will add today, of course, our digital transformation and the medium-term financial objectives that belong to that digital transformation. And last but not least, we will give you a view on 2021, our capital allocation outlook and some concluding remarks. So stay with us. And we'll start with the key takeaways, and that's on Slide #4. I think we've said it already quite some times, but 2020 was an exceptional year in unprecedented circumstances. We took lots of measures to keep our people safe and healthy. We changed part of our operation chain. We used, of course, lots of plastic screens, hand gels, et cetera, et cetera to keep our people safe and healthy, to keep our customers healthy. And we were able, of course, to have a strong post and parcel network over the full year. That have led to lots of positive improvements in employee satisfaction, in customer satisfaction, in the amount of volume we distributed. And as you already have seen, a very Q4 results -- very strong Q4 results and an improved financial position, which will help us in our acceleration in 2021. If we move then to Slide #5, tell you something about the financial highlights. We had an extremely busy Q4, which accelerated the strong performance we already saw in the first 3 quarters, and therefore, significantly outperformed our earnings and cash flow guidance. The exceptional performance in the last weeks of the year was mainly driven by Mail in the Netherlands, and that was because of the fact that we had much more Christmas cards than expected. As you can see on this slide, we overperformed in revenue, 14% revenue up compared to 2019. Normalized EBIT, we came in at 2.45%, which is 81.4% more than the year before. Free cash flow, EUR 186 million, which is 73% more. And of course, normalized comprehensive income, which is EUR 197 million with a proposed dividend of EUR 0.28. And that needs to be approved, of course, at our AGM in April. Very strong operational performance, leading to a very strong improvement in our financial position, and earlier than expected, a reinstatement of our dividend. A little bit more of the details of the full year normalized EBIT are on Slide #6. Out of the EUR 245 million, we do think that EUR 55 million is nonrecurring, a result driven by COVID-19. EUR 40 million of that is in Parcels and EUR 15 million of that is in Mail in the Netherlands. The flexible infrastructure we have in Parcel, the ability we had, of course, in arranging extra capacity, showed the robustness of our business model, but also gave us the opportunity to deliver 337 million parcels in 2020. The EUR 40 million in normalized EBIT relates to 25 million parcels, which we do think are COVID related. And then you should think of stuff which is ordered because people needed to work at home, people want to do sport at home, do their fitness at home, et cetera, et cetera. Parcels we do not expect to see again in 2021. Secondly, we did see a very favorable price/mix effect within Parcel, which is partly due to the fact that also lots of smaller shops started a web shop. And they started, of course, to send parcels as well. Within Mail in the Netherlands, overall, of course, a decline in volume, 9.6%, with the fact that we had much more greeting cards and other single items, and therefore, also a favorable price/mix effect. The costs which are related, of course, to rewarding our people and people working for our sorting and delivery partners is EUR 15 million. And that means that we had a very good financial year as PostNL, but we also, of course, made sure that the people working for us and with us had a possibility to take opportunity of that as well with a payment of EUR 15 million. We did good financially, and we also did good nonfinancially, and that's what you find on Slide #7. The amount of parcels and mail delivered emission-free is from 9 -- developed from 19% to 20%. The engagement under our employees saw an increase. We saw an increase from 76% to 84%, and that, in a year in which we had to take lots of measures to keep our people safe and healthy. Also the amount of highly satisfied customers increased to 37%, something which we are proud upon. And it had a positive impact on our reputation. It, of course, increased from 67% to 73.9%, which is, in the Netherlands, a very high reputation score. Fortunately, it was not only the nonfinancial scores that did well. We also saw a significant positive development in our digitization, and that's what you find on Slide #8. Important, of course, for our Digital Next program, which we will come to in a minute, we did see the growth in online visitors. 779 million visits in the year 2020, which is 62% more than the year before. And 60% of that was realized via our app. The amount -- the PostNL accounts on the app increased to 6 million. And by the end of February, were already higher than 6 million, which means that it keeps to be very interesting for consumers to have a download of that app, to follow your parcel and your mail items. We did sell much more stamp codes, which partly, of course, had to do with the popularity of sending cards, but also, of course, the ease of using a stamp code, 118% increase from '19 to '20. And what we talked about earlier is the fact that we introduced our chatbot Daan. We saw an increase in the amount of chat with Daan of 70%. That helps us in our efficiency, but it also helps customer satisfaction because the easy answers, which can be answered by chatbot Daan, do receive a higher customer satisfaction. And by this time, we already introduced [ Sam ], which is our chatbot in Belgium. And we introduced [ Nor ], which is our chatbot for our business customers. So it's a successful formula for us, which helps us to increase efficiency and increase customer satisfaction. To give you a few more details on Mail and Parcels, and to start with Parcels, I would like to move to Slide #10. In Parcels, the growth in Q4 was 29.6%, and we were able with the flexible infrastructure we have to further increase capacity also in the fourth quarter. It meant that we had a network which worked on almost maximum capacity. And that helped, of course, in efficiency, and therefore also helped in realizing the normalized EBIT we, in the end, realized. That, together with a positive price/mix effect, which is partly because of yield management, and that is what we have presented at Capital Markets Day in 2019, together with the fact that small and medium web shops grow faster, and therefore, of course, delivered parcels to us as well. It was not only our parcel network in the Netherlands, but also Logistics and Spring, who had a very good Q4 and a good year, which contributed to the results of Parcels. The results of Parcels in the first -- in the fourth quarter were EUR 75 million, which is significantly higher than the year before, and over the full year, EUR 209 million. And that delivered a margin of 10.2%. If you look into Parcels, it was an unprecedented year in which we were able to extend capacity in our existing network, which helped us in our efficiency and which also helped us to maintain a good working parcel network in the Netherlands, delivering 337 million parcels in the year 2020. Also, Mail Netherlands, and that's what you find on Slide 11, had an exceptionally strong performance in the fourth quarter, mainly caused by more greeting cards and other single mail items. That increased in the fourth quarter, their normalized EBIT from EUR 15 million last year to EUR 82 million this year. And over full year, they realized EUR 96 million of normalized EBIT, which gives a margin of 5.6%. Important to highlight is that the underlying volume decline is 9.6%. Although we had an almost flat Q4, we do see that business mail is still, of course, substituted, and therefore, the 9.6% of volume decline over the full year. That also, I think, makes clear that cost savings, going forward, together with moderate price increases remain to be important. What helped us is the consolidation with Sandd. It added almost 30% of volume, and it added, of course, lots of efficiencies. And we will come to what we delivered in synergies, but the synergy effect, which came out of the acquisition of Sandd, and the integration of Sandd, which was already finalized February 1, 2020, helped us in, of course, reaching the normalized EBIT we have reached over 2020. In Q4, we did not have any nonrecurring costs anymore out of the integration of Sandd. I hand over to Pim.

Yes. Let's look at a little bit more detail to our financial performance in Q4 and full year 2020. And I'll start with Slide #13. There, you'll find in the same format, as we quite frequently update you on the performance of the segments, the bridge for Parcels. And that is a normalized EBIT for the fourth quarter of EUR 75 million, which is EUR 34 million more in comparison to Q4 2019, obviously, driven by a volume effect of 29.6%. Herna talked about the yield measures and the positive mix effect with -- throughout our customer base, that contributed EUR 17 million to it. Organic cost increases on the back of CLA increases and indexation to subcontractors take out EUR 6 million. And we've run the network in a very efficient way, so the only -- the volume-dependent cost deduct EUR 67 million. Other costs, there, you also have -- we've included there the additional payments, for instance, to retail stores that are above and beyond the normal compensation we've given them. We've paid to ensure that they were able to keep their stores open so that we could continue our delivery activities throughout these retail stores. Other results, EUR 14 million positive, which was on the back of the good results of Spring and Logistics. For your benefit, we've included the revenue mix per segment Parcels in a different way. That gives you a little bit more indication about the relative size of all the components within the Parcel segments. And as said, Spring and Logistics had a very, very good quarter as well. So on a like-for-like basis, the result for the Q4 numbers were EUR 78 million, and the difference was the impact of new labor regulation that we talked about very many times already. If we then move over to the Mail segment. You see the huge step-up in profit from EUR 15 million to EUR 82 million, which was driven, of course, in the fourth quarter, by the limited volume decline of 0.2%, but more importantly, on the back of the positive price mix, in fact, driven by the high demand of greeting cards that we distributed particularly in December. A key component in this EBIT bridge is the contribution of the consolidation and the integration with Sandd, within the quarter, EUR 21 million of net synergies included. If you look at full year number, the overall gross synergies amount to EUR 79 million. And then you have to deduct EUR 30 million of one-off restructuring costs, bringing the net impact for the year 2020 at EUR 49 million. And as you know, we've sold a part -- a few companies within the Mail segment, being print and unaddressed distribution activities. And that's why you see, in comparison to last year, a minus EUR 3 million in the Q4 bridge as well. Then let's move over to the cash flow. Again, a very strong performance on cash in the fourth quarter. From the normalized EBIT of EUR 140 million in the fourth quarter, we turned a corrected free cash flow of EUR 135 million. And of course, there are specials in the fourth quarter being the sale-leaseback transaction of EUR 148 million and the payment of the traditional transitional pension plans of EUR 200 million, bringing the free cash flow for the quarter at EUR 83 million. If you look at the several components that make the bridge from EBIT to cash flow, a few points. We saw a positive from working capital in the fourth quarter, which is an important point to take. CapEx, of course, increased in comparison to last year on the back of investments in IT as well as investments in capacity expansion in Parcels. And last year, there was a big change in provisions related to the restructuring provisions that we accrued for Sandd, which, obviously did not materialize again in the fourth quarter of this year. So all in all, a very strong performance on cash, not only in the fourth quarter, but for the entire year, which obviously helps necessarily to reduce our net debt position, which on the back of the December 31, 2020, balance sheet, is at EUR 407 million of adjusted net debt. The invested capital we currently deploy is roughly EUR 1.3 billion. And if you then calculate a return on invested capital, then we've achieved 17.2%, which is clearly a lot more than our weighted average cost of capital net of tax of 7.8%. So a lot of value being created, and that obviously also results in good returns for shareholders. As Herna said, we will propose a EUR 0.28 dividend per share to our AGM. And that brings reinstatement of dividends earlier than expected back on the table, which is really good news for the company, and obviously, for the shareholders. Our equity position has strongly improved at EUR 219 million positive. Our leverage ratio is well below the 2, trading at 1x adjusted net debt over EBITDA. And that's why we'll be able to pay out dividends again. We'll settle for a payout ratio of 70% times EUR 197 million of normalized comprehensive income, which brings you the EUR 0.28 per share. Then we'll go back to Herna for an update on our purpose, ambition and strategy going forward.

Let's start then on Slide #19 with our purpose: delivering special moments. The raison d'etre or the reasoning for a company is important for many people who work in such a company so that they understand what it's all about. Our raison d'etre, our purpose, delivering special moments, is based on a very strong fundament, our people. And in the end, leadership, together with this reasoning, brings better results, not only nonfinancially, also financially. Purpose is translated into an ambition. And the ambition PostNL has is to be your favorite deliverer. This is our midterm marker. It's the reason why we want to have consumer preference. And the marker moves, and that's one of the reasons why our Digital Next program is so important. To be your favorite deliverer, to be in the sweet spot of every consumer gives us competitive advantage going forward. And that brings us to our strategy. And that is not new. We have discussed that already quite some times, to be the leading logistics and postal service provider in to and from the Benelux, in which we try to give clarity that we are focused on the Benelux, and of course, have a successful Spring organization who brings parcels and mail into and from the Benelux. Slide #20. I will give some highlights about Slide #20 on Slide #21. So I'll move to Slide #21. If you think about our strategy, to be the postal and logistics provider, it is translated into strategic objectives. And these strategic objectives, of course, help the organization and help our people to set clear targets and clear goals. Those are related to help customers grow their business and means that we invest in customer satisfaction, secure a sustainable mail market, which we will come to when we talk about our mail strategy, but also attract and retain motivated people. Good people in our organization are the basis of our success, knowing that we have more than 40,000 people working for and with us. And that work we want to do with an improvement of the environmental impact. When you are a transport company or a logistics company like PostNL, you do know that our biggest impact on, of course, sustainability is CO2 emission. And therefore, we've set clear targets to be emission-free in the 25 city centers by 2025, and by the end of 2030, having our full last-mile emission-free. And all, of course, related to our goal to generate profitable growth and sustainable cash flow. If you translate that into a value creation model, I think there are 3 important pillars under that value creation model: within Parcels, it's manage for profitable growth; within Mail, it's manage for value; and we've added our Digital Next program. Let's go through these value drivers point by point, and we'll start on Slide 22 with Parcels. In Parcels, we manage for profitable growth. If you translate that in objectives, then, of course, we want to enhance our customer interaction with our sending customers as well as receiving customers. We want to capture further e-commerce growth, and we expect that growth -- there will be growth for the next coming years. We manage our network capacity, and of course, the utilization of our infrastructure to capture the growth, and of course, to be efficient. And we deliver smart logistics solutions in our parcel network and in our other logistical networks. The important value drivers that gives a direction to manage for profitable growth are, of course, continued volume growth, are customer value management, which says something around price and price/mix, efficiency improvements, increasing capacity and better contribution of Spring and Logistics. I would like to give you a few highlights on each of those value drivers in the next coming slides. On Slide 23, we want to highlight why we do have such a strong position today. And that is because we have a state-of-the-art network, which delivers best quality, best service and has biggest proximity. Our delivery quality -- and I'll only take a few highlights. Our delivery quality in 2020 was above 99%. We have in Netherlands and Belgium almost 4,300 retail locations, which means that we're always in your neighborhood. Almost all our business customers do have a digital account with us, which makes interacting with them easy. And next to our big parcel network, we have more than 10 specialty networks, which are in adjacent markets, like, for example, health and like, for example, valuable goods, which help our customers to be , of course, the best in what they do. That state-of-the-art network, of course, will help us to have a competitive advantage going forward. On Slide #24, we've explained what sort of market indicators give you insight on how market develops. And that, in the end, impacts our volume development. Important indicators are the e-commerce growth indicators, the percentage of online buyers. And we see growth -- that is not unexpected, but we see growth from '19 to '20. We also see that the amount of medium and heavy users has increased, and that, of course, accelerates the amount of parcels distributed. And we saw an enormous increase in the amount of web shops. That has to do with the fact that many of the retailers started their web shop in 2020 to have a second channel to reach their consumers or their customers. That led to growth in online retail. So the online retail market share is 21% by the end of 2020. Those market indicators are a good indicator for how market develops, and therefore, also how volume develops. And that's what you do see in our first value driver. We expect volume to grow over the next coming years, and in 2021, with 10% to 12%. The second important value driver, and that's the one you find on Slide #25, is, of course, enhance our customer value management. This is what we also presented at Capital Markets Day in 2019, that we wanted to introduce peak pricing, pricing on parcel size and to have a better customer value management. That's what we have already introduced and what's helped us as well in our price/mix in 2020. Going forward, we still want to improve our indexation and our normal price increases. That was not the only important line. This was the orange line. Also, the blue line is important, which sees on value driver 3, which is efficiency improvements, which are translated in cost per parcel. 2020 did show that we do have a robust network and that adding, of course, parcels to the existing network delivers enormous efficiency. So we did see better utilization. We had a better equal flow, which we presented at Capital Markets Day as well. And we had a strong improvement in first-time delivery. Going forward, because of the opening of our new centers, we expect in 2021 a slight decrease in the efficiency improvements. If you think about capacity, so adding capacity to the network, which is of utmost importance. To be in line and to stay up to the growth we expect in e-commerce and efficiency, we've added an extra slide, and that's what you find on Slide 26. This is, again, an explanation of value driver 3, where we talk about network expansion, which is added expansion to the network, and of course, network utilization. And in both cases, we do see big improvements over the last few years within PostNL, partly because we added, of course, sorting capacity. And we will add in 2021, like, for example, this small parcel sorting center, a depot in the Netherlands, a depot in Belgium, but also a new sort-a-belt with a bol.com location. And we added efficiencies and equal flow is an important one in that as well as the perfect parcel. The last value driver in our strategy within Parcels is the strong progress in Logistics solutions and Spring, and that is value driver 4. Important for the next coming years are top line growth as well as a step-up in bottom line results. In Logistics, we have, of course, our specialty networks, like, for example, extra at home, which is a heavy goods network, like health, like food, like fulfillment and quite some others. Most of those networks are active in the Netherlands and Belgium. We did see quite strong growth in all our networks in 2020 and an improvement in margins. We do think that further improvement is possible. Spring delivered on all their strategic plans and even a bit more. With the growth we did see in 2020, at this moment in time, 77% of the revenue of Spring is e-commerce revenue. And we expect Spring to be able to grow that further in the next coming years. Strategy for Parcels is manage profitable growth with 4 important value drivers, which we highlighted. The second important part of that value creation model is Mail in the Netherlands, and that's what you find on Slide 28. Mail in the Netherlands is managed for value. And that means that we try to deliver a stable and predictable normalized EBIT and cash flow, which was also one of the big reasons behind consolidation. What are the objectives? We keep positioning the value of mail and enhancing customer experience. The year 2020 showed us that physical mail does have a big attention and does have a certain value, which cannot be created by digital mail. That is what we keep positioning going forward. The second important objective is that we keep the network accessible, reliable and affordable and reachable in the whole of the Netherlands and asset -- deliver stable and predictable normalized EBIT and cash flow. What are important value drivers? So how are we going to create manage for value? Volume development plays an important role in that as well as a positive price/mix effect, partly because of moderate pricing and realizing our cost savings. A few more words. On Slide 29, you find an overview of our strong nationwide postal network in the Netherlands. And this is the basis for sustainable profitability going forward. The integration with Sandd, as we've talked about in 2020, was already fully realized on February 1, 2020. And that gave us a headstart in the year. It made it possible to deliver the synergies, and it made it possible to deliver quite some big amounts of letters per day. Our average is 8.1 million, but in peak season, as said, we did 14 million letters a day. We have lots of letter boxes on the street, which make that they are always in your proximity. Still a lot of employees, almost 32,000. And out of the 6 million users of the app, 1.5 million of those used MyPost. And MyPost means that you see which letters you will receive the next day or the day after. The most important market indicator for Mail in the Netherlands, and that's what you find on Slide 30, is, of course, volume development. At this moment in time, mail market in the Netherlands delivers more or less -- Mail in the Netherlands, delivers more or less 250 letters per household per year. Largest senders are still the ones who do transactional mails. And the pace of digitization in those markets is still relatively high, which means that also for the year 2021, we expect a volume decline of around 7% to 9%. The recovery of direct mail is not yet there where we want to have it. So we did see, of course, a recovery in Q4, but we still want to see some recovery in the year 2021. And we try to help customers with, for example, the digital -- the usage of the post saver code, which is a digital service. So going forward, we still expect volume to decline. And that's important in how we, of course, make sure that we can deliver with Mail in the Netherlands, sustainable value. Value driver number one. The other very important value driver is you find on Slide #31, and that is, of course, realizing our cost savings. With the integration of Sandd, we've added 30% of volume and more or less 4,000 new customers. We also added to our network 4,000 mail deliverers and 300 staff employees. And our synergies are ahead of track -- are ahead of the track we, of course, proposed. That means that the synergy potential will be reached in 2021, and that is ahead of schedule as well. It also means that as of 2021, we will start intensifying our cost-saving programs. That's what we will do by, for example, the second phase of the new mail route, which will have a possibility to condense our network through centralization of processes and the delivery of non 24-hour mail on peak routes. We will simplify our product portfolio and our sorting processes, which will deliver efficiency. And we will digitize our supply chain and our supply chain control, which makes it -- which enables us to do better planning of our people, and of course, to have a much more advanced customer interaction. So as we said before, we still see quite some opportunities in cost savings. Nevertheless, it also will take, of course, lots of efforts to make it happen, but an important value driver within Mail in the Netherlands. So strategy Mail in the Netherlands is manage for value and then, of course, look into volume development and look into realizing of our cost savings. The third important pillar in that value creation model is the acceleration of the digital transformation, a program with the name Digital Next. On Slide #33, you'll find the objectives of Digital Next. With Digital Next, we want to further digitize our commercial engine and our core logistics and our -- scaling our platform and our digital business models. And the success of Digital Next, so the value drivers behind that, that -- is that those programs contribute to revenue growth, cost efficiencies, and of course, also so to return on invested capital to improve customer satisfaction. And we can follow this success by, for example, the amount of active users in our web and app, but also the percentage of digital-first sales and service. Let me give you some highlights of that program and why we are starting the acceleration of the program at this moment in time. That is what you will find on Slide 34. If you think about digitalization, this is the moment to accelerate. There is a change in customer experience by using iPads, by using iPhones, by indeed, having contact via the app. We do see that corona or COVID did make people more digital. Data are much more used to drive real-time decisions. We see new digital business models. We see robots. We see robotization possibilities. In other words, the world is changing around us. And that changing world does change, of course, the expectation of our customers, but also creates, for us, lots of opportunities to accelerate the digitization. Digitization doesn't start today, and that's what you find on Slide 35. It had a long preparation time, in which within PostNL, we changed a lot in our IT infrastructure. We changed a lot in our data infrastructure. In our data insights, we started our agile transformation 2.5 years ago. We started our API platform, our advanced analytics, all in preparation of the moment in which we would be able to accelerate that transformation. So the acceleration of our digitization is built upon strong digital foundations, which are laid in the organization over the last -- which have been laid in the organization over the last few years. Digital Next, and that's what you will find on Slide 36, will help and will contribute to our ambition. And our ambition is to be your favorite deliverer. The digital ambition underpins to us and underpins, of course, the fact that we want to be the favorite deliverer, and it also helps us to stay the favorite deliverer. By seamlessly integration with our customers, with our consumers and operators, as much as possible driven by data, and together, delivering a unique customer experience. And that will be also a digital experience with distinctive experience at the right time and place, personalized and customized in a proactive way. All beautiful words, and I will give you some examples in a minute to give you clarity around what it could be and what in certain programs, it will be. It's an ambitious plan, and that's what you will find on Slide 37, in which we have 3 important value drivers, as explained. That is the transformation of our commercial engine, by, for example, by simpler and smarter products, but also by automated and self-service retail. It is a transformation in our core logistics and operations by, for example, having a fully data-driven supply chain. And it's scaling our platform, our app and the digital business models around it. There are 2 important enablers. So what we need to do as well is further strengthen our technical and data foundation. We already did quite a lot when you look into the road map over the last 8 years. But still, some things to do in our foundational IT, an important enabler. And another important enabler is making sure that the people working for us have enough digital DNA to drive the transformation. And that means that we invest in, of course, education of our people at all levels, but also hire new people to underpin this acceleration. Slide 38 shows you how we are going to measure the progress we will make in our Digital Next program. We will do that in 2 ways. There are, of course, important internal digital metrics, which you find in the gray boxes. We have metrics for our commercial engine. We have metrics for our logistics and operational engine as well as for our scaling our platforms. And in outcomes, which will be visibly externally as well: an increase in NPS, an increase in revenue, an increase in margin, a better employee NPS, the speed in which we introduce new products and services, but also our return on investment in capital in digital. Our programs will be closely monitored and measured to make sure that they deliver in the end the ROIC, and of course, normalized EBIT we forecast. A few examples, Slide 39. One of the examples, and partly that already -- we are already partly piloting that at this moment in time, is that when you have our app and when you're not at home, you can choose, if you want to have your parcel delivered with your neighbors, or for example, with the retail store or by yourself decided place. You can make a picture of your car porch, of your garden, et cetera, et cetera, upload the picture and then your parcel deliverer will put the parcel at the by you decided place. It's an improved customer experience and consumer experience. It's reduced delivery time. And it makes that we have -- our first time right is much higher. This is an example of how we are transforming our commercial engine. Example 2, which you find on Slide 40, is an example how we transform our core logistics. These are the trackers on our roll containers. The trackers on our roll containers enable us to follow roll containers through our process. And we can, of course, then look into our roll containers following the most efficient route from our customer to our sorting centers and from our sorting centers to, for example, retail stores. What they also do is they give us information on the amount of parcels and letters in the roll container. And that enables us to be even more efficient in the planning of our employees. A second example of how we think digitization can help us in transforming our core. Then we've added a few more examples of what we are doing or going to do on Slide #41, which I will not dive into. Slide #42, which is, in my view, a beautiful slide gives you an overview of in each part of our process, where we do think that digitization can help us to become even more efficient than we are today. And then the last example, where I spend a few words on is on Slide #43, which is an example of e-identification, providing digital security to PostNL on identity or address. It's one of the things we want to add in our app, which gives us and also the consumer the possibility to communicate with each other in the most safe way possible. It also reduces the development and the maintenance cost in the end of our services, but it also helps, of course, to protect our PostNL brand reputation and protect the identity of our customers. I think all by all, examples of how digitization can help PostNL in reaching their ambition, reaching, of course, in the end, also the strategy. We've translated this into medium-term financial objectives, which will be highlighted by Pim as well as diving into the year 2021.

Yes. Let's look at the medium-term financial objectives first. And let's start at Slide 45. The Digital Next program will accelerate the growth of our normalized EBIT. Starting from the full year 2020 numbers corrected for the one-off COVID effects of EUR 190 million, we expect an increase of EUR 80 million to EUR 100 million by 2024. 50% of this increase -- roughly 50% of this increase will come from regular business performance, and the other 50% will be driven as a consequence of the acceleration of our digital transformation program, where Herna just talked you through. If we talk about the first half, the improvement of business performance, that growth is driven by Parcels, stable contribution from Mail, and it includes an increase of EUR 25 million of noncash impact pension expenses as well. In other words, the growth in Parcels is going to be bigger than 50% of the EUR 80 million to EUR 100 million step-up in performance towards 2024. The second part is then as a consequence of the acceleration of digital. And that will be a combination of both top line growth as well as cost reduction or efficiency improvements. As of 2023, with acceleration of digitalization program will be accretive to return on invested capital as well as on dividend per share. And in the meantime, for the years 2021 and 2022, we aim to pay a dividend of at least EUR 0.29 per share. If we then move to the next slide. There, you see what it takes to accelerate digitalization. And that is, we will aim to spend EUR 80 million roughly split 50-50 in operational cost as well as CapEx. And the phasing of that slide gives an idea of how the maturity of the different initiatives will flow through our numbers. So in 2021, you will see an impact on operational cost, operating cost and EBIT of roughly EUR 10 million and another EUR 5 million to EUR 10 million in our free cash flow outlook for CapEx investments. And as said, accretive as of 2023, both in terms of return on invested capital as well as on dividend per share. Obviously, the investment in digital is not the only investment we'll make. Slide 47 gives an overview of the overall investment levels. And we already talked about it throughout 2020 -- 2021, you will see a steep step-up in investment levels towards EUR 140 million to EUR 160 million CapEx levels. You will also find on this slide a split between the maintenance CapEx, Digital Next IT, capacity growth in Parcels as well as investments related to the cost savings that we need to realize within Mail in the Netherlands. What is important to note that not all capacity increases are managed through CapEx spend, but also some through lease and lease additions, that will also contribute to the increasing capacity in parcels. That is required to cater for the future growth that we do expect. After 2021, we expect to go back to a, roughly, run rate of EUR 100 million to EUR 120 million of investments for the year 2022 towards 2024. Now let's look into and a little bit more specifically, the 2021 outlook and guidance. And before we go there, we felt it appropriate to give you a little bit of an indication on how we look at prioritization of our capital. And this slide gives the capital allocation, which will fund growth and will lead to sustainable returns for shareholders. Obviously, from a company perspective, but also from a return on invested capital perspective, investments in business will be our first priority. We will do everything we can to improve our competitive position. We'll invest in capacity growth, as said, in infrastructure that will allow Mail Netherlands to save costs. Certainly some replacement and maintenance CapEx and working capital as well, given the fact that Parcels will require a little bit of working capital to facilitate future growth. The second component of that value creation model is related to the acceleration of our digital transformation, what we just talked about. Obviously, we'll want to accompany that with a good dividend return for our shareholders. And the dividend will develop in line with our business performance with a payout ratio of 70% to 90% of normalized comprehensive income. Selectively, we'll look at M&A portfolio changes. We'll adopt a disciplined approach based on clear strategic fit and return criteria before we engage in M&A transactions. If that all ends midterm to excess cash, we'll evaluate the opportunities to compensate future dilution of stock dividends and/or share buybacks, optimization of balance sheet and/or debt reductions when feasible. If we then look into the transition from 2020 towards 2021. Of course, you recognize the EUR 245 million normalized EBIT for the full year, of which EUR 55 million is nonrecurring impact of COVID-19, which is split roughly EUR 40 million from Parcels and EUR 15 million from Mail. That takes the baseline to EUR 190 million. And then we expect Parcels to continue to grow and add profit from that growth. As you know, we will open up new facilities for Parcels, and that will take the cost base EUR 10 million up. We'll have higher pension expenses of roughly EUR 20 million for the year 2021, which will be completely visible in PostNL Other. And as said, we'll have negative EBIT consequences of our Digital Next program of around EUR 10 million in 2021, which brings the outlook for normalized EBIT to EUR 205 million to EUR 225 million for the year. What is important is that, let's say, that outlook is obviously on the back of still limited visibility going forward around COVID-19 lockdown has continued into 2021, which has led to ongoing strong parcel volume, but also additional operating costs, to for instance, keep retail points open and only for the months January and February, we paid an additional contribution to those retail stores of EUR 14.5 million, which is obviously all taken into account when defining our normalized EBIT outlook for the year of EUR 205 million to EUR 225 million. If we look at the segment per segment comparison, on Slide 51, you'll see the bridge for Parcels. A starting point of EUR 209 million normalized EBIT for the year 2020. That will turn into a EUR 200 million and EUR 210 million indication of normalized EBIT for 2021. And the baseline of EUR 209 million includes there the EUR 40 million nonrecurring COVID impact. We expect Parcels to grow 10% to 12% in volume. Not an awful lot of additional positive price/mix effect. We expect to roughly keep the customer mix and price/mix around about the same levels as the high 2020 numbers. Of course, we will have some organic cost developments. And in other costs here, you will have the additional costs related to the start-up of new facilities, but also the Parcels part of the Digital Next costs. So ending up with Parcels between EUR 200 million and EUR 210 million of normalized EBIT for the year. If we look at the Mail in the Netherlands bridge. That bridge starts with EUR 81 million, corrected for one-off COVID impact, EUR 15 million that, so EUR 96 million of reported normalized EBIT. We expect a volume decline of 8% to 10%. Moderate price increases and mix effect will add a bit of profit. And then, of course, organic costs on the back of an increase of the collective labor agreements is a negative there. And in comparison to 2020, we obviously won't have the one-off integration costs in 2021, not anymore. So that is a contribution to the normalized EBIT in 2021. We expect for Mail in the Netherlands EUR 85 million to EUR 95 million normalized EBIT for the year. Then we'll move over to the other key performance metric financially, and that is the development of free cash flow within 2021. And here, you see our reconciliation from normalized EBIT to free cash flow from EUR 205 million to EUR 125 million towards a EUR 200 million to EUR 230 million outlook for free cash flow. There's a few important points that I want to talk you through. We do expect the cash-in, or we have realized, I should say, a cash-in on the sale of [ Sander's ] customer contact, which was completed on the 23rd of February and depreciation, amortization amount to EUR 150 million. And obviously, that's a little bit less than last year, driven by the one-off depreciation cost on stamp that we accounted for in 2020, a clear step-up in CapEx, driven by the increase in capacity of parcels, the increase in IT, the acceleration of digital, as well as investments in the new mail route at Mail in the Netherlands. A little -- slight investment in working capital is expected for 2021. While change in pension, liabilities, which accounts for the difference between the pension expense and the regular pension cash contribution. Also important to note is that the interest and income tax paid is minus EUR 25 million. But important there is that after 2021, we expect to be able to -- or we expect to go back to kind of regular tax rate and tax paid positions because by then, we have absorbed all the liquidation losses in relation to the transactions of Postcon and Nexive that we've structured for. The EUR 16 million is 1/5 of the phased payments on traditional pension plans that we still have to make, which brings the free cash flow to an attractive EUR 200 million to EUR 230 million for the year. That is summarized subsequently on Slide 54. Where you see the outlook for normalized EBIT on EUR 205 million to EUR 25 million, which includes EUR 30 million for Digital Next and the noncash pension expenses roughly split by EUR 10 million Digital Next and EUR 20 million additional pension expenses. On free cash flow, EUR 200 million to EUR 230 million, which includes around about EUR 15 million for Digital Next. Other insights in relation to financial indicators, the CapEx up to EUR 140 million to EUR 160 million, the changes in pension liabilities around EUR 55 million, and the normalized comprehensive income, which is obviously the baseline for dividends, roughly around EUR 200 million for the year. I think important to look at the phasing of these results over the year, both in terms of normalized EBIT and free cash flow, and they will not be evenly spread over the quarters. You will certainly need to expect -- in comparison to last year, a very strong first quarter in comparison to last year. The other quarters are expected to be below the 2020 numbers, obviously, because of the fact that in Q2, Q3 and as well, Q4 on the Mail side, we've had the onetime or nonrecurring consequences of COVID-19 in our results. On a cash flow level, Q2 and Q3 are cumulatively expected to show a negative free cash flow partially due to the EBIT pattern, but obviously as well driven by the increase in step-up in CapEx and a little bit of working capital investments. That brings us to the end of the presentation with some concluding remarks before we open up for Q&A. If you look at where we are today, we believe that we are very well positioned for future growth. We aim to deliver an attractive return to our shareholders. If you look where we are today, 57% of revenue is e-commerce related. The integration of Sandd is completely done with a higher, quicker and better synergy realization, the portfolio restructuring, selling off our international activities and refocusing the business on our core markets has successfully been done. We've integrated our ESG objectives in the way we work and steer the business. And by doing all those things in 2020, including sale lease back and pension agreements reached, we have created a very, very strong financial position, which brings us at a good starting point for future growth as of 2021. Balancing volume and value at Parcels by expanding our capacity to capture that future e-commerce growth as well as capitalizing on the consolidation of Sandd and intensifying the cost saving projects to mitigate the ongoing Mail volume decline. We'll accelerate our digital transformation to strengthen our competitive position by building further on our platform, connecting customers and consumers and solutions to even simpler and smarter digital journeys. Certainly, there will remain a little bit of uncertainty around COVID-19. It's difficult to predict where that will take us, but at least we believe that PostNL is in a very strong position going into 2021, and being the leading logistics and postal service provider into and from the Benelux. Jochem, I think we'll go back to you.

Yes. Thank you, Pim. And before we go into Q&A, good to note that we will organize a deep dive later in the year about the acceleration of our digital transformation program. And of course, you will be invited at that moment. Operator, over to you for Q&A.

[Operator Instructions] First question is from Mr. Frank Claassen, Degroof Petercam.

Three questions, please. First of all, on your guidance for volume growth in Parcels for 2021, the 10% to 12%, how much impact of -- positive impact of the lockdowns or COVID do you see in that number? That's the first question. And secondly, on your balance sheet. Indeed, leverage now already down to 1x. Is that a level you feel comfortable with or what do you do with additional room? Or yes, any words on the leverage -- target leverage you envisage going forward? And then finally, for the digital transformation program, do you also expect to see one-off charges or are all the costs included in the P&L already in the EUR 80 million? Or do you expect some one-off charges for this?

To start with your first question, we took into account in our volume prognosis and also in our normalized EBIT guidance for the year 2021 that the lockdown of COVID is, of course, taking place in the Netherlands so far and partly in Belgium as well. What we also took into account that as of a certain point in Q2 that the effect of COVID will fade out. So yes, we did take it into account with, of course, as Pim did say, the uncertainty around COVID because nobody knows how it exactly will develop in 2021.

If you look at the -- your second and third question, I will take those. Well, if you look at the balance sheet, indeed, leverage ratio around about 1, which is a clear and strong improvement in comparison to where we ended the year in 2019. I think for now, that sets us up with a very strong balance sheet that allows us to also make the investments in digital that we want to make. That is the first and foremost step we want to make. If you look at the capital allocation sheet, which was there, of course, for that purpose, we will be looking at those investment opportunities. We'll see whether or not there's attractive M&A chances that allow us to grow the company going forward. And only after we've taken those steps, we'll consider alternative ways to return capital towards shareholders. The third point, all costs being one-off or cost in relation to step-up in the number of people we employ of digital are taking into account the EUR 80 million. So there's no additional charge to the P&L next to the EUR 80 million that we talked about.

And what kind of one-off charges can we still expect going forward?

Well, there are always -- let's say, as you know, well, in order to counter the volume development that Mail in the Netherlands will continue and will intensify our cost-saving initiatives, and those could come at one-off restructuring costs at certain moments in time, which, of course, are part of the guidance and the outlook we gave.

Next question is from Mr. David Kerstens, Jefferies.

Yes. Congratulations with the strong results. I've got 3 questions, please. First of all, on the EUR 55 million nonrecurring EBIT impact. I was wondering if you could provide some further color on how that nonrecurring impact from COVID impacted revenue and operating expenses. You said 25 million parcels, if I multiply that at an average price of EUR 5 per parcel, that's already EUR 125 million in additional parcel revenue. The mail impact, I suspect, is probably around EUR 75 million. Does it imply that the COVID-19 related cost increases were of the order of EUR 150 million? Some color on that to get a good starting point for 2021 could be quite useful. Then the second question is on the partial volume growth of 19%. Compared to some other postal markets in Europe, that seems a relatively low number, whereas your EBIT improvement is among the strongest. So I just try to reconcile how that works. And I was wondering if you can give an indication on how the entry of Amazon in The Netherlands last year has altered the competitive landscape? Has that had any impact on your parcel volume growth number? And do you already have a number of how strong the market development was? And then finally, with interest rates rising and after you paid off a large part of the transitional pension plans, can you give an indication of the sensitivity to the EUR 20 million pension cost increase you're guiding for this year, what that could be in 2022. So how does that number change when interest rates go up again?

I'll start with your question 2, David, and then Pim will take your question 1 and 3. The -- and especially number one, we're still thinking and making the calculation you made that. So it gives us a little bit more time. But the volume growth 90%, I think the volume growth is partly depending on, of course, the lockdowns, and there was a big difference in the sort of lockdowns you saw in Europe. And it's exactly what we did see as well lockdown -- real lockdown periods in the Netherlands, growth was much higher, like we did see in, for example, April and part of May, but which we also did see again in the fourth quarter. So that's one of the reasons why there is a difference in the overall growth rate when it comes to parcel volumes. And we do not think that it has to do with the entry of Amazon. Amazon, we distribute, of course, part of the volume of Amazon, and the biggest part is distributed by DHL in the Netherlands. In our customer list, they are not in our top 10 customer list. Now we didn't see more growth than the normal growth we did see with all our big customers in the year 2020. So we don't think that, that at least in 2020 did make a difference.

Okay. Do you have a number for the market growth already for the total parcel market? Was it too early?

Too early.

That's too early. But remember that first quarter 2020, of course, the growth rate was impacted by dual vendorship that we talked about, which, of course, is a PostNL specific step down in growth at that quarter in time. Then you went very quick to the way you've calculated the COVID-19 impact. Let's go step by step. And we've not necessarily looked at it from a top line perspective only. But what we say is that roughly 25 million parcels were COVID -- nonrecurrent COVID driven. So from the EUR 55 million, EUR 40 million is additional result in parcels, EUR 15 million is additional result in mail, and that additional result takes into account, for instance, the additional contribution that we've given to our employees and the employees of our partners, which was roughly EUR 15 million. But it also includes additional retail costs that we've paid additional to the normal contribution to our retail partners of roughly EUR 4 million in 2020. And of course, the volume dependent cost that we need to carry just to ensure that we deliver the additional volume is here also taken into account. I think you calculated it with an average price per parcel EUR 5, which is significantly too high. But all in all, that is the split of how we look at the EUR 55 million additional contribution driven by COVID.

And do you have an indication of how much you spent on PPE and hand gels and face masks and things like that?

Yes. Well, there is millions -- a couple of millions, so to speak. So that's -- yes, that's not the biggest component of this bridge. Let's say, somewhere between EUR 2 million and EUR 5 million -- EUR 2 million to EUR 5 million additional cost in relation to changes in our process fees and indeed procuring hand gels, masks and what have you. Then your point on the sensitivity of interest rate developments on the level of pension expenses. That is -- there's more to it than just the development of the interest rate. It's also the indexation levels that are, from an IFRS point of view, taking into account when calculating pension liabilities. But just for your guidance, let's say, the step -- we had a step-up in pension expense driven from 2020 towards 2021 is on the back of, yes, in basis points, only a limited step down of interest rates of roughly 30 to 40 basis points. But obviously, percentage-wise, that was a relatively big step down of the interest rate used to calculate the interest expense. So at the moment, of course, we don't predict how interest rates have or will develop. We've taken the current interest rates as the basis of how we've calculated the pension expense for the years going forward. And that is done on the end of every year, the interest rate as per the 31st of December will determine the level of pension expenses for the year thereafter based on the IFRS guidelines.

And you said an increase of EUR 20 million in 2021 and EUR 25 million over the 4-year period. So EUR 5 million?

Yes. But that's not driven by only interest rate developments, but also development of the base of people. So that's the other component. In case collective labor increases, for instance, of course, also results in a higher -- slightly higher pension expenses.

Next question is from the Mr. Marc Zwartsenburg, ING.

Yes, a couple of them left. First of all, on the on the dividend outlook. You indicated '21, '22, at least EUR 0.29. But is the guidance also including the assumption that the prior year's dividend is the for, for next year dividend. Let's say you have EUR 0.29 for '21 and then for '22, it will be at least EUR 0.29. That's my first question. Then on the Mail NL EBIT and a bit looking towards your guidance for '24. you mentioned a stable contribution from Mail NL, but that is apart from the box on that slide below that the savings or efficiencies from digital investments. Should we assume even perhaps a growing EBIT for Mail NL towards the guidance of 2024? Or should we indeed keep it flattish, like you indicate on that slide? And then my third question is out of interest. Why would you already guide now for '24 instead of waiting perhaps for a bit more visibility once the one-offs of COVID are done and then you have a bit of visibility how things are developing post COVID. So let's say, at the same time next year, you could have also given a guidance for, say, EUR 25 million medium-term guidance. Why already provide a guidance now with the visibility that you have? Or perhaps you already have enough visibility, of course. So that was -- I'm just curious how that -- why you basically chose to give a guidance already. And then for Pim, my other question on excess cash. I think bank also already tried to get a bit of a feel for the leverage ratio. But what is -- as you define excess cash, as you mentioned on your capital return policy slide, what is your definition of excess cash at some point in the future? And then my final question, sorry for the many questions. On the mail volume guidance for this year, it's minus 8% to minus 10%. And that's actually in line with the normal market trend post-integration with Sandd. So actually, we had a negative COVID impact in 2020, so an easier comps. So why then stick to that minus 8% to 10% range instead of maybe lowering the low end of that a bit? That's it.

Your first question on dividends. It is literally what we stated, which means at least EUR 0.29 in '21 and at least EUR 0.29 in 2022 within our dividend policy, which gives us, of course, a little bit of flexibility because we did say that we will do a payout of net comprehensive income somewhere between 70% to 90%. So you have to read it literally as said, at least EUR 0.29 in '21 and at least EUR 0.29 in '22. The -- EBIT of Mail in the Netherlands, this -- is it's a stable contribution, so you should assume stability. And why are we already guiding now for 2024? I think to give you some visibility what a digitization program will bring. And of course, COVID, as we've seen in 2020, COVID can change a lot. Hopefully, in a few months from now, we're all vaccinated, and we will return to a more normalized. But the reason why we did it is to give you visibility on what digitization can bring to PostNL in revenue as well as in a normalized EBIT, which is based, of course, on the efficiencies we reach. And because we are presenting Digital Next today, we've added a view on how we think 2024 could look like.

Exactly. Then on your excess cash question, you know that we aim for BBB, BBB+ credit rating that we feel is appropriate for the company we are. That is what we've translated to, adjusted net debt over EBITDA of not bigger than 2. I think you all will remember that we're having a leverage ratio close to 3 for a part of the time, 2.6 by the end of last year. So we're currently at a much, much better position. But as said, we intend to use that room to invest in our business, to invest in acceleration of our digitalization program. And over time, we'll see whether or not there will be excess cash that we'll seek to deploy in a different way by distributing it towards shareholders or considering bond buybacks. So there's no specific excess cash position, but it's somewhere in between the 1.0x to 2x adjusted EBITDA over net debt.

Okay. That's very clear.

The mail volume development, we do expect, as we said, an 8% to 10% volume decline for the year 2021. The overall substitution levels in 2020 are more or less comparable to what we do expect in 2021 to happen as well.

Yes, but you have a bit easier comps due to COVID, maybe 2 or 3 percentage points in negative impact in '20. So that should have a bit of a positive impact in '21, or is that excluded?

Also 8% to 10%. So it gives you a little bit of -- it is a bandwidth between 8% to 10%.

Next question is from Ms. Lotte Timmermans, ABN AMRO.

First question on usual payments in 2021, Slide 53. How can we expect lower leisure payments in 2021 than in 2020? I would think that the reopening of the sorting centers and the sale leaseback could increase leasing repayments. Additionally, I think Q4 was roughly EUR 27 million. So this is suitably higher than EUR 75 million. Were there run offs in 2020 due to Sandd or any other things that could take into account? Then a question on the definition of the parcel supplications. Thanks for providing that. If you look at, also, in the Netherlands, I would say that then I assume that Belgium is included in logistics and other. Is that correct to assume? And what about the parcel volumes? Is this still Belgium and the Netherlands? And could you give some color on the split between Belgium and Netherlands as you always already said before that Belgium obviously grows at a significantly higher rate.

There is a risk Lotte that I need to ask you to repeat some of them because that was really quick. But I think the first one, clearly, starts with lease payments. On Slide 53, you see in slide -- or only a small increase of EUR 1 million in comparison to the EUR 79 million in 2020 and part of that is there are still one-off lease payments or lease payments in relation to Sandd lease obligations that were there that are part of the lease payments in 2020. So that's one of the elements.

And your question was, if Belgium was part of Logistics and Other or part of our Parcel Netherlands, our big parcels network, let's mention it that way. That was your second question?

Yes. That is a little bit of a technical answer that I need to give you there because that was always the case, where do you eliminate -- what do you do with your eliminations? So as you know, our strategy in Belgium is, to a large extent, driven by growing in Belgium by growing together with our Dutch web shops towards Belgium. So part of the external revenue in relation to those clients is within our Parcel Netherlands segment or bucket, so to say, and the external domestic and export revenues of Belgium are in the Logistics Solutions and Other bucket. The biggest component of our Belgium strategy is clearly the -- if you talk about, from a Belgium point of view, the import flows from the Netherlands. So that part is not included in Logistics Solutions and Other, but in Parcel Netherlands.

And that also means, Lotte, that the biggest part of our volume development is in our parcel network in the Netherlands, and therefore, in the volumes of our parcel network. And we did not guide on Belgium. That's also what we did not do before. But once in a while, we give you a little bit of a highlight on how the developments are in Belgium. And that's the reason why we did give in the future, for example, examples about growth in Belgium when there was a lockdown in Belgium as well. So I do think -- if you think about the growth of Parcels in Belgium, it's a little bit higher than it is in the Netherlands. That's related to the fact, and that's what we've discussed earlier as well that the development of e-commerce in Belgium are picking up, of course, also because of COVID, but are still a little bit behind. And that's what we expect to happen in 2022 -- 2021, sorry, this year.

Okay. That was clear. On the lease payment and follow-up, a small one. So does that mean that in Q4, because that was actually what I meant to say, in Q4, the initial payments were at EUR 27 million. Were there still some sense related one-offs in the lease payments then as well?

Not in the fourth quarter of 2020. No.

But then it means that in 2021, on a quarterly basis, it goes down compared to Q4. Is that correct?

I'm not quite sure. If we look at the lease payments, for the full year, the -- let's say, for the full year, they go down in the Mail Segment because of the fact that in 2020, it still includes these payments in relation to Sandd lease obligations. It grows or increases from a Parcels point of view because we, as said, have taken on lease additions that are related to capacity increases. So for the full year, we'll get you to the roughly EUR 80 million lease payments for the entire group, which is more or less comparable to the full year 2020 lease payments.

Next question is from Mr. Wijnand Heineken, independent Minds.

A few questions about Mail. You mentioned during the presentation that you expect the full potential of the Sandd synergies to be achieved this year. Just for safety, do you still anticipate a contribution somewhere between EUR 50 million and EUR 60 million? And then on cost savings for Dutch Mail, still important with all the new plans. Could you give us a bit of an update where we are standing now as far as cost savings is concerned on an annual basis? And how you expect that to progress in the upcoming years?

The first one, let's say, if you look at the full year synergies of Sandd, then it is a growth synergy of EUR 79 million. And then in relation to realizing those synergies, there are EUR 30 million of one-off costs associated with it. So the net impact is roughly EUR 50 million. Well, do not expect that EUR 30 million any more clearly in 2021, but volume decline will obviously also hit the synergy potential. But all in all, the contribution of Sandd in 2020 was beyond the bandwidth of EUR 50 million to EUR 70 million on a gross synergy level. And certainly, that will still be the case for 2021.

And then the cost expectations?

Yes. On cost savings, as I said, we gradually -- what we talked about when introducing the Sandd and the business case of Sandd, we said we have to phase or postpone some of the cost savings in order to accommodate the integration of Sandd, and we'll gradually see a step-up in cost savings a little bit from 2020 levels towards 2021, but more as steeply from 2021 towards 2022 in the level of cost savings that we that we aim to achieve to counter for the volume decline that we talked about as well. We're not going to be more specific at this moment in time about the level of those cost savings over time.

Next question is from Mr. Andre Mulder, Kepler Cheuvreux.

Still a number of questions left. Firstly, can you give a split of the EUR 80 million that you aim to spend on digital transformation, split between Mail and Parcels? Second question is you have given this outlook for '24. Can you also give us the assumptions that you have for the volumes in Mail and Parcels? Third question, also a bit related to that. About half of the volume increase in Parcels was due to COVID. Can you give us corresponding numbers for Mail as well? And then a bit of a numbers question, the last one. If I look at your EBIT guidance, you started with EUR 185 million plus. So you're now going to, let's say, EUR 215 million. I do not see that delta appearing under comprehensible income because that amount is still about the same. Why is that gap widening? Why are you more optimistic on EBIT? What your underlying assumptions are there? And why does that not boil down in comprehensive income?

We didn't give a split of the EUR 80 million between Mail and Parcels. It will be -- what we did say, of course, part of that will be CapEx, and part of that will be OpEx, and that split is more or less 50-50. If you look into the projects we have, then, of course, some of those projects are more related to Parcels than to Mail, but also within Mail, there are quite some projects on digitization. So that gives you a little bit of a flavor around it. The outlook 2024 assumptions, we did not give an outlook on volume for the years to come. So we did, of course, for 2021. And we gave the graphics in the slides a little bit of a view on the years to go. When it comes to Mail in the Netherlands, it's one of the things we already said, it's 8% to 10% for the year 2021. But also our expectation going forward is that Mail will keep declining. That's what you find on this slide about Mail volume. And for Parcels, the assumption for 2021 is 10% to 12%, but it was also the year thereafter we expect growth which will be around -- which will be around the same level or a little bit lower. That's the expectation we have at this moment in time. Your third question, which was on -- as you mentioned, half of the volume within Parcels was due to COVID, what was it within Mail in the Netherlands? And that answer, I don't know by heart. So I'm looking to Pim if he knows it by heart and otherwise, we'll look at the...

On a volume point of view, that is roughly 15 million pieces. So 1-5 mail volume against roughly 25 million of additional parcel volume as being the nonrecurring COVID-19 impact. So that is the answer on that question then. Is the gap widening between normalized comprehensive income, given the -- well, that is, let's say, if you look at the trading update language we used, we were not that specific. It was around EUR 185 million. It's now around the EUR 200 million. So it's not you should not read into this a logic of a gap that is widening. This is a little bit about the rounding and around numbers that come into play here, but nothing that makes that gap bigger or smaller.

Okay. And maybe a follow-up question on the expectation of stable Mail results. Over the last few years, 3 years in, numbers have been under constant pressure, not only in terms of sales but also in terms of EBIT. I assume that your cost savings potential at some point in time will become less there. Why expect stable contribution for Mail? I cannot believe that it will probably come from the effects of digital transformation. So what are other assumptions behind that?

As I said, there's a -- from a Sandd business case point of view, let's simplify stuff, a EUR 30 million improvement from 2020 towards 2021, because we'll not have the one-offs anymore. Of course, then you'll have volume decline also over the Sandd volumes. But still, that is a step-up of contribution of that integration from 2020 towards 2021. And then gradually increasing the level of cost savings again. Well, for the period that we just talked about, keep the stable -- the profit of mail, more or less stable.

[Operator Instructions] We have a question from Mr. Henk Slotboom from The Idea.

I've got a couple of questions in relation to Slides 46 and 47. As I look at the Slide 47. If I look at the orange bar, I can't really connect it to what I see on 46 orange bars. And I'd like to assume that Digital Next, you show that in 2022, the investments are peaking and then they go back again in '23 and '24. But I see the bars on Slide 47, the orange bar, staying more or less the same, a little bit lower in 2022 and then 2023, 2024. Can you provide me some background as to why that is the case? That's the first one. When we are on Slides 47, anyhow. And the dark blue parts, the capacity growth in Parcels. You're building a small parcel center this year, you're opening that up this year. Besides, there's a new parcel center in North Holland, one in Belgium. So I would expect 2021 to be, yes, so it's a peak in capacity growth in parcels and then easing down a little bit in the years to come moreover, because of the way the small parcel center is set up to accommodate more and more volume there. Can you elaborate about that? And then on the Digital Next strategy. The examples you gave are mainly focused on the receiver part of the business. And on the, call it, the operational part of the business. Is there an element of trying to help web shops or online retailers as well with their conversion? A couple of months ago, there was a presentation by DHL, and they showed how to -- how they were helping online sellers to boost conversion in order to basically improve the relationship with the clients, and yes, avoid too much pressure on tariffs. And then my last question, a simple one. There's still the discussion about whether or not PostNL should have been able to buy or merge with Sandd. I know that there's an appeal case going on and that economic affairs is working on all sorts of modifications of the proposal. Has that been interrupted by the Cabinet crisis we've seen? Is this a controversial subject? Or are things progressing as usual? Those were my questions.

I will take the first 2 to begin with. The logic or the connection between 46 and 47. 46 is the spend, both in terms of OpEx and CapEx in relation to Digital Next. So it does not take into account the maturity of these initiatives that will contribute to the bottom line as well. These are the cost side, the spending side of the equation, and that's also why there is a comment that says it will be contributing towards return on invested capital as of 2023, as well as contributing to dividend per share. So as of 2023, the balance will be positive is the message there. But for the first 2 years, the balance is clearly negative, and that's also why you see that back in our EBIT bridge for 2021. Then 47 is the overall CapEx spend. And their orange is the combination of IT and Digital Next. So clearly, Digital Next is what we've announced today, but there are still orange bars looking back. And capacity increases are not only because of additions of sorters or vans or depots, but also capacity investments are related to IT that we have seen and we'll expect to see going forward as part of capacity increasing investments that we need to make as well. So there's a clear step up from 2020 towards 2021 on the orange bar. And also for the years 2022 and 2023, you will see the levels of orange being higher than the levels of investments in IT that we've done in the past. Then what I've tried to address when talking about this slide first time around is that there's also different type of, let's say, ways that lead to an increase in capacity from a parcel side. Not all capacity increase is managed through CapEx. For instance, the small parcel sorting center itself, so the building is not CapEx but leased. The sorter that we'll place into that facility is a CapEx, cross docks that we open sometimes that are not within our normal analyst structure will not be CapEx but will lead to lease additions. So all in all, the combination of the 2 leads to an increase of capacity on the back of our volume expectations for parcels. So there is also lease addition expected over the year 2021 that also plays into the capacity improvement. Third question was related. Your Digital Next examples seem to imply, only you said it's slightly different network or operationally, elements...

But there are also many commercial elements.

Yes, exactly.

So the program is, of course, it's a balanced program between commercial projects, operational projects, and projects which are much more related to our business platform and our -- the data that we have. So it's a balanced approach, which will bring us revenue, which will bring us efficiency and therefore, normalize EBIT and which will bring us also new business. But I gave a few examples, which you can use as an idea of what the program entails, but it's by far not a full overview of all the projects.

Okay. The fourth question was related to the Sandd decision of the Ministry of Economic Affairs.

Yes. I think the Ministry of Economic Affairs or the Cabinet in the end. They will take a new decision as was communicated by the State Secretary of Economic Affairs, I think already almost half a year ago. We don't know -- we do not know exactly when to expect that. And then, of course, we will have the appeal afterwards as well. So there's still 2 important steps or -- yes, steps to be taken, which is a decision by cabinets, one. And secondly, also, of course, the appeal.

Next question is from Mr. Ivar Billfalk-Kelly from UBS.

I wanted to touch a little bit on your ESG trend that you're talking about, especially decarbonizing the last mile. Have you given a sense of estimate how much you might need to spend in terms of CapEx to actually achieve your goals? And is that included in your CapEx profile on Page 47? Secondly, on -- you talked about maintaining pricing power in the indexation as well. How long do you actually expect that to be in a position to be able to do that with the current environment? And is -- are you seeing the market and your competitors increasing their sort capacity in general, which will have an impact on that? And lastly, on the Digital Next, just quickly, you may have mentioned it, but forgive me if you did. But do you have a sense of how that's going to impact your FTE going forward?

Okay. The ESG, well, there's no -- yes, I thought let's give a split of all the CapEx spend in the different categories, but done, let's say, kind of the more traditional split. So we've not broken out the specific ESG-related investments, but they clearly are part of the overall CapEx spend. So there's everything that we need to do and want to do to improve on our ESG targets is included in the numbers that we've shown. For 2021, we've indicated on how we expect the price/mix to develop. We've seen positive developments in 2020 as a consequence of also smaller and mid-sized web shops growing, contributing more average price per parcel than some of the biggers do. Of course, we've also introduced our yield management measures throughout 2020 that will continue to mature during 2021. And for the time being, you have to work with that assumption. We've not given specific components of volume margin developments of 2022 towards 2024. But clearly, what we did say is that roughly, half of the step-up of EUR 80 million to EUR 100 million will come from business performance and the other half will come from our Digital Next program. On the Digital Next FTE development going forward, there's clearly -- all in all, parcels, of course, grows and is expected to grow. We'll add people there. And Digital will lead sometimes to more efficiency and maybe less employment in some parts of the processes. But given the fact that, all in all, parcels will grow there's no -- there shouldn't be an expectation that Digital Next in itself will have a big impact on the number of FTEs that we'll employ going forward.

And we will add, of course, also people in the organization to further accelerate the digitization. We do that, of course, with the existing people we have, but we will add new competencies and new people as well. So in that sense, in a growing environment, we do not expect that it will hit the amount of people working for us. In the contrary, to be honest.

Great. I'm so sorry, I didn't quite catch the question in terms of -- sorry, the answer, rather, in terms of what you see your competitors do in terms of their capacity additions.

Yes, the -- we, of course, will add capacity to our network in 2021 and quite a lot of capacity with 2 new sorting centers in the small parcel sorting center. Our competitors in the Netherlands added capacity, of course, in 2020, and I did not see any announcement of big capacity add-ons in 2021. But let's see, the year is still early times -- early days, sorry.

Next question is from Mr. Marco Limite from Barclays.

I've got just 1 question left. So when you're guiding about 10% to 12% partial volume growth for the year, I guess you're expecting a super strong Q1. So what sort of levels do you expect for, let's say, for the second half of the year? Is there going to be sort of low single digit or -- yes. So what's the expectation post COVID?

We did not, of course, guide quarter-by-quarter. On parcel volume development. We do see a strong January. And the expectation is that, that will continue in February as well, although we did have, of course, a bit snow week in the Netherlands, which impacts volume developments. Overall, taking into account a strong January, we have that guidance for the 10% to 12% for the full year. What we took up in our expectations and I think that's what I also answered on one of the first questions asked is that we expect the effect -- the positive effects of corona to fade away as of Q2 and then in the direction of summer. That's our expectation.

Next question is from Mr. Andre Mulder, Kepler Cheuvreux.

Yes. One question left. Just sort of trying to get even into the catch in there. If you are saying that about half of the exceptional volumes, half of the volumes in parcels is coming from, let's say, exceptional items. How do you determine that? I think a lot of parcels you kind of know what's inside there. So I'm just curious to see how you -- how you arrived at that number?

Well, there's -- let's say, we've done some analysis throughout 2020. And clearly, you can see, for instance, a spike on a couple of moments in time, for instance, related to a message of the mayors of the 5 biggest cities that when they said, "Well, let's not go into the city centers. Buy online." You can clearly see a step-up in volume development when lockdown is announced." And obviously, also, in the first phase of COVID-19, we saw a lot of equipment and also clients growing in relation to kind of the one-off stuff you need to be able to work from home. So different components, different data analysis has been done to end up roughly to that EUR 25 million, let's say, nonrecurring COVID volume, which is driven not only by working from home, but also, let's say, lock down effects as a consequence of people not being able to shop in more traditional retail stores.

Ladies and gentlemen, this was the last question. Please continue.

Thank you, operator, and thank you all for listening in. It's been a long call, but we had a lot of things to talk about today. Thank you for joining. We will be back on the 10th of May with first quarter results. And as said, we will also host a webinar later in the year to provide some further details on the Digital Next. Thanks very much, and you know where to find us when you have any further questions. Thank you. Bye-bye.

Thank you. Bye.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect your lines, and we wish you a very nice day.