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

Good morning, and welcome to the PostNL Fourth Quarter Full Year 2021 Analyst Conference Call. [Operator Instructions] I would now like to hand the call over to Mr. Jochem van de Laarschot, Investor Relations. Go ahead, please, sir.

Thank you, operator, and thank you all for joining us today. As usual, Hendrika Verhagen and Pim Berendsen will take you through the presentation that you can find on our website, after which we will open it up for your questions. Herna, over to you.

Thanks, Jochem, and welcome to you all. I would like to start on Slide #4, in which we, of course, look back to 2021, which was an exceptional year, of course impacted by the pandemic. Key takeaways of the year is that we, of course, recognized and rewarded the efforts of hard work of our people, partners and retailers. And for retailers, we did again with the lockdown end of December and also at the beginning of the year 2022. We saw strong performance, I will do a deep dive on the performance of the units in Q4 and full year, strong performance in Parcels and Mail in the Netherlands. As we already said in our trading update, our free cash flow and our cash flow performance was better than expected and further strengthened, of course, our already solid financial position. And that also has led to a share buyback program, which we announced in January and which we will start tomorrow. Going forward, we will have a continued focus on value creation for all our stakeholders. And of course, this is with the fact that we look into a war in the Ukraine, which makes it a little bit of a mixed feeling to bring good numbers and a good perspective for PostNL going forward, knowing what's going on in the world. On Slide #5, we summarize the financial highlights. Our earnings were at the high end of the guided range, which we had set last year between EUR 280 million and EUR 310 million, and we outperformed on cash flow. Q4 was a busy quarter and accelerated already strong performance of the first 3 quarters. The good performance in the last quarter was mainly driven by Mail in the Netherlands and Parcels in line with the expectation. That has led to good financial metrics for the year 2021. A plus of 6.5% in revenue, a plus of 23.6% in normalized EBIT, which brought us to a number of the EUR 308 million. And I think important, and we'll come back to that in some of the next slides, there's a nonrecurring COVID effect in it of EUR 82 million. Free cash flow came in at EUR 280 million -- EUR 288 million, which is a plus of 54.8%, and our normalized comprehensive income, which is, of course, the basis for our dividend, came in at EUR 285 million, which has led to a proposed dividend per share of EUR 0.42. In our view, strong financial results for the year 2021. As said, important to understand, and that is on Slide #6, what the COVID impact is on our normalized EBIT. And that's what you see over here. Normalized EBIT, EUR 308 million in 2021. The 2 COVID effects around EUR 40 million in Parcels which is split between EUR 26 million parcels in the Netherlands and EUR 15 million with Spring and Logistics. And in the bullets, of course, we provided also the number of parcels which are, in our view, nonrecurring. And in Mail in the Netherlands, an impact of EUR 42 million, of which we do think that 67 million mail pieces are assumed to be nonrecurring. And there, you can think about all the mailings we did for the vaccination programs to boost the mailings, but also, for example, the elections which we had in March last year where people older than 70 had the possibility to do their voting by mail. The assumed revenue impact is EUR 85 million in 2021, and that's compared to EUR 53 million in 2020. A good result and, of course, also helped by the nonrecurring effects in Parcels, Spring and, of course, Mail. I think those good results for the year 2021 are based on important progress we've booked in the execution of our strategy. And let's give a short update on our strategy. We won't do that too long because that's what we've already presented a few times and give you some details on examples we have and how we, of course, follow that progress. Our purpose is deliver special moments and that's with the ambition to be your favorite deliverer and a clear strategy to be the leading logistics and postal service providers in, to and from the Benelux region. The latter is a clear view on where we think we want to be active, which is the Benelux region, but it also gives clarity on the fact that parcels do come in and go out from the Benelux, and that's, of course, our Spring entity, which is important to PostNL. On Slide #9, you find the value creation model, which we already shared with you, which is also part, of course, of our annual report, which is also published today. We have 3 very clear elements in our value creation proposition. The third one is Parcels, and we manage parcels for profitable growth. For example, by enhancing our customer interaction but also customer satisfaction by capturing future e-commerce growth, where we do think e-commerce growth will continue, but also delivering smart logistics solutions. Mail in the Netherlands is managed for value. We positioned Mail as still very important to keep contact between people, and that's what we saw happening, of course, in COVID time as well, that Mail remains to be an important element in having people contact with each other, and we want to keep it accessible, reliable and affordable and that with, of course, delivering stable and predictable normalized EBIT and cash flow, the main reasons behind the consolidation. And the third important element in that value creation proposition is Digital Next. And there are a few slides -- in the next few slides, I will spend some more attention to the progress in the Digital Next program. I think important to mention our strategic objectives, of course, what we do is we work for our customers and help them grow their business. So Net Promoter Score of customer satisfaction are crucial for us. We want to secure a sustainable mail market as just explained, attract and retain motivated people, very important, especially in 2021 and also in 2022, with, of course, a tightened labor market. We want to improve our environmental impact, where we -- in the extra investments we announced last year, there was also an extra amount taken up for, of course, improvement in our CO2 emissions. And in the end, that should create and generate, of course, profitable growth and sustainable cash flow, which is important to create value for all our stakeholders and also shareholders. There are 2 elements I would like to give you a short highlight on, the first one is ESG. And you find on Slide #10. What is important in our ESG, of course, in the environment, it's about clean kilometers, it's about network efficiency, but also about sustainable buildings, where we made progress in 2021. In social, it's strengthening our employee engagement. And fortunately, also over the year 2021, we had a very high employee engagement, staying safe and healthy. That helped us enormously over the last 2 years to keep our network running and to make sure that we were able all of the days to deliver Mail and Parcels and of course, realize the change in workforce optimization. In governance, there's nothing new to tell, but these are the elements in governance, which create transparency, which keep us responsible and accountable. On Slide #11, you'll find some of the highlights when it comes to the important elements. Customers, the highly satisfied customers decreased slightly to 34%. In social, as said, we see in our employee engagement. We see the 84%, which is in line with 2020 which is a very strong score. It's higher than the score in the normal logistical industry, and it's around market average. Slightly higher absenteeism, and that's what we'll come back when we talk about 2022 because we did see a higher absenteeism in the month of January because of Omicron. In environment, we had a good year, 18% -- 1 8 - 18% reduction in our carbon emission. And I think important, as of January 1, we are net 0 through offsetting any remaining carbon emissions. And we're recognized for our ESG leadership, as you can see on the right side of that slide. A few examples on our progress in our environmental initiatives, you find on Slide 12. The first one is our light electric freight vehicles, which we are very proud of. And why? Because these vehicles have the possibility to put roll containers in it, which is much more efficient, so you can fill a roll container. And therefore, and then put it into those vehicles, which is more efficiency in, of course, preparing the vehicle, but also more efficiency in delivering the vehicle. These LEFVs will help us to get the inner cities of the 25th biggest cities in the Netherlands emission-free in the year 2025. And because of their size, they also reduce congestion. And we've put lots of efforts in renewable fuels as a transitional solution. As we have discussed earlier, many of our big trucks, there are not yet big trucks in the market who are fully electrical. And we, of course, tested one of -- in a pilot, one of the first ones. But they're still not available in big amounts. And that's the reason why we use HVO100, which is a solution that gives us the possibility to reduce 90% of our CO2 emission. The second important element where we would like to give you some highlights on our progress is our digital transformation. We, of course, communicated our digital transformation or Digital Next program to the market last year February. There are 3 important value drivers in that program. The first one is transforming our commercial engine. The second one is, of course, transforming our core logistics. And the third one is scale the platform we have, for example, with our app. And to be more quick in our digital transformation, we have to strengthen our IT foundation and data foundation and, of course, drive the digital DNA of our organization to make sure that people do understand why it is crucial for PostNL. That the shift takes place is what you can see on Slide #14. Here, you find the enormous growth in online visitors. So more than 1 billion visitors last year and 90% via mobile, almost 7 million consumers using our PostNL app. The talks with chatbot Daan, slight decrease, which had to do with the fact that we had much more calls in the year 2020 because of corona in that year. Self-service preparations did show an increase, same as of course stamp codes. Important for us on our business side is of course the business postal -- portal users, also there an increase, and the external APIs, which connect the network of PostNL with the networks of other companies. In other words, in these changes you do see that we do make progress in our DigitalNext program on the one hand, and secondly that we're of course making [ order ] to improving and increasing the KPIs which are important in the DigitalNext program. Also here 2 examples, and those you'll find on Slide #15, 2 examples of where we see progress. The first one is that we, with the elections in the Netherlands last year March, we put information, we did put information in the MyPostNL app, which meant that people had a pre-announcement of the fact that they would receive the candidates list and their voting cards. And that helped, of course, creating much more attention for the elections, on the one hand, and on the other hand, giving also people the ability to see when they should receive their voting cards and candidate lists. The second one is the customer journey I receive from outside the EU, which, of course, became very important after the introduction of the VAT as of June -- July 1 in 2021. Also there, we changed the app, which made it possible for consumers to do customer clearance, cost and payments in the PostNL app, which made it more easy for them to order from outside the EU. [ I think ] examples underpinning our strategy of value creation via Parcels, Mail and Digital Next. Let's move to Slide #17, in which we give you more insight in our business performance of Q4. And again, of course, we'll start with the COVID impact in our cross-border in Q4. Introducing VAT as of July 1, 2021, did have big impact on volumes coming from Asia to Europe. And that's what you see over here. You find here a normalized EBIT in Q4 2020 and the impact it had, of course, on our normalized EBIT Q4 2021. In the first part, you find the Q4 delta assume nonrecurring impact related to COVID-19, which is EUR 38 million. And the second one is the impact of cross-border activities, which is EUR 11 million, more or less equally divided over Mail and Parcels, which did have, of course, huge impact on our businesses in Mail in the Netherlands and in Parcels. And as you will see when we talk about 2022, the impact on our cross-border volumes probably continues in the first half year of 2022. A little bit more insight when it comes to cross-border volumes is shown on Page 18. And there, you do see that we, of course, when we were in summer and VAT was introduced, the blue line gives you a view on our expectations. And those expectations were based on, for example, many customer interviews. And in the orange line, you find what it actually was until the end of December. And that meant a drop in volumes of 50% to 60% by the end of the year. The global supply chain disruptions do cause, of course, a delay in the recovery. That is partly because of the impact of COVID on transport from and to Asia, but also the increased freight cost and transit times. And last but not least, a limited supply due to raw material shortages. So there are a few reasons behind the fact that you did see a much steeper decline in the amount of parcels coming from Asia than earlier expected. Then let's move to Parcels. That's what you find on Slide 19. A solid business performance in Parcels. You find, of course, here the results of the fourth quarter, together and at the last line, the full year results within Parcels. We did see a normalized EBIT in parcels of EUR 55 million. Last year, it was EUR 75 million. That was, of course, including COVID. If you take that out, we still see an increase in normalized EBIT within our Parcel division. Volumes minus 5.3% compared to last year quarter, which is much -- which was much more heavy in corona. If you take that out, we still see a growth of 9%. If you compare the amount of volume to the fourth quarter of 2019, the last quarter where there was no COVID, we see a growth (sic) [ decline ] of 21%. All the numbers do lead to our expectation that the growth in e-commerce will continue going forward. We didn't see any recovery in the last quarter of our international volumes, and that's also what we take with us, at least in the first half year of 2022. What we also do see within Parcels is a growth in our cost, for example, through energy and fuel costs, but also the utilization of our small parcel sorting center is impacted by the fact that we have less international volumes, which are generally small volumes and were partly, of course, very well applicable for the small parcel sorting center. On Slide #20, you find a few examples of what we did when it comes to enhancing our customer interaction, which was part, of course, of our strategy to create profitable growth in Parcels and what we did operationally. In our customer interaction and service offering, we put much of attention to improving our NPS. And therefore, we also started quite some customer journeys and one of those journeys is 'I manage returns'. We also started to expand the amount of parcel lockers. By the end of 2021, we had 214 and we're on track to have around 1,500 parcel lockers in 2024. It was also not quiet in the area of expanding our capacity. Of course, we opened our small parcel sorting center in Nieuwegein. We opened 26th parcel sorting center in the Netherlands, and we opened 2 new distribution depots in Belgium. What we also did in -- to support our Digital Next program is, we tracked 85% of our roll containers, which gives us real-time information, which is going to help us to have a better equal flow, but also to have a better understanding of what the amount of parcels is that come to our sorting centers. And I think the left part of the slide gives a little bit of a background on why we do think that e-commerce growth will continue going forward. On Slide 21, we look, of course, to the strong performance of Mail in the Netherlands. The strong result is partly related to COVID 19. Volume decline in the fourth quarter was 8.9%, which was partly because there were fewer working days, partly, of course, because we had more COVID in Q4 2020, and partly because there's still, of course, substitution. Also here an impact from international volume and less export Mail. I think good to understand when it comes to revenue is that in Q4 2020, we still had Cendris in our revenue numbers, which accounted in the Q4 2020 for EUR 20 million. The CLA for postal operators and deliverers, which is an important CLA for us, is still ongoing. I think an enormous strong performance of Mail in the Netherlands in the fourth quarter of the year 2021. Also for Mail in the Netherlands, a few examples on the progress they make in managing the mail company for value. I think important, first of all, is here, of course, the volume development we expect for the year 2022. It is 8% to 10%. Take into account that it is including the COVID effect. And we saw, of course, in 2021, an effect of 0.3%, which was mainly because of all the volumes we had from vaccinations, boosters, et cetera, et cetera. In Mail in the Netherlands, we remain to be focused on creating the value for Mail for example, direct mail. And also there, we did see that customers we did not have before 2021 started mailing in 2021, because physical mail still gives lots of attention. Sustainability plays an important role in the Mail in the Netherlands as well, although 90% of the network is already emission-free, CO2 emission free, is what we try to do is, of course, to make the last 10% emission-free as well by, for example, electrical bikes. In adapting the organization, we made a big step in 2021 by reducing the number of products we have. This is an important program on the Digital Next, and we came from 2,200 product codes, and we brought it to 200. And of course, we improved our sorting and preparation process by introducing the new mail sorting units. It's an important program because it's one of the programs that will deliver our cost savings going forward. Also here, progress has been made on making sure that Mail Netherlands remains to be a unit which is managed for value. On Slide #23, we give some specific attention points for the year 2022. The year 2022 remains to be on executing on our strategy. In Parcels, that means contribute to the development and growth of our customers, where, of course, the Net Promoter Score plays a very important role. Expansion capacity to accommodate further increase in volumes, which we expect in 2022, and further developing of a future-proof effective and sustainable delivery model, which needs to contribute to the aim of the 25 inner cities to be emission-free in 2025 and last mile emission-free in 2030. Mail in the Netherlands is managed for value. It needs to remain a strong nationwide network. Cost savings remain to be important in Mail in the Netherlands because that's the way to, of course, adapt and balance volume decline and safeguarding on-time delivery. Quality 2021 was 49%. By law, it needs to be 95%. So there's work to do in 2022. Speed up progress on ESG, I think already set quite some elements around those ESG targets and what we're going to do. Further accelerate our digital transformation. We will switch to Net Promoter Score. The year 2022 will be a transition year. We will increase our customer journeys and also make them as tailored as possible and accelerate our agile operating model. That will lead to a normalized EBIT outlook of EUR 210 million to EUR 240 million and a free cash flow outlook of EUR 110 million to EUR 140 million. Take into account that in the year 2022, of course, we have -- we expect almost 0 non-COVID -- COVID effects, that's one. What we took into account already is an increase in our organic cost upon which fuel and energy and, of course, the geopolitical changes we see in the last -- over the last few days will have their impact as well. Although as far as we can see at this moment in time, not impacting the normalized EBIT range we give for the year 2022. Much more to tell about 2021 and of course, also the outlook of 2022. And I would like to hand over to Pim to give you more background on it.

Thank you, Herna. And indeed, let's look at more of the financial details for '21 and '22. But before we do that, I would like to point you towards -- and that's kind of strange -- the Appendix, but that's there because I think you can find there additional reconciliations that can help you fine-tune your model and/or use that in comparison to peers. So there's, I think, reconciliation of the income statement and EBITDA per segment. There is the results development bridge per segment, but also a reconciliation of the profit versus normalized comprehensive income. And as usual, a breakdown of pension expense versus cash contribution on pensions. So look at those. And if there's questions, you'll know where to find us. I'll move on to Slide 25. The Q4 Parcels bridge. Well, certainly, we talked about the margin of Parcels by the end of Q3 being 5.3%. And as we indicated and basically promised, we would expect an improvement of margins. And you can see this realized in Q4, moving towards a 9.1% margin in the Parcel segment. All in all, it's EUR 20 million down in comparison to Q4 last year, but EUR 25 million down as a consequence of lower COVID, EUR 5 million down as a consequence of cross-border development being less favorable, which means underlying an improvement of the Parcels business and as such, a good result. If we then move towards Mail in the Netherlands for Q4, we see an EUR 82 million profit in 2020 to a EUR 66 million profit number in the fourth quarter '21. And that gap can be explained by EUR 13 million less nonrecurring COVID effect in 2021 and EUR 6 million less contribution from cross-border that, all in all, leads to a minus 19% and improved by EUR 3 million underlying business performance improvements within Mail in the Netherlands segments. And that's on the back of a 8.9% volume decline in the quarter, unreported versus reported numbers. On Slide 27, you'll find a new slide, which basically gives you the insight on how to get from normalized or from reported EBIT to normalized EBIT and to reported EBITDA. And if I look at some of the comparisons I see with peers in terms of valuation metrics, I felt the need to add this slide. And here, we make a reconciliation from the reported EBITDA. We will then make the correction for the noncash pension expense that is part of the reported EBITDA, which is almost EUR 70 million in 2021. So a corrected EBITDA for the non-cash pension expense would be EUR 542 million. And if you think about valuation metrics, you need to make sure that you at least understand what the IFRS 16 impact on EBITDA is. In PostNL's case, that's been EUR 62 million. So if you were to correct those as well, you'll end up with an EBITDA ex non-cash and IFRS 16 expenses of EUR 480 million. And there also on the IFRS impact, clearly, there is a difference between our balance sheet and lease users in comparison to some of our peers. So I think an important slide for you to look at, in case you want to make comparisons on EBITDA with our peers. Slide 28 is the bridge on cash flow from Q4 2021. EUR 93 million normalized EBIT, as we've seen turned into a free cash flow of EUR 65 million. Key part there are obviously slightly higher CapEx in comparison to last year, a lower result obviously driven by nonrecurring COVID deltas. Lease payments more or less in line, a positive change in working capital, which we'll see revert into an investment in working capital going into 2022. A change in pension liabilities, we just talked about those. And we didn't pay corporate income tax in the fourth quarter 2020, and we did do so on the back of our higher profits for 2021 already in 2021. The full year cash flow bridge is on Slide 29. And there, I think, to start off with, it indicates a free cash flow yield, and that is an unlevered free cash flow yield of 15%, basically calculated as free cash flow divided by the market cap, so the equity value. And then you'll see the bridge from EUR 308 million normalized EBIT towards EUR 304 million free cash flow before exceptionals. And then you need to take out one of the installments related to the soft pension transitional plans of EUR 16 million, and then you will end up with EUR 288 million as the free cash flow number for 2021. There's within that bridge, a book gain on the sale of Cendris. Herna already talked about it in terms of the revenue development. And you see CapEx numbers of EUR 140 million, including the acceleration of digitalization and the expansion of our capacity. Change in working capital, a positive one, driven by positive working capital developments, closely monitoring our DSOs, DPOs and what have you. Change in pension liabilities of EUR 69 million in comparison to EUR 34 million last year. Change in provisions and cash outs in 2020 related to [ Sannd still ]. And we talked to -- about the cash flow on the tax. Proceeds related to the sale of Cendris are reported under Disposals. And all in all, a very, very strong cash flow over 2021. That then obviously leads to a balance sheet that also moved favorable. You can see that back in the development of the adjusted net debt on the left-hand side of the graph -- of the slide, I should say, from EUR 407 million by the end of 2020 towards EUR 203 million adjusted net debt by the end of 2021, which is aligned with a leverage ratio of 0.4x which is also well within the ranges of how we have defined properly financed. If you talk about our invested capital and the returns we make on the capital that we do employ, the return on invested capital for 2021 turns out to be 16.4%, which is very attractive and more than 2x WACC. You'll also see the graph on the right-hand side that indicates the key drivers that have improved the working capital -- or the return on invested capital. Clearly the step-up in results, but also the investments that we've made. We do expect, obviously, to be above the WACC threshold in all the years that we're planning for. Certainly, return will come down a bit given the nonrecurring Covid effect that we do not expect to see back in 2022 and forward. The share buyback program that we've announced will positively contribute to the return on invested capital, roughly speaking 1% to 3% over the next years. And there is on Slide 32, the share buyback. Well, clearly, we've announced that program of a maximum of EUR 250 million in 2 tranches, first tranche to be executed as of tomorrow with EUR 160 million to EUR 170 million, with a maximum of 51 million shares to be bought back. And as I said, we'll start tomorrow a second tranche to neutralize the 2023 expected dividends, share dividends will follow in 2023. We'll use the cash that is -- that you've seen on the balance sheet of EUR 848 million to do this. And certainly, this share buyback program will not only have a positive impact on return on invested capital, but also a positive impact on the dividends per share of roughly EUR 0.03 to EUR 0.06 per share over the period 2022 to 2024. Then let's move towards the outlook for 2022. And there, Slide 34 basically explains the transition from 2021 towards 2022. Well, normalized EBIT for 2021, clearly, on the EUR 308 million, EUR 82 million of that is nonrecurring Covid. That leads to a normalized EBIT ex nonrecurring Covid of EUR 226 million. And then we see a couple of developments. We expect a volume growth at Parcels of 3% to 5% based on reported numbers, which is around 15%. If you exclude for the nonrecurring COVID effect, that is more or less in line with the underlying growth that we've seen in the fourth quarter. Volume decline at Mail 8% to 10% based on reported numbers, but again, corrected for nonrecurring COVID, that is a 5% to 8% decline. We do see a significantly higher organic cost development than in past years, driven by cost items around energy, transportation costs, fuel and also labor, clearly, which we've onboarded in our outlook that we're looking at. Then start-up cost of new facilities, the acceleration of our digital transformation program. Herna talked about that only will be accretive as of 2023 or during 2023, and higher pension expenses. Next to a cross-border development where we do not expect an improvement of the current market conditions for the first half year of 2022. And please remember that we had a very positive first half of 2021 prior to the 1st of July value-added tax threshold being abolished. Certainly there is uncertainty about, let's say, the global market developments. As good as we could, we've taken them on board, but everybody needs to recognize that in these times, there's going to be a fair amount of uncertainty about how prolonged these inflationary effects will last. On Slide 35, we've indicated the development of revenue, normalized EBIT and adjusted EBITDA, both in terms of reported and corrected for nonrecurring COVID effects. And it indicates the growth, both in terms of CAGRs on the adjusted level of revenue, around 4.5% normalized EBIT on 3% adjusted EBITDA, CAGR of 11.8% and again, also the expected volume developments leading up towards the outlook that we just discussed. And they are here to indicate that we're actually very positive about the transformation that PostNL has made over the past [ years ] and also very positive about the future developments that we see, given the market position that we hold and the way we steer the business towards our strategic ambitions. On the development of free cash flow in 2022 from the normalized EBIT EUR 210 million to EUR 240 million, we get to a free cash flow of EUR 110 million to EUR 140 million. And the key elements you can see here. So a step-up in CapEx in comparison to 2021, driven by Parcels capacity, acceleration of digital transformation, the introduction of more automated parcel lockers and a step-up in investments on ESG that will help us reducing our CO2 emissions. Lease payments, slightly higher. Working capital in comparison to last year. In 2021, we've seen a release of working capital. And in 2022, we expect an investment, and that is predominantly driven by our larger settlements of terminal dues that obviously are also a function of the higher cross-border results that we've seen in 2020 and 2021, that now need to be paid for towards colleagues' postal operators. Change in pension liabilities. We talked about interest and income tax, EUR 20 million to EUR 30 million minus where we can use the liquidation losses of Italy in 2022. And that basically is the reconciliation from EBIT to free cash flow with an outlook of EUR 110 million to EUR 140 million. On Slide 37, you see the outlook once more. We've talked about normalized EBIT and free cash flow, a normalized comprehensive income, we do expect to come in around the EUR 200 million mark for the year, which is the basis for our dividend policy. Slide 38 is an important slide. You know that we've been transparent and consistent for 2020 and 2021 in taking out the nonrecurring COVID elements of it, and certainly in the comparable number from '21 to '22, they will play a role. This slide indicates that we're basically going back to normal from a seasonal pattern in 2022, which basically means a lower result in the first half of the year, also driven in comparison to, let's say -- relatively to the full year, I should say -- higher costs, step-up in capacity and acceleration of digital transformation. And the impact on the utilization of the small parcel sorting sector in the beginning of the year gradually improving margins in Q3 and Q4. Also on the back of partial recovery in cross-border and cost savings in Mail in the Netherlands that are accelerating in the second part of the year. And that brings us to the conclusion of this analyst presentation. As said, although clearly around us, there is a lot of uncertainty and grave concern about the situations in Europe, we do reiterate that we're positive on PostNL's perspective, on PostNL's strategy going forward. and we are sure to deliver value for all our stakeholders in these uncertain times. And on that note, Jochem, I hand it back to you.

Thank you, Pim. Operator, please open the floor for questions.

[Operator Instructions] Our first question is from Mr. Frank Claassen of Degroof Petercam.

Two questions, please. First of all, on the Mail volumes now indicate minus 5% to minus 8% ex the COVID impact. That's clearly lower than in the previous years. Is this a change in trend? And what are the main drivers? And can we also expect that going forward, this kind of volume declines in Mail? And then secondly, on wage cost, what is roughly baked into your guidance on wage inflation? And can you remind us what are your latest CLAs, which ones are coming up for renegotiations and what is the status on the CLA?

I think on your first question, the minus 5% to minus 8%, is it a change in trend? I think too early to say at this moment in time. So that's the honest answer when it comes to the volume decline. We do see, of course, for example, new interest in direct mail. That's one of the examples I gave in the presentation. But too early to say that this is a trend which also continues in the year 2023 to 2024. Nevertheless, we're, of course, glad that we do see a decline of minus 5% to minus 8% in the year 2022. When it comes to wage cost, currently, we're in negotiation for the CLA for postal deliverers. That is, of course, still in negotiation. So no announcement from our side from what we are thinking that the correction or the increase of salaries will be. Normally, we take into account on wage cost around a 2% increase. We did do, of course, and I think that's what Pim already referred to when we talked about an increase in organic costs in the year 2022, we do foresee that the increase of wages or wage costs will be above the 2% in 2022.

Yes. Certainly, we've taken that into account. Obviously, we cannot be too specific given the fact that there are still negotiations going on, but significantly more than 2% is included. And maybe to add on the first point, I think we've also said that we've strived to get to a Mail result that over time is going to be more or less stable. From '21 to '22, we actually do realize that if you take out the nonrecurring COVID effect, basically the volume decline and cost savings, including the price development, will lead to a result from Mail in the Netherlands which is more or less comparable than the result in 2021, excluding the nonrecurring COVID.

Our next question is from Mr. Marc Zwartsenburg of ING.

A couple of questions from my side. First, Pim, on the CapEx. You're guiding now for a number slightly higher than last year. But if you look at the step-up from maybe 2019 levels, and then also looking to your outlook for '24 of the max EUR 450 million extra investments, it seems that we are running quite a bit on a lower run rate towards that EUR 450 million. I know it's a maximum, but is it fair to assume that maybe it can end up as high as EUR 350 million given the current run rate? Or should I expect an acceleration after '22 again in CapEx? That's my first question. Shall I take them one-by-one, or...

Yes, whatever you prefer, Marc. I'll take this one first, and then you've got time to think about the question 2 and 3, if not already on your piece of paper. On the CapEx, indeed, there is a step-up. We've talked about the EUR 450 million as the combination of step-up in CapEx and lease additions. And here, clearly, the cash flow element is only here on the lease payments and the CapEx additions and not so much on the lease addition. So that is one of the elements we might be tracking a little bit slower, but that's also a consequence of, for instance, shortages on some of the materials that we've ordered and did expect to get in '21, but haven't, and they now are obviously included in the EUR 160 million to EUR 170 million CapEx numbers. Some of the CapEx is related to the capacity expansion are gradually moving sometimes between the years by the end of '22, maybe into the beginning of 2023. But all in all, we're not looking at this moment in time in a significant step down on that EUR 450 million number. But what we said clearly is that is a function also of the growth expectation. So it's not one investment decision that we need to take. We are flexible, and that can also mean that over the years, it can move a bit. That is the answer on this point.

So the CapEx in '23, '24 should go up a little bit in combination with the lease payments. Is that how we should see it?

Yes.

Okay. Clear. Then on the Parcel volume guidance, at a plus 3% to plus 5% for this year on the reported numbers. Can you give us an indication of the start of the year in January, perhaps to get a bit of a feel for what is already in, so to speak, for the year?

Yes. Well, maybe one step further back, if you look at the Q4 numbers, we're basically [ trading ] on that around about 14% growth rate. If we look at the first weeks, month of the year, we're running in accordance with our expectations. So on track so far.

You mean the plus 3% to plus 5%. Is that what you mean? Or ...

Yes. Which is a full year number and take into account the quarterly split, that was one of the last slides I discussed. But let's say, in comparison to the expectations that lead to the 3% to 5%, we're running in line.

But that could imply that the growth is different from the plus 3% to plus 4% or 5% in the beginning of the year, just to understand each other correctly?

Well, last year, around that period in time, we did have nonrecurring COVID volumes. So you need to make sure that you do that right. And for the full year, it's 3% to 5% growth. And to get there, obviously we need to make our own expectations month after month, and so far so good.

Okay. Clear. Then on the dividend, looking to the, to 2022 already. I know it's early, we still have a year to go. But given the still very solid free cash flow generation and outlook in your reported results. Is it fair to assume that your dividend will at least be in line with the dividend you paid over 2021, the EUR 42 million?

No, I think that is too bullish. Obviously, what I said is, let's say if you compare normalized comprehensive income for 2021, it's EUR 285 million. The expectation for 2022 is around about EUR 200 million. And obviously that is because of the fact that we don't have the nonrecurring COVID element anymore. So that is too much of an ask, I would say.

And it's I think ...

[ Would you put any of the buyback ]

Yes, but do the math, then even then. So there will be a bit of accretion element, obviously, on dividend per share on the back of the share buyback program of a couple of cents. But I don't think you'll be able to -- whatever the calculation is going to be, go beyond the EUR 0.40.

We said earlier, Marc, that we do not expect the dividend in the year 2022, assuming the numbers will be like we presented them today, that, that will be exact number which we had as dividends for the year 2021. That's already what we did say in Q2 and Q3.

Yes, that's correct. I was doing the math, and I just got up to the EUR 0.42, EUR 0.43, so that's why I was asking.

Slight hope in your question.

Well, on the back of the outlook, a normalized comprehensive income expected of EUR 200 million will not get to the same level as 2021.

Okay. Fair enough. And then lastly, on Parcel volumes. We see now that Amazon is also opening up in Antwerp, and that is in the Flanders region, and with Brussels also they might even move cross border. We don't know. But can you give us maybe a bit more color what you expect from Amazon in the Belgian region for your volumes? And the other one and related to the other big customer you have in bol.com. They already went to a multi vendor. Would you expect them -- because they bought this company that also does last mile. Do you expect them to go that same route as Amazon, that they start to do more of the last mile delivery themselves?

The first one, Amazon in Belgium is, we're not distributing volume for Amazon in Belgium. So that's an easy answer. And in the Netherlands, we already, of course, explained it earlier that we followed and still follow a clear strategy that we do not want to distribute more than 30% of the Amazon volume in the Netherlands. And that also limits, of course, our exposure in case they want to do much more of their own distribution than they do today. On the -- the second part of your question, do we expect volume impact because of the multi-vendor or the acquisition done by bol.com? The answer is no. We do not expect that. And that's also because if you truly look into the network they bought, it's a cycle network which delivers within a certain amount of hours. And the volume, which can be distributed via that network is not that high. So we do not expect that to impact the volumes we distribute for Bol.

But you also do not expect Bol to maybe go a bit more the Amazon route, to do more themselves and to build out the network. [ Do we just ]...

It's not what we forecast at this moment in time based on the discussions we have with the company. And I do not have a crystal ball for the next coming 10 years, but that's where we are today.

[Operator Instructions] We have a question now from Mr. David Kerstens of Jefferies.

First of all, you gave a lot of detail on the COVID impact split between Parcels and Mail and partial split in Parcels Netherlands and Spring and Logistics. But I was wondering, maybe I missed it. Do you now also provide the EBIT of Parcels Netherlands and Spring and Logistics separately? That's my first question. Then secondly, on Spring, does your outlook for 2022 assume a recovery? And you said that you had anticipated the recovery based on customer interviews. Why would Spring recover? Why would those volumes come back after the VAT increase? And then third question, maybe looking out a bit further towards your 2024 ambition, you expect more or less stable normalized EBIT for 2022. But then in order to get to at least EUR 330 million by 2024, you need an acceleration in earnings momentum. What's driving that? And particularly, the outlook for stable EBIT for Mail in the Netherlands, you have, I think, increasing labor cost pressures, increasing energy costs, while -- whereas stamp prices are expected to remain relatively stable this year. How can you mitigate those effects and get to a relatively stable EBIT in your 2024 ambition?

And there were, let's say, also side questions in relation to the 3, so remind me if I miss some. So on the COVID impact, we do make that split, and we make that split consistently over the quarters of 2020 and 2021. We do split out revenues in the segment, but we do not give out the specific EBIT numbers of Logistics, Spring and domestic parcels. That is the question -- or the answer on question 1. On Spring, we do expect Spring's performance within the year will be lower than in the full year 2021. But we do expect on the trade lane Asia to China in the second part of the year, some improvements.

Asia to Europe.

Sorry, Asia to Europe, that's kind of silly. And why do we expect them? Obviously, the low value threshold is abolished. At the same time, we see that all the Chinese web shops that we serve have now the right connections and the solution to enable customers, consumers to easily buy their products. The reason why we've not seen the recovery that we expected in the fourth quarter was much more driven by increase in freight costs in combination with higher transit times. That has made the relative competitive position of these Chinese web shops in comparison to domestic web shops, but also domestic retailers, significantly less attractive. And that is one of the most important drivers behind the development in the fourth quarter. We do expect freight costs to be remaining at a higher level, not so high as in October, November time for the first part of 2022. But we do expect gradually an improvement there. On the ...

2024 trajectory.

Yes. Well, that was one, but that was also indicated on the back of Mail's performance. So we're still trending towards the same ambitions that we've earlier indicated. The reason why we believe in that acceleration of earnings momentum is obviously also driven by our Digital Next program, which we're doing the investments for, that currently lead to negative impact on cost and results but will bring returns as of 2023 and onwards. So that's part. Next to that, we have more additional network expansion cost in the year 2022 as well on the Parcel side, which will not continue that way going into '23 and further. A third element is that even though in 2022, there is no increase in stamp prices, we're able to get to a Mail in the Netherlands result which is more or less stable in comparison to last year. And that is obviously because the slightly more favorable volume development within the year and a step-up in cost savings from 2021 towards 2022. It's not to say, clearly, that stamp prices cannot increase from 2022 towards 2023. We do expect that to be possible as well.

Pim, very clear. And regarding the stamp prices, you do have some inflation in 2022, right?

Yes, we definitely do have inflation, and that is countered by the cost savings element and some other developments we just talked about. If you look at the full outlook bridge, the impact, if you talk about segment split of Digital Next, expansion of capacity and cross-border, they have impact on the Parcel segment predominantly, and not so much on the Mail segment.

Our next question is from Mr. Henk Slotboom of The Idea.

I have a few. First one is on fuel costs. Is it fair to assume that the higher fuel bill in the case of Parcels can be passed on to the companies you're working for, you're delivering for? And if so, can you say something about, is it lagging? How much is it lagging? And to what extent can you pass on these costs? That's my first question. The second question, you already spoke about your expectations with regard to the volumes in Mail -- sorry, in Parcels. Can you say anything about the expectation with regard to the mix as well? Is the mix or has the mix been changing in the first few months of this year? And thirdly, on Digital Next, you're getting a more and more IT-driven company, which is something you're all happy with, I guess. But at the same time, certainly, with the war going on in Ukraine, the risk of cyber warfare is increasing. And to what extent are you protected against this? I know that Herna used to have a committee on cybersecurity. So I guess it's okay, but perhaps you can say something about it? And last question, perhaps the most relevant question. If I look at the slides, how you expect earnings to be phasing through the year? What is the biggest challenge that you might be facing as the year progresses? Perhaps you can say something about that, too. Those were my questions.

Thanks, Henk, for your questions. I will take 1, 2 and 4 and then leave the third one to Herna, I would say. Fuel costs, yes. Certainly we've included them, maybe not on the level of $130 per barrel that was this morning's price. They can be passed on by customers in general, but it is lagging. So clearly, if you talk about contract renegotiations and indexations in commercial contracts. They have started on the first of January on the back of indexation levels for the full year 2021 and as such, don't take into account [ the spiky ] development over the last months. The 2023 indexation is then a function of the inflationary impact on 2022. So there is a lagging element to it. And it's not always 100% complete, the coverage of indexation. It is a function of also how commercial contracts are agreed upon. But in the year 2022, it is a dilutive impact on margins in the Parcel segment, because we cannot pass on within the year the higher fuel costs that we currently see. On the second question, let's say, the volume development at this point in time, we do not see fundamental changes in the mix. So we still see bigger customers growing slightly faster than smaller ones. So as such, that will have an impact on price/mix, but not a different trend than the one we reported in last year. What are the challenges in relation to the phasing? Let's say -- from an execution point of view, we know what to do. We have clear plans for 2022 and the preparation of new network extensions within the year as well as preparation that we work for the holiday seasons, that were there. The challenge is clearly reported to reported numbers, those will be down in the first quarters of the year. That in itself should not be a surprise. And that's clearly also why we've been consistently transparent on the nonrecurring COVID impact on our numbers. So at least to make sure that everybody understands the underlying trend that we are looking at. I think that is an important element. And then thirdly and fourthly, there was a question on cyber.

Yes, you're correct there. PostNL is more and more an IT-driven company. That's not something of the last year. That's, I think, a change over the last 5 years. We do have a separate and dedicated cyber and cybersecurity unit in our own company. There are close links with the other companies in the Netherlands and close links to the NCTV in the Netherlands. And that means that we have a dedicated team at this moment in time for -- to protect us for possible cyber attack from Russia or the Ukraine. So yes, it does have lots of attention. It needs also lots of attention because as you do know, those risks develop much faster than you sometimes can imagine. And it has specific attention at this moment in time because of what's happening geopolitically.

We have time for one more question, and that's from Mr. Wijnand Heineken of Independent Minds.

One follow-up question about the outlook for Mail Netherlands and also a bit for the longer term. You mentioned still cost savings plans that for the year will be higher than last year. Could you give us a bit of an update of what the trend is and maybe some quantitative impact on that? And what kind of savings you anticipate for the years after 2022 and what trends we can expect there? Because the story will not be different from previous years, that it is an important factor for realizing your goals.

Wijnand, I think that's correct. It is important and remains to be important also going forward to after 2022 to realize, of course, a stable value out of our Mail operations. To update you on plans, an important value driver and cost savings driver going forward is, for example, the product code reduction we did from 2,200 to 200 codes. That helps, of course, not only in being more customer-friendly, but also helps on the site where we have people which have to do the administration, but also accept every evening mail coming from customers. A second important program going forward is a program in which we talk about the new mail route that enlarges our mail route. That's also one of the reasons why you see more and more electrical vehicles for mail deliverers. That creates efficiency. They can take up more mail items in their mail route without using more time for it. And the last one, which remains to be important going forward is, of course, the reduction of the amount of locations we work in. I don't -- you probably do remember that we started 4 years or 5 years ago with an amount of 240 or 250 locations. We're now, as you've seen in the presentation, around 30, we think we can further reduce. So that is important in our cost savings program as well. The step-up we will create from 2021 to 2022, that is an important step up, which is from around EUR 25 million to around EUR 35 million, and that remains to be a level which we need going forward as well.

Just for clarification, the -- from EUR 25 million to EUR 35 million, that's a step-up in the annual cost savings you have? Or should I interpret that differently?

That's roughly speaking the step-up from 2021 realization to 2023 -- 2 numbers included in this outlook.

I'll hand back now to Mr. Jochem van de Laarschot, Investor Relations. Go ahead, sir.

Thank you very much. This concludes the conference call about our full year results. Thank you all for joining and for your questions. If you have any remaining questions for us, then let us know through the usual channels at IR. We look forward to see you again and meet you again later on in the year, and hope you have a good day. Thank you. Bye-bye.

This concludes the PostNL Fourth Quarter Full Year 2021 Analyst Call. Thank you for your attention. You may now disconnect your lines.