Good morning, ladies and gentlemen. Welcome to the PostNL Q4 and full year 2022 analyst call. At this moment, all participants are in a listen-only mode, and after the presentation, there will be an opportunity to ask questions. Now, I would like to hand over the conference call to Mr. Jochem van de Laarschot, Director Communications and Investor Relations PostNL. Please go ahead, sir. Thank you, operator. Good morning, everyone. Thank you for joining us today. With me here in the room, Herna Verhagen, our CEO, and Pim Berendsen, our CFO. As usual, we will start with a presentation and take you through the slides, also available on our website and in the webcast, after which we will open the floor for your questions. Herna, over to you. Thanks, Jochem, and welcome to you all. I'll start on slide four. The year 2022 turned out differently than we had all expected it at the end of 2021. After a few years that were dominated by the pandemic, we expected to start to see recovery and to gradually return to a more normal situation macro-economically and of course, also our operating environment. The war in Ukraine changed everything. As well as creating terrible human suffering, it has raised safety risks and uncertainty within Europe to levels not yet seen this century. The war, now ongoing for more than 12 months, also deeply impacted local, regional, and global markets. High inflation and deteriorating macroeconomic conditions put real pressure on consumer spending through the year. Meanwhile, most countries were recovering from the pandemic and its impact on the global supply chains. The combination of the two negatively impacted e-commerce, putting great pressure on the sector and also on PostNL, leading to lower results than we had expected and hoped for. We saw labor and fuel costs increase to levels we did not see before, with total organic cost increases of around EUR 185 million. That's around EUR 138 million. The 185 relates to 2023. Overall parcel volumes were down by over 10%. In this environment, we took swift and firm mitigating actions throughout the year to navigate this turbulent environment. We scaled our network capacity and optimized routes, staffing, and fleet. We also reduced indirect costs at parcels and looked critically at overhead costs by delaying projects and filling staff vacancies. We were able to mitigate about EUR 45 million of the impact. Bottom line, however, we delivered a normalized EBIT of EUR 84 million, significantly below our initial outlook range. Through strict cash control, free cash flow came in at EUR 40 million. Based on the leverage ratio of 1.9 and our dividend policy, we have proposed a dividend for the year 2022 of EUR 0.10. Over to the challenging macroeconomic environment and industry dynamics. Some of the elements I mentioned, of course, are related to 2022, and we will see them back in 2023 as well. 2022 was a year with challenging macroeconomic and operating environment impacted by many factors. Already mentioned, the war in Ukraine, which impacted local, regional, and global markets. The other hand, we also saw record high levels of inflation, putting real pressure on consumer spending throughout the year, and in the end, also real pressure on the e-commerce market volumes. With a slowdown in e-commerce volumes, we're now operating in a market that is characterized by overcapacity and that is highly competitive while consumers continue to demand high quality and evolving service offerings. These dynamics continue to impact our operating environment going forward. Also for the year 2023, we expect ongoing volatility and uncertainty. If we look a little bit further ahead and look into the fundamental drivers of the e-commerce, the expectation of growth is unchanged. In other words, the e-commerce market has a strong potential for future growth. Particularly if you look into online penetration, which is an important driver behind e-commerce growth, 19% at the end of 2022 shows that the market is still immature and offers a lot of potential. The trend going forward is upwards. In the graph on the right side of this slide, you see the Euromonitor. Based on their extensive research assumes that the growth path in online penetration will resume going forward. Of course, we saw a peak in e-commerce penetration at the time of the pandemic, and we were on lockdown. After that, once society was opened, levels have come back a bit, but overall, levels are still significantly above the level we've seen before the pandemic and show an upward trend. The second important driver is retail spending. Once the macroeconomic environment starts to turn, and the timing of this is of course an uncertain factor, that will be an extra growth factor for the upward trend in e-commerce. These are the main drivers behind growth in the market that underpins our confidence in future growth going forward and underpins our strategy. If you look into our strategy, that strategy remains to be the leading logistics and postal service provider into and from the Benelux, with three important pillars. Of course, parcels, which is managed for sustainable growth. Mail, which is managed for value. Digital Next, which will support our business performance in cost and revenue, but also is an important factor in increasing customer satisfaction. The year 2022 did show on our strategic objectives important improvements and important elements. In customer value, we saw 33% of highly satisfied customers. We had 98% of delivery quality parcels in the Netherlands and 91 with Mail in the Netherlands. By this time, we have around 600 automated parcel lockers. By the end of 2022, 517. 66% of the users are active users of the PostNL account, and almost eight million unique users of that PostNL account at this moment in time. In employee engagement, we saw a light decline to 81%. The absenteeism in 2022 was higher, partly because still of COVID, partly because of people needing to go to the hospital, which they couldn't do during COVID. That's what you see in absenteeism. As you do know, we had, of course, we made a pension agreement, just before the end of 2022, which is positive for PostNL, and Pim will come to the highlights of that, but also positive to our employees with 10% pension indexation. Of course, the CLAs are secured, which was important for PostNL. In the environment, we did lots of good. We did see that 22% of our last mile is now emission-free. We had a 25% improvement in our carbon efficiency, and of course, we offset any remaining emissions, so we are net zero. That was also seen by externals, for example, in the prices we received around environment. As said, 2023 is expected to be a difficult year, partly because of the lack of parcel growth, partly because of the still expected high organic cost. Nevertheless, we do expect that market continues to grow when economy recovers, and hopefully that's as of 2024. That means that we're well-positioned to resume our growth trajectory at parcels and maintain our solid performance at Mail in the Netherlands. For the year 2023, we expect a normalized EBIT of EUR 70 million-EUR 100 million. There are a few important elements underneath. As said, we still expect high organic cost. Pim will come back to that. We expect a slight decline in the amount of parcels. On the other hand, we do see continued growth after 2023. That makes the year 2023 for us so important to set the organization totally right. That's the reason why we also announced an additional plan to do EUR 25 million-EUR 30 million cost savings as of 2024 by the reduction of 200-300 full-time equivalents in overhead and other indirect costs, mainly at parcels. These will deliver a saving of EUR 25 million in 2024, which will grow to EUR 30 million in 2025. Of course, we will continue to adapt our organization with price adjustments. We'll give you some insights in what we did for the year 2023, scaling our organization to volumes and of course, also further efficiency programs. Beyond 2023, with all the actions taken in 2023, we expect a gradual margin improvement, mainly at parcels. Partly because of the e-commerce growth, with of course our flexible investment program. Secondly, we keep our mail accessible, reliable, and affordable, and we're building on our digital platform. We're integrating customers, consumers, and solutions to simple and smart digital journeys. What the exact gradual margin improvement will be in 2024 will be detailed later in the presentation. A very difficult year. By far not what we expected it to be. Still a difficult year ahead of us in 2023, where we took the necessary actions to be fully ready and fit the moment the market will start growing again. I'll hand over to Pim to give you the highlights of 2022 and make a first step to 2023. Thank you, Herna. We move to slide 11. Quite clearly, the year turned out different than we expected at the outset. Where we did expect growth, it turned into volume decline in parcels. Obviously, fundamentally changed market circumstances as of 24th of February of last year. I think we dare to say that we've made the most of the very demanding market circumstances, and I'm gonna talk you through the elements to indicate that. If you look at the organic cost developments, when we were at the outset of the year, we expected EUR 70 million of organic cost increases, part of which we were already not expecting to be able to put through in prices. That EUR 70 turned into EUR 135 million of organic costs, which is a EUR 65 million additional impact. Basically, in the year 2022, had an effect of EUR 80 million gap between organic cost increases and price increases. Obviously, because of the fact that prices were fixed prior to the steep increases in inflation and fuel prices as of February 24. In the beginning of the year, coming out of COVID, we did expect growth in parcels on the back of the same market drivers that Herna just discussed. Consumer spending was going to be up, online penetration was going to continue in the right direction, and that projected growth. Well, that growth turned into a 10% volume decline with roughly speaking 60 million items less than we predicted at the beginning of the year, amounting to EUR 100 million of assumed EBIT impact. Obviously, that decline is completely driven by lower consumer spending as a consequence of the uncertain market circumstances. Mail in the Netherlands, we projected an 8%-10% volume decline, and which ended up at eight at the better end of the range. I think all in all, Mail did a very good job also realizing the cost-saving plans as we projected them to be. Clearly, we've done our utmost to offset and to compensate those negative elements in our business model throughout the year. We managed to mitigate EUR 45 million of these elements through different measures within parcels predominantly. Scaling back operations, reducing the routes, taking out sorting capacity, and all different type of measures also focused on indirect cost in the year to mitigate as much as we could the elements of lower volume and higher organic costs. That amounts to EUR 45 million of mitigating actions, obviously separately from the cost savings within Mail. That then, all in all, resulted in the normalized EBIT for 2022 of EUR 84 million that you've surely seen. If we then look at the fourth quarter, we look at it as a solid peak season. Operationally very well executed against very good quality. Turned in EUR 60 million of normalized EBIT and EUR 79 million of free cash flow, where free cash flow is up in comparison to last year. Normalized EBIT, given the elements we just discussed, is down. I think, in Mail, the volumes were more or less in line with expectations. Ex-COVID elements in 2021, it is actually a flat result in comparison to Q4 last year. Parcel volumes were down, but from an operational perspective, we delivered strong performance. But we're not able to fully scale down the organization as labor markets remain to be tight, and we had to ensure our flexibility and service levels remain high in peak season. From a labor perspective, we reached an important milestone by reaching the agreement with the new collective labor agreement from April 2022 until March 2024. That has been applied retroactively, meaning that the full impact for 2022, also from April 1st to December 31st, is visible in the Q4 numbers, with a total impact of EUR 35 million. In order to further de-risk the balance sheet and improve the position, the financial position of PostNL, we've managed to conclude a very important pension agreement with the pension fund. further de-risking the pension position, which means that as of the first of January, there's no top-up payments anymore. It changed into a defined contribution scheme, which also means that from now on, what we will account for in the P&L and the balance sheet will actually be the cash cost of the pensions and no specific IFRS component anymore. That deal resulted in an improvement of PostNL's financial position of, roughly speaking, EUR 20 million because of the reduction of the unconditional funding obligation. There's also some technical accounting classification elements related to the pension deal that I'll discuss a little bit later on. On slide 13, we'll look at the segment of parcels in the fourth quarter, realizing EUR 24 million of normalized EBIT in comparison with EUR 55 million the year before. As said, on the back of a 5.4% volume decline corrected for COVID, that was 3.8%. Cross-border activities still suffered from difficult market circumstances in Asia in comparison to Q4 2021. We're on a more positive run rate, basically throughout Q3 and Q4 of 2022 in comparison to the first parts of 2022. As such, indicate some positive momentum in that area. Those were the key points on parcels. If we move then to the parcels bridge on the next slide 14. There you see the move from the EUR 55 million of last year to the EUR 24 million. The big driver there is the EUR 21 million volume development, positive price mix increases and favorable mix effects as well. Organic in-cost increase is very, very significant in this quarter and actually the entire year. EUR 27 million. Volume-dependent cost, obviously goes the other way. Other cost indicates the savings that we've realized by taking operational efficiency improvements and basically all operational efficiency drivers, we've done better than last year. In other results, also you see that the other businesses, not the volume-related elements, but logistics, Belgium, and transportation units have also been hit quite significantly by the changing market circumstances. If we then move over to Mail in the Netherlands, we are actually quite happy about Mail in the Netherlands' performance in the fourth quarter. Strong performance, the way we look at it, a result of EUR 60 million in comparison to EUR 66 million last year, also with a delta related to non-recurring COVID of EUR 6 million. Actually contributing a flat result ex-COVID, which is in our view, a good result also driven by the step-up in cost savings, realizing the total ambition of EUR 27 million of cost savings in the year, of which EUR 11 million are saved in the fourth quarter. Volume declined by 8.1%, corrected for non-recurring COVID items. The volume development was 6.5%, obviously driven by ongoing substitution. The bridge of Mail on slide 16. The impact of volume decline is EUR 25 million on the EBIT, slightly negative price mix effect. Obviously, positive price effect offset by less favorable overall mix. Organic cost increase is also quite high within mill. In other costs, you find the cost savings, including the positive results on bilaterals, and nothing specific in other results. Down EUR 6 million or EUR 7 million, but as said, corrected for non-recurring COVID, flat in comparison to last year. We're happy with the performance of mill operationally and financially in the fourth quarter. We then move to the second financial business driver, that's the cash flow in the fourth quarter. Our free cash flow in Q4 came in at EUR 79 million, which is an increase of EUR 14 million compared to Q4 last year. Let's say there's no pension deal elements in the cash flow bridge up to the point of the free cash flow before exceptional. There's the settlement payment transitional plans. There you find the EUR 28 million, because part of the pension deal led to a change in the payment schedule by which we've now paid EUR 28 million in the fourth quarter rather than the EUR 16 per year that you might recognize from the past. There are still one payment to be made in the first quarter of 2023, and then that is all done and settled. If we look at the full year cash flow, the bridge from normalized EBIT to free cash flow from EUR 84 towards a EUR 40 million free cash flow for the full year. Obviously also there you find the settlement payment transitional plans of EUR 28 million. The bridge actually goes business-wise from EUR 84 to EUR 68. With a fair amount of normalizations in EBIT in this year that we do not expect to see back in 2023. Depreciation, amortization, more or less in line with last year. CapEx, the same. I think again, much focus was set on strict working capital management, which helped protecting the balance sheet. All in all, a good performance on cash, I think. Slide 19, it's kind of a technical explanation of the accounting elements related to pensions, because on profit for the period, you might have seen and also on operating income, a quite significant loss. That loss is completely because of accounting elements related to pensions. That does not affect the equity, nor does it affect the total compre... normalized comprehensive income) - correct. * "operating income" (general term) - correct. * "other comprehensive income" (glossary: other comprehensive income) - correct. * "balance sheet" (general term) - correct. * "adjusted net debt" (glossary: adjusted net debt) - correct. * "share buyback" (glossary: share buyback) - correct. 4. **Convert spoken numbers to numeric form:** * "two hundred and sixty million" -> "260 million" * "twenty twenty-two" -> "2022" 5. **Apply currency formatting:** The primary currency is EUR. "260 million" will become "EUR 260 million". 6. **Punctuation:** Ensure correct terminal punctuation. 7. **Final review:** Check against all rules Pension liability show the impact of EUR 60 million regular soft pension settlement, EUR 12 million additional payments, and EUR 20 million release of the liability, which is actually the real improvement of the pension due on the balance sheet. Obviously, next to the fact that going forward, we'll only have the pension cash out as pension costs reported. As such, by managing the cash flow, the balance sheet carefully, also during the year, within that very difficult market circumstances, we managed to keep the leverage ratio below the 2.2 times, and ended up at 1.9. From there, it is a logical step to the dividends, the dividend policy. Obviously, the financial framework indicates that we steer for a solid balance sheet, aiming at a leverage ratio of adjusted net debt over EBITDA not exceeding two. We managed to stay within those boundaries, and that's also why, given the dividend policy, we propose a dividend of EUR 0.16 per share, of which EUR 0.14 have already been banked, so final dividend will be EUR 0.02 if approved at the AGM. In 2022, we executed a first tranche of the share buyback program with the objective to mitigate the dilutive impact of dividends over 2021, 2022, and that's been done. Obviously, given the more uncertain circumstances, particularly in 2023, we have decided to postpone the second tranche at least for now. Again, we'll reconsider whether or not we can do something about it on the back of the capital allocation funnel that we've shared with you before. First and foremost, we need to be able to invest in the business to focus on realizing our strategy, making sure our businesses are in the best possible place in relation to competitive tensions. accelerate our digital transformation, make sure that we pay a good dividend that is a function of the operational performance. We'll consider an M&A portfolio if there's room left, if there's excess cash again, we'll consider and make the same judgments as we've done when concluding the share buyback in the first time around. For now, it's postponed, to uncertain circumstances dictate that from us. I think, Herna, we go back to you for a first view on 2023, I'll take over with more financial details later. Yeah. Think move on to slide 24. We already explained why we're confident in that growth path will resume and that we are well-positioned. In the strategy we're executing at this moment in time and the extra plans also have a positive improvement or have an improvement on the performance as of 2024. 2023 remains a year with a volatile macroeconomic environment and therefore prolonged uncertainty. That also means that we've taken additional measures to strengthen our foundation. As such, the fundamental growth drivers of the long-term upward trend in e-commerce are unchanged. Therefore, we're confident that that long-term e-commerce growth perspective and also our position as market leader in the Benelux can be maintained. Our strategy helps us to navigate through these challenging times, on the one hand, and on the other hand, prepare for the future. In getting... In strengthening our foundation, we invest further in sustainability, in digitization, in labor model, in quality, and of course, also in our network. At the same time, we take all the necessary adaptive measures in which we, of course, align our organization to the volume we expect, in which we make the organization more efficient and effective. We announced today an additional plan. An additional plan to make sure we are well-positioned for once the economic conditions improve, and to secure our position in a competitive landscape that also resumes to resume our growth path, with, of course, an improvement of our margin as of 2024. To give you a little bit of insight in that additional plan to reduce costs, we're on slide 25. What we did say this morning is we will add to the plans we already have in our budget a reduction of 200-300 full-time equivalents in overhead and other indirect costs, mainly at parcels. The result in additional cost savings are on top of our regular cost saving program we run at Mail in the Netherlands, and on top of all the other adaptive measures we have implemented, will be EUR 25 million of cost savings in 2024, and expected to have its full run rate in 2025, with a cost saving of EUR 30 million at that moment in time. For this, a total of EUR 20 million in costs, mainly restructuring provision, is necessary, and that is what you will see back in the results of 2023. We will increase CapEx in 2023 by EUR 10 million to invest and secure our customer value and quality. A year 2023, a year with volatility in which we take lots of extra actions, including re-reduction of full-time equivalents, delivering cost saving and therefore margin improvement as of 2024. To give you more insight in the bridge from outlook, we'll go to the bridge, on slide 26, you find the outlook of 2023. What you find over there is that we have a normalized EBIT is of EUR 70 million-EUR 100 million. Next to that, a normalized comprehensive income, the basis for our dividend policy of EUR 40 million-EUR 70 million and a free cash flow of EUR 10 million-EUR 40 million. We assume that the current challenging and volatile macroeconomic environment continues in 2023, that we of course resume our growth path after 2023. We expect economic conditions to improve over time, and this together underpins the longer-term upward trend in e-commerce. The additional plans we have announced today, we will ensure that we are well-positioned to resume that growth trajectory. Through our strategy and proactive approach, including all the additional plans, focus on head office and indirect costs at parcels, we expect a step up in performance beyond 2023. For 2024, that means a margin improvement of at least 200 basis points that will be visible, particularly at parcels. With further upside potential dependent on economic conditions. With this, we expect a step up in EBITDA that will be around EUR 20 million higher than normalized EBIT as a result of the increase in demonetization and amortization. Our dividend policy remains unchanged, and we aim to pay a dividend that develops substantially in line with our operational performance. Do the transition from 2022 to 2023. Pim. There we look at kind of how do we end up with the composition and with the outlook. Bless you, Herna. Yeah. Let's say from the normalised EBIT of 2022 towards the outlook range of EUR 70-100, there's a few important markers that I want to spend a bit of time on. Here you see the improvement of the pension agreement of lower pension expenses that is visible in postal order of EUR 75. That also means that we are still, and that's all driven by very complicated market circumstances, assume business performance of parcels and predominantly mail to go back compared to the levels of 2022. In parcels that is driven by a low single-digit volume decline that we expect, also taking into account some potential loss of market share in line with what we've seen in 2022. Obviously also there's price adjustments, but the price adjustments that we've managed to put through to our clients don't compensate the entire organic costs increases. I'll show you later how big of an effort we've done to up the prices and compensate as much as possible of that organic cost increase. You see a far bigger step down in mail performance, that might seem bigger than expected, but I think it's important to understand here that price increases within mail normally help to offset volume decline. Roughly speaking, half of price increases, half of volume decline is compensated by price increases in line with our moderate price policies. That entire price increase is used to offset organic cost increases, and as such, does not contribute to part of the volume decline. That drives specifically from 2022 to 2023, this step down in performance, which we obviously won't see back from 2023 to 2024 again. The cost element of the restructuring plans that Herna just talked about is EUR 20 million for the combination of restructuring costs and additional costs in relation to the changes that you also see. You end up with the EUR 70 million-EUR 90 million outlook range as we just presented to you. I think important to look at slide 28, eight to get a better understanding of the big impact of organic cost increases from inflation. Those will continue from 2022 to 2023 and actually increase in comparison to 2022. All in all, we expect organic cost increase of EUR 185 million, roughly split between labor and other cost elements like transportation, electricity. Cost developments in other businesses than our mail and parcel businesses. By huge commercial efforts, we're able to offset a very big component of that EUR 185 million, but not fully. The not absorbed component is roughly speaking around about the EUR 30 million mark that also obviously impacts the EBIT forecast for 2023 and is included in the outlook we just discussed. If you look back at the combination of 2022 and 2023, we're actually looking at an impact on EBIT of more than EUR 100 million of organic cost increases that could not be offset by pricing policies. That's obviously a function of how contracts are set up, the moment that those inflationary elements kicked in, and also the competitiveness in the market in which we operate. We believe it's actually a huge feat to have that impact on prices, as this slide indicates. By the end of the day, it's short of the impact of organic costs, and as such, a explanation of a step down in profits. On slide 29, there is the quarterly split that you also recognize. It is a year in which the fourth quarter will be very important, but at the same time, business-wise, we'll be able to show positive comparables in comparison to last year for as of Q2 onwards. That's what the dotted line indicates with Q2 because of the fact that we, in terms of the planning of the restructuring, expect to be able to take a restructuring provision by Q2. The actual expected number is down, but business-wise, we're able to see improvements as of the second quarter in comparison to last year. To the last slide, as said, 2022 is completely different than we expected it on the onset to be, with serious implications on PostNL, but also on our competitors and clients in this e-commerce market space. 2023 will be a challenging year. At the same time, we're confident that we have the right strategy. We're confident that longer term growth will continue on the back of GDP growth and online penetration. In the meantime, we're doing everything we can to mitigate as much as we can those negative elements, to protect the balance sheet, to take all necessary measures to be in the right place competitive-wise and as an employer to benefit from the growth when it will return. I said, there's no doubt in our minds that it will come back at some point in time. In the meantime, we're taking all adaptive measures that we can think of. Thanks for now. Jochem, I think we go back to you. Yes. Thank you. Operator, please open the floor for Q&A. Thank you. To ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A queue. Once again, that's star one one for your question. Our first question comes from the line of Frank Claassen from Degroof Petercam. Please go ahead. Your line is open. Yes, good morning. Two questions, please. First of all, on the assumption of low single digit volume decline for parcels, could you roughly indicate how much you think the market overall will do and how much is due to market share loss? Could you also elaborate why you've lost market share? Secondly, could you help us on the mail savings? The programs you've already installed, how much is still to come in 2023 and 2024? Thank you. On the first point, Frank, thanks for your questions. I think overall we do expect a market growth of, well, zero to little single-digit increase. If we look back at market share development in 22, we've seen a market share loss of round about 2% for the full year. That's also what we expect to continue going into 23, obviously on the back of a fierce competition, temporarily overcapacity in the market because all parties were expecting growth to come. That overcapacity is looked for to be utilized sometimes with price points that we don't think are appropriate for the longer term. That drives a little bit of market share loss, obviously not fundamentally impacting the market position that we have still being by far the biggest in the market. That's how you end up with kind of the low single digits, volume decline number. When it comes to mail savings, we expect significant savings in 2023 of around EUR 47 million. We didn't give that number for 2024 going forward. What we normally do, and that's what we will do this year as well, is of course we develop our cost saving plans. Those cost saving plans are partly, of course, already implemented in 2023 and will partly be implemented in 2024. You can think about a few of the big programs this year. We're still, for example, reducing the amount of locations. We're also working on a reduction of how we steer our organization within Mail Netherlands, but also looking into increasing our the hours, the amount of hours in contracts of our employees, which in the end makes it more easy for us to do it efficiently. Part of the programs of 2023 will continue in 2024. Some new ones will be added, and those will be developed in the year 2024, and then will help, of course, the savings in 2024 and probably also the years ahead. Okay. Thank you very much. Thank you. We'll now move on to our next question. Our next question comes from the line of David Kerstens from Jefferies. Please go ahead. Your line is open. Thank you. Good morning, everybody. I also have two questions, please. First, on the pension agreement, can you explain how that actually came about? I think you highlighted that the pension went up by 10%. You go from defined benefit to defined contribution. I was wondering, what is the cash payment that is now included in EBIT and in your cash flow guidance for 2023? I think initially you got it for a roughly unchanged payment. Given that you've now come out much lower than what everybody was expecting, does that cash payment, has that increased compared to previous expectations, given the fact that you pay 10% more and also that you go to a DC scheme, which I think is less attractive than DB. The second question is around the share buyback. You put it now on hold. I was wondering to what extent are you limited by the large shareholding of your largest shareholder close to the 30% threshold? How will that situation change going forward that will lead to a return of share buybacks in the future? Thank you very much. Thank you, David. A few points on pensions. How did it came about and what are the implications? I think how did it came about is that, let's say, for many reasons, the specific accounting treatment of the setup of the fund and all the arrangements from an IFRS point of view has been complicated. It has been complicated also for you as an analyst community, as investors to understand. It makes comparisons with other companies more cumbersome, and that's also why we over time have been very explicit, okay, what is the cash component of the pensions? What is the IFRS charge of the expense? What are the differences? All of those differences you can find in the PostNL order lines. There was momentum to try to do this given the fact that the pension fund had a very high coverage ratio. From that coverage ratio, there was, from a coverage ratio point of view, room to index the pensions and the entitlements of active people more than what we agreed to in contract. On the back of the arrangement that was in place, there was a maximum indexation possible of 4%. If that 4%, needed to move up without the scheme being changed to defined benefit, then it would have had huge implications for PostNL's EBIT. Obviously, I didn't want to accept those, I tried to find the momentum to fundamentally change the agreement, which we successfully done. Leading to an indexation for the pensioners of 10%, becoming defined contribution, getting rid of the top-up payments, and getting back EUR 20 million, that immediately limited the net debt position of PostNL's balance sheet. From now on, pension expense will be the same as pension cash out, more or less in line with the pension cash out that you've also seen over 2022. We're not going to pay more because of this change. To the contrary, we've gained EUR 20 million and we've de-risked future top-up payments. Lastly, you know there is a change in pensions in the Netherlands going on, and that needs to be implemented by the first of January, 2027. We've also made a principle arrangement on how we would do that pension transition also on a cost-neutral point for the employer. Yeah. Yeah, that's amazing. Can you explain why the pension cash out will be more or less in line with 2022? It sounds like this should become more expensive, right? No, because let's say the pension arrangement is the same. The threshold on which the salary-given pension is the same, the contribution levels are the same. We've just taken out some of the DB elements that made it a defined benefit arrangement. They are no longer there. The employee has not suffered anything from this, nor are we going to pay more. We're gonna pay the same per individual as we've done in 2022. Plus the 10% indexation. No, that is not an indexation on, let's say, future payments. That is an indexation on the entitlements that are built up over the period to the first of January 2023. To simplify things, if I was a pensioner in the pension fund, and I did get in January 23 a pension which basically was 10% higher than the pension I got in December 2022, funded by the coverage ratio of the fund. Obviously going back then from 140% coverage ratio to 132 or something like that. Mm-hmm. We can't see your face, so is it clear or still questions? I probably still have more questions. What is the actual contribution now, then? Around 80. Around EUR 80 million. Yeah. Okay. I think in the back pocket there's the reconciliation of the pension expense with the pension cash, and there you can find it. Hopefully I got the number right. The second question was about share buyback and whether or not there is a limitation because of the size of the Vesa stake. Well, that did not play any part in our considerations, honestly. That was already a factor at the first tranche when they already also had a quite a significant market share. Sorry, shareholding. The arguments to postpone this are given the fact that we've ended the year at a 1.9 leverage ratio in very uncertain markets, and it's in our view not the right time to start that second tranche of share buyback. Nothing to do with the Vesa share. What is important for us in 2023 and the years ahead is to stay, of course, below the limit of the 2.0 leverage ratio. With all the actions taken, a share buyback doesn't fit into that important element. Yeah. Understood. Thank you very much, Pim and Herna. Welcome. Thank you. As a reminder, please press star one one to register a question. Our next question comes from the line of Stefano Toffano from ABN AMRO ODDO BHF. Please go ahead, your line is open. Yes, good morning, everybody. Actually, quite a few questions, but I will try to limit it to say three. Maybe the first question is on the 200-300 FTE. That's obviously quite a big gap, 200 or 300, but we have a fixed restructuring number. Maybe the first question is, what will it make? Will it be more towards 300, more towards 200? Or are you keeping it flexible dependent on how the macro and the market and your business will develop? That's the first question. The second question is maybe looking out towards 2024 and the margin improvement, because obviously you say we assume that the market at some point will go back to growth. How are we to think about your margins, let's say assuming stable, a stable market? Not assuming an improvement of the market, how do we have to look at the margins going forward after 2023? For, let's say 2024 and 2025. Maybe the last question is, I mean, you have been very, you were very close to the 2.0 times net debt to EBITDA. If I look at the outlook for 2023, I mean, I fully appreciate the bottom-up explanation. Just... I mean, thinking about, okay, 2023 we'll have pressure on the top line, we'll have higher costs, additional CapEx of EUR 10 million, additional costs, and you still get to a free cash flow of EUR 10 million-EUR 40 million. It seems you have to run a very tight ship not to get over that 2.0x on your leverage ratio. I don't know if you can maybe help us to understand what kind of flexibility you have to make sure that you do not reach that. Maybe related to this one, and my apologies, but related to this one. The reason of the EUR 40 million cash flow this year was also because you didn't pay any taxes due to deferred DTAs. If you can remind me how much of the DTAs, unutilized DTAs are left. Maybe assuming this kind of normalized EBIT, we won't see any tax cash out for this year as well. Is that just included in the EUR 10 million-EUR 40 million cash flow? Apologies for all the questions, thank you for your patience. I'll take the first and then Pim will take over. When it comes to the 200-300 full-time equivalents, it's a big gap, and we do have a fixed restructuring number in the sense that the positive impact of EUR 25 million. The reason for having that bandwidth is that not all of the cost savings will come through the reduction of full-time equivalents. The biggest part will come through the reduction of full-time equivalents, but not all. That's the reason why we gave a bandwidth. We still have to develop the plans. Of course, we know the directions in which we where we want to find the full-time equivalents. Plans still have to be made, need to be ready before the end of May to have the reorganization fully implemented by the end of the year. The reason for the gap is the fact that not all will come from restructuring. Biggest part will. On kind of the number of basis points increase, what we have said as part of the outlook slide is that we expect more than 200 basis points increase on the back of the measures that we take and gradually improving market circumstances. If you look at the 200 basis points, it's actually 300 basis points, roughly, in Parcels, 100 in Mail, and because of the mix, that turns to a 200 basis points improvement in total. Both segments will contribute to the improvement of margins. Mail, as said, because of the fact that the big gap between organic cost and price increases will not be there in 2020. For the step-up in cost savings, we're comfortable about... In the parcel side, there is the element where the biggest impact of the cost savings will land, and as such, they contribute from the margin contribution is driven by those cost saving measures as well. That is assuming a level of growth to return. We're confident that growth will return. If it is all a status quo and, let's say, it stays at the level of 23, then roughly speaking, all things being equal, you can calculate that it's actually a little bit more, roughly speaking, 100 basis points of contribution coming from the measures alone. That is, I think, the answer on question two. The leverage ratio, yes, we're running a very tight ship, and we have been doing that already for quite a while, if it is about the balance sheet, working capital, phasing of investment decisions. And that's why we've ended up with 1.9, because that also was not a given the big impact on costs and loss of volume that we just talked about. We continue to monitor that. We continue to manage quite rigidly our working capital positions. Yeah, we expect on the back of the numbers that we've discussed to be able to maintain that position below the two times. If market circumstances deteriorates, we'll obviously look at all the elements that make up adjusted net debt, which also includes lease additions and what have you, and we'll find ways to offset or compensate if profit numbers drop through the balance sheet to try to keep it under two. We're running a tight ship. It is, well, 1.9 is close to the 2, we still expect it to improve a little bit in 2023. On the tech side, I think the easy answer is that, roughly speaking, all tax losses in relation to Germany and Italy have been used to the extent that we could use them over the past period, and that's also why we do expect a tax payment, tax cash out in 2023 as part of our free cash flow expectations, which is obviously included in the free cash flow guidance that we've given. If I've not missed one- Thank you very much. I think those were the four questions, Stefano, that you've, that you were asked. Yeah. Exactly. Thank you very much. Thank you. Thank you. We'll now move on to our next question. Our next question comes from the line of Henk Slotboom from the IDEA!. Please go ahead, your line is open. Morning, Pim and Herna. I'm trying to break my mind on something where you need to explain me how it works. If I look at Mail, you've done a fantastic job there in keeping the underlying results more or less unchanged. If we filter out the COVID impact. There was a volume decrease of 8%. There was no room, at least as far as the USO is concerned, to increase tariffs. The only tariff increases we've seen are in the, call it, the non-regulated part of your business. Still they managed to keep their results unchanged. If I look at parcels, where roughly 80% of the parcels are still being delivered by subcontractors, you have a much more flexible setup there. I almost see a one-for-one relationship in the development of your sales and volumes and what it does to your operating level. What am I missing here? Is it the fact that mail has a more centralized setup in comparison to parcels, or are there any other things? That's my first question. The second question, well, you could have expected that's on price adjustments. The price adjustments you've penciled in on page 28 of the slide deck, is that something that has already been implemented or is there still a significant chunk of the, yeah, quality offers you've made to your clients on the way? The third question is on the competitive environment. Could you be a little bit more specific? What are you seeing there? The insourcing, by bol, the increased competition, in the field of tariffs, you referred to, and maybe, a quick word on DHL's intention to move into not only the letter box parcels but also the top end of the, of the, of the mail segment. Is that something that is a concern to you? Those were my questions. Thank you. Okay. Thank you, Henk. Herna, there was a couple of questions within one question, so shall I try to go at the first one and then. Yeah, then we'll do. We'll see. Other two and three. Yeah. I think, Henk, you tried to make a comparison in the leverage between mail and parcels. I think in the mail's performance, it's flatlining Q4. It's not completely flat full year. Mail is also impacted by higher organic cost increases than originally impacted. If you take out the full year non-recurring COVID element, then there is still a bit of a gap. Price increases also increased there, also not only for business mail, but also for USO within 2022, at the beginning of the year. By parcels, you say 80% is delivered by subcontractors or delivery partners, there should be more flexibility there. I think there's one fundamental difference. The entire Mail business has been set up and has been running a year-over-year declining business. As such, I don't know if it's 7%, 8% down, always works to mitigate those volume decline elements. Parcels in the beginning of the year coming out of 2021 was focused on growth, and growth expectations were legitimate at that point in time. That growth turned into a -10% quite quickly because of deteriorating market circumstances. Then you've got a big network with very many different locations that over time, have been added that is also adding a bit of complexity and part of the cost base is much more fixed than only, the 20% of delivery that we do ourselves. The infrastructures, the line haul routes, support around transportation units. It's not strange that in a year where there's so fundamentally different perspective on volume developments, that you are going to get hit on margins. That is my attempt on the first question. Your question on price adjustments, Henk, almost all of those price adjustments are already implemented because they were part of the contract negotiations at the end of 2022. The competitive environment. I think the competitive environment in the Netherlands became, of course, more competitive over the last few years. Reason for that already mentioned by Pim is the fact that there is overcapacity in the market. When we think about the market in 2021, not only PostNL but also competitors and customers were thinking that after COVID, market would grow further. That means that capacity is built by everybody to of course, be able to deliver those volumes. We didn't have the volumes in 2022, nor our customers, nor PostNL, nor competition. That means that there is of course overcapacity, and overcapacity brings more, I would say a stronger competitive situation with also price competition. Next to that, of course, you do see other competitors, and some of those competitors disappeared in 2022 because of the issues like Instabox. Some of them of course, were there and stayed there like for example, own delivery by Amazon but also the insourcing bol did when it comes to Cycloon. In our view, it's part of the parcel market going forward, and it's what we've said many times before. When we think about parcels in the future, the way a parcel will be delivered, will be more diverse than it was five to six years ago. I think the importance for PostNL is to maintain our leading position. The only way to do that, the only way to maintain that leading position is by the investments in we do by the digitization, by of course, also creating the products customers want or would like to have, and by staying competitive also on the side of our cost. DHL, moving into the top end of the mail segment, we've seen that communication as well. So far, we didn't see any action at that front. Of course, they are active in the domain of the letterbox parcels, and their competition is the same as it is in, in, I would say, parcel market, but we didn't see any action into the real mail market or the market top-end mail segment markets. Sorry. Can I ask for some clarification on what Pim said about the cost structure of parcels? Is it fair to assume, Pim, that with the decentralized structure you have right now, that the structure in itself makes it more difficult to bring down costs if we are talking about a prolonged period of stagnating economic growth or stagnating demands? I fully share your view on the growth of e-commerce and on e-commerce penetration. What happens if this period of no growth or slightly negative growth goes on for a longer period of time? How flexible are you really there? Well, I think one of the first slides we've indicated that, let's say, we've mitigated for EUR 45 million cost per parcels, roughly speaking EUR 0.30 per parcel by changing within the year the key operational elements here. It's not unflexible, but it is completely different if you set it up for growth and then all of a sudden growth turns into a -10% volume development. I think there is flexibility. At the same time, there's also changes to the network, additions to the network on the back of customer requirements to be able to do Sunday delivery or morning infeed early in the day. Those elements also lead to some increases of the cost per parcel element. Obviously, if you were to know for sure that you are in a period of prolonged standstill, then you could make different choices. We're not making those because we are confident that, let's say, when GDP improves, consumer spending will come back to the levels we've seen before, and online penetration will continue, and then growth will be there again. We want to be ready to capture that growth when that moment in time is there. We just cannot afford to kind of gamble by not investing in those elements, not being in a position to deliver that growth when it went back again. Why do you think, Henk, that a decent centralized structure is more difficult to bring back cost? We're giving you lots of arguments, but why do you think that? No, I think it's easier to bring back costs in a centralized environment. For example, if you have a sorting center with, let's say, 100 million parcels capacity, the average sorting center parcels has is, what is it? 12, 15 million or so parcels per annum. You can reduce the number of shifts, for example. If I were to close an NLI or two NLIs, I would have to reroute the whole system. Just when you add NLIs, you have to change the routes, you have to make alterations in the cross docks, and that sort of things. It works the same way, the other way around. That's the way it works. In my view, Henk, then you look into too much. I think you're only looking into the sorting center and forgetting that in the end, you also have lots of distribution. When you have only a few sorting centers, you do have lots of depots, where you do, of course, the, the further sorting before it is delivered. From a big sorting center, you cannot deliver on, for example, 5,000 routes in the Netherlands daily. That's impossible. There is a structure behind the big sorting centers, which are the depots, where you have to sort as well, from which parts the deliverers will depart. In my view, the structure we have is as flexible as any other structure, to be honest. Because also in the smaller sorting centers, you can, of course, change the amount of shifts you need to make sure that the buses of our parcel deliverers are filled. Mm-hmm. You have to change routes anyway, because of the volume you have or because of other reasons. That's what we anyway do quite regularly to change the routes. I don't see big differences, to be honest, between a little bit more centralized sorting infrastructure and a more decentralized sorting infrastructure. Because in the centralized sorting infrastructure, you have lots of depots which are a burden in case of a decline of parcels as well. I don't see that difference. I see much more the difference Pim is explaining, which is about you have to turn around an organization which is used to growth to decline. The way you do that and the speed with you can do that Depends, of course also partly on your future perspective. The future perspective still is that we will return to growth. Can you do more in the flexibilization of your cost? The answer is yes. You always have to ask yourself the question, am I then hurting my future growth potential, or am I still in the right balance? I think that's the balance Pim and I try to strike to do, of course, the cost savings we need to do and to create more flexibilization, but not limiting our further growth opportunity going forward. When it takes longer than 2023, of course you have to review that balance again. It's a review which you have to do every few months to see are we still on the track we expect to be. That is a more detailed answer to your question. That's a very detailed answer indeed. Thank you very much, Herna. Can I, without monopolizing the call, one quick question on the delivery score in Mail in the Netherlands, the 91%. When do you expect to have that back at the required 95%? Are you risking a fine there? I think the 91% of quality at Mail is of course by far not what we would like to have. It's mainly caused by the fact that within Mail we do have quite some vacancies in delivery routes. As long as we have so many vacancies as we have today, it is difficult to significantly improve. Of course, you can improve, but to significantly improve. We're working day and night, and I think we're running at this moment more than 10 projects to get in the right amount of people for those delivery routes. In this current labor market, it is not easy to do so. If it will be fined or not, in my view, too early to say. We have to deliver, of course, our numbers, I think in May or June, together with the argumentation around the mail delivery quality, and that is the starting point of a discussion with our regulator. From that moment in time, I will first start the discussion, Henk. Okay. Thank you very much. More than welcome. Thank you. We have time for one more question. Our final question comes from the last line of Marco Limite from Barclays. Please go ahead, your line is open. Hi. Morning. Thanks for taking my question. The one question I have is on your slide nine, where you're showing that all of the profit in your guidance is coming from Q4. Just analyzing the moving parts. I guess pricing won't be able to offset the cost pressures. I assume Mail will be flat at best year-over-year. Just trying to understand why you are expecting Q4 2023 to be quite above Q4 2022. Thank you. Well, the fourth quarter, it basically follows the same pattern that excluding the COVID years, you can recognize because of the seasonality. On the parcel side, obviously because of Black Friday, growing into Sinterklaas and Christmas, obviously contributing the most, and in the mail side, the Christmas cards that still contribute quite significantly towards the December results. You'll always see whatever market circumstances, growth or decline, a fourth quarter that will always be the biggest at PostNL, just by the nature of the markets we're in. I think the point that I was trying to make is that business-wise, in comparison to last year, we always had that discussion. Yeah, we have to compare against a very high COVID 2021 year. Your comparables will always be difficult, and that's also why we were transparent to try to detail out what was the non-recurring component of COVID. The point I wanted to make is that business-wise from Q2 onwards, you can see improvement. You don't need to wait until you see improvement until the fourth quarter. We can show that earlier on in the year. Nevertheless, the fourth quarter will be by far the biggest. Sure. If I think about the different moving parts, in parcels we are expecting, let's say, a flattish volume growth. We're not expecting pricing to offset cost. Parcels, I guess. Well, I'm not expecting a flat line for parcels. Definitely I do not expect that for the first quarter, given the fact that the beginning of 2022 still had January, February at pre-crisis growth levels. For Q1, you would see a quite significant volume decline that for the full year turns into a low single-digit decline as well. Okay. The assumption is for volume growth in Q4 in parcels? Yeah. Okay. Okay, cool. Thank you very much. Thank you. There are no further questions at this time. I'll hand the call back to Johan for closing remarks. Thank you, operator, and thanks for all the questions. I think we covered a lot of ground during the call. If you have any other questions or remaining issues to discuss, please reach out to the IR team. You know where to find us. Thanks again and see you next time. Thank you. Bye bye. This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.