Remuneration report 2020

Message from Ad Melkert

Dear reader,

On behalf of the Supervisory Board, I am pleased to present our 2020 remuneration report. This report includes an overview of the implementation of the remuneration policies in 2020.

Since a final set of EU guidelines on the standardised presentation of the remuneration report is not yet available, the 2020 remuneration report has been drafted in the spirit of the draft guidelines, in line with the 2019 remuneration report. We intend to update our report where necessary once the final EU guidelines have been published.

The 2020 remuneration report will be subject to an advisory vote at our AGM on 20 April 2021. During last year’s AGM, 99.29% of the shareholders voted for the 2019 remuneration report. In preparation for the 2020 remuneration report, we consulted (representing bodies of) several external stakeholders and have taken their feedback into account, resulting in a strengthened link between PostNL’s business performance and remuneration outcomes.

Highlights of 2020

The year 2020 is marked by the Covid-19 pandemic. For society at large as well as PostNL, 2020 qualifies as an exceptional year under unprecedented circumstances.

Thanks to the hard work of PostNL's people and the resilience of the business, PostNL was able to play a vital role in society. At all times, PostNL put health and safety of their people, customers, consumers and partners first, while ensuring business continuity.

Given these unprecedented times, taking into account the power of the Supervisory Board to adjust the value of variable remuneration on grounds of reasonableness and fairness and the guiding principle ‘Alignment’ in the remuneration policy, we conducted an assessment on the impact of Covid-19 on remuneration components of the Board of Management from a multi-stakeholder perspective. Thereby the impact on stakeholders including employees, customers, consumers, shareholders, partners, government and the Dutch society at large was reviewed against the possible Board of Management’s remuneration outcomes. This assessment did not result in the use of the Supervisory Board’s power to adjust in either direction the variable remuneration outcomes. Furthermore, since both short-term and long-term incentive plans do not contain a stretch opportunity, demonstrated outperformance on multiple performance measures did not lead to higher than target payout ratios.

Whilst PostNL adapted to the impact of Covid-19, it continued to execute its strategy to capture growth, deliver value and adjust its portfolio. In 2020 PostNL divested Nexive, Spotta, Adeptiv and Cendris and took a minority stake in CB Healthcare. Furthermore, PostNL conducted three collective labour agreements with the trade unions, concluded a sale-and-leaseback agreement for five sorting centre locations in the Netherlands and agreed on determination and conditions of the final payment for transitional plans with Pension Fund PostNL.

Financial performance

2020 was an exceptional year. With a profitability of €245 million and a cash generation of €186 million, PostNL strongly outperformed previous guidance and target levels. This was the result of strong business performance at Parcels, Mail in the Netherlands and Spring.

Regarding the long-term incentive (originating from the previous remuneration policy), PostNL's cumulative underlying net cash income of €440 million came in at the top-end of the maximum threshold, while cost savings remained below the minimum threshold due to lower than anticipated cost savings.

Non-financial performance

Employee engagement increased from 79.8% in October 2019 to 83.6% in October 2020, and exceeded target level. The company has demonstrated its ability to adapt with speed to frequently changing circumstances and this was highly appreciated by the employees.

PostNL also achieved a sharp uplift in customer satisfaction. The share of highly satisfied customers, measured twice a year, increased from 27% in 2019 to 37% in 2020. The improvement that was made on these important performance measures indicates that PostNL has made progress with the strategic focus on customer experience and becoming the favourite deliverer.

Delivery quality at Parcels remained high throughout the year and exceeded target level. At Mail in The Netherlands, PostNL delivered in excess of 94% of consumer mail by the next delivery day, a fraction below the 95% delivery target. This was impacted by the measures taken to cope with the pandemic.

We are very pleased with the progress made with respect to growth initiatives. PostNL's adaptability, reliability and resilience were demonstrated in 2020. At the same time, within all business lines, new growth paths were pursued, especially in health, marketplaces and digital initiatives, to speed up and realise growth.

Remuneration Supervisory Board

In line with PostNL's remuneration policy as adopted by the AGM in 2020, the Supervisory Board members are entitled to a Board fee and one or more Committee fee(s). Remuneration levels for the Supervisory Board remained stable compared to 2019.

Decisions made in 2020

In 2020, the AGM adopted the new remuneration policy of the Board of Management with a 98.98% (binding) vote and the new remuneration policy of the Supervisory Board with a 95.25% (binding) vote.

It was furthermore decided to index the base salary of the Board of Management for the first time since 2013, in line with the framework as defined in the remuneration policy.

Additionally, the financial targets regarding the running long-term incentive plans have been adjusted for the impact of the acquisition of Sandd.

Looking forward to 2021

We intend to update our 2021 remuneration report in line with the final EU guidelines, taking into account the advisory vote of shareholders regarding this remuneration report on 2020.

Due to the continued unprecedented circumstances, visibility going forward remains limited. We remain vigilant and continue to closely monitor these developments.

The Hague, the Netherlands, 1 March 2021

On behalf of the Remuneration Committee,
Ad Melkert, Chairman