Trade receivables that do not contain a significant financing component or for which PostNL has applied the practical expedient are measured at the transaction price determined under IFRS 15. PostNL recognises an allowance for expected credit losses (ECLs). ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that PostNL expects to receive, discounted at an approximation of the original effective interest rate. For trade receivables, PostNL applies a simplified approach in calculating ECLs. Therefore, PostNL does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. PostNL has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. The amount of the ECLs is recognised in the income statement. Any reversal of the ECLs is included in the income statement on the same line as where the original expense was recorded.
The risk of uncollectability of accounts receivable is primarily estimated based on prior experience with, and the past due status of, doubtful debtors adjusted for forward-looking factors. Large accounts are assessed individually based on factors that include ability to pay, bankruptcy and payment history. In addition, debtors in certain countries are subject to a higher collectability risk, which is taken into account when assessing the overall risk of uncollectability.
At 31 December | 2019 | 2020 |
|---|---|---|
Trade accounts receivable - total | 285 | 346 |
Allowance for expected credit losses | (14) | (10) |
Trade accounts receivable | 271 | 336 |
VAT receivable | 11 | 7 |
Accounts receivable from associates and joint ventures | 0 | 1 |
Other accounts receivable | 40 | 11 |
Accounts receivable | 51 | 18 |
Total accounts receivable | 322 | 355 |
Trade accounts receivable are non-interest bearing and are generally on terms of 3 to 30 days.
The main part of the allowance for expected credit losses related to a collective loss component established for groups of similar trade accounts receivable balances. This collective loss component is largely based on the ageing of the trade accounts receivable and is reviewed periodically. The fair value of the total (trade) accounts receivable approximated its carrying value.
The increase of trade accounts receivable-total from €285 million on 31 December 2019 to €346 million on 31 December 2020 is mainly explained by higher revenue in 2020. As a result of improved payment performance of debtors the trade accounts receivable past due decreased from €116 million on 31 December 2019 to €89 million on 31 December 2020 (see table expected credit losses below). This also resulted in a lower allowance for expected credit losses of €10 million (2019: €14 million).
VAT receivable mainly related to VAT receivables from foreign tax authorities (2020: Italy and Belgium, 2019: Germany). The decrease in other accounts receivable in 2020 is mainly caused by settlement of receivables. In 2019, other accounts receivable mainly related to the compensation scheme for paid transition benefits (€9 million), receivables related to the sale of Postcon (€10 million, including an earnout arrangement and a final net working capital adjustment) and receivables related to the sale of PostNL Communication Services (€7 million).
The top 10 trade accounts receivable accounted for 19% of the outstanding balance as at 31 December 2020 (2019: 19%). The concentration of the trade accounts receivable portfolio over the different regions can be summarised as follows:
Netherlands €290 million (2019: €235 million),
rest of Europe €26 million (2019: €22 million), and
the rest of the world €20 million (2019: €14 million).
The movements in the allowance for expected credit losses of trade accounts receivable were as follows:
2019 | 2020 | |
|---|---|---|
Balance at 1 January | 10 | 14 |
Provided for during financial year | 5 | 3 |
Acquisition of subsidiaries | 2 | - |
Receivables written off during year as uncollectable | (3) | (7) |
Balance at 31 December | 14 | 10 |
Set out below is the information about the credit risk exposure on the trade accounts receivable using a provision matrix.
At 31 December | Months due | |||||
|---|---|---|---|---|---|---|
Up to 1 month | 1-2 months | 2-3 months | 3-4 months | over 4 months | Total | |
Expected credit loss rate | 1% | 3% | 6% | 14% | 28% | |
Gross amount of trade accounts receivable | 209 | 28 | 11 | 4 | 34 | 286 |
Trade accounts receivable past due | 48 | 22 | 10 | 4 | 32 | 116 |
Expected credit loss 2019 | 3 | 1 | 1 | 1 | 9 | 14 |
Expected credit loss rate | 0% | 2% | 4% | 11% | 20% | |
Gross amount of trade accounts receivable | 281 | 11 | 8 | 5 | 42 | 347 |
Trade accounts receivable past due | 27 | 9 | 8 | 5 | 40 | 89 |
Expected credit loss 2020 | 0 | 0 | 0 | 1 | 9 | 10 |
At 31 December | 2019 | 2020 |
|---|---|---|
VAT payable | 19 | 44 |
Social security contributions payable | 24 | 27 |
Payments from customers received in advance | 49 | 48 |
Other | 18 | 26 |
Total | 110 | 145 |
The VAT payable increased by €25 million. This is mainly caused by higher VAT payable due to higher revenues (€10 million). In 2019, the VAT payable was positively impacted by the new methodology applied for calculating non-deductible VAT charges.
Other current liabilities increased by €8 million which is mainly explained by cash funding liabilities related to the sale of Nexive to Mutaris.
At 31 December | 2019 | 2020 |
|---|---|---|
Deferred revenue from unused stamps | 42 | 47 |
Deferred revenue from franking machines | 9 | 8 |
Rental of mailboxes | 10 | 10 |
Other amounts received in advanced from customers | 6 | 4 |
Total | 67 | 69 |
In 2020, strong demand for Children and Christmas stamps and increased stamp inventory at retailers increased the related deferred contract liabilities. We expect to perform almost all services related to the outstanding contract liabilities at 31 December 2020 within one year. However, note that within one year we expect outstanding contract liabilities more or less in line with the amounts currently reported.
At 31 December | 2019 | 2020 |
|---|---|---|
To be paid to third parties | 107 | 129 |
To be paid to personnel | 30 | 52 |
Vacation days/vacation payments | 83 | 92 |
Terminal dues | 129 | 169 |
Interest payable | 1 | 2 |
Other accrued current liabilities | 1 | 1 |
Total | 351 | 445 |
Main items within the expenses to be paid to third parties included payables to business partners of €19 million (2019: €12 million), claims of €9 million (2019: €6 million) and various other expenses to be paid.
Expenses to be paid to personnel included accrued wages and salaries of €26 million (2019: €22 million) and accruals for employee profit-sharing over 2020 (20 million).
The accrual for terminal dues relates to payables to foreign postal operators relating to the years 2020 and before, partly consisting of positions in SDR currency. The net payable position, including the receivable for terminal dues of €26 million (2019: €29 million) included in prepayments and accrued income, amounted to €143 million (2019: €100 million). The change reflects both the regular course of business as well as settlements of outstanding positions. The positions where there is no price multi- or bilateral agreement on price are based on our best estimate of the price for which we expect to settle.
Property, plant and equipment is valued at historical cost, less depreciation and impairment losses. The initial costs of an assets comprises its purchase price, costs of bringing the asset into working condition, handling and installation costs and non-refundable purchase taxes.
Land is not depreciated. System software is capitalised and amortised as a part of the tangible fixed asset for which it was acquired to operate.
Other property, plant and equipment is depreciated on a straight-line basis over its expected useful life, taking into account any residual value. The asset’s residual value and useful life is reviewed on an annual basis and, if necessary, changes are accounted for prospectively.
For the accounting policy concerning impairments, reference is made to note 5.4.
Land and | Plant and | Other equipment | Construction | Total | |
|---|---|---|---|---|---|
Depreciation percentage | 0%-10% | 10%-33% | 10%-33% | 0% | |
Historical cost | 780 | 487 | 61 | 5 | 1,333 |
Accumulated depreciation and impairments | (458) | (332) | (49) | (839) | |
Balance at 1 January 2019 | 322 | 155 | 12 | 5 | 494 |
Transfers to right-of-use assets at 1 January | (22) | (15) | (37) | ||
Capital expenditure in cash | 5 | 11 | 5 | 8 | 29 |
Acquisition of subsidiaries | 4 | 3 | 1 | 8 | |
Disposal of subsidiaries | (2) | (2) | |||
Disposals | (5) | (5) | |||
Internal transfers and reclassifications | 2 | 1 | (3) | ||
Depreciation | (23) | (30) | (6) | (59) | |
Impairments | (2) | (2) | |||
Transfers to assets held for sale | (7) | (5) | (12) | ||
Total changes | (50) | (36) | 1 | 5 | (80) |
Historical cost | 694 | 420 | 66 | 10 | 1,190 |
Accumulated depreciation and impairments | (422) | (301) | (53) | (776) | |
Balance at 31 December 2019 | 272 | 119 | 13 | 10 | 414 |
Land and | Plant and | Other equipment | Construction | Total | |
|---|---|---|---|---|---|
Depreciation percentage | 0%-10% | 10%-33% | 10%-33% | 0% | |
Historical cost | 694 | 420 | 66 | 10 | 1,190 |
Accumulated depreciation and impairments | (422) | (301) | (53) | (776) | |
Balance at 1 January 2020 | 272 | 119 | 13 | 10 | 414 |
Capital expenditure | 3 | 14 | 3 | 36 | 56 |
Disposals | (41) | (41) | |||
Internal transfers and reclassifications | 1 | 1 | (1) | ||
Depreciation | (18) | (26) | (5) | (49) | |
Transfers to assets held for sale | (6) | (2) | (1) | (8) | |
Total changes | (62) | (13) | (3) | 34 | (44) |
Historical cost | 392 | 414 | 46 | 44 | 896 |
Accumulated depreciation and impairments | (182) | (309) | (36) | (526) | |
Balance at 31 December 2020 | 210 | 106 | 10 | 44 | 370 |
As a result of the adoption of IFRS 16 at 1 January 2019, an amount of €37 million was transferred from property, plant and equipment to right-of-use assets of which €27 million related to finance leases and €10 million to capitalised leasehold rights and ground rent contracts.
Capital expenditures 2020 are above the level of 2019. Investments were made in the new sorting and delivery centres within Parcels and in various other equipment.
The disposals related for €36 million to the sale-and-leaseback transaction of four mail sorting centres and the international sorting centre. The remaining disposals related to the sale of other real estate in the Netherlands. The book profit from these sales are included in other income in the consolidated income statement. For further information on the sale-and-leaseback transaction, reference is made to note 2.1.2 Other income.
In 2020, the transfers to assets held for sale related for €6 million to buildings in the Netherlands and for €2 million to equipment from Cendris that was classified as held for sale per 31 December 2020. In 2019, the transfers to assets held for sale related for €7 million to buildings in the Netherlands and for €5 million to equipment from Spotta that was classified as held for sale per 31 December 2019.
Goodwill represents the excess of the cost of acquisition over the fair value of PostNL’s share of the identifiable net assets acquired. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition of joint ventures and associates is included in investments in joint ventures/associates and is not separately recognised or tested for impairment. Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Separately-recognised goodwill arising on acquisitions is capitalised and subject to an annual impairment review. Goodwill is carried at cost less accumulated impairment losses.
Costs related to the development and installation of software for internal use are capitalised at historical cost and amortised over the estimated useful life. Other intangible assets acquired in a business combination are recognised at fair value at the acquisition date.
An asset under construction is transferred to its respective intangible asset category at the moment it is ready for use and is amortised using the straight-line method over its estimated useful life. Other intangible assets are valued at the lower of historical cost less amortisation and impairment. The asset’s residual value and useful life is reviewed on an annual basis and, if necessary, changes are accounted for prospectively.
For the accounting policy concerning impairments of goodwill and other intangible fixed assets, reference is made to note 5.4.
Goodwill | Software | Other | Total | |
|---|---|---|---|---|
Amortisation percentage | 10%- 35% | 0%- 35% | ||
Historical cost | 143 | 257 | 42 | 442 |
Accumulated amortisation and impairments | (46) | (176) | (8) | (230) |
Balance at 1 January 2019 | 97 | 81 | 34 | 212 |
Additions | 128 | 22 | 10 | 160 |
Acquisition of subsidiaries | 3 | 30 | 33 | |
Disposals | (1) | (1) | ||
Internal transfers/reclassifications | 11 | (11) | ||
Amortisation | (31) | (3) | (34) | |
Impairments | (4) | (4) | ||
Transfers to assets held for sale | (2) | (2) | ||
Total changes | 127 | (1) | 26 | 152 |
Historical cost | 271 | 278 | 70 | 619 |
Accumulated amortisation and impairments | (47) | (198) | (10) | (255) |
Balance at 31 December 2019 | 224 | 80 | 60 | 364 |
Goodwill | Software | Other | Total | |
|---|---|---|---|---|
Amortisation percentage | 10%- 35% | 0%- 35% | ||
Historical cost | 271 | 278 | 70 | 619 |
Accumulated amortisation and impairments | (47) | (198) | (10) | (255) |
Balance at 1 January 2020 | 224 | 80 | 60 | 364 |
Additions | 1 | 21 | 17 | 39 |
Disposals | (3) | (3) | (6) | |
Internal transfers/reclassifications | 13 | (13) | ||
Amortisation | (33) | (4) | (37) | |
Impairments | (2) | (4) | (6) | |
Transfers to assets held for sale | (14) | (1) | (15) | |
Total changes | (16) | (1) | (7) | (25) |
Historical cost | 244 | 222 | 65 | 532 |
Accumulated amortisation and impairments | (36) | (144) | (12) | (192) |
Balance at 31 December 2020 | 208 | 79 | 53 | 339 |
In 2020, the transfers to assets held for sale of €15 million related to Cendris, which is classified as held for sale at 31 December 2020. In 2019, the comparable transfers related to Spotta, which was classified as assets held for sale at year-end 2019.
Goodwill is allocated to the Group’s cash-generating units (CGUs) and tested for impairment. The CGUs correspond to an operation in a particular country or region and the nature of the services provided. Compared to 2020, the CGU structure has not changed.
In 2020, the addition to goodwill of €1 million resulted from the preliminary purchase price allocation of the acquisition of MyParcel.com and is allocated to the CGU Spring. In 2019, the addition to goodwill of €128 million related to the acquisition of Sandd and is allocated to the CGU Mail in the Netherlands. Reference is made to note 5.3 Business combinations for more detailed information. In 2020, the disposal of goodwill of €3 million related to the sale of Adeptiv (CGU Mail in the Netherlands). In 2019, the disposal of goodwill of €1 million related to the sale of PostNL Communicatie Services (CGU Mail in the Netherlands).
Year ended at 31 December | 2019 | 2020 |
|---|---|---|
Parcels | 32 | 32 |
Mail in the Netherlands | 192 | 174 |
Spring | 1 | |
Total | 224 | 208 |
Based on the 2020 financial performance, a detailed review has been performed of the recoverable value of each CGU. The recoverable value is the higher of the value in use and fair value less costs of disposal. Fair value less costs of disposal represents the best estimate of the amount PostNL would receive if it sold the CGU. The recoverable value is determined based on the value in use. The value in use has been estimated on the basis of the present value of future cash flows.
For both mature markets and non-mature markets, the estimated future net cash flows are based on a five-year (2019: eight-year) forecast and business plan, which forecast period has been assessed as adequate to reach a sustainable basis for the calculation of the continuing value. The cash flow projections have been approved by management.
PostNL has determined the budgeted gross margin based on past performance and its expectations for market development. The weighted average growth rates used are consistent with the forecasts included in industry reports for the related operation and market and did not change materially compared to previous year. The pre-tax discount rate used in the CGU valuations varies around 10.0% (2019: around 9.5%). The difference is predominantly caused by the increased Dutch Corporate Income Tax rate.
Key assumptions used to determine the recoverable values for each individual CGU are the following:
maturity of the underlying market, market share and volume development in order to determine the revenue mix and (long-term) growth rate,
level of operating income largely impacted by revenue and cost development, taking into account the nature of the underlying costs and potential economies of scale,
level of capital expenditure in network-related assets, and
discount rate to be applied following the nature of the underlying cash flows and foreign currency and inflation-related risks.
Management has carried out an impairment test for each individual CGU and concluded that the recoverable amount of the individual CGUs is higher than the carrying amount.
The closing balance of software and other intangibles is build up as follows:
Year ended at 31 December | 2019 | 2020 |
|---|---|---|
Internally-generated software | 73 | 75 |
Purchased software | 7 | 4 |
Software under construction | 15 | 18 |
Customer lists | 45 | 35 |
Total | 140 | 132 |
The additions to software mainly concerned IT investments related to replacement and improvement of sorting and delivery processes within Mail in the Netherlands and Parcels, and software licenses and costs of internally-generated software for various IT projects including investments in our online landscape, logistic service platform and back office functionality. The reclassification from other intangibles was due to finalised IT projects. The decrease in customer lists mainly related to the impairment of the customer list of PS Nachtdistributie (€4 million) and the sale of Adeptiv (€3 million).
The estimated amortisation expenses for software and other intangible assets are:
2021: €39 million,
2022: €27 million,
2023: €21 million, and
thereafter: €45 million.
PostNL does not conduct significant research and development activities and therefore does not incur research and development costs.
PostNL leases sorting centres, sorting machines, distribution centres , offices, warehouses, trucks, vans, cars, transport equipment and other equipment. Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group. At the commencement date of the lease, the lease liabilities are measured at the present value of lease payments to be made over the lease term. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the incremental borrowing rate is used, being the rate that would have to be paid to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
The lease payments include the exercise price of a purchase option reasonably certain to be exercised by PostNL and payments of penalties for terminating the lease, if the lease term reflects PostNL exercising the option to terminate. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
PostNL elected to apply the practical expedient not to separate non-lease components from lease components, and instead account for each lease component and any associated non-lease components as a single lease component. PostNL elected also the practical expedient not to apply the requirements for short-term leases (with a lease term of 12 months or less and which do not contain a purchase option) and leases for which the underlying asset is of low value (<€5 thousand). The lease payments associated with these leases are recognised as an expense on a straight-line basis over the lease term.
Land and | Transport | Other | Total | |
|---|---|---|---|---|
Depreciation percentage | 0%-10% | 10%-33% | 10%-33% | |
Operating leases at 1 January | 76 | 55 | 1 | 132 |
Finance leases transferred from PP&E at 1 January | 12 | 2 | 13 | 27 |
Leasehold rights and ground rents transferred from PP&E at 1 January | 10 | 10 | ||
Balance at 1 January 2019 | 98 | 57 | 14 | 169 |
New leases | 84 | 37 | 11 | 132 |
Acquisition of subsidiaries | 28 | 7 | 5 | 40 |
Disposal of subsidiaries | (1) | (1) | ||
Depreciation | (39) | (31) | (7) | (77) |
Transfers to assets held for sale | (4) | (4) | ||
Total changes | 68 | 13 | 9 | 90 |
Historical cost | 212 | 101 | 31 | 344 |
Accumulated depreciation and impairments | (46) | (31) | (8) | (85) |
Balance at 31 December 2019 | 166 | 70 | 23 | 259 |
Land and | Transport | Other | Total | |
|---|---|---|---|---|
Depreciation percentage | 0%-10% | 10%-33% | 10%-33% | |
Historical cost | 212 | 101 | 31 | 344 |
Accumulated depreciation and impairments | (46) | (31) | (8) | (85) |
Balance at 1 January 2020 | 166 | 70 | 23 | 259 |
New leases | 43 | 34 | 1 | 79 |
Disposal of subsidiaries | (2) | (3) | ||
Disposals | (15) | (15) | ||
Depreciation | (35) | (29) | (6) | (70) |
Impairments | (1) | (1) | ||
Transfers to assets held for sale | (5) | (5) | ||
Total changes | (15) | 4 | (5) | (16) |
Historical cost | 215 | 122 | 31 | 368 |
Accumulated depreciation and impairments | (64) | (48) | (13) | (125) |
Balance at 31 December 2020 | 151 | 74 | 18 | 243 |
In 2019, as a result of the adoption of IFRS 16, an amount of €132 million of right-of-use assets and liabilities were included in the balance sheet. Further, an amount of €37 million was transferred from property, plant and equipment to right-of-use assets of which €27 million relates to finance leases and €10 million to capitalised leasehold rights and ground rent contracts.
The new leases of €79 million in 2020 related for €21 million to the sale-and-leaseback transaction of four mail sorting centres and the international sorting centre (for further information refer to note 2.1.2 Other income) and further to the replacement and expansion of buildings, vans and trucks. The new leases of €132 million in 2019 included new sorting and delivery centres within Parcels. In 2019, the acquisition of Sandd resulted in an increase of the right-of-use assets of €40 million. In 2020, the disposals of €15 million related to leasehold assets included in the sale-and-leaseback transaction (€7 million) and to disposed and subleased contracts from buildings from Sandd (€8 million). The depreciation of €70 million (2019: €77 million) includes €9 million (2019: €17 million) of accelerated depreciation of assets from Sandd. The transfers to assets held for sale of €5 million related to rented buildings from Cendris that was classified as held for sale at 31 December 2020 (2019: €4 million related to Spotta).
The right-of-use assets include a number of Parcel sorting centres and sorting machines financed by an entity especially set up for this purpose by a third party. The term of the related finance lease contracts and liabilities is 10 years. Up to 31 December 2020, 4 sorting centres (2018: 1, 2019: 3) have been finalised, for which the related right-of-use assets and lease liabilities have been recorded.
At 31 December | 2019 | 2020 |
|---|---|---|
Long-term lease liabilities | 201 | 231 |
Short-term lease liabilities | 63 | 63 |
Total | 264 | 294 |
In 2020, the lease liabilities increased by €30 million, mainly caused by the sale-and-leaseback transaction. The total cash outflow from leases amounted to €93 million (2019: €78 million) and related for €79 million to repayments of lease liabilities (2019: €62 million) and for €14 million to rent and lease expenses (2019: €16 million). Refer to note 4.1 for further information on the lease liabilities.
In 2020, rent and lease expenses of €14 million (2019: €16 million) relate for €12 million (2019: €9 million) to short-term leases and for €2 million (2019: €7 million) to leases for which the underlying asset is of low value. The interest expenses on lease liabilities amounted to €4 million (2019: €3 million).
The net defined benefit liability/asset for all pension and other post-employment plans that qualify as defined benefit plans is determined by calculating the present value of the defined benefit obligation and deducting the fair value of the plan assets. The resulting deficit or surplus is adjusted for any effect of limiting a net defined benefit asset to the asset ceiling and for any effect of minimum funding requirements.
PostNL uses actuarial calculations (projected unit credit method) to measure the obligations and the costs. Assumptions are made about financial variables (such as the discount rate and the rate of benefit increases) and demographic variables (such as employee turnover and mortality). The discount rate is determined by reference to market rates using high-quality corporate bonds. The assumed return on plan assets equals the discount rate applied in the calculation of the pension obligations at the beginning of the year.
Service costs are recognised as operating expenses in the income statement. Gains or losses on the amendment or curtailment of a defined benefit plan (past service cost) and gains or losses on a settlement are recognised as operating expenses in the income statement on the date of the amendment, curtailment or settlement.
The net interest expense/income on the net defined benefit liability/asset, asset ceiling and/or minimum funding requirements, is recognised as ‘Interest and similar expenses/ income’ in the income statement (below operating income).
Deviations between the expected and actual development of the pension obligation and plan assets, resulting in actuarial gains and losses, are recognised immediately within Other Comprehensive Income (net of tax). The impact of the asset ceiling and/or minimum funding requirements is also recognised within Other Comprehensive Income (net of tax).
Pension costs for defined contribution plans are expensed in the income statement when incurred or due.
PostNL’s main Dutch defined benefit average pay pension plan (main plan) covers the employees subject to PostNL’s collective labour agreement and staff with a personal labour agreement in the Netherlands. The main plan is externally funded in ‘Stichting Pensioenfonds PostNL’ (main fund), an independent legal entity which is not owned or controlled by any other legal entity and which falls under the regulatory supervision of De Nederlandsche Bank.
Based on the financing agreement with the pension fund, the final payment for transitional plans at year-end 2020 was determined on parameters as in Q3 2019, when interest rates were very low. Taking into account the interests of all stakeholders, PostNL initiated discussions with the pension fund on options for a solution to smooth the impact of low interest rates in determining the final payment. In June, parties agreed on modified payment conditions. The final payment now amounted to €280 million, of which PostNL has paid the pension fund €200 million at year-end 2020. The remaining €80 million will be deferred and paid in five annual instalments between 2021 and 2025. The deferred payment is accounted for as a minimum funding requirement. The agreement also led to reduced funding costs of soft pensions during 2020. In total, the reduction in the cash contribution for transitional plans amounted to around €20 million.
The main plan is a defined benefit average pay scheme, with a basis accrual rate of 1.875% of the pensionable base and retirement age set at 68 years. The pensionable base is derived as the pensionable salary, with a statutory maximum of €110,111 (level 2020), minus a state pension offset.
Pension (cash) contributions are bounded by a minimum level of 21.7% and a maximum level of 29.2% of the pensionable salary base. The calculations are based on the main fund's expected return on plan assets. Based on the total maximum premium amount, the intended pension accrual can be reduced in any year. Given the applicable financing arrangements and current low interest rates, it is expected that the accrual rate will be lower than the basis level of 1.875% for the coming years. The accrual rate for 2020 and 2021 has been set at 1.751% and 1.783% of the pensionable base.
When the 12 months average coverage ratio will be below the minimum required funding level of 104.0% a 5-year recovery period will start, in which top-up payments of at most 1.25% of the fund’s plan obligations per year might apply. In determining the top-up payment obligation, the resilience of the pension fund will be taken into account. The requirement to supplement a deficit will be determined on the basis of the ‘beleidsdekkingsgraad’ (i.e. the 12-months average coverage ratio). Based on our projections we do not anticipate any top-up payments.
By the end of 2020, the month-end coverage ratio of the main fund amounted 111.1% (2019: 113.4%). The decreased coverage ratio is mainly explained by a negative effect from a decrease of the interest rate and a positive return on plan assets. The 12-months average coverage ratio amounted 104.4% per 31 December 2020 (2019: 110.6%).
The returns on plan assets are linked to the strategic investment policy of the main fund. The fund uses interest rate derivates to reduce the net interest exposure on its assets and liabilities. The plan assets may from time to time include investments in PostNL’s own financial instruments through indirect holdings by mutual funds. Around 74% of the fund's total plan assets have a quoted market price in an active market. The unquoted part relates to investments in investment funds which invest in non-listed assets (for example real estate investments) and non-listed derivatives.
At 31 December | Actual mix | Actual mix |
|---|---|---|
Equities | 30% | 33% |
Fixed interest and inflation linked bonds | 60% | 58% |
Real estate and alternative investment | 10% | 9% |
Swaps | 0% | |
Total | 100% | 100% |
Return | 15.1% | 6.7% |
The following table presents an overview of the movement of the provision for post-employment benefit plans during 2020.
Balance at | Post-employment benefit income/ | Employer contributions | Deferred payment transitional plans | Actuarial gains/(losses) | Pension asset ceiling/minimum funding requirement | Balance at | |
|---|---|---|---|---|---|---|---|
Dutch main pension plan | 0 | (105) | 72 | (80) | (28) | 61 | (80) |
Dutch transitional plans | (280) | (29) | 227 | 80 | (0) | (2) | |
Other plans | (3) | (0) | 0 | 0 | (3) | ||
Provision for post-employment benefit plans | (283) | (135) | 299 | 0 | (28) | 61 | (86) |
The following table gives a break-down of total pension costs, pension cash contributions, actuarial gains and losses, and the impact of the asset ceiling and/or minimum funding requirement.
2019 | 2020 | ||
|---|---|---|---|
Regular defined benefit costs | (113) | (135) | |
Defined contribution costs | (12) | (12) | |
Total employer pension costs | (125) | (147) | |
Of which included within salaries, pensions and social security contributions | refer to note 2.1.3 | (119) | (145) |
Of which included within interest and similar expenses | refer to note 2.2 | (6) | (2) |
Defined benefit cash contributions | 99 | 99 | |
Defined benefit payment unconditional funding obligation | 33 | ||
Defined benefit final payment transitional plans | 200 | ||
Defined contribution cash contributions | 12 | 12 | |
Total employer pension cash contributions | 144 | 311 | |
Actuarial gain/(loss) due to: | |||
Change in discount rate | from 0.9% to 0.3% (2019: from 1.8% to 0.9%) | (1,422) | (1,066) |
Change in rate of benefit increases | from 0.9% to 0.8% (2019: from 1.1% to 0.9%) | 242 | 241 |
Change in future benefit accrual rate | 44 | 18 | |
Changes in demographic assumptions | 1 | 164 | |
Experience adjustments | 125 | 55 | |
Actuarial gain/(loss) on benefit obligations | (1,010) | (588) | |
Actuarial gain/(loss) on plan assets | 1,091 | 560 | |
Total actuarial gain/(loss) | 81 | (28) | |
Net charge within Other Comprehensive Income | 60 | (21) | |
Adjustment for pension asset ceiling | (120) | 142 | |
Adjustment for minimum funding requirement | 33 | (80) | |
Total gross adjustment | (87) | 61 | |
Net charge within Other Comprehensive Income | (65) | 46 |
The actuarial gain of €18 million (2019: gain of €44 million) resulting from a change in the rate of benefit accrual that follows from the maximum level of pension (cash) contributions of 29.2%, in combination with a decrease of the future rate of benefit accrual due to low interest rates. Given these current low interest rates and the applicable financing agreements, it is expected that the benefit accrual rate will be lower than the basis level of 1.875% for the coming years.
The negative adjustment of €61 million is the consequence of the decrease in the main fund’s funded status (on the basis of IAS 19 accounting) during 2020, triggering the decline of the asset ceiling and the new minimum funding requirement relating to the deferred payment of the transitional plans.
For 2021, we expect total cash contributions of around €105 million including the first instalment of the deferred payment of one fifth of €80 million (2020: €311 million including €200 million final payment of soft pension benefits per year-end 2020).
For 2021, we expect total employer pension costs of around €162 million (2020: €147 million). The increase is mainly explained by the lower discount rate resulting in a higher defined benefit obligation and higher service costs. As the net liability of the main pension plan is limited to the outstanding funding obligation, we expect an actuarial gain of around €75 million recorded in other comprehensive income.
The following table reconciles the opening and closing balances of the present value of the defined benefit obligation and the fair value of plan assets, the funded status and the netted pension provisions, and the employer pension expenses of PostNL's defined benefit post-employment plans.
2019 | 2020 | |
|---|---|---|
Change in benefit obligation | ||
Benefit obligation at beginning of year | (8,607) | (9,655) |
Transfers to liabilities relating to assets held for sale | (1) | |
Service costs | (116) | (143) |
Interest costs | (155) | (87) |
Actuarial (losses)/gains | (1,010) | (588) |
Benefits paid | 234 | 237 |
Benefit obligation at end of year | (9,655) | (10,235) |
Of which funded benefit obligations | (9,375) | (10,233) |
Of which unfunded benefit obligations | (280) | (2) |
Change in plan assets | ||
Fair value of plan assets at beginning of year | 8,364 | 9,512 |
Transfers to liabilities relating to assets held for sale | 0 | |
Assumed return on plan assets | 150 | 86 |
Employee contributions | 18 | 19 |
Employer contributions | 132 | 299 |
Other costs | (9) | (9) |
Actuarial (losses)/gains | 1,091 | 560 |
Benefits paid | (234) | (237) |
Fair value of plan assets at end of year | 9,512 | 10,230 |
Change in funded status | ||
Funded status at the beginning of year | (243) | (143) |
Transfers to liabilities relating to assets held for sale | (1) | |
Operating expenses | (107) | (133) |
Interest (expenses)/income | (5) | (1) |
Employer contributions | 132 | 299 |
Actuarial (losses)/gains | 81 | (28) |
Funded status at end of year | (143) | (5) |
Impact of pension asset ceiling | (140) | |
Impact of minimum funding requirement | (80) | |
Netted pension liabilities | (283) | (86) |
Components of employer pension expenses | ||
Service costs (net of employee contributions) | (98) | (124) |
Interest (expenses)/income | (6) | (2) |
Other costs | (9) | (9) |
Total post-employment benefit income/(expenses) | (113) | (135) |
Weighted average assumptions as at 31 December | ||
Discount rate | 0.9% | 0.3% |
Rate of benefit increases | 0.9% | 0.8% |
Life expectancy 65 year old men/women (in years) | 21.4/23.3 | 21.0/23.0 |
The discount rate is based on the long-term yield on high quality (AA-rated) corporate bonds, taking into account the duration of the projected pension liabilities of around 18 years. The corporate bond yield information is sourced from iBoxx, taking into account a minimum outstanding amount and other defined selection criteria. By applying curve-fitting procedures, a yield curve is generated. Using the full yield curve, the discounted value of the expected future benefit payments is matched with the comparable present value when using a single discount rate.
The conditional benefit increases are based on the (derived) Consumer Price Index. The assumed rate of benefit increases is based on advice, published statistics, the pension plan's ambition level and the actual financial status of the pension fund.
Assumptions regarding the longevity outlook are based on advice, published statistics and experience per country. The applied prospective longevity rates are derived from the Dutch mortality table 'AG prognosetafel 2020' taking into account experience rates based on postal areas, as applied by the main fund.
The table below shows the sensitivity of the defined benefit obligation at year-end 2020 to deviations in key assumptions, with all other assumptions held unchanged. The percentages presented exclude any impact from applying a liability ceiling, nor is the impact on plan assets, asset ceiling and/or minimum funding requirement included. The sensitivity to life expectancy of +1/-1 year is measured by assuming all plan participants 1 year younger/older. The percentages presented are prior to any effect of liability or asset ceiling.
%-change in assumptions | impact on defined benefit obligation | |
|---|---|---|
Benefit obligation at end of year (in € millions) | 10,235 | |
Discount rate | + 0.5% | (8.6%) |
Rate of benefit increases | + 0.5% | 10.0% |
Life expectancy men/women | + 1 yr | 4.4% |
Benefit obligation at end of year (in € millions) | 10,235 | |
Discount rate | - 0.5% | 9.6% |
Rate of benefit increases | - 0.5% | (9.1%) |
Life expectancy men/women | - 1 yr | (4.3%) |
Provisions are recognised when there is a present obligation as a result of a past event, making it probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation on the balance sheet date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The gross-up of the provision following the discounting of the provision is recorded in the income statement as interest expense.
PostNL recognises termination benefits when the company has committed to terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or provides termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the balance sheet date are discounted to their present value.
Provisions for onerous contracts are recorded when the unavoidable costs of meeting the obligation under the contract exceed the economic benefits expected to arise from that contract, taking into account impairment of fixed assets first.
The following table presents the changes in the short-term and long-term provisions.
Other employee | Restructuring | Claims and indemnities | Other | Total | |
|---|---|---|---|---|---|
Non-current other provisions | 13 | 11 | 2 | 26 | |
Current other provisions | 7 | 31 | 5 | 10 | 53 |
Balance at 1 January 2020 | 20 | 31 | 16 | 12 | 79 |
Additions | 4 | 8 | 6 | 4 | 22 |
Withdrawals | (3) | (27) | (4) | (9) | (43) |
Releases | (2) | (3) | (2) | (7) | |
Total changes | 1 | (21) | (1) | (7) | (28) |
Non-current other provisions | 13 | 14 | 2 | 30 | |
Current other provisions | 8 | 10 | 1 | 3 | 21 |
Balance at 31 December 2020 | 21 | 10 | 15 | 5 | 51 |
The estimated utilisation of the other provisions in 2021 is €21 million, in 2022 €18 million, in 2023 €3 million and in 2024 and thereafter €9 million.
As at 31 December 2020, the other employee benefit obligations mainly relates to a provision for jubilee benefits of €13 million (2019: €13 million) and long-term disability benefits of €7 million (2019: €7 million).
The additions in restructuring provision of €8 million mainly relates to the restructuring programmes within operations Mail Netherlands (€5 million) and Cross Border Solutions (€2 million).
The withdrawals of €27 million concerned severance payments within Sandd (€23 million) related to around 1.330 FTEs, severance payments under the cost saving programmes totalling €2 million related to around 30 FTEs and payments for other initiatives totaling €2 million related to around 20 FTEs.
The release of €2 million mainly related to the restructuring programme within Sandd, resulting from reduced redundancies and periodical reassessments of the expected cash costs.
The provision for claims and indemnities includes provisions for claims from third parties with respect to PostNL’s ordinary business activities, as well as indemnities and disputes related to business disposals. Within Sandd, the disputes mainly relate to discussions on the remuneration (incl. pensions) of employed and contracted people. More detailed information relating to these provisions is not provided, as such information could prejudice the company’s position with respect to these claims and indemnities.
The withdrawals in other provisions of €9 million mainly relate to onerous contracts within Sandd (€7 million) and anticipated customs clearance costs (€2 million).
An associate is an entity over which PostNL has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
A joint arrangement is an arrangement of which two or more parties have joint control. There are two types of joint arrangements: joint operations and joint ventures. PostNL only participates in entities that can be considered as a joint venture.
PostNL’s share in the results of joint ventures and associates is included in the consolidated income statement using the equity method. The carrying value of PostNL’s share in joint ventures and associates includes goodwill on acquisition and includes changes to reflect PostNL’s share in net earnings of the respective companies, reduced by dividends received. When PostNL’s share of accumulated losses in a joint venture or associate exceeds its interest in the company, the book value of the investment is reduced to zero and PostNL does not recognise further losses unless PostNL is bound by guarantees or other undertakings in relation to the joint venture or associate.
For the accounting policy concerning impairments, reference is made to note 5.4.
The following table presents the changes in the carrying value of the investments in joint ventures and associates.
2019 | 2020 | |
|---|---|---|
Balance at 1 January | 3 | 3 |
Share in net result | 0 | |
Additions | 1 | 1 |
Disposals | (1) | |
Transfer MyParcel.com to investments in group companies | (1) | |
Balance at 31 December | 3 | 3 |
As at 31 December 2020, the investments in associates mainly related to minority shareholdings in Roamler Care and CB Healthcare within Parcels. There were no material joint ventures.
In 2020, the addition of €1 million related to the acquisition of 40% of the shares of CB Healthcare and an additional capital contribution in Roamler Care. CB Healthcare is a specialist in warehousing, fulfilment and other services in the media and healthcare sector.
In 2020, an additional 20% equity stake in MyParcel.com was acquired, totalling PostNLs stake at 60% of the shares. PostNL obtained control and the entity has been included in the consolidated figures of PostNL as of 1 July 2020.
In 2019, additional capital contributions were made in Roamler Care and MyParcel.com of €1 million in total. PostNLs stake in MyParcel.com increased to 40% of the shares. In 2019, the disposals of €1 million relate to the liquidation of Postkantoren B.V., our former joint venture with ING Bank N.V.
Management has assessed none of the investments in joint ventures and associates to be material to the company. On a 100% basis, the profit/(loss) of all immaterial investments in joint ventures amounted to €0 million (2019: €0 million). The profit/(loss) of all immaterial investments in associates amounted to €0 million (2019: €(1) million).
Deferred tax assets and liabilities arising from temporary differences between the carrying amounts of assets and liabilities and the tax base of assets and liabilities are calculated using the substantively enacted tax rates expected to apply when they are realised or settled. Deferred tax assets are recognised if it is probable that they will be realised. At the end of each reporting period the amounts of deferred tax assets and the amounts of unrecognised deferred tax assets are reassessed. Deferred tax assets and liabilities within the same tax group, where a legally enforceable right to offset exists, are presented net in the balance sheet.
The following table shows the movements in deferred taxes in 2020:
Net balance 1 January 2020 | Changes via income statement | Changes via OCI | Disposed subsidiaries | Other changes | Net balance 31 December 2020 | Assets | Liabilities | |
|---|---|---|---|---|---|---|---|---|
Provisions | 32 | (21) | (8) | 3 | 3 | |||
Intangible assets | (27) | (2) | 1 | (28) | 6 | 34 | ||
Property, plant and equipment | (22) | (24) | (46) | 4 | 50 | |||
Leases | (1) | 9 | 8 | 56 | 48 | |||
Losses carried forward | 6 | 3 | 9 | 9 | ||||
Other | 77 | (51) | 15 | 41 | 41 | |||
Deferred tax assets/liabilities | 65 | (86) | (8) | 1 | 15 | (13) | 120 | 133 |
Offsetting | (110) | (110) | ||||||
Net deferred taxes | 65 | (86) | (8) | 1 | 15 | (13) | 10 | 23 |
Of the deferred tax assets at 31 December 2020, before offsetting, €48 million (2019: €75 million) is to be recovered within 12 months and €72 million (2019: €94 million) after 12 months. Of the deferred tax liabilities at 31 December 2020, before offsetting, an amount of €30 million (2019: €35 million) is to be settled within 12 months and an amount of €103 million (2019: €69 million) after 12 months.
The changes via other comprehensive income of €8 million fully relate to taxes on OCI from pensions.
The other changes of €15 million (2019: €18 million) represent mainly the Dutch tax credit potential upon realising (liquidation) losses in connection with the sale of the Nexive and Postcon businesses (refer to note 3.9).
The total accumulated losses available for carry forward at 31 December 2020 amounted to €106 million (2019: €115 million). With these losses carried forward, future tax benefits of €27 million could be recognised (2019: €29 million). Tax deductible losses give rise to deferred tax assets at the statutory tax rate in the relevant country. Deferred tax assets are recognised if it is probable that they will be realised. The probability of the realisation is impacted by uncertainties regarding the realisation of such benefits, for example as a result of the expiration of tax losses carried forward and projected future taxable income.
As a result PostNL has not recognised €18 million (2019: €23 million) of the potential future tax benefits and has recorded deferred tax assets of €9 million at 31 December 2020 (2019: €6 million).
The expiration of total accumulated losses is as follows:
2021: €6 million,
2022: €2 million,
2023: €1 million,
2024: €2 million,
2025 and thereafter: €8 million, and
Indefinite: €87 million.
The following table shows the movements in deferred taxes in 2019:
Net balance 1 January 2019 | Changes via income statement | Changes via OCI | Acquisition of subsidiaries | Other changes | Net balance 31 December 2019 | Assets | Liabilities | |
|---|---|---|---|---|---|---|---|---|
Provisions | 21 | 6 | 4 | 1 | 32 | 32 | ||
Intangible assets | (24) | (3) | (27) | 6 | 33 | |||
Property, plant and equipment | (23) | 1 | (22) | 9 | 31 | |||
Leases | (1) | (1) | 39 | 40 | ||||
Losses carried forward | 6 | 6 | 6 | |||||
Other | 55 | 4 | 18 | 77 | 77 | |||
Deferred tax assets/liabilities | 35 | 8 | 4 | 0 | 18 | 65 | 169 | 104 |
Offsetting | (104) | (104) | ||||||
Net deferred taxes | 35 | 8 | 4 | 0 | 18 | 65 | 65 | 0 |
Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of the carrying amount and fair value less costs to sell. Assets held for sale are no longer amortised or depreciated from the date they are classified as such. Accounting for assets classified as held for sale requires the use of assumptions and estimates. In line with IFRS 5, management assessed compliance with these statements and the assumptions used in the fair value calculations as well as the estimated costs to sell.
For the accounting policy concerning impairments, reference is made to note 5.4.
A disposal group qualifies as discontinued operation if it is a component of an entity that either has been disposed of, or is classified as held for sale, and:
• represents a separate major line of business or geographical area of operations,
• is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations, or
• is a subsidiary acquired exclusively with a view to resale.
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the income statement.
As at 31 December 2020, assets classified as held for sale amounted to €55 million (2019: €91 million) and related for €14 million to buildings held for sale in the Netherlands (2019: €10 million), for €0 million to the minority interest of 20% in Nexive and for €41 million to Cendris (2019: €65 million related to Nexive and €16 million to Spotta). The liabilities related to assets classified as held for sale of €25 million (2019: €100 million) related to Cendris (2019: €84 million related to Nexive and €16 million to Spotta).
In 2018, PostNL decided to divest Nexive and Postcon. On 3 August 2018, the classification criteria of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations were met. Accordingly, as of Q3 2018, Nexive and Postcon are reported as ‘held for sale’ and the results and cash flows are reported as ‘discontinued operations’.
On 5 August 2019, PostNL announced that it signed an agreement on the sale of Postcon’s activities to Quantum Capital Partners. The transaction closed on 31 October 2019. As part of the transaction, parties agreed on an earnout arrangement with a value of between €0 and €12 million, recorded as other accounts receivable.
On 24 February 2020, PostNL announced that it signed an agreement on the sale of 80% of the activities of Nexive to Mutares SE & Co KGaA. The transaction closed on 1 July 2020. PostNL obtained a minority interest of 20% in the entity acquiring the Nexive business. As part of the transaction, PostNL agreed to commit to a cash contribution. On 16 November 2020, PostNL and Mutares announced they reached an agreement with Poste Italiane to sell 100% of the activities of Nexive to Poste Italiane. The transaction has been completed on 29 January 2021. Refer to note 5.5 Subsequent events.
The following table presents the financial performance and cash flow information for the discontinued operations in the years 2019 and 2020. In 2020, the figures include the business results of Nexive until 1 July 2020 (2019: Postcon until 31 October 2019 and Nexive until 31 December 2019).
Year ended at 31 December | 2019 | 2020 |
|---|---|---|
Revenues | 659 | 91 |
Expenses | (679) | (109) |
Operating income | (20) | (18) |
Financial expense | (1) | (0) |
Income taxes | 1 | 0 |
Profit/(loss) after taxes | (20) | (18) |
Adjustments to fair value less costs to sell | (48) | 22 |
Profit/(loss) from discontinued operations | (68) | 4 |
Net cash (used in)/from operating activities | 8 | (8) |
Net cash (used in)/from investing activities | (2) | 1 |
Net cash (used in)/from financing activities | (9) | (4) |
Changes in cash and cash equivalents | (3) | (11) |
The adjustments of €22 million (2019: €(48) million) resulted from the updated fair value assessment of the transactions with Mutares (Nexive) and Quantum Capital Partners (Postcon) and includes a positive tax effect of €15 million (refer to note 3.8). The fair value measurement is based on inputs not based on observable market data (level 3).
The following table presents the carrying amounts of assets and liabilities (excluding equity and intercompany balances) of Nexive at 31 December 2019. The value of the minority interest of 20% in Nexive is €0 million at 31 December 2020.
31 Dec 2019 | |
|---|---|
Total non-current assets | 16 |
Trade accounts receivable | 7 |
Other current assets | 35 |
Cash and cash equivalents | 7 |
Total assets | 65 |
Provisions | 9 |
Long-term liabilities | 15 |
Trade accounts payable | 34 |
Other current liabilities | 26 |
Total liabilities | 84 |
At 31 December 2019, the main part of the provisions of €9 million related to the unfunded defined benefit plan Trattamento di Fine Rapporto (TFR) of €7 million in Italy.
As a specific contingent tax liability, at the end of December 2020 a tax dispute exists relating to the years 2012, 2013, 2014 and 2015 which can be estimated, using a probability-weighted assessment, at €15 million. Although we believe that this risk is in the possible range (20%-30%), supported by external advice, the outcome of the matter will depend upon the result of any negotiations with the relevant tax authorities and the outcome of related litigation. The outcome hereof will also determine whether additional tax notices for the years 2016 onwards may follow.
At year-end 2020, the classification criteria of IFRS 5 Non-current Assets Held for Sale were met in relation to the anticipated sale of Cendris, a specialist in customer contact services in the Netherlands and part of the segment Mail in the Netherlands. The assets of Cendris consist of goodwill of €14 million, other non-current assets of €10 million and current assets of €17 million. The liabilities consist of non-current liabilities of €5 million and current liabilities of €20 million. The transaction closed on 23 February 2021. Refer to note 5.5 Subsequent events.
Property, plant and equipment included in assets held for sale relate to buildings in the Netherlands. The book profit from the sale of buildings is included in other income in the consolidated income statement. The following table presents the movements of the balance sheet positions during 2020 and 2019.
2019 | 2020 | |
|---|---|---|
Balance at 1 January | 5 | 10 |
Disposals | (2) | (2) |
Transfers from property, plant and equipment | 7 | 6 |
Balance at 31 December | 10 | 14 |
Commitments are probable obligations that arises from past events whose existence will only be confirmed by the occurrence (or non-occurrence) of one or more probable future events.
Contingencies are possible obligations (contingent liabilities) or possible assets (contingent assets) that arise from past events whose existence will only be confirmed by the occurrence (or non-occurrence) of one or more uncertain future events, not wholly within the control of the entity.
At 31 December | 2019 | 2020 |
|---|---|---|
Short-term leases and leases of low-value assets | 5 | 3 |
Leases, not commenced | 82 | 84 |
Capital expenditure | 34 | 39 |
Purchase commitments | 127 | 140 |
As at 31 December 2020, €118 million of the commitments indicated above are of a short-term nature (2019: €118 million).
In 2020, short-term leases mainly consists of leases of depots in Mail in the Netherlands. Leases of low-value assets are mainly related to the lease of scooters.
As at 31 December 2020, commitments in connection with leases not commenced amounted to €84 million (2019: €82 million). These commitments primarily relate to the new head office (€60 million). Other commitments relate to vans and cars.
As at 31 December 2020, commitments in connection with capital expenditure amounted to €39 million (2019: €34 million) and are related to property, plant and equipment. These commitments primarily relate to the new sorting centres of Parcels.
As at 31 December 2020, PostNL had unconditional purchase commitments of €140 million (2019: €127 million), primarily related to various service and maintenance contracts for information technology, security, salary registration and cleaning.
Multinational groups of the size of PostNL are exposed to varying degrees of uncertainty related to their tax planning, their (changes in) transfer pricing models, regulatory reviews and tax audits, fuelled by tax regulations and relevant practices in the countries where PostNL operates being subject to change. PostNL accounts for its (income) taxes on the basis of its own internal analyses, if needed, supported by external advice. PostNL continually monitors its global tax position, and whenever uncertainties arise, assesses the potential consequences and either records the receivable, discloses a contingent asset, accrues the liability or discloses a contingent liability in its financial statements, depending on the strength of the company’s position and the resulting chance of income or risk of loss.
As at 31 December 2020, PostNL, on behalf of its subsidiaries, had various bank and insurance guarantees outstanding. However, none resulted in an off-balance sheet commitment for the Group as the relating obligations to external parties have already been recognised by these subsidiaries following their ordinary course of business.
The company is involved in several legal proceedings relating to the normal conduct of its business, such as claims for loss of goods, delays in delivery, trademark infringements, subcontracting and employment issues, and general liability. The majority of these claims are for amounts below €1 million and are insured and/or provided for. PostNL does not expect any liability arising from any of these legal proceedings to have a material impact.
The company is also involved in regulatory proceedings. While it is not feasible to predict or determine the ultimate outcome of these proceedings, the company is of the opinion that they may have an impact on the company’s financial position, result of operations and cash flows going forward. The company has made provisions for probable liabilities where deemed necessary and to the extent a reliable estimate of the future cash outflows can be made.
Following the demerger of Express, PostNL and TNT Express entered into a separation agreement, which remained valid despite the sale of the shares in TNT Express under the public offer by FedEx in May 2016. The separation agreement creates certain rights and obligations for both PostNL and TNT Express after the demerger. Relevant aspects relate to pensions, litigation, such as claims and litigation handling, non-allocated and non-anticipated claims and release of provisions.
Pursuant to the pension arrangements concluded between PostNL, TNT Express and the pension funds, PostNL provided a subsidiary guarantee for TNT Express in the event of violation of contractual terms, irregularity of payments and bankruptcy. This subsidiary guarantee only relates to pension benefits accrued under the existing pension plans (up to the date of the demerger) and will comprise a liability that gradually decreases over time. In addition, PostNL has provided a guarantee for future TNT Express pension payments, barring certain unforeseen circumstances. The guarantees of PostNL will only exist as long as the coverage ratio of the TNT Express fund is below a certain level. If the coverage ratio rises above that level and remains above that level for three consecutive quarters, the guarantees lapse.
As at 31 December 2020, no events had occurred that triggered disclosure of a significant contingent asset or liability following the aforementioned agreement with TNT Express.
PostNL reports two operating segments: Parcels and Mail in the Netherlands and one other segment: PostNL Other. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-makers. These chief operating decision-makers, who are responsible for allocating resources and assessing the performance of the operating segments, have been identified as the Board of Management of PostNL that makes strategic decisions. Transfer prices between operating segments are on an arm's length basis.
A reconciliation of the segment information relating to the balance sheet of the reportable segments is presented below. Segment information relating to the income statement is reported in note 2.5.
At 31 December 2020 | Parcels | Mail in NL | PostNL Other | Discontinued operations | Total |
|---|---|---|---|---|---|
Intangible assets | 56 | 240 | 43 | 339 | |
Property, plant and equipment | 273 | 88 | 10 | 370 | |
Right-of-use assets | 177 | 51 | 15 | 243 | |
Other non-current assets | 27 | 2 | 25 | 54 | |
Trade accounts receivable | 190 | 144 | 2 | 336 | |
Other current assets | 69 | 89 | 653 | 812 | |
Assets classified as held for sale | 53 | 2 | 0 | 55 | |
Total assets | 793 | 667 | 750 | 0 | 2,210 |
Non-current liabilities | 155 | 155 | 755 | 1,065 | |
Trade accounts payable | 67 | 48 | 27 | 141 | |
Other current liabilities | 256 | 500 | 1 | 757 | |
Liabilities related to assets classified as held for sale | 25 | 0 | 25 | ||
Total liabilities | 478 | 727 | 783 | 0 | 1,988 |
Cash out for capital expenditures | 26 | 31 | 21 | 78 |
A reconciliation of the segment information relating to the balance sheet of the reportable segments as at 31 December 2019 is presented below.
At 31 December 2019 | Parcels | Mail in NL | PostNL Other | Discontinued operations | Total |
|---|---|---|---|---|---|
Intangible assets | 65 | 267 | 32 | 364 | |
Property, plant and equipment | 259 | 140 | 15 | 414 | |
Right-of-use assets | 176 | 62 | 21 | 259 | |
Other non-current assets | 20 | 0 | 69 | 89 | |
Trade accounts receivable | 143 | 127 | 1 | 271 | |
Other current assets | 51 | 105 | 494 | 650 | |
Assets classified as held for sale | 0 | 26 | 0 | 65 | 91 |
Total assets | 714 | 727 | 632 | 65 | 2,138 |
Non-current liabilities | 236 | 249 | 720 | 1,205 | |
Trade accounts payable | 62 | 105 | 30 | 197 | |
Other current liabilities | 199 | 462 | (7) | 654 | |
Liabilities related to assets classified as held for sale | 0 | 16 | 0 | 84 | 100 |
Total liabilities | 497 | 832 | 743 | 84 | 2,156 |
Cash out for capital expenditures | 28 | 22 | 16 | 66 |
The segment information from a geographical perspective is derived as follows: the basis of allocation of assets and investments by geographical area is the location of the assets.
At 31 December | 2019 | 2020 | ||||
|---|---|---|---|---|---|---|
The Netherlands | Other countries | Total | The Netherlands | Other countries | Total | |
Intangible assets | 363 | 1 | 364 | 338 | 1 | 339 |
Property, plant and equipment | 411 | 3 | 414 | 366 | 4 | 370 |
Right-of-use assets | 232 | 27 | 259 | 221 | 22 | 243 |
Financial fixed assets | 88 | 1 | 89 | 49 | 5 | 54 |
Total non-current assets | 1,094 | 32 | 1,126 | 974 | 32 | 1,007 |
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