5 Other notes

5.1 Remuneration of Supervisory Board, Board of Management and senior management

Accounting policies

Equity-settled share-based compensation plans
PostNL operates a number of equity-settled share-based compensation plans, under which the employees receive (conditional) shares of the Group for services rendered. The fair value of the employee services received, as measured at the grant date, in exchange for the grant of the shares is recognised as an expense, with a corresponding increase in equity.

Non-market performance and service conditions are included in assumptions about the number of (conditional) shares that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all the specified vesting conditions are to be satisfied. In addition, for some share-based compensation plans, employees provide services in advance of the grant date and therefore the grant date fair value is estimated for the purposes of recognising the expense between service commencement date and grant date. At the end of each reporting period, the Group revises its estimates of the number of shares that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

Remuneration of members of the Supervisory Board

Total remuneration of the Supervisory Board in 2020 amounted to €375,867 (2019: €403,742). For details see the 'Remuneration report' .

The members of the Supervisory Board receive no compensation related to performance and/or equity and accrue no pension rights with the company. The members of the Supervisory Board receive no severance payments in the event of termination. PostNL does not grant loans, including mortgage loans, advance payments, guarantees and options or shares to any member of the Supervisory Board.

Remuneration of members of the Board of Management

In 2020, the total remuneration based on IFRS of the Board of Management amounted to €2,163,095 (2019: €1,926,351). The following table presents total remuneration of the Board of Management:

PostNL Remuneration of the Board of Management in €
2019, 2020

  

Base salary1

Other benefits2

Pension costs3

One year variable

Multi-year variable

Total remuneration

Herna Verhagen - CEO

2020

640,625

181,760

34,316

216,211

163,464

1,236,376

2019

625,000

185,135

24,355

140,625

119,963

1,095,078

Pim Berendsen - CFO

2020

486,875

114,341

41,099

164,320

120,084

926,719

2019

475,000

115,002

32,252

106,875

102,144

831,273

  • 1 Base salaries 2020 were indexed with 2.5%.
  • 2 Other benefits include company costs related to tax and social security, pension allowances, company car and other compensation.
  • 3 Pension costs represent the service costs of the defined benefit scheme and risk premium for the net pension plan.
Base salary

The base salaries for both members of the Board of Management were increased in 2020 compared to 2019 in line with the remuneration policy.

Accrued for short-term incentive

PostNL accounts for the short-term incentive on the basis of the performance of the year reported. In 2020, an amount of €380,531 was accrued for. In accordance with the remuneration policy, this amount will be paid in cash in 2021. In 2020, an amount of €247,500 was paid to the members of the Board of Management in relation to the short-term incentive of 2019.

Accrued for long-term incentive

In 2020, the total share-based payment costs relating to the long-term incentive performance share plan for the members of the Board of Management amounted to €283,548 (2019: €222,107).

Performance share plan (PSP)

The members of the Board of Management are awarded a long-term incentive, which represents a maximum potential reward of 37.5% of the annual base salary in the form of a performance share plan. The characteristics of this performance share plan are:

  • it is a conditional equity-settled share plan based on a three-year performance period

  • each year shares are conditionally allocated to members of the Board of Management

  • a conditional dividend equivalent is added to the conditional shares equal to the dividend rights of ordinary shares

  • the conditional shares and their conditional dividend equivalents will vest after a performance period of three years

  • vesting is subject to the achievement of targets set on each of the long-term performance measures supportive to the attainment of PostNL’s strategy

  • if a member of the Board of Management leaves the company during the performance period due to circumstances involving fraud or gross misbehaviour, any accrued rights on the long-term incentive plan will terminate and become void

  • if a member of the Board of Management leaves the company due to other reasons, a pro rata performance and time-based vesting applies, unless decided otherwise by the Supervisory board

In compliance with the Dutch Corporate Governance Code, following a three-year performance period, the holding period for vested shares expires two years thereafter or at termination of employment/service if this occurs earlier. For compliance reasons, a sale of shares may not occur within six months following the date of termination of the employment/service. Any sale of shares for the purpose of using the proceeds to pay for the tax due at vesting of these shares is exempted.

PostNL Performance share plan Board of Management number of shares
2020

Name of Director - position

Specification of plan

Number of shares held at 1 Jan 20201

Number of shares granted during 20202

Number of shares settled during 2020

Number of shares forfeited during 2020

Net number of shares under a holding period at 31 Dec 2020

Number of shares subject to a performance condition at 31 Dec 2020

Herna Verhagen - CEO

PSP 2020

 

161,884

   

161,884

 

PSP 2019

105,737

    

105,737

 

PSP 2018

85,692

    

85,692

 

PSP 2017

63,150

 

(21,048)

(42,102)

10,629

 
 

PSP 2016

25,725

   

25,725

 
 

PSP 2015

27,423

     
 

Total shares

307,727

161,884

(21,048)

(42,102)

36,354

353,313

        

Pim Berendsen - CFO

PSP 2020

 

123,032

   

123,032

 

PSP 2019

80,361

    

80,361

 

PSP 2018

65,126

    

65,126

 

PSP 2017

28,688

 

(9,562)

(19,126)

3

 
 

Total shares

174,175

123,032

(9,562)

(19,126)

 

268,519

Total shares

 

481,902

284,916

(30,610)

(61,228)

36,354

621,832

  • 1 The shares of PSP2017 held by Pim Berendsen reflect the number of shares that were granted in his duty as member of the Executive Committee.
  • 2 The number of conditional shares granted is based on 37.5% of the annual base salary divided by the five-day average Euronext Amsterdam share price of PostNL prior to the date of publication of the Q1 2020 results (€1.4478).
  • 3 The shares of PSP 2017 were granted to Pim Berendsen in his duty as member of the Executive Committee and are not subject to a holding period.

PostNL The main conditions of share award plans
2020

Specification of plan

Performance period

Grant date

PSP 2020

01/01/2020-31/12/2022

06/05/2020

PSP 2019

01/01/2019-31/12/2021

10/05/2019

PSP 2018

01/01/2018-31/12/2020

09/05/2018

PSP 2017

01/01/2017-31/12/2019

09/05/2017

PSP 2016

01/01/2016-31/12/2018

10/05/2016

PSP 2015

01/01/2015-31/12/2017

09/05/2015

The vesting date is generally equal to grand date plus three years. Subsequently a holding period of two years applies.

Note that the number of outstanding conditional shares does not represent the total number of shares held by each member of the Board of Management, which includes vested shares under PostNL's performance share plan and variable remuneration.

In 2020, an amount of €283,548 (2019: €222,107) was expensed for the cost of the performance shares of the Board of Management. The costs are determined by multiplying the number of granted performance shares by the fair value of such shares on the date of the grant (PSP 2020: €1.341 per share; PSP 2019: €1.853 per share; PSP 2018: €3.220 per share; PSP 2017: €4.361 per share) and by taking into account expected vesting percentages.

Other periodic compensation

Other periodic compensation included company costs related to tax and social security, pension allowances, company car and other compensation.

Pension costs

The pension costs consist of the service costs for the reported year (net of employee contributions) and risk premium for the net pension plan. The members of the Board of Management are participants in a career average defined benefit scheme.

Loans, advance payments of guarantees

No loans, advance payments or guarantees were granted to members of the Board of Management in 2020 (2019: nil).

Remuneration of senior management

Short-term incentive

The short-term incentive for senior management represents a potential reward of a percentage of the annual base salary (the percentage depending on the job level), which is based on annual performance measures. Of the realised achievements, 50% is paid in cash and 50% is paid in PostNL shares in the following year. Shares will be granted unconditionally and will be delivered without restrictions or a restricted period, other than those defined in the PostNL insider trading policy.

The 50% of the short-term incentive settled in shares is accounted for as an equity-settled share-based payment. The accrued share-based payment costs relating to this short-term incentive amounted to €2.1 million in 2020 (2019: €1.6 million). The realised amounts will be granted and paid in PostNL shares in 2021.

Performance share plan

A selected group of members of senior management is awarded a long-term incentive, which represents a potential reward of 37.5% of the annual base salary in the form of a performance share plan that contains three-year performance measures. The long-term incentive is part of the remuneration package for this selected group of senior management. It is aimed particularly at aligning their interests with the long-term interests of the company and its shareholders.

The performance share plan contains the same characteristics as the performance share plan of the Board of Management with the exception that there is no holding period applicable for senior management.

PostNL Performance share plan senior management
2020

Specification of plan

Number of shares held at 1 Jan 2020

Number of shares granted during 20201

Number of shares settled during 2020

Number of shares forfeited during 2020

Number of shares outstanding at
31 Dec 2020

PSP 2020

 

372,094

  

372,094

PSP 2019

238,111

   

238,111

PSP 2018

187,763

   

187,763

PSP 2017

122,087

 

(40,694)

(81,393)

 

Total shares

547,961

372,094

(40,694)

(81,393)

797,968

  • 1 The number of conditional shares is based on 37.5% of the annual base salary divided by the five-day average Euronext Amsterdam share price of PostNL prior to the date of publication of the Q1 2020 results (€1.4478).

In 2020, an amount of €342,354 (2019: €347,600) was expensed for the cost of the performance shares of senior management. The costs are determined by multiplying the number of granted performance shares by the fair value of such shares on the date of the grant (PSP 2020: €1.341 per share; PSP 2019: €1.853 per share; PSP 2018: €3.220 per share; PSP 2017: €4.361 per share) and by taking into account expected vesting percentages.

Bonus matching share plan

Since 2011, senior management have had the opportunity, on a voluntary basis, to participate in a bonus/matching plan. The company sees the bonus matching plan as part of the remuneration package for the members of senior management, particularly aimed at aligning their interests with the long-term interests of the company and shareholders. At the discretion of the Supervisory Board, grants are made on an annual basis in accordance with the bonus matching plan which has been approved by the Supervisory Board. The significant aspects of the plan are:

  • bonus shares are purchased by the participant using 25% of the gross (cash) variable remuneration and delivered upon the grant of the right on matching shares

  • the number of bonus shares is calculated by dividing 25% of an individual’s gross annual cash bonus relating to the preceding financial year by the share price on Euronext Amsterdam on the date the grant is made

  • the rights to matching shares are granted free of charge. The number of matching shares is equal to the number of bonus shares (equity settled scheme)

  • the matching rights vest three years after the delivery of the bonus shares

  • for each bonus share that is sold within three years, the associated right to one matching share lapses. If more than 50% of the bonus shares are sold within three years, the entire right to matching shares lapses with immediate effect

  • if a participant leaves the company for certain reasons (retirement, certain reorganisations, disability or death), the right to matching shares will vest immediately and he/she can exercise his/her right pro rata

  • a participant loses the right to exercise his/her right on matching shares when he/she leaves the company for reasons other than those mentioned

The exercise of the rights to matching shares is subject to the PostNL insiders trading policy.

PostNL Bonus matching plan senior management
2020

Specification of plan

Vesting period

Number of shares outstanding at 1 Jan 2020

Number of shares granted during 2020

Number of shares settled during 2020

Number of shares forfeited during 2020

Number of shares outstanding at 31 Dec 2020

Bonus matching 2020

06/05/2020-06/05/2023

 

60,688

 

(5,120)

55,568

Bonus matching 2019

10/05/2019-10/05/2022

40,498

  

(3,096)

37,402

Bonus matching 2018

09/05/2018-09/05/2021

11,345

 

(180)

(1,636)

9,529

Bonus matching 2017

09/05/2017-09/05/2020

27,522

 

(27,170)

(352)

 

Total

 

79,365

60,688

(27,350)

(10,204)

102,499

In 2020, an amount of €61,451 (2019: €92,685) was expensed for the cost of the equity-settled bonus matching shares. The costs are determined by multiplying the number of granted matching shares by the fair value of such shares on the date of the grant (2020: €1.341 per share; 2019: €1.853 per share; 2018: €3.220 per share; 2017: €4.361 per share) and by taking into account expected vesting percentages.

Financing of equity-settled plans

For all equity-settled and cash-settled share plans, PostNL intends to perform the settlement (or in case of cash-settled plans, fund the settlement) via the issuance of new shares. Accordingly, the company does not need to actively hedge the risk in connection with its obligations. As a result, the company did not purchase any additional shares in 2020 (2019: 0) to cover its obligations under the existing share plans. As at 31 December 2020, the total number of shares held for this purpose was nil (2019: 0).

5.2 Related party transactions and balances

The PostNL Group companies have trading relationships with a number of joint ventures as well as with companies in which PostNL holds minority stakes. In some cases, there are contractual arrangements in place under which PostNL companies source supplies from such undertakings, or such undertakings source supplies from PostNL. Transactions are carried out at arm's length. During 2020, sales of PostNL to joint ventures and associates amounted to €1 million (2019: €0 million). Purchases of PostNL from joint ventures and associates amounted to €0 million (2019: €0 million). The net amounts due from the joint ventures and associates amounted to €11 million (2019: €0 million), of which €10 million related to a loan of €10 million to Nexive. Related party transactions with PostNL’s pension fund are presented in note 3.5 to the consolidated financial statements.

PostNL considers the members of the Board of Management and Supervisory Board as key management personnel as defined by IAS 24. For disclosure on related party transactions with the Board of Management and Supervisory Board, see note 5.1 to the consolidated financial statements.

5.3 Business combinations

On 1 July 2020, an additional 20% equity stake in MyParcel.com was acquired, totalling PostNLs stake at 60% of the shares. MyParcel.com provides a multilingual e-commerce platform facilitating services like label generation, global address validation and parcel track-and-trace. The preliminary purchase price allocation resulted in goodwill of €1 million and related to expected synergies from combining operations of MyParcel.com and our existing international parcel business. The impact of the acquisition on the pro forma results of PostNL is not material.

Sandd
On 22 October 2019, PostNL acquired 100% of the shares of Sandd, the other postal company with country-wide coverage in the Netherlands, for an amount of €65 million. The acquisition fits within the goal to create one nationwide postal network for the Netherlands in order to ensure that the postal market remains reliable, accessible and affordable for everyone. The purchase price allocation resulted in intangible assets of €30 million (customer relationships, with an amortisation period of 16 years) and goodwill of €128 million. The goodwill comprises the value of expected synergies arising from the acquisition. None of the goodwill recognised is expected to be deductible for income tax purposes. Transaction costs of €6 million were expensed and were included in other operating expenses. In 2020, there were no changes to the fair values of the identifiable assets and liabilities of Sandd.

5.4 Summary of all other accounting policies

Consolidation

The consolidated financial statements include the financial figures of PostNL N.V. and its subsidiaries, associates and joint ventures and have been prepared using uniform accounting policies for like transactions and other events in similar circumstances. All significant intercompany transactions and balances have been eliminated on consolidation. A complete list of subsidiaries, associates and joint ventures included in PostNL’s consolidated financial statements is filed for public review at the Chamber of Commerce in The Hague. This list has been prepared in accordance with the provisions of article 379 (1) and article 414 of book 2 of the Dutch Civil Code.

Subsidiaries

A subsidiary is an entity controlled directly or indirectly by PostNL N.V. Control is defined as the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether PostNL controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to PostNL and are de-consolidated from the date on which control ceases. PostNL uses the acquisition method of accounting to account for the acquisition of subsidiaries. The consideration of an acquisition is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of exchange. The consideration transferred also includes the fair value arising from contingent consideration arrangements. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values on the acquisition date irrespective of the extent of any non-controlling interest. Acquisition-related costs are expensed as incurred.

The excess of the consideration transferred over the fair value of PostNL’s share of the identifiable net assets of the subsidiary is recorded as goodwill. If the cost of acquisition is less than the fair value of PostNL’s share of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement. The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

When the Group ceases to have control or significant influence, any retained interest in the entity is re-measured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequent accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are recycled to profit or loss. The non-controlling interest is initially measured at the proportion of the non-controlling interest in the recognised net fair value of the assets, liabilities and contingent liabilities. Losses applicable to the non-controlling interest in excess of the non-controlling interest in the subsidiary’s equity are allocated against PostNL’s interests, except to the extent that the non-controlling interest has a binding obligation and is able to make an additional investment to cover the losses.

Functional currency and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary environment in which the entity operates ('the functional currency'). These consolidated financial statements are presented in euros, which is PostNL’s functional and presentation currency.

Foreign currency transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions. Monetary assets and liabilities in foreign currencies are translated to the functional currency using year-end exchange rates. Foreign currency exchange gains and losses resulting from the settlement of foreign currency transactions and balances and from the translation at year-end exchange rates are recognised in the income statement except for qualifying cash flow hedges and qualifying net investment hedges that are directly recognised in other comprehensive income.

Foreign operations

The results and financial position of all Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

  • assets and liabilities are translated at the closing exchange rates,

  • income and expenses are translated at average exchange rates, and

  • the resulting exchange rate differences based on the different ways of translating between the balance sheet and the income statement are recognised as a separate component of equity (translation reserve).

Foreign currency exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to the translation reserve. When a foreign operation is sold, such exchange differences are recycled in the income statement as part of the gain or loss on the sale.

Impairment of goodwill

Goodwill is not subject to amortisation but is tested for impairment annually or whenever there is an indication that the asset might be impaired. For the purposes of assessing impairment, assets are grouped at the lowest levels at which there are separately identifiable cash flows, being the cash-generating units (CGUs). If the recoverable value of the CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of the goodwill allocated to the CGU and then pro rata to other assets of the CGU. The recoverable amount is the higher of the fair value less costs of disposal and value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the asset-specific risks. For the purpose of assessing impairment, corporate assets are allocated to specific CGUs before impairment testing. The allocation of the corporate assets is based on the contribution of those assets to the future cash flows of the CGU under review. Impairment losses recognised for goodwill are not reversed in a subsequent period.

Impairment of investments in joint ventures and associates

PostNL assesses on each balance sheet date whether there is objective evidence that an investment in a joint venture or associate may need to be impaired. If the recoverable value of the investment is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The recoverable amount is the higher of the fair value less costs of disposal and value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the asset-specific risks. The fair value less costs of disposal of a joint venture or associate is reviewed based on observable publicly available market data. Possible impairment charges may be reversed if there is an indication that the impairment no longer exists or has been reduced.

Impairment of finite-lived intangible assets and property, plant and equipment

At each balance sheet date, PostNL reviews its finite-lived intangible assets and property, plant and equipment for an indication of impairment. If any indication exists, the recoverable amount of the assets is estimated. The recoverable amount is defined as the higher of an asset’s fair value less costs of disposal and its value in use. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Any impairment loss is recognised immediately in the income statement. Impairment losses recognised in prior periods shall be reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The recoverable amount shall not exceed the carrying amount that would have been determined had no impairment loss been recognised in previous periods. A reversal of an impairment loss is recognised immediately in the income statement.

Profit sharing

The company recognises a liability and an expense for profit-sharing by employees, based on a calculation that takes into consideration quantitative and qualitative performance measures in accordance with contractual arrangements.

Dividend distribution

Dividend distribution to PostNL’s shareholders is recognised as a liability in the financial statements in the year in which the dividends are approved by the shareholders. If PostNL offers its shareholders (the choice of) dividends in additional shares, the additionally issued shares are recognised at their nominal amount.

5.5 Subsequent events

On 29 January 2021, PostNL and Mutares announced to have closed the sale of Nexive, the number-two mail and parcels provider in Italy, to Poste Italiane. PostNL also terminated the joint venture agreement with Mutares, which resulted in the release of the remaining part of the committed cash contributions. The transaction resulted in a net result of €26 million and cash proceeds of €29 million.

On 23 February 2020, PostNL completed the sale of Cendris, a specialist in customer contact services in the Netherlands and part of the segment Mail in the Netherlands, to Yource, market leader in customer contact within the Benelux. The transaction is expected to result in a book profit of around €15 million and gross cash proceeds of around €48 million.