To: the shareholders and Supervisory Board of PostNL N.V.
We have audited the financial statements 2021 of PostNL N.V. (hereinafter: PostNL or the Company), based in The Hague, the Netherlands.
In our opinion the accompanying financial statements give a true and fair view of the financial position of PostNL N.V. as at 31 December 2021 and of its result and its cash flows for 2021, in accordance with International Financial Reporting Standards, as adopted by the European Union (EU‑IFRS) and with Part 9 of Book 2 of the Dutch Civil Code.
The financial statements comprise:
The consolidated primary statement and corporate primary statement of financial position as at 31 December 2021
The following statements for 2021: the consolidated and corporate income statement, the consolidated and corporate statements of comprehensive income, changes in equity and cash flows
The notes comprising a summary of the significant accounting policies and other explanatory information.
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the “Our responsibilities for the audit of the financial statements” section of our report.
We are independent of PostNL in accordance with the EU Regulation on specific requirements regarding statutory audit of public-interest entities, the “Wet toezicht accountantsorganisaties” (Wta, Audit firms supervision act), the “Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten” (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore we have complied with the “Verordening gedrags- en beroepsregels accountants” (VGBA, Dutch Code of Ethics).
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We designed our audit procedures in the context of our audit of the financial statements as a whole and in forming our opinion thereon. The following information in support of our opinion and any findings were addressed in this context, and we do not provide a separate opinion or conclusion on these matters.
PostNL provides businesses and consumers in the Benelux with an extensive range of services for their mail and parcel needs. Through their international sales network Spring, they connect local business around the world to consumers globally. The group is structured in components and we tailored our group audit approach accordingly. We paid specific attention in our audit to a number of areas driven by the operations of the group and our risk assessment.
We start by determining materiality and identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error in order to design audit procedures responsive to those risks and to obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
5% of operating income (rounded)
We consider an earnings-based measure as the most appropriate basis to determine materiality. We consider operating income to be the most appropriate earnings-based benchmark, as it provides us with a consistent year on year basis for determining materiality and is one of the key performance measures for the users of the financial statements.
The benchmark applied is in line with last year’s audit. Compared to prior year materiality increased as a result of increased operating income.
We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons.
We agreed with the Supervisory Board that misstatements in excess of €750,000, which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.
PostNL is at the head of a group of entities. The financial information of this group is included in the consolidated financial statements.
Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit. In this respect we have determined the nature and extent of the audit procedures to be carried out for group entities. Decisive were the size and/or the risk profile of the group entities or operations. On this basis, we selected group entities for which an audit or review had to be carried out on the complete set of financial information or specific items.
Our group audit focused on significant group entities of PostNL N.V. within the segments Parcels, Mail in the Netherlands and PostNL Other. Based on their significance and/or risk characteristics, we performed full scope or specific scope audit procedures on the significant group entities within those segments.
For the entities in scope within Parcels, except for Spring Hong Kong, and Mail in The Netherlands the group engagement team performed the work. For Spring Hong Kong we used EY auditors from Hong Kong (component auditors), who are familiar with local laws and regulations, to perform audit procedures to obtain sufficient coverage for financial statement line items from a consolidated financial statements perspective.
Component materiality was determined by our judgment, based on the relative size of the component and our risk assessment. The component auditor applied a component materiality that is significantly less than €7.5 million.
We sent detailed instructions to the component auditor, covering the significant areas that should be addressed and set out the information required to be reported to us. We interacted regularly with the component team where appropriate during various stages of the audit, reviewed key working papers and were responsible for the scope and direction of the audit process.
Because of the continuing (international) travel restrictions and social distancing due to the Covid-19 pandemic, we needed to restrict or have been unable to visit management and/or the component auditor to perform our oversight procedures on site. In order to compensate for the limitations related to physical presence and direct observation, we performed alternative procedures (for example reviewed key working papers electronically and held our meetings with the component auditor using video or teleconferencing facilities) to obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
In total these procedures represent 99% of the group’s total assets, 87% of revenues and 83% of operating income.
None of the components covered through other procedures (remaining components) individually represented more than 2% of total group revenue. For those remaining components we performed, amongst others, analytical procedures to corroborate our assessment that there were no significant risks of material misstatements within those components. By performing the procedures mentioned above at components of the group, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence about the group’s financial information to provide an opinion about the consolidated financial statements.
We ensured that the audit teams both at group and at the component level included the appropriate skills and competences which are needed for the audit of this industry. We involved several EY specialists to assist the audit team, including specialists from our tax, forensics, valuations, actuarial and treasury departments.
We performed our audit in cooperation with Internal Audit of PostNL, leveraging their in-dept knowledge of the Company and the work performed. We agreed about the joint coordination of the audit planning, the nature and scope of the work to be performed, the reporting and documentation. We evaluated and tested the relevant work performed by Internal Audit to satisfy ourselves that the work is adequate for our purposes and established what work had to be performed by our own professionals.
Climate change will be high on the public agenda in the next decades. It addresses risks related to the sustainability of the business model and access to financial markets. Objectives such as CO2 reduction impact financial reporting, as these entail risks for the business operation, the valuation of assets ('stranded assets') and provisions.
As part of our audit of the financial statements we evaluated the extent to which climate-related risks are taken into account in estimates and significant assumptions, such as investments into environmental projects as part of PostNL’s longer-term strategy. We refer to the key audit matter ‘Valuation of Investments in subsidiaries (corporate primary statements)’. Furthermore, we read the report of the Board of Management and considered whether there is any material inconsistency between the non-financial information in section 8 ‘Environmental value’ and section 21 ‘Non-financial statements’ and the financial statements.
Our audit procedures to address the assessed climate-related risks and the possible effects of the energy transition did not result in a separate key audit matter.
Although we are not responsible for preventing fraud or non-compliance and we cannot be expected to detect non-compliance with all laws and regulations, it is our responsibility to obtain reasonable assurance that the financial statements, taken as a whole, are free from material misstatement, whether caused by fraud or error.
We identify and assess the risks of material misstatements of the financial statements due to fraud. During our audit we obtained an understanding of PostNL and its environment and the components of the system of internal control, including the risk assessment process and the Board of management’s process for responding to the risks of fraud and monitoring the system of internal control and how the Supervisory Board exercises oversight, as well as the outcomes.
We refer to section 10 of the Business Report for Management’s fraud risk assessment and section 14 of the Supervisory Board report in which the Supervisory Board reflects on this fraud risk assessment.
We evaluated the design and relevant aspects of the system of internal control and in particular the fraud risk assessment, as well as the code of conduct, whistle blower procedures and incident registration. We evaluated the design and the implementation and, where considered appropriate, tested the operating effectiveness, of internal controls designed to mitigate fraud risks.
As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect to financial reporting fraud, misappropriation of assets and bribery and corruption in close co-operation with our forensic specialists. We evaluated whether these factors indicate that a risk of material misstatement due fraud is present.
We incorporated elements of unpredictability in our audit. We also considered the outcome of our other audit procedures and evaluated whether any findings were indicative of fraud or non-compliance.
We addressed the risks related to management override of controls. In our audit approach we considered that this fraud risk would primarily impact the revenue related accruals (terminal dues) as this can impact normalised EBIT, one of the key metrics of the Company on which incentives (yearly bonus) are based. The judgments and assumptions in the determination of the revenue related accruals due to uncertainties around the negotiation results may represent a risk of material misstatement due to fraud. We refer to the Key Audit Matter ‘revenue related accruals (terminal dues)’ for the description of the audit procedures responsive to this fraud risk.
Furthermore, we performed additional procedures to address risks related to management override of controls. We obtained audit evidence to support material top-side manual entries as part of the consolidation and used data analysis to identify and address high-risk journal entries for the in-scope entities.
We considered available information and made enquiries of relevant Board of Management, Executive Committee members, directors including internal audit, legal, compliance, human resources and regional directors and the Supervisory Board/Audit Committee.
The fraud risk we identified, enquires and other available information did not lead to specific indications for fraud or suspected fraud potentially materially impacting the view of the financial statements.
We assessed factors related to the risks of non-compliance with laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general industry experience and through discussions with the Audit Committee, the Board of Management, Executive Committee and Director Audit & Security.
We refer to section 11 “Regulatory compliance management” as included in the Business report. Our audit approach included amongst others the following steps: 1) obtaining an understanding of the environment and the Company to enable the detection of non-compliance with laws and regulations 2) reading minutes and inspection of internal audit and the integrity committee reports and 3) substantive tests of details of classes of transactions, account balances or disclosures. We also inspected lawyers’ letters and correspondence with regulatory authorities and remained alert to any indication of (suspected) non-compliance throughout the audit.
As disclosed in section ‘Going concern’ in Note 1.2 to the financial statements and Statement of the Board of Management in section 19, the Board of Management made a specific assessment of the company’s ability to continue as a going concern and to continue its operations for at least the next 12 months.
We discussed and evaluated the specific assessment with the Board of Management exercising professional judgment and maintaining professional skepticism. We considered whether the Board of Management’s going concern assessment, based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, contains all events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion.
Based on our procedures performed, we did not identify serious doubts on the company’s ability to continue as a going concern for the next 12 months. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company to cease to continue as a going concern.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements. We have communicated the key audit matters to the Supervisory Board. The key audit matters are not a comprehensive reflection of all matters discussed.
The key audit matter “Sale-and-leaseback transaction”, which was included in our last year’s auditor’s report, is not considered as a key audit matter for this year. The key audit matter last year saw to the complexity of applying IFRS 15 and IFRS 16 at initial recognition. Since there were no significant sale-and-leaseback transactions this year this no longer qualifies as a key audit matter in 2021.Download spreadsheet
Our audit approach
Revenue related accruals (terminal-dues)
The revenue related accruals of the Company mainly relate to outstanding positions with international postal operators for services provided or received (terminal dues). In several cases the prices and volume negotiations with the counterparties are not finalized, which results in assumptions being used by management in the determination of the revenue related accruals.
The estimates used in the calculation of the terminal dues can have an impact on the operating revenues and accrued liabilities and is therefore important to our audit.
Further reference is made to note 3.1.4 to the consolidated primary statements. In addition, the general accounting policy around revenue related accruals is disclosed in note 1.3 of the consolidated primary statements.
We have gained an understanding of the terminal dues position and its revenue related accruals process, performed walkthroughs of the revenue classes of transactions and evaluated the design of the relevant internal controls in this area.
We performed detailed analytical review procedures on the terminal due positions, which included inquiry of management of the Company on the development of the postal volume and the status of the negotiations with the largest counterparties. We challenged this information with external reports received from other postal service providers on postal volume delivered to PostNL.
We assessed the quality of the estimation process of management by performing back-testing procedures on the estimates of prior year by comparing those to final settlements in the current year.
We performed test of detail procedures by verifying prices and volumes, based on contractual agreements and volume registrations received from foreign postal operators respectively. We performed detailed procedures to determine the correctness of manual adjustments by substantiating the amounts to supporting documentation.
We also assessed the appropriateness of the Company’s accounting policies in relation to revenue related accruals and the adequacy of the Company’s related disclosures as included in note 3.1.4 of the consolidated primary statements.
We note that the Company’s revenue recognition accounting policies were appropriately applied.
Furthermore, we consider that management‘s assumptions related to the terminal due positions are within the acceptable range and the positions as per 31 December 2021 are management’s best estimate.
In addition, we assessed that the disclosures are appropriate.
Valuation of Investments in subsidiaries (corporate primary statements)
At 31 December 2021 the value of Investments in subsidiaries, as included in the corporate primary statements, amounted up to €3,526 million (2020: €3,002 million). At each balance sheet date, the Company reviews whether there is an indication that its Investments in subsidiaries are impaired or whether there are indicators that a previously recognized impairment may no longer exist or may have decreased.
Auditing the calculation of the recoverable amount is complex, given the significant judgment related to assumptions and data in the model used to determine whether the carrying value of Investments in subsidiaries is appropriate. Significant assumptions used in the model to support the recoverable amount of Investment in subsidiaries are the discount rate and operating income.
The assumptions and related changes, sensitivities and results of the tests performed are disclosed in note 6.4.1 of the corporate primary statements. In addition, the general accounting policy around impairment is disclosed in note 1.3 and 5.4 of the consolidated primary statements. The Company recorded an impairment reversal of €524 million in 2021.
We have gained an understanding of the Investment in subsidiaries impairment testing process, performed a walkthrough of the impairment analysis process (e.g. controls over the data and assumptions used in the analysis such as the discount rate and operating income) and evaluated the control design in this area.
Our EY valuation specialists assisted us with our audit of PostNL’s annual impairment analysis. We reviewed the valuation model to assure that the methodology used is in line with IAS 36 Impairment of assets.
We validated that the projected financial information used in the analysis was derived from PostNL’s most recent strategic plan and long-term forecast as approved by the Board of Management and Supervisory Board and have evaluated the historical accuracy of management’s assessment by comparing the historical actual results to the forecasts used. We verified that ESG’s climate related investments are included in the strategic plan and therefore incorporated in the long-term financial forecasts. Additionally, we challenged the impact of Digital Next, which is considered as a substantial driver for in the increase of the Investment value.
We challenged the assumptions and related changes used by the Company in their valuation model by comparing to external information such as discount rates and implied growth rates driving operating income.
We confirmed that the cash flow projections are appropriate and consistent with the information approved by the Board of Management and the Supervisory Board and we reconciled the carrying value to financial information from the accounting system.
On top of the procedures mentioned before, we have assessed the impact of Covid-19 and challenged the sensitivity analysis as performed by the Company. In the sensitivity analysis for Investments in subsidiaries the Company stress tested the key assumptions discount rate and operating income to calculate the impact of a change in assumption.
We also assessed the adequacy of the Company’s disclosures around Investments in subsidiaries as included in note 6.4.1 of the corporate primary statements.
We consider management’s assumptions to be within the acceptable range and we assessed that the disclosures for Investments in subsidiaries are appropriate.
The annual report contains other information in addition to the financial statements and our auditor’s report thereon.
Based on the following procedures performed, we conclude that the other information:
Is consistent with the financial statements and does not contain material misstatements
Contains the information as required by Part 9 of Book 2 for the report of the Board of Management and the other information as required by Part 9 of Book 2 of the Dutch Civil Code and as required by Sections 2:135b and 2:145 sub‑section 2 of the Dutch Civil Code for the remuneration report.
We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements. By performing these procedures, we comply with the requirements of Part 9 of Book 2 and Section 2:135b sub-Section 7 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is substantially less than the scope of those performed in our audit of the financial statements.
The Board of Management is responsible for the preparation of the other information, including the report of the Board of Management in accordance with Part 9 of Book 2 of the Dutch Civil Code and other information required by Part 9 of Book 2 of the Dutch Civil Code. The Board of Management and the Supervisory Board are responsible for ensuring that the remuneration report is drawn up and published in accordance with Sections 2:135b and 2:145 sub‑section 2 of the Dutch Civil Code.
Following the appointment by the annual general meeting of shareholders on 14 April 2015, we were engaged by the Supervisory Board on 11 January 2016 as auditor of PostNL N.V., as of the audit for the year 2016 and have operated as statutory auditor since that date. We were re-appointed in the annual general meeting of shareholders on 16 April 2019.
We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation on specific requirements regarding statutory audit of public-interest entities.
PostNL has prepared the annual report in ESEF. The requirements for this are set out in the Delegated Regulation (EU) 2019/815 with regard to regulatory technical standards on the specification of a single electronic reporting format (hereinafter: the RTS on ESEF).
In our opinion, the annual report, prepared in the XHTML format, including the partially marked-up consolidated primary statements, as included in the reporting package by PostNL, complies in all material respects with the RTS on ESEF.
The Board of Management is responsible for preparing the annual report, including the financial statements, in accordance with the RTS on ESEF, whereby the Board of Management combines the various components into a single reporting package.
Our responsibility is to obtain reasonable assurance for our opinion whether the annual report in this reporting package complies with the RTS on ESEF.
Our procedures, taking into account Alert 43 of the NBA (the Netherlands Institute of Chartered Accountants), included amongst others:
obtaining an understanding of PostNL’s financial reporting process, including the preparation of the reporting package
obtaining the reporting package and performing validations to determine whether the reporting package containing the Inline XBRL instance document and the XBRL extension taxonomy files, has been prepared in accordance with the technical specifications as included in the RTS on ESEF
examining the information related to the consolidated primary statements in the reporting package to determine whether all required mark-ups have been applied and whether these are in accordance with the RTS on ESEF.
The Board of Management is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code. Furthermore, the Board of Management is responsible for such internal control as the Board of Management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, the Board of Management is responsible for assessing the company’s ability to continue as a going concern. Based on the financial reporting framework mentioned, the Board of Management should prepare the financial statements using the going concern basis of accounting unless the Board of Management either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so. The Board of Management should disclose events and circumstances that may cast significant doubt on the company’s ability to continue as a going concern in the financial statements.
The Supervisory Board is responsible for overseeing the company’s financial reporting process.
Our objective is to plan and perform the audit engagement in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all material errors and fraud during our audit.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.
We have exercised professional judgment and have maintained professional skepticism throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. The ‘Information in support of our opinion’ section above includes an informative summary of our responsibilities and the work performed as the basis for our opinion.
Our audit further included among others:
Performing audit procedures responsive to the risks identified, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion
Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control
Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Management
Evaluating the overall presentation, structure and content of the financial statements, including the disclosures
Evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation
We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant findings in internal control that we identify during our audit.
In this respect we also submit an additional report to the audit committee in accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audit of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor’s report.
We provide the Supervisory Board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Supervisory Board, we determine the key audit matters: those matters that were of most significance in the audit of the financial statements. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.
Amsterdam, 28 February 2022
Ernst & Young Accountants LLP
signed by S.D.J. Overbeek-Goeseije