PostNL N.V. is a public limited liability company with its registered seat and head office in The Hague, the Netherlands. PostNL provides businesses and consumers in the Benelux with an extensive range of services for their mail and parcels needs. Through our international sales network Spring, we connect local businesses around the world to consumers globally. PostNL’s services involve collecting, sorting, transporting and delivering letters and parcels for the company’s customers within specific timeframes. The company also provides services in the area of data management, direct marketing and fulfilment.
The consolidated financial statements include the financial statements of PostNL N.V. and its consolidated subsidiaries (hereafter referred to as ‘PostNL’, ‘Group’ or ‘the company’). The consolidated financial statements were authorised for issue by PostNL’s Board of Management and Supervisory Board on 27 February 2023 and are subject to adoption at the Annual General Meeting of Shareholders on 18 April 2023.
The consolidated financial statements of PostNL:
have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU), including International Accounting Standards (IAS) and related interpretations of the IFRS Interpretations Committee (IFRICs), and Dutch law,
have been prepared under the historical cost convention, except for financial instruments, and
have been prepared assuming a going concern.
The significant accounting policies applied in the preparation of these consolidated financial statements are included at the relevant notes to the consolidated financial statements or, in case of more general policies, see note '5.4 Summary of all other accounting policies'to the Consolidated financial statements for more information. These policies have been consistently applied to all the years presented, unless stated otherwise. All amounts included in the consolidated financial statements are presented in euros, unless stated otherwise. Note that the numbers presented in the financial statements and disclosures thereto may not sum precisely to the totals provided and percentages may not precisely reflect the absolute figures due to rounding.
Based on the cash flow-generating capability of the company, the current finance structure and the company’s ability to realise its assets and discharge its liabilities in the normal course of business, PostNL’s financial statements have been prepared assuming a going concern. As at 31 December 2022, the balance of cash and cash equivalents amounted to €556 million and the company has an undrawn multi-currency revolving credit facility of €200 million. Its financing arrangements do not include financial covenants. Bond repayments are not due until 2024.
In 2022, the war in Ukraine and macro-economic developments had a profound impact across society. High inflation and rapidly rising energy costs affected consumer confidence and spending, negatively impacting parcel volumes for much of the year. Rising inflation also led to increased costs for PostNL, which could not be absorbed through regular price increases. These issues also affected our customers, partners and suppliers. Globally, supply chain issues led to delays in the availability of products, while rising energy and other costs made the transportation of goods more expensive.
Management assessed the impact of the current developments on all material assets and liabilities. We performed a review for impairment triggers on goodwill and other intangibles, PP&E and Right-of-use assets. We also analysed the trade accounts receivable position and customers' payment behaviour. And last we assessed the need to make adjustments to the fair value accounted financial assets and balance sheet positions related to our non-current assets held for sale. The assessment did not reveal any need for significant negative adjustments to the accounts mentioned in and per year end 2022.
Based on a joint decision by PostNL, the pension fund and the trade unions, taken on 23 December 2023, PostNL’s main pension plan has been amended as per 31 December 2022. As part of the amendment, the pension plan is now based on a ‘collective defined contribution’ plan. Among others, this means that as of 31 December 2022 PostNL will be only required to pay the regular pension contribution, as the agreement for top-up payments and restitution has been cancelled. As a result, if the financial position of the pension fund would deteriorate, PostNL is no longer obliged to make top-up payments. At the same time, PostNL is also no longer entitled to restitutions, even if the financial position of the pension fund would allow for that.
With the amendments made, the accounting classification of the main plan changed from a defined benefit plan to a defined contribution plan at 31 December 2022. According to IFRS, this change in classification is accounted for as a settlement. As part of the agreement and therewith settlement, the unconditional funding obligation has also been adjusted. The adjustment concerns a reduction of €20 million and an amended payment schedule (2022: €28 million; 2023: €16 million). On balance, this resulted in an improvement in PostNL’s adjusted net debt position of €20 million at 31 December 2022.
The material settlement impact on different line items, like operating income and total comprehensive income, has been presented in a separate column in the related financial statements. Within the cash flow statement, the material non-cash settlement impact is directly segregated at the profit before tax starting entry. Through this method of presentation, the 2022 pre-settlement results can be compared with the 2021 results, which results are both based on the previously applicable defined benefit pension plan. As of 31 December 2022, pension expenses will equal the contribution paid by PostNL to the pension fund.
See note 3.5: Provisions for pension liabilities' to the Consolidated financial statements for more information.
On 1 March 2022, PostNL started a share buyback programme to neutralise the assumed dilutive impact of shares issued in relation to dividends over 2021-2023. The company targets to repurchase ordinary shares of PostNL N.V. to a value of maximum €250 million, spread over 2022 and 2023. In 2022, PostNL repurchased 51 million ordinary shares from the first tranche for a total amount of €164 million. Out of the 51 million shares, 16,358,973 shares were used for the payment of the 2021 final dividend in stock, 7,868,569 shares were used for the payment of the 2022 interim dividend in stock and 1,051,073 shares were used for the settlement of PostNL’s equity-settled share plans. The remaining 25,721,385 shares were cancelled on 22 November 2022. A second tranche of the programme, scheduled to be executed during 2023, will be delayed until further recovery of business performance and in accordance with PostNL’s capital allocation framework. The company aims at a leverage ratio (adjusted net debt/EBITDA) not exceeding 2.0.
On 27 September 2019, the State Secretary of Economic Affairs cleared the merger between PostNL and Sandd. Legal appeals have been filed by a number of parties against the approval. On 11 June 2020 the courts (Rechtbank Rotterdam) annulled the approval for consolidation in the Dutch postal market. The government appealed against the court decision. PostNL also decided to appeal. On 9 April 2021, the earlier approval of the merger was confirmed by a new decision taken by the State Secretary. This new decision, which has retroactive effect, has been included in the appeal procedure. On 2 July 2022, the Dutch Trade and Industry Appeals Tribunal ruled that the Minister for Economic Affairs and Climate Policy had been wrong to approve the merger of PostNL and Sandd. Although the approval and corresponding conditions are no longer valid, PostNL will continue to adhere to the conditions imposed in relation to the acquisition. The legality of the transaction is not at stake. As we obtained control as of the acquisition date of 22 October 2019, we have fully consolidated Sandd in our financial statements from that date going forward.
The preparation of PostNL's consolidated financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. It also requires management to exercise its judgement in the process of applying PostNL’s accounting policies.
Estimates, assumptions and judgements are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting positions will, by definition, seldom equal the related actual results. On a continuous basis, we evaluate our expectations with the actual results, and include the learnings going forward.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed below.
Post-employment benefit accounting is intended to reflect the recognition of future benefit costs over the employee’s approximate service period, based on the terms of the plans and the investment and funding decisions made. The accounting requires the company to make assumptions regarding variables such as the discount rate, the rate of benefit increases and future mortality rates. In relation to the plan assets, the valuation of level 3 investments is based on valuation techniques using inputs that are not based on observable market data. Changes in these key assumptions can have a significant impact on the defined benefit obligations, plan assets and pension costs incurred. Given the change in accounting classification of PostNL's main pension plan from defined benefit to defined contribution at 31 December 2022, this emphasis on critical accounting estimates and judgments applies only to the 2022 and 2021 results. For details on pensions, seeto the consolidated financial statements.
Other provisions mainly include expected costs related to jubilee, illness, long-term disability and termination employee benefit obligations and claims & indemnities. The provisions recorded reflect the present value of management's best estimate of the expenditure required to settle the obligation. Given the uncertain outcome, management must use a certain degree of judgement in this respect. This includes the thorough analysis and concluding view of our position and that of the third party. See note '3.5 Provisions for pension liabilities'to the Consolidated financial statements for more information on the other provisions.
In determining impairments of intangible assets including goodwill and software, tangible fixed assets and financial fixed assets, management must make significant judgements and estimates to determine whether the recoverable amount is less than the carrying value. 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. Determining cash flows requires the use of judgements and estimates that have been included in PostNL’s strategic plans and long-term forecasts. The data necessary for the execution of the impairment tests are based on management estimates of future cash flows, which make it necessary to estimate revenue growth rates and profit margins. See note '3.3 Intangible fixed assets' to the Consolidated financial statements for more information on the impairment test of goodwill.
PostNL has to estimate the deferred revenues from stamps sold but not yet used by its customers. The company uses a seasonal model based on historical figures in order to account for the seasonal effects on sales from stamps (for example, stamp sales for Christmas greetings in November and December). Additionally, the company handles large quantities of international mail and parcel volumes to and from foreign postal operators. Although the net outstanding accrual positions reflect our best estimate, given the assumptions involved, final settlements might deviate from the outstanding positions. See note '3.1 Working capital' to the Consolidated financial statements for details on the current positions.
The company is subject to income taxes in a number of jurisdictions. Significant judgement is required in determining the provision and liability for income taxes. PostNL recognises liabilities for potential tax issues based on estimates of whether additional taxes will be due, based on its best interpretation of the relevant tax laws and rules. PostNL recognises deferred tax assets to the extent that it is probable that future taxable profits will allow the deferred tax asset to be recovered. This is based on estimates of taxable income by jurisdiction in which the company operates and the period over which deferred tax assets are recoverable.See notes '2.2 Other income'and '3.8 Deferred income tax assets and liabilities' to the Consolidated financial statements for more information on income taxes and deferred tax assets.
Legal proceedings covering a range of matters are pending against the company in various jurisdictions. The cases and claims often raise difficult and complex factual and legal issues that are subject to many uncertainties and complexities, including but not limited to the facts and circumstances of each particular case and claim, the jurisdiction and the differences in applicable law. PostNL consults with legal counsel and certain other experts on matters related to litigation. PostNL recognises a liability when it is determined that an adverse outcome is probable and the amount of the loss can be reasonably estimated. See note '3.10 Commitments and contingencies'to the Consolidated financial statements for more information on commitments and contingencies.
The following provides a brief description of recent issued International Financial Reporting Standards, amendments and/or interpretations, that could have a material impact on our financial statements.
PostNL has adopted Onerous Contracts – Costs of Fulfilling a Contract (Amendments to IAS 37) from 1 January 2022. This resulted in a change in accounting policy for performing an onerous contract assessment. Previously, PostNL included only incremental costs to fulfil a contract when determining whether that contract was onerous. The revised policy is to include both incremental costs and an allocation of other direct costs. The amendments apply prospectively to contracts existing at the date when the amendments are first applied. The Group identified no contracts as onerous applying the revised accounting policy. There is no impact on the opening equity balances as at 1 January 2022 as a result of the change.
There are no other IFRS standards, amended standards or IFRIC interpretations taking effect for the first time for the financial year beginning 1 January 2022 that would be expected to have a material impact on the 2022 accounts of the Group.
The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the financial statements have been reviewed by the Group. The Group intends to adopt these new and amended standards and interpretations, if applicable, when they become effective. It is not expected that the Group’s consolidated financial statements will be significantly impacted.