Generate sustainable growth and cash flow
The ongoing challenging macroeconomic and geopolitical environment continued to strongly impact the company. The uncertainty that surrounds macroeconomic developments makes it difficult to determine short-term developments in the e-commerce market, where volume projections are becoming increasingly volatile, both for our customers and thus for us. At the same time, the company continues to deal with additional cost pressures that are mainly related to our main financial risk of total cost of labour, due to a very tight labour market, high levels of sick leave, and rising wages.
PostNL is taking all necessary adaptive measures and is focusing on strict cost control in the near term. The effect of severe inflationary pressure, with organic cost increases of €178 million, was largely offset through €150 million in price increases. In 2022, we announced a reduction of 200-300 staff-function FTEs at our head office and Parcels, and further measures to reduce indirect costs. The FTE reduction plan was finalised during 2023, leading to cost savings during the year of €5 million and we are on track to achieve the expected savings of €25 million in 2024. However, our strategic aims remain unchanged. We remain confident in our longer term strategy and the growth potential of the e-commerce market, and will remain focused on solid cash flow and capital management, smart yield management, operational excellence and cost savings at Mail in the Netherlands.
Our strong focus on capex as well as strict working capital management contributed to a cash flow performance well above our outlook, while we continued to fund further growth of our business.
We aim to capture value through smart yield management, for example by driving value through smart services and delivery options, enhancing pricing strategies based on data and insights, and balancing volumes and value for effective margin management.
We continue to invest in the performance of our operations, both in terms of network capacity, synergies and digitalisation, while enhancing cost efficiency and delivering high-quality services. At Parcels, we worked to balance volume, value and capacity.
At Mail in the Netherlands, our continued focus on cost savings was helped by the optimisation of delivery routes and digital supply chain planning. However, if we want to keep mail reliable, accessible and affordable for everyone in the Netherlands, we need to look at changes to the current service framework, and both the universal service obligation (USO) and the entire mail business need to evolve with this. More information on PostNL's position on the future of Mail in the Netherlands can be found in the 'Current position of Mail in the Netherlands is untenable' box later in this chapter and in the 'Our operating context' chapter.
Our goal remains to provide short- and long-term financial value to allocate our financial resources to optimise our value creation model and to enable our financial stakeholders to obtain an attractive return.
Throughout this chapter we provide detailed insights into how we performed on our strategic objective to generate sustainable growth and cash flow in 2023.