Revenue and normalised EBIT
PostNL Business performance in € million
2022 - 2023
| Volume | Revenue | Normalised EBIT1 | ||||
|---|---|---|---|---|---|---|
| Year ended at 31 December | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 |
| Parcels | 344 | 343 | 2,165 | 2,260 | 56 | 47 |
| Mail in the Netherlands | 1,884 | 1,745 | 1,495 | 1,373 | 107 | 50 |
| PostNL Other | 215 | 245 | (80) | (5) | ||
| Intercompany | (731) | (713) | ||||
| PostNL | 3,144 | 3,165 | 84 | 92 | ||
- Note: Normalised figures exclude one-offs in 2023 €7 million and in 2022 €1,375 million.
PostNL applies the key performance indicators (KPIs) of revenue, normalised EBIT and free cash flow in its management analyses and reports on profitability performance. Normalised EBIT gives a reflection of the operating income performance, adjusted for the impact of project costs and incidentals. Free cash flow gives a reflection of our ability to generate cash available for dividend distributions, acquisitions, and/or debt repayments.
Normalised EBIT and free cash flow represent non-GAAP financial measures and should not be viewed in isolation as alternatives to the equivalent IFRS measures, which are presented in the consolidated financial statements, but should be used in conjunction with the most directly comparable IFRS measures. Non-GAAP financial measures do not have a standardised meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers.
Group
In 2023, revenue increased by 0.7% to €3,165 million (2022: €3,144 million). The global macroeconomic and geopolitical environment impacted domestic volumes at Parcels, although international volumes grew strongly, with both Asia and Europe contributing to the result. The ongoing volume decline continued at Mail in the Netherlands. In 2023, 62% of our revenue was generated from e-commerce-related activities (2022: 61%).
In 2023, normalised EBIT amounted to €92 million (2022: €84 million). The resulting margin, being normalised EBIT divided by total operating revenue, was 2.9% in 2023 (2022: 2.7%). Compared to 2022, normalised EBIT increased by €8 million in 2023.
Normalised EBIT in 2023 includes a €178 million organic cost increase, of which around €127 million is explained by pressure on labour costs due to collective labour agreement increases, minimum wage increases and indexation of delivery partners. The remaining €50 million is caused by higher inflation, energy prices and international transportation costs.
PostNL Normalised EBIT development in € million
Normalised EBIT excludes exceptional items, which amounted to €(7) million in 2023 (2022: €(1,357) million; the main part of this normalisation is caused by the accounting impact of the amended pension plan). The amended pension plan resulted in a positive impact of €75 million in normalised EBIT, visible in PostNL Other.
Parcels
In 2023, we delivered 343 million parcels. There were no Covid-19-related volumes in 2023 (2022: 2 million). This resulted in a (0.2)% volume decline compared to 2022.
Revenue grew to €2,260 million (2022: €2,165 million). However, the shift in product and customer mix was unfavourable while prices increased. Revenue at Spring was up, mainly driven by Asia.
PostNL Normalised EBIT Parcels in € million
Normalised EBIT decreased by €9 million, from €56 million in 2022 to €47 million in 2023.
Organic costs increased by €82 million due to collective labour agreement increases, higher wage costs as the minimum wage increased, indexation of delivery partners and higher energy costs. Other costs decreased by €20 million, mainly caused by efficiency improvements.
The other results were €9 million, mainly caused by higher normalised EBIT from Spring, driven by higher revenues.
Mail in the Netherlands
In 2023, we delivered 1,745 million items of mail. This resulted in a reported volume decline of (7.4)% compared to 2022. The underlying domestic and international volumes in 2023, excluding the impact from non-recurring volumes related to Covid-19, decreased by (5.9)% compared to 2022.
Revenue at Mail in the Netherlands decreased to €1,373 million (2022: €1,495 million), mainly showing the impact of the ongoing volume decline in addressed mail. The volume decline, combined with a positive price effect partly offset by a negative mix effect caused by a shift in products, had an impact on the result of Mail in the Netherlands, which amounted to €(31) million.
PostNL Normalised EBIT Mail in the Netherlands in € million
Normalised EBIT decreased by €57 million to €50 million (2022: €107 million). The net volume price/mix effect of €(31) million was partly compensated by lower volume-dependent costs of €16 million. Organic costs increased by €(44) million mainly due to collective labour agreement increases, increases to the minimum wage, inflation and higher energy costs.
Other costs improved by €13 million, as cost savings of €39 million were offset by additional costs related to illness rates, staff shortages and some other, partly non-recurring, effects. Other results were down €(10) million, mainly explained by international mail.
PostNL's position on the future of Mail in the Netherlands can be found in the box below and in the 'Our operating context' chapter.
Current position of Mail in the Netherlands is untenable
PostNL is committed to sustaining an accessible and dependable postal network for all residents in the Netherlands, irrespective of their location. Over the last decade we have faced mail volume decline of around 8-10% annually, fuelled by the ongoing rise of digital communication. We also see our customers' needs and expectations changing. Today, far fewer customers require and expect the 24-hour delivery window that was once the industry standard. This situation is not unique to the Netherlands, and various countries across Western Europe have made clear changes to their regulatory service levels, replacing 24-hour delivery targets for consumer mail with 48-hour or even 72-hour delivery targets. Our current network, in relation to customer demand and the costs associated with it, are no longer in proportion to the current and expected 24-hour volume. These trends have led to a sharp autonomous increase in the cost per mail item, which is further raised by the ongoing growth in organic costs in both labour and other operations-related expenditures. At the same time, structural shortages in the labour market mean we are trying to fill over 1,000 mail delivery vacancies that have a direct influence on, for example, quality.
The steps we have taken
PostNL has always successfully taken on the challenge of adapting to changing external circumstances. For more than 10 years we have deployed a wide range of measures to improve efficiency and cut costs and keep our mail business financially healthy, leading to cost savings of over €500 million. We have also optimised our pricing to stay profitable while taking into account price elasticities. And in 2019 we acquired Sandd, which led to an increase in our volume base, although substitution means volumes have continued to shrink since then. However, further change is necessary. 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. Without these changes the USO, as of today, and over time the entire mail organisation will be structurally loss-making, which is unsustainable.
How quality is impacted
We see two key structural developments that are impacting the delivery quality of mail.
- It is now extremely challenging to maintain the required very high turnaround times for a rapidly shrinking share of mail items within the 24-hour service level segment.
- The ongoing labour shortage, evidenced by the structurally high number of open vacancies, especially for mail deliverers in certain areas of the Netherlands, makes it very difficult to maintain the required 95% level for 24-hour mail. However, in 2023 we delivered 96% of mail within two days.
How financial performance is impacted
A combination of external factors is impacting our ability to deliver a sustainable financial performance at Mail in the Netherlands.
- Volume decline.
- The negative mix effect in revenues due to the shift from 24-hour to non-24-hour mail volumes by customers.
- The sharp increase in organic costs per mail item due to a number of factors, including:
- Cost of labour due to CLA increases, minimum wage increases, and inflation
- Additional costs to respond to staff shortages
- Inflation of other autonomous costs.
When taken together, and considering the current regulatory landscape as well as our objective to keep the postal network in the Netherlands accessible, reliable and affordable, these negative impacts can only be partially countered by price increases, cost-saving projects, new ways of working for our people, and reduced overheads.
PostNL Other
Revenue at PostNL Other in 2023 amounted to €245 million (2022: €215 million). This revenue is mainly inter-company revenue related to IT. Normalised EBIT of €(5) million was more or less in line with 2022, when adjusted for the positive impact of €75 million related to the accounting impact of the amended pension plan.
Pensions
Pension expense and regular pension contribution in 2023 each amounted to €92 million (2022: €172 million pension expense; €97 million pension contribution). The switch to a collective defined contribution scheme as at 31 December 2022 is the main reason for the lower pension expense as of 1 January 2023.
Accounting impact of change in pension accounting classification in 2022
The accounting consequence of the amended pension plan was a change from defined benefit accounting to defined contribution accounting per 31 December 2022. The settlement result as recorded in the statement of profit or loss comprised the release of the positive funded status and the reduction of the unconditional funding obligation. As a separate sequential step, the recorded asset ceiling adjustment was reversed within other comprehensive income.
The financial impact of the change in pension accounting classification was material, being a loss of €1,357 million (net loss: €1,007 million) recorded in the statement of profit or loss, comprising a defined benefit pension expense of €1,354 million and an addition to other provisions of €3 million, and a net defined benefit pension income of €1,020 million recorded in other comprehensive income. Both impacts were normalised in our key financial indicators, normalised EBIT and normalised comprehensive income, in 2022.
Financial income and expense
In 2023, the net financial expense amounted to €2 million (2022: €19 million). The increase of other interest and similar income of €17 million mainly relates to higher interest on cash and cash equivalents.
Income taxes
In 2023, the income tax expense amounted to €24 million (2022: €21 million, excluding the tax effect on the change in pension accounting classification). The increase of €3 million is predominantly explained by the increase in operating income.