In conversation with our chairman
Supervisory Board chairman Jan Nooitgedagt reflects on a tough year for PostNL.
Looking back on 2023, how do you feel about the year and PostNL’s performance?
In terms of performance, 2023 proved to be a better year than 2022. While we saw the positive impact of measures initiated in 2022 to mitigate the impact of the macroeconomic situation and inflationary pressure, the ongoing challenging macroeconomic and geopolitical environment continued to strongly impact the company. In this regard the second half of the year reconfirmed the uncertainty that surrounds macroeconomic developments. This made 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, which are mainly labour-related. This has resulted in a result which ended up in line with our initial outlook, but below the range guided on 6 November, as communicated on 25 January 2024 already. At the same time, focus on capex and strict working capital management contributed to a strong cash flow performance with a free cash flow well above our outlook.
That said, there were opportunities and many things to be proud of. The organisational changes, made to reflect the shift in the company’s commercial and operational focus towards e-commerce, including the changes made to the structure, way of working, and the composition of the Executive Committee as of 1 January 2023, have paid off. The Supervisory Board understands that the changes led to effective, to-the-point discussions and enhanced decision-making, and ultimately to synergy advantages. One example is the creation of the central Strategy and ESG department, which plays an important role in strategic (ESG) discussions.
Additionally, PostNL made further progress in areas such as ESG, while the acceleration of the company's digital transformation continues and is accretive to the results. We see that consumers and customers are increasingly digitally connected to the company’s platform. We also agreed new collective labour agreements (CLAs) in 2023, implemented a further roll out of automated parcel lockers, and successfully delivered voting cards for November's national election, and delivered a well-executed peak season. We also announced that from 2024 we will be engaging in a sport partnership with Team dsm-firmenich PostNL, a professional cycling team at UCI WorldTeam level. This is a key investment in PostNL’s brand and ambitions. These were among the topics the Supervisory Board focused on in 2023, and which have had an influence on PostNL’s strategic direction and the sustainable long-term value it creates for stakeholders. And as a Supervisory Board, we were particularly proud of our people and our partners, working day and night to ensure we can deliver parcels and mail responsibly.
How does the Supervisory Board look at the company's strategy?
As a Supervisory Board, we fully support the company’s strategy, and the continuation of the current strategy in these challenging times. At the same time, the Supervisory Board also recognises that as circumstances change, the pace at which our strategy is executed also needs to be adjusted, for example by adjusting the view on the pace of certain investments. Despite such changes, key elements, such as the digital transformation and our sustainability goals, are still progressing well. The Supervisory Board fully supports the execution of the strategy while adhering to the company’s financial policy.
The company’s competitive position, competition, and market share were discussed regularly with the Board of Management, and were deep-dive topics. In June, we held our regular strategic plan update with the Board of Management and the Executive Committee. The Supervisory Board's role is to challenge the establishment of the strategy in a constructive and critical manner. Furthermore, the Supervisory Board was further involved on small- and medium-sized enterprise (SME) and integrator propositions, and the strategy of Mail in the Netherlands in light of the applicable regulatory requirements. In light of our digital transformation, accelerating digitalisation across the company will enable us to strengthen our competitive position and further develop customer satisfaction, as well as reducing our cost base and attracting new customers. Consequently, PostNL's IT strategy, the speed of digitalisation, (the impact of) artificial intelligence, and cybersecurity were discussed regularly and fully with the Board of Management, the Executive Committee, and management, and we acknowledge the importance of compliance with the GDPR and digital ethics.
How is the Supervisory Board involved in initiatives to provide value to customers and consumers?
As can be read throughout this annual report, and which the Supervisory Board believes strongly, working together with customers to understand their needs, and how PostNL can improve its services to meet these needs, is essential in achieving our ambition of being everyone's favourite deliverer. The change in customer and consumer demands and expectations, as well as the speed of change, are regular discussion topics in the Supervisory Board, and in 2023 the Supervisory Board was kept up to date and had regular discussions on initiatives initiated by PostNL to further develop customer value, such as the roll-out of automated parcel lockers. The Supervisory Board was provided with updates on the development of the digital KPIs and investments in digitalisation, and shown the latest improvements such as the scan glove, planning algorithm and the progress on consumer E-ID. An important aspect for PostNL is the net promoter score (NPS), which is used as a key client satisfaction indicator and an important KPI for PostNL. The Supervisory Board was updated on NPS and the NPS measurements within PostNL, and will be kept informed on the outcome of the NPS measurements. And, of course, the Supervisory Board was updated on the potential and the use of AI within PostNL, which will remain an attention point going forward.
Could you elaborate further on the topic of ESG and the involvement of the Supervisory Board?
ESG is an important topic with a number of different dimensions that cover the environment, the responsibility companies have for their employees and their impact on society, and governance. The Supervisory Board believes ESG is a vital element in our strategic development, and to reflect the importance of ESG internally and externally, in July the Supervisory Board established a dedicated ESG Committee. Additionally, the Supervisory Board held a deep-dive with the Board of Management, senior management, and an external speaker to discuss ESG from both an inside-out and an outside-in perspective. More information on the scope of the ESG Committee and the meetings held in 2023 can be found in the paragraph ‘Meetings of the committees of the Supervisory Board’.
In terms of environmental progress during 2023, PostNL continues to steadily reduce its environmental footprint, and improved the average carbon efficiency of its own fleet compared with 2022. The Supervisory Board discussed the importance of tackling climate change and the environmental goals set by the company with the Board of Management and senior management, including the underlying plans on how to reach those goals.
With PostNL one of the largest employers in the Netherlands, offering thousands of people the certainty of having a job, a stable income, security and opportunities for personal development and growth, the importance of the social dimension of ESG is clear. The Supervisory Board was closely involved in developments connected to the company’s employment model, as well as the scarcity of labour and absenteeism, and the impact these issues have on the company’s operations, such as delivery quality within Mail in the Netherlands. The Supervisory Board discussed the status of PostNL in Belgium during the year, including with external legal advisors in attendance. Currently, we are awaiting the outcome of the legal proceedings scheduled in May 2024, and also the outcome of the investigation by the investigative judge. We look forward with confidence to the outcome of both. The Supervisory Board also discussed compliance as a whole, labour conditions along our value chain, employee engagement, and diversity and inclusion, PostNL's culture, and negotiations on the PostNL CLA and CLA for Saturday deliverers.
Through the Audit Committee, the Supervisory Board is continuously updated on the progress the company is making in relation to the reporting obligations of the EU Taxonomy and the CSRD. We are proud that PostNL has once again been ranked as one of the top three most sustainable companies in the transport and logistics sector worldwide in the Dow Jones Sustainability Index (DJSI) and that PostNL is the winner of the Diamond Award Cultural Diversity 2023. ESG as a whole was a regular topic of discussion in the Supervisory Board, and will continue to be an important topic for discussion in 2024.
Additionally, the Supervisory Board discussed the ambitious and appropriate targets for the Board of Management and senior management to promote gender diversity, as well as succession planning through the Nomination Committee. Other topics included the organisational changes (as mentioned earlier) to reflect the shift in the company’s commercial and operational focus towards e-commerce, including the changes made to the structure, way of working, and the composition of the Executive Committee as of 1 January 2023. Furthermore, several members of the Supervisory Board met with the daily management of the Central Works Council, and regular sessions were held between members of the Supervisory Board and PostNL employees and senior management, to get their view on the company. And, of course, performance reviews were held with Herna and Pim.
In relation to governance, why did the Supervisory Board decide to nominate Martin Plavec, connected to your largest shareholder, as a Supervisory Board member?
As elaborated on during the 2023 AGM, the Supervisory Board had been in discussion with VESA Equity Investment on the addition of a Supervisory Board member. And given the considerable interest of VESA Equity Investment in PostNL, this is in line with their policy. This has been discussed thoroughly and critically with VESA Equity Investment, and of course also with the full Supervisory Board, and as such a thorough process was run. After careful consideration, the Supervisory Board decided to be in favour of adding a new Supervisory Board member and, in agreement with VESA Equity Investment, decided to nominate Martin Plavec, who was subsequently appointed at the General Meeting. Martin fits well in the profile of the Supervisory Board, and adds to the diversity within the Supervisory Board. And he also provides the Supervisory Board with a valuable addition to the existing knowledge in e-commerce and last-mile delivery.
Given the position of Martin within VESA Equity Investment, he is considered a non-independent member of the Supervisory Board. What is important to mention, however, is that under Dutch law, Supervisory Board members are appointed on personal titles, and always need to take into account the best interests of the company and all its stakeholders. This applies equally to independent and non-independent Supervisory Board members.
Can you reflect on the company’s financial situation?
Given the challenging macroeconomic environment, the Supervisory Board fully supports the Board of Management in securing the company’s robust financial position, the measures taken to mitigate the impact from cost increases, and the adjustment to investments to align with volumes and strictly manage working capital. Throughout the year we had in-depth and thorough discussions with the Board of Management, in particular on the business and financial performance. The overall financial position, and as such the financial resilience of the company, was a recurring discussion topic, in conjunction with the company’s credit rating.
How do you see the future?
We saw that 2023 was a year of continuing challenging circumstances, with rising costs and geopolitical volatility impacting consumer sentiment and our customers. While PostNL adjusted as well as possible to these conditions, we expect 2024 to be another year where consumer confidence remains fragile, and parcel volumes changeable. Furthermore, in relation to Mail NL we have to face that we have exhausted our options to adapt to the declining mail volumes, and if we want to keep mail reliable, accessible and affordable for everyone in the Netherlands need to look at changes in the current applicable rules and regulations.
That said, we are convinced that the Board of Management will continue to take the right decisions and actions to steer the company forward, and that we have talented, motivated people and management teams in place to tackle any issues that come our way. We continue to learn and adapt and, more than ever, PostNL is ready to deliver.
In closing, I would again like to thank our people for their hard work and commitment in 2023, and to compliment them for the way they are working together to succeed in today's fast-changing environment. I also want to thank our other stakeholders for their trust in PostNL and for their constructive feedback. It helps us to continuously improve the way we deliver on our purpose and our strategy.