Thank you. Good morning, everyone. Thank you for joining us for the first quarter results presentation. With me in the room, Herna Verhagen, our CEO, and Pim Berendsen, our CFO. Pim, over to you, please.
Thank you, Jochum. Welcome to you all. Thank you for joining us today. Well, the first quarter of this year has been an exceptional one off PostNL. Again, we've continued the strong momentum that we've seen over the last quarters. Now thanks to the hard work of our people and the resilience of our business, we've been able to deliver a record number of parcels in a quarter. Also, performance at Spring and Logistics, as well as Mail in the Netherlands, have been very strong. While underlying performance is strong, part of the Q1 performance was related to lockdown that lasted longer than originally anticipated, at least by us, and some other one-off effects. I'll dive into those a little bit later.
If we go to slide number three to look at the high-level Q1 results, which we already communicated in the trading update of April 26th, you see a very strong performance. As mentioned, we delivered a record number of parcels in one quarter with 108 million parcels delivered, which is a volume growth of nearly 62% across all segments and products. If we were to exclude the non-recurring COVID impact out of that volume, roughly 26 million pieces, the underlying volume growth is still 23%, which around about that number is also our full-year expectation of volume growth at parcels. Performance at Mail in the Netherlands was strong as well, mainly due to the impact of some non-recurring mailings, like elections, vaccination programs, and a very favorable price mix development.
The underlying volume decline due to substitution continues, was roughly 6%, but is more favorable than the 8%-10% volume decline that we indicated before. This resulted in revenue that was up EUR 261 million to EUR 962 million for the quarter. Normalized EBIT coming in at EUR 130 million, EUR 150 million more than last year. Last but definitely not least, we continue to work hard towards our long-term objectives of emission-free last mile delivery in the Benelux. Through greater use of renewable fuels and further electrification of our fleet, we've improved our CO2 emission index by 7% in the quarter. Based on this strong performance in the quarter, we raised our outlook for 2021 on April 26th, with now a normalized EBIT expected to be at least EUR 250 million for the year and free cash flow to come in above EUR 225 million.
On slide four, if we look at the EUR 130 million, we're going to look closer at the non-recurring COVID-19 effects. Within the quarter, we assume around EUR 42 million of non-recurring COVID contribution. Non-recurring impact for parcels is assumed to be EUR 17 million, which is on a like-for-like basis, calculated as the 2020 COVID impact, which is driven by additional volumes due to the lockdown of non-essential stores, and does take into account also the additional cost to accommodate the additional volume. The other EUR 7 million within the parcel segment is driven by Spring and Logistics that is also partially non-recurring related to COVID. We look at the Mail in the Netherlands component of it, which is EUR 18 million, is a result of non-recurring volume and positive price mix driven by higher single items.
These results include the additional costs and investments made to accommodate the additional volumes, as well as the incentive payments paid to non-essential retail stores to ensure that they were able to keep their stores open, which was EUR 15 million in the quarter, roughly split EUR 11 million in Parcels and EUR 4 million in Mail. Let's look into a little bit more detail into the performance of each segment. To begin with on slide six, we see, of course, that Parcels has benefited from strong e-commerce growth and a growth that we believe will remain on a very high pace going forward as well. Parcels reported a growth of more than 61%. I said, if you take out the EUR 26 million non-recurring COVID volume within the quarter, that is still a 23% growth rate ex non-recurring COVID.
Very strong performance of Spring and Logistics, also on the back of strong cross-border e-commerce growth, predominantly driven by growth on the trade lines from Asia to the Netherlands, as well as the e-commerce growth in Europe at large. Building on our flexible infrastructure and through efficient use of our capacity, this resulted in revenues of EUR 662 million, which is a EUR 248 million increase versus last year, and a normalized EBIT at EUR 92 million, which is EUR 67 million higher than last year. As you might have expected, we've seen a higher hit rate and a lower drop duplication. By looking forward, we're on track by expanding our capacity to capture future growth. As planned, we will open new sorting facilities as well as the small parcel sorting center in the second half of the year.
On slide seven, you'll find the bridge that is by now pretty familiar, I think, for you, which shows the normalized EBIT for the first quarter at EUR 92 million, EUR 67 more than last year. The increase is mainly driven by the volume growth that we already discussed before. A small negative price mix effect, also in line with what we earlier indicated. Regular CLA increases and volume-dependent costs that relate to the volume growth. In other costs, the biggest component in other costs is the additional fees paid for the retailers, as said, roughly EUR 11 million for parcels. In other results, you see the very good performance of Spring and Logistics.
On that note, it's important to understand that we do not expect such a big delta on Spring GDS and Logistics for the quarters to follow, but a very strong performance by these two group companies as well. If we then move over to the Mail business on slide eight, like at parcels, performance at Mail was very strong. Overall Mail volumes were up in Q1 2021 compared to last year, which is obviously very special. The increase is supported by a couple of large non-recurring mailings. For example, voting by Mail and invites for the vaccination program. We see the underlying trend in volume decline continue at a substitution rate of around 6% this quarter. We also expect, given the original indication, 8%-10% volume decline to be better than that 8%-10%. In other words, a slightly lower volume decline number than indicated before.
Important to understand that from that 5% or 6% volume growth, 4.5% relates to non-recurring COVID volume, 3.8% regular elections, and there's three more working days in the first quarter that account for 3.4%. Important to note for the quarters to come is that the three additional working days will reverse itself in the fourth quarter. There we will have three working days less. Performance was significantly impacted by a very positive price mix effect, favorable shift in product mix, more single items, more e-commerce items, and the regular moderate price increases that were partly offset by higher volume-dependent costs.
This, as well as the decline in other costs, mainly driven by the integration of Sandd last year and achieved cost savings, resulted in revenues at Mail in the Netherlands of EUR 466 million, EUR 72 million more than last year, and a normalized EBIT of EUR 59 million, which is EUR 54 million higher than last year. Let's look at the bridge for Mail in the Netherlands from EUR 5 million to EUR 59 million normalized EBIT in the quarter. You see the volume effect being positive here this quarter, obviously impacted by non-recurring COVID volumes. A positive price mix effect as said, both in terms of product mix, more single items, e-commerce items, for both domestic and international mail flows. Regular CLA indexation, volume-dependent costs in line with volume growth.
In other costs here, the +22, you see a benefit of roughly EUR 20 million in comparison to last year related to Sandd integration costs. Also a very strong performance of Mail in the Netherlands this quarter. On slide 10, only briefly there you see the overall performance, including the PostNL Other segment. Basically, the point there is that in PostNL Other, the delta in comparison to last year is the delta in relation to the pension expense, which will recur in the next quarter like we reported it in this quarter. Having covered the normalized EBIT metric, let's look at our second key financial metric being the cash flow.
In the first quarter, we've realized a free cash flow of EUR 159 million, which is an increase compared to the first quarter of 2020 by more than EUR 154 million, which is to a large extent driven by higher normalized EBIT. Also here, we see the impact of the sale of Sandd in the first quarter of this year. The book profit is here included in the normalizations, and the proceeds of the sale are included in the disposals at the lower end of this bridge. Working capital is still strong, and in comparison to last year, we're paying taxes in the first quarter of 2021, whilst we did not do so in the first quarter of 2020. All in all, a very strong cash performance in the quarter as well. Obviously, that then helps our balance sheet, which is on slide 12.
We're looking at a very strong financial position. Adjusted net debt currently at EUR 224 million. The equity increased to EUR 396 million, obviously reflected by a net profit of EUR 136 million and a EUR 40 million one for positive impact from pensions net of cash. Total comprehensive income amounted to EUR 149 million. Normalized comprehensive income amounted to EUR 112 million. The delta between those are the normalizations to EBIT related to the sale of Sandd, as well as profits from discontinued on the back of the sale of Nexive towards Poste Italiane. That leads to an adjusted net debt position of EUR 224 million compared to EUR 407 million at the end of 2020. That brings us to Digital Next.
Digitalization is one of our key strategic pillars, and we've announced that we will further accelerate digitalization over the next two to three years, where we aim to strengthen our competitive position, contribute to our customer satisfaction, reducing our cost base, and attracting new customers. If we go to slide 14, there you'll see the key components, the key value drivers, and enablers of the digitalization program, which we expect to spend EUR 80 million on in the years 2021 towards 2024, with obviously the first part being in 2021, which we have accelerated a little bit towards EUR 25 million of spend in 2021. If you look at the key components of digital, it's about transforming our commercial engine, transforming our core logistical and operational processes, and scaling our digital platform.
What we have to report on progress is that since the launch, which was March 1st, obviously, we have started up new journey teams. In particular, we are starting the redesign of our main customer journeys, iReturn and iGet Help, which are crucial e-commerce related journeys. Furthermore, we've rolled out delivery preferences for consumers in specific regions, a feature based on our app that is widely used among Dutch consumers. By filling the specific preferences for delivery, we expect to further improve customer satisfaction, while at the same time, it will also help creating a more efficient delivery process. We intend to organize a deep dive session on transforming our commercial engine in June, and invitations for that deep dive session will follow in the next few days after today. As a last example of the many things that we're doing, we're currently piloting contactless validation upon delivery.
The purpose is to identify the receiver of a parcel by contactless connecting his or her mobile phone with the device of the deliverer. This way we can, for example, do necessary age checks automatically. These are just a few examples, and the first elements we started off with since March 1st. If you look at slide 15, you see some other indicators that indicate the speeding up of our digital transformation. With a few interesting figures. The number of online visitors has significantly increased in comparison to last year to 252 million. The number of PostNL accounts that are being used has increased by 12%. We currently have 6.2 million accounts. Talks with chatbot Daan further increased, also our stamp codes keep on growing. Good progress is being made and looking forward to further accelerate this Digital Next program.
Let's look at our 2021 outlook and guidance section of the presentation. I think it's important to look at slide 17 by spending a fair amount of time explaining how we look at the performance. For now, we expect full year 2021 normalized EBIT to amount to at least EUR 250 million based on the strong performance of the first quarter and further improvement of the business performance that we have seen. Starting at the top, the normalized EBIT full year 2020 was EUR 245 million, of which EUR 55 million was non-recurring COVID-19 impact. That led to a base of EUR 190 million at the start of the year. There are three components that we've shared with you before that are important to note.
That is, we are opening up new facilities and roughly EUR 10 million of additional cost is expected for that, there are EUR 20 million higher pension expenses in comparison to last year, and we've introduced Digital Next, which will also have negative cost consequences of EUR 15 million, around EUR 15 million, I should say, within 2020. You can add roughly EUR 60 million-EUR 70 million of non-recurring COVID-19 impact in 2021. Currently, as per Q1, we're at EUR 42 million. We do expect it to grow to EUR 60 million-EUR 70 million, and that additional component will materialize itself in the second quarter of 2021. That leads to a subtotal of EUR 205 million-EUR 215 million. Given the fact that we've set the full year outlook at least EUR 250 million, the difference between those is at least the step-up in business performance that we expect, which will be mainly visible in parcels.
On slide 18, the outlook slide, where you see the normalized EBIT at least EUR 250, including EUR 30 million-EUR 35 million for Digital Next and the increase in non-cash pension expense. Free cash flow to be at least EUR 2 million-EUR 5 million, including EUR 20 million-EUR 25 million for Digital Next. The step-up in EBIT is not directly followed by an equal step-up in free cash flow. We're, as said, accelerating a little bit of the digitalization CapEx. Before the merger, we make a few trade-offs between CapEx and leases, resulting in a slightly higher CapEx for 2021, as well as slightly higher tax effects on the back of higher profits. On CapEx, the original indication was EUR 140 million-EUR 160 million, and it's fair to assume that we'll end up at the high end of this range.
I think also very important to note is that the normalized comprehensive income that we guided before at around EUR 200 million will be at least EUR 2 million-EUR 5 million. As you know, the normalized comprehensive income is the basis for our dividend policy, which means that 70%-90% of that normalized comprehensive income will be the basis for our dividends. A step-up of normalized comprehensive income is a positive sign on the expected dividend proceeds over the book year 2021. On slide 19, you will find the phasing over the next quarters. As said, we expect a step-up in normal business performance for 2021, mainly visible in parcels. If you look at the quarters, Q2 will be more or less comparable to last year. As said, part of the additional COVID-19 effect from EUR 42 million to EUR 60 million-EUR 90 million will materialize itself in Q2.
For Q3 and Q4, we do expect a lower profit than last year. Obviously, the fourth quarter in 2020 was the biggest quarter, where we had the biggest component of non-recurring COVID effect in 2020. I said before, we'll have three working days less in the fourth quarter of 2021 in comparison to 2020. If we look at cash flow, Q2 is expected to show slightly positive free cash flow, and while Q3 is expected to be negative. This has to do with the phasing of the EBIT pattern, but also the step-up in CapEX spend in the second part of the year in comparison to the first part of the year. That brings me to the end of the presentation on slide 20, maybe with a few concluding remarks before we open up for Q&A.
We truly believe that we're very well positioned for future growth and aim to deliver an attractive return to our shareholders. This we do by balancing the volume and value strategy at parcels while expanding our capacity to capture further e-commerce growth. Through the delivery and capturing of full synergies of the consolidation with Sandd and intensifying our cost-saving projects. Next to that, the acceleration of our digital transformation will help us grow our business as well. In the first quarter, we've delivered exceptional performance that was partly non-recurring, but also underlying very strong. Based on this strong quarterly result and the expected improvement in business performance, we now expect fully normalized EBIT to be at least EUR 250 million and free cash flow to come in above EUR 225. Going forward, visibility remains limited.
The exact consequences of the changes in the lockdown now that the stores, the non-essential stores have reopened, is still difficult to predict. On that note, thank you so far. Jochum, back to you so that we can open up for Q&A.
Thank you, Pim. Let's move to the operator who will explain how that is going to work.
Thank you, sir. Ladies and gentlemen, we're starting the question and answer session now. If you have a question or remark, please press star one now on your telephone. Star one for your questions or remarks. Go ahead, please.
First question is from Mr. David Kerstens of Jefferies. Go ahead, sir, your line is open.
Yes. Good morning, everybody. Three questions, please. First, on the mail, on the volume trends, the 6% underlying substitution in mail, what's driving that? Is that partly because there's still more greeting cards, or is that seen as a COVID effect? Do you now see that you have seen probably the worst in terms of e-substitution in the Netherlands? On parcels, I think I heard you say that you are expecting 23% volume growth for the full year, in line with the first quarter. I assume that's on an underlying basis. Is that a step up in your guidance? I think previously you were guiding for 10%-12% from a reported basis. I don't think that gives me exactly the same number, and probably about 2% or 3% higher than what you were saying before.
The second question on your EBIT guidance of at least EUR 250 million, that implies around EUR 120 million for the remainder of the year. If you then add back the extra cost that you highlighted for pensions, Digital Next, start-up cost for new facilities, you would get to at least EUR 160 million. That compares to around EUR 230 million in the prior year, down about 30% year-over-year. That seems quite cautious in comparison to what some of your peers have said last week. Can you comment on what the reason is for that? Is it because you are much more exposed to parcels and benefited much stronger in 2020 that you expect a much larger step down for the remainder of the year? Finally, looking at 2022, I appreciate the new starting point is EUR 185 million.
Should we add around EUR 40 million for normal business performance as you anticipate for 2021, and then additional Digital Next investments may be offset by lower pension expense on the back of a higher discount rate? Can you give an indication of what that impact would be based on today's discount rates, please? Thank you very much.
Let me take question one, the question around the underlying substitution within mail. I think the underlying substitution is driven by the normal substitution we see every year. Reason why it is positive is slightly because of single mail items as so cards, but that's very little, mainly in the first quarter because of the special mailings we did for around vaccinations. For example, also the fact that elderly people, 70+ people in the Netherlands would vote by mail. For the year 2021, we do expect that volume decline will be a little bit better than the bandwidth of 8%-10%. That is not, if you think about 2022, it's not what we expect going forward. We do not see a breaking point or a point in the substitution level we do see going forward.
For the year 2021, it is slightly more positive. 23% volume growth of parcels, is that slightly higher than the reported basis? The answer is yes.
Okay.
Yeah, maybe on that last point, I didn't say in my mind 23% full year, but around about that number. I would say 22%, 23% roughly is the indication that I have given there.
That's on a normalized basis, right? Excluding the one-off parcels in 2020.
Yeah.
Yeah.
Your third question was related to the at least EUR 250. There's a few components here. I think if you look at the first quarter, important to note is that the PostNL Other results, Spring and Logistics, the delta there will not materialize itself in the next quarters in the same way as we've seen in the first quarter. In the second part of the year, in 2021, you see a step up in the cost base because of the new facilities opening up, Digital Next acceleration. Let's not forget that Q4 2020 had roughly EUR 40 million out of the EUR 55 million of non-recurring COVID effects. As you know, we do not expect non-recurring COVID effects beyond Q2 of 2021 in our assumptions leading up to the at least EUR 250 million for 2021.
Yeah.
You were very quick in your fourth point, David.
Yeah, it was about the year out of 2022.
What you're doing is you are taking the midpoint between 60 and 70 of the at least 250, say that is the starting point of how you will go into 2020. Is that the question?
Correct, yes. EUR 185 is starting point, and then you add the normal business performance, which you're saying is at least EUR 40 million this year. If you assume similar type of growth in 2022-
Yeah
you get to EUR 235.
The pension effect, at the moment, we have not calculated it. Let's say that at the moment in time where we define the non-cash pension expense is always at the end of the year.
Discount rates have increased, indexation also. Roughly you would say that if there is a development, it would be a little bit positive development on the pension expense side, but we've not calculated it. Of course, bear in mind that we've indicated before a step up in Digital Next cost also from 2021 towards 2022 that you need to take into account as well.
Yeah. Makes sense. Thank you very much.
The next question is from Mr. Marc Zwartsenburg of ING. Go ahead, sir, your line is open.
Good morning, everybody. My first question is around Spring. On the bridge in EUR 26 million, well, Spring and Logistics, so to speak, everything outside parcels. There was in the bridge of EUR 26 million uplift versus last year. Can you give us an indication what the EBIT was in Q1 last year? Assuming that it's a little bit positive, if I then look at the drop-through from revenues to your EBIT, it seems that the drop-through is not different from what we've seen in Q4 2020. In 2020 we had a far more irregular increase in volumes with the peak holiday season in there. I assume that there would be far more extra costs, temping power put in Q4 than the more gradual volume spread through the quarter in Q1.
Is there anything in terms of extra cost in Q1 already for Digital Next or another explanation why the drop-through isn't higher? Following up on that, the EUR 17 million indicated as the one-off effect from COVID in Q1 in parcels, is it then indeed the proxy that each month is around EUR 5 million, EUR 6 million additional EBIT in parcels? Is that then also the number we should use for Q2 for the month of April? On mail, could you give us a bit more feel for the vaccination letter impact you expect for Q2 in terms of volumes? We already discussed so the mail guidance slightly better than the -8% to -10%, what kind of assumption of the vaccination letter impact is in that number?
Lastly, the volumes for parcels in April on a working day basis, can you give us a bit of a color there? I think in Q4 and also start of this year, we were probably running at 1,500 a day. I think we had seen the press release in Q4. Is that still the same sort of number for April, during the COVID lockdown? Thank you.
Thank you, Marc. I'm trying to follow the speed of where you can fire off your questions.
Yeah, sorry.
I'm almost going at answering them.
Happy to repeat, Pim.
Oh, yeah. I know. First one, Spring and Logistics. Spring and Logistics have, of course, different volume patterns than our domestic networks per se. Not all Spring volumes hit our domestic networks, because they are cross-border mail, but also in between European countries and from Asia to other destinations than the Netherlands. There's not that much of a fundamental difference in volume development between those two. If you look at the actual contribution in the quarter, we have seen from Spring, also driven by COVID, additional volume on several trade lanes on particularly big foreign e-commerce web shops like for instance, AliExpress and Joom, and what have you, which we like. We've looked at it from a domestic point of view, being partially to be non-recurring. The profit of the first quarter of that together was, I would say, EUR 5 million-EUR 7 million+ or something like that.
That is then what it is on your first point.
Sorry to interrupt, Pim. The EUR 5 million-EUR 7 million was last year, is that what you're saying?
Yeah. Q1 2020.
Yeah. Around five, six. Yeah.
Yeah. Okay. Yeah.
This EUR 17 million in parcels, that is the impact of not within the parcel segment, but what we would now call our domestic parcel business. That EUR 17 million is of course influenced by the EUR 11 million additional compensation to non-essential retail stores and also some additional cost to cater for the additional volume. That is the way to look at it. From EUR 17 million you need to add back some non-essential compensation or compensation to non-essential stores, and then divide it by three if you want to end up with a proxy of what roughly an additional month of COVID contributes.
Take into account as well that of course the opening of stores changed a little bit over the month in the first quarter, Marc.
Yes.
I think the retail costs mentioned by Pim are one of-- because your question was also the drop-through of revenue to EBIT is not equal. One of the reasons is the retail cost, which we did have in the Q1 and to a bigger extent, of course, than in Q4.
Yeah, that explains the gap indeed. Thank you.
Yes.
The next one was three and four related to the vaccination impact, both in terms of Q2 as well as on the full-year guidance on volume decline. As said, let's say from the EUR 42 million- EUR 60 million- EUR 70 million non-recurring COVID effect, the delta from EUR 42 million to EUR 60 million to EUR 70 million is expected to materialize in Q2. Part of that relates to the vaccination programs, where we do expect around about 8 million pieces to be distributed for this purpose in the second quarter. That's also together with roughly 1.5 million, which is already in the first quarter, the amount of volume we now currently expect for the total vaccination program into our full-year expectation.
Yeah. Thank you so much.
We do not expect additional vaccination mail in Q3 and Q4.
Hopefully not.
Indeed. Waiting for it.
For many reasons.
Waiting for it.
Yes.
Ask the run rate of April for parcels. Yeah. Well, I would say not materially different than the run rate in Q1. We yet have to see the impact from the opening up of the stores again. As we discussed before, we didn't see material impact of click and collect on the volume developments, but it's still too early days to say anything about the volume development since the stores are opened up. Also, given the fact that it is May holiday season, and there are some bank holidays in it as well. We have to wait and see a bit throughout the second quarter what the implications of opening up the stores will be for our growth rates. Yeah, run rate not materially different than in the first quarter.
Okay. Well, that is all indeed. Well, remember, thank you very much.
Thanks, Marc. Thanks, Marc.
Thank you, David.
Our next questions are from Lotte Timmermans of ABN AMRO ODDO. Go ahead, please. Your line is open.
Good morning, everyone. Two questions from me. First, on the non-recurring items in parcels, could you help me understand how you identify them as non-recurring? I think we discussed a couple of quarters previously about the computer mouse and other working from home equipment. How do you identify them now? That seems somewhat more difficult currently. Second question is on your balance sheet. In my view, very healthy. I know you don't publish it on a quarterly basis, but could you say something about the leverage ratio? Additionally, on this question as well, the maximum leverage ratio is two, but what would you see as a healthy leverage ratio to identify additional excess cash? Thanks.
On your first one on the non-recurring parcel items, the way you think about it is, of course, you had a full lockdown in the first quarter of this year, and that means that lots of the volume for which you normally go to a store, you were not able to buy in a store and you had to order online. It's relatively easy, to be honest, to define what non-recurring is and what not. That has to do with the fact that you exactly do know which shops are closed. That's how we identified it, and when it comes to mail items, it is of course closely related to COVID when it comes to vaccination mailings and also when it comes to the voting material for the elderly people in the Netherlands.
Can I ask a follow-up on that one? Basically, if the store is closed, so say H&M is closed, then all the parcels.
No.
Okay. No, no.
What we do is like we've done in last time around, you take the normal growth rate of the market. There's different lenses you can look at. Let's look at the overall growth rate in the market. One other lens is the client's expectations. Then you see a step-up in these growth rates at lockdown. Let's assume for an argument's sake that it's 10% growth. You see a step-up from 10 to 12 on the back of a lockdown. What we then say is the 10- 2 step-up is what we say is non-recurring.
Okay, thanks. That's clear. This could then also be that it be a shift towards e-commerce in total as well, so that it's structural.
Yeah, to simplify it again, let's say 8% grows to 10% because of the fact that online has gained market share from offline. That is the structural component. From 10 to 12 because of lockdown is what we call non-recurring COVID in this example.
Okay, thanks. That's clear.
On your second question, the balance sheet, I must admit that I have not calculated the leverage ratio. I would've then looked at the LTM numbers, but certainly below one. How does a healthy ratio look like? Well, as you know. Not exceeding two. I don't want to be too close to two, but I would say somewhere between 1.5 and two is what I would say healthy. If you remember the capital allocation slide that we discussed on March 1st, we'll go through the motions by identifying investment opportunities that can further strengthen our competitive position. There will be a little bit of working capital investment required given the fact that parcel growth will explore bolt-on acquisitions if and when they truly contribute to the value story of PostNL.
Over time, we'll assess if and to what extent we believe we'll have excess cash, and at that moment in time, we'll determine what to do with it. It's a bit too early for that if you were to ask me.
Thanks, Pim.
Thanks, Lotte.
Ladies and gentlemen, if there are any further questions or remarks, you can still press star one on your telephone at any time. Star one if you have a question or remark. Go ahead. In the meantime, our next question is from Mr. Ivor Kelly of UBS. Go ahead, please. Your line is open.
Good morning. First of all, I'll link it to Lotte's question in a way, but are you intending to pay interim dividend this year? If so, what would the timing of that be? Secondly, you mentioned that your mail and retail benefited from e-commerce as well. Does that take into account the 108 million parcels that you disclosed for the parcel division, or does that actually allow for incremental parcels over and above that? Last one, I appreciate this is probably very early and it's far early for you to comment, but I'll try anyway. If you were in a position where you had your Digital Next program fully up and running, what sort of incremental EBIT would you have expected to have seen? Thank you.
Yes. Interim dividend, yes. Part of our dividend policy is interim dividend, and that is one third of the dividend of the previous book year, and that is expected of always done in August, and will not deviate from that policy.
On the second question, the e-commerce elements within mail are not part of the 108 million parcels, should also not be added onto that because it's a totally different product. It's a product that fits through the letterbox. It does not have track and trace. You cannot compare the two. What we do see is that smaller shops also use the possibility to have thicker envelopes which fit through the letterbox without track and trace. Don't add them to the 108 million because it's truly a different product.
Third one was on how big we expect the incremental contribution of Digital Next to be. If you look at the guidance we've given on this point on March 1st, we basically said over time, we do expect to add EUR 80 million-EUR 100 million of profit, 50/50 split between business performance predominantly from parcels, compensating for the additional pension expenses, and the other half is going to be a step-up in profit driven by our Digital Next program.
That's great. Thank you very much.
Next question is from Mr. Henk Slotboom of The IDEA!. Go ahead, your line is open.
Good morning, all. Very simple question. A lot has been said about mail and mail volumes already. You mentioned the e-commerce part of it. This has already been an improvement in direct mail, because last year in the second quarter, you got absolutely hammered because of the standstill in direct mail.
You see slight improvement, Henk, and we did a few big mailings in the first quarter, but we're not yet fully recovered. Fortunately, you do see recovery.
Perhaps a follow-up to that one. If I look at the quantities you're referring to in terms of the vaccination mail, estimated 8 million you said, and now that the stores have reopened again, normally speaking, it should lead to higher direct mail volumes as well. Is it strange to expect another increase in volumes again, mail volumes again, on a reported basis in the current quarter?
Look, I do think that if you look into the presentation Pim gave, then you have to take into account that the positive in the first quarter were also caused by three extra working days, which was more than 3% of volume, with, of course, the normal election mail stempassen , normal election mail, which was also almost 3.5%. There were more positive elements in the first quarter, which helped us, of course, to a positive development growth. We do not expect elections in the second quarter again. We do not have extra working days in the second quarter again, and we also do not have the voting mail for the elderly. You will have some positives around vaccination, but absolutely not to the extent we've seen them in the first quarter, Henk.
Okay. That's a very clear answer. Thank you.
We have no further questions. Please continue.
Okay. Thank you very much for joining again. As Pim already said a moment ago, on June 7th, we will organize a deep dive webcast to look further into the acceleration of our Digital Next program. You can expect our Chief Digital Officer, Bart Delmulle, to go into further details as to what we presented on the 1st of March, and we will also talk about a number of business examples to explain how we plan to accelerate digitalization. We hope you can all join. Invitations will come your way shortly. Again, thank you very much, and you know where to find us in case you have further questions. Thanks very much. See you next time.