Good morning, ladies and gentlemen. Welcome to the PostNL Q4 Full Year 2024 Results Call. At this moment, all participants are in a listen-only mode, and after the presentation, there'll be an opportunity to ask questions. Now, I would like to hand over the conference call to Miss Inge Laudy, Manager in Investor Relations. Please go ahead, Madam.
Thank you, and welcome to all of you. This morning, we have published our Q4 and Full Year Results, and we will now explain these to all of you. With me in the room are Herna Verhagen, our CEO, and Pim Berendsen, our CFO. Herna will present the 24 results to you, and after that, Pim will take over, and he will elaborate on our strategy and outlook for 25. Afterwards, Pim and Herna will answer your questions. Herna, over to you for your last full year results.
Thanks, Inge, and welcome to you all. Let's start with the key takeaways for 2024. A few elements on which we are very proud for the year 2024 and achieved with relentless efforts is the favorable NPS, where we have a strong position versus competition. Of course, well-executed cash and balance sheet management, and I think with all the changes we saw in trends, we improved our efficiency and our capacity, delivering 41 million of cost saving within our Mail Division and 35 within Parcels. Of course, organic costs kept increasing, but with the smallest gap in recent years, it's mitigated by higher prices, and we even further improved in the year 2025. Our leverage ratio is below two, meaning we propose a dividend of EUR 7 in the AGM. Of course, EUR 53 million of normalized EBIT is unsatisfactory.
The main driver within Parcels is the shortfall. The result is the margin pressure due to the acceleration in client concentration. Our top 20 customers in Q4 2024 did 60% of our volume, where a year earlier it was lower than 50%. So that is increasing rapidly. Within that, of course, international customers grew much faster than the domestic customers. That's a trend we saw also in the other Quarters. A second big change is consumer behavior. People are ordering much later than they did in the past, so they wait, of course, for the big discounts, and then they start ordering. In Mail in the Netherlands, not that much news under the sun, meaning that volume decline continued 8% over the year.
And what we did see over there is we still have, of course, difficulty in filling in all the vacancies, although we've put lots of extra people and extra money into that together with still high sickness leave, had impact on the results of Mail in the Netherlands. If we look to the Normalized EBIT of 2024 and compare that to our outlook, what are then the main drivers for difference? Already shortly mentioned when we discussed key takeaways. Within Parcels, we see EUR 25 million, which is mainly because of the negative mix effect due to concentration with customers. And secondly, a less favorable volume distribution in the short peak period. We're only able to deliver in such a short period the peak volumes if we do the ramp up earlier, and that is, of course, less efficient and therefore costly.
The impact with Mail in the Netherlands is also there because of mix effect, that meaning that 24-Hour Mail we had less, and therefore we got in, of course, non-24-Hour Mail, which has a lower margin, and we saw higher cost because of the related absenteeism. Coming in at EUR 53 million for the Full Year. If we then give you PostNL at a glance, and I think I will mainly look into the non-financial KPIs, we saw, of course, our first CSRD Report published today. We're proud of it, proud that we, of course, made all the guidelines and have, in our view, a readable report. We saw again, of course, carbon efficiency improvement and also an improvement in the share of our emission-free last-mile delivery.
We saw growth in the amount of PostNL Accounts, very important because that's our possibility to reach those consumers and get their information, for example, when it comes to delivery preferences, and we expanded the amount of Parcel Lockers, and what we did see is that the utilization of those lockers is growing, and especially in the last Quarters, accelerated in growth. Also, but there is a separate slide on cash. I would like to, of course, focus on our Free Cash Flow. We had a very strong Fourth Q uarter and therefore also a positive year-end result of EUR 12 million in cash. Looking into Parcels and then, of course, our Q4, we saw revenue growth together with Normalized EBIT growth, and we saw strong volume growth, 10.5%. That 10.5% did deliver, of course, margin extra Normalized EBIT, but did not deliver the margin increase we expected.
That is mainly because of that client concentration. To give you a feeling of what the impact is, we did quite some price increases over the year 2024, EUR 14. 14. On the other hand, we saw a shift in mix, meaning bigger customers becoming bigger, and that was a negative of EUR 22. That, I think, is the translation or the explanation why we do see pressure on margins. Secondly, we achieved our targets when it comes to efficiency, efficiency improvements, and therefore also, of course, cost reduction of EUR 35 million in the year 2024. Overall, when you look into volume increase, a good Quarter, when you look into where volume comes from, together with the fact that consumer behavior is changing, we saw pressures on margins in Q4 and therefore also over the Full Year.
The bridge explains to you where we are, the bridge, of course, from Q4 2023 to Q4 2024, up from EUR 23 million in 2023 to EUR 31 million in 2024. What are the main parts within? Of course, volume growth that delivered extra revenue. We lost because of the unfavorable product mix, bigger customers, as explained. Then when you have more volume, of course, you have more cost to deliver those parcels. We also see organic cost increases, mainly because of wage increases. And then we saw again the positive of our tariff increases and the positive in Q4 of the operational efficiency improvements. The latter was EUR 11 million in Q4, and for the Full Year, it was EUR 35 million. Let's do the same for Mail in the Netherlands.
In Mail in the Netherlands, we see a large step down in result from EUR 54 Quarter for 2023 to EUR 38 in the Fourth Quarter of 2024. We see, of course, that volume decline was 10.5% over the Full Year, around 8%, but it also includes, of course, last year's election mail. So real substitution is eight, and that is still within the bandwidth we've given in the beginning of the year 2024. To keep revenue up, we increased stamp prices twice in the year 2024. Per January 1, 7.9%, and then again 4.6% per July 1.
Reason for, of course, the step down is, first of all, the shift from 24 to non-24-Hour Mail, and secondly, also a higher illness rate in a tight labor market, which makes that we have less efficiency and slightly more cost because we have to hire external people to fill in as much as possible the empty people spaces. On cost saving side, Mail in the Netherlands did very well, EUR 41 million over the Full Year of 2024. Also for Mail in the Netherlands, the bridge, the EUR 54 million Q4 2023 to the EUR 38 in 2024. Here, of course, you see a revenue decrease because of the volume decline. We have a slight revenue mix. Then, of course, volume-dependent cost and organic costs, which are wage increases and other inflationary pressures. Also here, tariff increases that did have quite some positive impact. And here, EUR 5 million for cost savings.
And as said, a total year result on cost savings is EUR 41 million. And that brings us to the EUR 38 million in the Fourth Quarter of 2024. On cash flow, we had a very strong Fourth Quarter. As already said, we brought in EUR 106 million in Q4. Obviously, Normalized EBIT was down in Q4 compared to last year's number and lower than we expected. But thanks to the well-executed cash and balance sheet management, the Free Cash Flow performance in the Quarter was solid, resulting in EUR 12 million for Full 2024 and well above our outlook. Looking a bit deeper into the cash flow components in Q4, the CapEx, which is mainly related to parcels, was less than, of course, the year before, and we did a good job on working capital.
This winds up the 2024 financials, but obviously, these were realized in an environment where market dynamics keep on changing, and then the last slide before I hand over to Pim. Those market dynamics, already mentioned of course when we discussed the numbers of 2024. Within the e-commerce market, we see evolving consumer behavior, meaning that on the one hand, they order their parcels later, mainly based on discounts, and secondly, we see that they order more and more with the big partners, and that creates, of course, client concentration. In postal services in the Netherlands, and we said a lot about it last Friday, we keep on seeing a structural decline due to substitution. Also here, consumers say there is no need for urgent mail. It's fine for us if we can get it within two days, so predictability is much more important than speed.
We see further cost increases, mainly labor-related, and we did see in 2024 that the decision on postal regulation is postponed. That means that for parcels, we think that we're keeping, of course, our commitment to further investments and innovation. We also do think that it is important to start a dialogue with the whole value chain to come to a fairer distribution of value in the sector, and we start as a leading player, and of course, as a leading player in the market, we want to start that discussion. Some of the consequences of that discussion you will also find in our plans for 2025. For mail in the Netherlands, we're committed to, of course, a future-proof and financially viable postal service. The business model is unsustainable and requires urgent action. That's what we already said more than a year ago.
That's why we presented our plan in February 2024, how to make mail services in the Netherlands reliable and financially viable. And that's also the reason because there is no view at this moment in time for changes in the postal law, why we submitted our request for a financial contribution to government for the year 2025 in the amount of EUR 30 million and for the year 2026 in the amount of EUR 36 million. I think EUR 38 million, sorry, pinpointing that action from Dutch Government is needed and in our view urgent. And that, I think, concludes 2024, gives you, in our view, a good view on what happens in 2024. What we also did say in our trading update is that the outcome of 2024, together with some of the market trends we see, means that we're looking into certain elements, adjusting certain elements of our strategy.
That, together with the outlook for 2024, will be the story of Pim, and I hand over to Pim.
Thank you very much, Herna, and first and foremost, let's look at our Group Strategy, and subsequently, I'll dive into the adjustments on strategic themes in both our segments, but Slide 15 to start off with, we're focused on delivering distinctive customer and consumer experiences with the aim to be the leading e-commerce and postal service provider into and from the Benelux, and this overarching strategy fully embeds our Environmental, Social, and Governance ambitions, which will enable us to drive towards a sustainable future. Obviously, the dynamic nature of the markets we're in will require us to every now and then respond to external developments and collaborate with customers to introduce new, increasingly digital solutions.
If we then move over to our Parcel Segment on Slide 17, let's first look at the addressable market and how we believe that will develop. We have strong confidence in the growth potential of the Dutch and Belgian e-commerce markets, which is driven by growth of Dutch retail market spending as well as the development of online penetration. For the Dutch retail market growth, the general view is that we will see growth for the years to come. The pace at which the market will grow is, of course, partially dependent on economic conditions, and these are and will remain to be volatile. When it comes to online penetration, we see an upward trend both in the Netherlands as well as in Belgium. The blue line on the graph, a small graph, shows the online penetration as a worldwide basis.
In our countries, there should still be room to catch up towards this level, which is a very important driver behind the overall market growth. Based on these two fundamental drivers, a mid-single-digit growth for the Dutch e-commerce market in the medium term is expected. Our assumption for 2025 is a growth rate of between 4% and 5% based on the increase in online penetration and the growth of the retail market. However, as the e-commerce market matures, factors beyond growth potential become increasingly important. That is the bridge towards slide 18. The e-commerce market is changing in very many dynamics. Obviously, also this e-commerce market is impacted by increasing costs, more requirements on labor conditions, but a more unequal split of volumes over the days of the week and over the periods in the year.
So an even more spiky consumer pattern putting pressure on networks in the market. And that, of course, requires some adjustment. We obviously remain committed to further investments and innovation to support sustainable growth in this market. But given the market dynamics that have clearly impacted our financial performance, we believe it's necessary to adopt some of the elements of our strategy. In this presentation, we'll discuss five elements of this strategy where we will respond to the changing market dynamics. I will present them in more detail one by one in the slides that follow. So only the high-level strategic initiatives are discussed here. There's increasing awareness for decent working conditions in our labor market that is very tight. Consumers buy an increasing amount of parcels online. We also see an increased focus on reducing the company's carbon footprint.
And in response, we will further step up our investments in health and well-being of our people, as well as the investment base for sustainability. We've seen consumer behavior change as you and I tend to buy products more often at large market players and platforms instead of medium and smaller-sized web shops. This change in behavior impacts PostNL and resulted in an acceleration of client concentration that has put pressure on our margins. With targeted yield measures specifically aimed at our largest customers, we will enhance the value of our customers. We've also experienced an increasing demand from web shops and consumers to be able to send and receive parcels from countries within Europe. To support our customers in this, we will expand our Spring proposition in Europe and our presence in Belgium.
Lastly, we will accelerate the rollout of our Parcel Lockers in response to the growing adoption of consumers and customers for our out-of-home options. We truly see that the flywheel has been accelerated in 2024, and as such, the time is right to step up those investments even more. So these are our five high-level strategic initiatives that I will subsequently discuss in a bit more detail. The first one is targeted yield measures to enhance customer value. We see an increasing level of client concentration since large market players and platforms are outgrowing the other client categories. In just two years' time, the share of our top 20 customers increased from 49% to close to 60% in the Fourth Quarter of this year. That top 20 consists of both domestic, international, and platform players, and the internationally are mainly Asian-based customers.
The accelerated client concentration put pressure on our margins. Also, as you've seen in the bridges Herna explained, the average price per parcel went down irrespective of the increase of EUR 0.13 on price points that we've put through. So those negative mix impacts have been the most important factor explaining the gap with our outlook. All in all, only the mix factor accounted for roughly EUR 30 million of the difference between outlook and the EUR 53 million. Having said that, this is clearly an area where we need to seek a better balance between volume, volume growth, and value. We will need a fairer contribution from large web shops and platforms to fixed costs to pay for sustainability, improving labor conditions and labor remuneration.
If we want to maintain in a position to keep on innovating this broader e-commerce market, as well as create facilities with capacity to facilitate their future growth ambitions, we need to get to a better balance and fairer contribution of margin within the chain. We will further accelerate the utilization and number of customers that have Locker Delivery in their checkout processes, which will be an efficiency improvement in itself. We will further build upon our SME propositions to support the growth of that client category as well. Next to that, we'll focus on more efficient flow of parcels to increase the utilization of our network.
Examples are to increase the number of First-Time Right Deliveries and to encourage our customers to set delivery preferences right in order for us to increase the First-Time Right Delivery, utilize the existing infrastructure, and create slightly more equal flow in the network. We expect these measures to impact our volume growth and anticipate on slower growth relative to the e-commerce market and, as such, expect a slight loss in market share. Next to that, we see great organic growth opportunities that are now ready to be captured. We see possibilities both in the international growth domain as well as in Belgium. In the international growth domain, we think we can leverage our existing Spring infrastructure. That is an asset-light business model. We report it within the Parcel Segment. So we don't have own deliveries. We don't have own networks, nor are we going to invest in those.
Spring's platform is very well equipped to align customer demand and supply to combine various trade lanes and have customers grow those Europe trade lanes. As you know, the European market is a very big cross-border e-commerce market, and we have performed very strongly over the past years in this area, 16% growth. We already have a strong market position in Europe, and we believe that from that asset-light network, we are able to boost organic growth. Let's mention some of the actions we will initiate to make this happen. We intend to expand and optimize our asset-light network, aiming to reach all top destinations within 48 hours. It differs per country of origin what the key trade lanes are for export out of the Netherlands. For instance, Germany, Belgium, France, and the U.K. are most important, but out of Spain, it's different.
It does make sense to build an EU network linking these lines together to create scale effect and further growth opportunities. We will intensify commercial efforts and improve the sales force targeted at the European and Dutch market to grow the number of customers and invest in tools and commercial intelligence, while introducing new services and offerings, for instance, fulfillment and additional customs capabilities. Next, we see also great opportunities for further growth in Belgium, where we are clearly the number two in the market, very good performance since 2022, and also here a market with growth potential. Good to mention that the Belgian e-commerce has some characteristics that differ from the Dutch market. For example, as you can see on the graph, the part of import is relatively high due to historic factors.
Our actions there, we want to expand our position on export Belgium into Europe through Spring, targeted yield management to achieve a better volume mix there as well, and we have existing infrastructure and capacity in place in which we can accommodate additional volume without further investments. Next to that, we'll focus on improving our net promoter scores as well and roll out our out-of-home strategy to Belgium. That brings us to the third pillar of the changes to the e-commerce strategy, which is the acceleration of the rollout of out-of-home strategy. Here you see the flywheel that is now clearly working, and that's why we believe we should accelerate it. In last year, we have seen growing adoption of out-of-home delivery from our customers as well as from our consumers.
Large customers have now added delivery to APLs in their checkout, and we've delivered 97% more parcels to APLs than in the year before, receiving very, very favorable, very high actually NPS scores of 51 from our consumers using this delivery option. This has made us decide that there's sufficient adoption now to accelerate the rollout of Parcel Lockers. This Out-of-Home Delivery Strategy has many advantages for our customers, but also for ourselves. Our customers receive higher NPS scores as consumers tend to return to web shops after experiencing a smooth checkout and delivery process, which in return generates more revenue for our customers. With delivery to lockers, we can reduce our costs. The costs for delivery to an APL are roughly 30% lower than for home delivery, as we have fewer stops in routes and can drop off more parcels in a stop.
Also, the utilization of our network can be increased, and retail locations have less handling as consumers can pick up their parcels without interaction with personnel working at their retail location. We've assigned a CapEx budget of around EUR 10 million for 2025 for the rollout of lockers. That is a couple of million more than assumed before. So for lockers and also the expectation of utilization currently at 36%, that will rapidly increase to 100% in the years to come. So we plan for the additional investments to roughly add 500 Parcel Lockers and to improve the utilization even more, capturing the scale effects and efficiency gains we just talked about. The fourth element relates to our role as a large employer, both in the Netherlands as well as in Belgium.
As a large employer, we are committed to decent labor conditions to enhance employee engagement and the health and well-being of our people. Increasing online purchases have resulted not only in growth in volume, but also in different types of products. We see more parcels that weigh more, requiring tools to support the process for our people. The health and well-being of our people in the operations in both our parcels and Mail Division is of great importance to us. With long-term absenteeism remaining high, we take a lot of effort to reduce these rates and support reintegration. We have a dedicated team that supports employees in tailoring the best possible way to return back to work. Also, we do invest in prevention.
With the accelerated rollout of tools like, for example, tilters that support in placing parcels on the sorting bands, but also a mover that helps you to transport a roll cages next to frequent rotation of tasks, supports to minimize the physical strain for our people. With people coaches at our depot, we keep a close eye on work pressure and job satisfaction, and in this year, we also have introduced a centralized Health and Safety Department that has expertise in one central place and will build on uniform guidelines and safe working practices, and the last part relates to our role in the environment, and we are determined to remain at the forefront of sustainability and have set an ambitious path towards Net Zero Emissions. We are on track to reach our recently validated SBTi targets.
We decided to further step up our investments in sustainability, of which I will name a few. We will expand our Electric Fleet and increase the utilization of our fleet through improved fast charging efficiency, and we'll expand our Zero Emission Network to increase the amount of city centers that we deliver with zero emissions. We currently do this already in 27 cities. We will also expand the use of renewable HVO100 fuel for our large trucks and Last Mile vehicles. And besides our own fleet, we financially support our delivery partners in electrification of their fleet in the Netherlands and in Belgium. Next to making our fleet more sustainable, we also invest in building stronger algorithms to optimize routes and minimize error in parcels we collect and deliver. To summarize the effects of these five strategic initiatives, Slide 24 is there.
In 2025, we will invest an additional EUR 15 million related to the initiatives, and both revenue and Normalized EBIT will see impact from this when we compare to the base case. So on Normalized EBIT, we expect a hit of EUR 5 million-EUR 10 million in this first year with EUR 15 million additional CapEx. Over time, those five initiatives, so this should not be confused by a Midterm Guidance, only those initiatives will over time lead to roughly EUR 300 million-EUR 400 million revenue increase and a positive EBIT contribution of EUR 25 million-EUR 35 million. For us, it clearly makes sense to take those steps right now. They're clearly in the interest of the enterprise and are directly related to the market dynamics in e-commerce that we've seen in 2024. Obviously, next to those strategic initiatives, we will continue our efforts to reduce costs.
We keep on doing what we can to improve efficiencies. To mention a couple of main projects that will contribute to margin improvement over time: Direct and Indirect Cost Savings in First and Middle Mile, Collection and Transport by integrating networks, reduce kilometers including in Last Mile by further developing our planning algorithms and Digital Supply Chain Solutions, improve the management structure in depots to further accelerate efficiency measures, improve capacity utilization during off-peak periods, reduce our Customer Care Queue, implementing our Conversational AI Platform to capture part of context with consumers. And then, as always, there are some very many smaller initiatives to reduce costs. All in all, we anticipate on saving between EUR 40 million and EUR 50 million in costs with the efficiency measures that we just discussed in 2025 within the parcels segment. On that, now let's move to Mail in the Netherlands.
Let me start by repeating our message that the current business model of postal services is unsustainable, which is again underpinned by the financial performance that Herna explained a little while ago. In 2024, despite EUR 40 million in cost savings, we've experienced a large step down in result as a result of structural decline in Mail Volumes, shift in mix, rising costs in tight labor markets, and continued high illness rates. We fully acknowledge that Dutch government needs to assess the future of postal services, but there is an urgent need for change in postal regulation. While we await further decision, we are continuing to make every effort to address this situation. I have started to migrate a large part of Business Mail to D plus two delivery. By the end of the year, all Business Mail will be at a service level of D plus two.
As of this month, we have amended the collection processes of our mailboxes and will collect mail partially during the day to save costs and increase our network efficiency. All measures are taken in the transformation towards a future-proof and financially viable postal service. On the next Slide, we have laid down our roadmap towards a service level for Standard Mail to be delivered within two days, moving towards three days over time in line with consumer needs and in line with customer expectations, and yes, for that, postal regulation needs to be adjusted urgently. Given the discussions that we had on the roadmap earlier on, we thought it wise to explain the different steps and how they do relate to cost savings. We show a roadmap that assumes that the USO Mail can migrate to D plus two at January 1st, 2026.
On the next Slide, we see the projections when taking into account that this is not the case. We continue with the measures that are within our control and anticipated cost savings between EUR 40 million and EUR 45 million in 2025. Part of these savings relate to the migration of Business Mail and mailbox collection during the day. On top of this, we continue our efforts to optimize our network. In Phase I of our roadmap, we assume that USO Mail can also be migrated to a service level delivery within two days. Then we will be able to eliminate off-peak routes and have delivery concentrated on three days at every address. This allows us to make further optimizations in our network and in the mailbox collection process. It will still be possible to send items within 24 hours, so-called Priority Mail, at different price levels.
These items will then be delivered via the parcel infrastructure. Those steps are expected to bring in roughly EUR 40-50 million in cost savings. In Phase II of our roadmap, we transform the service framework to delivery within three days. With that, we can further achieve cost savings, and anticipated further decline in volume will justify to bring down the amount of delivery days within the mail network. And with one delivery day less, we have sufficient time to be able to sort all mail during the day and will need fewer locations to carry out all our processes. In other words, we won't need night work anymore. In total, we expect that this will result in cost savings in the range of EUR 80-100 million as well.
Please note that amending the service level for USO Mail will be dependent on the outcome and timing of the political decisions on postal regulation. Slide 29 compares the development of Normalized EBIT in the Mail Segment in different scenarios. It is also where EBIT should be to cover the cost of capital at the level of the WACC of the group. Without interventions, the loss will become larger by the year. Our roadmap, as explained on the previous Slide, we expect to be able to limit the anticipated loss for the postal services in the next year and then turn back to positive results. These projections clearly show that the USO obligations need to be reformed urgently. We stress the importance of including a service level for Standard Mail to deliver within two days and over time to within three days.
Also taking into sensitivities, a financial safety net should be incorporated in regulation. These changes are in line with regulation in other European countries. While we are awaiting parliamentary decisions, last week we submitted an application to the Dutch Government for a financial contribution of EUR 30 million in 2025 and EUR 38 million in 2026. This is to cover the costs of the Universal Service Obligation that we have. So it's a cost coverage of loss-making activities that we have to do as part of the Universal Service Obligation that we have. We've asked the Ministry of Economic Affairs to take a decision at short notice. Then let's move to our outlook. So after explaining to you about the strategic initiatives in parcels, the roadmap for Mail, I would like to show you our main assumptions for 2025 and how they will translate in our outlook for the year.
We expect organic cost increases of around EUR 125 million, of which 75% is labor-related. We expect within this year, those costs to be fully absorbed by price adjustments. Another improvement. At Parcels, we expect volume growth between 1%-3%. That total volume growth is lower than we expect the Dutch e-commerce market to grow, mainly related to the Yield Measures that we will take, which will result in a slight loss of market share, mainly on international. Positive price mix effects are expected roughly around EUR 55-60 million, almost fully explained by pricing. And we will continue our efforts to take adaptive measures, of which we expect a contribution of in between EUR 40-50 million. At Mail in the Netherlands, we expect between 8%-10% volume decline and between EUR 40-50 million in cost savings.
All these factors taking into account, including the strategic initiatives we will focus on this year, we expect a Normalized EBIT for 2025 in line with 2024. As showed earlier in the presentation, the EBIT impact, negative impact in this case of the initiatives, is between EUR 5 million and EUR 10 million. Lastly, and maybe you're not fond of it, but for us, it's important that there will be a change in Segment Reporting. As of January 1st, we will report our Real Estate Activities in the Parcel Segments in order for us to be as close in the Mail Segment of the result of the mail business in itself and not making the distinction between Mail and Parcels in the Netherlands anymore. I know that will result in a bit of extra work for you, but we kindly ask you to amend your models accordingly.
To help you, you will find a full reconciliation of Quarterly Results in the appendix to this presentation. On 32, we present the development per segment to help you understand the expected deltas compared to last year. What you clearly see is that, let's say, the results in Parcel Segment will grow and the Mail in the Netherlands result will diminish from a positive of three towards a negative result. For Parcel, the main developments are additional revenue from volume growth. Organic cost increases are expected to be mitigated by price adjustments. The impact of cost saving and efficiency programs partly offset by higher costs. The strategic initiatives we discussed will result in a step down visible in other results. At Mail in the Netherlands, the impact from volume decline is clearly visible. Furthermore, we anticipate to be able to mitigate organic cost increases fully by price adjustments.
Then over to the split of Normalized EBIT over the quarters. Even more than in 2024, Normalized EBIT will have to be earned in Fourth Quarter. The impact of pricing will be larger in Q4 than in any other Quarter. Overall, Working Day Distribution over the quarters is slightly different than in 2024, also impacting the Quarterly split. For parcels, you should take into account that the announced Yield Measures will start to come into effect as of Q2. And for Mail, please remember that in 2024, we had elections in the Second Quarter, and for this year, no elections are scheduled. To wrap up the outlook on Slide 34, Normalized EBIT is expected to be in line with performance of 2024 due to those balanced Strategic Decisions. CapEx will be slightly above the level of 2025 and will include EUR 50 million related to the strategic initiatives.
We expect that economic conditions over time will improve, but for 2025, we assume that the external environment remains challenging, and we stress that the pace of Client Concentration due to changing consumer behavior is difficult to predict. Having said this, I emphasize our intention to pay a dividend over 2025. We hold on to our aim to be properly financed, taking into consideration the anticipated improvement in performance going forward and the progress towards a Future-Proof Postal Service. Good to add that Normalized Comprehensive Income, which is of course less, is the base for dividend, is expected to follow a pattern which is more or less in line in terms of step down compared to EBIT than the 20% of the 2023 year.
Lastly, before we close and open up for questions, I would like to announce that in September of this year, we will host the Capital Markets update and will elaborate on how we see the e-commerce market going forward based on market dynamics that we've seen and will continue to see. We will provide you further details on the elements that we will adjust our strategies on. Also, the progress made towards a Future-Proof Postal Service will be discussed at that point in time. Based on all of that, we will provide a market and Medium-Term Financial Guidance for PostNL. Looking forward to have that discussion with you at that point in time. For now, I would like to conclude the presentation and hand it back to Inge, and she will then subsequently open up for Q&A.
Yeah, thank you, Pim.
So operator, please open the lines for Q&A, please.
Thank you. To answer the question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We will now go to your first question. One moment, please. And your first question comes from the line of Michiel Declercq from KBC Securities. Please go ahead.
Yes, hi. Here now, Pim, thanks for the presentation and the extra call on the Strategic Measures that we'll be taking. And maybe first question on that, I was just wondering of these five Strategic Mmeasures, you will of course have some revenue impact and some EBIT impact into 2025. I was just wondering, what is this revenue loss related to?
Is it like that you assume maybe some customer losses on some more aggressive pricing pass through? And then maybe following up on that as well, looking towards that target that you have by 2028, how should we see the benefits from that coming through in the P&L in terms of the phasing effects between 2025 and 2028? And then the second question would be, and you mentioned it a couple of times on the decision of the amendment of the change in the postal regulation. Can you maybe remind us now what the timeline is at this point in time and how you are looking at it?
Yeah, because based on your presentation and what you show on Slide 29, I would expect that you officially start a shift towards the D plus two also for the USO Mail as from January 27, based on that graph that you showed. Just wondering if you can give a bit of an update on that front, where do you or when do you expect this change to finally happen if it happens?
Thank you for your questions. Let me start in the sequence of how you've raised them. I think on the Revenue Loss element there, yes, we do expect that the Yield Measures aimed at our biggest clients will most likely also result in some loss of volume. It's definitely much more than just price increases. The most important elements are related to efficiency improvements and creating more equal flow.
But we do expect that in some cases, that could lead to slight loss of share of wallet on those clients, and that will lead to the negative on revenue that we indicated. And that's also the reason why our volume growth is behind the expected market growth. So we do expect a slight loss of market share, but that's by choice because at the end of the day, we believe that we need to get to a better balance between volume and value for PostNL. So that was one. Then the target to 2028, yes, clearly this is only aimed at the initiatives we talked about. So they will gradually mature towards that level. How exactly that phasing will go will be an element that will certainly guide you in more detail on in September when we do have that Capital Markets Day.
And we'll also make it as part of the overall revenue and EBIT contribution for a Midterm Period. So I'm not going to say too much about the phasing right now. We truly believe those Initiatives are robust, and we believe it's the right moment in time to accelerate those growth opportunities and will have the In-Year Effects that we also indicated. So a EUR five million-EUR 10 million loss related to those initiatives. Turning to postal regulation. Maybe Herna, you can share the latest there.
Yeah, so I think two processes in the sense that, of course, the discussion in Parliament on changes of the postal law are still going on. They're waiting at this moment in time for a review of ACM that will be there somewhere in spring, not exactly known when.
And that, of course, is the basis also for the minister to give his view on how he thinks postal regulation should be changed. Because a change in postal regulation will take at least one and a half years to two years. So it will be at the earliest January 27 that that postal regulation will be in place. That's the reason why we've asked for financial compensation, and that was the press release we issued last Friday. When are we able to bring USO to D plus two, so a delivery within two days? Is that from January 27? That depends on the changes in the postal law.
So, depending on what is the outcome of the political debate, and of course, the decision to be taken by the minister in the end, that is decisive for the moment we can start changing the universal service obligation into a D plus two service level.
Okay, that's clear. If I understand it correctly, the discussion in Parliament will be in the spring of this year. If all goes well, there will be or they will approve the change in regulation, and then it will take one to one and a half years. That's the earliest would then be 1st of January 2027.
Yeah, if they speed up, it could be mid-2026, but the expectation is that it will take at least the year 2025 and probably 2026. That's also the reason why we asked financial contribution for 2025 and 2026.
Obviously, that can change if there's a willingness to create transitional arrangements prior to the postal law to become in place. Like was the intent in October.
Okay, that's clear. Thank you. Looking forward to the Capital Markets Day.
Thank you.
Thank you.
Thank you. Your next question comes from the line of Marc Zwartsenburg from ING. Please go ahead.
Good morning. Herna, Pim. I would like to go back to the slides 28 and 29 just to get a bit smaller there and also to see if I'm reading it correctly. If I read Slide Number 28 with related cost savings, that's an annual number. So in 2025, obviously, the EUR 40-45 million is there. And then Phase I, Phase II, the EUR 40-45, and the EUR 80-100. Is that conditional on indeed the changes coming through to the USO?
Is that an annual number on top of each other? Should I read it like that?
What you need to do, Marc, is to basically add the amounts from Phase I and Phase II, and those will be divided over the years that we here discussed. It will be dependent on the phasing. Also, the Phase II step will be a function of how volume will develop. It's not all on a yearly basis. Obviously, the 2025 number is. This is the absolute amount of cost that we can take out in this horizon.
Right. These numbers then add up to the orange line on Slide 29. Is that correct?
Yes. If we, and that assumes the phasing that we just discussed.
If you then go to 29, then what we will say is if we're able to realize our plan that in a transition period up to the point that we are at D plus three, the mail business will be loss-making. Only after the step towards D plus three, we're able to get back to positive numbers again. That is what the orange line says, and still, we believe that is the best possible plan for postal delivery in the Netherlands as we felt it was.
That's also why we believe that also in the postal law, a financial safety net needs to be there in case sensitivities push that orange line down or government policies like minimum wage increases put those numbers down need to be offset in order for us to at least create a mail business that can function and not at a loss-making level that we're currently looking at.
Yeah. And if I look at the orange line and at 2027, it's still more negative than in 2026. So you're only asking for compensation for 2025, 2026, but wouldn't it then also be logical to ask for compensation also for 2027 when you have an even bigger loss still?
That depends. So we need to make the distinction between the two different elements here.
We've got a period up to and including the new postal law being in place and the mechanisms of the postal law. So assuming that postal law is in place on the 1st of January 2026, 2027, then within the postal law, we intend to have that financial contribution described in the law. That makes a separate request for financial contribution not necessary. Of course, if timelines move, we at some point could consider if there's no postal law yet to do for 2027 what we're now doing for 2025 and 2026. But we've taken the years because we expect, or at least we are prepared for the fact that it could take until the end of 2026, beginning 2027 before there is a postal law. For now, that financial contribution is aimed at those two years. Preempting that.
Yeah, I understand. Yeah, exactly.
Then it's laid out in the postal law, of course. Yeah. This scenario, does it, because this morning was also news about DHL going into the postal market and increasing capacity, etc., did you take that into account in driving these scenarios or did it come as a surprise this morning as well?
We are never surprised that they communicate something on the day before our results announcement, Marc. At the same time, we didn't take this into account. Let's be frank, Intrapost is a very, very small Mail Player. No, I don't see any impact on that news on our numbers nor on our strategy as we've presented it this morning.
I think the relevance of Out-of-Home is, of course, also underpinned with what they say, and that's what you see back in our strategy.
I think when you think about Out- of-H ome for PostNL, we do have 3,600 retail stores. We do have 1,100. We do have 1,100 Parcel Lockers. We will add quite a lot of Parcel Lockers in the year 2025. So the total will be, of course, around the 5,000 numbers of retail/parcel locker locations you can do your parcel business. So that's quite an impressive number, and it shows, I think, the importance of Out- of-H ome.
Yeah. No, that's absolutely clear. Maybe a final one. So I'm just curious about the scenarios you put into your model for the larger accounts where you try to increase your yield management. How much market share loss or lower volumes did you pencil in for those clients where you're really taking action to improve the yield with, for example, price increases?
Yeah, basically the gap between 4%-5% and the growth of One to Two that we forecast ourselves. And that is a market share loss. And as you know, we've managed to keep the market share stable also throughout 2024. But now, when looking at those bigger accounts, we believe we need to get a better return out of those clients. And if the consequence is that they are not willing to move on our efficiency measures or on price points, at some point, you are better off without certain volumes of certain clients, not all, but some. And then we're okay to surrender part of market share to whomever wants to do that below full cost numbers. We're not going to go that way. And that's why there's a gap between market growth and our expected growth.
So I just take that gap, and I assume that 60% of volume is with larger clients. Then I should take that as an average over that 60% to explain that the gap of, say, 3% is, let's say, 5% or so.
Yeah, but we also said that it will mainly be in international, which is not included in the market share definition that we every time put on paper talking about the 58%. So it will only have a limited impact on the non Cross-Border volumes, at least as we see it in 2025, but will have an impact on our cross-border volume flow. Also, for that flow, we don't expect a growth to growth, but a slight decline in volume, while our domestic volume growth will be there.
Okay.
I need to know then a bit what the Asian Flows are to get a bit of a feel for, and that explains a large part of that gap. So then we're talking about more than 10% volume loss at those lines. Is that a correct assumption, or am I wrong here?
Well, I don't want to be too specific, Marc, because as you also heard me say, those elements will kick in as of Q2. That is also related to contract end dates that are at the end of first quarter. So we're in the middle of those conversations right now. But I would say roughly you're right and the expected decline on those flows. But I'm not going to be more specific on which client and how much exactly, since that doesn't help our commercial position here.
Yeah, that's logical.
But it means that it still needs to be implemented. So the first quarter is then trending above that year guidance, and then you expect the market share loss to be more skewed to the second half. Is that how I should read it?
Absolutely.
Okay. Clear. Thank you very much.
Thank you for your questions, Marc.
Thank you. As a reminder, if you would like to ask a question, please press star one and one on your telephone keypad. Your next question comes from the line of Marco Limite from Barclays. Please go ahead.
Hi, good morning. Thanks for taking my question. So the first one is on your request for compensation in 2025 and 2026. We saw on the press on Friday that the minister has somehow already said no to your request, but you still look, let's say, hopeful that that comes true.
If you could really clarify what's how the conversations are going on, I thought there was already a no from the minister. Second question is on the USO cost savings opportunity. Just to be very clear on the question from Marc, the EUR 80-100 million is the absolute aggregate number. So we should not do EUR 40 million in Phase I plus EUR 80-100 million. So let's say EUR 150 million is €100 million, the absolute amount of cost savings aggregated. And also on this one, I mean, in the past, we've been able to achieve about EUR 40 million of cost savings in Mail per annum. Shall we expect a meaningful amount of additional cost savings on top of the USO change, or let's say, I mean, overall, you're still kind of thinking about EUR 40 million of cost savings per annum, including the USO changes?
And the third question, my final. Thinking about EUR 40 million of cost savings per annum, including the USO changes. And the third question, my final question is on the 2025 dividend to be paid in 2026. So your leverage is already quite close to times. You expect a Free Cash Flow burn in 2025 plus dividend payment from the 2024 dividend. So shall we think about PostNL not paying a dividend for 2025 to be paid in 2026?
I think on your first point, I can imagine when you read the news and the newspapers that you think that the minister said no, but that is not the case. What he did say, he is not what he did say is that he thinks that commercial companies that need to deliver a task from government, which is, of course, laid down in regulation, should not be loss-making.
That's a very important quote from the minister, and he will look into our request, of course, for Financial Compensation very thoroughly. The way we've built it up is via, of course, via principles that are laid down in that same regulation. It's a document of many pages. They will go through it thoroughly. They will start up a discussion with us on it, and we expect at a certain point in time a decision from the minister and his Ministry on the request we did.
On the second point, yes, you're right. Those are cumulative. We need to add up those numbers. So if you add them all up, you're roughly at EUR 160 million-EUR 200 million of savings over that period, roughly divided by 4 to 5, a bit depending on the phasing, as the Slide already says. That gives you roughly the yearly amount of cost savings.
There can be some differences within year. It's also functional when changes can be made. Can changes be made at the beginning of the year, or are changes only allowed at some point when the postal law is there mid-year? In total, roughly speaking, that EUR 160-200 million relate to roughly EUR 40-50 million compared to a 2024 cost base. On your third point, what we say is that we intend, we still have the aim to pay dividends. We intend to pay dividends based on our dividend policy to be properly financed whilst taking into account these strategic initiatives and the progress that we make on those, as well as the progress on a sustainable future mail position. There's a bit more moving parts than the ones that you also mentioned. EBITDA will be slightly higher, for instance, than in 2024.
So we clearly have the intent to pay dividend in line with dividend policy also over the book year, 2025, partially by an interim dividend in August and hopefully a final dividend in 2026.
Thank you.
Thank you, Marco.
Thank you. We will now take our final question for today. And the final question comes from Henk Slotboom from the IDEA!. Please go ahead.
Good morning. And thanks for taking my questions. I have a few. First of all, on the guidance for the current year, does that include or exclude a possible financial contribution from the Dutch State? I assume it's excluding. Is that right?
Excluding.
Okay. So if it comes, it will create a tailwind for you in 2025 in terms of.
Yeah, but I need to correct you here, Henk.
Let's say how this works is that this is a net cost request based on the Net Cost of the Obligation of the Universal Service, basically compares the factual cost and the counterfactual without the Universal Service that is currently assessed based on our own view of 2025 of EUR 30 million. But the factual, so our own assumptions need to be changed by an actual ultimately. So a cash in, if at some point, will only be there after the 2025 book year because you need to have the actuals to determine the full and final number of those Net Costs. But we do expect to get an agreement or a decision in principle clearly before that point in time. But we don't expect in any circumstances an actual cash in in 2025. That will then need to be in 2026.
Okay. Perfect. That's clear.
Second question is on the reallocation of real rstate. I'm a bit puzzled. What exactly does that mean? Is it rental revenues or is it book profits or what is it?
It's both. And what we said is in order to create the least possible confusion about the results that we realize with Mail, the Mail Distribution Part, we wanted to clean up the segments in order for Mail in the Netherlands to truly be the results of our mail business. The Real Estate, which was in this segment, was a combination of the internal rent markup for economic ownership purposes, as well as some remaining real estate proceeds. I would say more than two-thirds, well, probably 75% of that is related to internal rent and not to real estate proceeds.
Okay. That's clear also. Then the next one on the cross-border initiative you announced, Pim.
I'm a bit in the dark as to what it means exactly. You have an Asset-Light Model there. Is it basically assisting your Dutch clients to make sure that if somebody orders a parcel in France at bol.com, for example, that you make sure that it arrives at the proper place in France? Is it a Mid-Mile? Let me put it in those phrases. It's not an initiative that stretches beyond this. It's not a Last Mile or so Initiative.
No, it's an Asset-Light Model Spring. And over the years, we've managed to transition the Spring Europe Business from a traditional Cross-Border Mail to a 75% Cross-Border e-commerce market. I would say already quite mature, close to EUR 200 million of revenues. And they assist clients to create trade lanes within Europe so that they can ship and deliver their products towards consumers in different recipient countries.
We do that by leveraging our partners. We've got access to very many different Delivery Options. What we're going to do is create more dense line hauls to also increase the speed in which you can get deliveries from, let's say, Spain to Germany to within 48 hours. It is to a large extent Intra-Europe. It could be from the Netherlands to Spain, but it can also very well be from Italy to Germany. With our footprint in Europe and with additional services in relation to some fulfillment activities, we believe that there is great organic growth on the back of a very positive track record of Spring. We're not going to go into, and you follow us already for a very long time, we're not going to go back to Postcon and Nexive-Type Business Models and actually Last Mile Networks with infrastructure.
That's not what this is. It's an asset-light business model. And also in that sense, there's no stranded assets. There's not an awful lot of fixed costs that you add. So even if the plan doesn't work out as we expect it to be, there's no stop losses of any material kind anyway.
Okay. And then my final question, and perhaps I should ask this question to DHL and Intrapost or whatever. Intrapost has a collaboration with the others like Cycloon and Spotta and there are a couple of others as well. My first impression when I read this news this morning was that it creates more body for the initiative DHL already announced, what was it, a year and a half or so ago, that they opened their network for the heavier Mail items as well. I was surprised by the fact that they think about a 24-Hour Initiative.
What makes you think they can do it better than you can? I mean.
I don't think they can, Henk. That's the answer. I don't think they can at all, let alone at scale. And as you said, you indicated that you go back to something that they announced a year and a half ago on Mail. I have not seen any impact on Mail because of that. So yeah, I think you're better off asking them the questions. You could also maybe ask them why they're putting this out there a few hours for our own notification. And I think you'll get the answer quite quickly then.
I see what you mean. Okay. Thank you very much. Have a nice day.
Thank you, Henk.
Thank you. I will now hand the call back for closing remarks.
Yeah. Thank you. So that's all for today. Thank you for joining.
If there are any questions left, please reach out to us. Thank you for now.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.