PostNL N.V.

Thank you very much. Good morning, everyone.

We're here with Hendrika Verhagen, our CEO; and Pim Berendsen, our CFO. They will take you through the second quarter numbers and a number of other topics.

And after that, we will go into Q&A. Verhagen.

Over to you.

Thanks a lot. Let's start with the key takeaways of quarter 2.

And then, of course, looking forward to the end of the year and 2024. I think quarter 2 was another solid quarter, which contributes to a very strong half year performance in which we do see a significant improvement if you compare that to 2020.

Based on the first half year results, we did raise our full year outlook to €280 million to €310 million. To be sure that we can deliver as expected, of course, the growth in Parcels.

We increased our investments to an amount of €950 million, and we will use that for the expansion of capacity, digitization and ESG. Please be aware that the extra €450 million will be a step-by-step investment.

For the full year 2022, we expect to come in below full year 2021 because of the nonrecurring impact. The underlying business performance continues to improve.

Based, of course, on our results 2021 and also the expectations for the next coming years, we raised our ambition for 2024 to €330 million to €370 million, which is an increase of €60 million to €80 million. Let's look to Q2, Q2 2021.

Our normalized EBIT is up 17% to a number of €63 million. That, of course, also course together with the results of Q1, an increase in the full year expectation to €280 million to €310 million.

We do have still nonrecurring profit, which is in this quarter, €26 million. Free cash flow is when you look into the first half year positive.

And of course, that also then counts for normalized comprehensive income. The interim dividend for 2021 is set at €0.10 per share.

We did see in the second quarter an improvement into our CO2 efficiency of 13%. And as said, we increased our normalized EBIT for the full year.

Looking into the COVID effects, around €26 million is assumed to be nonrecurring and relates to COVID. Part of that comes from Parcels, €7 million more or less from Parcels in the Netherlands.

And there, we did see that after the reopening of the stores in May, Parcel volume came relatively quickly to our normal expected levels, although, of course, higher than the levels of 2019, and we see €7 million in Spring and Logistics as well. [ 12 million meal ]in the Netherlands, and that is due to, for example, the vaccination program of the Dutch government together with the fact that we did see that the reopened stores did send lots of direct mail to attract customers to their stores.

That means that the underlying normalized EBIT or the normalized EBIT without the nonrecurring result is €37 million for the second quarter. Let's talk a little bit into the details of our business performance and start with Parcels.

Parcels benefits from the e-commerce growth and the volume is up 11.4%. That, of course, translates into a strong revenue growth.

And that revenue growth is partly because of the transition from offline to online, where we do see and think that part of that sticks also towards the future. The underlying volume growth for Parcels is around 10%.

We saw a slightly negative price mix effect, which is partly better pricing at customers and customer level. But what we did see is that large customers did grow faster than the smaller ones.

And that's also what we communicated last year Q2 when because of the start of COVID, ofcourse, lots of small companies and individuals starting to send parcels. A very strong performance of Spring, same for Logistics.

Looking into the normalized EBIT, that normalized EBIT was up €6 million when you exclude the nonrecurring COVID effect. We saw increased costs and they were in line with our expectations.

We added, of course -- we added operational measures to accommodate the volume growth within our current infrastructure. We added also cost to new capacity.

We saw an ongoing good performance and particularly at logistics. If you compare margin Q2 2021 to 2020, and especially when you compare it to 2019, we see a very strong margin sort term which will be operational in Q3 and the official opening is planned in October.

And of course, we're fully ahead and in the right pace to open our first sorting and distribution center in Belgium beginning of 2022. Mail in the Netherlands showed a strong performance.

The underlying trend in volume decline is still around 7%. Volume growth of 4.2%, as explained, especially because of the letters coming from government because of the vaccination program and the recovery of direct mail, that's around 9%.

And we did see 1 additional working day and some other effects, which is around 2%. That means that volume growth underlying is still a substitution trend of 7%.

The moderate price increases were almost fully offset by a less favorable mix effect compared with last year. And please remember that last year, at the beginning of the COVID crisis, we had lots of single mail items.

And sale of noncore activities, the revenue of Cendris is, of course, out of the numbers in 2021. The normalized EBIT, excluding COVID, is €11 million up.

We saw a decline in other costs mainly explained by the nonrecurring integration cost for Sandd and of course, cost savings, for example, in the efficiency improvements in our preparation processes. A very good quarter for Mail in the Netherlands, supported by a large nonrecurring addressed mail volume.

March 1, we communicated on our strategy. That strategy remains the same as is shown on Slide 10.

And that means that we focus on our purpose delivering special moves. Now we want to be the favorite deliverer in the Benelux, and that our strategy is to be the leading logistics and postal service provider to in and from the Benelux region.

Focus on ESG is in that, of course, crucial. That is what, for example, is also shown in the fact that we increased our investments in environment.

There are 3 important parts in ESG. Of course, be your favorite deliverer, enhance our customers' business, but also create smart solutions for customers and create a sustainable mail business going forward.

The social part is important to be a socially responsible employer, which has to do with workforce optimization but also capacity management, strengthening our employee engagement of which we did see over the last few years, a strong improvement and, of course, staying safe and healthy, priority #1 in this profit crisis. Delivering on emission-free last-mile delivery.

There, we want to speed up and increase, of course, the investment and therefore, also increase our emission-free lost miles towards 2030, in our view, an important part of our strategy going forward. On Slide #12, we give you a few examples of what we do to speed up the reduction of our carbon footprint.

For example, the expansion of our electrical fleet. And at this moment in time, we have around 1,300 electrical vehicles.

We are preparing our electric infrastructure. At 8 of our sorting centers, we have huge charging stations, and that's what we want to expand to the other sorting centers as well.

And of course, we use renewable fuels. HF10 is an important fossil-free diesel fuel, which we will use for larger vehicles.

All by all, it will speed up the reduction of our carbon footprint, and it will help us to deliver on our targets have a last mile emission-free delivery in the inner cities by 2025 and the last mile emission-free delivery for the whole of -- by 2030. The strategy of Parcels to manage for growth, of course, did not change.

The volume projections towards 2024 are higher than earlier expected. That is the 11% to 13% growth we expect as of 2022, dependent, of course, on the level of stickiness and also driven by market developments.

In the second quarter, we did see an increase in online buyers, which is, of course, underpinning our view on volume development for the next coming years but also the amount of online purchases increased same as, of course, the retail market, which is at this moment in time online. The graph and Pim will come to the graph as well, thus show you the step-up we see in growth rate also shows you the projections we made pre-COVID together with the nonrecurring parcels we had in 2020, and we did have in the first half year of 2021.

An important value driver, of course, managed for growth is what we will do for the next coming years as well. If we want to manage for growth and expansion of our capacity is crucial.

And therefore, we announced today to, of course, increase our investment with €450 million. I think important to know and to say that this will be a step-by-step investment when there is sufficient possibility in the market to invest, of course, and to expand capacity, but also with the possibility to adjust where necessary.

Those €450 million will not only be invested in new sorting and delivery centers. We're also looking into expanding current sorting and delivery centers, expanding our small parcel sorting center, and we will expand, of course, also the other materials necessary to add capacity.

That comes together with a better network utilization with a better network utilization, which we can do because of our scalability of assets and the fact that we can scale our asset of [indiscernible] has been proven in the year 2020. Next to adding capacity.

We also want to add capacity where people can pick up 24 hours a day their parcel or bring it back. That's why we want to expand to 1,500 parcel lockers by 2024.

It helps, of course, to support our retail stores because we will keep our 4,000 retail stores in the Netherlands, and we will expand our retail stores in Belgium. It helped them when they have high volumes to, of course, have a place bring their volumes to that's one.

Secondly, it helps customers to have much more flexibility in when and where they want to pick up their parcel. It is consumer and control and for us, an important part of the extension of our retail network.

The strategy for Mail in the Netherlands is managed that company for growth. And that means that via moderate pricing policy together, of course, with further cost savings, we want to offset the impact of continuing volume decline.

We saw in the first and second quarter of 2021, something we have not seen over the last years, and that is volume growth. The underlying trend, although is still substitution.

And that means that a big part of the volume, which, of course, caused the growth over the first and second quarter, we will not see back in 2022. And the volume decline we forecast for 2022 is around 8%.

So a trend in substitution to continue, which means that further cost savings and moderate price increases remains to be of utmost importance for that part of our company. The third important pillar under our strategy is, of course, our ambitious plan to accelerate the digital transformation.

Phase by phase, we are implementing the examples we already discussed with you on March 1. And on the orange part -- in the orage part of Slide 17 we give you a few examples of what we did in the second quarter to fill in our digital transformation strategy.

The ambition is still the same. The investment we have to do in digital -- in our digital strategy is also still the same.

To underpin the importance, but also, of course, the success of our strategy, we gave you some KPIs on Slide 18. There you find consumers, which is the upper part of this slide, and you find business customers, which is the lower part of the slide.

And we show you the improvements we did see compared to the half year 2020. And there, you can see that the shift to digital channels and products continues and that with all products and services we implement, we further, of course, enhance this improvement.

That brings me, before Pim takes over and walk you through lots of the bridges and, of course, details on Q2 2021, 2022 and 2024, to give you a summary that we do deliver on our strategy. I want to be the Logistics and Postal service provider to in and from the Benelux.

We saw a strong performance in Q2 2021. Normalized EBIT was up 17%.

Supported by nonrecurring impact related to COVID-19 that is fading out because of the easing of the lockdown and measures. We had a very strong first half year with a strongly improved underlying business performance when you compare that to 2020.

We expect continued growth in e-commerce. And of course, we improved our carbon efficiency.

The good results of the first half year means that we raised our outlook for the full year 2021 to between €280 million and €310 million. And of course, with these improvements, we did see in the business in Mail and Parcels, we look forward to 2024 and expect that the step-up in e-commerce trends will lead to higher parcel volume projections also for the next coming years.

The level of stickiness will become visible in the next coming months and year. We accelerate, of course, progress towards achieving our environmental targets, which we do think is crucial to remain the favorite deliverer.

We increased our ambition in 2024 to €330 million to €370 million, which is a step-up of €60 million to €80 million compared with our earlier ambition. To underpin the growth, we do additional investments in capacity, but also in network IT infrastructure that is €450 million.

And as I said, it will be a step-by-step investment approach. And what we said over the last 18 months is what we repeat the exact consequences of the pandemic remain uncertain going forward.

And I would like to hand over to Pim.

Thank you, Herna. Let's dive into a little bit more detail on the financials per segment both in terms of 2021, 2022 and 2024.

First and foremost, at Slide 21, the Parcels bridge, excluding a delta of round about €10 million on nonrecurring COVID impact in this segment. Normalized EBIT increased by €6 million compared to last year.

In this bridge, you see a volume effect driven by the 11.4% volume growth, a big negative price mix effect, which was exactly as we expected given the very favorable mix last year, as Herna already said, driven by a lot of single items and smaller customers coming online last year, trying to salvage part of their business. Organic cost increases in line with previous quarters, volume-dependent costs, likewise, then another cost bucket with €80 million of additional costs, and that can be easily explained by a couple of elements that I would like to spend a few minutes on.

I think if you look back at the last 6 quarters, we've done everything we could to stretch the network to accommodate the growth of our customers as best as possible, but it's also a bit of time now to rebase the network to accommodate the future growth that is ahead of us in the next peak period. So we've added a bit of cost to ensure that we can stretch the network once more in the outer part of the year.

Next to that, there is additional cost in relation to preparation of new capacity coming online also prior to Q4 2021. There are also 3 days, working days difference in comparison to last year.

So all in all, that drives the other cost per cut here. The other results is a €12 million plus driven by very good performance by Spring and Logistics.

If you look at the nonrecurring part, and this year, we've seen, as Herna already indicated, €14 million nonrecurring impact. If we, like we've done that in the first quarter, look at also the impact of Logistics and Spring in relation to nonrecurring volume streams, the comparison to 2020 would be €16 million in Parcels and €9 million in Spring and Logistics, predominantly driven by nonrecurring positive effects in the time-definite networks and the e-commerce fulfillment part.

Now if you look at that quarter, the result of Parcels, you could say, yes, it's a deterioration of the margin in comparison to the first quarter of the year, which is true but still turns a 9.5% margin and a half year result at 11.8%. Expectation for full year are still around about a 10% margin mark which is [3% points] more than the margin in 2019.

So all in all, if you look at a slightly longer time frame, significant improvements in marginality in the Parcels business that makes this business extremely valuable. If we now look to the bridge of Mail in the Netherlands, you see the €5 million of 2020 turning into €23 million.

And there is a positive €8 million additional nonrecurring COVID impact within the Mail segment driven, of course, by the vaccination campaigns that an already talked about. So without an increase of normalized EBIT of €11 million driven by 4.2% volume growth, a slight positive price/mix effect where the price impact being positive was almost fully offset by a less favorable mix.

And remember, in Q2 in 2020, there was a lot of single items, greeting cards sent in the first period of COVID-19, where people were refrained from visiting their friends and family. Organic costs, a reflection of the CLA increases, volume-dependent costs in line with normal developments and a huge improvement in other costs of €22 million, of which €6 million is driven by the nonrecurring and integration cost in the second quarter last year.

€6 million additional cost savings in the operational processes, €4 million additional cost savings on indirect and some other effects that are part of this other cost bucket as well. On the international side, we see a deterioration of the profit, and that's predominantly driven by lower import flows in the cross-border environment.

All in all, a very good performance of the Mail business. Then we turn to the cash flow on Slide 23.

From a normalized EBIT of €63 million, we get to an adjusted free cash flow of €70 million. what you see is quite clearly in comparison to last year, a step-up in CapEx, which is from €11 million to €26 million.

In the working capital, there is a negative in this period in time that's partly, I should say, to the largest part of it is phasing, which we expect to see back in the second part of the year. And we've paid the first of 5 annual installments for the transitional plans already in the second quarter of this year just to optimize the financing cost and negative interest rates.

So also on cash flow, an important performance that we're happy with. Looking back now, then how does that reflect to the balance sheet, and that's on Slide 24.

Adjusted net debt of €15 million to 239 obviously impacted by the cash dividends that were paid. Total comprehensive income of €56 million, normalized comprehensive income for the quarter at €57 million, which means that year-to-date, we are at a normalized comprehensive income from -- of €169 million.

Obviously, the basis of our 70% to 90% dividend payout policy. Today, we've also announced a 2020 interim dividend of €0.10, which in accordance to the policy is 1/3 of our 2020 dividend.

On dividend expectations, full year 2021, I'll get back when I discuss the 2020 full year outlook. And let's turn to that straight away.

On Slide 26. So we've raised our outlook from at least €250 million to €280 million to €310 million, which includes a negative of €30 million to €35 million for Digital Next and an increase in noncash pension expenses and the step-up in normalized EBIT in comparison to the previous outlook will also impact the free cash flow positively and will turn into cash in the same in the same way towards €250 million to €280 million for the full year.

CapEx is expected to increase to €160 million within the bandwidth -- but the higher end of the bandwidth that we previously communicated. There's no change in pension liabilities and normalized comprehensive income will be up to €250 million to €280 million as a consequence of a higher normalized EBIT.

And if you take that €250 million to €280 million and apply the dividend policy, you'll get to a dividend per share of around about €0.40, a level at which we believe we'll be able to pay out sustainably. And I think a very, very nice dividend return on the back of a share price around about the €450 million mark.

And even with a bit of dilution, I would say, that is an attractive return. Then let's look at the expectations of the second part of the year on Slide 27.

Half year result at €193 million, which is, Herna already talked about it, roughly €90 million more underlying business-wise than in 2020. We'll have additional cost in the second part of the year for new facilities, €10 million higher pension expenses, €10 million step-up in Digital Next cost of €15 million and then €120 million to €150 million business performance to be added on top of the €193 million.

We do not expect a material impact from nonrecurring COVID impact in the second part of the year. We're now at €69 million for the first half year.

There might be a little bit of additional volume in mail driven by vaccination campaigns for the younger people but that will not be materially more than the roughly €70 million in total that we've guided for. We do expect some impact of the value-added tax changes for international parcels and mill driven by the exemption of low threshold value-added tax that's now been gone as of July 1.

A key question is, of course, the level of stickiness in relation to the Christmas cards and the exceptional performance on those that we've seen in the last quarter of 2020. And that's, of course, less easy to predict in comparison to our Parcel volume developments.

And yes, as Herna already said, it's of course, doubtful what will happen in the second part of the year in relation to the pandemic. But all in all, quite a good business performance as we see it for the second part of of the year.

Now let's dive into that segment by segment. That's a new slide that tries to explain how the different segments will evolve from half year to last year to half year to this year.

And the first and foremost, let's look at Parcels from 124. There's a change in nonrecurring COVID impact in the second half of the year of €37 million.

and an improvement of business performance of €5 million to €25 million, which brings the normalized EBIT for the second part of the year to between €90 million and €110 million. For me, it is a €9 million change negative and a deterioration of the business performance in comparison to last year of €15 million to €35 million and the €15 million to €35 million can be explained by a couple of components.

I think if you look at the domestic business, volume decline and organic costs are compensated by cost savings, but we've seen a temporary deterioration of our cross-border import flows, lower results from terminal juice and as said, 3 working days less that also come into play here. Then we go to Slide 29 to show the quarter-by-quarter comparison.

And as said, on normalized EBIT, we do not expect within Parcels any nonrecurring COVID anymore for the remainder of the year and only very limited COVID-19 impact at Mail in the Netherlands, a little bit in Q3 and a very strong Q4 2020. That was, of course, driven by a very big nonrecurring COVID part.

Important to note that here, we've explained the 2020 nonrecurring profit impact at €77 million, applying the same methodology on nonrecurring COVID impact that we've seen in Spring and Logistics, as we talked about it in the first quarter of this year. On cash flow, we look at an outlook of €250 million to €280 million, where, let's say, the first half year, of course, had a very strong contribution to that full year number and what changes in the second part of the year is, of course, will not have the impact of the sale of centers anymore.

We'll see a step-up in CapEx for the second year quite considerably in comparison to the first half year and there are some more tax effects in the second part of the year. All in all, a very good cash flow for the full year is expected.

Then let's look at how that outlook for 2021 brings us further a key component of the messaging today is that driven by the higher volume that we've been distributing and the higher volume expectations in the Parcels business of [11% to 30%] will accelerate our level of investments with €450 million. Now that is driven, as I said, by carrying significantly more volume over the next 3 years than originally anticipated, which is good news because that additional volume will bring additional results but it does take a step up in our investment levels.

If we talk about investments, it's always a combination of CapEx and lease additions, roughly speaking, a 1/3 of that amount is lease additions and 2/3 is CapEx. And what is really important to understand that this is not a onetime investment decision.

Here are multiple investment decisions that all in all cumulate to this number that we can take, and there's a lot of flexibility in it in terms of timing, and we can see where we end up with volume growth expectations to balance the level of investments to it accordingly. Another important point is that, that step-up in investments will not lead to a deterioration of the leverage ratio.

In other words, we were able to fund this additional investment from the cash flow that we generate and as such actually contributes to the value of the company because leverage ratio will remain unchanged. Profit will be significantly up, which will also lead to higher dividend payouts.

On Slide 32, we look at the development from 2021 towards 2024, the €280 million to €310 million, the first step is going to be a step down from 2021 to 2022 take out roughly speaking, the €70 million nonrecurring profit, but then add back improvement of business performance of roughly half of that and that's going to be the starting point for 2022. Then the trajectory of growth will remain the same comparable to the trajectory that we've discussed earlier, but starting from a higher starting point.

That will grow towards €330 million to €370 million of normalized EBIT by 2024, which is €60 million to €80 million higher than earlier indicated. If you talk about the €60 million to €80 million more then roughly speaking, €45 million -- €40 million to €45 million will be driven by improved performance of Parcels and around about €20 million to €25 million will be driven by better performance of Mail.

And remember that the original €80 million to €100 million step-up was driven 50-50 Digital Next initiatives and business performance, offsetting a negative pension expenses. So you'll end up with a profit of €330 million to €370 million.

If you then assume more than €200 million of depreciation and amortization, you are talking about a business that turns more than €550 million EBITDA by the end of 2024. Whatever multiple you want to apply to that leads to quite a lot of growth potential if you talk about valuation.

Those are the key components of this graph, obviously driven by 11% to 13% CAGR growth expectations for Parcels and assumed around 8% volume decline for Mail. And it does include the speed up of our investments, both in terms of CapEx, but as well in OpEx on our ESG targets, and that I think is very attractive perspective going forward.

Now back to the concluding remarks. And I'm going to try to simplify this in my own words.

We're looking at a very strong half year results. We're looking at a step-up of profit for the full year, which turns into a higher comprehensive income.

And as such, leads to a dividend around about €0.40 per share. Underlying improvement of performance very significantly, if you compare that with 2020.

From 2021 towards 2022, there will be a small step down basically half the size of the nonrecurring profit part with a big step up towards 2024 in terms of normalized EBIT, EBITDA, which for us is a very, very attractive perspective. The additional investments come at once.

We are flexible in the way we will take those investment decisions, and those will not have a significant impact on the leverage ratio. And on that note, I'll hand back to Jochem.

Thank you very much, Pim. I think this starts the Q&A.

[Operator Instructions] Operator?

A couple of questions, please. First of all, on the expansion strategy.

Can you give an indication how much capacity are you now adding. I understand you did stretch the network last year and this year in the pandemic, which enables you to realize an EBIT of €295 million based on the increased guidance.

And are you saying now that you need to invest €950 million in addition to increase that level further to €330 million to €370 million. That seems quite a large investment compared to a relatively smaller increase in your EBIT expectation.

How should we see that? And should we look at the expansion CapEx of €450 million, I think that's adding about 30% to your invested capital.

I'm assuming that's even larger in Parcels, if you exclude the mill side of investment capital. That's my first question.

Then secondly, the 2022 guidance for mail volume and parcels, 11% to 13% for Parcels. I understand that from elevated basis, including positive COVID impacts.

What would be the underlying growth? And is that a normal -- new normal growth rate that you see in the market?

And same for mail, I think minus 8% does include the strong impact in the second quarter this year. What would be the underlying rate of substitution?

Is it now materially lower going forward at minus 6%? And maybe finally, a question on your parcel locker strategy, an increase by a factor 10 to 1,500 lockers.

Is that the end game? Or is there still potential for further increase?

I think in Germany, they announced 12,500 lockers for population 5x a size. How much partial volume do you expect to go to these lockers once you have 15,000 lockers in place?

All right. Maybe let's start with the first question.

On the -- if we talk about the additional investments we talk about €450 million more than in our previous plan. That €450 million is driven not only but to a large extent by the higher volume that we already carry partially in 2021 and the improved perspectives on growth going forward.

But next to expansion in Parcels in terms of sorting capacity, it's also rule cages, events and what have you, is the step-up in ESG investments, roughly speaking, Also, I would say, around about €50 million of investments there to ensure that we deliver upon our ESG targets and accelerate the trajectory towards them. We believe that's very important.

Next to that is the step-up, and that you talked about in parcel lockers, which basically is also a €30 million to €35 million investment. So it's a couple of components that drive that step-up of investments and I think a €60 million to €80 million additional profit coming from those additional investments in itself is a pretty attractive return.

If we look at our return on invested capital, that will still easily exceed significantly our WACC. So we'll still be beyond the 10% to 11%, 12% for the years.

So all in all, I think the fact that it is flexible, and we can determine based on the volume expectations to do a bit more or to face it differently is actually a very attractive way to utilize the room that we have on our balance sheet to invest. Since all of those investments will actually contribute to the bottom line and make our proposition as the favorite deliverer in the Benelux even stronger.

Do you have a ballpark of how much capacity is being expounded? I recall when you announced the small parcel sorting center, you talked about 40% additional capacity that would come online this year and next year.

So how much capacity will come online after this in the [indiscernible]

Let's make sure that we are not mixing up capacity with volume because, let's say, the volume is not easily -- evenly distributed over the months and periods of the year. So roughly speaking, capacity, you could say it's on average over this time frame around about the €100 million capacity per year that is added.

If you talk about volume, I would say, as how we look at it from the 11% to 13% CAGR. So that's over the average over the next 3 years will add around about, I would say, €125 million to €175 million of volume

And to add to your point around the small parcel sorting center, what we've said over there, David, is that more or less 40% of our volume could be sorted in the small parcel sorting center. That's not the amount of volume we expect to do.

What we said by then, that's more around 15% to 20% of our volume that will be sorted in our small parking sorting center. But it gives us 0because that more -- a bigger percentage, of course, is applicable to that sorting center.

It gives us the opportunity to bring more to the small parcel sorting center than the 15% to 20%, which we communicated earlier. And if you think about the expansion strategy, as explained by Pim, part of that investment money will also be used for the expansion of our small parcel sorting center.

Then coming back to your question around volume. The volume forecast we give for Parcels, the 11% to 13% is -- does not include COVID effect.

So this is the expectation we have going forward. And take into mind that the stickiness, of course, is important for the next coming period, but 11% to 13% is the percentage which we expect for the next coming years.

For Mail in the Netherlands, we only gave a view on 2022. And that's also an effect which is clean for all COVID effects.

So we expect a substitution in 2022 of around 8%.

So the volumes excluding the COVID effects?

Yes, but let's go back. The underlying substitution for 2021 second quarter at, what Herna explains, around about the 7% substitution rate.

We expect for 2022 a substitution of around 8%. Originally, we have set a 8% to 10% substitution expectation.

So from there on, you could say, it is a slight improvement but still around about the 8% underlying substitution is what we do expect for 2022. Then your room for expansion in Parcel lockers off to 2024.

I think our first ambition is, of course, to make sure that those 1,500 parcel lockers are placed by the end of 2024. And take into account before you compare the Netherlands to Germany, that the size of the country, therefore, also the size of the rural areas in the Netherlands is a bit different from Germany.

Is there, of course, opportunity for expansion after 2024? I would say, in general, the answer is yes.

But let's see by that time how market has developed, what could you your preferences are, how they have developed and then take a decision on that.

Okay. Understood.

And what percentage of volume do you expect to go through these lockers when you have 1,500 lockers in place?

We did not forecast the exact percentage of volume, which goes through the lockers. What we did do, and that's how we came, of course, to the 1,500, but also the buildup over the next coming years.

For this important, if you want to use those lockers efficiency, you have to have the opportunity to fill them to a certain rate. And that's how we calculate the amount of lockers, but that's also how we will, of course, in the end position those lockers over the Netherlands that we can reach a certain efficiency rate with the lockers.

Two questions, please. First of all, on your medium term, the 2024 increase, €60 million to €80 million.

Part of that will be driven by mail, I understood. But I'm trying to understand the drivers.

Is it particularly the lower mail volume decline you anticipate 8% instead of the 8% to 10%? Or are there also more cost savings?

Or what is driving this more [indiscernible] view on mail? That's the first question.

And then secondly, on the parcels growth for 2021 this year, the remainder of this year, what do you expect for second half? Is this also in line with this 11% to 13% or do you expect more?

And the price/mix effect, it was rather negative in Q2. Do you expect that to continue?

Or can we expect some easening there?

Sorry. On the first question, Frank, the improvement in mill is driven by basically indeed partially a lower substitution rate that we just discussed from 8% to 10% to around which drives the important and partially a change in the mix of the products we carry with a positive average price component that also in revenue terms, will be contributing a bit more than originally anticipated.

So that is the first question.

Do you expect difference in the savings you've targeted, the synergies we've sent or is there [indiscernible]?

No synergy is unchanged. The synergies are at maximum run rate.

What we are currently seeing in the 2021 cost savings and that we're realizing our cost-saving ambitions for 2021. That does take a step-up from 2021 to 2022 that we previously talked about, but there's no changes in those assumptions that drive the step-up in business performance that we just talked about.

So the improvement is driven by volume and the product mix component within mail.

Your second question was around parcel growth. By the second half year of 2021, what our expectations are for the second half year?

It is more or less in line with our growth forecast, we, of course, already gave. But I think important to understand in the second half year is what the exact stickiness is of behavior of consumers after COVID?

Then back to the price/mix effect. What you did see, of course, in the second quarter is that second quarter last year, as said, we did have quite some small customers with parcels and consumers that what we did not see to come back in the quarter not expect, to be honest, to come back in the second quarter of 2021.

Also, for the remainder of the year, we expect that big customers are growing a bit faster than the smaller ones.

So is it fair to assume a small negative price/mix effects still to continue in the second half?

Yes. The answer is yes.

And just a quick follow-up on the Parcel volume, just so I get the numbers right. Were you guiding for a slight acceleration then in Parcel volume for the second half?

If you refer to the 11% to 13%, is that correct? And does the plus 20% to 23% guidance that we had at Q1 still stands for full year?

That's my first question.

Yes. It's still around about 23% underlying volume growth within Parcels, more or less around about that mark indeed.

And for the mill to get that also clear. So the 8% substitution for next year that is excluding the positive impact you currently have from the COVID volumes, so we should add an additional decline for half year comps.

Is that correct or not?

No, it's the other way around. So what we do expect is just a substitution effect of around 8% for 2022.

Of course, 2021 performance and the volume growth that we've seen is impacted by nonrecurring COVID effect. But the underlying substitution, as Herna said, around about half year is 7% -- of around 7% for the half year.

Yes. No, correct.

But for 2022, we have a substitution effect and you have tougher comps from the COVID tailwind that you have in '21? Or am I now thinking in the wrong direction?

Because you had plus 4, for instance, now in Q2.?

Yes. But yes, we need to be careful that we're not taking half years and annualizing that.

So for the full year, we do still expect a volume decline for mail. Because, as I said, in Q3 and Q4, we won't have that much of a nonrecurring COVID effect anymore and substitution will continue.

And as I said, there are 3 working days less in the second part of the year as well. So let's say, full year volume development in mail, I would say, is expected to be around about the 4% to 5% volume decline mark, which is then still based on the substitution level of around 8%.

Yes. Okay.

Well, we'll get to this offline later on. Then on the news today with the government looking at sending mail letters to -- for people to -- so that they can opt for self-test to be delivered at our houses for 2, 3.

I can assume that it is 1 letter. And if you opt in, you get another letter or 1 or 2 that could be, say, [ €15 million ] in volumes added to the second half.

But actually, you're saying we have a limited impact built in the Mill division for COVID support in the second half. But is this news then new to you as well?

And should we add that to the second half because that could be quite a tailwind.

No, it's not new to us, of course. So we did build it in.

I think you're too positive about the response rate on mailings so that we do not take into account that 100% of the households in the Netherlands will start asking for those self-tests. We did take into account, of course, a mailing to the households in the Netherlands, and that's what we also will distribute over the next coming weeks.

And then I think related also to what Pim said when he talked about the COVID effect in -- over the full year 2021, we did say that the by far biggest part is seen or was seen in the first half year of 2021 and a very small part still to be seen within Mail in the third quarter, and then he meant, of course, this mailing.

Okay. But that should be a bit bigger than being just small because it's -- every household gets this notification, then you have to react for but still significantly?

You do know, Marc, of course, what the average or the average revenue per letter is that 1? And secondly, small when you think about the €70 million or €68 million, €69 million we had in the first 2 quarters.

So you have to relate it to the €68 million to €69 million we already have seen as a COVID effect. And for the rest, I fully agree that stimulate people to receive positively to this mailing because that's helpful.

So...

Yes. But this could get something for free, maybe the response rate is higher.

Let's see But it takes me to the guidance for Q3 because you're basically guiding for a lower result in Q3. But last year, Q3 was also not that impacted by COVID because the lockdown is ended.

Can you explain me why the results should be lower than in Q3

Additional pension expense, preparation costs of the new facilities in Parcels coming live and additional digital next costs that were also not there

Yes, that's great. And then maybe another 1 on the Digital Next, €30 million to €35 million OpEx this year, wasn't that number initially a little bit lower for this year?

So 2022 into '21?

No. The €30 million to €35 million is the combination of Digital Next and the delta pension expense.

So there is no change in Digital Next nor in terms of OpEx nor in terms of CapEx in 2021 in comparison to our earlier guidance.

Firstly, on the near term, can you talk a little bit about what you've seen in July so far, both on the parcels and mail side? And what your customers are saying about peak season this year?

And then secondly, just on your '24 guidance. You've talked about parcel volume growth.

How should we be thinking about kind of price mix impact going forward, are you thinking about price increases? And then how should we think about margin on the parcel side of things?

And similarly on mail, you've talked about volume, how should we thinking about pricing and margins, please?

When you talk about customers and how they look into peak season, they expect, of course, for Black Friday, Santa Clause and Christmas again, peak season in the Netherlands as well as in Belgium. That's also the reason we are preparing for that.

And as highlighted by Pim, some of those costs are seen in second quarter and will be seen in the third quarter as well. So we expect an or peak season in, of course, this year.

When it comes to July -- the way we look into July or we always say, you have to look into July and August to have a good feeling around volume development over summer because how volume is pressed over the weeks very much depends on holidays in the Netherlands and Belgium. And as you maybe do know, we do have prep holiday in the Netherlands.

So it's not like in or in Italy, everyone is on holiday in August. That's not the case in the Netherlands, so it's much more spread.

So difficult to say at this moment in time. When it comes to mail, same answer, except of the fact as we just discussed that we expect in the next coming weeks, the mailing to households in the Netherlands, in which they can ask for free self-testers.

When it comes to price increases, for mail as well as for Parcels, we do forecast price increases, of course. For mail, those are crucial together with cost savings remain -- or to keep the margin stable.

So that gives also an answer to your margins. When it comes to Parcels, we do, of course, forecast price increases, which was an important part of our Capital Markets Day strategy, which we presented in 2019.

And when it comes to margins, I think Pim already gave quite a concrete answer on what we expect on margins this year and going forward.

Yes. Around the 10% mark also for 2024.

I have 1 question on local target and the potential financial impact. We know that another company, of course, can be significantly reduced in too.

Of course, it's based on a completely different country, but have you looked into that? Could you get the bulk estimates?

And is this included in your 2024 guidance?

[indiscernible] you were really quick with -- I think I got the context talking about the parcel lockers, but maybe just repeat the question one by one, if I can ask you.

Sure. It was indeed about to put a local target and a potential financial impact.

We know for another company that is can be significantly reduced because you can use more -- you can ship more parcels using less drivers. Of course, it's completely different countries, so the assets will be completely different.

Have you estimated what the potential cost reduction could be in the Netherlands. And is this also included in your 2020 guidance?

Okay. And then I also understand what you're referring to.

I think it is difficult to compare, and that has to do, first of all, with, of course, the country and the size of the country. But I think secondly, also with what consumers are used to in the Netherlands and consumers in the Netherlands are used to have their parcel within 24 hours at a hugely high quality, which was also different to the other country.

So their quality was helped and also consumers could get their parcels earlier when they drove to a parcel station. That is totally different in the Netherlands.

So the amount of Parcel Lockers, we want to place in the Netherlands over the next coming years are, in our view, necessary to fill in consumer needs when it comes to certain flexibility, when and where and how you're going to pick up your parcel Secondly, those parcel lockers are also important because we do have 4,000 retail locations in the Netherlands. With the growing parts of volume, we expect, of course, also a growing volume for retailers.

And sometimes you need overflow which we can do with our parcel lockers. So the way we've calculated with those parcel lockers is, of course, that they do have financial impact when it comes to the investments, we did not take into account that they will lead to huge cost savings.

But at the same time, just looking at it differently, it is an investment with a positive net present value. And as such, then, of course, leads to returns in excess of the WACC.

Otherwise, you wouldn't have a positive net present value.

Of course. Additional questions partially 160 if I'm correct.

What is the percentage of fully currently delivered in those locals? Is it still relatively small?

It's very small. And as I said, it's an additional option to deliver the parcels, but it's by far the smallest version.

So I would say it's really small. And then you talk a few percentage points.

Yes. Okay.

And additional quick question. I heard you said the split on the step of the guidance, the 60 to 80 mails responses I missed the numbers.

Could you repeat that 1, Pim?

[indiscernible] But if I may, I'll go back to the entire step-up just to make sure that we get it right. So if we talk about -- we've talked about in March, a step-up of €80 million to €100 million.

That was driven 50% of that by Digital Next, and the other 50% by parcels, offsetting a roughly €25 million deterioration of pension expenses. On top of that, will now add €60 million to €80 million.

That €60 million to €80 million is roughly split 40 million to 45 million parcels, €20 million to €25 mail million. Obviously, parcels driven by the higher volume growth, mail driven by slightly lower substitution and product mix effects.

Pim, I want to go back to where we started this Q&A session, the question of David, on the €450 million. And I'm not sure what I caused the numbers right.

But there's a step-up in ESG investments of around €50 million. There's a step-up in lockers investments of around €30 million to €35 million.

Did I understand it correctly that the balance of the €450 million is what you spent on the capacity increase, the additional capacity increase in Parcels?

Yes, but that's not always leading to an increase in sorting capacity. So that's also a cage.

It's also trucks. If you add number of depots, you might need to add cross docs that will not in itself each and every investment lead to an increase in capacity.

So it's the combination of those elements that allow us to do roughly €125 million to €175 million more parcels by the end of 2024 in comparison to 2021.

And if I do my math correctly, then it adds up to, let's say, €370 million-ish what you're going to spend incrementally on Parcels. Now if I go back to the slides of the capital market presentation in 2019, the parcels deep dive.

You were already anticipating a growth CAGR of around 14% in the period 2018, 2022. Now I realize that in the past, let's say, 16, 18 months, there's been an enormous step-up in volumes, but the amount, the incremental amount you spend on capacity increases strikes me as relatively high in comparison to what you've been communicating before.

Can you perhaps give me some more color on that?

Yes, that's what I tried to do just yet. There is, let's say, not every investment leads to an increase in capacity.

The bigger the network becomes, you need cross-docking facility. That is partially, in the lease additions, you sometimes rent spaces to allow for buffering and what have you, that doesn't necessarily lead to an increase in capacity.

Likewise, the bigger the network, the more volume, the more IT is required to sustain that infrastructure in a way that is flexible and gives you the best customer journey experience that we also seek for our clients. So -- and let's not forget that we're already doing significantly more volume then assumed by 2019 in that Capital Markets Day that you alluded to, I think it's 2 years progressed in terms of volume that we carried.

Next to that, there's also a bit of scarcity on raw materials, as I'm sure you're aware of, Henk, that comes into play as well as steel prices are up building costs are a bit higher. So also, there's a bit of inventory elements in it, which basically means that you need to invest a little bit more for the same capacity at price points right now than at price points 2019.

And all of these components lead to that step-up. It's not only parcels, the vast majority is parcels, clearly.

But if you then look at the step-up in performance, and you hear me say that this business will get to a margin will be at this level by the end of 2021, which is 3 basis points -- 300 basis points more than by the end of 2019, and we'll be able to continue to drive the business around about that margin level. I would say with a significantly better top line development and a significant step of profit is actually a very attractive investment case.

Okay. Clear.

Then a couple of other questions, if I may. First of all, on Spring.

It had a fantastic run in the past, what is a year or so. Last time, during the analyst call, you said, I believe, 70% of it was e-commerce related.

And the vast majority of that comes from China. Now we've had some changes in the VIP reported last week that you encountered some problems.

I assume that, that is all included in the guidance you gave. But do you expect a structural adverse effect from imports from China, for example, or rather from non-EU countries, which could affect the business model of Spring?

Well, I think a couple of components to that question. Spring is not only in this below the €22 threshold.

That type of volume is predominantly postal and it's probably driven by universal service flows. So that's much more part of also the Mail performs than only of Spring.

At the same time, yes, we do expect at least for the next few months, a significant step down of volume, whilst customers are trying to get used to this new system. There is a working system in place.

And if you look at the websites and the platforms that we work with, it functions, so you are still able to quite easily source products from China in a way that allows you to pay the value-added tax in the right way. But what we've seen as well is that there has been a small spike prior to July 1, and it takes a bit of time for people to get used to it.

We've assumed a certain deterioration of those volumes in the second part of the year. But this is an element that is not that easy to predict how it exactly will play out.

It's not the stream that we earn the most margin on. So I would say we've made best as we can estimate on that is part of our guidance, I don't see a big risk on that full year guidance that we've given here.

A final question, if I may. That's on the decarbonization of the last mile.

A couple of years ago, you already announced that you were aiming at CO2-free delivery in 25 cities in the Netherlands. Now a couple of months ago, there was an interview with your Dutch colleague from [indiscernible] working for a German firm.

And he said his company wants CO2-free delivery through the entire -- through the whole of the Netherlands by 2025. And to what extent -- you had a magnificent lead over DHL DPD because if you look at your mail network, that's almost 90% CO2-free.

Have you lost the initiative here? And couldn't you be forced -- couldn't you risk being forced into a position that you have to step up your 2030 ambition to go to free delivery in the whole of the Netherlands.

Mike, I think, If you look into reputation, if you look into service, we do amongst customers and consumers, we are the favorite deliverer in the Benelux, and that's what we want to remain to be. There are certain aspects crucial in remaining that favorable deliverer.

And I think CO2 emission free delivery is one. In [indiscernible], I think the targets we've set for the next coming years are realistic targets.

And with the expansion, of course, in CapEx and OpEx, which we've now announced. We can accelerate it.

We can accelerate it. It means that we can invest more in our electrical vehicles.

But do know that we already have 1,300 electrical vehicles in place at this moment in time. So when you start comparing then I would say, compare the apples to the apples instead of stories to reality.

And that's how I look into it. I do think and I do believe that keeping the position we are in remains to be crucial over the next coming years, and it's 1 of the reasons, as we also communicated when we announced our Digital Next program is 1 of the reasons why we also will expand in digital because there, we do think is the biggest relation consumers and our customers to stay ahead of competition in the Netherlands.

[indiscernible] investment In Belgium with the opening of the new center in 2022. Is any of the 11% to 13% volume growth in parts, if you're talking about, can that be directly allocated to increased operations in Belgium.

And linked to that, within the context of your our EBIT improvement range of €330 million to €370 million. Is it possible to quantify what proportion of that increase might be allocated to increased activities in Belgium?

That's all I have.

Yes. A logical question, but we do not split in our investments in Belgium and the Netherlands at all, although you can calculate a little bit of [indiscernible] because we're opening 2 centers in Belgium.

And the same is for, of course, the margins we earn in Belgium, margins we earn in the Netherlands. What we can say is, of course, that in the 11% to 13% growth in Belgium is included.

We did see over the last half year, but also in 2020, that growth in Belgium was higher than we did see in the Netherlands. Also there, of course, with a big COVID effect, which will not -- which is not taken into account when we talk about 11% to 13% and also not taking into account when we talk about the expansion in capacity.

What we already did do in Belgium is we opened 7 sorting depots. So that's what we already did do.

We will open a new sorting center beginning of 2022, and the expectation at this moment in time is that also the second sorting and delivery center will be started to open by the end of 2022. So we expect volume growth to continue in Belgium as well.

We have time for a final question.

Two questions. First question.

On Sheet 16, your since suggests that the volume decline in '21 is something like 9.5%. Can you fill us in how that is [indiscernible]?

Secondly, can you give us a bit more insight on the drivers for '23 and '24. The [indiscernible] volume and the price mix effect.

Do we expect that the volume increase in parcels will be a similar 11% to 13%? And formal, it will be less than the 8% for '22 and maybe some comments on the price/mix as well?

Andre, you have to help me with the 9.5% question because what we're looking at is kind of a substitution rate of around about 7% by the end of Q2, which we say will be, roughly speaking, around 8% going into 2022. So I just don't really recognize the 9.5% market use.

That's why I get from the columns that you produce on Sheet 16.

Yes, okay. But 9.6% is the 2020 number, right?

So we see, yes, an improvement in relation to the substitution towards around about that 8% mark. And that's also why I said that, let's say, we were looking at 8% to 10% substitution rate.

And we see now a slight improvement towards around 8% driven by partially product mix, a combination of, let's say, single mail still declining at higher rates. But also, as Herna said, direct marketing bouncing back a bit, some other product categories that are not declining as fast as they did in the past.

So all in all, on average, leading towards a substitution of around the 8%. We've not explicitly said something about '23 and '24 for Mail.

At this moment in time, this is what we're looking at. On the Parcel side, let's remind everybody in the call that we're talking about a CAGR of 11% to 13% from '21 to '24 onwards.

Pricing policy for both companies remain the same. The quite significant price mix effect in Parcels in the second quarter is not something that we expect to continue on that size.

There will always be a little bit of mix effect in it because bigger customers are expected to grow faster than smaller, but definitely not to the extent that we saw in the second quarter, given the fact that it was for a large extent, driven by a high level of single items in the second quarter of 2021 -- 2020.

11% to 13% is not only sold for '22 but for the whole period, let's say, '22 to '24?

Andre, I'm assuming that was your final question. Thank you very much all for joining us today.

If you have any further follow-up questions, you know where to find us. On a final note, we will have a next deep dive at the end of September, 30 September to be exact to talk about sustainability and ESG.

We look forward to see you or meet with you by then. Thanks very much again, and see you next time.

Thank you.

Bye-bye.