Annual Report Capturing growth, delivering value How to read this report Management summary Readers looking for the highlights of 2020 are advised to read chapter 1 until 6, and the first pages of chapter 7 until 10. Report of the Board of Management The report of the Board of Management consists of the following sections: • Introduction • Business Report • Governance, chapter 16 until 19 Forward-looking statements This Annual Report contains forward-looking statements. Readers should not put undue reliance on these statements. These provide a snapshot on the publication date of this report. In addition, future actual events, results and outcomes likely differ from these statements made. Chapter ‘Non-financial statements’, section ‘Safeguarding report quality’ provides more information on forward-looking statements. Contents 8 Message from Herna Verhagen 24 How we create value 30 Our strategy 72 Financial value Introduction Governance 1 At a glance 4 12 Board of Management 92 2 Message from Herna Verhagen 8 13 Supervisory Board 94 3 Our operating context 12 14 Report of the Supervisory Board 96 4 Impact of Covid-19 20 15 Remuneration report 102 16 Corporate governance 110 17 Our tax policy and principles 120 Business Report 18 PostNL on the capital markets 122 5 How we create value 24 19 Statements of the Board of Management 126 6 Our strategy 30 7 Customer value 40 8 Social value 54 Performance statements 9 Environmental value 64 20 Financial statements 129 10 Financial value 72 21 Non-financial statements 213 11 Risk and opportunity management 80 22 Other information 237 Appendices Other non-financial performance indicators 252 Data coverage table 253 Glossary and definitions 254 GRI Content Index 260 UN Global Compact reference table 265 Summary of key figures 266 PostNL Annual Report 2020 2 PostNL Annual Report 2020 Introduction 3 At a glance 4 Message from Herna Verhagen 8 Our operating context 12 Impact of Covid-19 20 PostNL Annual Report 2020 1 At a glance Key fi gures (at year-end) Average number of letters Average number of parcels Number of delivered per working day delivered per working day PostNL employees (in the Netherlands, incl. Sandd) (in the Benelux) 8.1 million 1.1 million 40,541 Total kilometres transported Around the world by Sorting centres 4 in the Benelux foot and bike (in the Netherlands) (in the Netherlands, 25 parcel, (on average per calendar day) 5 mail, 1 international) > 1.1 million > 1,200 times 31 Letter boxes Retail locations Number of solar panels (in the Netherlands) (in the Benelux) on our buildings 11,403 4,286 25,208 Unique PostNL Online visits Active business accounts to postnl.nl customers on mijnpostnl.nl 6.0 million 779 million 92,607 PostNL Annual Report 2020 1. At a glance Overview of our network and services Data solutions Shipment Express Time-critical service networks High-value Night goods distribution Parcel delivery 5 Health logistics Food logistics Fulfi lment Cargo solutions Mail delivery @Home delivery and installation Cross-border mail and parcels Full-service City logistics furniture distribution Flora logistics PostNL Annual Report 2020 1. At a glance Performance 2020 in € million, unless indicated otherwise 2019 2020 change Results Revenue 2,844 3,255 14% Normalised EBIT 135 245 81% Profit for the year 4 213 Profit from continuing operations 72 209 190% Normalised comprehensive income 83 197 137% Free cash flow 107 186 74% Closing balance positions Adjusted net debt (736) (407) 45% Consolidated equity (21) 219 Cash and cash equivalents 480 651 36% Operational results Parcel volume (in million items) 283 337 19% 6 Parcel volume growth 12.4% 19.2% Addressed mail volume (in million items) 1,742 2,054 18% Addressed mail volume decline (2.2%) 17.9% Adjusted addressed mail volume (in million items)1 2,271 2,054 (10%) Adjusted addressed mail volume decline1 (9.7%) (9.6%) Ratios Normalised EBIT margin 4.7% 7.5% +2.8% Earnings per share (in € cents) 0.8 43.0 Leverage ratio (adjusted net debt/EBITDA) 2.6 1.0 62% Return on invested capital 7.5% 17.2% +9.7% 1 2019 pro forma, including full year of Sandd volumes Revenue Profit for the year Earnings per share in € millions in € millions in € cents 3,2553,255 2,723 2,7252,725 2,7722,772 2,8442,844 213213 43.043.0 148148 135 30.5 33.033.0 3333 7.17.1 44 0.80.8 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 PostNL Annual Report 2020 1. At a glance in percentage, unless indicated otherwise 2019 2020 change Customer value Share of highly satisfied customers 27% 37% +10% Share of satisfied customers 80% 83% +3% Delivery quality Mail in the Netherlands (2020 preliminary) 94% 94% +0% Delivery quality Parcels in the Netherlands 98% 99% +1% Share of e-commerce revenue 52% 57% +5% Social value Share of engaged employees 76% 84% +8% Share of females in management positions 22% 23% +1% Share of females in senior management positions 27% 28% +1% Absenteeism (share of total working days) 5.4% 5.9% +0.5% Recordable accidents (per 100 FTE) 4.2 4.0 (0.2) Environmental value CO2 efficiency improvement (scope 1 and 2; base year 2017) (8%) (10%) (2%) Share of emission-free delivery of mail and parcels in the last-mile 19% 20% +1% 7 Share of highly satisfied customers Share of e-commerce revenue Share of females in senior management positions 41%41% 38%38% 57%57% 37%37% 52%52% 27%27% 28%28% 48%48% 25%25% 44%44% 30%30% 40% 27%27% 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2018 2019 2020 CO2 efficiency improvement Share of emission-free delivery of mail Absenteeism (scope 1 and 2; base year 2017) and parcels in the last-mile (% of total working days) 5.9%5.9% 5.4%5.4% 5.9%5.9% 0% 19%19% 20%20% 5.0% 5.2%5.2% (2%)(2%) 17% (8%)(8%) (10%)(10%) 2017 2018 2019 2020 2018 2019 2020 2016 2017 2018 2019 2020 PostNL Annual Report 2020 2 Message from Herna Verhagen Some years just go by and are forgotten quickly. The year 2020 is generally developed in line with national trends, I’m proud to say certainly not one of those. It will be stored in our collective memory that we were able to keep our operations running at all times. From for a long time. Although the world has had to deal with more mid-March, we asked our colleagues in office jobs to work from pandemics in recent decades, the impact of Covid-19 surpassed our home. As much as we miss working together and seeing each other imagination. It affected literally everyone, both in our private lives on a daily basis, our people and our teams have proven they are able and at work. We had to adapt to social distancing measures to help to work successfully together from home. contain the spread of the virus. Some of us fell ill. Some of us lost family members, friends or colleagues. And we had to adapt to a new Thanks to the dedication and focus of our people and the resilience set of rules, limiting our freedom to live, work and move around. of our business in these challenging circumstances, we were able to play a vital role in society, creating value for our key Health and safety always came first stakeholders: customers, consumers, employees, shareholders Throughout the pandemic our first priority always was, and still and society at large. This was reflected in our reputation score, is, the health and safety of our people, partners and consumers. which increased considerably in 2020. Customer satisfaction and In March, we were quick to implement the necessary distance employee engagement also improved, as we connected people, measures and to provide physical and hygiene means across all companies and communities through our uninterrupted delivery of of our locations. While the infection rate among our workforce parcels, mail and logistic solutions. PostNL Annual Report 2020 2. Message from Herna Verhagen This helped us make great progress in realising our ambition of mail volumes as direct mail campaigns were postponed, and a steep being the favourite deliverer in, to and from the Benelux. Although reduction in international mail as borders closed and flights were we incurred additional costs to make our operational processes grounded. Quality at Mail in the Netherlands was impacted by the Covid-19 proof, we managed our business effectively, leading to measures taken to combat the pandemic. As a result, we delivered financial results well above our guidance. This improved financial over 94% of consumer mail by the next delivery day, which was position enables us to reinstate dividend for our shareholders ahead below our 95% target. of schedule. We saw strong revenue growth at Spring, boosted by accelerating Highlights of our business performance in 2020 e-commerce-related revenue both in Asia and Europe, and at our The pandemic led to a number of key market developments. The other logistic solutions, which helped contribute to our strong first was unprecedented volume growth at Parcels, driven by the financial performance. acceleration of online shopping. E-commerce growth picked up significantly and the transition from offline to online accelerated. Exceptional year, outstanding performance The number of first-time online buyers increased and the share of Although the pandemic had a major impact on our results, it is existing medium and heavy online shoppers grew. important to note that the strategic steps we took in 2019 and 2020 provided a strong foundation for this year’s outstanding operational Despite the demands we faced implementing the required changes and financial performance.