PostNL NV
AEX:PNL
PostNL NV
AEX:PNL
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Earnings Call Transcript
Earnings Call Recording
Other Earnings Calls
So I'll start the presentation. We will do first the announcement we did today on the acquisition of Sandd, which is a proposed acquisition. And then secondly, we'll do the Q4 numbers, like we regularly do.So start with, of course, why we announced today that we would like to acquire the shares of Sandd VSP, for a few reasons. We do think that when it comes to the sustainability of the postal market in the Netherlands, it is important to create one strong nationwide postal network. It is a strong foundation for a sustainable and solid postal sector, which has a positive effect, in our view, on PostNL as well. It inevitably, of course, makes sure that we remain to be an accessible, affordable mail company today and in the future. It gives us the opportunity to create much more job security for the people working for us but also working in the postal market than we can today. It is sustainable value creative for our shareholders, and we will come to that in a few slides from here. And of course, it is still subject to regulatory approval, which means that we have submitted our request to the relevant authorities today.So in our view, taking into account the volume decline we've seen in the market and which we think will continue going forward, we do think if you want to maintain having a reliable and, of course, affordable network in the Netherlands, together with job security for the people working in the postal market, consolidation is the way forward.If you think about the postal sector in the Netherlands, there, of course, are lots of international comparisons of the Netherlands to the other European or worldwide countries. And what you see if you look into service quality, that the Netherlands, the Dutch postal operators, are scoring or ranking, having a #2 position in a worldwide survey done on service quality, which means postal services in the Netherlands are of high quality if you compare that to many other countries.When it comes to stamp prices, we're more or less in the middle of what we see in Europe, so half of the countries in Europe are above the price level of stamp we have in the Netherlands and the other half is below. It's very people-intensive sector, which is not unknown to you, but 65,000 people working in the mail market today. So postal sector in the Netherlands is high quality, moderate rates and many jobs.What we see for years, and it is -- this is what we discuss almost every quarter with you is, of course, that volume decline continues. And looking to the highest point, which we've seen around 2005, volume decline is more than 60% till today, where we've started with a volume of almost 6 billion pieces today, the total market is around 2.5 billion pieces.Volume decline will continue going forward, which is one of the main reasons why we do think if you want to maintain that affordable and reliable network and create job -- more job security, that consolidation is, of course, the way forward.Looking into what we -- what we've seen over the last few years is that, although digitization, of course, is the main influencer of volume decline, physical mail is still very relevant and appreciated. And that means consumers and companies do think that mail, physical mail is relevant, still relevant for them. There is a desire in society to maintain a 24-hour service, 5 days a week. That's what we've seen -- what we see with consumers, but also companies. And that is, of course, also set by the political discussions, which have taken place in 2018 in Parliament, where politicians also confirmed that they would like to maintain a 5 days a week service delivery in the Netherlands against a high quality.If you want to guarantee that availability and continuity, consolidation is the only way forward in our view. And that's not news because that's what we tell everyone already for 2 years, but fortunately, today, we did -- we made the announcement, which is a big step towards the future.In our view, consolidation will serve all stakeholders. Of course, our customers, because we can offer them a very solid base for quality and continuity. We make sure that there is availability of mail services in the whole of the Netherlands, also in the non-dense areas. And it, of course, has influence on the -- positive influence on the affordability going forward. For our employees, but also the employees working with Sandd [ VSP ], we can offer much more job security for our postal deliverers when we are a combined company. Because of the fact that we have more volume, we can reduce the amount of work in a more socially manner, and there's more job perspective. So also for employees, we do think that consolidation offers a lots of positives. For shareholders, we forecast a solid synergy potential, and we'll give you more details in a minute. We create sustainable value going forward, and it's earnings accretive. So also for shareholders, we do think that consolidation offers a positive way forward.For consolidation, it is important to have broad support. Consolidation of the 2 biggest companies in the market is not the most used way of bringing 2 companies together. What was very helpful, in our view, is the fact that the Ministry of Economic Affairs started the postal dialogue by the end of 2017, in which they started the dialogue with the question, "How can we maintain a high-quality 5 days a week delivery -- postal delivery in the Netherlands in the dense areas but also rural areas going forward?" That has led to a report of Ms. Oudeman by June 2018. And in her report, it was very clear that if we want to have a sustainable postal network going forward, consolidation was the only option, bringing the 2 biggest networks together to maintain the affordability but also the service level and much more job certainty for the people working in that market. That is also written in a letter of the State Secretary sent to Parliament, on which was a discussion in Parliament in September 2018. And fortunately, there was broad political support for consolidation, and that led to the announcement today, in which we said PostNL and Sandd will join forces on the mail delivery market, and we started the regulatory approval process as of today.Of course, today is the announcement of what we are aiming to do, bringing the 2 companies together. What you see is that there is still a process ahead of us, and that's the approval process. Today, we've send in the approval request to ACM. OCM -- ACM, in our view, will do a Phase 1 and Phase 2 process on this request. That will take at least 3 to 4 month. But as you do know, ACM can ask questions to us and then stop the clock, then in that -- for that reason, it can take longer than the period just mentioned. If they approve consolidation, we still need some other conditions, such as a positive advice of the Workers' Council, final transaction documents with Sandd VSP and all those other conditions, together with the approval of ACM, will lead to a completed transaction. If ACM will not approve, we have the possibility to ask the State Secretary of Economic Affairs for an approval on the ground of significant public interest. So in current law, there is a possibility created that government can take a decision on, in this case, consolidation because of significant public interest. When she does, the same, of course, other set of conditions need to be met before we can complete the transaction. If she does not, in that case, no approval with ACM, no approval via the Ministry of Economic Affairs, the transaction is terminated. As such, the outcome and also timing of this process is totally depending on the period of time ACM will take to come to a decision. But because of the reason that we want to give you some insight in our financials, we took an illustrative start date, which is in Q4 2019. So remember that every number you see going forward is based on the assumption that we get an approval in Q4 2019, but also here with the caveat that it can take longer. And then of course, you have to postpone the synergies, implementation cost, et cetera, to the moment of closing. There is a strong strategic rationale for consolidation. First of all, of course, it creates a sustainable and solid base for our customers. It creates better prospect for employees, but it also creates enhanced economies of scale, which facilitate that we can manage volume decline and keeping mail affordable, and the integrated networks can operate at a higher occupancy level, which is, of course, has a positive impact on our earnings. It's also based on a strong financial foundation. Mail in the Netherlands becomes a more robust and stable business. A more stable mail market will lead to a more stable mail company of PostNL. We expect synergies as of the first year after completion, which are in the beginning offset by one-off costs and a delay in cost-saving plans. I will come back to the numbers we forecast for the one-off cost and how we see the delay in cost-saving plans. The annual underlying cash operating income contribution is EUR 50 million to EUR 60 million, and it's accretive as of the first year after approval. And with this case, we do see an improved midterm financial basis. It also has a very strong public interest. And that is that we can create a reliable, accessible and affordable postal service for the future and that we will be able to manage volume decline in a social manner.Combining the 2 companies means combining PostNL, which has 38,000 employees with 18,000 postal deliverers, together with the 16,000 postal deliverers of Sandd. So it creates a company in which 34,000 postal deliverers will have a job. The total volume, and this is based on 2018, is around 2.5 billion, and the revenue mail in the Netherlands 2018, as you can see over here, was EUR 1.678 billion and that one of Sandd is EUR 201 million. So combining the 2 networks, PostNL and Sandd, means combining the #1 and 2 in this market.
Thank you. Now let's look at the transaction highlights. Price and funding, the transaction value is set at EUR 130 million enterprise value. We'll fund that at completion through cash on hand and new debt arrangements that we'll organize upwards to the moment of completion. As Herna just mentioned, the net annual equal contribution of scale effects as a consequence of this transaction will be approximately EUR 50 million to EUR 60 million based on the assessments we've currently made, and we expect reaching the run rate max of these synergies 3 years post closing. Integration-related costs will approximately relate to 1x run rate synergies, and we expect to incur them in the first 2 years of the integration. I'll tell you a bit more on how that integration is expected to go a little bit later on. It will be accretive to UCOI relatively quickly, as in the first year after closing.Key conditions around this transaction obviously relate to the regulatory approvals we just talked about. And likewise, we need to go through consultation processes with works councils and unions. And ultimately, of course, we need to agree final transaction documentation with Sandd as well.This is meant to be, and certainly will be, an investment in the postal sector and in PostNL, and we'll get to more stable, more solid and more predictable results and cash flow coming out of our Mail business going forward. If you talk about synergy realization, it's going to be an integration into one network. So this is not a transaction where you value a company on its intrinsic value. Valuation is here based on the fact that we'll integrate the 2 different networks into 1 nationwide network, actually meaning that we'll gradually transfer the more than 700 million mail pieces from Sandd gradually to our own network. And as a consequence, we'll create scale effects and cost benefits. We expect that process to take 1 to 1.5 years, and we'll offer Sandd postal deliverers a job against PostNL terms when we can complete the transaction.As said, these additional volumes will lead to economies of scale. They will find its way in better utilization of assets, different transport line hauls, different real estate requirements. And of course, with that additional volume, we can optimize the mail routes of the joint postal forces. Adding those volumes to one single network will give you more ability to adjust in the years ahead on volume decline that is sure to be continued.The consequence of such an integration -- there is a consequence of an integration related to our cost-saving plans. What you should understand is that if you add that volume, you cannot execute your cost-savings plans in the way we've planned for it without a consolidation. That will cause some delay in the implementation of those cost savings. In the end, we'll end up with the same amount of cost savings, but the consequence of the delay is that it will cost you approximately EUR 50 million to EUR 70 million in the first or next 4 calendar years after completion of the transaction. The implementation costs will be incurred in the first 2 years after closing. And as said, we'll expect 1 to 1.5 years before we've fully integrated the volumes in PostNL's network.A few basic principles around the integration approach. And please, bear in mind that, of course, we've made the announcement today but we'll also certainly use the time between this day and ultimate completion date to work together with Sandd people to further detail out our implementation plan. The principles that will apply to that is it's going to be a joint effort towards that integration. Certainly, we'll take all the required steps and consultations of all employee representations involved. We're not going to surrender quality of service at all. We want to maintain delivery quality throughout this entire process. And if you look at the graph or the picture, I should say, on the slide, it will basically say that gradually we'll move away volumes out of the Sandd network towards PostNL's network, gradually migrating that, whilst at the same time, we will introduce the new mail route Phase 1 that we talked about, which will be ready mid-2019. And after we've transferred all those mail volumes from Sandd network to our network, we'll accelerate towards the next phase of the new mail route, which will allow us to take costs out going forward. And we'll able to adopt the organization with volume decline that, as I said before, will continue in same path that we've seen over last years.An explanation on how the synergies will be built up and how they will contribute to UCOI as of 2020 and reaching full run rate as of 2022. And again, as Herna pointed out, we've assumed a indicative timing of completion in Q4 of 2019. That will then mean that we will start that integration process in that quarter, and it will mean that a part of the integration costs will already be incurred in 2019 with a limited impact on cost savings in 2019, and that impact will grow in 2020. And at the same time then, as you gradually move the volumes from one network to the other, you will also capitalize the synergies. And as you see, we expect the full run rate of those synergies to be achieved in 2022. The way it will go afterwards will be following the trend of volume decline, so gradually those synergy effects will also decline.The transaction will have impact on our leverage ratio and on the dividends. As I said, the acquisition consideration will be funded through cash on hand and new debt arrangements. The choices we'll make on how to do that will be later. As a result of the transaction and the integration costs and the delay in cost savings, the combined effect of those 3 elements will lead to a leverage ratio that will exceed, temporarily, the 2x threshold, which is part of our policy. And I mean, the net debt over EBITDA should not exceed 2.0 in order for us to pay our dividends in accordance with the policy. We will remain to be committed to maintain a prudent financial policy. And therefore, we'll temporarily delay the dividend payments post closing. We expect an aim to reduce debt-leverage ratio quite quickly below the 2x target in the 12 to 24 months after closing. And as soon as we get there, we'll resume dividend payments in relation to our policy. And as I said, the acquisition will be accretive to UCOI in the first year after closing.So that basically brings us back to the reason why we started this all off, and that's our conviction that to get a mail market that is affordable, accessible and will continue to be so for everybody in the Netherlands throughout the country, it's the only way to do that is through a consolidation of these big networks, and we believe it's an inevitable step. It will create value for all stakeholders concerned, employees, customers and shareholders alike. And of course, subject to regulatory approval, we have submitted the requests to ACM today.And then we move on to our Q4 results, Herna.
Or maybe we can pause for a moment to see if there are any specific questions on the proposed transaction, either here in the room or on the line. Please wait for the microphone before asking a question, and please state your name and company before doing so. Thank you. Marc?
All right. Then we move onto the key takeaways for the full year 2018. There's a strong performance in Q4, which brings the underlying cash operating income to the higher end of the guided range. What we did also see is an improved run rate of our cost savings in the second half year. We have the intention to pay a progressive dividend over 2019 -- '18, and that intention is delivered. Of course, needs to be approved by the AGM, and we still strive for certainty and stability for all stakeholders in a declining market, and that means that consolidation is closer than ever before, with a very strong fourth quarter of 2018 and of course what is also good news is that the run rate of cost savings improved in the second half year. If we take full year of PostNL into account, then the revenue was up 2% to EUR 2.77 billion. Our underlying cash operating income was EUR 188 million, which is EUR 47 million lower than it was in 2017. It is in the upper part of the guided bandwidth. Our last bandwidth was EUR 160 million to EUR 190 million, and we've put it in on the upper part. The proposed dividend of 2018 is EUR 0.24. And as said, it needs to be approved by the AGM, but it's a progressive dividend as intended. I think, good is that, of course, the percentage of revenue related to e-commerce increased again in 2018. 48% of our revenue is e-commerce related, and I think that's a very important signal in the transition of our organization towards an e-commerce logistic company.In August 2018, we also announced our decision to divest Nexive and Postcon and further focus on being the postal and logistics solution provider in the Benelux. The progress of that divestment process is according to plan. And we expect, as also said in August 2018, to sign the agreements before summer. So a strong fourth quarter helping us to end in the upper part of the guided bandwidth with our underlying cash-operating income and important good progress to become the leading postal and e-commerce player in the Benelux.Then some of the details on Q4, and then we'll first start with Parcels. I think Parcels had record-high volumes in Q4 but also a challenging peak. If you look into revenue, revenue was up to EUR 439 million. The underlying cash operating income came in at EUR 36 million, which was a bit lower than in 2017, which was caused by the fact that Spring, our international business, did not deliver up to what we expected and that declares more -- that declares more than the EUR 3 million difference with Q4 2017.Volume growth over the full year 22%. In Q4, it was 20%. Total revenue EUR 1.555 billion. And I think important, on the right part of this slide, is that part of the business is volume-related, meaning Benelux and international and part of the business, meaning Spring and logistics solution is nonvolume-related. That's what we say, I think, every quarter, but it also explains partly why the volume increase we see is not fully translated into, for example, revenue growth, because of this mix. What we did see is very strong volume growth, which is ongoing, still slightly offset by a negative price mix effect. We're improving our operational efficiency by a better drop duplication. I'll give you some highlights on that on the next slide, but we also see that our operational costs are impacted by the additional peak season cost we had to absorb in Q4. In Spring, we see fierce competition mainly in Asia and that resulted in margin pressure in 2018.Then coming to the pressure on margin within Parcels, that is related to the peak season in 2018. And the additional capacity measures are taken to absorb the daily swings in volume. What we do see is that during our peak periods, our daily swings in volume are up to 20%, and we see different distribution of peak volumes of week and working days than what we normally see. So it's not only peak in volume, but also a different pattern of how volumes do come in. Those daily swings in volume compared to last year are between plus 30% and minus 20%, which means there is a volume swing of around 50% on certain days.We took a lot of measures to have a good peak period, and those are partly structural, which is adding capacity via, of course, our new sorting and delivery centers and partly, of course, only during peak seasons like additional storage and additional spaces rented. And we had to hire additional workforces to face, of course, the tight labor market and transport market. Underlying, we see improved efficiency. Because by the growth in volume, we see a higher drop duplication and what -- that's what you see in the lowest graph, the drop duplication is growing, if you compare '16, '17 and '18. And that helps, of course, enormously in the efficiency of the network.Many questions are asked, of course, by you, but also by shareholders, on how will you improve the balance between the continuing volume growth within Parcels, the profitability of Parcels and cash flow. And that's what we want to address at a Capital Markets Day, which will be organized on May 7. That is also the day in which we will announce our Q1 figures of 2019, and it will be combined with the Capital Markets Day. During that day, we would like to give you insights into future perspectives of Parcels, starting with market developments, competitive developments, but also our commercial position, our strategy and plan. The plans how to adjust our network and what are we going to do in innovation and digitalization, including, of course, the key financial metrics of Parcels. The aim of that update is to give you evidence and to give you a feeling around the improved sustainable value creation we forecast for Parcels going forward. What we will add to the Capital Markets Day is we will come up with a mid-term outlook for PostNL, including guidance on Mail in the Netherlands and Parcels.So an important day for us to give you a further update on Parcels, the improved balance on volume growth, profitability and cash flow. And together with, of course, Mail Netherlands, also give you mid-term outlook for PostNL.What are the important drivers for growth in Parcels in 2019? First of all is, of course, continuing growth in volume. So we expect volume growth to continue over the year 2019. Already in '19, we see an improvement in the balance between volume, profitability and cash flow. We expand our network with 3 new sorting and delivery centers in 2019, and we also expect a further impact of the tight labor and transport market. We further develop service propositions, for example, in growth areas like food and health. Those key drivers, of course, will lead to revenue guidance, which is a low-teens revenue guidance, and the margin guidance, which is between 7.5% to 9.5%, which is the same margin guidance as in 2018. And of course, what you do remember, it includes Spring. Why are we so certain about continuing volume growth? And these are the slides which you saw before, but we would like to highlight what changed over the years and what gives us the confidence that growth will continue. E-commerce, of course, drives, most importantly, the volume growth of Parcels. And we see that market developments are still relevant and still positive. The online share of retail is increasing. The online spending is increasing, and we see an extensive growth in the amount of parcels which are ordered by heavy users. So market developments are still positive and guiding in a growth direction. Secondly, of course, there's still lots of customer interaction, and we see even increased online customer interaction with PostNL. We see volume growth in added services, and we have a solid customer satisfaction leading to, and that's what you see in the orange part of the right bar, leading to an accelerated volume growth also in '19. To give you a few numbers -- and you saw these graphs before, but what we've added are the numbers for 2018 to underpin our message that we do believe that further growth in the amount of parcels is, of course, pushed by growth in e-commerce. The online spending -- growth in online spending was plus 11% from Q2 2017 to Q2 2018. What you also do see, and maybe you have to look into that part of the chart a few times, but what you do see is that the heavy users in Parcels are ordering much more, and the growth in the amount of what they order is growing much faster than with the people who have -- who order lesser amounts of Parcels. It shows you in 2 ways, the growth potential. Of course, the people who are now in the more -- in the parts which do order lesser amounts of Parcels, some of them will go to the heavy users, so that creates extra growth. And secondly, the growth in heavy users, in our view, will continue going forward, leading to -- and this is the graph you already see for the third year, leading to that, at this moment in time, 17% from on-time -- from online -- from retail is online, and that -- means that there's still 83% of retail not online. So it shows you growth potentials in 2 ways.Of course, it's the same we do see with our customer interaction. We do offer a wide range of delivery options and added services. Those fuel volume growth, but also have an important impact on customer satisfaction. When you look into customer interaction and customer interaction are the online contact with our customers, you see a growth from '17 to '18 of 24%. The amount of accounts on the PostNL app, growth of 30%. And at this moment in time, more than 4.5 million unique consumers in the Netherlands do have the PostNL app and use it. And volume growth in our added services, for example, evening, for example, early morning, same day, 66% of growth in 2018, leading to a high customer satisfaction of 82% also underpinning the growth of e-commerce volume going forward. That also does mean that we keep a need to invest in our infrastructure, and we're planning to open 3 new sorting and delivery centers in 2018, which will bring the number of sorting and delivery centers to 22, but we also keep expanding the amount of retail locations. Proximity of retail location is one of the reasons why customers are so satisfied with the services of PostNL, so we will add 250 shops to our capacity of already 4,000 retail stores or Parcel retail stores in 2000 -- we did in 2018, and we will continue that in 2019. I think also important to say is that we are innovating in our network as well. And for example, in 2018, we increased the sorting capacity of the centers we have by adding 2 shoots per depot, which is increasing the amount of routes which can start -- or which can, of course, start delivering from a sorting and delivery center. A very important element that we're not only increasing the amount of sorting and delivery centers, but also creating better efficiency in the current sorting and delivery centers.To give you a flavor of innovations, a very important innovation in 2018 is the return solution, which means that when a parcel driver delivers your parcel, you will be able -- or you can give the parcel you want to return, give it with the parcel driver. It's an option which is important, of course, and which creates less hurdles in ordering online because most of the people are irritated when they have to bring their parcel. They don't want to have -- bring to a certain location. Now you have the solution to give it with your parcel driver, and he will do all the return hassle. A very important innovation in keeping customers happy on the one side, and on the other side, also creating business. The second important example is the further expansion of our food services. Currently, we have 5 days a week or 6 days a week delivery service for food in the Netherlands and Benelux. It was a evening delivery service. That's what we still do, but we added morning delivery as well because the amount of deliveries is growing faster. What we also added, and here you find the example of Marley Spoon, for which we distribute meals and, of course, groceries is that you can follow your driver within a time frame of 15 minutes. So you can follow the driver when it's coming into your neighborhood, so you have a very exact time of when the driver will arrive at your door, which is also operational efficiency for us because a driver almost never comes to closed door.Last but not least, a few words on Spring. And Spring is, of course, our international provider of meal and parcel solutions to our businesses worldwide. In 2018, the results of Spring were not what we expected or wanted them to be, which was mainly because of very fierce competition on Asia. What we did do in '18 is adjusting the organization, and that's how we did it, is what you see on this slide as well as a gateway to Europe, which is Parcels coming in from other parts of the world into Europe as our cross-border solutions. What we tried to do next to, of course, cost savings, which is the middle column. What we tried to do is to create an offensive strategy, which complements our Gateway and which gives companies and our customers the ability not only to do the distribution of their parcels in Europe via Spring.Then over to Mail in the Netherlands, the fourth quarter of Mail in the Netherlands. Here you saw revenue decline. Revenue decline was 5.9%. You saw also a decline, of course, when it comes to the underlying cash operating income, which was only a slight decline. EUR 73 million in the Q4 2017, EUR 71 million in Q4 2018. The total cost savings in the fourth quarter came in at EUR 14 million and added up for the full year to EUR 48 million, which is just below the bandwidth given at the beginning of the year, and that guidance was already changed at -- with our Q2 numbers. The volume decline full year, 10.7%. They had a very strong Q4, and that means that the results are back-end loaded, as we also forecasted in our initial guidance. They delivered their Christmas meal against a very high quality, and it was I think the second-best delivery quality in the last 18 years. So they did very well. So they had a good Q4, which was translated in a good outcome when it comes to the underlying cash operating income as well as total cost savings in the fourth quarter.Those cost savings are, of course, important because we used the cost savings to offset part of the volume decline we have yearly. EUR 48 million for the full year is just below the bandwidth we've given. What you see, and that's what we're satisfied with, is the fact that the run rate of cost savings in the second half year were much better than that of the first half year. That's what we guided for. And fortunately, it also is now shown as a realization over 2018.The cost-savings plans we have in -- we had in 2018 are already discussed, of course, a few times with you over the course of 2018 and you should think of a reduction in line management, a reduction in overhead, a further rollout of the sorting code, a further rollout of the combi bundle, a reduction of post boxes, et cetera, and that sums up to the EUR 14 million of cost savings in the fourth quarter.The key drivers for Mail in the Netherlands in 2019. The key driver is, of course, volume decline, which is forecasted at 8% to 10%, and price increases, which are increases well above inflation. Important in 2019 is also the switch to the new mail route. That's a big change in the setup of Mail in the Netherlands, which will allow us to adjust the organization to volume decline for the next coming years. I will come to it in a few minutes on a separate slide to give you a little bit of insight what this big change will mean. Of course, we have ongoing focus on cost savings, and we have a potential new conclusion of the regulator on Significant Market Power. That leads to an outlook of revenue of mid-single-digit in 2019 and UCOI margin expected between 3% to 5%, which is the same level as we've seen in 2018.An important driver in the results of Mail in the Netherlands is, of course, volume and pricing. As already said, volume forecast 2019 is 8% to 10%. This is mainly explained by the fact that, on the one hand, we see very strong and continued digitization in all segments. And on the other hand, we also do see less volume decline in direct mail, and that probably has to do with the economic upswing. Still, 8% to 10% is quite a lot. It will be offset by -- it will be partly offset by cost savings and, of course, by pricing. In bulk mail, we will price well above inflation for the year 2019. And in single mail, we already announced, of course, the increase, which was 4.8% for January 1, 2019.As said, important -- it remains important to have sufficient cost savings, and that's the reason for a transition towards the new mail route. And what we've tried to do is to explain on this slide what the new mail route means. The new mail route means much more flexibilization of the business model we see within Mail in the Netherlands. It's a simplification of sorting and delivery processes and improved automatic coding, which are already implemented in 2018 and those conditions are successfully met. And those conditions were important for the introduction of the new mail route. The new mail route, if I say it very simple, is switching from a big trough model we have today to an equal flow model, which we will use going forward. So why is that equal flow model so beneficiary for all of us? For customers, because of the fact that also the nontime critical mail can be delivered on 5 days a week instead of currently 3 days a week. By doing that, we are better able to manage the flow of their processes over the weekdays. And we can, of course, offer them high quality against affordable prices. For our employees, they'll benefit in it as well because we do expect that we can create longer working routes. As you see, we go from long route, short route, long route, short route, which is current model, into 5 days a week, the same route with the same -- more or less same amount of time. That means that we can offer longer contracts with more working hours a day. And to make sure that people can do the work, and that they can do those long routes, we also are changing into e-bikes. What are the benefits for PostNL? With the change, we are better able to absorb future volume decline, so we will be -- it will be easier for us to adjust the organization year-over-year to the volume decline we still expect. We achieve more cost savings because we can, of course, divide the amount of volume better and more equally, not only over our people but also over our assets, like the locations we are in, like our sorting machines, which can be much more equally used over the days, which is more efficient allocation of resources. And we expect a contribution of this cost saving as of 2020 onwards.On the next slide, you find the cost saving plans for 2019 and 2020. Many of them did not change. So we're still in the centralization of location, which will continue in 2019. We're still optimizing our sorting processes and increase the automation level. We optimize our delivery routes, and we introduce more cargo bikes. We simplify our portfolio and are reducing staff. Those plans didn't change. And I discussed with you already for a few years, but they will continue to deliver cost savings in 2019. What will be added in 2019 is the new mail route, so going from the peak-trough model we have today to much more equal flow model. The change will take place beginning of June. That will bring us to the cost savings, as shown on this slide. In 2019, we expect a cost saving between EUR 45 million and EUR 65 million. And that's what you see forecasted here in the gray bar on the left side. The total related cash-out between 2015 and 2021 is EUR 425 million, and it's still around the same division. When we have EUR 1 of cost saving, it's more or less related to EUR 1 of related cash-out. And of course, when we take into account what we announced a possible consolidation. If consolidation will take place, these numbers will change slightly because of the fact that we have a different phasing of some of the reorganization plan, which will lead to less cost savings in -- out of these cost-saving plans in the first 4 years. And by the end of the horizon, all cost savings will be delivered, but it's different phasing. I think last but not least on Mail in the Netherlands is, of course, a regulatory update. And when we presented our Q3 numbers, we had the good news of the fact that we've won the court case with the CBb. And I don't know how to translate in English CBb, but the regulatory -- the legal authority in the Netherlands. ACM came up with a new concept, Significant Market Power decision, just before Christmas. The consultation period ended on February 14. And we, of course, submitted our opinion. We disagree with this draft decision for a few reasons. It creates new uncertainty in the market. That's one. Secondly, there is clearly guidance given by a government that they want to move into a market with less competition because of the fact that market is so strongly declining. And what we do see that in a market that is so rapidly declining, it also has a very negative effect. If ACM will take the decision and based on what we see in their draft, the impact will be EUR 50 million to EUR 70 million. And as already answered on one of the questions, we included part of that in our outlook 2019 to be very clear on -- that the outlook we've given is an outlook that will keep up also when the decision will be taken finally.If you look into all the things I've told you on the changes we see in express -- sorry, in Parcels, the enormous transition we have, the changes we see in Mail in the Netherlands, the fact that we go to the new mail route to Mail in the Netherlands, we do have confidence in our strategy. And our strategy is, of course, to be the postal and e-commerce logistics solution provider in the Benelux. The ambition is, of course, to be your favorite deliverer. That's what we would like to be, the favorite deliverer in the Benelux, to give you special moments to everyone.What is necessary? So what are our strategic objectives? Of course, first of all, help customers grow their business, which is important to keep, of course, volume growth in online. We enhance sustainable employability. We secure, of course, also the accessible and reliable postal services, which remains to be important. We deliver profitable growth and generate sustainable cash flow and reduce our environmental impact.So there's still confidence and lots of confidence in this strategy announced to be -- of course, to become the leading postal and logistics solution provider in the Benelux.So what are then -- and this is a little bit of a repetition of what I've already said. The key drivers for performance in 2019 for Parcels are: focus on growth in volume; improve the balance between continuing volume growth, profitability and cash flow; expand our networks; expect some impact from tight labor and transport market; further develop our service prepositions, be innovative and make sure that we also grow in our growth areas like food and health. Within Mail in the Netherlands, it's volume decline and price increases which will be key drivers in 2019, of course, the ongoing focus on cost saving, together with the switch to the new mail route, which is, in our view, of utmost importance when it comes to future cost savings and potentially, a new conclusion of ACM on Significant Market Power, which brings us to an outlook of EUR 170 million to EUR 200 million and our dividend policy for 2019 is unchanged.
Thank you, Herna. Let's go to the financial review and first look at Slide 45. I think as of the beginning of this year, we said that 2018 would be a year with results being back-end loaded. And indeed, that proved to be the case. I think a strong fourth quarter performance brought us to EUR 180 million of UCOI for the year, which is in the upper end of our guided range. And of course, in that Q4 number, we did include the retroactive effect of the invoice we've sent to the postal operations as a consequence of the CBb tribunal's decision on the court case we did successfully complete.Of course, Mail in the Netherlands, we have volume decline effects from ACM measures and price increases and in the second part of the year. And that's important to note, an improvement in cost savings compared to the first part of the year. And although an improvement compared to Q3, net cash was below our expectations, mainly impacted by negative changes in working capital, which I'll address a little bit later on in the presentation.Then over to the bridge going from Q4 '17 towards underlying operating income and towards the underlying operating income in Q4 2018 and back to UCOI. In the second and third orange bars here, you will see the reconciliation of underlying operating income, which has a delta of EUR 15 million negative compared to 2017. Volume price mix effects in Q4 based on 10.2% volume decline and this EUR 9 million effect takes into account the impact of Significant Market Power and, of course, also the positive impact related to the invoice we've sent to the postal operators. This effect, combined with the autonomous cost increases we saw, was fully compensated in the quarter by cost savings. We realized EUR 14 million of cost savings, of which EUR 9 million in Mail in the Netherlands and the remainder on -- over at savings in the group. The result of Parcels in the year was slightly lower than last year. And just to be clear, we've made an additional split in that Parcels number you can see on the slide, where basically, our Parcels international logistics solutions businesses has -- have improved compared to last year with EUR 3 million, but it's compensated in a negative way by the performance of Spring of minus EUR 6 million compared to Spring's performance in 2017, which is, as we've seen throughout the year, as a consequence of the increasing competitive position or competitiveness, particularly in the Asia to Europe Gateway trade lanes.Then on the cash conversion for the full year, starting with the UCOI of EUR 188 million and bridging it to the net cash from operating and investment activities, of course. First, we need to reverse the one-offs and add back the noncash depreciation and amortization points here on the slide. Biggest component of those one-offs are obviously the top-up payments on pensions of EUR 33 million that we've made in the fourth quarter of 2018 and together with AMM legal costs and cost to sell Nexive and Postcon businesses. We've invested EUR 120 million in working capital throughout 2018, and I've got a specific slide on that point, just in a few minutes.CapEx resulted in a net cash of minus EUR 95 million, of which EUR 29 million related to new sorting and delivery centers of Parcels and EUR 15 million related to the cost-saving initiatives. Disposals and other resulting cash inflow of EUR 47 million, part of which, of course, relates to real estate sales. All in all, net cash from operating and investment activities was minus EUR 19 million over 2019. As we said before, within 2018, we were not able to generate enough operating cash flow to pay our dividends from. That's the onetime exception that we've indicated 2018 would be. And going towards 2019, you'll see an increase in net cash from operating and investment activities going forward.There are more specific insights in the working capital development. You'll see a comparison of full year 2017 with full year 2018 numbers. As explained, a change in working capital of EUR 122 million. That change is caused to several effects. Of course, you see a change in revenue mix. Mail revenue is declining. Mail has a negative working capital. Parcels is growing and has a positive working capital. So given the organic developments in the portfolio, we've always indicated that we'd see an increase in working capital requirements. In addition to that, there is also the case, which is also a function, you can see in the price -- price mix effects in Parcels' performance that the bigger customers grow faster than the smaller customers and that will not only have a average price impact but also a working capital requirement impact. And a important point to note is that our working capital is also significantly influenced by terminal due settlements, and they will not always be average numbers. That all depends on the relative settlement position. We've got big settlements done in 2018 on big trade lanes on bilaterals, for instance, with Italy -- sorry, with Germany and France. And that have -- has -- sorry, has had the implications on working capital that we see here on the slide.Then to the statement of income. Lower operating income partly compensated by lower financial expenses and lower income taxes. The profit from continuing operations in this fourth quarter was EUR 76 million, which is slightly higher than last year. Our full year profit was EUR 127 million. Net financial expense was lower than last year, of course, due to the redemption of the bonds we've done in November '17 and August 2018. The result on discontinued operations, our activities in Italy and Germany was negative. Also in Q4, we've made an additional fair value adjustment of approximately EUR 19 million. And of course, there was also negative business results in discontinued, but at the same time, those negative business results were less negative than in 2017. The fair value adjustment that we've taken into account resembles the current status of the sales processes of both Nexive and Postcon, and we expect to sign deals before the end of Q2 2019.Then let's move onto our balance sheet. With our operational results in Q4, we've achieved again a positive consolidated equity of EUR 46 million positive. Our net debt position is now EUR 149 million, which is EUR 30 million -- EUR 34 million better than at the end of Q3. And I'll -- in a little later, I'll explain how you get from net debt to our leverage ratio require relevant debt position on the next slides. But first, to pensions. The coverage ratio of the pension fund further improved to 116%, which has a positive impact of pensions on our equity position of EUR 13 million. Given this coverage ratio, there is very limited risk of further top-up payments than the ones that we're already incurring, of which the EUR 33 million we've paid for in Q4 of 2018. There's still one tranche left to be paid in the fourth quarter of 2019, which is the last installment of our unconditional funding obligations. The remainder then of the pension liabilities, EUR 263 million, relate to the transitional plans or soft pension plans for early retirement. We've got 2 more years to go for regular payments related to those plans. And at the end -- ultimately, at the end of 2020, we'll have a large one-off payment of the remaining liability on the soft pension plans.And over to the last slide of this part before I go to the outlook, this is on dividends. The intention to pay progressive dividends in 2018 will be delivered. Our dividend proposal will be EUR 0.24 per share based on a net cash income of EUR 130 million. And as we've said before, we'll increase the payout ratio from 75% to approximately 80% to get to the EUR 0.24. And of course, our shareholders will have to approve this proposal during our AGM that will take place on April 16. Take into account the interim dividend of EUR 0.07, this will mean a final dividend of EUR 0.17.Then let's look at the outlook, I'm at Slide 54. Of course, Herna already explained the outlook for the different parts. Here, you see it for the group at large. We anticipate a UCOI contribution of EUR 170 million to EUR 200 million for 2019, more or less comparable to the 2018 results, whilst we expect Parcels revenues to grow low teens with the 7.5% to 9.5% margin bandwidth. Mail in the Netherlands revenue will decline mid-single-digit, and we'll keep the margin between the 3% to 5% bracket that we've also guided for in 2018. CapEx, we expect not to spend more than EUR 100 million. And during our Capital Markets Day, we'll give more insights on the best composition of volume growth, profitability and cash flow and, as a consequence also, investments of Parcels going forward.I know you're well aware of the fact that we've got a strong seasonal pattern. As this picture shows, Q4 contributes to a large part of the full year result. And clearly, also in 2018, that was the case, back-end loaded. For Q1 2019, we assume a development in line with full year expectations, so more or less stable or comparable to what we've seen in 2019. Please note that there's one working day less this year in the first quarter and we'll also see the positive impact of the higher run rate of cost savings as a consequence of step up on these cost savings in the second part of 2018 compared to the first part of 2018.Looking at our full year outlook, we expect underlying operating income to be between EUR 190 million and EUR 200 million. In Mail in the Netherlands, we expect our addressed mail volumes to decline by 8% to 10%, which will be partly offset by price increases. Based on the new SMP concept decision, we adjusted the expected impact from ACM measures to between EUR 50 million to EUR 70 million, fully visible in 2021. And that part is included in the volume price mix effect for 2019. Our autonomous cost increases will be slightly higher than in 20 -- will be higher in 2019 due to the CLA, based on the principle agreement that we've reached with the 3 of the 4 unions. This will, of course, impact segment Mail in the Netherlands and PostNL order as well. We expect cost savings to be between EUR 45 million and EUR 65 million. And of course, they will partly be visible -- the biggest part will be visible within Mail in the Netherlands, but also part will be visible in PostNL order -- particularly the part that relates to overhead cost savings at group level. In Parcels, we expect revenue to grow and will continue to grow. Herna has indicated why we believe that growth will continue, and we expect margin to be within the 7.5% to 9.5% bandwidth. And these numbers also include an improvement on Spring in comparison to the performance we see from Spring in 2018. So all in all, an UCOI outlook between EUR 170 million and EUR 200 million.Maybe a bit of extra or additional information that we talked about throughout the year is to try to get you on a better page as to how do -- does the UCOI definition, or profit definition UCOI relate to EBITDA. And here, we make that bridge from UCOI to EBITDA before IFRS 16 consequences. And subsequently, we show the adjusted leases impact to get us to an EBITDA expectation for 2019 of EUR 295 million to EUR 325 million. And together, of course, you have to correct the UCOI for the one-offs, changes in pension liabilities and provisions and, of course, the noncash depreciation and amortization, which is included in UCOI. That first step gets us to EUR 250 million to EUR 280 million and the impact of IFRS 16 is EUR 45 million on EBITDA.The impact of that IFRS 16 adjustment on operating income net profit is expected to be nonmaterial, although straight-line lease expenses will be replaced by depreciation and interest expenses. As a consequence, the cash flow statement, of course, will show a shift from net cash from operating activities to net cash used in finance activities, where you'll see the lease payments to be taken out of the cash flows.So what we expect from cash conversion in 2019. The most important thing to highlight here is that translating underlying cash operating income is to look at the net cash from operating and investment activities, where we just said the impact of IFRS 16 is visible and in line with the depreciation and amortization.As you can see, in 2019, we expect to invest cash in working capital again. However, the amount of cash will be lower than the number we've seen in 2018. After subtracting CapEx bottom line, the expected net cash from operating and investment activity will between EUR 90 million and EUR 120 million and that is then subsequently the money that is -- that we've left for payments for all our financial lease obligations, potential acquisition and for the cash part of dividends.On financial strategy, we have a solid financial position, and we aim for progressive dividends. The balance sheet end of 2018 showed a positive consolidated equity of EUR 46 million. We still have a Eurobond with a coupon of 1%, with a maturity date November 2024. The net pension liabilities, which is the composition of one top-up payment left, 2 years of regular pension payments to be made on transition pension schemes as well as the final payment to be done at the end of 2020, amounts to EUR 296 million. The lease liabilities that will account on our balance sheet as a consequence of IFRS 16 and will always -- have always been part of our leverage calculation, amount to EUR 188 million. And the cash position at the end of the year was EUR 269 million positive. That gets us to the adjusted net debt position and that drives the calculation of our leverage ratio, which for 2018 was 1.9.From financial strategy to our dividend policy, as said a couple of times already today, our dividend policy remains unchanged. We aim to pay progressive dividends and developing that in line with our operational performance. The payout ratio is set at 75% of underlying net cash income and will be paid in cash or in shares at the choice of our shareholder. The condition for paying out dividend is a leverage ratio, our adjusted net debt, as I said before and shown on the previous slide, over adjusted EBITDA that has to be below 2.0. This graph shows that following today's announcement, the development of the leverage ratio implies that the period we'll have to delay dividend payments temporarily after closing of a transaction. And that, again, assumes completion of that transaction in the fourth quarter of 2019.When cost savings and synergies will be kicking in, being accretive as of the first year, you'll quite quickly see a decline in the leverage ratio again, which will allow for restoring our dividend payments. And that's also visible in the priorities we apply for capital allocation. First priority is the aim to distribute progressive dividends. Secondly, we intend to invest in further growth if and for as long, of course, that will be value accretive. And we also express our intention to see if there's ways to compensate for dilution of earnings per share in future when we've seen the full run rate synergies of the consolidation leading to a reduction of the leverage ratio.On this slide, the dotted line resembles the expected leverage ratio on the back of Q4 potential completion of the transaction. The straight orange line is the development of the leverage ratio without the consolidation taking place.Then to conclude today's presentation, we have confidence in our transition. I have explained to what the key drivers of our 2019 performance are. We expect an underlying cash operating income of between EUR 170 million and EUR 200 million. And of course, I want to underpin this outlook might change if we're allowed to set a next step in the consolidation process later in this year.On the 7th of May, we'll give more insights on the longer-term improvement of sustainable value creation for our parcel business. And added to that, we'll combine that for a mid-term view on PostNL as well as the financial metrics we'll use guiding you for that mid-term period. So thank you very much. Jochem, I think back to you to open up for Q&A.
Yes. Marc Zwartsenburg, ING. First of all, is there -- has there been any contact already with the ACM in the process towards the proposed merger today? And is, in the cash EBIT contribution you expect, already significant amount of revenues in there that are being asked by the ACM to make a deal more likely? That's my first question.
The answer on any contact with ACM, the answer is no. So we are submitting our request today. We expect in the next coming period lots of discussion meetings and questions we need to answer. In the cash EBIT contribution, we didn't take into account measures or measurements taken by ACM or whomever.
So there's nothing in there? This is simply cost synergies.
And of course, our normal course of business, in which you have certain regulatory developments already.
Okay then. Then to the synergies, the EUR 50 million to EUR 60 million cash EBIT contribution. If I look at EUR 200 million of revenues for Sandd, maybe you can comment a bit on what the profitability of Sandd is. And plus, also what their net debt status is -- was --is -- was at the end of '18. But also given that there's EUR 200 million and maybe they're slightly profitable, that means that there's a huge amount of cost in there, which should lead to a higher cost-saving potential. So taking over, for instance, all the staff, is that included in the EUR 50 million to EUR 60 million cash EBIT contribution that you take on and keep 16,000 mail people, which, in the end, I think, if you merge them, they can't walk the street together, I presume. So that must be a higher number in terms of cost savings. Can you give me a bit of a more indication how you come to the EUR 50 million, EUR 60 million of savings synergies?
Yes, certainly. This is better. A couple of questions, Marc, you raised. As said, this is not about the intrinsic value of Sandd. This is all about the synergy value we can capture by transferring that volume to our network. And that's the basis that the under the EUR 30 million enterprise value is being based on. And as you know, enterprise value, it's -- I don't know exactly, and it's more in the likelihood for Sandd, how that will be split by debt or equity holders. It's the way we value the business given the synergy potential we expect to make. The EUR 50 million to EUR 60 million net UCOI contribution, as we said, is a consequence of that integration approach as we currently can assess. As I said, we'll take the period from now until completion to work out, in more detail, how we can do that integration best. And it does take into account the fact and the commitment we announced that we'll offer all postal deliverers of Sandd a place to work for at PostNL. The way we can do that is, of course -- because, and indeed, they will not walk side by side after the integration, the same street, so we'll, as I said, gradually migrate the volume from one network to the other. Mail people will then join that -- will amend the postal routes that will go -- that will lead into dropped duplication, the distance between a house or that you need to pass before you can deliver to the next households will also diminish and those elements, together with cost savings in the infrastructure, will add up to that EUR 50 million to EUR 60 million based on what we can assess today. Afterwards the completion, we'll have a more detailed implementation plan, but this is the assessment we've -- we're able to make so far.
So to be clear, the 16,000, all, I assumed, become postal men for PostNL, under a condition?
Yes. And of course, you'll have in that population, as well in our own mail delivery, some natural attrition over time that will allow us to combine those workforces without any -- or too much negative cost implications.
That leaves still my question. Where do those people -- then what are they going to do? Because, yes...
They are going to deliver 700 mail -- 700 million mail pieces that Sandd currently delivers into the PostNL network. And I said, with natural attrition, we'll optimize the mail routes and take out part of the cost base of the combined organizations.
Together with the vacancies we have because we do have a lot of vacancies as well, so vacancies, natural attrition rate, together with the fact that 720 million pieces cannot be added to our network without extra hours of people working on the street makes that we do think we can offer them a job at the day of integration. And of course, going forward, we will maintain to save costs, and that means that we have to adjust the organization and that we have to adjust the workforce. So we'll continue in our normal process of cost savings and adjusting the organization. But the day we start, we start with all mail deliverers of Sandd.
And then in terms of approval, the Secretary of State, what -- is she involved in here in this whole merger process? And how likely is it that she will, if the ACM opposes, for example, that she withdraw Article 47 and still push it forward?
Of course, when you want to acquire a company, it's a negotiation between the 2 companies. We first, we'll start the approval process of ACM. And hopefully, that's where it ends. The State Secretary of Economic Affairs did send a letter to Parliament, in which she said only after a negative advice or non-approval of ACM, she will be in a position to act because of a general interest. And that's what she confirmed to Parliament as well, but only after that process.
And then maybe a final one. I've got many, but maybe a final one. The earnings accretion, is that 2020 you're referring to 1 year after? What is it exactly?
I have said, it assumes, for the financial analysis in these presentations, we've assumed a Q4 2019 completion date. And within that, if you take it from that assumption, within the first year after completion, we'll see it being accretive to UCOI.
So 20 here.
And that's then 2020.
Like 15 if you take the balance, okay. Right.
If you make a balance between those points, you have the answer.
Yes.
Sorry to -- next question here in the room. [Operator Instructions] Thank you. Please go ahead.
Yes. Frank [indiscernible]. A question on your dividend policy, some clarification. Suppose that the approval would take longer than expected, how will that impact your 2019 dividend policy? Will you simply continue with announcing and paying dividends as long as there's no approval?
I think what we've said is that there's no change to the dividend policy, and that's exactly what the answer is. And the reasons why we state the point here is assuming Q4 2019 completion, the combination of the purchase price, the integration costs and the phasing of cost-saving initiatives will get us above to 2x debt ratio, and that causes a potential delay in dividend payments. So if we don't exceed the 2.0, we'll just continue with the dividend policy we have.
So in theory, suppose that the approval would come in the course of next year, you will have to -- you will announce a '19 dividend as in...
The dividend policy will stay, as I said it will.
Moving to the operator now.
Yes. There's a question, Mr. Edward Stanford from HSBC.
Regarding the deal, have you had any conversations with the government or otherwise? Or do you expect any undertakings that you may have to give in terms of pricing perhaps or otherwise, given that you're effectively creating a monopoly? Has that been factored into your thinking? How does that influence how much you pay for the business?
Difficult to forecast at this moment in time. What we did today is to submit our request to ACM. And for sure, in the next coming month, we will be able to give a little bit of insight on this, but at this moment in time, we'll wait for the questions of ACM.
The next question here in the room.
Wijnand Heineken, Independent Minds. Just for my own understanding, a few questions on what has already been asked. First, with the dividend, let's assume that the deal closes in Q4 and you stick to your dividend policy, that would then mean, under that assumption, that after the 2019, there will be an interim dividend paid and that will be done the final for the year as well, I presume. Okay. And then the other thing about the implementation costs. It was already been discussed, well, pretty similar towards the annual synergy effects you predict. So that might balance each other out short term. On the other hand, you said earnings accretive within the first year. So how is -- how are these 2 related in the start-up phase? Will the implementation cost be as gradual as the transfer of volume from the Sandd infrastructure into your own? Or will there be some differences between the 2 that maybe, for starters, the cost will outweigh the benefits you attempt to realize?
In general, the phasing of those volumes from one network to the other will gradual -- will be gradual. And also, to a large extent, the implementation costs will also be gradual. Certainly, there might be some deviations on some cash points, but in general terms, as you migrate that volume, you'll incur the biggest part of your implementation costs.
And that's also what is stated in the presentation that we expect implementation cost to be cost in the first 2 years. And on the slide -- on the integration of Sandd, we expect the integration of Sandd in 1 to 1.5 years, so there is -- it's in, I would say, for 95% aligned.
For our next question, we are going back to the operator please.
Yes. The next question is from Mr. Henk Slotboom, The Idea.
I've got a few. First of all, I understood that there's no breakup fee that applies to this deal. First question is, is that correct? And secondly, how do I interpret that in terms of deal certainty? That -- if there's no breakup fee, I know the people in Apeldoorn are doing well enough that they are not going to accept being left empty-handed, put it in those phrases.
Hello, Henk, we miss you here in the room. I'll give my answers via the mic. What is exactly discussed and put into the active agreement with Sandd, we will not disclose. So no answer to your first question, unfortunately. And your second question, I didn't hear or I didn't understand very well, so please...
It was in relation to the breakup fee. I understood this morning that no breakup fee applied. You're saying something else now. And that was -- if there would not be a breakup field -- breakup fee, then it -- I would interpret that as a high degree of deal certainty, but if you say you don't make any comments on that then I think the second part of that question can be skipped.
But it's exactly the same answer as I did give this morning. We didn't -- we do not disclose content on active agreement.
Okay. Another one, as you will know, there are still a couple of loose ends Sandd has to deal with amongst others, the outcome of the ruling there was in a case started by FNV along the fact that Sandd used a company, CLA, whereas FNV argued that due to the fact that there was worse that they should have used the transport sector, CLA. On the basis of first ruling, Sandd was due -- was ordered to make a payment retroactively. I understood that Sandd went to a higher court. It went an appeal to this -- against this decision. Has there been -- Have there been any provisions, the EUR 130 million is hard amount? Or am I right to assume that a certain amount is being put in escrow that if one of these legacy issues falls the wrong way that, that will be reflected in the takeover price?
Hank, Pim here. Of course, we're aware of those proceedings. And as I told you, it's EUR 130 million enterprise value, which certainly means that we'll take any account of potential liabilities, and we've catered for it in the terms in the active agreement.
Yes. And then final question on Sandd. The churn rate amongst its delivery personnel, and I believe that you referred to that as well, Pim, that part of the -- yes, if it may be overpopulation of deliverers on the last mile that may solve itself. Can you -- what do you expect to happen in that respect? Because if the churn rate is going to spike because you're buying Sandd, assuming that everything will go as planned, it would strike me as rather difficult for Sandd to hire personnel, you would normally expect, if I want a delivery job, I would apply with PostNL, I guess.
In my view, if you look into the deliverers of Sandd, I think they're on the -- in the same way motivated as deliverers of PostNL and that's because they want to do their -- the job as good as possible. So the turnover rate of our mail deliverers, indeed, of course, is a role in our way of how we think we can integrate the organizations. And as said, integration plans still to be made by the 2 companies. And as of today, that operational information can be shared to come to that plan, but we are not forecasting spikes over to ever because of the fact, I think, people are at the same level in our -- in the same -- at the same level and in the same way motivated to do the job as well as possible.
Marc, you're in the room?
Yes. A couple of questions left. Maybe on the dividends argument, so you say, okay, we keep the leverage ratio, okay, we stick to the policy of 2x. But have you ever considered a different way of paying the dividend that would still enable, let's say, extra dividends, something like that to just sustain it?
Now what our view is that we want to maintain a prudential, stable financial position of PostNL. And we have said that we'll continue with the dividend policy as it stands. What we'll also say, and it's part of the deck that we look at, is that when we've achieved the run rate savings, and as a consequence, have reduced our leverage ratio well below the 2.0 again, the capital allocation rules that we've defined is to reinstate our aim to pay progressive dividends as quickly as we can. Subsequently, we'll always consider whether or not there are growth options that will be value creative for our stakeholders as well. And at that moment in time, we'll -- we intend to consider whether or not there's ways to limit the dilutive effect of our current dividend policy, which is, of course, a choice dividend on stack -- stock and cash. So later on, in the years, we'll probably consider changes to take out that dilutive element of our current policy.
Yes. The question was more that do you want to increase the dilution a bit to sustain a dividend? I think you pay a full-strip dividend.
No. the dividend policy will remain unchanged.
Then another one. If I look to Slide 15, in terms of interpretation. It's the one with the cash EBIT contribution. The cost savings are on a negative scale. I'm not sure how I should read your orange figure. Normally, I should add orange -- deep orange with light orange and then subtract the integration costs. Is that how I should look at the carrier?
No, the other way around. You need to add the integration cost in the light orange and that will be offset by the dark orange. So the orange -- light orange one is the consequence -- is the -- in a way, the cost, the UCOI cost of a later cost saving. So it's a negative consequence.
Oh, it's rather than saving, it's phasing. Okay. Not a phasing of the cost synergies?
No, that's the orange. The dark orange one, I should say.
We'll change the wording because now I understand your misunderstanding. Yes. It's master-plan saving.
Yes. I know we can't use the word but it's easier. Okay, that's clear now. Then on the phasing, so after year 4, we are back to the old target of master-plan savings and then -- or do we still miss out on EUR 50 million to EUR 70 million after the 4 years? How should I read that?
You, on a UCOI contribution, you miss out on the EUR 50 million to EUR 70 million but will have hit the overall cost savings over those years, but that comes at a price. You take cost out with the same number as we've said before, but it will take you longer to get there, and that has a cost. That is EUR 50 million to EUR 70 million. So we'll not exceed that cost-saving number to offset this cost. That's not what we're saying.
Thank you, Marc. Between our 2 companies, we should be able to work out the different colors of orange, I'm sure. Let's go back to the analysts waiting online, please.
Yes. The next question is from Mr. David Kerstens, Jefferies.
Just a question to better understand the regulatory approval process. I was wondering, after all the discussion that has taken place within the Ministry of Economic Affairs and then in Dutch Parliament, why do you first have to ask permission for the takeover with the ACM when you probably already know what their outcome will be given how stubborn they have been with regards to the Significant Market Power [ fell ]. Is it not possible to go directly to the Minister of Economic Affairs and implement Article 47 in order to save time? But will happen is they take 4 months and then say no. How long would it take before you can get a positive ruling on the Article 47? That's my first question. Then the second question would be regarding the market position of Sandd. Do you see already any impact on your volume development from customers that are coming back to PostNL? And is that baked into your volume guidance for 2019 will develop from smaller volume decline of 8% to 10%?
First question. It's impossible to have a direct route to the Ministry of Economic Affairs, so you'll have to go through ACM because out of -- they are the regulator for -- or at this moment in time, the one's who have to approve the consolidation. So it's first to ACM. And if they do not approve, then there's another route possible. How long the route by the Ministry of Economic Affairs will take, we don't know. But our first focus is on getting it done via -- or with ACM. Then on your second question, the 8% to 10% in relation to the 10.7% of 2018. No, we do not see that already volumes are shifting. What we do see is that the volume decline in direct mail is less progressive than in the last few years, and there you probably see the economic positives we saw over the last years. So that's the main reason behind the lesser volume decline in 2019 compared to 2018.
And maybe since we're talking about ACM here. Can I also ask a question about significant market power? I saw that you have included that already in your 2019 guidance, the original impact of EUR 50 million to EUR 70 million. Can you give an indication how much is that actually in the 2019 guidance for Significant Market Power now?
No, we didn't give an indication on that, and we won't do. The only thing we want to say is when there will be a decision of ACM and when the decision will not change from what we see of the concept published by them before Christmas, then the impact will be again EUR 50 million to EUR 70 million. If that decision will be taken in 2019, part of the hit will be in 2019, and we've taken it into account into our outlook. In other ways, if they will come up with a decision this year, it's already part of the outlook, but we do not want to forecast timing, we do not want to forecast what will be the outcome of that decision. This is more safety measure and giving you a clear outlook for 2019 and than it's a forecast of the outcome or timing.
The last time you appealed with success. What was different this time around that you decide to include this potential outcome from the consultation, et cetera, already in your guidance for 2019 when the decision has not been made yet?
In my view, same reason as last time. When they take the decision, of course, we can go to court, but probably, they will take as long as they did last time, and that means that implementation needs to be done within 4 weeks or 8 weeks, but at least relatively soon and before you have an outcome of -- for a legal process, that will take much more time. So there's always a time lag between a final decision and probably, or hopefully or winning, a court case. And that's not different from the last AMM or Significant Market Power decision.
And as you've seen in the previous instances, after the moment of final decision, where you quite quickly see the consequences of that decision leading to the financial consequences we've seen before, and that's the reason why we've taken it into account in our outlook numbers, as Herna just said.
Before we dive into Significant Market Power, I would like to do that when we discuss Q4, so I would like to round up or -- on the consolidation and then move to Q4.
And we still have a number of people waiting. Operator, please?
Next question is from Ruben Devos, KBC Securities.
Just a short one regarding the transition to adjusted net debt. Could you just help us understand the rationale to the extent the net debt definition? And then I was just wondering, yes, we've seen with other companies they sometimes include the unrealized synergies or part of the unrealized synergies in the EBITDA in their leverage calculation. Just wondering could that be a possibility as well with Sandd or is that a far stretch, let's say?
On the last one, we have not included unrealized cost savings in the way we calculate our leverage ratio. We -- what we do is we take account of the net debt position based on the actual net debt, lease adjustments and pension liabilities. And then of course, in relation to the phasing of the synergies, as you can see on Slide 14, that will contribute to the adjusted EBITDA, and those elements together will get us to the leverage ratio that will apply in relation to the dividend policy.
Okay. And it's fair to say that the adoption on -- from IFRS 16 has inflated the carry leverage quite substantially?
No, I don't really think so. Of course, IFRS 16 leads to a higher EBITDA number. And the lease obligations that we have and did have were always already taken into account in the adjusted net debt that we used to calculate the leverage on. But also on this point, there's a specific slide in our Q4 deck so we can spend a bit more time later on if we go through our Q4 numbers.
Next question online?
Next question is from Mr. Matija Gergolet, Goldman Sachs.
Yes. A couple of quick questions from my side. Firstly, just a clarification on the interim dividend for 2000 -- so for this year, the one that you should pay. I couldn't quite get whether you intend to pay an interim dividend because it's before the closing of the deal or not. That's the first question. Secondly, when it comes to Sandd, are there any, say, synergies also on your Parcels side? Could you use some of the, what you call idle infrastructure in the future for your Parcels operations? Third question, could you give us any, say, factual information about Sandd 2018, like, okay, revenues you gave us, but anything about profitability? Are they making any positive EBIT or not? And then just last one, just a bit more conceptual to help us understand clearly how a lot of mail items, 700 million, but the price per mail item is significantly lower than what you have. Why is that? Is there any option? Or is it potential for you to reprice those mail items in the future or not?
On your first question, when it comes to the clarification of the interim dividend in 2019, the question here in the room was, assume that this consolidation will be approved in Q4, then the interim dividend is already paid because they will be paid, of course, in August. That is then the dividend paid for 2019. And to that question, the answer is yes. Then Sandd synergies on the Parcels side, the answer is no. No synergies on the parcel side. Do we have factual info on the 2018 revenues and profit? Revenues are, of course, disclosed. And profits, we don't have. And when it comes to mail items, their price is lower. Can we reprice? The answer is no. And that's also what we said publicly that we will adhere to the contracts they made with their customers, so that's how we will -- that's the price for which we will deliver those mail items.
Okay. Let's round it up here and move on to Q4 and full year. And after that, will be more room to ask questions if there's any further questions on this topic. Let's move on.
Yes. Please, let's start here in the room.
Marc Zwartsenburg, ING. What happens to the proposed merger and the terms you put out in the press release if the ACM demand certain remedies? Will that change the EV? Will it break the deal? Anything you can add to that? The cost savings, the EUR 45 million to EUR 65 million you're guiding for, for 2019. You say they will be impacted in case you merge with Sandd. But since that is expected only in Q4, I would suspect that most of the cost-savings initiatives are already in place by then. Will that change the number then massively only by, say, EUR 5 million or so? And then on Spring, can you remind us what the EBIT result was of Spring in 2018? And I think you mentioned, Pim that the loss will be lower in 2019. Can you give a bit of an indication what we should expect for Spring? And then related to that, why is the guidance on the margin, if you expect Spring to improve still 7.5% to 9.5% for the Parcels division? Should we improve it into 8% to 10% or so? And then lastly on the leverage ratio, the dotted line, including Sandd merger, is it also including this divestments of Germany and Italy and the proceeds from that? And can you provide us the number that you included, if so, in that calculation in terms of proceeds for those 2 entities? Those are my questions.
On your first question, what happens to the proposed merger? As said, we did take into account, of course, our ongoing business and the synergies out of consolidation. We did not take into account yet the measures of -- the possible measures of ACM. And of course, we will value case by case what those measures will mean for the merger, but I think too early to give guidance on what effort. And full confidence that, together with them, we try to bring it to an approval.
Can you change the EUR 130 million EV, for example, or can you change or walk away from it et cetera?
I think what we've included in the financials in relation to the -- and tend to consolidate is everything we can tell you right now. But what we've said before, both Herna and myself is we'll only do that transaction if it's going to be value accretive for the company and our shareholders. And I think the slide in the deck on the proposed acquisition indicates the regulatory processes and how we could end up with an approval and what happens if we don't get the required approvals. But I said, we'll only do a transaction if it's going to be value accretive for PostNL and its shareholders.
On your second question, the impacts of cost savings in case of merger, assumed Q4, and it's still an assumption, as I said, then, of course, it will be not the biggest impact in 2019. It will be bigger in 2020. On the Spring EBIT results, we never gave guidance on those EBIT results.
Well and if I -- I think, Marc, you said it will be less negative or negative in 2019. What I said is that, of course, in 2018, compared of -- let's say if I did say it wrong, intended to say, its '18 compared to '17. The delta on Spring contribution to the UCOI was EUR 6 million. So it was EUR 6 million less than in '17, and we expect Spring's performance to improve from '18 to '19. At the moment, we've announced the intent to sell Nexive and Postcon. We've changed our segment reporting, as you know and at that moment in time, added Spring to our Parcels segment. That has the consequence that -- we brought down our old range to 7.5% to 9.5% margin. And there's no reason why we should be differentiating from that margin with the current perspectives, both on Parcels and on Spring performance for '19.
Excluding Spring, the old Parcels business are still within the 9% to 11% range. Is that something you can confirm?
That's what we said before. And that's what 7.5%, 9.5% still expects to be delivered, yes.
Seeing no questions at this stage here in the room, let's go back to the operator, please.
I have a question about the presence of Germany and Italy and its general impact...
The expected proceeds based on the adjusted valuation after the adjustment for fair value at the end of Q4 of approximately EUR 20 million. The remainder of that position, we assume, indeed, to be part of the cash flow that leads to the leverage graph, the orange line on the slide you referred to, Marc.
Operator?
The next question is from Mr. David Kerstens, Jefferies.
I just would like to clarify a little bit further the cost savings -- the timing of the cost savings and why the run rate you're guiding for, for 2019 of EUR 45 million to EUR 65 million is a lot lower than compared to your original plan that you presented a year ago. That cannot just be a slowdown related to Sandd, right? Are there any other factors that are leading to that relatively lower number? And also, I think you mentioned that the total cost savings remain unchanged, but you also highlighted now the new mail route and equal flow model as a new source for cost savings, and what other savings related to this new initiative coming in, I think, you said in 2021? And then finally, maybe just to clarify, I didn't get the point you made regarding the remaining settlement payment for the pension plan in -- I thought you had another EUR 150 million to EUR 200 million outstanding for 2021. Is that correct? Or will that be lower, or will you pay that earlier?
Your first question on the cost savings and the bandwidth of the EUR 45 million to EUR 65 million. When we gave guidance on the cost-saving plans, I think 2 years ago, what we did say, more or less 6 months ago, is that we didn't want to guide for Mail Netherlands because of all the regulatory changes, the impact of AMM and the changes we still expect. And at that moment in time, we also -- we did not gave guidance anymore on the cost-saving plans, except of the year we are in. So we gave guidance for the cost-saving plans 2018 last year, and we did give guidance for cost savings 2019 for this year. So the New mail route, we do no split out the cost savings per project, we only give you a total number. The New mail route will add indeed to the cost savings in 2020 and 2021, even so to 2022. And when we come back on our Capital Markets Day in May 7 on which we will give mid-term guidance on PostNL, we give mid-term guidance on cost savings as well because that's a very important factor, of course, in the total. And the settlement payment, the settlement payment mentioned on the slide for 2020 of EUR 263 million, it's the settlement -- so after the payment of this settlement, there will be no payment in 2021 of EUR 150 million to EUR 200 million.
That part of EUR 263 million hasn't already been paid, right?
So if you look at the overall pension liabilities on our balance sheet, it's EUR 296 million. You need to split them in EUR 33 million, a last and final fifth installment on the unconditional funding obligation. Then the remainder of EUR 263 million remains to transitional plans. That includes 2x a yearly payment for '19 and '20, and that leaves an ultimate payment to be made before the end of 2020. After which, basically, all transitional pension funds will be funded and also the liabilities, of course, will then be out of the balance sheet.
And then what is the annual payment you expect to make and what's the -- the final payment? Just to get those numbers correct in the model.
I think we've said before there's approximately -- within the year, it's approximately EUR 115 million of pension cash-outs in the year, which includes this number approximately, I think, EUR 30 million roughly a year for '19 and '20. So if you detract approximately EUR 60 million to EUR 70 million from the EUR 263 million, you have the remainder full and final payment that we need to make to fully fund the transitional pension arrangements.
All right. And then maybe going back to the cost savings. You said the total savings remain unchanged, but you now also have an additional source of savings, or was it already included in the previous savings target of EUR 500 million over the 5-year period until 2020?
The New mail route was indeed included. What we all did say is when you look into cost savings, we have plans, which are, of course, already developed and plans to be developed. And the New mail route is one of those plans, which was 2 years ago to be developed and now ready for implementation.
Thank you, David.
The next question is from Mr. Ruben Devos, KBC Securities.
Yes. Two questions, just to come back on the equal flow model, just wondering what is the feedback of some stakeholders, such as the employees and the customer on the future implementation of the new model. I looked at the turnaround time. Could the come -- mail could be delivered over a 5-day period instead of 3 days? Or maybe are there any pushback from customers, that sort of thing? Then the second question just relates to the tight labor in the transport market. Could you give some flavor on the tight conditions as how you manage those challenges, let's say? And I can imagine that capacity constraints could lead to cost inflation. So just thinking, is there a possibility that at a certain level you would sort of hold back a bit on stimulating Parcel growth and -- or what's the idea?
Your first question on the equal flow, what is the feedback? There is a positive advice from the worker's council on the implementation of the equal flow model on the New mail route. So that station is passed, which is -- that is passed. I think employees are positive because it offers them an opportunity to have longer working -- to have more working hours a day than they do have currently. And also for customers, it's a plus because they have the possibility to have their non-time critical mail on 5 days a week instead of 3 days a week. So as far as we can see now, the stakeholders who are involved to equal flow model or the New mail route are positive. How do we manage the tight labor market? Partly by, of course, transferring people from Mail to Parcels. So last year, quite an amount of people went from our Mail business to Parcels to start working as a Parcel driver or working on other jobs we have within Parcels, so that's one. Secondly, we have a lot of specific programs to hire enough people. And those specific programs are also programs in which people can start in our company to work as, for example, unexperienced people, and we give them experience. And by giving them training and experience, we educate them to be able to do the job, but also having special programs to make sure that the people who come in stay longer so that the attrition rate is lower than we had before. And we do have special hiring programs on the labor market in the Netherlands. So do we hold back growth a little bit when labor market becomes even more tight? What we see at this moment in time is that PostNL is a very attractive employer in the market for Parcels. So we do not expect, although it is a tighter labor market, we do not expect, at this moment in time, that we will get severe issues in 2019 in finding the right amount of people.
Just a few more questions before we round up. Please, operator?
Okay. Your next question is from Mr. Henk Slotboom, The Idea.
Yes. I'm here again, not physically but on the phone. And I am a bit puzzled what you said about cost savings. If I can turn to Page 40 of the handout, there you guide for cost savings in the period 2019-2021 of EUR 180 million to EUR 200 million. Is that on the basis of PostNL as it is today, so not taking into account any merger, takeover scenarios or whatever?
Yes.
The answer is yes, Henk. So the slides you -- the Q4 slides are numbers based on our current organization, not taking into account consolidation.
Then maybe a follow-up on that one because a year ago, you gave a cost savings target of EUR 500 million in the run-up towards 2020, whereby you said part of that may show in 2021. If I look at the numbers, then the EUR 253 million and let's take the bottom -- the top end of the range to EUR 200 million, brings me to EUR 453 million. Where's the remainder, EUR 47 million?
I think it comes back to what we said at the -- with the Q2 numbers in 2018. What we said, at that moment in time, is that the amount of changes we do see in our regulatory environment makes it difficult to give clear forecast for Mail in the Netherlands. And that's also the reason why, at that moment in time, we took away the forecast for Mail in the Netherlands for 2020.
Okay, that's clear. Then another question on the labor situation. You recently entered into a new CLA, whereas I understood that you have a corporate CLA. So you may deviate from what's happening in the rest of the transport sector, the approval you have to use the corporate CLA, as far as I am informed, expires in September. Or have you renewed that approval already?
The answer is no. We did not renew it already.
So there's still -- because one of the unions is pushing hard to -- what they did with Sandd. Do you expect that you can renew it after September?
At this moment in time, we do. There is no reason to assume different.
And of course, we expect to conclude the CLA also before that moment in time.
Which you did already. The CLA you recently announced expires after September.
That's not -- to be very clear, Henk, we have a principal agreement on the CLA of PostNL, so that needs to be still approved by the members of the unions. Not yet an approved CLA. And then we start negotiating, of course, for our postal delivers, CLA somewhere in summer or just after summer. And your question relates to the latter.
Okay, perfect. Then a final question from my side. You recently said that you wanted to get rid of the -- I don't know if it's the right term, namely the payrolling construction at the sorting centers and that you wanted to offer these people a normal -- yes, the same pay for same work, let me put it in those phrases. How quickly do you plan to implement it? And how much, just as an idea, are the extra costs of that? Because, I can well imagine that, that makes it a bit more expensive for you.
The difference between what we would pay under a PostNL CLA and what was paid or is paid by contracting party is not that huge. We never used contracting for a reason of differences in payments. So the cost difference is not that big, that's one. So we want to avoid or we want to -- yes, we want to avoid all the rumors and all the issues, which were there in the markets for us and around us because we're using contracting and assets not because of the reason we don't want to have -- we don't do it because of payment reasons. So that's the reason why we did say then let's skip with it. And in the end, all the discussions in public on contracting, and we'll start using normal temporary agencies.
Thank you, Henk. Let's have 2 more people on the line, operator. And move on to the first one of those, Mark McVicar, I think.
A couple of questions. First one's on the discontinued operations. Obviously, you had an operating loss of EUR 41 million in 2018 and the cash flow statement says there was a EUR 72 million cash transfer to discontinued between now and the point of sale, which we expect that run rate of losses to continue. And do you see yourself having to put any further cash into those business before their disposal is my first question.
Back to the discontinued. As we've said, we've adjusted the fair value based on the current status of the divestiture processes, both in Italy and in Germany. And we expect to do a transaction before the summer of 2019 and have taken into account whatever cash is required to get us to that transaction based on the current business performance of those countries. And as I also said in Q4 '18, there was an improvement in performance compared to 2017. And we're in the process of entertaining the next process of that divestiture process with multiple buyers in for both countries, which makes us, at this moment in time, comfortable with the assessment on value that we've included in our balance sheet. Yes.
Okay. And just a linked question that goes back to one before. Again, in the accounts, you've got the discontinued assets minus liabilities of EUR 74 million. So that's the net carrying value of the 2 discontinued businesses. Is that right?
Yes, but there's also some technical intercompany adjustments that go between continued and discontinued operations that are also part of that.
Which would...
There's, of course, trading also, for instance, between Spring and those countries that will also lead to intercompany adjustments that you also need to reflect and are part of those positions, too.
So would that make that gap smaller or bigger?
In actual performance, smaller.
Smaller, okay. And then my other question was if the mix of business continues to be basically letters down, Parcels up, why should the working capital outflow be less in '19 than '18 if proportionately they move in the same direction?
A couple of components. As I tried to explain, a big impact on that 2018 working capital investment was big settlements on bilateral positions that will not follow the same pattern year-over-year. And of course, knowing that cash flow creation is fundamental to our dividend policy, of course, we'll always strive to improve on our working capital position. Although organically, the element of Parcels growing and Mail declining will require working capital investments. So we certainly, as one of the 4 measures that we also manage the business and guide our companies on, will be an increase in performance on cash, fundamentally addressing DVO -- DSO, and that should also lead to part of this improvement.
And for our last question of the day, let's go to [ Frankfurt ] Tobias, please.
So just some financial questions from my side. Firstly, working capital of Sandd is probably negative, so if in your EV calculation, any adjustment for that working capital in there? And secondly, do you find any real estate disposals for 2019? And will they contribute to your underlying cash operating income? And if so, could you give us an idea of what the amount is in there?
Sorry, Tobias, can you -- it was not quite easy for me to get your first question. Could you maybe repeat the point?
Okay. I'm assuming Sandd being -- it might also have negative working capital, if there's any adjustment in the EV calculation for Sandd for a negative working capital? Or would you just take the balance sheet as is in the EV calculation?
Are you asking what the implications of the consolidation working capital investments are going to be?
Yes, just Sandd -- sorry, maybe I'm quite -- maybe buying Sandd on that fee if it's for EUR 130 million but, say, a EUR 15 million negative working capital would be considered as -- is that part of your consideration or not? That's the question.
No, well -- sorry, now I get it. The EUR 130 million is the enterprise value on a cash and debt-free level, assuming a normal working capital requirement that is part of Sandd's business model, at this moment in time. And then if we then subsequently talk about the synergies, you talk about the equal contribution of those synergies. So yes, we've taken into account the working capital requirement. Of course, we'll take on, at the end of that, the customer contracts as Sandd concluded them. But the working capital requirement related to those contracts are the normal working capital requirement that is taking into account coming up with EUR 130 million enterprise value.Yes, on real estate, also 2019 includes proceeds of real estate. We don't separately disclose them, but they will be slightly less than the year before. Also given the fact that there's, over time, of course, much of the real estate, particularly the bigger locations has been sold already, but part of the equal EUR 170 million to EUR 200 million relates to real estate disposal proceeds.
Thank you very much for joining us for a pretty long conference. But then again, lots of news today. Thanks very much, and see you next time. Thank you.