InPost SA
AEX:INPST
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InPost SA
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Good morning, everyone. My name is Gabriela Burdach, and I'm the Investor Relations Director at InPost. Thank you very much for joining InPost's Full year 2022 presentation.
Today, we will have comments from our CEO, Rafal Brzoska; CEO, International; Michael Rouse; and our CFO, Adam Aleksandrowicz. A quick disclaimer. Today's call includes forward-looking statements that are subject to risks, and it is possible that actual results may differ materially. I would like to confirm that this presentation is being recorded and will be uploaded on our website shortly after the call.
Rafal, over to you.
Thank you, Gabi and thank you all for joining us this morning. I apologize for my congested voice due to my call, but let's jump in, and let's try to focus on the key super excited news that I want to share with you. So InPost had another really fantastic quarter, and we can't wait to dive into the details because what sets InPost [ apart ] is our mission to make Europe e-commerce last mile more convenient, cost-effective, but also eco-friendly through our innovative locker solutions. And these lockers are game changers for both merchants and consumers. They strike very, very balanced by cutting costs through automation, while providing huge benefits to everyone involved. You will soon see how our growing market share is a kind of testament to the incredible value we offer to merchants but also for our end consumers.
Let's jump in to the next page. Our flywheel. For those who've been with us for some time, you are probably familiar with the flywheel concept. It's a strategy that creates a self-sustaining growth cycle. And it's our secret sauce behind the success and our global expansion. It all begins with bringing our lockers closer to consumers and offering next-day delivery which boosts convenience like never before. As a result, people start choosing our lockers as their go-to delivery option. While no logistics company, of course, owns the front door of a home, our lockers have become the destination for nearly 17 million Polish customers.
As our user base and their usage intensity grow, we become increasingly attractive to merchants. And what's very important. What fuels this growth cycle are our investments in data and technology as well as our dedication to sustainability which is a key aspect of our automated parcel machines delivery model.
On the next page, you may see 3 solid reasons why lockers are the ultimate consumer friendly and eco-friendly mass-market solution for last mile delivery. First, lockers offer unmatched convenience to customers who love having control over their packages, something that door-to-door delivery can't compete with. And our ability to consistently grow volume above the market, along with third-party research showing our APMs boosting an impressive NPS of 81 points, confirms this. Our score is much higher than our door-to-door rivals have got.
Second valid point, happy customers mean big wins for merchants. This drives the conversion. And here, our merchant NPS significantly outlines the rest of the market, proving again that merchants trust imposed as a reliable partner.
And lastly, lockers are far more sustainable than door-to-door delivery when used effectively, of course. In Poland, each merchant order delivered through our lockers can reduce the carbon footprint by up to 97% compared to door to door last-mile delivery. In the past, it was 75%. Now we did the recalculation because of the growing density, we boosted that savings. And as merchants increasingly focus on their suppliers' emissions, I strongly believe that our edge over competitors will only grow stronger. Next slide, please.
It's the fact that our remarkable success in Poland has caught many eyes, but it's in more developed e-commerce markets where our automation productivity and sustainability benefits truly shine. We are now operating in 9 European countries, including major players like the U.K. and France, the #1 and #3 e-commerce markets in Europe. In France and the Benelux countries, we keep them on [indiscernible] brand due to its strong customer base and brand recognition. But meanwhile, we are naturally expanding under the InPost brand in all other markets.
Moreover, by the end of 2022, our entire network boosted over 2,8000 APMs, making us the #1 APM network in Europe. Most of our APMs are in Poland, of course, where we are the market leader by a huge margin, but we are catching up on the other markets very quickly. In France and the U.K., we are already the top merchant-agnostic APM network in both countries. And we are also naturally pushing a capital-like expansion of put up points in other markets because it helps grow our client base for future automation, but also it captures the underlying volume there.
On the next page, few numbers. I'm really thrilled to share some of the incredible highlights from 2022 with you. First, despite facing major macro challenges. Our group delivered a record-breaking more than 740 million passes, which is 44% increase in comparison to 2021. During the Q4 peak season as European economies grappled with rising pressures, we experienced a 35% year-on-year volume growth in our international markets and impressive 80% increase in Poland, both being like-for-like organic figures.
In 2022, we also reported over PLN 7 billion in revenue, which is up 54% year-on-year. The cost and environmental staff with rising inflation, fuel prices impacting margins earlier in the year. However, thanks to our operating leverage and our natural ability to adjust prices with large merchants starting in Q4, as we communicated before, we achieved a record adjusted EBITDA of nearly PLN 2 billion for the full year. Of course, Adam will provide more details a little bit later.
Moreover, our top-rated mobile app remained popular in Poland, reaching more than 10 million users. And we also soft launched the Mondial Relay out in France in Q3 which continues to gain traction with over 350,000 downloads. And at the end, in Poland, we surpassed 1.3 users the household, total income was 70 million users in the country. Michael will discuss that later when he presents international KPIs, but I can already reveal that we've exceeded 2 million APM users in the U.K. as well.
In France and the U.K., we are already the #1 agnostic APM network, as I said. And outside of Poland, we have almost 9,000 APMs and more than 22,000 Pudo points, positioning us in this market similarly to where we were in Poland just a few years ago. Next page, please.
Our Q4 showcased robust double-digit growth as we outpaced the market in our key regions. You'll see that clearly on those bar charts. In Poland, we may say our stronghold. We continue to grow our e-commerce market share despite new competitors. Our flywheel strategy I described before, with consumers, merchants reinforced our full power to gain market share. InPost Poland's volume grew by 20% year-on-year, outperforming the market by 6 percentage points in Q4. In France, we out shown a sluggish market in H1 2022 with second half of the year, volume growth of nearly 30% year-on-year our momentum accelerated bolstered by our C2C segment strength, competitive pricing and, of course, rapid locker adoption. We see ample room from -- for growth in France as enhanced consumer experience, boost our relevance to Modules vast merchant base.
And lastly, in the U.K., our growth is promising, but logistics constraints have limited our B2C launch. However, our recently Last C2C locker-to locker service saw exceptional demand almost 6x higher demand than our capacity. Coupled with our significant market share in merchant returns, this positions us very well for launching B2C services once logistics capabilities improve.
Quickly on the next page. Sustainability is central to our strategy with lockers offering a greener delivery alternative. And our ESG focus includes promoting eco-friendly habits through our Green City program in Poland, but also in France, where we launched the Green City program recently. Also, minimizing environmental impact with a 2040 net 0 target, fleet electrification and better packaging. And at the end, encouraging employee and partner engagement and sustainability initiatives. One more page about ESG, please.
You see our core business focuses on reducing e-commerce's carbon footprint, making us keenly aware of our role in addressing the climate crisis. We are really proud that our climate strategy has been recognized by the Science-based Targets Initiative, SBTI, positioning Impulse as the absolute leader of the net 0 transition. Imagine that of the 4,500 companies submitting targets to SBTI, only around 180 have approved net 0 goals and just 40 aimed to achieve this by 2040. And what is even more important. We, as InPost. We are the first Polish company with approved net 0 goals, confirming our leadership in sustainability.
Now let's jump into the next chapter of the presentation. So after having looked at our group as a whole, we are now going into more detail for each of the geographies that we cover. So let's start with Poland. What you may see on that page is that we are the #1 APM network in Poland, with more than 19,000 APMs and almost 3 million lockers at the end of 2022. At the core of our consumer-centric strategy is, again, the density of our network and proximity to our lockers, which we keep improving every year. Already 59% of the population in Poland lives within 7 minutes walk to our lockers. And in cities, the population within 7 minutes walk from our APMs as high as 85%. And related to this, as you can see in the right-hand chart, when lockers are closer to our consumers, of course, the intensity of usage is over 40% higher than in the main poly cities.
On the next page, you may see that consumers are loyal and highly satisfied with our service. A sentiment backed by third-party research. Key metrics indicate improved customer perception with our APM Net Promoter Score rising by 6 percentage points in skyrocketing to 81%. Furthermore, 94% of Internet users prefer our APMs as their primary delivery method, which is highlighting our locker success. Automation, significantly reduces resources needed for parcel delivery. And of course, that positions our solution as Poland's greenest last-mile delivery option.
Last but not least, with 84% of survey respondents viewing InPost lockers as the most eco-friendly delivery choice, it's clear that sustainability really matters to both consumers and merchants. Moreover, we anticipate that our environmental efforts will continue to strengthen our competitive edge and growth potential. Next slide, please.
You may see that our loyal user base continues to grow significantly. In the past year, our APM users in Poland increased by nearly 2 million, reaching almost 17 million customers by year-end. And the portion of the Polish population using our lockers, has risen to 44%, up from 39% last year and 34% in COVID driven 2020. Our super heavy user base consisting of clients who received at least 40 parcels in the last 12 months now stands at almost 3.3 million, including heavy users, those are with over 13 parcels, we have nearly 8 million high-intensity users out of the 17.
What is important, these guys, these customers account for roughly 75% of our total volume, and the usage is increasing annually year-by-year. So these loyal customers, sticky customers not only drive our growth but also contribute to the outperformance of the Polish e-commerce market compared to most European markets.
On the next page, you see in Poland, our focus remains on elevating the experience for our nearly 10 million app users. So our top rated app both for star rating in the App Store, the highest among our peers. And we are absolutely dedicated to continually innovate and redefine this user experience. Understanding better that only a high-quality, reliable, cost-effective and sustainable service can achieve long-term success. We are fully focused on transforming the user experience with features such as labelless shipping, eco returns, reusable returnable packaging for parcels, remote locker openings and very soon new financial services. Almost half of our customers now open lockers remotely. And typically parcel collection takes less than 5, 7 seconds.
And at the end, the next slide highlights our resilience against competition. Our internal data continuously so that our customer base remains loyal and grow significantly. We monitor the performance of all our machines when a competitor is introduced nearby. And we are showcasing the past year's performance for our APMs with competitors within 100 meters, and these machines volumes are indexed related to other APMs without those neighboring competitors and the index is above 100 because competitors naturally gravitate to our best locations.
However, there is no noticeable impact from competition. Since consumers don't see a price or quality difference and given our larger footprint, proximity, better brand and of course, the access to the major merchants in the country our customers continuously demonstrate loyalty to our machines and they evolve using the others. Next page, please.
This is another slide my favorite one that is particularly meaningful and that once again confirms the success of our business model based on APMs. The first chart in this slide provides evidence that the utilization rates of our APMs progressively increases over the months after installation and remains high despite increasing density. This is a very good indicator that as we continue to improve convenience, adoption and utilization growth when looking at return on investment in the middle of the page we observe that, on average, our APMs breakeven in about 14 months from installation and that the return on the investment keeps accelerating over time. Our ability to leverage technology and data to monitor the APM utilization naturally allows us to plan our CapEx in the best way.
And next slide emphasizes the importance of our relationship with merchants, which is a key driver of our growth. First, InPost offers merchants a sustainable, cost-effective solution that enhances the customer delivery and returns experience and helps them with the share of checkout in the basket. In Poland, our merchant base has consistently grown reaching around 47-plus thousand merchants at the end of last year. We collaborate with major merchants such as Zalando one of our latest acquisitions and serve as a vital partner for big brands and all the marketplaces in Poland.
Thank you, everyone, for joining us today. And now I'd like to hand over to Michael Rouse.
Good morning, everyone. Thanks, Rafal. So let's go through our international business update. Turning to Page 21. As we step into '23, our key geographies are accelerating with momentum. We're proud to be the fourth largest player in the out-of-home e-commerce parcel markets globally and already hold the top spot for APMs. Operate in the net geographies outside of Poland, we're gaining traction amongst our 43,500 plus European merchant partners, thanks to our vast network of over 31,000 [indiscernible] item pickup points.
With faster delivery times, improved customer engagement and standardized experiences, our productivity-enhancing impulse APMs are winning over the consumer in France and U.K. as we densify the network. By the end of 2022, we had over 8,600 international APMs, up from 3,921, demonstrating our ability to deploy with speed quality and leverage our pan-European presence with key landlord partners. Despite the e-commerce headwinds from the post COVID reopening, our combined volumes in these markets rose 28% on a pro forma basis. While international revenues reached 2.9 billion, up 23% on a pro forma basis, underscoring our market share gains in all our international markets.
Moving on to France. So we have continued to strengthen our leading position in out-of-home deliveries. Our Pudo numbers rose 4% to over 12,000 via targeted expansion driven by capacity needs and service needs. However, the bulk of our energies are focused on deployment of lockers, which are transformational for both the consumer experience and last mile courier productivity in France. As these APMs are not deployed at our Pudo's, but rather outdoors and with landlords that are typically new to Mondial, there's a deployment learning curve. Nonetheless, we've managed to increase our total APM numbers in France, almost 8x to over 2,400. 51% of these APMs were deployed with landlord partners with national reach, including the likes of Little, Intermarche, Carrefour and Aldi.
As these larger existing partners account for a significant portion of our APM pipeline, their grid familiarization with lockers and impose should further facilitate and accelerate APM deployment in '23. The pace APM deployment is building the density of our out-of-home network across sounds so much so that 32% of the population in France now lives within 7 minutes walking distance from one of our Pudo's APMs. Not only will this figure continue to grow, but lockers will increasingly be the driver of our improving proximity to French e-commerce consumers. Beyond improving last-mile productivity with APM deployment, one of the greatest market share opportunities from our purchase of Mondial is to improve delivery service from 3-plus days to next day under 2-day delivery.
Moving to Next day requires continued expansion of Mondial's logistics infrastructure, and we have [ Anda ] making good progress, as you can see in the graphic all on the right. In '22, we added 2 new very sizable centralized sorting hubs on 4 edibles . In fact, one of these is the largest in the entire inflows network. The investment in the infrastructure to support Next Day logistics will continue throughout '23 as it is a critical enabler for both quality and capacity to achieve that national coverage.
Turning to '23. In France, we're working hard to improve the customer experience and elevate the Mondial brand beyond one that has been largely reflected as an economic product and price offering. Associated with this, the Mondial brand relaunch has shown positive traction. As you can see from the metrics provided on the left-hand side of this slide, as we make next-day out-of-home delivery ubiquitous, and we bring the seamless experience of lockers to more customers. The residence of the Mondial brand amongst consumers and merchants will continue to broaden.
I would also like to mention the soft launch of our Mondial Relay app in the third quarter. As of today, we have over 350,000 downloads. We're still in the early stages, but our goal in France is to replicate the high level of active app usage in Poland that elevates customer service and strengthens our out-of-home mold, but is unique in the logistics industry. We also continue to build our sustainability credentials beyond reduced resource per parcel required for every out-of-home delivery on the unmatchable sustainable games as an APM usage rises.
In '23, we've also partnered with Hipli to offer reusable packaging made from recycled materials allowing us to further elevate our brand to reflect what is a unique last mile offering from a sustainable perspective.
On the next slide, with inflationary pressures hitting retailers and consumers, our cost proposition and no meaningful APM coverage is attracting merchant detention in France. Merchant engagement and reach is improving. In 2022, we hit over 43,000 merchants in France, up 5,000 during the year. Notable merchant wins in '22 included Okaidi, Little Cigogne, The Bradery as well as the powerful stable of recognized global brands already using our services today.
With our expansion of the locker network and merchant appreciation of how the ease of use elevates the consumer experience, we're beginning to see greater merchant focus on lockers and checkout. For those who don't speak French, if you Google translate the text on the far right, you see how merchants are starting to educate consumers on the benefits of using lockers, but moreover, living the locker separately in the checkout the merchant in France is now educating the shopper of the benefits of the -- and the par of the APM.
Page 25 as some of my favorite stats. First, you'll see that in Q4 '22, Lockers accounted for 7% of our total volumes in France. That's a great outcome in year 1 of the consumer exposure to lockers. While it's tough to quantify it's pretty clear that new demand associated with lockers contributed to our exceptional 80% volume growth in a year when overall sector volumes fell. The chart in the middle of the page demonstrates the continued improvement in utilization on the year-over-year deployed cohort. The final chart shows a pattern we've highlighted often in the past.
Namely the fact that the new French locker consumers pick up parcels just 1/3 of the time of those to pick up at a manual put collection point. This performance has maintained as the state has expanded rapidly, which is, again, impressive. This is a huge vote of confidence from the consumer in the ease of using lockers. And importantly, this is before we have begun to replicate the app-driven toolkit we use in Poland to motivate faster pickups. Faster pickup means a more satisfied consumer it means a merchant that is more likely to see the consumer purchase again. And of course, for us, it means we get higher capacity utilization in APMs that we get versus code capacity.
On Page 26, you can see that we increased the number of APMs by 8x in '22 versus '21, but our volumes increased even faster by 15x year-on-year in '22 versus Q4 '21. In a sector where overall volumes declined, it is also impressive that we saw our parcels put rise 13% despite the relative maturity of the Pudo network.
And finally, we are well underway of our transformation of Mondial Relay France into a consumer-centric e-commerce enabler. We are primed for growth and already performing strongly versus the market, winning share on new customers alike. As you can see, we're gathering grip momentum in C2C with 47% year-over-year growth in Q4 and cross-border with 9% share in Q4 '22 parcel volume. The power of the Pan-European network being an important lever for brands such as Vinted as we power the surge in e-commerce economy. While we see strong potential for both C2C and cross-border, our biggest opportunity is the B2C market, where our share is just circa 7% versus over 40% in C2C.
As mentioned previously, launching next-day services and locker usage simplifying consumer e-commerce transactions, we have scope to become more and more relevant to merchants. And with our first media merchants my life, this is a space we'll continue to update you on in the future.
So now let's turn to the U.K. market, which is one of our highest potential, if not the highest opportunities. At the end of '22, we reached [indiscernible] APMs, up 53% year-over-year, which positions InPost as the #1 agnostic APM provider in the U.K. During the year, we focused on deploying larger machines, which improves our courier economics. Additionally, we've begun to add Pudo points in dense urban locations that have high footfall, but are not suitable for APMs to complement the network. In core cities, which include 12 of the major cities in the U.K., 38% of residents are now within a 7 minute walk of an InPost APM and 75% of residents are going in a 14 minute walk. When deploying new APMs we worked together with the major chains and landlords, 66% of our APMs have been installed at our landlord partners like Tesco, like Sainsbury's, like Little, all high key footfall locations.
On 29 to date, our product offering in the U.K. has large mean rental, C2C and merchant returns, we will continue to successfully grow the merchant table of over 200-plus recognized brands with new wins in the last quarter, such as Post Direct and linked to the [ Frasers ] Group. In Q3, we launched our C2C locker service in the U.K., and we were met with unprecedented demand, as I touched on before, for consumers that pushed us October, 2 million unique customers over the year with nearly half using our services more than once. The demand was so high that it caused some capacity issues in logistics, and we ended up capping volumes for the service and continue to do so to maintain quality as exhibited by the positive trust pilot rating of 4.3.
Clearly, with the demand proof of concept and I met, we're seeking to definitively resolve this logistics bottleneck in the near term. This will then position us to leverage our 17% share of returns checkout with our merchants by launching consumer to locker ordering for merchants commencing later this year.
On the next slide, you can see on the left-hand chart, for utilization of our APMs from '22 was much better than the utilization from '21, demonstrating the growing consumer adoption for our services and the quality of location being deployed. Thanks to the launch of locker to locker in Q3, the structure of our product mix changed some more profitable service architecture as we reduce the locker to door services and convert shoppers to locker to locker. The increase in the share of locker to locker volumes resulted in a decrease in the cost per parcel. We decreased total direct cost per parcel by 16% in Q4 compared to the previous quarter. Clearly, resolving our logistics capacity constraint to capture the pre-existing locker to locker demand will drive us further towards a more profitable product mix in the U.K.
As we look at the U.K., we believe that this is the right time for a locker specialists like InPost in this market. This is for a number of reasons. First, the reduced e-commerce sector growth post COVID is inevitably causing an additional merchant focus on profitable growth rather than just growth. Inflationary cost pressures only add to the additional scrutiny on profit and cash flow targets for merchants.
Secondly, merchants have started to realize that lockers allow them to offer a high-quality standardized service to consumers. That reduces delivery friction and elevates the propensity to purchase online. We've clearly demonstrated in the U.K. with returns through this proposition. So finally, there's an increased societal and merchant focus on carbon footprints. As this comes increasingly to the [ fore ], merchants are facing continued pressure to reduce carbon emissions in their supply chain. Lockers represent a low carbon solution to this problem, especially and immediately for large listed merchants.
InPost current market share in the U.K. is small. However, we've been encouraged by the demand we received from consumers in '22 and the fact that we're already seeing in excess of 17% share of returns of our existing merchants. The high demand for our services in the U.K. in our view, a clear confirmation there's a strong preference from the U.K. consumer for a high-quality automated auto delivery service. With that proof-of-concept provider, we see a tremendous opportunity now in the U.K., and we're focused on resolving the capacity bottlenecks over the coming quarters, so we can fully exploit the potential the market offers.
So as we look to continue this positive momentum in '23, we'll continue to expand our network of APMs and PUDO's accordingly to meet the ongoing market demand.
I'll now hand over to Adam to comment on the financials.
Thank you, Michael. Good morning, everyone. As usual, let me run through this year's financial performance and then wrap up with the 2023 outlook. On Page 33, you can see our usual way of presenting our actual results, which includes both reported and organic like-for-like performance, which is stripping out the impact of Mondial Relay consolidation.
A few main points I would like to highlight on this slide. So first of all, we have a reported revenue growth of over 50% year-on-year higher than the volume growth. Will go through the drivers of this performance in detail in the specific market slides. Excluding Mondial Relay, which was not consolidated fully in 2021, we had 25% revenue growth way above e-commerce market growth in our key geographies, as already described by Rafal and Michael.
Our adjusted EBITDA grew by 20.6% as reported and by 10.8% on a like-for-like basis. EBITDA margin declined by 760 basis points, driven partially by the full year effect of Mondial Relay consolidation. The 480 basis points EBITDA margin contraction reflects the organic performance with solid margin decline of 280 basis points and the rest driven by the increasing share of the international business. Of course, we are all aware of the extraordinary inflationary pressures that all businesses faced last year so we are quite happy with the performance, which reflects resilience of our business model and ability to offset inflationary pressures.
I'll talk more about CapEx shortly, but CapEx as a percentage of revenue was at 15.8%, visibly lower compared to last year, even if we reported a very significant step-up in 1 year Relay CapEx investment. And finally, net debt to EBITDA stood at 3.2x. I'll comment on drivers of this later on.
Moving on to Page 34. On this page, we are looking at Q4 reported figures only as this was the second quarter when we had like-for-like performance, including Mondial Relay, which was consolidated as part of the group for the first time in Q3 2021. At the group level, we recorded an overall growth of 23% in terms of volume and a 28% increase in revenue year-on-year. As we are going to see in more detail on the following slides, this performance was driven by the increase in volume across all of our geographies, together with an early positive impact of the repricing.
In terms of profitability, adjusted EBITDA margin has decreased by 400 basis points, with Poland proving more resilient due to operating leverage and pricing while Mondial Relay margins fell more sharply in product mix and investment in operational capacity and into the brand. CapEx 6% percentage of revenue stood at 12.6% in Q4, significantly lower than the 19% recorded in Q4 2021. And in line with our earlier comments that on the first half of the year, we expect it to be more CapEx heavy versus second half.
Now on Page 35. We are now looking specifically at Poland's performance. In Poland, the volume growth in Q4 was at 18% versus previous year. I would like to draw your attention to how the Q4 revenue grew by 24%, showing 6 percentage points higher growth than volume. This is a result of the positive effect of the repricing that we mentioned previously in the 2022 earnings calls. Looking now at the adjusted EBITDA margin in the quarter. This was down by approximately 250 basis points compared to Q4 2021 with EBITDA growing 17% year-on-year.
For the full year, the revenue growth in Poland reached 22% year-on-year, with volume growth at 20% year-on-year. Full year adjusted EBITDA in Poland was 14% higher year-on-year, and we saw 280 basis points margin decline, which, again, with the cost pressures we faced in 2022, we think is a good result. All in all, we are satisfied with our profitability in Poland as the margins show resilience to the inflationary pressures as we were able to offset the inflation effect with the operating leverage and the price adjustments coming in late in the year.
Now moving to Page 36. As mentioned already, Mondial Relay was acquired by InPost in July 2021 and has been consolidated in the group financials since the second half of 2021. However, on this page, we are presenting the pro forma full year results as if Mondial Relay was part of the group for the full 12 months.
In Q4, the business grew dynamically with volumes increasing to almost 65 million parcels, representing 29% year-on-year growth. This was mainly driven by France, with the other markets also positively contributing to the Mondial Relay volumes. In France, the volume increase was a result of strong C2C growth the relaunch of Mondial Relay brand with the new and improved quality and further adoption of the growing APM network.
In Q4 2022, Mondial Relay revenues exceeded PLN 800 million so north of 30% year-on-year growth. Slightly higher revenue versus volume growth in Q4 was driven by mix and as a result of higher priced cross-border volumes. Adjusted EBITDA in Q4 amounted to PLN 90 million, a decrease of 13% versus Q4 of previous year. Mainly due to additional peak season investments necessary to maintain delivery promise in the context of extraordinary peak volume demand. In the full year 2022 adjusted EBITDA decreased by 18% due to a number of factors. Firstly, it was profitability normalization after peak during pandemic, which was very visible in the first half of 2021 results. Secondly, there was the effect of the product mix. Moreover, we invested in operations development. And finally, our expenses related to SG&A grew significantly to support further growth. However, adjusted EBITDA margin of above 12% is in line with our expectations, and we are pleased with the full year performance of the Mondial Relay business.
On Page 37, now moving on to international, which includes both U.K. and Italy performance. Q4 Parcels volumes in our international markets increased by 123% and compared to previous year, with U.K. recording more than 80% growth. The U.K. growth was despite the fact that we introduced the capping volumes in Q4 to manage both unprecedented locker to locker demand and provide the right service ability. That means we still were not able to fully capture the volume and revenue potential of that service, but it was the right choice as demonstrated by the improved consumer ratings.
Revenue increased by 124% in Q4, and we saw over 200% revenue growth on a full year basis with Italy impact on total revenues becoming more visible. Looking at the adjusted EBITDA, this nominally decreased due to the growing scale of the business. But as I will explain on the next slide, unit economics improved both last year and last quarter. Most notably, U.K. Q4 loss was almost flat year-on-year in nominal terms despite dynamic volume growth, which is a demonstration of improving unit economics.
Now moving on to Page 38. As already highlighted by Michael, the U.K. has seen a strong volume uptake in the last 2 quarters on the back of the launch of our locker to locker service as well as the growth in the returns product. So as mentioned before, in parallel with volume growth, we also have significantly changed our product mix across 2022. This is pronounced in the reduced average price per parcel, which is driven by product mix, as you see in the center of this page. Now on the profit side though, while locker to locker returns are lower price point product compared to our locker to address, it is much more scalable and, therefore, offering lower cost to serve and better operating leverage.
So this, coupled with transition to carrier model, which allows us to capture that operating leverage benefit, led to improvement in unit cost. The combination of those 2 factors, so beneficial product mix and carrier model change is visible in EBITDA loss per parcel consistently reducing quarter-on-quarter across the last year.
Now moving on to Page 39. So now a few comments on below EBITDA items. Operating EBITDA was up by 33% year-on-year to over PLN 1.9 billion with a 27% EBITDA margin. The growth was supported by the fact, the quantum of EBITDA adjustments in 2021 was far higher with Mondial Relay M&A and IPO costs accounting for the bulk of those adjustments. Below EBITDA line, the IFRS 16 right of use amortization grew by 69%, where 1/3 of the nominal increase was driven by the 12-month consolidation of Mondial Relay. IFRS leases, excluding Mondial Relay consolidation, in fact, grew by 51% year-on-year.
In the next line, the impact of the intangible amortization will be attributable to Mondial Relay acquisition accounting. The variation year-on-year on intangibles amortization would stand at minus 17%. So would decline if we exclude underlying impact. Depreciation and amortization of property, plant and equipment that you see in the following line grew by almost 45%. Half of the step-up in this cost category was again attributable to Mondial Relay. Excluding Mondial Relay fact, there was a 42% increase year-on-year in this cost line. As a result, we have seen our EBIT grow by 14% on a full year basis at 13.3% EBIT margin, which was 470 basis point margin decline.
Below EBIT, when you look at financial costs, there was a step-up in the quantum of gross debt, but also we have had a full year effect of utilization of Mondial Relay acquisition debt which incrementally added 90 million to our interest expense charge. Excluding this effect, interest costs would have risen by 65% and reflecting increased interest rates on RPO and denominated financing and negative foreign exchange movements on the euro-denominated finance.
On Page 40, looking at the bridge between adjusted EBITDA and free cash flow, we start with breaking the free cash flow down to Poland and International. By doing that, I would like to highlight that both high free cash flow generation and EBITDA cash conversion significantly improved in Poland with growth of free cash flow of more than 130% year-on-year.
On Page 40, looking at the bridge between adjusted EBITDA and free cash flow, we start with breaking the free cash flow down to Poland and International. By doing that, I would like to highlight that both high free cash flow generation and EBITDA cash conversion significantly improved in Poland with free cash flow of more than 130% year-on-year.
Of course, in line with our strategy, we continue to utilize our cash generative model in Poland to invest into international expansion in our core markets. On Page 41, on this page, we are looking at our group CapEx in more detail. The development of our APM network is still a key driver behind our group capital expenditure with the first half of the year being CapEx heavier due to our procurement effort in that period.
It's worth noting that almost half of the CapEx in 2022 was attributable to international markets, and we expect International to account for increasingly higher proportion of total group CapEx. Looking specifically at the CapEx intensity ratio, this has decreased in Poland to 14% of revenues while Mondial Relay has seen the most notable step up to 13% of revenue.
So now on to Page 42. Looking at net debt and leverage, the growth in our gross debt was caused mainly by the increase of IFRS 16 lease liabilities as we have scaled up our operations and deployed assets. We have also drawn more RCF at the end of the year to fund increased cash requirements of modular IP coperations. Net leverage stood at 3.2x.
This was slightly higher than previously anticipated due to EBITDA impacted by one related logistics cost in the peak season and unfavorable foreign exchange valuation impact of the gross acquisitions. And now let me move to outlook and final remarks on Page 44.
As in previous years, our conviction for the year is focused mostly on our ability to continue to grow ahead of the overall e-commerce parcel market and continue to gain share in all key geographies. So far in Poland, we have seen e-commerce market visibly slowing down this year. We expect Polish market to be challenging this year, and therefore, for the full year, we expect mid- to high single-digit growth in market volumes during 2023.
We have similar expectations for France, while the U.K. e-commerce parcel market, in our view, is expected to decline in volume this year. As in previous years, we expect to grow ahead of the broader market and to keep gaining market share. We also expect pricing to be supported for the revenue growth as we will see full year effect of the repricing catch-up that we implemented end of last year and this year.
Despite continuing cost inflation, we expect therefore pricing to have positive net impact on our margins and would expect margins to expand versus last year, especially in Poland. In France, we expect to start seeing early margin improvements on the back of our continued investment. And in the U.K., we believe at the end of 2023, we should reach breakeven on a run rate basis. and turn EBITDA positive on a full year basis in 2024.
We expect to continue expanding our logistics and APM infrastructure and we'll continue to deploy in all key markets at a similar pace as you have seen in 2022. For the whole group, we expect total CapEx to range from $1.1 billion to $1.2 billion in 2023. That's Polish market Mondial Relay, of course, most of which will be invested to support growth in international markets.
So all of those factors combined with EBITDA and high operating cash conversion in Poland, should result in positive free cash flow on group level in 2023 and net leverage ratio reduced visibly by end of year. Now on the current trading. So far in the first quarter of this year, as mentioned, we have observed visible signs of the consumer slowdown.
Although we are mindful of these trends, our own parcel volumes do not seem to correlate with what we see in the market year-to-date. Our volumes in Poland have continued to grow at double-digit rate levels similar to Q4 2022. France is experiencing slightly lower growth, but this is still growing at double digits year-on-year.
And other markets are displaying similar growth dynamics to those seen in 2022. So we remain cautious, but encouraged by our business resilience in the face of the consumer slowdown this year. So finally, on Page 45, just wrapping up on our key focus and priorities for 2023 [indiscernible] markets.
In Poland, we expect to continue consolidating car leading market position. Revenue growth should be positively impacted by the repricing effect, which should also help to offset inflationary cost pressures and support margins. In the international markets, we will keep building on our first-mover advantage. We will also expect to continue investing in the international expansion, supported by the strong cash generation in Poland. For Mondial Relay, we'll keep focusing on operational improvements to gear up to deliver D+1 D+2 delivery to drive our B2C parcel volumes in France.
In terms of profitability, the adjusted EBITDA margin is expected to improve slightly compared to last year. In the U.K., resulting in the bottlenecks in the logistics is our main focus for 2023. While we strive to start growing our B2C presence, we'll keep focusing our efforts to increase our merchant base and of course, continue to improve convenience and consumer satisfaction. So that is all from my side. Thank you for your attention, and let's start Q&A part.
[Operator Instructions]
First question comes from Sathish Sivakumar from Citigroup.
I've got 2 questions here. So firstly, on your pricing, if you could actually comment on pricing expectations across 3 segments on your international and Poland as we go into '23? And second one, actually, also in Poland, can you actually give us that update what is the market split between locker [indiscernible] to door exposure on parcel volumes.
And then with -- again, most over to Poland, can you also help us understand what percentage of your volumes in Poland are actually like related to next-day delivery and probably -- sorry, third one. So now you're kind of like keeping a Mondial relay as a stand-alone brand. So just, again, help us understand where we are on the integration between Mondial Relay and InPost both on the front and back end -- Yes, that will be helpful.
Let me maybe answer the 2 questions about market split APMs to door. So if I understand correctly, the question is about our split or the market split?
I actually want to know about the market split.
Yes. So we assume currently that around -- there are different starts showing different numbers. But based on our best guess seems that between 50% to 60% is right now out of home. And in this out of home, our coverage is more than 90%, closer to 95% than 90%. And in terms of the question about what's the percentage of the next day deliveries, we keep our high-level next day delivery rate on the level of around 98.5%.
And on average to APMs and slightly below that in door-to-door. Door-to-door mostly driven by [ failed ] deliveries, which is out of our control. So those are the main starts. In terms of the pricing, before I hand over to Adam, just the first wave of repricing, we finalized at the beginning of this year in Q1, we are not expecting in the current macro trends have another repricing before years.
And, of course, there are some contracts that you know that are having their own cycle of repricing during the year. So apart from those contracts, we are not expecting additional repricing at least for now.
So maybe addressing the question around the pricing. So in Poland, depending on the type of the customer across the portfolio, we expect different levels of repricing. I think there was a lot of coverage around actually change of our headline pricing in the price list for the individuals and long-tail SME clients where those increases were high kind of double digits, even high teens to 20%.
But of course, when we think about the effective price effect, the big blue chip phones, et cetera, the repricing rates here, especially in Poland -- so depending on the arrangement, depending on the volume commitment arrangements and depending in general, how good our cooperation is, how big our share of checkout is, how merchants commit or do not commit to deliver a step-up in volume in the current year.
Obviously, our pricing policy here is quite flexible. And we try to build this long-term relationship and try to build a very beneficial or mutually beneficial volume versus price balance in that relationship as was the case in the previous year. So all in all, that plays very different according -- depending, sorry, on the customer segment.
But I think we expect the effective repricing of mid- to high single digits in Poland, similar vein, probably something of a low single digit in the interim where obviously, inflation rates are very different compared to Poland and inflationary pressures are somewhat lower compared to Poland.
And so just on the , how does it come around the 2-door network within Poland.
So again, I think it very much depends on the headline versus effective repricing, but our understanding is you know the effective repricing and the [indiscernible] door pricing is double digit.
Our next question comes from Sam Bland from JPMorgan.
I have 3, please. The first one is sort of a general comment on Poland. We've seen some announcements of competitors getting a bit more active with lockers. I know you've answered this question in previous sessions, but would you say the competitive landscape is particularly more difficult now than it was a few months or quarters ago? Second question is, if I look at Q4 in particular, there were various items or below EBITDA around tax and interest and I think depreciation accelerated as well.
Could you just have a bit of a run-through on how many of those are -- which of those items will repeat in 2023 and which are kind of one-off or temporary in nature? And then the third question is U.K., you mentioned you'd like to sort of fix the logistics network there. Should we think of that as being sort of a gradual process that started in '23? Or is this sort of a bit more of a step change. I think the headlines in the press around M&A? Is it something that's probably going to require a bit more of a step change to get that in the right place.
Let me answer the first question then about one-offs and visibility for 2023. I think Adam and at the end, Michael, about U.K. So I think in terms of the competition in Poland, I think especially our strong messaging around Q1 evolution shows clearly that this is completely opposite.
I think at least the numbers are very supportive to the statements that first-mover advantage that impost already has got and extreme sticky clients, 17 million of clients, growing number of clients, growing number of mobile users, growing number of super hard users and hard users, the way we can avert the soft users into hard users.
I think all those numbers and especially the one of the charts we are presenting on every reporting showing that even competitors on the same real estate deployed, they are having hard to comment about the utilization. We are counting parcels to our machines and to their machines. And we know exactly that on average, our machines have got 78-100 parts per day, competitors' machines is like negligible, low single digit today.
So when you look at those facts all together, looking at the consumer sentiment softening in Q1, looking at the general statistics presented last week that Jan was minus 15% Feb, minus 8% on the value of the e-commerce decline. And volume-wise, we are growing double digit. If you combine all this data, I think that is pretty clear here. And in terms of the one-offs, Adam, if you may comment and then handing over to Michael as well.
Yes, yes, sure. So we've seen in Q4 in terms of one-offs and material impact on the net profit, it's mostly the income tax line. And there, we basically had a swing, which was driven by additional recognition of the deferred tax liability, which was the effect of us revising our tax amortization rates that we use for PPE in France, where originally, we've applied across the slightly more aggressive tax amortization rates but adjusted based on the review and revised judgment at the end of the year.
So effectively, we recognized additional tax liability -- deferred tax liability there. But if you look actually at the effective tax rate and compared to full year 2022 to full year 2021, you will notice that effectively -- effective tax rate has just increased by 70 basis points, and it's give or take in a very similar territory than it was in clear 2021.
So nothing major going there on a full year basis other than just an adjustment basically quarter-to-quarter, mostly from Q2 and Q3 into Q4, really. And that should not repeat. So that's typically one-off adjustments and in general, not even distorting the full year results. The other element, as we have commented somewhere, has been quite significant one-off swing in the FX. And that is mostly a balance sheet date translation of the financial liabilities.
So that obviously is not hedged because you would not be normally hedging your year-end valuations, and therefore, depending on how foreign exchange rates will develop across 2023, this might be subject to further adjustments on the net profit line.
Thank you, Adam. Just to comment on the U.K. logistics. The plan as we go forward now is we're making a step change in U.K. logistics. As we go into the second half of '23, we're currently finalizing, we'll make a more detailed share of the plans in the coming weeks. But really the objective now in the U.K. as we enter into the second half as we have a logistics plans it secures for service quality, secures our ability to unlock the capacity immediately.
And thirdly, it secures our ability to continue to influence and grow the product offer to really increase the ongoing profitability with long-term security on unit economics and servicing the solution. The solution will give us the ability to go across the full country from a servicing point of view to match the retailer and merchant demand. And so really, we see it as a significant turning point as we go into the second half of the year to really overcome the challenges we've been facing, really to service the demand that the U.K. consumer and merchants have been asking for.
And our next question comes from Lisa Yang from Goldman Sachs.
I have a few questions, please. The first one is on the current trading. I think you talked about strong sort of volume growth continuing. Could you maybe be a bit more specific, obviously, at the end of Q1 now in terms of the trends you're seeing across the 3 main segments? And is there any reason to think that this should change in the beginning of Q2? So any color would be helpful.
Second question is you talked about margin expansion in Poland. Could you maybe comment about a range of some of the level of expansion we could expect? And how do you think about the sequencing of that margin expansion as I understand like Q4 last year, obviously, you have quite challenging inflationary pressure. So should we expect H2 to be better than H1?
And just to follow up on the U.K. Can you maybe clarify if your guidance of breakeven assumes any M&A? And similarly, your guidance around net debt to EBITDA fully below 3x, including for M&A as well as there. And lastly, on the free cash flow, obviously, you mentioned it will be positive in 2023, but that's obviously very -- similarly, can we maybe have a bit of a range, I guess it should be in the sort a couple of hundreds above median for 2023, I have 500. So any color would be appreciated.
Right. So let me take those questions. And Rafal, maybe I'll defer to you in terms of [indiscernible] trading and a bit more color in terms of how it's going to develop in our view. But addressing the 2 remaining questions. So the margin development in Poland. I think as we were saying, obviously, pricing is going to be very supportive, we can say we already kind of have some read-through in Q1. You've seen that in Q4 already as well.
So I hope it's quite visible if you look at Poland's performance in Q4. I think it will be -- should be more pronounced in the first half of the year, where, obviously, the comp is somewhat lower, given the fact if you go back to 2022, the main cost shock, if you like, has come end of Q1, Q2, and that's where we've seen most of the margin erosion. So the step-up will be more visible in the first half of the year and probably a little bit less visible in the second half of the year as basically -- first of all, base will be different.
Secondly, we'll see probably more pronounced cost inflation again and full year effect of that cost inflation in Q2. So I think, thinking about the dynamics, this is we're probably, how we leave it. In terms of leverage, of course, our comments around leverage, free cash flow, et cetera, has use no M&A at this stage. So we're commenting on organic development, and this is our base case for this year.
Obviously, depending on whether M&A is on the table or not and the size of the ticket, that will have an impact on the free cash flow and leverage, but difficult to speculate at this stage as we're not talking about any specific transaction and obviously cannot refer or relate to the potential value of the transaction. So that is definitely just taking into account our organic development.
And in terms of the free cash flow, the absolute number, I think, Lisa, you're couple of hundreds, probably in the kind of lower to net register of the couple of hundreds is give or take, which is the right range. So....
Yes, and happy to cover the first question about month-by-month evolution. So Jan was super strong Feb softening, but also it was linked with the winter holidays in Poland and also winter holidays in the larger cities like Warsaw, which always has got an impact.
This year, the impact was a little bit more profound than years ago. And at the end March, again, super strong, and that's like evenly spread across the services. So also improved share of checkout with our friends from Allegro. So yes, I think many good points, many strong points on different angles showing clearly that the traction adoption, but also our repricing strategy landed very well and volume commitments, satisfaction from the deliveries and consumer retention was the main -- that were the main drivers for merchants to literally diversify away from the others and move on with the volumes to inputs because on the shrinking market, such a growth, this is the only where you may obtain that.
So -- yes. Let's see how it evolves in Q2. Very hard to have any visibility. As you may imagine, the market is very bumpy. Even the Q1, month by month, it looked differently. So let's see. But definitely when we will have our Q1 results, we are more than happy to share our views on next quarters.
May I just have a follow-up again on the U.K. So given the logistic challenges you're talking about, and maybe you're going to announce some measures in the -- shortly in the coming weeks or so. Do you think you can get to breakeven and profitability there without sort of like M&A? Like could you do that all organically?
We have a very gradual organic step-up in terms of unveiling capacity. It's all about capacity. So the current setup we've got with the third-party providers was pretty difficult that was not giving us ability to create operating leverage with the growing volume.
And then, of course, the breakeven point was -- like for future then for now, if we take an organic scenario where we do control critical clusters, greater London, greater Manchester, greater Birmingham, only having ability to serve volume in those 3 clusters, we are addressing more than 70% of e-commerce and more than 70% of our current volume.
So even with the current organic scenario by addressing those 3 clusters, of course, we maybe may handle less volume than in a nonorganic scenario. But still, our base case is to achieve breakeven. So we'll see how it goes. We have as Michael said, 50-50 scenarios for both potentials. And definitely in coming weeks, we'll have clarity, which way is better for us.
It's worth mentioning we are not just sitting and waiting we started our organic scenario preparations since the beginning of the year means that the workload that we have already dedicated also in a new organic scenario will contribute to much higher capacity that we may give to the merchants. And that's the kind of add- on top of potential nonorganic scenario we may have.
And we will now take our last question in the queue from Muneeba Kayani from Bank of America.
I wanted to understand how you're thinking about price increases going forward? And whether you'd be kind of investing because you're giving guidance of margin expansion but you talked about kind of investing also your margins into the business. So how do you think about price increases if you could help explain that.
And then secondly, on CapEx, can you just give a breakdown on what that CapEx is, growth APMs, where do you target APMs to be this year? And an indication of how to think about CapEx in the medium term?
Happy to handle the first question and then handing over to Adam about CapEx. So price repricing as a general role in our company. It's always a combination of keeping the right balance on one hand, not passing through the whole cost inflation to our merchants.
We want to be always a helping hand to our merchants. That's why you know the adoption of the merchants is skyrocketing with more than 91,000 merchants already using our service in 9 countries. That's why the NPS with merchants as well has increased by 9 points to more than 70 already means they do value the way we handle the problem with the cost inflation. So we passed literally like half of the cost inflation to the merchants this year and we shared our operating leverage with them in exchange for a much stronger relationship for future.
And that's the way we want to address that topic as well. in coming quarters and years that in exchange for much tighter relationship with the merchants, we are more than happy to decrease the pricing pressure and also to reduce it to as much as potentially we could and nothing is going to change here. So the margin expansion that you observe is kind of already a result of the repricing we have concluded plus on top of this, part of that strategy is that because of the quality we offer because of the satisfied consumers, we provide, thanks to our end consumer centricity, simply the merchants and the consumers vote for impose, giving us more volume.
The more volume they give to us, the better operating leverage we achieve. And that's the part of the flywheel that we described that this creates the profitability and the margin expansion for future.
Yes. And let me take the CapEx question. So in terms of the breakdown and structure of the capital expenditure. You should expect 2023 to be broadly similar to 2022. So again, majority of the spend, probably in the territory of 65%, give or take, will be investment into APM. Then around, give or take, 20% will be investment into logistics, infrastructure, mostly depots, automation, to a lesser extent in Poland.
But quite focused on Mondial Relay mostly France. And then the remainder of, say, 10% to 12% will be an investment into IT. The difference, I think, as I indicated during the presentation, will be that, obviously, there will be a visible shift from Poland to International. That's been the case already in 2022.
It will continue to be the case in 2023, where increasingly more capital expenditure will be focused on international markets mostly in France and the U.K. to an extent also Italy and Iberia. And less and less in Poland is obviously our coverage, our density is becoming competitor right now. But internal structure and where we focus CapEx is going to be largely unchanged.
We will now take our next question from Marco Limite from Barclays.
The first question is just a follow-up on the U.K., and I'm just wondering if this organic plan is based on continuing the cooperation with existing partner? Or is -- so the existing partner just giving more capacity? Or are you actually adding also additional partners to your network?
And the second question, I just really wanted to have a bit of a better understanding on the state of the art in France. So a few kind of leading indicators such as B2C versus C2C splits in terms of volumes, how much of the volumes are D+1 or D+2 versus, let's say, less quality type of service? And also what's the average pricing, how the average pricing compares to competition?
So if there is a meaningful discount and if you are planning to keep that discount also when you will let's say, scale your D+1, D+2 type of service?
Why don't I take those questions? On the U.K., it will mean a change in partnership. We will basically evolve the partnership structure. So we have effective exclusivity to ensure we have the right level of control influence and commitment on the organic scenario. And thirdly, means also we don't have the ongoing, I would call it, competitive tensions because obviously, this solution will allow us to go-to-market without the necessary pressures we've seen in the past from a competitive development point of view.
So the go-to-market is freed up. And the capacity availability will mean that we are actually bringing brand-new capacity to the market without competing with other third-party carriers in that solution. So quite differentiated. And again, we will talk more about the details in the coming weeks as we get through the sensitivities of the change. Related to France, just to give you a flavor, if you look at where we are, clearly, we're still in transformation phase.
As we look at the phasing of the volumes and how it is evolving, it's still very much a C2C led business in terms of growth. I'd say B2C today is still around about 40% of our injected volumes into hubs. So when you look at the shape of our business, it's grown slightly, but not in terms of the future potential of what we're seeing.
We have actually taken live now a number of merchants on our D+1 proposition. And really, that is still in beginner phase because we still have to invest in the logistics infrastructure and particularly in the Southwest of France, which we started at the end of last year and will continue into this year to ensure we full national coverage. But today, we still can take a number of merchants live based on injection ability from a regional point of view.
And those services are now live. And actually, early data is showing very, very positive traction relative to that. When it comes to pricing, we've just completed our first price increase within the market. I would say our price increase is still below the competitive thresholds of where the market has been. Similar to actions we've taken in Poland, we've actually secured the price increase in exchange for volume commitments, actually starting to advertise lockers and checkout.
And that's been a critical factor because now the locker size and scale is sort of the right math that merchants are willing to commit to that split out and check it, which will be obviously quite important as we go forward. And when I look at the differentials today in terms of service versus the door, we're at least 30% cheaper, if not more versus the door in some cases, that is even greater, probably more like 50% versus the door.
And when we look at our D+1 service, the target proposition is really to be around 25%, 30% cheaper than the most premium to door next-day service. And that is certainly the position of the product and what we will continue to evolve with. And clearly, that will allow us to really present the product competitively with the merchants and ensure there is a value uptick for the consumer.
As there are no further questions in the phone queue. I'd like to hand the call over to Jack for any webcast questions. Over to you, Jack.
Thank you. There have been a number of questions submitted on the online audience, some of which have already been covered. Just following on from Mark's question on the phone, [ Yukim at Defer ] asks, could you describe your progress and time line for the faster delivery capacity in France? And how do you see the impact of this on your growth margins in France over the next 2- to 3-year period? Michael, if I could direct that to you, please?
Yes. As I just articulated to Marco, we've started that process. Obviously, it's still reliant on us developing the logistics infrastructure in Southwest France, and that won't really be fully completed in terms of implementation phase until the balance of this year. So in terms of full national coverage for D+1, we'll continue to be selective to those merchants that can inject into our key hubs in order to with the right cut-off times to deliver the proposition. But obviously, we continue to build out the network. But this year, we have a commitment to sort of need to roll it out and still take a small percentage of our volume as we bring on test at [indiscernible] merchants and already from those that are live.
But I would expect sort of to see -- start to see significant traction towards the second half of this year and then really meaningful traction going into early '24. And that really has always been our plan and clearly linked to our guidance development. We start to see margin improvement this year, really just from the overall operating leverage of the investments we've already made, but really the product mix benefit starting to really come through heavy in 2014.
Thank you. The next question comes from Jack Ham from Hayfin. In your view, what's the normalized EBITDA margin for Mondial Relay? Adam, if I could direct that to you, please.
Yes, sure. Thanks, Jack. Our view on this one has not changed. So we've communicated this a couple of times already, and I think we are very consistent that we see this business in the territory of high 20% to 30% of adjusted EBITDA margin. That obviously is a combination of factors and is a journey that will take a couple of years.
So first of all, that will require that obviously, we have sufficient coverage and density of our APM network so that most of the volume is the APM volume. And therefore, we optimize the flow of parcels, but also we optimize the unit economics there. Secondly, this will obviously require robust capacity in terms of logistics and automation of the logistics.
So I think we've heard here to the effort that we increased number of logistics points and depots basically to improve coverage reduce driving distances and therefore, be able to deliver next-day delivery. But at the same time, capacity is also driven by the automation, efficiency is also driven by the automation. So those 2 elements in the logistics network that will really drive improvement of the unit economics in line with capacity improvements and efficiency.
And then thirdly, once we're able to launch D+1 in most of France that obviously corresponds with ability to price a premium level. So there should be a pricing element by entity as well in terms of margin improvement in the midterm. And all those 3 are expected to drive our margin improvement. But as I said, it's a couple of years July before we get that.
Thank you, Adam. The final question from Sebastian Bank of China. Rafal earlier mentioned the capacity constraints in the U.K. where demand has outpaced capacity. Can you elaborate, please, on the nature of these capacity restraints as well as the plan to increase the capacity and the expected related CapEx. Michael, if I could direct this to you, please.
Sure. Thank you. I think I already touched on this. And the capacity constraints were driven by -- the -- firstly, the demand that we saw on from the launch locker to locker services, which is 6x greater than what we had originally forecasted. And then two, the ability to scale the existing third-party logistics operation and deliver the quality of service has been a challenge.
And so really, with gap capacity as a consequence ensure quality and then really now looking to improve that capacity by making a significant change in our third-party operation from an organic scenario point of view to really unlock capacity effectively going into the second half and more over to secure and control and influence our logistics in a way that we have not been able to do from a third-party point of view, effectively a version of in-housing to scale it and control it and make sure we can deliver the ongoing capacity constraints and create the operating leverage that we want to do to improve the unit economics. And that is particularly more already covered.
Thank you. As that concludes the Q&A portion, I would like to hand over for closing remarks.
Yes. Let me guys maybe say first, thank you very much for your attention and participation in that meeting. I'm more than happy to invite you as well for our capital Market Days that we are organizing in June. So more details to come about that event. I think we had a very good start in 2023.
Of course, the macro economy is changing literally day by day. So hard to estimate the full year outlook. That's why we stay cautious as always. But I think we're already having now a very good momentum. All the other players are struggling around us in all the key markets we're observing the same trend.
And literally, this is a kind of very good moment for companies like InPost with the tailwind coming from the inflationary environment, people you got to save money, people, you got to literally save every Euro as well on the deliveries. And if it's combined with the convenience we're offering to the end consumers, really, we are able to create super loyal clients, what we've proven already in our home market irrespective of the competitive movements on that space.
We strongly believe that the flywheel we've created the end consumer centricity, skyrocketing NPS, next-day delivery and operating leverage and also helping hand always to mergers, those are the key elements that are driving the volumes and that's fueling our market bid strategy on every angle. So once again, thank you very much for participation in today's presentation and see you soon once we reveal our Q1 results.