PostNL today said it aims to triple its cash profits by 2015 by stepping up cost savings,raising prices and growing its parcels business after announcing worse results for 2012 and scaling
back its mail restructuring programme with fewer redundancies.Key factors were the continuing slump in mail volumes, the financial impact of a poorlyimplemented restructuring programme and also the lower value of the 29% stake in TNT Express.
The Dutch postal group reported a 30.2% drop in operating profit to €291 million for last year,although underlying operating profit declined only 4.2% to €408 million, while the underlying cashoperating profit slumped by 40.9% to €130 million. Revenues rose fractionally to €4,330million.
The slump in the value of the 29% holding in TNT Express hit net profits, which dropped 60.9% to€678 million, although excluding the TNT stake there was a slight 1.3% improvement to €241million.
In Q4, 2012, reported operating profits were up nearly 65% to €219 million while underlyingoperating profits dropped nearly 13% to €128 million and underlying cash profits dropped one thirdto €67 million. Net profits dropped 3.7% to €155 million and improved by 20.5% to €106 millionexcluding the TNT stake.
CEO Herna Verhagen said: “Our underlying cash operating income for 2012 was €130 million, inline with our outlook. This is a satisfactory result for a difficult year in a challengingcompetitive and economic environment.”
The core Dutch mail business saw underlying revenues drop 5.1% to €2.3 billion last year, withunderlying profits down 44% to €135 million and underlying cash profits of just €18 million, down88% from €154 million in 2011.
PostNL was forced to halt a major operational reorganisation during the year due to problemswith delivery quality, and has now decided to seek mostly voluntary departures rather than a largenumber of compulsory redundancies.
Verhagen said: “The initiatives we took to restore our quality levels worked out well. InOctober our quality was back at standard. We started to prepare for a solid further roll out of thereorganisation. We have thoroughly and successfully tested a phased roll out to lowerimplementation risk and increase flexibility. The personnel migration towards a part-timeorganisation will be done in a more phased manner and we will better balance the mix betweenexperienced and new employees.
“As a consequence, we will have fewer forced redundancies than the previously indicated 2,800.Since 2006 our Mobility programme has helped over 7,000 employees from work to work in their searchto find new jobs outside PostNL. The delay in the reorganisation, combined with the expected volumedecline of 8-10% to 2015 triggers the need for extra cost savings and a clear focus on our pricingpolicy,” she explained.
“In 2013 we will restart the roll out of the operational restructuring and implement additionalmeasures that will result in an increase of our cost savings target from €330 to €400 million, ofwhich €110 million was already achieved in 2011 and 2012, leaving a target of €290 million for theperiod 2013 to 2017. To balance the volume decline, we will increase prices.”
In 2012, PostNL’s parcels division continued to grow strongly due to more B2C parcels generatedby e-commerce as well as the acquisitions of the trans-o-flex businesses in the Netherlands andBelgium. Its underlying revenues rose 20% to €730 million last year, underlying profits were up9.1% at €96 million and underlying cash profits improved 8.7% to €100 million.
Verhagen stated: “We will enhance the operational synergies between Mail in the Netherlands andParcels, through a further integration of the shared backbone. Parcels will continue to focus onprofitable growth, including branching out into new verticals and niches.”
PostNL’s International business, centred on its mail activities in the UK, Germany and Italy,increased revenues by 7% to €1,570 million and improved underlying profits from just €4 million in2011 to €27 million. “In International, we have turned around our business from 2010 to 2012,” theCEO declared.
In Britain, TNT Post UK increased 2012 revenues by 14.4% to €699 million, including a near-21%increase in Q4 due to an 11% rise in volumes and higher prices. In Germany, 2012 revenues droppedfractionally to €506 million and cost savings continued. Italy revenues grew by 6.8% to €203million last year.
Looking ahead to this year, PostNL said it expects underlying cash operating income of €20million to €60 million. The company also reiterated that it will sell its stake in TNT Express inthe medium-term “after we have seen stability return”.
PostNL also updated its strategy for 2015, which will be based around higher prices, therestructuring programme, growth in parcels and better international profits. “For 2015, I amconfident that PostNL will be able to generate sustainable cash profitability. Our outlook for 2015for underlying cash operating income remains €300 million to €370 million,” Verhagenstated.
Price increases are necessary in the Dutch mail business to cope with an expected volume declineof 8-10% between 2013 and 2015, PostNL said. Under the modified restructuring programme the companywill only seek 450 – 650 compulsory redundancies instead of the previous 2,800 and will seek asmany voluntary redundancies as possible out of a total of 2,700 to 3,500 positions.
“The careful and gradual approach of the further roll out, based on simplification of processesand therefore less disruptive, means that we will be able to achieve the required operationalsavings. In addition, our overhead costs will be reduced through centralisation and efficiencyprogrammes,” the CEO said.
In Parcels, PostNL said it will continue the strategy of profitable growth, mostly organic butalso “via partnerships and small acquisitions in attractive verticals and niches”.
“Overall, our clear aim is to be an efficient and reliable parcel and mail company, stronglycommitted to profitable growth in parcels, and to maintain our strong focus on cash while restoringcash dividend in the medium term,” Verhagen concluded.
