TNT today reported their Half Year 2005 results. In the secondquarter, the group achieved a 10.8% revenue increase. Express reached another record margin of over10%, with double digit growth, and Mail achieved a margin of almost 21%, with revenue growth inboth European Mail Networks and Mail Netherlands. Logistics, affected by the continuingdifficulties in France, saw a slight margin decline. In Logistics France, TNT announced plans torefocus their operations to areas where TNT can earn its cost of capital, reasserting itscommitment to the French logistics market.
Group Financials
TNT´s Group EBIT was € 342 million, a 2.8% decrease on last year. Thisresult was affected by non-allocated costs of € 28 million, a € 18 million increase on last yeardue to spending on business initiatives – including China and rebranding– and other corporatecosts. Net financial expenses were € 22 million, slightly lower than last year, despite the debtincrease, due to lower interest rates and finance charges. The effective tax rate was 34.7%,slightly lower than last year. The profit attributable to shareholders was € 210 million, equal tolast year’s. Earnings per share increased by 4.3% to 46.1 cents due to the repurchase of 20.7million shares. Net cash from operating activities was particularly strong at € 384 million, € 269million more than last year. This quarter’s result benefited from an anticipated € 132 million taxrefund and the phasing of payments. Capital expenditure was € 97 million, € 19 million more thanlast year, and included the planned infrastructure improvements in Express.
|
|
Q2 2005 (in € million) |
Q2 2004 (in € million) |
Growth |
HY 2005 |
HY 2004 |
Growth |
|
Revenues |
3.385 |
3.056 |
10,8 % |
6.661 |
6.037 |
10,3 % |
|
Operating income (EBIT) |
342 |
352 |
– 2,8% |
646 |
648 |
– 0,2% |
|
Net Income |
210 |
210 |
0% |
403 |
396 |
1,8% |
|
Cash operating flow |
384 |
115 |
233,9% |
459 |
406 |
13,1% |
|
Earning per share (€ cent) |
46,1 |
44,2 |
4,3% |
88,6 |
83,3 |
6,4% |
Operations
Mail achieved an operating margin of almost 21%, despite the € 20 million increase inpension costs. The division handled 19 million more addressed mail items than the comparativeperiod last year due to the strong growth of the European Mail Networks. EMN grew organically byalmost 20%. In the Netherlands, revenues were up by 0.6%, as price mix effects outweighed a 2.5%addressed mail volume decline, and next day delivery exceeded 97%. Cross-border revenues continuedtheir negative trend and Data and Document Management grew total revenues with the addition of thecall center joint venture.
Express booked another record margin, this time of 10.1%, and organic revenue growthremained at the high end of expectations, at 10.6%. The resulting operating income improvement was27.7%. In Europe, international air volumes were 9% higher and road volumes 7% higher, with kilosgrowth outpacing consignments. TNT did not see adverse impact of higher fuel costs. Networkoptimisation improved, particularly in respect of air volume utilisation. Revenue yield remainedpositive.
Logistics revenue growth came from the addition of freight forwarding activities (the Wilsonacquisition), which are progressing well. Organic growth was strongly positive in North America andRest of World, but negative in Europe as certain units faced either general market or clientspecific issues. In the case of France, structural inability to deal with weakness in thetransportation sector weighed on the results. Some European units did show healthy growth,including Germany. The contract logistics margin, excluding France, softened from 4.9% last year to4.7% this year, affected by higher fuel prices. The freight management margin was 2.2%. On a morepositive note, contract gains were well in excess of terminations and the business developmentpipeline strengthened.
TNT´s logistics activities in France are reported to consist of transportation, whichrepresents around 60% of the business, and contract logistics, which represents the remaining 40%.Losses in the first half of this year were € 17 million, on revenues of € 117 million. ThereforeTNT intend to sell its transportation activities. Strong network coverage is a key success factorin this business, which TNT does not possess. In contract logistics, the company will refocus onparts of the business where TNT can earn its cost of capital, including complex supply chainsolutions for the automotive industry. TNT intend to sell the parts of the contract logisticsbusiness that do not fit into this strategy.
Strategy
On 18 April, TNT signed a cooperation agreement with Norway Post, withboth parties then forming a task force to identify areas of mutual interest in the Nordics. On 24June, TNT announced that it is not participating in the Belgian Post sales process and reconfirmedits strategy of challenging incumbent postal operators through its European Mail Networks, in caseswhere the terms of cooperation with the incumbent would not be mutually beneficial. On 12 July, the State sold 43.4 million TNT shares in the market, withthe result that its holding is now reduced to 10% of the share capital.
Outlook
In Mail, TNT expect total revenues to be stable, with gains in EMNcountering declines in Dutch addressed volumes. TNT expect a strong operating margin of 19% to20%. In Express, the company expect high single digit revenuegrowth and an operating margin in the range of 8.5% to 9.0% – on track to the “10% in 2007”target. In Contract Logistics, the company expect revenues to remain stable witha margin of around 4%, excluding France. In Freight Management (Wilson acquisition), revenues
growth at a high single digit, with an operating margin of around 1.5%, after chargingamortisation of intangible fixed assets recognised on acquisition and integration costs areexpected.
