TNT today outlined improvements in a number of its key performance objectives during the secondhalf of 2014, claiming to be on the right trajectory to achieving its turnaround targets after
acknowledging and reversing various failings and dysfunctional areas within the business, butstressing that it would take another three to four years for the full benefits to emerge.At the company’s Capital Markets Day event in London this morning, Ian Clough, managing directorfor TNT’s International Europe business, said the company had been losing market share for the lastsix years, with the main reasons including a loss of focus, lacking attention on the customer, toomuch internal focus, and a structure that did not focus on the wider needs of the business.
He highlighted the fact that the individual countries had been focused on their own businesses,which he described as “dysfunctional”, adding: “If you run a network business, that is not going towork.” He said the necessary changes had already taken place in terms of the structures, althoughit would require three to five years for the full results to be felt.
After more than 20 years at DHL, he observed that TNT had some unique positive features that ithad failed to fully capitalise on in the last 10 years, which it was now making progress towardsleveraging. These included its unrivalled European road network and its portfolio of next-dayexpress and economy express products all the way up to 500 kg.
“Some other companies within this sector, including one with yellow and red colours, claim thatthey offer the same breadth of services, but not within the same unit,” he observed. He stressedthe importance of this one-stop shop when 65% of TNT customers who ship pallets also use parcels,and 85% of TNT express customers also use TNT economy express.
He said TNT had been less focused on yield management than some of its competitors. While thelatest indicators showed that the company was on track, having begun to reverse some of thedeclines in quality and performance that had driven down yields and profits, there was some way togo before it achieved its goals of doubling adjusted operating profits.
He said the International Europe business was “starting to see some upside”, with SME growthrising from 0.5% in 2013 to 0.9% in the first half of 2014 and increasing to 2.2% in the secondhalf of 2014. Within the company’s 40 European markets, 10 of those were now reporting SME growthof 10%, he added.
In terms of quality measures, on-time performance rose by 0.8% in the first half of 2014 and by0.9% in the second half of last year, while the so-called Orange Experience Score index rose fromthe base level of 100 in 2013 to 101 in the first half of 2014 and improved to 108 in the secondhalf of 2014. Meanwhile, measures to improve productivity had also begun to take effect, with theindirect cost index improving from its base level of 100 in 2013 to 97 in 2014.
However, adjusted operating income for International Europe had yet to rebound. It rose to 5.3%in the first half of 2014 from its level of 4.4% in 2013, but fell back again in the second half of2014 to 3.3%.
But Clough insisted that the measures being taken meant he was “extremely confident” that thebusiness now had “the organisation and the people to deliver” the company’s targets, which forInternational Europe meant delivering adjusted margins of 8-10% by 2018-19.
Meanwhile, Michael Drake, managing director for TNT Asia, Middle East and Africa (AMEA), saidthe company’s International AMEA business was also making progress. He said good localrelationships were extremely important in markets with a large and growing SME customer base, aswas the case in many parts of Asia.
He estimated that SMEs made up around 83% of the market in China and 42% of the market in ASEANcountries. For TNT’s International AMEA business, the revenue split is 67% from SME customers and33% from large customers.
He said the results from the region were “showing positive traction”, with SME growth risingfrom 5.1% in 2013 to 10.4% in the first half of 2014 and 12.8% in the second half of 2014. On-timeperformance had also improved significantly; after falling by 1.3% in the first half of 2014, itrose by 2.5% in the second half of the year.
Meanwhile, the Orange Experience Score index rose from a base of 100 in 2013 to 104 in the firsthalf of 2014 and then improved dramatically in the second half of last year to 122. In themeantime, indirect costs had also fallen, dropping from the base level of 100 in 2013 to a level of96 in the first half of last year and improving again in the second half of 2014 to a level of91.
Adjusted operating income margin had also been significantly improving, rising from 1.9% in 2013to 5.2% in the first half of last year and 6.2% in the second half of 2014.
