RNS No 6900k
TNT POST GROEP N.V.
31 August 1999
TPG BOARD OF MANAGEMENT CONFIRMS EARLIER OUTLOOK
TPG announces 10.7% net income growth for the first half year 1999
TNT Post Group N.V. (TPG) has announced a net income growth of 10.7% in the
first half of 1999 compared with the same period last year. The growth is in
line with the outlook given by TPG at the publication of the annual results on
22 March 1999 (10% - 15%).
Operating revenues rose by NLG 695 million, an increase of 8.7% compared to the
same period last year. The operating income of TPG increased by NLG 39 million
(5.7%) in the first half of 1999.
In NLG Millions lst half 99 1st half 98 Variance
Revenues 8,645 7,950 8.7%
Operating income 724 685 5.7%
Net income 404 365 10.7%
Earnings per share
(in NLG) 0.85 0.77 10.4%
Interim dividend
(in NLG) 0.30*) 0.30 -
*) The election period starts on 2 September 1999. The dividend is payable as
of 27 September 1999.
Outlook
At constant exchange rates, TPG Board of Management expects that both operating
income and revenue growth for the remaining period of 1999 will exceed the
growth rate already realised in the first half of the year. Net income growth
for the full year is expected to be at least in line with the performance
achieved in the first half of this year.
Challenging first half year
Chairman and CEO of TPG, Ad Scheepbouwer states that: "The half year results
were solid for our Mail business, although operations were marked by quality
issues. In the first five months economic activity slowed down in major
countries resulting in lower earnings from operations in our Express business in
Europe. However, strong foundations were laid in anticipation of further
expansion of the business. Together with our new board members we are focusing
intensely on service performance and revenue quality in the Express business. We
are focusing on key issues and this is already showing results in recent months.
We expect this upward trend to continue in the second half of the year. Results
of the Express activities outside Europe developed satisfactorily. Strong
organic growth resulted in our division Logistics exceeding expectations."
TPG, with its two brands PTT Post and TNT, is a global provider of mail, express
and logistics services. TPG has more than 100,000 employees in 60 countries
serving over 200 countries. TPG is publicly listed on the Stock Exchanges of
Amsterdam, New York, London and Frankfurt.
DIVISION MAIL
Revenues in the Mail division increased by 4.1% to NLG 3,918 million in the
first half of 1999. Extra investments and costs were made in order to cope with
bottlenecks in the sorting process. The earnings from operations (operating
income excluding amortisation of goodwill and non-recurring costs) from the
division Mail therefore increased by 2.1% to NLG 823 million.
Domestic Mail
Domestic Mail sales rose by 6.6% to NLG 1,835 million. The growth was mainly the
result of increased volumes of the Postage Paid Mixed and Parcel products.
Furthermore, acquisition of Rinaldi at the end of 1998 contributed to the
increase in revenue.
Direct Mail
The revenues of Direct Mail Services grew by 7.7% to NLG 1,147 million.
This growth was mainly derived from the acquisition of Tesselaar Marketing
Services and Germany Mail (GMA) at the end of 1998. Higher mailing volumes
(especially in Belgium) and increased Print & Mail and Mailprofs activities also
contributed to the revenue growth.
International Mail
International Mail produced growth of 1.2% to NLG 698 million as a result of
higher volumes of international mail and new international customers partially
offset by a decrease of revenue in the Americas.
Post Offices and Other
The business of Post Offices and Other showed a decrease in operating revenues
primarily due to the sale of the Catering Service activity at the end of 1998.
Briefpost 2000
Throughout the first half year of 1999, TPG continued implementing its Briefpost
2000 automation project. Begun in 1992, Briefpost 2000 aims to increase the
proportion of mail sorted automatically to more than 90% of the total mail
handled by PTT Post. The Briefpost 2000 project includes the replacement of 12
manual sorting centres by 6 new fully automated sorting centres and in the first
half year TPG faced some bottlenecks in finalising this project which impacted
the quality of service.
Quality performance fell behind expectations for a combination of reasons which
include:
- mail delays in the first quarter due to relocation of the Oosterdokskade
sorting centre to the new sorting centre in Amsterdam Sloterdijk.
- training and familiarisation courses for new sorting centre staff took
longer than expected and the machines needed a longer adjustment period
- the volume of postal flows increased by more than had been expected causing
capacity problems
- mail packaging changed with an increased use of plastic seals and
enclosures which required the machines to meet different and specific
demands
The Board of Management has implemented a number of measures which will improve
performance in the second half of the year and these include:
- expansion of sorting centres and commissioning of extra sorting equipment
(21 machines).
- extension of sorting times. Following consultation with clients the
processing of bulk consignments now begins in the afternoon.
- extra staff training courses and additional checks on error-sensitive parts
of the process.
DIVISION EXPRESS
Express revenues, compared with last year, increased by 9.0% to NLG 3,486
million with the growth being almost entirely derived from higher revenues and
acquisitions in Europe. The results of Express activities outside Europe
developed satisfactorily, but in the first few months various issues resulted in
lower earnings from operations in Europe. Overall, earnings from operations
declined by 23.2%, compared with last year. The intense focus on service
performance and revenue quality now being applied by new management will pay off
in the second half of the year.
Express Europe
Revenues of the Express Europe business increased in the first half year by
10.9% to NLG 2,829 million compared to the same period last year. Revenue growth
was impacted by inclusion of the activities of the Jet Services acquisition (NLG
167 million).
The main underlying causes of the lower earnings from operations in the first
few months of the year are:
- a slowdown of the economies in major European countries resulting in lower
than anticipated volumes and under-recovery of express network costs
- excessive volumes of low yielding volumetric freight, currency effects and
one-off costs
Measures in hand that address lower earnings from operations in Express include:
- provision of more reliable on-time customer service performance and
improved revenue quality
- development of simplified service and pricing structures that target the
market for door to door delivery of high yielding international express parcels
- elimination of unprofitable traffic from the European Air Express network
- senior management changes
- cost efficiency and revenue quality improvement plans implemented as of March
These measures and tight control are already bearing fruit in the last few
months
Encouraging recent performances indicate a pick-up in market and economic
conditions. The Express business is achieving an uplift in volume compared with
earlier months and this has resulted in improved utilisation of the
international and domestic networks.
Express International
Revenues of Express International for the first half year increased by 1.4% to
NLG 657 million and earnings from operations showed a considerable improvement
compared to the previous year.
Australia recorded low revenue growth in comparison to the previous year. A more
competitive environment in Australian domestic express markets and the loss of a
number of key accounts are seen as having been particularly obstructive to
business growth.
Asia generated 15.3% growth in revenue compared with last year spurred by
stronger local currencies and improved economic activity. Improved utilisation
and higher cost efficiency enabled the growth in revenue to contribute to a
considerable improvement in earnings.
DIVISION LOGISTICS
In the first half year of 1999, total revenues of Logistics increased by 28.5%
to NLG 1,426 million. An amount of NLG 81 million (7.3%) of the revenue increase
was due to the acquisition in this period of Tecnologistica and the logistics
activities of Jet Services.
New contracts and increased volumes from existing customers contributed NLG 276
million to the revenue increase but this was partly offset by foreign exchange
rates which impacted the revenue negatively by NLG 41 million.
Earnings from operations for the first half year increased by 23.6% to NLG 89
million.
Operating revenue growth in Southern Europe was accelerated by the acquisition
of Tecnologistica and Jet Services (Logistics). Growth was also produced by new
business that includes the new inbound logistics operation with Fiat in Italy
together with warehousing and distribution work for several
manufacturers/suppliers in Italy and France. The considerable operating revenue
growth achieved in North America was largely produced by organic growth in the
automotive business and the commencement of new business-streams for major
customers.
Operating revenue quadrupled in Asia and was largely due to early contributions
of new contracts won in China and Malaysia. In addition volume increases were
achieved from several existing customers.
ADDITIONAL INFORMATION
Capital expenditures
In the first half year TPG made capital expenditures in property, plant and
equipment of NLG 344 million compared to NLG 432 million in the first half of
1998.
Mail
The division Mail incurred capital expenditures of NLG 130 million on property,
plant and equipment. The major part of this amount relates to the Briefpost 2000
project and to the rebuilding of sorting centres, as well as expenditures on
extra sorting machines, other buildings and equipment.
Express
Total capital expenditure for Express amounted to NLG 171 million in the first
six months of 1999 and mainly relates to new depots, road hubs and IT
investments.
TPG invested in facilities for new depots (Barking, Edinburgh, Nottingham and
Slough), replacement depots (Leicester and Bristol), a new warehouse for hanging
garments and the second state-of-the-art national hub at Kingsbury Link in the
United Kingdom. Integrated depots in Bielefeld and Dusseldorf Neuss together
with a NET hub in Austria were developed in Germany. Several depots in Ancona,
Torre Spaccata, Bergamo, Roma via Affile, Napoli and Frosinone were opened in
Italy. In Australia capital expenditures were incurred for fleet replacements
and new depots.
Logistics
In Logistics capital expenditures on property, plant and equipment amounted to
NLG 43 million. These capital expenditures mainly relate to the setting up of
tailor made warehousing and distribution facilities for new logistics contracts
and expansion of the IBC (Intermediate Bulk Containers) fleets in the UK and
Australia respectively.
Employees
In the first half of 1999 the average number of full time equivalents (FTE)'s
increased by 7,688 (9.9%) to 85,483 compared to the average number of FTEs in
full year 1998.
The increase reflects the growth of business in each of the three divisions. The
average number of FTEs in the first six months of 1999 was also impacted by the
acquisition of Jet Services and Tecnologistica.
Interim dividend 1999
The Board of Management of TNT Post Group has decided to pay an interim dividend
of NLG 0.30 per ordinary share over the first half year 1999. Shareholders may
elect to receive the interim dividend either in cash or in ordinary shares. The
value of the ordinary share dividend will be 2% to 5% lower than the value of
the cash dividend. The election period starts on 2 September 1999. The dividend
is payable as of 27 September 1999.
Safe harbor statement under the private securities litigation reform act of 1995
Certain information contained in this press release, particularly in the
"Outlook" section, is forward-looking. By their nature, forward-looking
statements involve risk and uncertainty because they relate to events and depend
on circumstances that will occur in the future. In addition to the assumptions
specifically mentioned in the above paragraphs, there are a number of other
factors that could cause actual results and developments to differ materially
from those expressed or implied by these forward-looking statements. These
factors include, but are not limited to, the actual effects of recent and
future regulatory changes and technological developments, mail and express usage
levels, and competition from alternate technologies, globalization, levels of
spending in major economies, the economic climate in Europe and Southeast Asia,
levels of marketing and promotional expenditure, actions of competitors and
joint venture partners, employee costs, future exchange and interest rates,
changes in tax rates, uncertainties associated with developments related to the
Year 2000 problem and the introduction of the Euro, unexpected costs of
integrating recently acquired businesses and future business combinations or
dispositions. Continuing investment in infrastructure (airplanes, depots, and
trucks) is important to maintain and increase market share. Infrastructure
investment requires substantial lead time and involves significant fixed costs.
Any mismatch between investment in infrastructure and actual market growth (or
increases in TPG's market share) could result in costly excess capacity (if
investment is too great) or losses of market share (if investment is
insufficient).
Figures 1st half year results TNT Post Group
Income Statement Overview TNT Post Group (million)
1st hyr 1st hyr 1st hyr
Description 1999 1999 1998
EURO NLG NLG
Net sales 3,889 8,570 7,771
Other operating revenues 34 75 179
Total operating revenues 3,923 8,645 7,950
Salaries and social security
contributions 1,462 3,222 2,974
Depreciation, amortisation and
impairments 102 226 221
Operating expenses 2,030 4,473 4,070
Total operating expenses 3,594 7,921 7,265
Operating income 329 724 685
Financial income and expenses (23) (49) (48)
Income before income taxes 306 675 637
Income taxes (121) (266) (269)
Results from investments in
affiliated companies (1) (2) 0
Net income before minority Interests 184 407 368
Minority interests (1) (3) (3)
Net Income 183 404 365
Basic net income per Ordinary Share
and per ADS 0.385(1) 0.85(1) 0.77(2)
(in Euro and NLG respectively)
Diluted net income per Ordinary Share
and per ADS 0.385(3) 0.85(3) 0.77(2)
(in Euro and NLG respectively)
(1) Based on the average amount of 475,942,322 Ordinary Shares, including shares
represented by ADS
(2) Based on the average amount of 475,173,350 Ordinary Shares, including shares
represented by ADS
(3) Based on the average amount of 476,150,915 Ordinary Shares, including shares
represented by ADS
Mail operating revenues (million)
1st hyr 1st hyr 1st hyr
1999 1999 1998
EURO NLG NLG
Domestic Mail 833 1,835 1,721
Direct Mail* 520 1,147 1,065
International Mail* 317 698 690
Post offices and other 108 238 289
Total Mail 1,778 3,918 3,765
* Comparable 1998 changed due to reclassifications
Express operating revenues (million)
1st hyr 1st hyr 1st hyr
1999 1999 1998
EURO NLG NLG
Express Europe 1,284 2,829 2,551
Express International 298 657 648
Total Express 1,582 3,486 3,199
Logistics operating revenues (million)
1st hyr 1st hyr 1st hyr
1999 1999 1998
EURO NLG NLG
Total Logistics 647 1,426 1,110
Operating Revenues (million)
1st hyr 1st hyr 1st hyr Variance
1999 1999 1998 %
EURO NLG NLG
Operating revenues segments
Mail 1,778 3,918 3,765 4.1
Express 1,582 3,486 3,199 9.0
Logistics 647 1,426 1,110 28.5
Intercompany (84) (185) (124)
Total operating revenues 3,923 8,645 7,950 8.7
Total operating expenses 3,594 7,921 7,265 9.0
Total operating income 329 724 685 5.7
Operating income (million)
1st hyr 1st hyr 1st hyr Variance
1999 1999 1998 %
EURO NLG NLG
Mail 373 823 806 2.1
Express 50 109 142 (23.2)
Logistics 40 89 72 23.6
Total earnings from operations 463 1,021 1,020 0.1
Amortisation of goodwill 27 61 62 (1.6)
Non-recurring costs 107 236 273 (13.6)
Total operating income 329 724 685 5.7
Balance sheet after appropriation of net income
Balance sheet (million)
June 30,1999 June 30,1999 December 31,1998
EURO NLG NLG
Fixed Assets
Intangible assets 2,042 4,501 3,253
Property, plant and equipment 1,650 3,636 3,245
Financial fixed assets 506 1,114 940
Current assets 2,016 4,444 4,017
Total Assets 6,214 13,695 11,455
Group equity
Shareholders' equity 2,031 4,476 4,088
Minority interests 11 25 16
Provisions 1,515 3,338 2,956
Long term liabilities 401 884 483
Current liabilities 2,256 4,972 3,912
Total Liabilities and Group Equity 6,214 13,695 11,455
Cash Flow Statement
Consolidated Cash Flow Statement (million)
Description June 30, 1999 June 30, 1999 June 30, 1998
EURO NLG NLG
Net Cash Flow
Net cash provided by operating
activities 208 459 777
Net cash used in
investing activities (558) (1,229) (622)
Net cash provided by financing
activities 126 277 33
Changes & in cash and
cash equivalents (224) (493) (188)
US GAAP
Net income (million)
Description June 30, 1999 June 30, 1999 June 30, 1998
EURO NLG NLG
Net income under Dutch GAAP 183 404 365
Adjustments for:
Employment schemes and group
reorganisation (43) (94) 42
Pension costs (54) (119) (82)
Other 44 96 12
Net Income under US GAAP 130 287 337
Basic net income per Ordinary
Share and per ADS under US GAAP
(in guilders) 0.274(1) 0.60(1) 0.71(2)
Diluted net income per Ordinary
Share and per ADS under
US GAAP (in guilders) 0.274(3) 0.60(3) 0.71(2)
(1) based on the average amount of 475,942,322 Ordinary Shares, including shares
represented by ADS
(2) based on the average amount of 475,173,350 Ordinary Shares, including shares
represented by ADS
(3) based on the average amount of 476,150,915 Ordinary Shares, including shares
represented by ADS.
END
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