Corporate
2009 Q2 results
Interim dividend as a sign of confidence in operational performance
Focus on costs and cash pays off
TNT published its 2009 Q2 and half year results on July 27. Here we provide a summary of the most important events and results.
Chairman of TNT’s Board of Management Peter Bakker began his presentation by noting that “the trading environment continued to be tough this quarter. In response, TNT’s management teams have once again significantly reduced costs without jeopardising our service levels. The underlying performance in our businesses clearly improved over Q1 this year. Our focus on cash has resulted in a strong free cash flow over the first six months this year. Our announcement today of a € 0.18 dividend per share, optional in cash or shares, is a sign of confidence in our operational performance.”
Q2 summary
Group reported revenues saw a decline of 10.0% to a level of € 2,528 million due to lower volumes in Express and Mail. Reported operating income saw a decline of 45.1% to € 178 million due to lower volumes and net one-off charges, only partially offset by substantial cost savings in Express and Mail. Profit attributable to the shareholders came in at € 81 million. As business results and trading environment are often better explained by underlying developments, the analysis below will focus thereon. The underlying figures over 2009 (see below) are at constant currency and for Express exclude the impact of a restructuring provision (€ 34 m), the Easter impact on revenues (€ 40 m) and EBIT (€ 20 m); and for Mail net one-offs consisting of a restructuring provision (€ 4 m), a one-off charge (€ 5 m) and book gains (€ 20 m).
Group underlying revenues were –6.9% in Q2 2009. Underlying operating income decreased by 30.2%. Net cash from operating activities was € 410 million, an improvement of € 195 million versus last year. This strong cash development is reflected in the reduction in net debt from € 1.7 billion in Q1 2009 to € 1.4 billion.
Express underlying revenues were down 11.2%, of which 3.3% fuel surcharge, to € 1,523 million. Core kilos declined more than the decline in consignments, resulting in 6.1% lower weight per consignment. Combined with an average lower rate per kilo, this resulted in an 11.0% lower revenue per consignment. Partially offsetting these developments were aggressive cost savings. Total costs were reduced by 9.2% or € 135 million (excluding fuel), which compares favourably with the 6.4% decline in consignments.
Overall, Mail revenues were essentially in line with the previous year. Addressed volumes in the Netherlands fell by 6%. Operating income of Mail was impacted by higher pension charges as well as lower volumes. This was partially offset by € 19 million Master plan savings. This quarter saw a net positive one-off impact from the sale of Spring Aspac to Singapore Post of € 20 million. Underlying Mail operating income was € 138 million, which represents an operating margin of 13.4%.
| As reported | Underlying * | |||||||
|---|---|---|---|---|---|---|---|---|
| Q2 2009 | Q2 2008 | % Change | Q2 2009 | Q2 2008 | % Change | |||
| Group | ||||||||
| Revenues | 2,528 | 2,809 | -10.0% | 2,613 | 2,809 | -6.9% | ||
| EBITDA | 262 | 410 | -36.1% | 317 | 410 | -22.7% | ||
| Operating income (EBIT) | 178 | 324 | -45.1% | 226 | 324 | -30.2% | ||
| Profit from continuing operations | 89 | 207 | -57.0% | |||||
| Profit attributable to the shareholders | 81 | 205 | -60.5% | |||||
| Cash generated from operations | 289 | 337 | -14.2% | |||||
| Net cash from operating activities | 410 | 215 | 90.7% | |||||
| Express | ||||||||
| Revenues | 1,450 | 1,716 | -15.5% | 1,523 | 1,716 | -11.2% | ||
| EBITDA | 83 | 209 | -60.3% | 151 | 209 | -27.8% | ||
| Operating income (EBIT) | 29 | 153 | -81.0% | 89 | 153 | -41.8% | ||
| Revenues | 1,020 | 1,028 | -0.8% | 1,032 | 1,028 | 0.4% | ||
| EBITDA | 179 | 201 | -10.9% | 167 | 201 | -16.9% | ||
| Operating income (EBIT) | 150 | 173 | -13.3% | 138 | 173 | -20.2% | ||
in € millions, except percentages | ||||||||
| As reported | Express
restructuring | Express
Easter impact | Mail one-offs | FX rates impact | Underlying * | |
|---|---|---|---|---|---|---|
| Express | 1,450 | 40 | 33 | 1,523 | ||
| 1,020 | 12 | 1,032 | ||||
| Other networks | 63 | 63 | ||||
| Non-allocated | (5) | (5) | ||||
| Total revenues | 2,528 | 0 | 40 | 0 | 45 | 2,613 |
| Express | 29 | 34 | 20 | 6 | 89 | |
| 150 | (11) | (1) | 138 | |||
| Other networks | 3 | 3 | ||||
| Non-allocated | (4) | (4) | ||||
| Operating income (EBIT) | 178 | 34 | 20 | (11) | 5 | 226 |
in € millions * The underlying figures over 2009 are at constant currency and for Express exclude the impact of a restructuring provision (€ 34 m), the Easter impact on revenues (€ 40 m) and EBIT (€ 20 m); and for Mail net one-offs consisting of a restructuring provision (€ 4 m), a one-off charge (€ 5 m) and book gains (€ 20 m). | ||||||
Half year summary
Over the first half of 2009, Group revenues decreased over the prior year period by 10.1% and EBIT decreased by 44.4%. During the first half, non-allocated costs were brought down considerably as part of the company’s overall push to cut costs (€ 11 million versus € 18 million). Cash performance was very strong due to our tight working capital control: net cash from operating activities was up 21.9% despite the fall in operating income.
Outlook
In February 2009, TNT announced it would not give a 2009 outlook. As previously indicated, TNT assumes that the severe pressure on the global economy is likely to persist throughout 2009, as early signs pointing towards improvements in the general economic climate in the second half of 2009 are still too uncertain to indicate a positive trend line development. Express revenues in 2009 are expected to be down compared to 2008, as a result of lower volumes and lower fuel surcharges. For Mail in the Netherlands, as previously indicated, addressed volumes are expected to show an increasing rate of decline compared with the years before 2009. Emerging Mail & Parcels is expected to continue to grow in revenue at a comparable underlying operating margin to 2008.
Cost savings in total of around € 550 - 600 million, an increase from the previously indicated € 400 million, are targeted in 2009 (around € 275 million reached in the first half of the year).
New business
New growth in Europe will be actively pursued by creating a dedicated Standard Parcels unit aimed at developing a position in both BtB and BtC delivery of parcels, a growing market currently estimated to be € 20 billion in size. As a starting point, the Standard Parcels unit will in the first instance combine TNT Post Pakketservice and TNT Innight with related elements from Express alongside other third-party partnerships. In addition to parcels, TNT will focus on capturing the growing customer demand in so-called “special delivery solutions”, through dedicated networks – like shop logistics, fashion services – or via hybrid and digital solutions – like e-commerce and e-billing.