Transcription TNT Q4 and Full Year results 2010 - Analyst
Meeting
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Andrew Beh
Hello, welcome to those here in the room with us and those watching remotely. My name is Andrew
Beh, I am Group Director of Investor Relations and I am joined today by our CEO, Peter Bakker and
Bernard Bot, our CFO. Today our format will be a little different. We will actually begin with Bernard
who will take you through some of the details about the changes in the reporting structure from the old
to the new. Then over to Peter who is going to take us through some operational highlights and then
back to Bernard for financials and then of course finally Q and A. So, Mr. Bot.
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Bernard Bot
Thank you, Andrew, good afternoon, ladies and gentlemen here and on the web. The figures that we
publish today are quite different from what you are used to, apologies. This does follow from our
December 2 announcement on separation and the internal legal carve out which we have put in place
as of the 1st of January. Now, the following slides are there to provide you with some clarity on these
changes.
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First Express, as you may have seen in the annual report, will be reported under what is called
discontinued operations. Don’t be taken back by the term, it is purely accounting and reflects the
Express businesses to be demerged. So that is one. Two, the allocations change. That has to do with
the legal entities that previously fell under other networks and non-allocated, thus go to either Express
or Mail. There are also some other temporary differences due to pension accounting and to what we
call a profit pooling arrangement we have between Express and Mail.
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Now the final one and that you will like because it gives you a lot more detail on our numbers, is the
new segment reporting which will give you much more insight into each individual piece of the
business. First the numbers as they are presented in the TNT NV accounts and also the separate
Express financial supplement which we also published today. On the left side you see TNT NV, that
shows the Mail business which is revenues and operating income and you see highlighted in red the
discontinued operations.
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That is Express. And that number can be tied back to the number on the right which is out of the
financial statements for Express which is their equal to the profit for the period. Two different sets of
accounts, TNT NV now reflecting Mail and Express on the discontinued operations. Please note the
two operating income numbers for the full year 2010. €480 million for Mail and €180 million for
Express. Those are the reported numbers and I will now explain you what the allocations have done to
arrive at these numbers.
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We start here on the left with the reported numbers as we used to do. You see Express, Mail, other
networks and non-allocated, that should look familiar, adds up to €660 million. Then you see us
moving with the different changes to the right where we have the numbers I just highlighted to €180
million and €480 million. So the first change has to do with the change in legal scope, so the entities,
other networks and central units which have moved to Express and Mail.
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Two has to do with the profit pooling arrangement we had in place whereby Express absorbed losses
from Mail, that is a fiscal structure we had and it is also temporary: done as of the end of last year.
Then the pensions, that is a long story, but to make a long story short, basically it means that there is
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a difference in which we account for pensions temporarily and also that will be reverted back. If you
make all those adjustments you come to the €180 million and €480 million, but those are reported
numbers on the new structure and of course you want to know what is going on underlying.
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That is what we have highlighted here on the next sheet. We take again the €180 million and €480
million and we move to the underlying figures as we have also presented them in the annual report.
The darker grey areas, so the first three columns after the results in the new structure indicate the
temporary or one-off adjustment which are included in the change allocations. So for example, the
head office allocation for Express included €45 million in demerger cost, that is one-off, so you can
take that out.
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Then we reverse back the profit pooling and the pension impact to derive again at the more correct
numbers or more underlying numbers for Express and Mail. Next to that some restructuring which I will
highlight when I will talk about each of the individual units, but there are things like Brazil, the weather
and the strike impact are in there and for Mail of course the provisions taken this year. All that takes
you to the underlying in the new structure, the €317 million and €580 million but also note that the
€317 million does include a €21 million FX impact as we used this number to compare 2009 to 2010.
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As you start to see what is the basis for the numbers in 2010, then of course you should not take the
effects, the numbers in € 338 million for Express and € 580 million for Mail, that is the jump off point for
this year. Finally, the new segment reporting will show lots of detail on the quarter. In this presentation
just to highlight where you only had four segments previously, you now get a lot more detail reflected
in the Express and the Mail businesses.
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With that, hope we have clarified a little bit on what has changed and now focus on the underlying
figures and I hand over to Peter for a review of the quarter and the full year.
Peter Bakker
Thanks, Bernard. Welcome everybody here and on line. Let me take you straight into the highlights. At
this page number 9 pretty much indicates that the demerger process is well on track. Of course first
announced on December 2nd.
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The internal legal and organisational separation has been completed on time. That is to say on
January 1st. On December 2nd a number of assumptions were presented leading into funding gaps,
equity gaps and therefore a 29.9% stake of Express to be retained by Mail. All of those assumptions
have now been confirmed as part of the year end closing. So there are no surprises in any of the
financial analyses out there. We have established analyst days or capital markets days.
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The first one on May 3rd, where Marie-Christine and her team will come out and present the strategy
and outlook for Express and on May 9 Harry and Jan Bos and Cees by the way all present here in the
room, will present the stories for Mail. That leads up to an AGM which is now scheduled for May 25
and of course that is the AGM where the demerger proposal and the separation proposal will actually
be voted upon by our shareholders.
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If we look at the highlights of the business, then in Mail obviously the volume decline in the Dutch
addressed mail has continued. 9% for the full year, 9.6% in quarter four, bringing the whole year at the
upper end of the expected decline range. As we said earlier, the Master Plan savings were tracking
ahead and have come in ahead of our own expectation. We started the year at €75 million
expectations. We were able to produce €93 million of those savings.
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We were of course struck by the strikes in November and December, but following those we have
reached an agreement with the unions and more importantly, those agreements have now been
ratified by the members and form the real platform for us now to start redesigning the postal network in
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the Netherlands. Express, I would typify 2010 as the recovery year from the crisis. Volumes are back
or ahead of the pre-crisis levels.
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Of course yield was an issue particularly in the first part of the year, but the actions we have put in
place are effective, although in the fourth quarter we saw some negative mix impacts. Then the
dividend, basically what you see there, is 40% of normalised net income has been our guidance as a
group. We stick to that guidance, that means €0.57 a share will be paid out. €0.28 cents was already
paid out as an interim dividend last August.
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€0.29 additional per share will be paid out on March 11. So what we have decided upon, is a second
interim dividend, given that the AGM is somewhat later than usual as a result of the whole preparation
of the demerger. So there should be no timing disadvantage to our shareholders. Looking at the
numbers and as Bernard said, these are underlying numbers in the new structure.
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Then you clearly see that Mail overall has grown 1.3%, 8% decline in the operating income to €580
million and as I said, a recovery year for Express. 8% increase in its revenue, 32% increase in its EBIT
or operating income and it is good to note that in Europe now segmented as EMEA, the return on
sales for the full year has been restored to 9.0% for 2010.
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The Mail summary is a mix of elements. There is a number of positive developments that were
noteworthy in the early parts of this year. First and foremost of course the ratification of the agreement
with the unions. The outcome of the Vreeman commission, the commission that was put in place by
our junior minister, has been positive. The subsequent parliamentary discussions have led to an
agreement that by 2013 80% of all the postal workers should have an employment contract.
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Parcels continued to perform strongly throughout the year 2010 and the Master Plan savings have
been confirmed at the original level of €430 million. That those savings are absolutely necessary,
because pretty clear when you look at this particular slide with the last ten years of volume declines,
volumes Mail, addressed volumes in the Netherlands, target declining in the year 2000.
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The decline clearly accelerated in the first year of full liberalization and was running at a 9% as we
said in 2010. So the union agreement that was struck in December and ratified in January has seen
the Master Plan III now being defined as impacting 11,000 fte, most of them full timers. Originally
forced layoffs of 4500 in those 11,000 were foreseen,
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but after the discussions and negotiations with the unions, we have been able to scale this back to
2,800 of forced layoffs. 300 employees will stay longer in the system than originally anticipated. Of
course we will do everything possible to help as many of our colleagues as we can through the work to
work programme or TNT mobility.
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In the regulatory environment, once more the Vreeman committee wrote a clear report underlying
once more that competition on labour cost is not what the politicians would like to see happen in this
market and therefore 80% of the employees in the postal sector should be on labour contracts. At the
moment the ministerial – de ministeriele regeling – is up for discussions in the parliament with no
surprises as far as we can tell.
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Later in the year, in the autumn of 2011, an evaluation of the USO will be discussed in parliament. If
we look at the numbers of Mail, the overall revenue was grown by 1.3% for the full year. You all
remember that as per July 1 of last year the VAT regime in the German mail market has been
changed and that meant a different way of invoicing also for our German unit.
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A few exclude the additional invoiced revenue as a result of that matter and the overall revenue would
have come down 3.5%. As I said, operating income €50 million lower than the year before, but still at a
healthy level. Corporate responsibility. This is the second year that we publish our annual report. It
was published and is available on the web since eight o’clock this morning.
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It is the second time we publish an integrated annual report, so not just our financial performance, but
also our CR performance is now available and disclosed. Some of the highlights for Mail on this slide.
The employee engagement is coming in at 54%. It was not measured in 2009, but it is below the levels
that we saw in 2008, when we last measured it. Of course that is directly related to the major
restructurings going through. Customer satisfaction remained at a stable and good level.
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Fatal accidents came done significantly and the CO2-efficiency index – the measure for the
performance of CO2 – has improved as planned. If we look at Express, again a recovery year. Clearly
visible throughout the year in all the volumes which are now at or ahead of the 2007 levels, both in
terms of consignments as well as in kilo’s.
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The yield, first half we clearly saw negative trends. We announced a significant amount of measures
whether it is trade tariff, surcharge increase or volumes rationalisation. And the effectiveness of those
measures is beginning to show up. However in the fourth quarter as said, as a result of the bad winter
weather, we did see some negative mix impacts. And Brazil very clearly issued in the trading update a
couple of weeks ago. A €20 million one-off cost has been taken.
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Some pretty basic integration mistakes have been made. Systems in Mercurio and Araçatuba
integration did not perform well, did not provide the information one needed. That led to claims for its
provisions and have been made. A lot of efforts have been put into Brazil over the last few weeks.
Internal audit teams have been crawling all over the operation and Marie-Christine and Bernard have
been out there.
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The corrective measures are underway. This slide illustrates the volumes throughout the year. Pretty
much well above the prior year. Tinkering off a little bit towards the backend of the year, but that is
because already Q4 of 2009 was a stronger year. The results. In Express as said, 8% top line growth
for the whole group, the Express group that is 32% higher EBIT or operating income is clearly a good
recovery.
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And then corporate responsibility performance for Express. Employee engagement at a significantly
higher level than Mail as one would expect, 69%. Customer satisfaction is one to monitor best. That is
more than 1% below last year and the other area of course that jumps off this page, is the very
unfortunate high number of fatal accidents that we were involved in. Not as high as the 2008 number
was, but clearly well above 2009.
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Major part of those accidents take place in India, which is by far the highest scoring country, but also
the other emerging markets, China and Brazil add to it and show that road safety in emerging markets
is a theme to continue to focus on. The CO2-efficiency index in Express has clearly been managed
very well. If I take you through the outlook. For Mail a pretty clear outlook has been given, more
detailed than I think we have been given you in recent years.
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8 to 10% volume decline, so basically continuation of what we have seen in 2010. The Master Plan
savings at a somewhat lower level than 2010, between €50 and €60 million. Cash EBIT clearly below
2010, between €130 and €170 million. Of course these lines together indicate that 2011 that will
continue as Jan told you on December 2nd, are the first years in which the major redesign of the Dutch
postal network will take place.
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Investments will flow through this. Restructuring charges will be taken and of course the negative
impact of volume declines will continue. This will give us a throve in the performance of cash EBIT for
the next couple of years. In order not to scare the market and to show our confidence that that throve
is temporarily, we have now set a floor in the dividend for Mail to be paid after the separation at a €150
million or a 75% pay-out ratio, whichever is the highest.
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In Express a pretty clear outlook as well. From a management point of view the focus will remain on
the yield. Of course we need to look at structural costs and Bernard will give you one or two
indications of where that will be. Particularly driving down the overhead costs is going to be part of our
focus. The financial targets have been confirmed as Marie-Christine presented them to you on
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December 2 .
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Between €7.3 and €7.5 billion of revenues in Express into 2011 and another 30% improvement of the
operating income to be looked for. That should bring it between €400 and €420 million. Dividend
guidelines for Express is now also being clearly communicated at a 40% pay out of normalised net
income. Then the timeline. The timeline until the demerger. As I said, announced on December 2,
internal carve out completed on January 1.
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Today the announcement of the full year results and therefore of the annual accounts 2010. They are
input and form the basis for the demerger accounts that we will be drafting up now which will be
audited and then form the basis of all the demerger documentation including a full-fledged prospectus
for Express.
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All that demerger documentation will be filed or made public no later than April 13, because April 13 is
a 42-period, 42-day period before the AGM and that is the legal term that one has to adhere to these
days. Like I said, on May 2nd already planned our Q1-results. I was told it was a bank holiday, sorry if
we mess up your long weekend, but the analyst day will therefore only be held for Express on May the
3rd in London,
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whereas Mail will hold its analyst day on May the 9th and that will be in Amsterdam. That all should
lead up, of course these analyst or capital market days will be followed by road shows by the two
separate teams, but that should then all lead up to the shareholder meeting on May 25th, where next to
the approval of the annual accounts and all the other ordinary elements of an annual shareholder
meeting, we will also put the separation proposal up for approval by the shareholders.
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Should that approval be obtained on May 25, then by May 30 all the formalities and legal
documentation for the separation ought to be completed. That then should be the first day of listing of
the two separate companies. Whereas TNT Express NV is the most likely name for the Express unit.
Mail will come up with a new name. We have tried every trick in the book, but Harry refuses to tell us
what the brand is going to be.
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So we will probably have to wait until May 9 before we hear that. TNT NV, the Mail activities after the
separation will be rebranded and both new stocks will then be trading as of May 30. That is the plan.
Ok, I hand back over to Bernard for some more details on quarterly numbers and then we will take
your questions. Thank you.
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Bernard Bot
Thank you Peter. Let me take you to some of the numbers, quarter and outlook and detail some of the
things we intend to do. Now it would not be the annual report day and therefore I do need to show you
the statement of income. This is the statement of income for TNT NV Mail. So on the second column,
the third column from the right, you see the full year 2010.
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That are the numbers in the annual report. Express is discontinued operations and the revenue in
operating numbers for Mail. Going to more detail into those two just to highlight two things which I
won’t cover later. The net financial expense, €106 million, that should be seen in conjunction with the
net financial expense that sit in Express. Those are around €37 million, so all together €143 million in
line with the guidance we have given previously on interest.
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Income taxes down on 2009, that is mainly because 2009 included some non-deductable
impairments. Then to Mail. Here once again you see the bridge from the reporting to the underlying,
both for the quarter and the full year. If we focus on the quarter you see there the impact from the bad
weather and strikes, which we indicated in our trading update and the reversal of the “benefit” which
Mail has in the reported numbers for the profit pooling arrangement and for pension.
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That leads to the underlying number of €184 million. Then to the segments. This is the first time that
we present a full segmentation of Mail with numbers for the quarter. Quite a lot of additional detail for
you to look at. If we start with the revenue line, you see that Mail Netherlands showed the impact of
volume decline. Parcels shows a 4% increase, but bear in mind that these numbers have not been
adjusted for three fewer working days in the quarter.
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International has an increase, but again as Peter said, there is an accounting difference for our
Postcon revenues. If you were to take that out and not take that into account, then the underlying
growth is closer to around 5%. Then moving to the other side of the sheet, the underlying operating
income. Mail Netherlands down, but bear in mind that that includes the fact of three fewer working
days.
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We have not corrected for working days in that figure and there is also an €11 million negative impact
of pension phasing. And of course the remainder of the drop is then explained by the general volume
decline, autonomous cost increases off-set of course by the Master Plan savings which were €29
million in the quarter. Parcels had a stable quarter, but remember also here the effect of three fewer
working days.
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A good improvement in international. 2009 did include loss making activities which we have shed in
Italy and Germany in the unadressed area. Both numbers do include the loss making German network
regional activities. Then to the cash EBIT. Given the fluctuation we have just shown on the pension
P & L, I think this is the better measure to focus on. We will take the underlying cash EBIT and correct
on the one hand for the restructuring outflows but on the other hand for the actual cash payments in
pensions.
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So the number to keep in mind is the €110 million for the quarter, also the €341 million for the year of
which we think is the best reflection of the performance for the entity. Master Plan savings, Peter
talked about them. Targets through to 2017 confirmed, €430 of which €50 to €60 million next year.
Then in regards to restructuring cash flows as announced also and indicated on December 2. Those
are going up. €80 to €90 million in 2011 and then an average of €65 million per year over the period.
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A total of around 475 from now until the end the programme. Quickly on pensions. Just to note that we
are up again in our coverage ratio. A 101% at Q2, 104% at Q3 and now above the minimum required
level of 105% and still trending upward as we speak, given that this is the status as per the end of the
year. Now to the outlook for Mail and there is important to highlight the affecting the underlying cash
EBIT.
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We have guided that the volume would decline 8 to 10% and savings to €50 to €60 million, but all that
would lead to an underlying cash EBIT of between a €130 and a €170 million. Now you see that
amount here on the bottom. The amount on the top is the underlying cash EBIT for this year. We try to
highlight some of the changes which gets you from the 340 to the indicative 130 to 170 range.
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Obviously the impact of volume between 8 and 10% guided for the year is a major effect, but you also
need to take into account general and wage inflation which is in the first delta we show there between
€120 and €160 million and some other facts which Mail has to take account of. Then implementing a
restructuring programme of the size of the Master Plans takes some initial investments.
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That is doubling up on certain cost. The whole project management, ICT, housing, accelerated
depreciation, all those elements go into the Master Plan implementation cost which are expected to be
higher in 2011 as we launch the Master Plan III restructuring. Then there is some additional central
cost which also has to do with the separation.
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Those are all the P & L guidance and then the next two restructuring and pensions, are basically the
additional cash out for restructuring which we expect for this year. Remember the Master Plan side
between €80 million and € 90 million which is around €27 million and the €58 million which we had this
year, which we rounded off to the €30 million here. The pension cash out is also expected to be
somewhat higher than €25 million.
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Now all said that, the Master Plan savings, €55 million and the full effect of the Master Plan III savings
are yet to come into effect. So that brings you to the 130 to 170. You will ask yourself, how does this
match the developments over time in regards to the guidance we gave of the underlying cash EBIT for
2015 between €300 million and €370 million. Let me guide you then through that, just guided you
downwards, so let me now try to guide you upwards.
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Firstly to start with is the restructuring cash out. As said, €80 to €90 million this year, by 2015 larger a
larger extent that will have gone. So that is a plus. The cash out tied also in part to the outflow of staff.
Also that is due to the decrease and I think that in this room in earlier occasions are guided between
€75 and €100 million lower.
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Now the volume addressed Mail Netherlands obviously a decline, but at a slower rate and pace than
what we will see this year and that will then be offset by the full effect of the Master Plan III savings.
Then parcels and international. International is losing around €25 million in 2010, obviously by 2015
that should have a good contribution to profit, so you see a delta there and parcels set to grow at a
good profit level it has now, but will also additionally contribute.
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If you look at all those moving parts, you will see that from the basis of a €130, €140 million able to
move up again to the range of €300 to €370 million we guided on. Next to Express and here again the
differential between what we reported on and the underlying operating income. The €35 million should
be familiar. That is the €15 and €20 million. The €15 million on the weather and the Brazil €20 million
from the trading update.
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Demerger cost as part of the total of €45 million for the year and then the reversal, this time on the
positive side of the profit pooling and the pensions to bring you to an amount of €100 million for the
quarter and €338 million for the year. Also for Express lots more detail on the segments. Here you see
the profitability and the three geographic segments and on other networks. Other networks includes
our fashion and Innight activities.
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If we go through them in turn, Europe EMEA in revenue down but then remember there, three fewer
working days. If you look at the year as a whole, growth is about 6%. Volume is also up 6 to 8%
compared to last year and up on 2007. If we go cross the underlying operating income down €9 million
,again, not corrected for working days nor the lag in recouping the fuel price increases. If we had
adjusted for this, then the result would be up on the quarter.
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If you look at the year the result is up 20% for the Europe and EMEA region. Asia Pacific, that includes
the international and domestic activities in North-Asia and South-Asia, but also our Australian activities
which are primarily domestic. Overall good growth but damaged somewhat by lower international
growth out of China. Profit up and that reflects primarily the much better performance of our domestic
platform Hoau.
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Finally to the Americas, North America where we have a full service activity inbound and SouthAmerica including Brazil. There you see a revenue decline and that has to do with the contract
reorganisation which we are doing in Brazil. We are trying to get customers with a higher yield, so
overall that is positive for the profit. If you look at the loss in the underlying operating income it is good
to note that it is mainly related to the North-American activities.
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As said, those are mostly inbound with limited outbound volumes. So that then gets reflected in the
profitability of that activity. Volumes already seen, 3% up on cons, 6% on kilos, slightly lower than in
the previous quarters and full years, but of course the competitors are also getting a little bit tougher.
Then to yield, remains negative at 2.3%.
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Was minus 1.8% in Q3 and the drop from quarter on quarter is mainly due to the negative winter effect
where you see that those areas where we had high yielding activities were most impacted and there
was a shift from the express product to the economy product in international. In more recent trading
we are seeing the yield improve. Couple of further things to say on yield. The last time when we
talked, we showed some of the measures we are taking to support the yield improvement.
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You see them highlighted here. Base price increases coming through nicely. Also the contract specific
negotiations and the deployment of surcharges. Where the key focus now is on improving the
customer mix which is still not where we want it to be and as we highlighted the negative product mix
effect within the impact of winter weather in Q4. Now we have highlighted that we will have about €20
million higher cost mainly because of the separation.
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Now we are looking to avert those cost by a number of cost savings measures and basically all the
non-operating cost are in the area which we will explore, it is around 25% of the total cost base and we
are looking at very specific measures at each of those from top to bottom, from corporate to the
country level organisations to see how we can optimize those to negate the additional cost we will
face. Quick word on Brazil.
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As highlighted, claims and negative adjusted resulted in the last quarter in a €20 million negative
impact on profit, tied to the integration issues of Mercurio en Araçatuba. My reflection is that it shows
how complex what apparently is a simple business, actually is. Complex in the sense that there are
thousands and thousands if not millions of consignments and individual pieces which go through the
system with still various processes and hand-off points
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and if in one of those processes or hand-off points things do not go well, then the issues accumulate.
Now we have been there, Marie-Christine and I have been there in recent weeks. We have additional
teams on the ground and are looking at all the functions among the finance, marketing but also
operations to take corrective actions. One of the things which is particularly good is that we are putting
through automation in all the hubs and depots.
00:38:46:00
00:39:11:00
That will allow what we call full piece labelling and with that we have full track and trace and that
makes the whole transparency and administrative process better controlled next to giving better
service to our customers. Let’s also not forget that we remain to be the market leader in Brazil and
recognized as such. Now to the outlook for Express.
00:39:12:00
8
00:39:47:00
Only to say or to summarize it that we are reiterating the guidance we gave on December 2, so €400
to €420 million absorbing the 20 million higher TNT central cost. And we trade our dividend guidance,
40% of normalised net income. Quickly to net debt only to highlight that we have reduced the net debt
position somewhat from last year and that with this position we are fully in place to make the demerger
happen as we had intended.
00:39:48:00
00:40:16:00
Remember there were always two issues, the funding gap and the equity gap. In regards to the net
debt we are where we wanted to be. Finally the interim dividend. Peter has highlighted the reasons for
th
doing this. That will be put in place to be payable as of the 11 of March. That concludes my part and
give back to Andrew and you for your questions.
00:40:17:00
00:40:41:00
Andrew Beh
Thank you Bernard, Peter. Let’s start with the Q & A session. It will be better if we could start with a
few questions here from the room. For those of you on the telephone, please note that you need to
press ‘star one’ to register a call. You can do so now and we will join you in a few questions from now.
If you please say your name and what company you work for.
00:40:42:00
00:41:23:00
Axel Funhoff, ING
Good afternoon, Axel Funhoff from ING. I had a couple of questions. first of all on Mail. You report
quite a large underlying EBIT number in Mail other. Can you just quickly break down the business,
what is allocated in that business line?
Bernard Bot
Let me quickly answer that, it is technical. That gets me in the area of pensions. As we highlighted,
there is a difference between defined benefit and defined contribution accounting for the pensions and
that is also the differential that you see between Express and Mail that gets reversed.
00:41:24:00
00:41:58:00
The same occurs within Mail. Between the segments the pensions are accounted for in terms of the
cash contribution paid, but obviously for Mail as a whole it gets accounted as defined benefit which is
a lower number. That differential is in Mail other. So, what Mail other covers is basically some of the
non-allocated cost, but the largest amount and I think we have highlighted in the press release it is
€24, €27 million in Q4. The largest amount in there is that reversal of the defined benefit compared to
defined contribution.
00:41:59:00
00:42:32:00
Axel Funhoff, ING
Ok, thank you that is clear. Second question. You have not really spoken about the potential impact of
the competitor consolidation. You still guide quite conservatively in my view at an 8% to 10% volume
decline in 2011. As far as my own calculation goes, you have lost about an average of 2 percentage
points to competition in the past. Obviously pricing was always under pressure.
00:42:33:00
00:43:02:00
How do you see the impact of the competitor consolidation of the Sandd/SelektMail merger on your
own business on pricing and volumes?
Peter Bakker
I will be consistent with what I said this morning in the press call. That potential consolidation has been
announced but is not closed yet. There are authorities that need to improve that transaction and as far
as we have been informed, it has not been received yet.
00:43:03:00
00:43:31:00
So our view is that until that approval has obtained and before the networks of those two units are
then integrated, quite some time might still go. So in 2011 there might be some impact, but I don’t
count that to be material. On the longer run, should that combination be formed, then of course there
is a significant boost to the volumes that Sandd currently has assuming their integration is successful.
00:43:32:00
9
00:44:09:00
That should then allow them to be in a position that the higher labour costs as the result of the
outcome of Vreeman can be born more easily and all together that should lead to at least an
avoidance and that has I think been the objective of the politicians of further cost competition when it
comes down to labour cost. But in 2011 given the status of where I think that deal is and the time they
will require to get to the economic benefits, we don’t expect too much impact. That is why we gave the
guidance we gave.
00:44:10:00
00:44:41:00
Axel Funhoff, ING
Two more questions please. First of all you also mentioned that in autumn the universal service
obligation will be debated in parliament. Can you just tell us what is at stake? What the potential
outcome could be? And then the other and final question more general on Express. What are going to
be the key positive swing factors for earnings in Express for 2011? Is it gone be Brazil or Asia? Is it
volumes, is it pricing? May be just a word there.
00:44:42:00
00:45:14:00
Peter Bakker
The USO-evaluation was already foreseen at the time that the new postal law was put in place. It
might even be part of the law text, I don’t know, but it certainly was part of the political decision making
at that time. Basically when the liberalisation was agreed upon and laid down in the postal law, it was
said that the parliament wanted to have an evaluation whether indeed competitive positioning would
be achieved.
00:44:15:00
00:45:49:00
Well, from that point of view, whether it is one or two competitive networks, it is clear there is an
alternative or alternatives to the network that we operate. Outcomes I find hard to speculate on.
Certainly one of the areas where we will continue to be pushing for is that with the volume declines as
they are, with the relevance, or say it the lower relevance of Mail as a communication channel, the
requirements put on USO ought to be reviewed downwards.
00:45:50:00
00:46:16:00
Is it really necessary to have six days a week, can we overtime see that come off? That is the title of
the debate we will try to engage the politicians into. What the politicians do, we have to wait and see.
Bernard Bot
I will cover Express. So the swing factors I think we have highlighted also in the course of the previous
quarters.
00:46:17:00
00:46:43:00
Very important is the yield and not only the yield in terms of the base rate increases and surcharges
and the like, specifically also in the mix and highlight the customer mix, so the continued growth in our
medium and large accounts and of course also the continued growth in global accounts but in a
different stage. So looking for faster growth in the higher yielding areas.
00:46:44:00
00:47:15:00
Obviously for the product mix to come back to the stronger growth of the international express product
compared to economy. That is in the mix. I think in yield, and especially the mix factors are important.
Then obviously costs are going to be key, so that the volume growth that we will see that we get the
optimal operational gearing on that, especially in the environment which is becoming a little bit more
inflationary. So that continues to be an area on which we focus.
00:47:16:00
00:47:51:00
That is I would say, let’s say the key priorities for the EMEA. Obviously the ASPAC intercontinental
volumes out of China, that is where we want to focus those to be strong next to the continued
improvement of our Hoau platform. I think Americas there I would say, we have made a loss in total in
this year. Again, underlying a large part of that is North-America and that is unavoidable cost, but we
need to make sure that Brazil is stabilised and starts tracking to break even and a profitable position.
00:47:52:00
00:48:33:00
Axel Funhoff, ING
Thanks.
10
Henk Slotboom, theIdea
Couple of questions on Mail. First of all with regard to, I watched the press conference this morning on
the web cast. What strikes me is, you still have pencilled in €430 million of savings on the back of the
Master Plan ideas. First of all, if I look at the original proposals you have made to the unions in terms
of the restructurings, there is a gap of 1,700 people in terms of less forced redundancies.
00:48:34:00
00:49:08:00
There is a temporary effect of these 300 people that will stay on till 2013. Is there a trade-off between
structural higher cost because of keeping more people on board and fewer one-off restructuring cost.
Your guidance was six times €80 million, is €480 million until 2015. If so, could you please fill us in
there. The second thing is with regard, you just discussed, the competitive landscape in the
Netherlands.
00:49:09:00
00:49:40:00
You have said, two parties are talking, but by no means they will get approval. What makes you so
cautious in that statement, because you will have roughly 85% of the Mail market in terms of volume.
The combination will have roughly 15% in terms of volume. Then I add on to that is, did it surprise you
to see how the Germans withdrew from the Dutch market? Everything they have done so far is
benefitting TNT.
00:49:41:00
00:50:11:00
Look at the closure of Interlanden if they would have sold it to Alpha Groep for example, you would
have had a much stronger competitor in Network VSP for example.
Peter Bakker
Thank you for the questions. there are a lot of things that surprise me from the Germans, but we have
learned not to speculate either their motives or the speed of which they can implement it. The answer I
gave this morning and on which I echoed just now, is just a statement of fact.
00:50:12:00
00:50:50:00
This morning there was a little bit perception that the combination of Sandd and SelektMail was
already in place and that the benefit should therefore already be reflected. The fact is, all they have
done, is announce the deal, which needs to go through formal process. I am not speculating anything,
in no way. Either it makes or it does not, we will find out, but until it does and until they are able to then
integrate the networks knowing how hard it is to integrate networks, it will take time before the actual
dynamics in the market as a result of that move, will change.
00:50:51:00
00:51:24:00
I think that was all we were trying to say. The €430 million target has been reconfirmed. The
composition of the target will change, what we have said I think in one of the lines in the press
releases, is that we expect there will be some back ending in the period of those savings, but the
precise update of these savings and how these plans will interfere with them, is being made as we
speak in the Mail division.
00:51:25:00
00:51:52:00
I would anticipate that to be one of the key parts of the presentation on May 9 when they come out for
the capital markets. The important thing for us is to confirm the number today, that is not going to
change but the composition will. Most likely therefore additional measures to get for lost savings on
the personnel side, will have to be included and will be included.
00:51:53:00
00:52:26:00
Menno Sanderse, Morgan Stanley
Thanks. First on yield. So you are at 1.8% in Q3, we are now at minus 2.3, so a couple of months of
hard work and we actually went backwards. Does that mean that October and November were better
than Q3 and if so, can you tell us how much? By now you also said that in the last couple of weeks
things have improved. Can you define improve? Is it still negative or is it now positive?
00:52:27:00
00:53:00:00
I find it hard to see how you can go from where we are today to plus 3.5% which is your guidance for
the full year. Something recklessly clear is going to happen in the rest of the year, but what is that?
Bernard Bot
11
I think the impact as we highlighted was December. Negative on the higher yielding products. If you
average it out, then I think the trend that we had in Q3 was slightly better, slightly worse in the months
of October/November. The big hit then in December.
00:53:01:00
00:53:37:00
You are now seeing a trend back on improvement through the still unfortunately negative number but
lower than the minus 2.3% If you look at the guidance on the base rate increases, contract
negotiations, the surcharges, that is going strong. I would say, if we need the targets we are looking at
both from a customer mix basis and a product mix basis we should be able to achieve at least a
significant share of that. I would appraise it differently.
00:53:38:00
00:54:07:00
We have said a guidance of €400 to €420 million and if it does not all fall through through the yield,
which we previously said, if you take off inflation of 1%, then that would be the delta on the result, then
it will have to come through to additional measures that we take on the cost side.
Menno Sanderse, Morgan Stanley
Ok. You are 7% below your yield clean from 2007. What has changed in the industry to allow you not
to make that old yield of 2007 again?
00:54:08:00
00:54:36:00
Bernard Bot
That is always the “structural” question, that if you look where the biggest challenge is, it is in the
customer mix. It is not as if we are in a radically different environment to what we need to re-jag the
customer mix again to one where we are much more preeminent in the medium and large compared
to the global accounts. That is basically what is “harming” us last year and where we still are at work to
reverse that.
00:54:37:00
00:55:05:00
Menno Sanderse, Morgan Stanley
So how do you change that?
Bernard Bot
We change that by being more selective on the global accounts side and by being even more
proactive and even more clever on your pricing side on the territory sales and the actions you take to
midsize it out.
Menno Sanderse, Morgan Stanley
Ok. Then on Brazil. This feels a bit like Australia ten years ago to say the least. I am a bit surprised
that you said, we have been there the last couple of months.
00:55:06:00
00:55:36:00
You had Brazil for three years, it sounds likes you have just been to see it. Why has it not happened
earlier? I mean, this is a big issue. Why have you not integrated this properly and what has happened
exactly, because I am still a bit puzzled.
Bernard Bot
If I say, we have been there, given what has happened. It does not mean that we have not been there
before. Don’t misunderstand that. In 2009 we bought Araçatuba and 2009 was also the year in which
the transport market in Brazil saw a bit of a dip.
00:55:37:00
00:56:09:00
I think the accumulation of trying to integrate the two platforms and the dip lead to some measures
which were taken, for example centralizing some of the receivables work which previously was in the
depots. We centralized that. If you don’t have the right systems and people in place, then you quickly
come into a process which is less well controlled then it previously was. You also had two head
offices, one in Porto Alegre, one in Sao Paulo. Anyway, you are trying to integrate.
00:56:10:00
00:56:36:00
As I said, transportation is a more complex business then you may be realising from the outside. Then
you see that some of those things are not really well managed, there is a spin-off. That is where now
on all of these areas we are taking measures to recontrol it.
12
Peter Bakker
I would object to the comparison with Australia. I think the problems in Australia were financially of a
much larger size.
00:56:37:00
00:57:02:00
There we were dealing with an integration of five different units, here it is only two. It does not say that
this integration has gone well. It has not. We need to fully focus on addressing all those issues, but it is
a simpler animal to fight than Australia was in 2001.
Menno Sanderse, Morgan Stanley
Ok. A few ones. First on the pricing in the USO, the 10% return on sales. When is the decision to be
taken on that?
00:57:03:00
00:57:35:00
Peter Bakker
The way I understand it but I am looking at Harry, it is in the parliament now. It should be discussed
any of these weeks, but it has been there before, mid-December. That discussions, we have no signs
that it leads to any surprises.
Menno Sanderse, Morgan Stanley
Ok. So that should be finished before the 25 of May, AGM?
Peter Bakker
Clearly.
Menno Sanderse, Morgan Stanley
Than the supervisory board on Mail or in Express. The NV stays the same one, is Express getting a
new supervisory board or how is it going to be and has it been appointed yet?
00:57:36:00
00:58:13:00
Peter Bakker
I don’t think we have published the compositions yet but what will happen is, the existing supervisory
board of TNT NV will be split as well. So a number of the members will move out with Express. The
numbers therefore will stay behind with Mail.
Menno Sanderse, Morgan Stanley
And finally on the 8 to 10% volume decline, how much is substitution and how much is competition in
Mail?
Peter Bakker
75% is substitution.
00:58:14:00
00:58:45:00
Damian Brewer, RBC
Three questions. First of all just coming back on the yield issue in Express. If you say, covered back
up to something like Q3 rates from last year, that still implies a compound like two year decline in
average yield. What is causing that? Is there resistance to fuel surcharges coming through in the
business or is it a lag effect of contracts being renegotiated?
00:58:46:00
00:59:13:00
Can you give a little bit more colour on what is thriving that? Secondly and I give all the questions at
once. Just on the Express side as well. Can you give us a little bit more colour how you are thinking
about the remuneration structure of Express management, how much equity and business
performance incentives there will be there. Then finally on the Mail business. The 8 to 10% decline
goal or threshold for this year feels like a nudge up on the 7 to 9% we have had previously.
00:59:14:00
00:59:42:00
What is thriving that? One would have expected with a more stable economic environment that may
be the decline rate would come down. Is there something else that we cannot see in the numbers, that
you can see that is thriving that slight increase in deterioration? Thank you.
13
Peter Bakker
If you take the yield part, I take the colour on the Express remuneration. It will be published first as part
of the prospectus which will come out mid-April.
00:59:43:00
01:00:16:00
The guidance I can give you today, that there is no material change to be expected from the current
existing TNT NV remuneration policy, so it will be pretty much along those lines. The 8 to 10%, no, I
don’t think there is anything that we are not telling you or that you have missed. Like I said, the
improvement of the competitive landscape if at all it emerges, we don’t expect any impact to 2011. At
least that what we have assumed in this outlook.
01:00:17:00
01:00:54:00
Of course there are contracts and contract renewals we know, so that is a pretty clear guidance and
for substitution we assume continuation of the trends. You are right, it is slightly above the 7 to 9%. I
think we have said a couple of years ago when the liberalisation was coming to the Dutch market, that
the initial two or three years after the liberalisation, we would see slightly increased numbers. There
was not a shock intended, basically trends continue as we see in 2011.
01:00:55:00
01:01:24:00
Bernard Bot
Then to the yield question. We are working on to some other metrics, because this is a somewhat
imperfect matrix. It takes con’s, kilo’s, domestic businesses, international businesses within
international economy and express, different customer categories, so it becomes very difficult to
explain all the moving parts. If you say, what is then holding it back. The key is the customer mix.
01:01:25:00
01:01:50:00
We are seeing some run off on rates which are still lower, but that is only part of the effect. The
customer mix is the main one which is holding us back and actually the product mix is positive but less
positive then it was, if you can still follow me. Based on the fact that international is growing faster than
domestic, then within international what we have seen lately is that the international express was
somewhat lower.
01:01:51:00
01:02:38:00
That was the effect in Q4 of the severe winter weather. But the overall, the key is the customer mix.
Andrew Beh
Ok, operator, let’s take some questions from the phone line, over to you please.
Andy Chu, Deutsche Bank
Thanks so much. Two questions. Just again on the Express yield please. What is the amount just give
us a feel as to when you expect the Express yield to tip back into positive territory. Is it in Q1 or Q2,
just whenever?
01:02:39:00
01:03:10:00
Then in terms of the slowdown in Chinese international volumes, may be you can give us a
quantitative feel of what has happened on that front. Is it a sharp slowdown from December and the
outlook there please. Thank you.
Bernard Bot
To start with the volumes. I think that what we see is some lightness in the first couple of weeks, also
coupled to the Chinese new year, week 4.
01:03:11:00
01:03:43:00
Probably a little bit slower than we had expected, but it is very difficult to say what the trend is. Is it
something that is going to endure? Does it have to do with the roll out of some of the new high tech
gadgets? When is it going to come online? The pipeline we have GAM is very healthy, but we saw
some slowdown in January which we also see confirmed in some of the cargo rates coming out of
China and some of our competitors are also indicating some weakness.
01:03:44:00
01:04:15:00
I think it is for me too early to tell where it is going to go, but it is something which we obviously
watching closely, giving the impact that it could have. I think overall on the yield, much will depend on
14
both the product and the customer mix as I just highlighted, be more comfortable to come back after
Q1 to show you where we are, when we also have flushed out the things which are happening now in
the beginning of the weeks of January, to see exactly where we are.
01:04:16:00
01:04:55:00
The only thing I can again reiterate is the guidance of €400 to €420 million.
Andy Chu, Deutsche Bank, London
May be just on the volumes out of China, I guess it is a pretty high average revenue from China. It will
have a drag on mix and yields of the group, please?
Bernard Bot
Obviously it is an important product, international express out of China. So we have to wait how that
trends, but again, let’s see what happens in the first couple of weeks and not take the first trading
weeks as an indication.
01:04:56:00
01:05:34:00
Neil Glynn, Credit Suisse
Thank you, good afternoon, gentlemen. Two for me please. First a follow up to the question regarding
China. Are you also seeing a parallel trend in China domestic? Then my second one, I know you
generally feel you can pass on higher fuel cost through fuel surcharges, but I wonder if you could
clarify just on what proportion of your expected cost base is actually fuel, to give us a feel with what
kind of quantum of fuel surcharges may be required to the year?
01:05:35:00
01:06:11:00
Bernard Bot
The exact on fuel is a difficult one. Obviously, some of the fuel is paid into the tariffs of our outsource
partners. Overall the fuel surcharge we have in place with many of our customers helps cover that,
although with a lag effect. We had some of that lag in Q4. With regards to China domestic, yes we are
also seeing a bit of weakness, but that is I think primarily tied to the planning of the Chinese new year
in week 4.
01:06:12:00
01:06:51:00
Neil Glynn, Credit Suisse
Great, just a follow upon the fuel side. Is that lag fair to think about two to three months?
Bernard Bot
It is around two months.
Neil Glynn, Credit Suisse
Great, thank you.
Philip Scholten, Rabobank, Utrecht
Good afternoon. A question on your total cost for the Master Plan savings. You are still maintaining the
total savings target. You are also guiding to a restructuring cash out, but as I understand you have
now also introduced an implementation cost per year.
01:06:52:00
01:07:30:00
Can you give some guidance on that going forward as well as you can give an overview of the total
cost and cash out for the total savings plan?
Peter Bakker
Like I said, I would prefer to come up with a full overview and evaluation of the Master Plans on the
May 9 meeting. As part of the outlook that we have given you, there is €35 million of initial costs in
2011, but a multiple year outlook for that I leave for Harry and Jan to work out and present to you on
May 9.
01:07:31:00
01:08:01:00
Bernard Bot
Let me be very clear. The €35 million is incremental over the €35 million we already had last year, so
€70 million for the year.
15
Philip Scholte, Rabobank
Right. Is it fair to assume then that the cost will continue going forward as you progress with your
Master Plan savings?
Bernard Bot
Well, what Peter said, if we take the peak of the implementation you will have some implementation
cost around the same levels.
01:08:02:00
01:08:37:00
It depends a little bit of what you do specially and specifically in each year. We are now in 2011, 2012
and 2013 expect some further implementation cost, but obviously that goes away once the programme
has been run through.
Philip Scholte, Rabobank
Secondly if I may, from a cash generation point of view and combined with your dividend promise, it
looks like on my calculation that Mail would be leveraging itself up while it is paying a dividend of at
least €150 million in the next couple of years.
01:08:38:00
01:09:16:00
Is that true and what are your thoughts around that? Obviously, in the old separation structure it was
meant to deleverage Mail. It looks a bit conflicting here.
Bernard Bot
Remember that Mail will hold a 29.9% shareholding in Express at some point a selloff of that. Actually
it is not leveraged, it has excess cash if you take the stake in cash terms. That in part will serve where
it can for excess returns to shareholders, but also to support the on-going dividend payments.
01:09:17:00
01:09:46:00
Philip Scholten, Rabobank
If I may, can you give us the organic growth figures in old reporting style of Express Europe and
Express emerging markets?
Peter Bakker
I don’t think so. The new reporting style is the start of our segmentation reporting and we are not going
to do further reconciliations, because then even us don’t understand anymore where we are.
Philip Scholten, Rabobank
Ok, for the whole of Express than may be.
01:09:47:00
01:10:20:00
Bernard Bot
That is tied pretty tight to the new one. There is not much change. The only thing that has changed is
that Innight other networks has faltered into Express. I think in the big scheme things you can look at
the underlying revenues as projected on page 15 of the press release to give you guidance on growth.
Andrew Beh
Also you may check out page 21, reconciliations might help as well. We have two more calls from the
phone line and then we will wrap up with a couple of questions in the room.
01:10:21:00
01:11:06:00
Ed Wolfe, Wolfe & Trahan
Good afternoon, guys. could you give a sense for the timing of Brazil. Peter, you talked about it is not
Australia. Can you give us a sense that it is two quarters, three quarters, is it two or three years before
we start to see the losses go?
Bernard Bot
The items are one offs. The objective is to be breakeven to profitable this year and move from there. It
is not as a something which should be seen as structural. These are really one-off items related to
customer claims, wrong billing, those types of things, additional provisions.
01:11:07:00
16
01:11:37:00
So nothing to do with the core of the business, nothing which would repeat itself in this year or the
years thereafter.
Ed Wolfe, Wolfe & Trahan
And the one-off restructuring cost, when should we see those go away?
Bernard Bot
You mean the ones in Mail?
Ed Wolfe, Wolfe & Trahan
No, the ones in Brazil. So you said that the €30 million was one-off to the integration and restructuring.
01:11:38:00
01:12:06:00
Bernard Bot
That is the past so that is gone. That was 2010. Those were one-offs which we can pinpoint. So the
restructuring in the integration is moving along and again the objective is slightly else to make the
breakeven on the Brazilian platform this year.
Ed Wolfe, Wolfe & Trahan
I just want to clarify again. You are saying that you are not see a further charges related to the
restructuring in Brazil as put forward from Europe unless something new develops.
Bernard Bot
Indeed.
01:12:07:00
01:12:30:00
Ed Wolfe, Wolfe & Trahan
Just one clarification. When you discussed in the accounting, can you just put some clarification
around that? What was in the fourth quarter and going forward, how that was?
Bernard Bot
I did not quite get you. Are you talking about the profit and loss pooling?
Ed Wolfe, Wolfe & Trahan
Yes, the profit and loss pooling was between Mail and Express.
01:12:31:00
01:13:06:00
Bernard Bot
Yes, so that is gone. That no longer since the end of November exists. That was a fiscal structure
which was in place to optimize the fiscal position of our activities in Germany with some of the German
Mail activities loss making, Express profitable, then you are allowed to put that into one fiscal entity or
unity and thus lower your tax charge. That has been dissolved as of the 30th of November 2010. So
that should be a temporary effect which we have to account for in the way we do, because of all the
accounting rules.
01:13:07:00
01:14:03:00
That is going forward, gone and will not return under the Express P & L.
Ed Wolfe, Wolfe & Trahan
Thank you very helpful, I appreciate your time.
Caspar Lund from Edoma in London
Good afternoon, I just want to settle back to the yield on Express. You have given a confident
guidance on the EBIT, the operating income number for 2011. Then you repeated that today and also
when you warned on the one-off for the fourth quarter, what yield for the full year is built into that
number?
01:14:04:00
01:14:36:00
You should be able to tell me that, because you repeated the full year guidance number. What yield
number is built into that and what sequencing or seasonality of yield development is assumed in that
number?
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Bernard Bot
In the previous guidance we have always indicated the target of 3.5% increase in yield. We have
always said that it would be offset by inflation effects, so that you should look at 1% increase year on
year.
01:14:37:00
01:15:11:00
You can also see that is the step up from the result this year to the guidance we are giving. It is
basically two moving parts. If we don’t make it in the yield, then we have to make up for it on the cost
side. Obviously we are looking for the yield to trend upwards and go as much as possible to the 3.5%.
I would have wished to have seen more effect in Q4, given some of the one off effects and I would
have wished that for the first weeks we have seen somewhat weaker trading in international express
would not be there.
01:15:12:00
01:15:37:00
All and all to say, a significant part of that has to be recouped by yield. If we are not able to put that in
place, then we have to look more sharply at what we can do on the cost side.
Caspar Lund from Edoma in London
Just that. I think you made some comments this morning that yield was also negative in the month of
January and correct me if I am wrong.
01:15:38:00
01:16:10:00
Where given the on the last quarter of February, is there any notable improvement or are you
surprised that you have not seen a great improvement in yield at the beginning of the year given how
weak yield was in the fourth quarter?
Bernard Bot
It is again, it is a difficult beast to get your hands around, because the rate increases are going
through, the supplements are going through in the right way, we are doing all the contract
negotiations.
01:16:12:00
01:16:41:00
It sounds a bit like a broken record, there are very much things in the mix happening, both on the
customer side and the product mix which unfortunately in the first couple of weeks this year was not as
we wanted it through the lower trading in international express from China. That is were the focus is
and that is what going forward needs to propel us to positive territory on yield. The actions that we
take there.
01:16:42:00
01:17:12:00
Caspar Lund from Edoma in London
Just one final question on that. One of the analysts I think it was Menno from Morgan Stanley has
said, is it realistic at this stage to think that you can return to a yield profile similar to what you saw in
2006 or has there been such a change in the business mix and or the awareness of customers that
those yield numbers will never be obtainable again?
01:17:13:00
01:17:42:L00
Bernard Bot
Well, the proof will be in the pudding. What I think is, is if I look at the main issue, it is the customer
mix. If that is what we need to tackle, then the question is, is there a structural shift in customer mix
and that I still don’t believe to be the case. Therefore there should be, once we fix that, we should be
able to return to healthier territory in yield.
01:17:43:00
01:18:15:00
Peter Bakker
Let me just add to that, because we are beating yield to death here. It is a too complex matter to
satisfy all your questions. We know where we need to focus, we focus there. Let me remind you that
EMEA results in 2010 are back at 9.0% return on sales, Q4 was 11.1% return on sales, so it is not the
case that there is an indication that there is such a structural change in this market, that the pre-crisis
return on sales levels are unattainable.
01:18:16:00
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01:18:46:00
What I think Bernard is saying, roll over the matter. I still go to some of the Express meetings and it is
all they talk about, I can assure you. At the same time, wherever we see deviations from our planning
like the stuff coming out of China, we are all over the cost side of it. I think the outlook and the
confirmation of the outlook has a solid basis in management actions and that should give you the
comfort.
01:18:47:00
01:19:33:00
Thijs Berkelder, Petercam
Thanks. First question on Australia. Are Australian margins also back to close to 10% and let say, the
conclusion then would be that China/India still quite negative. China/India next year also negative
again, so a bit of follow up on that. Second question on parcels. In December parcels was presented
as a high growth entity with an EBIT margin of 20%.
01:19:34:00
01:20:04:00
We now see an organic growth of only 2% and a margin of only 14% for the year. What is the
difference or the change there? Third question. UK Mail revenues of 25%, but EBIT is flat. Can you
may be explain what you expect for next year?
Peter Bakker
I will start with Australia. Australia is not at 10% and has never been actually.
01:20:05:00
01:20:35:00
For some reason which in my time at TNT I have never quite worked out, market position, market
power and return on sales in Australia is a different formula than in the rest of the world. China is
overall I think still loss making, but what I have said before, we see positive months even in the Hoau
stand alone, so it is clearly improving and on its way up.
01:20:36:00
01:20:59:00
India is loss making, but getting very close to break even as we speak. That is kind of the mix were we
are on that front. Parcels, I heard you shout out all the numbers. I am not aware of any change since
December in parcels.
Bernard Bot
No, I don’t quite get the 2% in parcels. Underlying is 6% revenue growth which is multiple of GDP.
01:21:00:00
01:21:26:00
Thijs Berkelder, Petercam
The volume is 6%, but in revenues it was 4% and you acquired an entity, so a growth of 2% a bit of
impact of the working days of course. You are now investing a lot of money into future growth in
parcels.
Bernard Bot
We are more than happy to explore the maths in more detail, but I think the 2% does not do justice to
what we are doing in parcels.
01:21:27:00
01:21:53:00
The growth in volume is actually higher than the 6%, so I think that is very healthy in what is an activity
which is fairly mature and it is one of the leaders in the Netherlands. It is still able to grow on the back
of all the e-commerce activities they have and able to grow at a very significant profitability. You have
seen the operating income jump 33% in the year, which I think is not bad and business which warrants
some investments.
01:21:54:00
01:22:31:00
Thijs Berkelder, Petercam
Revenues were up 25%, but EBIT was flat. It was said to going forward.
Bernard Bot
It is new that we report on UK Mail, it might be that I have something missed.
Thijs Berkelder, Petercam
The annual report.
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Bernard Bot
For the year, anyway, I think it is, you know the model in the UK. I think Europe, a bit precise on the
numbers, I would say overall it is profitable.
01:22:32:00
01:23:05:00
It is a model with the downstream access, so it does not have the full value added as some of our
other activities have. That is trending along in a good way generally for the type of business that it
represents.
Arun Rambocus, Kempen
Two questions please. Continuing on the yield versus customer mix. Where are we first pre-crisis
levels, and how has it evolved throughout the year? That is the first question. A second question on
Mail.
01:23:06:00
01:23:38:00
Is any change on pricing throughout the year particularly in Q4, competitors becoming more
aggressive? Or is there a sort of stabilisation in that area? Thanks.
Bernard Bot
I can take the pricing in Mail. No, if you look at the quarter it is flat, quarter on quarter. Also there in
Mail various moving pieces, it is the mix, the decline in bulk is higher than in single, we have an
uptake, we have a bit of a decline in some of the customer contracts, but overall the price level is
steady.
01:23:39:00
01:24:16:00
Then the question on yield which I probably given that, we get so many questions on yield, I did not
quite get it.
Arun Rambocus, Kempen
The question was, how did the customer mix evolve throughout the year and where are we versus precrisis levels? That was the question.
Bernard Bot
It did not evolve the way we wanted and we are not at the pre-crisis level yet in the split of the global
accounts and the medium and smaller accounts.
01:24:17:00
01:24:37:00
Arun Rambocus, Kempen
I asked you actually for a bit more colour, more numbers, an index based number so we can see
where we are.
Peter Bakker
I want to stop the debate on yield. I think we can’t satisfy more questions on it then we are trying to do.
Be assured that we are all over the topic and that we are working per customer segment on corrective
measures where we can.
01:24:38:00
01:25:04:00
Again we can be negative, but the fact is, the main issue in yield is that global accounts are growing
faster than the midsize and large accounts. That gives some pressure on yield but at the same time it
gives a lot of volume and therefore a better utilization in the network and thrives the margins to where
they are. It does not mean we should not continue to look for yield improvements.
01:25:05:00
01:25:58:00
I have no indication that there is structural change at this point that makes any of our long term
outlooks unviable.
Arun Rambocus, Kempen
Thanks.
Robert van Overbeek, Chevreux
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Hopefully you can help me to make a bridge between the €180 million Express EBIT and the €69
million of profit after tax. I assume a tax rate of 35% and also interest charge indicated at €35 million.
Then I still miss about €40 million. The EBIT for Express €180 million and then to €69 million.
01:25:59:00
01:26:45:00
Bernard Bot
We guide you through the supplements not to the annual report, but to a separate report on Express.
Let me try to find the P & L. So we have operating income for the year of €180 million, then we had
interest expenses of €37 million and then looking at page 33 of the supplementary report, then
Express also includes the Logispring activities where we had a negative result of €17 million because
of a number of impairments there.
01:26:45:00
01:27:09:00
Then the income tax was €57 million and if you add all that up, you get to the €69 million. Let me then
say something on the income tax. If you do the math, the ECR is relatively high and that has to do
primarily with a number of losses including those in Brazil which we were not able to offset and are
non-recoverable in the tax.
01:27:10:00
01:27:48:00
Basically operating profit before tax line goes down without any offsetting movements on the tax line
itself. The full details to be found on page 33 of the separate report for Express.
Robert van Overbeek, Cheuvreux
Is that the annual report supplement?
Bernard Bot
To be very clear. We published today and let me hold them up, we had two reports. One is the annual
report TNT NV, full details, that is basically Mail and then Express is discontinued operations.
01:27:49:00
01:28:12:00
Not to disappoint you, we also made a full financial report for Express with all the details, same
structure as the annual report. By the way that will also be the basis for the prospectus which will
come out and basic gives you all the details for 2009 and 2010 for Express.
Robert van Overbeek, Cheuvreux
Thank you.
01:28:13:00
01:28:42:00
André Mulder, Kepler
A question on the margins from the return cap. If we look at Mail Netherlands, parcels will make 14%
operating margin. I assume that the USO activities are making a higher margin there, possibly up to
20% or so. If I take this 10% pre-tax margin cap into account, to what extent has that already been
taken into account in the full cost.
01:28:43:00
01:29:12:00
Should we expect the full effect of that in 2012 and what form would that take? If I assume if that is
volume and cost will be the same, would it mean that you will be forced to lower your stamp price
again?
Peter Bakker
The return cap or the reasonable return that we are allowed to make on the USO is on the grouping of
the USO services, so there will be not forced changes in prices.
01:29:13:00
01:29:52:00
Given the volume developments in the letter business, the letter part of the USO, the USO margins will
continue to be under pressure in that part of the business. In that case the reasonable return will work
as kind of return guarantee, but then on the upside. So on the stamp price I would expect continued
room to increase prices in the coming years, particularly as we see the volumes continue to decline
and the returns on the USO parcels will be part of that overall target or number.
01:29:53:00
01:30:31:00
I am not in waiting not significant enough to change much of that formula.
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Wijnand Heineken, Independent Minds
To get back to the mail other category. You told us a bit about the impact of the pensions, but it
includes as well activities held for sale. So we know already that you have announced the divestment
of some Belgian and Italian activities, so I presume that is still under that category in the old 2010
accounts.
01:30:32:00
01:31:03:00
Could you give a bit more background on the numbers, what they attribute to more profit of these
Belgian and Italian activities? So just to have a feeling what will be out of the numbers later on and
what kind of other activities held for sale, are still classified under that category.
Peter Bakker
I have to guess here, I am looking at Jan, it is around €10 million is it? Higher? Ok.
01:31:04:00
01:31:29:00
Bernard Bot
In the €29 million is the €27 million which I mentioned on pensions. The number above €10 million for
the Belgian unadressed activities and the Italian activities which we have announced are being spun
off.
Wijnand Heineken, Independent Minds
Just for safety, are we now talking about Q4 or the full year?
Bernard Bot
The full year.
01:31:30:00
01:32:01:00
Peter Bakker
And the impact of the disposal will only be reported in the first quarter.
Andrew Beh
Right, with that then we say, thank you for your time and interest. We see you again on May 2nd for the
Q1 results and then the capital market days in the weeks thereafter. Thank you.
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