Press Release


Newly listed company on track

Publish Date : 30 August 1998 at 10:43 CET - TNT Post Group announces a net income growth of 18% in the first half of 1998 exceeding the company's earlier estimate of a 10-15% growth. Revenues rose by NLG 592 million, an increase of 8% compared to the same period last year. Operating income increased by NLG 55 million (9%) in the first half of 1998. Overall, exchange rate effects were negligible.

1 st half 98 1 st half 97 %
Revenues 7,950 7,358 8%
Operating income 685 630 9%
Net income 365 310 18%
Earnings per share 0,77 0,65 18%

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 of the 1998 financial year which shareholders may elect to receive 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 September 2, 1998. The dividend is payable as of September 25, 1998.

TNT Post Group provides a wide range of mail, express and logistics services worldwide. On June 28, 1998, TNT Post Group was demerged from Koninklijke PTT Nederland NV (KPN). On June 29, 1998, TNT Post Group was listed at the Stock Exchanges of Amsterdam, New York, London and Frankfurt.

IMPORTANT STEPS TAKEN

Listing

During the first half of this year, much emphasis was placed on the demerger from KPN, on the structural development of the new corporation and on the listing of the company. The listings at the Stock Exchanges of Amsterdam, New York, London and Frankfurt were successfully accomplished.

Rating

In June 1998, TNT Post Group received credit ratings from both Standard & Poor's and Moody's Investors Service. Standard & Poor's assigned an A/positive corporate credit rating. Moody's assigned a counterparty rating of Aa3 to TPG. These ratings reflect TNT Post Group's strong financial position.

European Express network

On April 29, 1998, TNT opened a new purpose-built European Express Centre at Liege Airport, Belgium. Part of this project involved moving operations from Cologne to this new hub. The state-of-the-art Express Centre is one of the most advanced of its kind in Europe, and offers fast and efficient handling services to customers world-wide giving the company a competitive advantage in a demanding market. As a result of the opening, the air network increased its connections to five new destinations. The company also announced that it will add 14 Airbus A300B4 aircraft to its fleet. Starting September 1998, the aircraft will gradually be introduced to replace 10 B727-200 aircraft.

Integration

The company progressed on a large scale, with the integration of the international and domestic express operations. Notably in Italy, Germany and the Benelux, much progress was made, leading to the reallocation of operations and more efficient use of resources, especially depots and vans.

TNT brand identity

Of great importance was the launch of the new TNT brand identity, which aims at communicating the new TNT logo, taking ownership of the colour orange and increasing awareness about the business TNT is in. It will enhance brand awareness and recognition.

Briefpost 2000

During 1997, the implementation of the new sorting structure in the Dutch Mail operations resulted in quality problems. In the first half of 1998, these problems have been addressed and are expected to be resolved in the second half of 1998. The financial objectives of the project remain unchanged.

Mail 2000

Among other strategic initiatives, TNT Post Group commenced a joint venture in the USA, presently called Mail 2000. The project concerns print & mail activities; customers offer their mailings to the company in an electronic format, after which Mail 2000 will sort, print and organise final distribution.

BUSINESS PORTFOLIO DEVELOPS ACCORDING TO PLAN

Mail

Revenues in the Mail business increased by NLG 236 million (6.7%) to NLG 3,765 million in the first half of 1998. Both higher volumes in business mail and direct mail activities contributed to this growth.

Dutch Domestic Mail sales rose by NLG 83 million (5.1%) to NLG 1,721 million. The growth is mainly the result of growth in the volume of business mail. More customers in the "postage pre-paid" segment, and a higher volume of bankletters in the bulk mail segment, as well as the favourable economic situation contributed to this growth.

The revenues of Dutch Direct Mail Services grew by NLG 136 million (16.3%) to NLG 968 million. Acquisition effects (NLG 49m), incidentals (NLG 19m) and favourable market situations were attributable to this significant growth.

International Mail showed a growth of NLG 30 million (4.0%) to NLG 787 million. The growth is the result of higher revenues of Dutch outgoing mail, higher international mail in Europe, partially offset by a decrease of other international revenues.

The business of Postoffices and other remained more or less stable. On balance revenues declined by NLG 13 million due to the deconsolidation of certain non-core service activities.

Earnings from operations

The earnings from operations from the business area Mail increased by 7.9% to NLG 806 million. Return on sales showed a slight improvement.

EXPRESS

Express revenues increased by NLG 189 million. The Asian currency crisis and the restructuring program in the USA offset the solid growth in Europe.

Revenues of Express Europe increased by 9.6% to NLG 2,551 million. All regions in Europe contributed to the increase. In the UK growth was due to the increase of existing business and a small acquisition effect of NLG 2.8 million. Growth in express freight in Sweden and Finland was the driving force behind the overall business growth in North Europe. In the Benelux region revenue growth developed satisfactorily, due to increased volumes as well as the commencement of new contracts. In Italy, the acquisition of Pony Express contributed positively. The focus in several countries, notably Germany and the Benelux, was on the integration of domestic and international infrastructures. On top of that, the move of operations to the newly opened hub in Liege has led to short time quality issues. As expected, these processes slowed down overall growth in these countries.

In Asia, the business grew with nearly 10%, but this could not compensate for the negative foreign exchange effect of 14% due to the Asia currency crisis. In the Americas, in line with expectations, the restructuring program that was implemented included a planned decline in revenue. In the Middle East region, overall business developed favourably.

Earnings from operations

Earnings from operations from the business area Express increased by 12.7% to NLG 142 million. Return on sales increased from 4.2 to 4.4%.

LOGISTICS

In the first half of 1998, total revenues in the business area Logistics increased by NLG 192 million (20.9%) to NLG 1,110 million. The increase in revenues was due to growth in business through increased volumes from existing customers and contracts with new customers. TNT signed a five-year contract with Fiat to provide inbound logistics for manufacturing on location in Northern Italy. In addition, new contracts were commenced with Fiat in Brazil and Poland. The combination of these new contracts with the existing outbound logistics contracts will provide one of the biggest automotive logistics service offering in the world. The UK achieved growth, mainly due to increased volumes from existing contracts and new contracts commenced in the first half of 1998. Similarly there was strong growth in the Benelux from existing contracts, as well as several new contracts. In North America the existing inbound logistics contract with Ford continues to expand and new contracts were commenced, for example with Toyota.

Earnings from operations

Earnings from operations increased by 20.0% to NLG 72 million. The return on sales of 6.5% was maintained during this period of strong growth.

ADDITIONAL INFORMATION

Operating income

Total operating income increased NLG 55 million to NLG 685 million in the first half of 1998. Mail, Express and Logistics each contributed to the growth. There was a negative impact from higher non-recurring costs and the slightly higher amortisation of goodwill.

Capital expenditures

The capital expenditure in property, plant and equipment for the first half year 1998 included expenditures in the business area Mail (NLG 105m), in Express (NLG 300m) and Logistics (NLG 27m). Capital expenditures in the Mail segment primarily relate to Briefpost 2000. The Express segment includes capital expenditures in the European Express Hub in Liege, depots in Germany, airport facilities in Hong Kong and the major road hub in the United Kingdom. Capital expenditures in Logistics are related to plant and equipment, in connection with new contracts.

Employees

In the first half 1998 staff decreased from 86,939 FTE's by 1,499 to 85,440 FTE's. These figures include the FTE's of proportional consolidated subsidiaries, which decreased from 8,582 FTE's by 462 to 8,120 FTE's.

Financing

The cash received from KPN at the demerger was used to pay off an amount NLG 2.1 billion of debt which consisted of the Revolving Credit Facility (NLG 1.7b), and a high-interest Swiss bond loan (NLG 0.4b).

OUTLOOK FOR THE YEAR

Based on the outcome of the first six months and assuming present exchange rates, the Board of Management reconfirms its expectations that the overall increase in sales for the full year 1998 will be in line with the 1997 development.

Assuming present exchange rates, the Board of Management further expects for the remainder of the year that net income will develop in line with the first six months of 1998.

The company expects capital expenditures to be well above the 1997 level. The number of FTE's in the Group is expected to remain stable.

SAFE HARBOUR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT of 1995:

Certain information contained in this press release, particularly in the "Prospects" 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, globalisation, levels of spending in major economies, the economic climate in 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, unexpected costs of integrating recently acquired businesses and future business combination or dispositions.

Figures 1st half year results TNT Post Group

Income Statement Overview TNT Post Group (NLG m)
1 st hyr 1 st hyr
Description 1998 1997
Net sales 7,771 7,183
Other operating revenues 179 175
Total operating revenues 7,950 7,358
Salaries and social secruity contributions 2,974 2,918
Depreciation, amortisation and impairments 221 216
Operating expenes 4,070 3,594
Operating expenes 4,070 3,594
Total operating expenes 7,265 6,728
Operating income 685 630
Financial income and expenses (48) (54)
Income before income taxes 637 576
Income taxes (269) (269)
Results form investments in affiliated companies 0 2
Net income before minority Interests 368 309
Minority interests (3) 1
Net Income 365 310
Basic net Income per Ordinary Share and per ADS 1) 0.77 0.65

1) Based on the number of 475,173,350 Ordinary Shares

Mail operating revenues (NLG m)
1 st hyr 1998 1 st hyr 1997
Ducth Domestic Mail 1,721 1,638
Other operating revenues 179 175
Dutch Direct Mail 968 832
International Mail 787 757
Post offices and other 289 302
Total Mail 3,765 3,529
Express operating revenues (NLG m)
1 st hyr 1998 1 st hyr 1997
Express Europe 2,551 2,328
Express International 648 682
Total Express 3,199 3,010
Logistics operating revenues (NLG m)
1 st hyr 1 st hyr
1998 1997
Total Logistcis 1,110 918
Operating Revenues (NLG m)
1 st hyr 1 st hyr Variance
1998 1997 %
Operating revenues segments
Mail 3,765 3.529 6.7
Express 3,199 3,010 6.3
Total operating revenues 7,950 7,358 8.0
Total operating expenses 7,265 6,728 8.0
Total operating income 685 630 8.7
Operating income (NLG m)
1 st hyr 1 st hyr Variance
1998 1997 %
Mail 806 747 7.9
Express 142 126 12.7
Logistics 72 60 20.0
Total earnings from operations 1,020 933 9.3
Amortisation of goodwill 62 52 19.2
Non-recurring costs 273 251 8.8
Total operating incom 685 630 8.7

Balance sheet after appropriation of net income

Balance sheet (NLG m)
June 30, 1998 January 1, 1998 December 31, 1997
incl. Demerger effects incl. Demerger effects
Fixed Assest
Intangible assest 3,179 3,242 3,242
Property, plant and equipment 3,015 2,847 2,847
Financial fixed assets 1,125 1,081 842
Current assets 3,895 5,122 3,942
Total Assets 11,214 12,292 10,873
Group equity
Shareholders' equity 3,858> 3,617 2,369
Minority interests 16 13 14
Provisions 3,187 3,064 3,064
Long term liabilities 445 490 331
Current liabilities> 3,708 5,108 5,096
Total Liabilties and Group Equity 11,214 12,292 10,873

Cash Flow Statement

Consolidated Cash Flow Statement (NLG m)
Description June 30, 1998 June 30, 1997
Net Cash flow 777 261
Net cash provided by operating (622) (151)
Net cash used in investing activities 33 18
Net cash provided by financing activities 188 129
Changes in cash and cash equivalents

US GAAP

Net income
1 st hyr 1998 1 st hyr 1997
Net income under Dutch GAAP 365 310
Adjustments for: Employment schemes and group reorganisation 42 142
Pension costs -82 -97
Other 12 -20
Net income under US GAAP 337 335
Basic net income per Ordinary Share and per ADS Under US GAAP *) 0,71 0,71

*) Based on the number of 475,173,350 Ordinary Shares

Page publication date: 30 August 1998 at 10:43 CET