Press Release

TNT Announces Initiatives to Sharpen Strategic Focus

Publish Date : 6 December 2005 at 07:30 CET - Tightens focus on higher growth, higher margin network-based businesses and adjusts its capital structure

Key announcements include:

  • Refined strategy focuses on networks
  • Exit logistics business
  • Initiate € 1 billion share repurchase

Amsterdam , TNT N.V. announces today a broad range of initiatives that will sharpen its strategic focus on its core competency of providing delivery services by managing transport networks like Mail, Express and Freight Management. Key resulting initiatives include exiting its logistics business and a € 1 billion share repurchase which commences today.

Peter Bakker, CEO of TNT, stated: “Over the past several months we have conducted a thorough strategic review of our businesses, focusing on defining our strengths and identifying the best opportunities for TNT to serve our customers, grow our business and create value for our investors. As a result, we have developed a set of clear initiatives that we believe will deliver value to shareholders – while not losing sight of other stakeholders.”

“It is clear that we are successful at designing, implementing and running delivery network businesses. This is our core competency, lies at the heart of our business going forward, and offers us a sustainable competitive advantage and very compelling growth opportunities. We have very strong network platforms to build on – particularly our fast growing Express and European Mail Networks (EMN) businesses and our profitable Mail Netherlands business. To underline this, we revise our revenue growth expectations for our Express division upwards to the 10 – 15% range over the medium term versus “high single digit” previously. Additionally, we believe total revenues of our EMN businesses will amount to approximately
€ 1.7 billion, at an operating margin of 10%, in 2012.”

“TNT will continue to be customer driven with an emphasis on innovation as the leading integrator in both Europe and Asia. Today's announcements of our acquisitions in Spain and China further expand our capabilities”, continued Bakker.

“While our logistics business is a strong operation with a talented group of employees and good customer relationships, it will no longer fit with our strategic focus going forward. Given industry consolidation, we announce today our intention to sell our logistics business. The focus on networks and the exit of Logistics will allow simplification of our organisation. In the next few months a plan aimed at further cost reductions will be put together.”

“We have taken the initiative to optimise our capital structure and we intend to return capital to our shareholders, as we are focused on creating value for our shareholders both in the short and in the long term.”

Focus on networks

In reviewing our existing strategy we have come to the conclusion that high-quality networks have proven to be intrinsically more attractive than customer dedicated supply chains. In networks like Mail, Express, and Freight Management, TNT can drive increased volumes across infrastructures resulting in continually improving efficiency, operating leverage, and higher return on capital.

TNT has been a clear industry ‘first mover' in developing and implementing network solutions, including the extensive automation of mail networks in the Netherlands, the roll-out of the European Mail Networks, and the creation of the premier Express integrated air and road network in Europe. Our Mail and Express activities continue to drive high top-line growth with attractive margins. Additionally, TNT has an unparalleled track record in terms of people management and employee satisfaction.

TNT benefits from having complementary Mail and Express networks that provide access to both businesses and consumers, offer a range of price and speed alternatives, leverage hard-to-replicate infrastructures, and increasingly share critical resources.

Three new business development initiatives further support TNT's network focus: the announced acquisition of TG+, one of the leading domestic Express operators in Spain and Portugal; advanced negotiations for the acquisition of Hoau, China's leading domestic freight and parcel operator; and the start of Phase I of its previously announced Asia Road Network roll-out. Together with the recently announced China domestic Express network and the launch of the China/Europe air lane, these initiatives further position TNT as the leading integrated transport provider in this region.

Exit logistics

TNT Logistics is a business with a unique global footprint and the worldwide number two provider in contract logistics. TNT is committed to transitioning this business in a professional manner to a new owner that has a clear focus on growing and investing in the franchise. Throughout the process TNT will continue to provide its customers with the superior levels of service and will do its utmost to ensure a seamless transition for both customers and employees.

TNT intends to sell logistics business representing approximately € 3.4 billion in annual revenues and it has appointed Goldman Sachs to assist in the sale. The intended sale is expected to be completed in the second half of 2006. The transaction is subject to TNT shareholder approval and will be compliant with the applicable employee consultation procedures.

The group will retain a limited amount of the logistics activities that clearly fit our core network strategy. These businesses include the In-Night and high-tech spare parts operations, which together represent approximately € 300 million in annual revenues.

TNT Freight Management, representing approximately € 800 million in annual revenues, is an essential element of TNT's global network, connecting in particular Asia and Europe and therefore is not part of the activities to be sold.

Optimise capital structure

The sharper focus in its strategy allows TNT to optimise its capital structure and TNT maintains committed to an investment grade credit rating. Today it also announces to return capital to its shareholders by repurchasing ordinary shares. The repurchase program will be financed from available cash and committed bank facilities.

On 7 April 2005, TNT's shareholders' meeting mandated the Board of Management of TNT to repurchase ordinary shares for a period of eighteen months. Given the share buyback value of € 1.0 billion, the approximate number of ordinary shares to be repurchased under the repurchase program is 42.6 million, calculated on the basis of the last trade prior to commencement of the repurchase program. The repurchase program is expected to be accretive to EPS.

The share buyback commences today and ends after four months unless prior to such date: the aggregate value of shares acquired would exceed the € 1.0 billion; ten percent of the outstanding ordinary shares have been repurchased, including any ordinary shares already held by the company; or if a cash or exchange offer with respect to the shares of TNT is publicly launched through the publication of an offer document (biedingsbericht). The maximum consideration to be paid per ordinary share under the repurchase program is the higher of the price of the last independent trade in TNT shares and the highest current independent bid price on the trading venues where the purchase is carried out. Furthermore, this price will not exceed the normal trade price plus ten percent. The normal trade price is the average closing price during the five trading days prior to the day of purchase. Not more than 25 percent of the average daily volume of the ordinary shares will be repurchased in any one day on the regulated market on which the purchase is carried out. The average daily volume figure is based on the average daily volume traded in the 20 trading days preceding the date of purchase.

The announced repurchase program will be executed by ABN AMRO Bank N.V. who shall make the trading decisions in relation to TNT's buyback program of ordinary shares independently of, and without influence by, TNT with regard to the timing of the purchases. It is TNT's intention to cancel the ordinary shares acquired through the repurchase program.

Subject to unforeseen events, TNT has the intention to use the cash proceeds from the sale of logistics to make further share repurchases, pay dividends, or to invest in compelling value creating opportunities.

Given the strong cash generation of the network business this may enable ongoing capital returns to shareholders in the future, including a potential upgrade of its dividend policy. The group intends to maintain adequate financial flexibility to pursue a selective and disciplined acquisition strategy and invest in other growth opportunities.

Financial guidance

The initiatives announced today do not lead TNT to change its guidance for 2005 as most recently disclosed at the presentation of TNT's third quarter results on 31 October 2005. However, TNT expects revenue growth for its Express division to be in the 10-15% range over the medium term versus a previous expectation of “high single digit”. Margins for the Express division are expected to be managed at around 10% in the medium term. Additionally, TNT believes total revenues of our EMN businesses to be approximately € 1.7 billion, at an operating margin of 10%, in 2012. TNT will give guidance for 2006 at the announcement of its full year 2005 results, which is scheduled on 27 February 2006.

Warning about forward-looking statements
Some statements in this press release are "forward-looking statements" within the meaning of U.S. federal securities laws. We intend that these statements be covered by the safe harbors created under these laws. 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. These forward-looking statements involve known and unknown risks, uncertainties and other factors that are outside of our control and impossible to predict and may cause actual results to differ materially from any future results expressed or implied. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industries in which we operate and management's beliefs and assumptions about future events. Forward-looking statements include, without limitation, statements concerning our financial position and business strategy, our future results of operations, the impact of regulatory initiatives on our operations, our share of new and existing markets, general industry and macro-economic growth rates and our performance relative to these growth rates. In addition to the assumptions specifically mentioned in this press release, important factors that could cause actual results to differ materially from those expressed or implied include, but are not limited to, the results and the timing of the conclusion of our tax investigations and our discussions or disagreements with other tax authorities and the other factors discussed in our annual report on Form 20-F and our other reports filed with the US Securities and Exchange Commission. Given these uncertainties, no assurance can be given as to our future results and achievements. You are cautioned not to put undue reliance on these forward-looking statements, which only speak as of the date of this press release and are neither predictions nor guarantees of future events or circumstances. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.

Page publication date: 6 December 2005 at 07:30 CET