Update Vision 2015 Q2 & HY 2010 Results Press Presentation - - PowerPoint PPT Presentation

Update Vision 2015 Q2 & HY 2010 Results

Press Presentation Peter Bakker, CEO Bernard Bot, CFO 2 August 2010

2

Today’s announcement

• CFO
• Q2 & HY 2010 Results
• Vision 2015

2

1 2 3

3

Bernard Bot, Chief Financial Officer

Effective 2 Augustus 2010, appointment to member of Board of

Management will be notified to shareholders in upcoming AGM in April 2011

Works for TNT since 2005 within Finance Business Control M&A Risk Management Leading major corporate projects Prior to joining TNT: partner at McKinsey & Company (primarily post,

transport and logistics sectors)

4

Margin improvement through yield and cost management Update Vision 2015 Volumes back at around 2007 levels, though yield (excl fuel surcharge) and temporary cost pressures exist Roll-out of additional owned Asia-Europe capacity to correct over-reliance on commercial linehaul

Express summary

4

5

Q2 results highlights

GROUP

• Operating income € 55 million after initial € 168 million net

Master plan III provision

• Underlying* operating income € 211 million
• Profit attributable to shareholders € 3 million
• Cash, as expected, below prior year mainly due to phasing of taxes paid

and changes in working capital

• Interim 2010 dividend of € 28 cents per share

5

6

Q2 results highlights

EXPRESS

• Underlying* revenues increase of € 150 million (+10.3%)
• Underlying* operating income € 73 million up 15.9%
• Volumes back around 2007 levels (core kilos +9.5% versus Q2 2009)
• Yield (excl fuel surcharge) down 2%

MAIL

• Underlying* revenues decline of € 28 million (-2.7%)
• Underlying* operating income € 136 million (€ 139 million in Q2 2009)
• Addressed mail volumes in the Netherlands declined by 8.4% (corrected

for working days), Parcel volumes grew by more than 10%

• Final restructuring programme (Master plan III) announced

* The underlying figures are at constant currency and exclude the impact of working days and one-offs (Express: €3m restructurings,€2m book gain aircrafts; Mail €6m positive outcome OPTA case, €3m book gain sale subsidiaries, € 168 million net Master plan III provision; Group: €4m Vision 2015 projects) in 2010 and the impact of restructuring related costs/one-offs in 2009.

7

Consensus GDP forecast Europe eases

Development of forecast consensus GDP growth (%)

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 Apr 10 May 10 Jun 10 US 2010E consensus Europe 2010E consensus

8

Volumes continue to improve

* Average per working day

Express 2010 volumes versus prior year and 2007 (%)

• 15%
• 10%
• 5%

0% 5% 10% 15% Q1- 08 Q2- 08 Q3- 08 Q4- 08 Q1- 09 Q2- 09 Q3- 09 Q4- 09 Q1- 10 Q2- 10 Core kilos* versus prior year Core cons* versus prior year Core cons* versus 2007 Core kilos* versus 2007

9

Express underlying revenues up € 150 million

Underlying revenues development € millions

Note: indicative only

1,600 1,450

Other Underlying Q2 2010 Emerging Platforms Fuel surcharge Price Volume impact (cons) Underlying Q2 2009

10

Express underlying operating income increase € 10 million

Operating income development € millions

Actions taken

Note: indicative only * Excluding Brazil and commercial air linehaul Comm air linehaul

73 63

Other Underlying Q2 2010 Brazil Emerging Platforms* Cost per con Price Volume impact (cons) Underlying Q2 2009

11

Margin improvement through yield and cost management

• Customer mix
• Product mix
• Pricing pressure

Yield Cost

• Mostly outside core markets
• Commercial linehaul
• Brazil
• Higher cost inflation and

investments in emerging markets

• +3.5% price announcement
• Up-rating of underperforming

contracts

• Rebalancing customer portfolio
• Implementation of an improved

pricing mechanism for significant part of the customer base

• Roll-out of additional owned

Asia-Europe capacity

• Further roll-out LEAN and GO

efficiency programmes to

• utside Europe

12

Mail summary

12

Strong performance Emerging Mail & Parcels Master plan savings € 25 million Master plan III: final restructuring programme announced, € 168 million net provision established

13

Master plan III: final restructuring in Mail Netherlands

2009 2010 2012

• 2015

Inform and prepare First steps C

• n

t i n u e d r

• l

l

• u

t Fundamental cost-base transformation

• Significant decrease of full time jobs
• Socially responsible implementation

via forced and voluntary redundancies and attrition Infrastructure efficiencies and streamlining

• perational processes

Introduction of three peak days of delivery Centralisation of bag-level sortation Migration of labour costs towards market conforming levels

14

Outlook 2010

Modest improvement European economy Global economic recovery remains fragile – caution is warranted Focus on costs and cash will continue

Overall Express Mail

Volumes and revenues expected to be well above 2009 levels Operating income improvement clearly tempered by yield pressure and

cost inflation

Specific yield management and cost reduction actions taken Addressed volume decline in the Netherlands of 7-9% Master plan savings of € 75 million targeted Mail operating income expected to be below 2009 levels, including the

impact of higher P&L charges for pensions

15

Today’s announcement

• CFO
• Q2 & HY 2010 Results
• Vision 2015

15

1 3 2

16

1 2 3 4 5

Emerging Platforms Emerging Platforms SDS SDS Parcels Freight Mail NL EMN Cost leadership & customer focus

Vision 2015

Vision 2015 was launched on 3 December 2009

17

Prevent downside

►

Structural volume decline Mail NL

►

Challenges in liberalisation and regulation

Accelerate upside

►

Cyclical and high growth

►

Develop day-definite delivery services through cost leadership and customer focus

►

Pole position in emerging economies

Vision 2015 has reviewed TNT’s portfolio

Current Mail portfolio

+ =

Current CEP portfolio

Cyclicality

Group

• Partner option EMN
• Dutch parcels
• New initiatives

Realise upside

18

On 8 April 2010 we announced the carve-out of Mail Review of best position Mail Review of best position Mail

Carve-out Carve-out Business plans Business plans Vendor due diligence Vendor due diligence

19 19

Today TNT announces intended full separation

TNT announces its intention to separate fully Express and Mail The objective:

To create two best-in-class operations with strong management and solid capital structures to successfully implement their strategies for the benefit of their shareholders and all stakeholders

This intention is subject to works councils

advice / opinion

19

20

Conclusions on portfolio

Strategic challenges for

Express and Mail increasingly different

Mail and Express two

successful standalone companies

Strong balance sheet –

no synergies

Two focused investment

• pportunities

20

21

Express and Mail two successful standalone companies

Track record as one of the best postal operators in the world European mail activities to concentrate on the large countries Explore business renewal options Continued growth from Dutch parcel unit Mail Mail Four focus areas: Parcels, Freight, SDS and

Emerging Platforms

Attractive high-growth opportunities in each focus

area confirmed

Expansion of leading positions in Europe and

Emerging Platforms

Benefit from unique international offering Express Express

22

Separation in stages

Full managerial and organisational internal

separation Mail and Express

Implementation under TNT NV per 1 January 2011 Evaluate capital market transaction Relevant advisors have been appointed Exploration will contain a.o. setup of solid capital

structure review accounting and asset allocation; resolve regulatory issues; request for workers councils advice

Prepare shareholder approval Internal separation Internal separation Separation

• f equity

transaction Separation

• f equity

transaction

23

Next steps

Explore capital market transactions Design transitory governance Obtain works councils advice Group Group Finalise business plans and capital structure Design “standalone” organisation reflecting

business plan

Express Express Finalise business plans and capital structure Design “standalone” organisation Resolve (USO) regulatory matters Mail Mail

Q2 & HY 2010 Results

Bernard Bot, CFO 2 August 2010

25

Statement of income

367 533 4,972

Underlying* HY 2009

201 285 2,528

Underlying* Q2 2009

507 579 465 EBITDA 262 292 136 424 5,226

Underlying* HY 2010

211 2,657

Underlying* Q2 2010

43.3 39.3 EPS 22.1 0.7 33.9% 36.2% Effective tax rate 29.4% 70.0% (84) (85) Income taxes (37) (14) (81) (71) Net financial (expense) / income (41) (35) 6 55 2,771

Actual Q2 2010

89 178 2,528

Actual Q2 2009

164 150 Profit for the period 341 306 Operating income (EBIT) 4,972 5,518 Revenues

Actual HY 2009 Actual HY 2010 € millions

* The underlying figures are at constant currency and exclude the impact of working days and one-offs (Express: €3m restructurings, €2m book gain aircrafts; Mail €6m positive outcome OPTA case, €3m book gain sale subsidiaries, € 168 million net Master plan III provision; Group: €4m Vision 2015 projects) in 2010 and the impact of restructuring related costs/one-offs in 2009.

26

2009 - 2010 impact of one-off charges and fx

(20) (9) (20) (9) Other 9 168 9 168 Restructuring related costs (2) (2) Other 288 299 86 37 49 HY 2009 295 (15) 151 132 (10) 3 (22) 163 HY 2010 136 4 (27) 73 (8) 3 (6) 86 Q2 2010 34 Restructuring related costs Working days Mail 150 Reported EBIT 139 Underlying EBIT 63 Underlying EBIT Fx Working days Express 29 Reported EBIT Q2 2009

€ millions

27 27

Express Q2 underlying

Volumes back at around 2007 levels; yield pressure continues Operating income growth constrained by specific factors Overall cost per consignment below volume growth

15.9% 6.8% 10.3% Total 0.9% 5.9% 117 125 EBITDA 4.3% 4.6% Operating margin 0.5% 15.4% 63 73 Operating income (EBIT) 1.7% 8.6% 1,450 1,600 Revenues Acq Organic Q2 2009* Q2 2010* € millions

* The underlying figures are at constant currency and exclude the impact of working days and one-offs (Express: €3m restructurings,€2m book gain aircrafts) in 2010 and the impact of restructuring related costs/one-offs in 2009.

28

Volumes continue to improve

* Average per working day

Express 2010 volumes versus prior year and 2007 (%)

• 15%
• 10%
• 5%

0% 5% 10% 15% Q1- 08 Q2- 08 Q3- 08 Q4- 08 Q1- 09 Q2- 09 Q3- 09 Q4- 09 Q1- 10 Q2- 10 Core kilos* versus prior year Core cons* versus prior year Core cons* versus 2007 Core kilos* versus 2007 10.4% 22.4% vs Q1 2009 Q1 2010

• 2.9%
• 4.7%

vs Q1 2007 Q2 2010 13.6% 19.9% vs Q2 2009

• 1.0%
• 5.8%

vs Q2 2007 Road volumes Air volumes

29

Express yield stabilising

Express yield

Rebased to Q1 2007 (excluding fuel surcharge) at comparable rates

90 92 94 96 98 100 102 104 106 Q1- 07 Q2- 07 Q3- 07 Q4- 07 Q1- 08 Q2- 08 Q3- 08 Q4- 08 Q1- 09 Q2- 09 Q3- 09 Q4- 09 Q1- 10 Q2- 10 Core revenue quality yield Core RPC Core RPK

30 30

Mail Q2 underlying

2.4% 2.1%

• 0.5%

Acq

• 2.2%
• 3.0%
• 2.7%

Total

• 5.4%

168 163 EBITDA 13.6% 13.7% Operating margin

• 4.3%

139 136 Operating income (EBIT)

• 2.2%

1,020 992 Revenues Org Q2 2009 Q2 2010* € millions

Decrease in underlying revenue of 2.7%, while underlying addressed Mail

volumes declined by 8.4%

Good organic revenue and profitability growth in Emerging Mail & Parcels Dutch Parcels up more than 10%

* The underlying figures are at constant currency and exclude the impact of working days and one-offs (€6m positive outcome OPTA case, €3m book gain sale subsidiaries, € 168 million net Master plan III provision) in 2010 and the impact of restructuring related costs/one-offs in 2009.

31

Volume decline -9.5% or

• 8.4% (corrected for working

days)

Limited positive mix effect –

bulk vs single-item

Mail NL; addressed mail volumes

31

• 10%
• 8%
• 6%
• 4%
• 2%

0%

Total

Actual 2009 Actual 2010 2010 corrected for working days and

• ne-off mailings

Q2 Q1 Q4 Q3 Q2 Q1

32

895 200 695

Target

425 198 227

Still to go

470 2 468

Realised 2001 - 2009

€ millions

MPIII MPI & II Total

Planning of cost savings and provisions up to 2017

2010 – 2013 2014 – 2017

Financial impact Master plan III

€ 140m € 210m

2010 € 75m

Cost savings Increase provision

Q2 2010 € 168m

Cash out for restructuring

2010 - 2015 € 80m average per year

33

Reconciliation Cash EBIT(DA) Mail

6.6% 7.4% as percentage of revenues 67 73 Underlying Cash EBIT (21) (12) Restructuring cash outflow (51) (51) Changes in pension liabilities 139 136 Underlying EBIT 9.3% 10.1% as percentage of revenues 95 100 Underlying Cash EBITDA 168 163 Underlying EBITDA (12) (51) Q2 2010 (21) Restructuring cash outflow (52) Changes in pension liabilities Q2 2009

34

Net cash generated, free cash flow

483 (102) 18 567 141 (58) 484 99 HY 2009 (70) (77) 7 (191) (44) 235 (237) HY 2010 93 (61) Changes in working capital 369 (72) Free cash flow (48) (44) Net capex 7 3 Interest received 410 (31) Net cash from operating activities (36) (32) Interest paid 289 156 Cash generated from operations 157 (155) Income taxes paid Q2 2009 Q2 2010

€ million

35

Net debt development Q2 2010

Net debt € millions

(1,261) 34 (63) (30) (44) (31) (1,127) (1,387)

Dividend 3 Jul 2010 Repayments debt and

• thers

Acquisitions Net Capex Net cash from

• perating

activities 3 Apr 2010 27 Jun 2009

36

Coverage ratio main defined benefit pension fund:

• By end of July, coverage ratio has been restored to above the

minimum required level

• Full year P&L charge expected to be ~€ 65 million in 2010, cash

contributions € 287 million

• Pension fund board has decided on new investment strategy to

reduce downside risk

101% End of Q2 2010 108% End of 2009 93% End of 2008 141% End of 2007

Pension developments

37

Normalised net income for dividend

Adjustments (net of tax) Restructuring related costs, positive outcome OPTA case and EMN disposals Restructuring related costs and aircraft book gains 117 Mail: 264 Normalised net income 1 Express: 146 Profit attributable to the shareholders Actual HY 2010

€ millions

38

Interim dividend 2010

• Interim dividend over normalised net income in the first half
• f 2010
• Ex-dividend date is 3 August 2010
• Record date is 5 August 2010
• Dividend payment date is 20 August 2010

Interim dividend € 0.28 In cash In ordinary shares

Premium targeted at, but not lower than 2% above cash dividend

Pro forma pay-out ratio 40% of normalised net income

• r

39

Outlook 2010

Modest improvement European economy Global economic recovery remains fragile – caution is warranted Focus on costs and cash will continue

Overall Express Mail

Volumes and revenues expected to be well above 2009 levels Operating income improvement clearly tempered by yield pressure and

cost inflation

Specific yield management and cost reduction actions taken Addressed volume decline in the Netherlands of 7-9% Master plan savings of € 75 million targeted Mail operating income expected to be below 2009 levels, including the

impact of higher P&L charges for pensions

Other

Structural cost savings: around € 200 million Capex around € 350 million Pensions: cash contributions defined benefit obligations ~€ 287 million Net financial expense: around € 140 million Taxes paid: around € 300 million

41

Warning about forward looking statements

Some statements in this presentation are "forward-looking statements". 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

• ther 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, analyses and projections about the industries in which we

• perate and management's beliefs and assumptions about future events. 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

• bligation 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.