Press release TNT reports third quarter 2015 results - PDF

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Press release TNT reports third quarter 2015 results Substantial progress made toward European Commission clearance of FedEx offer Reported revenue growth of 2.3%; underlying revenue growth of 3.6% Continued
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Press release TNT reports third quarter 2015 results Substantial progress made toward European Commission clearance of FedEx offer Reported revenue growth of 2.3%; underlying revenue growth of 3.6% Continued growth of revenues from SMEs; improved service performance Adjusted operating income of 13m includes Outlook-related transition costs Capex investments of 62m (3Q14: 41m) in Q3; Outlook investment programme on track Completed outsourcing of IT infrastructure to selected partners Net cash position of 223m Amsterdam, The Netherlands, 26 October 2015 TNT today reported third quarter revenues of 1,674 million, up 2.3% year-on-year, and a negative operating income of 27 million, compared with a negative operating income of 51 million for the third quarter of Currency comparable revenue growth was 1.8%. Underlying revenue growth, excluding currency effects and the negative impact of lower fuel surcharges, was 3.6%, reflecting higher revenues from SMEs, particularly in the International Europe segment. The economic volatility in Australia, China and Brazil weighed on TNT s revenues and overall performance in these parts of the world. Operating income includes net one-off charges of 40 million, including restructuring charges of 23 million. TNT s adjusted operating income was 13 million in the third quarter, compared with 46 million for the same period of last year. Operating result was affected by pricing pressures, Outlook-related transition and project costs ( 8 million), and costs to enhance service capabilities. TNT experienced lower margins in France in particular. Capital expenditures increased to 62 million (or 3.7% of revenues) in the third quarter of 2015 from 41 million (2.5% of revenues) in the same period of During the quarter, TNT successfully opened three new automated sorting facilities in Madrid, Swindon and Eindhoven, while upgrading existing ones as part of its Perfect Depot project. The net cash position of 223 million at quarter-end (2Q15: 261 million) reflects the investments made as part of the Outlook strategy. Tex Gunning, TNT s Chief Executive Officer, said: Substantial progress has been made in the recommended acquisition of TNT by FedEx: TNT shareholders have approved the resolutions of the Extraordinary General Meeting. We have been informed by the European Commission that it will not issue a Statement of Objections. We continue to support FedEx in obtaining all necessary approvals and expect the transaction to close in the first half of At the same time we remain focused on executing our Outlook strategy to transform and turn TNT around. Revenue growth from SMEs continued in the third quarter. Service performance and customer satisfaction further improved. Our investments in IT and productivity are on track. As said, time is needed for these profound transformations to influence the bottom line is a transition year for TNT. We expect to see year-on-year margin improvements from 2016 onwards. Summary: Consolidated results in million euros respective rates Notes 3Q15 3Q14 %chg 3Q15 3Q14 %chg Revenues 1,674 1, ,674 1, Operating income/(loss) (2) (27) (51) Operating income margin (%) Profit/(loss) equity holders of the parent (49) (55) 10.9 Cash generated from operations Net cash from/(used in) operating activities Net cash from/(used in) investing activities 13 (33) 0.0 Net cash Reported Adjusted (non-gaap) (1) Notes: Non-GAAP adjustments (1) As from year-end 2014 the definition of adjusted operating income has changed from constant foreign exchange rate to respective foreign exchange rate (2) 3Q15: 23m restructuring related, 10m PP&E impairment, 2m fair value adjustment fleet Brazil, 6m other cost, (1)m profit on sale of SSC Mauritius (2) 3Q14: 37m restructuring related, 9m implementation cost, 1m softw are impairments, 50m provision French competition case International Europe segment in million euros respective rates 3Q15 3Q14 %chg YTD'15 YTD'14 %chg Revenues ,075 2, Comparable revenue growth (%) (1) Operating income/(loss) (2) One-offs Adjusted operating income/(loss) Adjusted operating income margin (%) Average consignments per day ('000) Revenue per consignment ( ) (2) Average kilos per day ('000) 8,419 7, ,532 8, Revenue per kilo ( ) (2) (1) based on reported constant fx (2) based on reported International Europe s revenues were 693 million, up 4.4% from last year s third quarter. Currency comparable revenue growth was also 4.4%. Adjusted for the negative impact of lower fuel surcharges (-2.1%), the segment s underlying revenue growth was 6.5%, driven primarily by higher revenues from SMEs, but revenue growth remains uneven across Europe. Average daily consignments grew 6.3%. Revenue per consignment was down 1.3% due to lower fuel surcharges and price pressures in some markets. International Europe s adjusted operating income for the third quarter of 2015 was 14 million, down from 22 million a year ago. The decrease reflects transition and Outlook project costs ( 2 million), the costs of introducing new services or upgrading existing ones, such as the expansion of TNT s air network coverage and pre-noon delivery service in the Nordic countries. The stronger US dollar led to higher air network costs than prior year. International AMEA segment in million euros respective rates 3Q15 3Q14 %chg YTD'15 YTD'14 %chg Revenues Comparable revenue growth (%) (1) Operating income/(loss) One-offs Adjusted operating income/(loss) Adjusted operating income margin (%) Average consignments per day ('000) Revenue per consignment ( ) (2) Average kilos per day ('000) 1,218 1, ,234 1, Revenue per kilo ( ) (2) (1) based on reported constant fx (2) based on reported International AMEA revenues rose 6.1% to 242 million, mainly due to favourable currency effects. Currency comparable revenue growth was -3.9%. Adjusted for positive currency effects and the negative impact of lower fuel surcharges (-4.0%), the segment s underlying revenue growth was roughly flat compared with last year. The segment s revenues were affected by the drop in China s exports, especially to Europe, as exports products make up for more than 70% of TNT s revenues in Greater China, the segment s largest unit. Service quality continued to improve over last year, with on-time delivery performance 6 percentage points higher than in the third quarter of The segment also continued to grow revenues from SMEs. 2 As in the first half of 2015, International AMEA transported fewer but heavier consignments compared to the prior year. Average daily weights rose by 6.2%, which reflects the growth of higher weight Economy freight shipments and a continued trend of falling document volumes. Revenue per consignment rose slightly year-on-year (1.1%). Adjusted operating income increased by 7 million to 14 million, supported by cost management initiatives. Domestics segment in million euros respective rates 3Q15 3Q14 %chg YTD'15 YTD'14 %chg Revenues ,891 1, Comparable revenue growth (%) (1) Operating income/(loss) (19) 7 (34) (11) One-offs Adjusted operating income/(loss) (3) 23 (8) 58 Adjusted operating income margin (%) Average consignments per day ('000) Revenue per consignment ( ) (2) Average kilos per day ('000) 12,713 12, ,989 13, Revenue per kilo ( ) (2) (1) based on reported constant fx (2) based on reported The Domestics segment reported revenues of 615 million, down 2.7% from last year, as lower revenues in Brazil and Australia more than offset revenue growth in Europe. Underlying revenue growth, excluding currency effects and the negative impact of lower fuel surcharges, was 0.6%. Revenues from SMEs improved year-on-year in all units, supported by better service quality. On-time delivery performance was 2 percentage points higher than in Domestics average daily consignments increased by 2.5%. Revenue per consignment improved sequentially, but declined 3.0% year-on-year due to pricing pressures, lower fuel surcharges and customer mix effects. Adjusted operating income decreased by 26 million to (3) million. The decline is attributable to lower sales in Brazil and Australia, lower yields -particularly in France and Australia- and Outlook-related transition and project costs. To adjust to the economic recession, Brazil management took cost-reduction measures, which helped protect margins. TNT s performance in France was affected by competitive pressures and higher B2C delivery cost. TNT also faced competitive pressures in Australia, compounded by the drop in commodity markets, and the ongoing cost of modernising the Australian infrastructure. During the fourth quarter, TNT will ramp up activities at two new hubs in Melbourne and Brisbane to enhance service to customers and productivity. 3 Unallocated segment in million euros respective rates 3Q15 3Q14 %chg YTD'15 YTD'14 %chg Revenues Comparable revenue growth (%) (1) Operating income/(loss) (17) (72) 76.4 (43) (103) 58.3 One-offs Adjusted operating income/(loss) (12) (6) (31) (25) Adjusted operating income margin (% of tot. TNT rev.) (1) based on reported constant fx The Unallocated segment consists of Other Networks (TNT Innight), Central Networks and corporate head office functions. The segment s revenues were up 8.5% year-on-year to 127 million. Adjusted operating income was minus 12 million, compared with minus 6 million in the third quarter of This result includes transition costs of 4 million related to the establishment of Global Business Services, a three-year, strategic Outlook project. Guidance TNT reiterates its current financial year and longer-term guidance. TNT expects 2015 to be a challenging year of transition marked by the progressive ramp-up of new and upgraded facilities and other transformation projects, such as the outsourcing of IT. TNT anticipates restructuring charges of about 10 million in the fourth quarter of 3Q15 segmental performance overview in million euros respective rates Reported Adjusted (non-gaap) (1) Revenues ( m) Notes 3Q15 3Q14 %chg One-offs 3Q15 3Q14 %chg International Europe International AMEA Domestics Unallocated Elimination (3) (4) 25.0 (3) (4) 25.0 Total 1,674 1, ,674 1, Operating income ( m) International Europe (2) (2) International AMEA (3) Domestics (4) (19) (3) Unallocated (5) (17) (72) (12) (6) 0.0 Total (27) (51) Operating income margin (%) International Europe International AMEA Domestics Unallocated (% of total TNT revenues) Total Notes: Non-GAAP adjustments (1) As from year-end 2014 the definition of adjusted operating income has changed from constant foreign exchange rate to respective foreign exchange rate (2) 3Q15: 6m restructuring related, 10m PP&E impairment (2) 3Q14: 15m restructuring related (3) 3Q15: 1m restructuring related, 2m other cost (4) 3Q15: 15m restructuring related, 2m fair value adjustment fleet Brazil, (1)m profit on sale of SSC Mauritius (4) 3Q14: 16m restructuring related (5) 3Q15: 1m restructuring related, 4m other cost (5) 3Q14: 6m restructuring related, 9m implementation cost, 1m softw are impairments, 50m provision French competition case 5 Year-to-date performance commentary 2015 is a challenging year of transition for TNT, as the company takes structural measures to transform its business under the Outlook strategy. For the first nine months of 2015, revenues were 5,053 million, a year-on-year increase of 3.3%. Adjusted operating income for the first nine months of 2015 was 55 million, down 65.4% from the yearago number. Profitability was affected by transition costs related to the execution of the Outlook strategy, lower volumes from international accounts and pricing pressures. Summary: Consolidated results in million euros respective rates Notes YTD'15 YTD'14 %chg YTD'15 YTD'14 %chg Revenues 5,053 4, ,053 4, Operating income/(loss) (2) (19) (33) Operating income margin (%) -0.4 (0.7) Profit/(loss) equity holders of the parent (69) (58) Cash generated from operations Net cash from/(used in) operating activities (84) (4) 0.0 Net cash from/(used in) investing activities (115) (35) 0.0 Net cash Reported Adjusted (non-gaap) (1) Notes: Non-GAAP adjustments (1) As from year-end 2014 the definition of adjusted operating income has changed from constant foreign exchange rate to respective foreign exchange rate (2) YTD'15: 51m restructuring related, 10m PP&E impairment, 2m fair value adjustment fleet Brazil, 12m other cost, (1)m profit on sale of SSC Mauritius (2) YTD'14: 112m restructuring related, 27m implementation cost, (7)m profit on sale of Fashion Group BV, 9m impairment and depreciation Brazil Domestic, 1m softw are impairments, 50m provision French competition case in million euros respective rates Reported Adjusted (non-gaap) (1) Revenues ( m) Notes YTD'15 YTD'14 %chg One-offs YTD'15 YTD'14 %chg International Europe 2,075 2, ,075 2, International AMEA Domestics 1,891 1, ,891 1, Unallocated Elimination (7) (8) 12.5 (7) (8) 12.5 Total 5,053 4, ,053 4, Operating income ( m) International Europe (2) International AMEA (3) Domestics (4) (34) (11) (8) Unallocated (5) (43) (103) (31) (25) Total (19) (33) Operating income margin (%) International Europe International AMEA Domestics Unallocated (% of total TNT revenues) Total Notes: Non-GAAP adjustments (1) As from year-end 2014 the definition of adjusted operating income has changed from constant foreign exchange rate to respective foreign exchange rate (2) YTD'15: 21m restructuring related, 10m PP&E impairment (2) YTD'14: 44m restructuring related (3) YTD'15: 3m restructuring related, 2m other cost (3) YTD'14: 1m restructuring related (4) YTD'15: 25m restructuring related, 2m fair value adjustment fleet Brazil, (1)m profit on sale of SSC Mauritius (4) YTD'14: 60m restructuring related, 9m impairment and depreciation Brazil Domestic (5) YTD'15: 2m restructuring related, 10m other cost (5) YTD'14: 7m restructuring related, 27m implementation cost, 1m softw are impairments, (7)m profit on sale of Fashion Group BV, 50m provision French competition case 6 CONSOLIDATED INTERIM FINANCIAL STATEMENTS GENERAL INFORMATION TNT Express N.V. is a public limited liability company domiciled in Amsterdam, the Netherlands. The consolidated financial statements include the financial statements of TNT Express N.V. and its consolidated subsidiaries (hereafter referred to as TNT, Group or the company ). The company was incorporated under the laws of the Netherlands and is listed on Euronext Amsterdam. TNT operates in the Courier, Express and Parcel (CEP) market and collects, transports and delivers documents, parcels and palletised freight on a day-definite or time-definite basis. Its services are primarily classified by the speed, distance, weight and size of consignments. Whereas the majority of its shipments are between businesses (B2B), TNT also offers business-to-consumer (B2C) services to select key customers. The express business is seasonal in that it is affected by public and local holiday patterns. BASIS OF PREPARATION The information is reported on quarter-to-date and year-to-date bases ending 26 September Where material to an understanding of the period starting 1 January 2015 and ending 26 September 2015, further information is disclosed. The interim financial statements were discussed and approved by the Executive Board. The interim financial statements should be read in conjunction with TNT s consolidated financial statements in the 2014 annual report as published on 17 February The interim financial statements have been prepared in accordance with IAS 34 Interim financial reporting. The significant accounting policies applied in these consolidated interim financial statements are consistent with those applied in TNT s consolidated financial statements in the 2014 annual report for the year ended 31 December The measure of profit and loss and assets and liabilities is based on the TNT Group Accounting Policies, which are compliant with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). AUDITOR S INVOLVEMENT The content of this interim financial report has not been audited or reviewed by an external auditor. SEGMENT INFORMATION TNT discloses the following reportable segments: 1) International Europe; 2) International AMEA; 3) Domestics; and 4) Unallocated. This reporting segmentation was introduced during 4Q14 and is integral to TNT s Outlook strategy to create focused and accountable units, with a clearer line of sight on the distinct domestic and international businesses. The International Europe reporting segment is centrally led with integrated responsibility across Europe. The International Asia, Middle East & Africa reporting segment is managed separately but operates in close cooperation with International Europe. The Domestics reportable segment includes the domestic operations in France, Italy and the United Kingdom, as well as Brazil, Chile, Australia and New Zealand. The domestic entity creates a dedicated focus on domestic operations, whilst keeping the synergies with the international activities. The Unallocated segment consists of Other Networks (TNT Innight), Central Networks, IT and the TNT Head Office. 7 The following table presents the segment information relating to the income statement and total assets of the reportable segments for the first nine months of 2015 (ended 26 September) and 2014 (ended 27 September): International International Europe AMEA Domestics Unallocated Intercompany in millions Total Q ended at 26 September 2015 Net sales 2, , ,869 Inter-company sales (7) 0 Other operating revenues Total operating revenues 2, , (7) 5,053 Other income/(loss) Depreciation/impairment property, plant and equipment (28) (8) (42) (46) (124) Amortisation/impairment intangibles (2) (2) (5) (20) (29) Operating income (34) (43) (19) Total assets 1, , ,219 Q ended at 27 September 2014 Net sales 2, , ,746 Inter-company sales (8) 0 Other operating revenues Total operating revenues 2, , (8) 4,893 Other income/(loss) Depreciation/impairment property, plant and equipment (18) (7) (43) (36) (104) Amortisation/impairment intangibles (1) (2) (6) (17) (26) Operating income (11) (103) (33) Total assets 1, ,201 1,134 4,320 8 Consolidated statement of financial position 26 Sep 31 Dec in millions Notes Assets Non-current assets Intangible assets Goodwill 1,005 1,007 Other intangible assets Total (1) 1,135 1,117 Property, plant and equipment Land and buildings Plant and equipment Aircraft Other Construction in progress Total (2) Financial fixed assets Investments in associates and joint ventures Other loans receivable 2 2 Deferred tax assets Other financial fixed assets Total Pension assets (3) 7 4 Total non-current assets 2,318 2,290 Current assets Inventory Trade accounts receivable 1, Accounts receivable Income tax receivable Prepayments and accrued income Cash and cash equivalents (6) Total current assets 1,878 1,986 Assets classified as held for disposal (4) 23 1 Total assets 4,219 4,277 Liabilities and equity Equity Equity attributable to the equity holders of the parent 2,189 2,180 Non-controlling interests Total equity (5) 2,199 2,192 Non-current liabilities Deferred tax liabilities 6 10 Provisions for pension liabilities (3) Other provisions (7) Long-term debt (6) Accrued liabilities 5 4 Total non-current liabilities Current liabilities Trade accounts payable Other provisions (7) Other current liabilities Income tax payable Accrued current liabilities Total current liabilities 1,562 1,589 Liabilities related to assets classified as held for disposal (4) 0 0 Total liabilities and equity 4,219 4,277 9 Consolidated income statement in millions Notes 3Q15 3Q14 YTD'15 YTD'14 Net sales 1,609 1,586 4,869 4,746 Other operating revenues Total revenues 1,674 1,637 5,053 4,893 Other income/(loss) (8) Cost of materials (90) (104) (270) (298) Work contracted out and other external expenses (971) (899) (2,855) (2,645) Salaries and social security contributions (510) (516) (1,570) (1,595) Depreciation, amortisation and impairments (57) (42) (153)
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