TPG’s Q1 profits surge on strong Mail and Express performances

TPG reports a healthy increase in net income, with improved margins in its Mail and Express segments, and evidence of a turnaround in the Logistics business.

TPG has achieved strong first quarter earnings growth in markets that continue to be difficult. Earnings from operations climbed 11.7percent (or 12.7percent at constant exchange rates) on revenues that grew by 2.3percent (3.3percent at constant exchange rates). Strong performances by Mail and Express saw operating margins rise significantly in both businesses and, for the first time in two years, Logistics earnings were ahead of the previous year.

For the first quarter 2004, TPG posted Group revenues of EUR2.98 billion, a year-on-year increase of 2.3percent (Q1 2003: EUR2.92bn), and a total net income of EUR163 million, up 16.4percent (Q1 2003: EUR140m). The company attributes this growth to good operational performance, reductions in financing costs, and an improved effective tax rate. A free cash flow of EUR241 million was generated in the quarter, the highest quarterly cash flow since the record level achieved in the first quarter of last year.

The Mail segment delivered a significant rise in operating margin despite an underlying decline in Dutch addressed mail volumes in line with recent quarters, which resulted in a 1.9percent decline in mail revenues.

Mail Netherlands revenues fell by 3.1percent in Q1 2004, of which 1percent was due to the disposal of Geldnet in 2003. Cross Border revenues dropped 9.5percent, whilst European Mail Networks revenues grew by 18.5percent. Last year’s acquisition of Doc Vision in the Netherlands contributed to the Data & Document division’s 6percent growth.

The mail segment’s margin improvement was attributed to the increased flexibility of the operating cost base in the Netherlands, plus cost savings of €10 million achieved through the company’s Cost Flexibility program.

The Express segment’s earnings were up 29percent, driven by further positive revenue quality yields and strong growth in international volumes that boosted the operating margin from 5percent to 6.1percent.

TPG’s Logistics division delivered slightly higher earnings than last year in spite of a higher than normal level of start-up costs. The focus on the turnaround of under-performing countries as part of the company’s Transformation through Standardisation (TtS) program is beginning to pay off with most internal targets for this quarter either being met or exceeded. All other aspects of TtS are on track and are set to deliver the promised annualised savings of EUR55 million by the end of 2004.

CEO Peter Bakker commented on the results: “This was a good quarter for TPG. The Mail and Express businesses both delivered very good results, which are all the more pleasing given the difficult economic conditions which continue in the Netherlands and other key markets in Europe. Probably the most satisfying development however is that there is first evidence of a turnaround in the Logistics business. Building on this encouraging start to the year, we are confident that good improvements in earnings will be achieved in 2004.”