TPG lifts target to 10% for express delivery unit
TPG yesterday set a new medium-term target for its express delivery business, saying the unit would achieve a 10 per cent operating margin in 2007. The division is forecast to achieve a 7.5-8 per cent margin for 2004. In October it posted earnings before interest, tax and amortisation of EUR72m in the third quarter, from group ebita of EUR255m (USD342m). Separately, Jan Haars, TPG chief financial officer, told analysts in Rotterdam that the company “might be prepared to live” with a one-notch credit rating downgrade “if the right [acquisition] opportunity presents itself”. It is currently rated A1 by Moody’s and A by Standard & Poors. TPG would use surplus cash for investments, rather than share buy-backs, he said. It is targeting acquisitions in freight forwarding, to fill gaps in its express network in emerging markets, and for European mail consolidation and Chinese growth.
Currently only two European governments have announced moves to unlock parts of former monopoly mail networks: Belgium and Denmark. Austria has withdrawn plans and there is little clarity over Italian postal liberalisation prospects, said Harry Koorstra, managing director for TPG’s mail division.
TPG has a team investigating the Belgian sale and in October expressed interest in the 25 per cent of Post Danmark being sold by the Danish government.
Mr Koorstra said an announcement on the Danish sale had been expected on November 15 but had been pushed back to the year-end or January. The Belgian government is likely to issue an information memorandum around Christmas, he said.
He played down investor concerns over the effect on TPG earnings of an expected 3.5 per cent decline in Dutch mail volumes in the coming years, saying it would not hurt profitability, largely as a result of cost-saving programmes. TPG reiterated that the mail unit would hit a 21.5 per cent operating margin this year.
Group-wide cost saving initiatives, notably related to procurement, would lead to the announcement of new financial targets alongside full-year results for 2004, said Peter Bakker, chief executive. He said restructuring programmes had led to “all kinds of speculation about the impact on the group organisation and management”, but added TPG would continue to operate under the current divisional structure “for the next few years”.
