We will do better, promise TNT management
24 / 02 / 2015
TNT Express has outlined the steps that will return the parcels and freight operator to profit.
A core part of its strategy is to set up focused international Europe and domestic units, strengthening its management and accelerated investment in its transport and IT, along with improved service levels.
At a capital markets day conference this week in London, chief executive Tex Gunning and his senior management team sketched out the details.
TNT Express had earlier announced a €137m loss in the 2014 fourth quarter and a warning from Gunning that the company continues to face challenging trading conditions.
TNT was the subject of a failed takeover bid by UPS in 2013, and restructuring charges (€70m), goodwill impairments (€32m) and the costs of a re-launch (€22m) since then have compounded its financial woes.
Chief financial officer Maarten de Vries admitted that the company had suffered from a “structural underinvestment in infrastructure and IT” since the express arm of the company was demerged from the postal operations in 2011.
But since then, the company had invested to “drive operational excellence”. Further investments would, in 2018-19, further improve service reliability and lower the cost base, he said.
The company’s cost reduction programme – branded ‘Deliver!’ – had reduced worldwide headcount from 62,468 in 2012 to 58,292 he added. The target now was to generate €250m of cost reductions and realised €125m of net savings by 2018.
One of the ways this will be achieved will be by simplifying the current highly complex service portfolio – over 3,500 product codes – to a much more streamlined offering of four basic products with 75 options.
Maarten de Vries also said that processes and IT systems were much too complex and a centralised global IT organisation would be put in place.
A new ‘simplify and transform’ programme over the next three to five years would cut IT spending by €100m, although in the short term there would be IT cost increases and there would be a €70m investment in new IT systems.
Activities such as accounting, procurement, data management and customer contact centres, currently operated mainly on a country by country basis, could be consolidated through shared service centres, saving €100-150m by 2018.
The price to pay for these root-and-branch reforms would be restructuring charges of €250-300m over three years. However, these should diminish to no more than €25-50m by 2017, after hitting a peak of €125-175m in 2016.
Investment of €800-€900m in 2015-17 would, among other things, increase European air network capacity by 50 per cent, as well as improving productivity and reliability. Investment in hubs would include two new ones in the UK, three in Australia and modernisation and automation in France and Italy, added domestics managing director Marco van Kalleveen.
International Europe managing director Ian Clough pointed out that TNT was still a major player in the European global market, with 12 per cent of the total, third only to DHL (19 per cent), UPS (16 per cent) and well ahead of FedEx and Schenker’s five per cent each.
But he said that it was important to ditch the current “dysfunctional organisation” with its “heavy overhead structure” and create an integrated international European business.
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