TNT plans €500m buy-back

TNT, the Dutch post and express delivery group, on Monday announced a new €500m share buy-back, as it nudged higher estimates for full-year operating margins from its mail operations.

The company, dogged by speculation that it might be acquired by a competitor or private equity, also raised from 25 per cent to between 30 and 35 per cent sales growth expectations for its European Mail Network, its European post business outside the Netherlands.

However accelerated growth at the EMN unit came at the expense of higher than anticipated start-up costs, particularly in the UK packets and parcels business, and meant a low single-digit operating margin goal for 2007 was cut to "around break-even".

The company is attempting to off-set a continued decline in domestic mail revenues, partly the result of increasing e-mail use, by restructuring, boosting post services in countries like Germany, and extending express services.

Group sales rose 10 per cent to €2.69bn, largely thanks to its fast-growing express business, which has moved into China and India. But operating income fell 2.1 per cent to €330m, a result skewed by one-off items in the second quarter of last year, TNT said. Profit attributable to shareholders rose 16.7 per cent to €244m.

The new share buy-back, to be completed by mid-2008, follows a €400m programme launched in April, and reflects efforts by the company to "optimise its capital structure". TNT said it had scope to leverage its balance sheet further, targeting a BBB+ credit rating down from its existing A minus.

Raising mail operating margins half a percentage point to 17.5 per cent, Peter Bakker, chief executive, said results in the second-quarter were "satisfactory".

"The question we are busy with is how to accelerate growth, but the trend is positive,” he said.

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