Express

In 2004, our Express division earned revenues of € 4.7 billion, a 10.5% increase from 2003. Express contributed 36% of TPG revenues and 27% of TPG earnings from operations.

In Express, we aim to be the leader in day/time-certain, door-to-door transport, focussing on business-to-business customers, with the widest geographical coverage. We aim to deliver long-term revenue growth of between 5-10%, and to achieve a 10% margin in 2007.

In Express, we delivered more than 176 million consignments for one million customers in 2004.

We also delivered strong earnings and margins increases and a revised strategy aimed at leadership in Europe, emerging markets and special services.

Strong volume growth
21 consecutive quarters of positive revenue quality yield
Expansion in air and road networks

Despite the mixed global economy, our Express division delivered good results in 2004. Volume growth, particularly in our international business, along with ongoing optimisation of our network and continued revenue quality yield made for a strong performance. By instituting a fuel surcharge, we were able to mitigate the impact of increased fuel prices. Overall revenues were € 4.7 billion with a margin of 7.9%.

Volume growth was strong in our home market of Europe, where more than 80% of our revenues originate. We saw strong growth in the United Kingdom, Eastern Europe, Spain and the Netherlands. We also achieved growth outside Europe, particularly in China and the Middle East. Revenue growth was aided by our continued focus on improving revenue quality yield – our composite measure of growth in revenue per consignment and per kilo – by offering the right products, disciplined pricing management and an efficient sales process.

We’re enhancing our networks so we can deliver more.

With dense coverage in 33 countries, our extensive integrated road and air networks are key to delivering for our customers. We expanded our European network in 2004 by adding 16 new road linehaul connections between eight new European Union member states . We also added a road service to Bosnia in 2004, making it the thirty-third country in our road network, and we added a new road transit hub in Spain.

In March, we introduced a direct flight between our TNT Express European air hub in Liège, Belgium and Turku Airport in Finland. The new daily route improved delivery times for imports to customers by more than two hours and extended collection time for exports by the same period. In September, we replaced a smaller aircraft with a Boeing 737 16-tonne capacity aircraft on our six-day-a-week Liège-Istanbul-Liège route, and in December we replaced a chartered B737 with a second TNTB737. The aircraft are among five new leased B737s that will replace chartered aircraft across our European network. We expect to add an additional aircraft each year in 2005, 2006 and 2007.

In May, we introduced global express and airfreight services into Somalia. This twice-weekly service operates between our hub in Dubai in the United Arab Emirates and the Somali capital Mogadishu, with an air connection to Hargeisa in the north of the country. To facilitate delivery to remote areas, we signed an agreement with Somal Post that allows us to access the organisation’s network using its fleet of 19 road vehicles.

Also in May, we announced a € 36 million investment to expand and upgrade facilities at our European air hub. The initial investment – to be completed in the first half of 2006 – is part of a six-year plan that will create 245 new jobs at the facility by 2010. The first phase includes doubling sortation space from 28,000 square metres to 56,000 square metres, re-engineering to improve speed and efficiency of sortation systems, expanding office space, and improving staff facilities. Phases two and three will add new sortation equipment, increase air container throughput, modernise equipment, and further improve information and other systems.

We aim to establish our second home market in China.

If the China express market continues its current trend of 25% per annum growth, by 2010 it will be the world’s sixth-largest express market and a key cog in global supply chains. We’re currently outstripping the industry in China, turning in 40% growth in 2004. To sustain that growth, we’re making significant investments in our network.

TNT Express entered China in 1988, working with a state-owned joint venture partner. In June 2003, we began operating under our own auspices in 12 locations. In a country of some 10 million square kilometres, we estimate that a pan-China network must cover 100 cities with 140 to 170 locations in order to serve about 1,000 cities and reach 95% of the addressable population. Today, we have 25 company-owned locations supported by an extensive agency and associate network that allows us to serve some 500 cities. We aim to have 35 of our own locations by the end of 2005.

Our network development, however, is dependent on infrastructure development within the country. The government has made realising a sound infrastructure a key focus of its most recent economic development programme and is investing heavily in port and city development and highway reconstruction, but realising a modern infrastructure in China is a long-term initiative.

We’ve revised our strategy to deliver more to targeted markets.

In 2004 we laid the foundation that we believe will help us to not only continue delivering more for our customers, but to grow our Express business well into the future. Our revised strategy builds on our strong position in Europe. It is aimed at achieving leadership in both domestic and intra-European express flows in Europe, leveraging our presence in China to fuel our European network and establish an intra-China network, and seizing the number-one positions in emerging markets in the rest of the world, and in special services.

As there is no commonly shared market definition for the global courier, express and parcel (CEP) market, our strategy begins by defining what we see as our market. The CEP market can be segmented along the axes of transport speed – same-day and in-night, time-certain, next-day, day-certain, and day-uncertain – and weight per consignment.

We define our market to include time-definite and next-day delivery of shipments and consignments transported through a scheduled network. It includes both scheduled and on-call pick-up with drop-off possibilities. It allows for door-to-door tracking-and-tracing of individual items, and often includes a money-back guarantee. Weight can be up to 1,000 kilograms per consignment, and it includes both domestic and international shipments. Our Express market includes only business-to-business shipments, not those going from business to consumer or consumer to consumer. Within this market definition, TNT Express has a 22% share of the European market.

TNT Express market definition

We aim to leverage our relationships with multinational customers in China to fuel consignment flows carried by both air and sea from China to Europe and the rest of the world, and to establish an intra-China network.

We aim to achieve the number-one position in emerging markets in the rest of the world. In South America, for instance, we’re pursuing selected opportunities in countries such as Brazil. In India, we’re investigating development of the domestic express business, and in Southeast Asia, we’re also working to leverage our relationships with large multinational customers to increase flows into Europe.

We also aim to achieve the number-one position in special services such as transporting pharmaceuticals. We’re investigating partnerships with niche players in the United States to serve our vertical market customers, and we’re developing non-network services to provide solutions to customers. For example, we support the logistics of large-scale clinical trial programmes by delivering test kits and medications to research sites, and returning clinical samples to labs located all over the world.

Express highlights

Express financial highlights

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Express strategy

Our ambition is to be the leader in day/time certain, door-to-door transport for our business-to-business customers, with the widest geographical coverage.

Our global strategy is to:

Be number one in Europe in domestic and intra-European express flows.
Build volume capacity from China to fuel our European network and establish an intra-China network.
Be number one in emerging markets in the rest of the world.
Be number one in special services.

The most important elements of our strategy are to:

Achieve profitable revenue growth through volume acquisitions at optimised pricing.
Maintain a balanced customer portfolio that includes global accounts, major national, large, medium, small and ad hoc customers.
Focus on product performance.
Improve cost effectiveness.
Ensure quality in all key areas.
Provide high-quality and cost-effective intra-European services through connecting strong domestic businesses.
Secure outstanding levels of customer satisfaction.
Equip employees to fully satisfy customer needs.
Develop leading-edge support technologies that provide added value for customers.
Strengthen the TNT brand and increase top-of-mind awareness of the comprehensive range of reliable on-demand express delivery services we provide.

Express market position

Our Express division provides on-demand door-to-door express delivery services for customers sending documents, parcels and freight. We offer regional, national and worldwide express delivery services, primarily for business-to-business customers. The express services we provide and the prices we charge to customers are, in general, classified by transit times, distances covered and sizes and weights of consignments.

In Europe we provide regional, national and pan-European Express services as well as time-sensitive door-to-door services that deliver consignments between Europe and the rest of the world. Our extensive integrated road and air networks give us a strong position in the European market and, with dense coverage in 33 European countries, are an important strategic asset.

TNT Express 2004 European road network extensions

We also provide door-to-door express delivery of documents, parcels and freight in all areas outside Europe and from these areas to Europe. Our worldwide coverage extends to more than 200 countries. In many of these countries our global Express services are augmented by domestic and regional Express delivery services. We also are building our position in Asia and have further improved service levels between Europe and Asia. Our business in Asia is expanding through a mix of organic growth, acquisitions and cooperative ventures such as our alliance with China Post.

air and road network development