PostNL reported Underlying revenues up 4.1% y/y to € 1,033m (1,011 kbcs, 1,013 css), with underlying EBIT at € 89m (82 kbcs, 85 css) and underlying cash operating income coming in at € 25m (27m kbcs, no css). 2Q Underlying cash EBIT represents 15-20% of FY11 guidance and YTD 60-80% of guidance is already met. As a result management expects underlying cash operating income to be at the top half of the guided range 130-170m in 2011 (€ 156m kbcs) and saw positive developments in all key parameters.
Divisions broadly in-line to somewhat better than expected
Mail in NL saw its addressed mail volumes decline by 8.9% y/y which is in line with FY11 guidance of a decline by 8-10%. Underlying cash EBIT came in at € 12m (16m kbcs) and revenues were exactly in-line with forecasts. Parcels on its term performed 4.3% better than expected with operating margins still strong at 14.4% (14% kbcs). Underlying Cash EBIT came in at € 21m vs. € 20m expected. International topped our revenues by 2.8% and reported Underlying Cash EBIT of € -2m (-2 kbcs). Management said measures to improve the results of Spring showed good progress and Germany is on track to become profitable supported by a positive outcome of their German Court Case. Mail Other Underlying Cash EBIT came in at € -6m vs. € -7m forecasted.
Living up to the dividend promise
An interim dividend of € 0.214/sh will be paid out which represents half of the minimum € 150m/year stemming from PostNL and € 0.017/sh from its share in TNT Express. Ex-dividend date is 9 August 2011.
Distributable equity sufficient for coming dividend period
The company decided (as prescribed by accounting standard IAS36) to take a € 397m impairment, and as a result the total equity end 2Q stands at € 566m (1,025m kbcs ex-impairment) with € 189m non-distributable. This means that € 377m is left to be paid out as a dividend over the coming year which compares to the minimum targeted to be paid out of € 150m p.a. Furthermore, the recent share price decline to € 6.83/sh should on our estimates reduce distributable equity by another € 79.4m to bring it to € 298m. We expect earning contributions and gains on the sale of real estate to lift distributable equity over the coming quarters. As already explained by the company, a change in IAS19 will lead to a negative € 775m equityimpact in 2013 based on current parameters which are heavily dependent on interest rate movements. At the current share price we expect there would not be enough distributable equity left (around 250-350m shortage), but the share price of TNT Express has till 2013 to recover from current positions.
We believe the beating of PostNL’s share price has been too harsh, and the company could be picked up at attractive prices. Management lifted FY11 guidance, while 2Q11 results came in in-line with expectations. We re-iterate our Accumulate rating and € 7.6/sh TP. A conference call is scheduled at 14:00 CET.