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Do jilted brides go on to have happy independent lives? Sometimes – but rarely without a bit of suffering. TNT Express is a case in point. Marriage to UPS has been frustrated; its shares have dived 40 per cent below UPS's cash terms and its chief executive has departed. There is a small plus in the €200-million ($271-million) break fee paid over by UPS last week, which adds to TNT's end-2012 net cash of €140-million. But that pales alongside the acute need for a go-it-alone strategy.
Which, of course, is what TNT had just unveiled a year ago, when UPS's offer arrived. Now the current acting management appears to be reverting to that plan – focus on Europe and exit domestic operations in the likes of Brazil and China. More details are expected next month. But the intervening 12 months have not improved the operating backdrop, and time has been lost in terms of cost-cutting plans. As Monday's 2012 results showed, TNT faces pricing pressures in Europe (which accounts for two-thirds of group sales): underlying operating margins there fell from 8.4 per cent in 2011 to just above 6 per cent last year. Elsewhere, TNT is making little money overall.
In short, the company and its board need to act fast. First job, provide management certainty, if only by confirming acting executives in their positions. Next, decide on how broad and speedy divestments should be. China is well under way, but Brazil's losses are declining and there is also a profitable Australasian business to also be considered. Costs in Europe still need attacking. Strong partnership arrangements would help elsewhere. TNT had previously targeted a 10 per cent-plus operating margin, but in current market conditions, that could be stretch. The shares now trade on an enterprise value to 2013 earnings multiple of under 6 times – compared with 9 at UPS and 6 at FedEx. Given the task ahead – and barring a new suitor – that seems high enough.