TNT profit falls amid anger over Royal Mail deal

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TNT, the Dutch mail company which is the front-runner to take a stake in a part-privatised Royal Mail, unveiled a 37 per cent fall in profits today after a sharp drop in demand for its express delivery services.

Shares in the parcel company, Europe's second-largest, fell 5 per cent to €13.89 after it revealed that earnings before interest and tax totalled only €160 million (£143.5 million) in the fourth quarter, down from €253 million at the same time last year. The group warned that it was continuing to experience tough trading.

The poor performance from TNT will give unions and MPs further ammunition about the danger of plans by the Department for Business, Enterprise and Regulatory Reform, to sell a stake of up to 33 per cent in the postal service.

The plans — which could lead to the loss of up to 50,000 jobs — have met with fierce opposition from unions and MPs and are set to trigger one of the biggest fights faced by Gordon Brown's administration. The dispute has put in jeopardy the union's financial backing of the Labour Party.

TNT's expression of interest was formally welcomed in December. Lord Mandelson, who is leading the project, said that such a tie-up would help to boost Royal Mail's peformance and secure its future. He has said that the status quo is "untenable". Other interested bidders include CVC, the private equity group.

Billy Hayes, general secretary of the Communication Workers Union, said: "TNT's results demonstrate that the problems facing the postal industry are not unique to Royal Mail.

"TNT are the supposed miracle workers that the Government wants to bring in to turn around Royal Mail. These poor financial results give the lie to their touted expertise and undermine their position as competent network provider and serious candidate to 'coach' the Royal Mail."

Peter Bakker, the chief executive of TNT, said: "The extremely tough trading conditions we saw for our Express business in the second half of 2008 are continuing into 2009 so far.

Danny Van Doesburg, an analyst at SNS Securities, said: "The company needs to adjust its costs more than previously anticipated."

TNT said that it would now target cost savings of about €400 million in 2009, up from €270 million to €330 million previously. The bulk of cutbacks will be in its Express unit.

Today it emerged that ministers have signalled they may reduce the scale of the Royal Mail part-privatisation project in a bid to limit a rebellion.

Lord Mandelson and Pat McFadden, the postal affairs minister, are said to have insisted that their "doors are open" to unhappy backbenchers after more than 100 signed a Commons motion criticising the plans.

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Danny Van Doesburg, an analyst at SNS Securities, said: "The company needs to adjust its costs more than previously anticipated."

Translation: Let sack more front line workers and give ourselves bigger bonuses.

The tune never changes does it.