Annual Report • Mar 10, 2009
Annual Report
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Delivering on the Future
| 2007 restated |
2008 | + / – % | ||
|---|---|---|---|---|
| Profi t from operating activities (EBIT) before non-recurring items | € m | 2,668 | 2,410 | – 9.7 |
| Non-recurring items | € m | 535 | 2,977 | – |
| EBIT | € m | 2,133 | – 567 | – 126.6 |
| Revenue | € m | 54,043 | 54,474 | 0.8 |
| Return on sales 2) | % | 3.9 | – | |
| Consolidated net profi t / loss 3) | € m | 1,383 | – 1,688 | – |
| Operating cash fl ow (Postbank at equity) | € m | 2,808 | 3,362 | 19.7 |
| Net debt (Postbank at equity) 4) | € m | 2,858 | 2,412 | – 15.6 |
| Return on equity before taxes | % | 8.6 | – 9.0 | |
| Earnings per share 5) | € | 1.15 | – 1.40 | – |
| Dividend per share | € | 0.90 | 0.606) | – 33.3 |
| Number of employees 7) | 447,626 | 456,716 | 2.0 |
1) Excluding Postbank. 2) EBIT / revenue. 3) Excluding minorities, including Postbank. 4) Adjusted for fi nancial liabilities to Williams Lea minority shareholders. 5) Including Postbank. 6) Proposal. 7) Average FTE.
| € m |
|---|
| 14,393 |
| 14,569 |
| 13,637 |
| 13,874 |
| EXPRESS |
| 14,179 |
| 12,959 |
| GLOBAL FORWARDING / FREIGHT |
| 13,718 |
| 14,317 |
| SUPPLY CHAIN / CIS 3) |
| 2008 2007 restated |
1) Excluding Corporate Center / Other and discontinued operations.
2) Note 10.
3) CORPORATE INFORMATION SOLUTIONS.
1) Continuing operations. 2) Note 10.
II
At a Glance
We are both Germany's postal operator and the global market leader for logistics. Our Deutsche Post and DHL brands stand for a wide range of easily accessible services and sustainable solutions for the transport of letters, goods and information. With around 500,000 employees in more than 220 countries and territories, we are one of the world's most important employers. As the largest company in our industry, we take our responsibility to the environment seriously. We have developed GoGreen – our environmental initiative that institutes a systematic approach to achieving our climate protection target. www.dpwn.com
Deutsche Post delivers mail and parcels in Germany, and we are specialists in dialogue marketing and press distribution services. In Germany, we operate the largest network of fi xed-location retail outlets – around 14,000 – where Postbank services are also offered. At the heart of our nationwide transport and delivery network are 82 mail centres processing around 70 million items per working day and 33 parcel centres, where on six days a week our handling volume exceeds 2.5 million units. An annual volume of around 7.5 billion items makes us the cross-border mail market leader and Europe's largest postal operator. www.deutschepost.com
DHL delivers time-critical shipments as well as goods and merchandise by road, rail, air or sea. We transport courier and express shipments via one of the world's most extensive networks – our gateway to over 220 countries and territories. We are the world's largest air and ocean freight operator and one of the leading overland freight forwarders in Europe and the Middle East. In 65 countries all over the world, we offer customised solutions in outsourced contract logistics at every link in the supply chain. Our tailored solutions for both digital and print information round off our comprehensive offering. www.dhl.com
FEBRUARY/MARCH +++ Dr Frank Appel is appointed as new chairman of the Board of Management. The LOGISTICS Division is dissolved and split between two board departments. Bruce Edwards becomes the new Board member in charge of the SUPPLY CHAIN / CIS Division and Hermann Ude the new Board member in charge of the GLOBAL FORWARDING / FREIGHT Division. +++
APRIL +++ The Group sells a portfolio of approximately 1,300 properties located mainly in Germany to US investor Lone Star for € 1 billion in cash. +++
APRIL +++ Deutsche Post World Net – the largest player in its industry – sets itself a measurable climate protection target. For every letter posted, every container shipped and every square metre of space used, the Group aims to reduce its carbon footprint by 30 % below 2007 levels by 2020. +++
APRIL +++ During their collective-bargaining negotiations, Deutsche Post AG and the service trade union Verdi agree on an extended job security pact, a pay increase for staff covered by the collectivebargaining agreement and additional weekly working hours for about 130,000 company employees. The collective agreement will end on 30 June 2010. +++
MAY +++ A dividend per share of € 0.90 for financial year 2007 is distributed. The total dividend amounts to € 1,087 million. +++
MAY +++ European air freight hub at Leipzig / Halle Airport launches operations. The Group invested around € 300 million in the facility where approximately 1,500 tonnes of freight are transhipped each working day. +++
JULY / AUGUST +++ The European Court of First Instance annuls a decision by the European Commission, which had ordered Deutsche Post to repay purported state aid. As a result, the German government repaid the sum of € 1,067 million to Deutsche Post. +++
SEPTEMBER +++ Deutsche Post agreed to sell a minority stake in Postbank to Deutsche Bank. The sale of the fi rst tranche of the shareholding will be completed in the fi rst quarter of 2009. +++
NOVEMBER +++ Deutsche Post World Net announces that it will exit the domestic express business in the USA by the beginning of 2009. The international express offering in the United States will be maintained. +++
2008
We have agreed to sell shares in Deutsche Postbank to Deutsche Bank and we began to reorganise our US express business. We have consistently implemented the initia tives set forth in our Roadmap to Value capital markets programme and ran a tight cost management system. Thanks not least to these efforts, we met our adjusted target for the period. Earnings from operating activities ( excluding Postbank) were just above our target of € 2.4 billion.
The economic downturn has impacted the entire logistics industry. Yet we remain convinced that our strong brands – Deutsche Post and DHL – and our global reach make us well-equipped for difficult times. To mitigate adverse effects from materially lower business volumes, we plan to make fewer investments and to lower indirect costs by € 1 billion by 2010 in a Group-wide cost-cutting drive.
| A | GROUP MANAGEMENT REPORT | 21 |
|---|---|---|
| B | CORPORATE GOVERNANCE | 101 |
| C | CONSOLIDATED FINANCIAL STATEMENTS |
125 |
| D | FURTHER INFORMATION | 201 |
| Selected Key Figures | I |
|---|---|
| At a Glance Milestones 2008 |
II |
| Delivering on the Future | 2 |
| Letter to our Shareholders | 14 |
| Overview | 23 |
|---|---|
| Business and Environment | 24 |
| Capital Market | 37 |
| Earnings, Financial Position and Assets and Liabilities |
40 |
| Divisions | 52 |
| Non-fi nancial Performance Indicators | 73 |
| Risks | 85 |
| Further Developments and Outlook | 93 |
| Report of the Supervisory Board | 103 |
|---|---|
| Supervisory Board | 109 |
| Board of Management | 111 |
| Mandates Held by the Board of Managment | 112 |
| Mandates Held by the Supervisory Board | 113 |
| Corporate Governance Report | 114 |
| Income Statement | 127 |
|---|---|
| 128 | |
| 129 | |
| 130 | |
| 131 | |
| 132 | |
| 199 | |
| Auditor's Report | 200 |
| CONSOLIDATED FINANCIAL STATEMENTS Balance Sheet Cash Flow Statement Statement of Changes in Equity Segment Reporting Notes Responsibility Statement |
| D | FURTHER INFORMATION | |
|---|---|---|
| Index | 203 | |
| Glossary | 204 | |
| Contacts | 206 | |
| 8-Year Review | III | |
| Events | IV |
| GLOBAL PRESENCE At home in the markets of the future |
4 |
|---|---|
| GLOBAL CUSTOMER SOLUTIONS Full service for key customers |
6 |
| GOGREEN A drive towards sustainability |
8 |
| INDUSTRY EXPERTISE Customised solutions |
10 |
| FIRST CHOICE Being the First Choice |
12 |
+++ The economic developments and the shift in customers' behaviour have prompted us to re-examine the most important factors determining our business. As a result, we have developed strategic goals and initiatives, examples of which we present in this report.
We are following the trend towards globalisation by maintaining a higher presence in rapidly growing markets and our own customer relationship management orga nisation for key customers. We are responding to the shift to outsourcing with integrated and customised logistics solutions, and we are fulfilling our responsibility to the environment by offering climate-neutral products. Our dedicated employees provide what we need to achieve high customer loyalty. We take our responsibility to our customers' needs, employees, investors and society very seriously. That's why we say we're
4
GLOBAL PRESENCE STRATEGIC GOAL INITIATIVE
+++ Delivering on the future – because our strong global presence gives us an edge in dynamic future markets. Asia, Eastern Europe and the Middle East are the key growth drivers of our express and logistics business. +++
We are continuously expanding our international presence and investing in infrastructure. We have established and expanded air hubs, particularly in the Asia Pacifi c region. Starting in 2010, DHL will service the Chinese market primarily from our new northern Asia hub at Pudong International Airport in Shanghai and be able to guarantee time-defi nite deliveries to cities in northern Asia. This new gateway augments the Asia Pacifi c hubs in Hong Kong, Bangkok, Incheon, Singapore and Sydney. In Jebel Ali, the free-trade zone in Dubai, we have opened the largest transhipment centre of its kind in the Middle East. Our customers in the freight business use the centre as an intermediate storage point when transporting goods between Europe, Africa and Asia.
5
GLOBAL CUSTOMER SOLUTIONS
STRATEGIC GOAL
+++ Delivering on the future – because our customer relationship management organisation, Global Customer Solutions, f ollows the trend towards globalisation and complete solutions. Our industry experts bundle our entire array of logistics know-how and each key customer is supported by a single point of contact who handles their logistics questions. +++
7
INITIATIVE
International corporations need globally networked and centrally managed solutions. Global Customer Solutions is our customer relationship management organisation, established to support 100 of our largest and most important customers with a team of specialised logistics experts. This allows us to respond quickly, fl exibly and personally to our customers' developing needs and to changing market conditions, not to mention achieve encouraging growth rates. DHL is the most important transport services partner for Airbus – one of the world's leading aircraft manufacturers – and will be over the next fi ve years. We have developed a new transport concept that streamlines air, ocean and ground transport and that standardises the handling of customs formalities and value-added services.
8
+++ Delivering on the future – because we have taken the initiative as the largest player in our industry and have set ourselves a measurable climate protection target. Our GoGreen products offer customers a climateneutral shipping option, which we have not only introduced across Europe but have also already extended into 17 countries in the Asia Pacifi c region. +++
For every letter posted, every container shipped and every square metre of space used, we aim to reduce our carbon footprint by 30 % below 2007 levels by the year 2020. As an interim target, we are striving to improve our CO2 effi ciency by 10 % by 2010. To meet this climate protection target, we have developed a systematic approach: the Group's GoGreen programme. By using energyefficient processes and technologies, offering climate-neutral products and leading an environmentally conscious workforce, we are fulfi lling our responsibility to the environment. GoGreen items are climate-neutral because the emissions caused by their transport are offset by climate protection measures, such as solar or hydroelectric plants.
9
INDUSTRY EXPERTISE
STRATEGIC GOAL
+++ Delivering on the future – because we develop customised logistics solutions for each individual product. As the market leader in outsourced contract logistics, we align our services precisely to our customer's needs. For we are not only logistics experts, but also specialists in our customers' industries. +++
INITIATIVE
As economic structures become more complex and more globally networked, our customers continuously face new challenges when it comes to planning, managing and monitoring their business processes. We lead the market in offering customised logistics solutions to meet these challenges. For example, DHL developed its ColdChain freight product – backed by state-of-the-art technology and quality service – to safely transport sensitive products such as pharmaceuticals and vaccines for the healthcare industry within a temperature-controlled network. ColdChain is the logistics solution that meets all the requirements of the industry – from two-stage, adjustable refrigerated transport and GPS tracking to especially fast transit times – so that our customers can concentrate fully on their core business.
11
+++ Delivering on the future – because we have developed our First Choice service campaign, creating a culture of continuous improvement. With consistent customer orientation amongst our employees, we aim to improve our service systematically in all areas and at every point of contact. This way we will become the best service provider and every customer's First Choice. +++
FIRST CHOICE STRATEGIC GOAL INITIATIVE
All of our employees bear a very special responsibility – a responsibility to their customers. In order to meet their product and service needs, we have developed the First Choice programme. Our overall objective is to raise customer loyalty and thereby increase growth because we will only maintain our leading position in the industry into the future by being the best logistics company. Around 500,000 employees are working together to make our company the First Choice worldwide. The success of the programme proves us right: All organisational units that have implemented these initiatives have demonstrably higher levels of customer satisfaction.
Dr Frank Appel, Chairman of the Board of Management
25 February 2009 Financial year 2008
Chief Executive Offi cer Deutsche Post AG
25 February 2009 Financial year 2008
One year into my chairmanship of the Board of Management, the Group has carved out a clear path for continued success. We have initiated steps to sell Postbank and to restructure the US express business, consistently implemented the Roadmap to Value and prepared ourselves for the impacts of the global economic crisis.
For Postbank, we have found the perfect partner in Deutsche Bank. Our thorough analyses and sound decision-making processes have paid off , and we established attractive conditions for the transaction despite the diffi cult market climate.
Th e second decision of great consequence concerned our US express business. In May, we began to restructure the business from the ground up in order to minimise losses that were no longer acceptable. Nevertheless, the weak US economy and declining shipment volumes have since then forced us to take even more drastic measures. In November, we decided to focus our express business in the US on our international off ering and to exit the domestic business. Th is was certainly one of the most diffi cult decisions I have had to take in my management career to date.
Th e current economic crisis has taught us that we must do more to safeguard the future of our Group. With our Roadmap to Value capital markets programme, we are already well underway. As a result of the programme's initiatives, we have achieved encouraging growth rates in the emerging economies, cut costs and made operational improvements. We increased our reporting transparency by now reporting the logistics business units separately and our fi nancial position is stable. Net cash from operating activities increased signifi cantly, whilst working capital declined.
Th anks to these eff orts, we have met our adjusted target for the period. Earnings from operating activities before non-recurring items (excluding Postbank) were just above our target of € 2.4 billion. However, non-recurring items impacted our earnings. Th e repayment from the German government awarded as a result of the state aid proceedings boosted earnings, whilst the restructuring costs for the US express business and a write-down on the goodwill of SUPPLY CHAIN / CIS undermined our bottom line. Adjusted for non-recurring items, we are reporting a loss. EBIT (excluding Postbank) declined to € – 567 million; the Group generated a consolidated net loss for the period of € 1.98 billion.
1 /2
Postal address Deutsche Post AG Headquarters 53250 Bonn, GERMANY Business address Deutsche Post AG Headquarters Charles-de-Gaulle-Straße 20 53113 Bonn, GERMANY
Visitors' address Deutsche Post AG Headquarters Platz der Deutschen Post 53113 Bonn, GERMANY
Phone + 49 228 182 -90 00 Fax + 49 228 182 -70 60
www.deutschepost.de
Th e economic downturn has impacted the entire logistics industry appreciably and, in turn, our business. Trading volumes continued to weaken in most of our business units, especially in the fourth quarter. We have seen that this trend has continued and even intensifi ed in the fi rst weeks of the new fi nancial year.
Yet we are taking action. In keeping with our Roadmap to Value, we intend to cut costs further – an additional € 1 billion by the end of 2010. We are setting strict standards for investments and acquisitions and further tightening our working capital. Th e restructuring in the US is progressing according to plan. We intend to minimise losses there to US \$ 400 million (annualised) by the last quarter of 2009.
Management is setting a clear example: Th e Board of Management and the Supervisory Board will not receive any performance-based bonuses for the past fi nancial year.
I am thoroughly convinced that we will come out of the recession in a stronger position. Since we are the market leader with a global network and a comprehensive portfolio, we are able to respond more fl exibly than competitors to our customers' changing requirements.
Now that we have boldly and systematically set a clear course, it is time to take up our strategy for the future. We want to maintain our position as "Die Post für Deutschland" (the postal service for Germany) whilst making optimum use of the global strength of our logistics business.
Together with our around 500,000 employees, we are creating a corporate culture marked by a focus on results and mutual respect. We intend not only to meet the expectations of our customers and shareholders in the future but to exceed them.
I would like to sincerely thank our employees for their hard work in an extremely challenging year and I thank you for your trust in our company. We would like to show our appreciation by proposing a dividend of € 0.60 per share this year.
Yours faithfully,
RADIO FREQUENCY IDENTIFICATION (RFID) is a system that uses radio signals to locate and identify merchandise, batched products and transport assets fi tted with special electronic chips. Th is enables the automatic tracking and tracing of merchandise and assets throughout the supply chain. RFID can help to reduce administration, optimise the use of warehousing space and thereby increase productivity on the whole.
Symbol: RFID chip
| 24 | BUSINESS AND ENVIRONMENT | |
|---|---|---|
| Business activities and organisation | 24 | |
| Disclosures required by takeover law | 25 | |
| Remuneration of the Board of Management | ||
| and the Supervisory Board | 28 | |
| Economic parameters | 28 | |
| Strategy and goals | 33 | |
| Group management | 35 | |
| 37 | CAPITAL MARKET | |
| Deutsche Post shares | 37 | |
| Roadmap to Value | 39 | |
| 40 | EARNINGS, FINANCIAL POSITION AND ASSETS AND LIABILITIES |
|
| Signifi cant events | 40 | |
| Earnings | 41 | |
| Financial position | 43 | |
| Assets and liabilities | 50 | |
| 52 | DIVISIONS | |
| Overview | 52 |
|---|---|
| 53 | |
| EXPRESS | 59 |
| GLOBAL FORWARDING / FREIGHT | 65 |
| SUPPLY CHAIN / CORPORATE INFORMATION | |
| SOLUTIONS | 69 |
| Discontinued operations | 72 |
| Employees | 73 |
|---|---|
| Sustainability | 77 |
| Procurement | 79 |
| Research and development | 80 |
| Quality | 81 |
| Brands | 84 |
| Report on post-balance sheet date events | 93 |
|---|---|
| Report on expected developments | 94 |
| Opportunities | 98 |
Th e year 2008 was an extraordinary year for our Group. It began with a transition in management and successful wage agreements. As the year progressed, we agreed to sell shares of Postbank to Deutsche Bank and we began to reorganise our US express business. All of this took place in the shadow of a weak fi nancial market that evolved into a global economic crisis during the course of the year.
Th anks above all to the fact that we consistently implement the initiatives set forth in our Roadmap to Value capital markets programme and run a tight cost management system, we have met our adjusted target for the period: Earnings from operating activities before non-recurring items (excluding Postbank) were just above our target of € 2.4 billion.
In the year under review, non-recurring items impacted our earnings. Th e repayment from the German government awarded as a result of the state aid pro ceedings boosted earnings, whilst the restructuring costs for the US express business and an impairment loss on the goodwill of Supply Chain/CIS undermined our bottom line.
Including non-recurring items, we are reporting a loss: EBIT (excluding Postbank) declined by € 2.7 billion to € − 567 million; the Group generated a consolidated net loss for the period of € 1.98 billion.
Consolidated revenue (excluding Postbank) grew by 0.8% to € 54.5 billion. Trading volumes continued to drop in most of our business units in a year-on-year comparison, especially in the fourth quarter. All of our divisions performed below the expec tations, which we had laid out at the beginning of the reporting year in a diff erent economic environment.
Our fi nancial position appears to be stable. Net cash from operating activities (Postbank at equity) signifi cantly increased, whilst working capital fell. Moreover, because investments were below the prior-year level, free cash fl ow grew signifi cantly by € 950 million to € 2,448 million.
By agreeing to sell Postbank and initiating restructuring activities, we are carving out a strategic path on which we can take our continuing operations and face the challenges of the current economic crisis head on. We are confi dent that we will come out of the crisis a stronger market leader.
1) Excluding Postbank. 2) EBIT / revenue. 3) Excluding minorities, including Postbank. 4) Including Postbank. 5) Proposal.
Deutsche Post World Net off ers integrated services and customised solutions for the processing and transport of goods and information in a global market.
In the MAIL Division, we transport mail and parcels in Germany, and we are specialists in dialogue marketing and press distribution services. We also off er mail and communications services through direct links to more than 140 countries across the globe. Our portfolio additionally includes a wide range of electronic services.
Our EXPRESS Division provides courier and express services to business and private customers. We can draw on an extensive network that covers 220 countries and territories.
In the GLOBAL FORWARDING/FREIGHT Division, we carry goods by rail, road, air and sea. We are the world's largest air and ocean freight operator and one of the leading overland freight carriers in Europe.
Our SUPPLY CHAIN / CORPORATE INFORMATION SOLUTIONS Division (hereinaft er SUPPLY CHAIN / CIS) is the world leader in contract logistics, providing ware housing and ground-based transport services plus specialist sector-based value-added solutions along the entire supply chain. We also off er end-to-end solutions for corporate information and communications management.
We have centralised the Group's internal services, such as IT and Procurement, into the Global Business Services (GBS) Board Department, which allows us to respond more fl exibly to the requirements of our business and leverage economies of scale and cost benefi ts.
Th e Group is organised into four operating divisions, each of which operates under the control of its own divisional headquarters. Th e Group manage ment functions are performed by the Corporate Center.
| EXPRESS | GLOBAL FORWARDING / FREIGHT |
SUPPLY CHAIN / CIS | |
|---|---|---|---|
| • Mail Communication • Dialogue Marketing • Press Services • Parcel Germany • Retail Outlets • Global Mail • Pension Service |
• Europe • Americas • Asia Pacific • EEMEA |
• Global Forwarding • Freight |
• Supply Chain • Corporate Information Solutions |
25
As announced in the prior year and with eff ect from 1 January 2008, we unbundled the SERVICES Division, allocated the costs of Global Business Services to the operating units and assigned the retail outlets to the MAIL Division. We now report a more narrowly defi ned unit, Corporate Center / Other.
On 18 February 2008, the Supervisory Board of Deutsche Post AG appointed Dr Frank Appel as the new chairman of the Board of Management aft er Dr Klaus Zumwinkel resigned from the Board of Management. Dr Appel had been the Board member in charge of the LOGISTICS Division. His appointment prompted us to reallocate responsibility for the logistics business in the middle of the fi rst quarter and divide it between two Board of Management members. Since that time, Hermann Ude has headed the Global Forwarding and Freight business units, and Bruce Edwards has headed the Supply Chain and Corporate Information Solutions business units.
Th is new structure refl ects the increasing business volume and the diff erent business models: Global Forwarding and Freight engage chiefl y in transport services, whilst Supply Chain and Corporate Information Solutions off er customised logistics and communications solutions. We have reported this structure under segment reporting since the second quarter of 2008. We successively reorganised the global and regional organisational structure of the two new Board departments.
In the third quarter, the Pension Service was reallocated from the FINANCIAL SERVICES Division to the mail business. Having agreed to the sale of our subsidiary, Deutsche Postbank, we have reported its activities under "discontinued operations" since the third quarter of 2008. Dr Wolfgang Klein resigned from Deutsche Post's Board of Management eff ective 10 November 2008.
Disclosures required under Sections 289 (4) and 315 (4) of the Handelsgesetzbuch (HGB – German commercial code) and explanatory report
As at 31 December 2008, the company's share capital totalled € 1,209,015,874 and was composed of the same number of no-par value registered shares. Each share carries the same statutory rights and obligations and entitles the holder to one vote at the Annual General Meeting (AGM). No individual shareholder or group of share holders is entitled to special rights, particularly rights granting powers of control.
Th e exercise of voting rights and the transfer of shares are based on the general legal requirements and the company's Articles of Association, which do not restrict either of these activities. Article 19 of the Articles of Association sets out the requirements that must be met in order to attend the AGM as a shareholder and exercise a voting right. Only those persons entered as such in the share register are considered by the company to be shareholders. Th e Board of Management is not aware of any agreements between shareholders that restrict voting rights or the transfer of shares.
Structure in accordance with governance tasks and responsibilities (boards and committees)
Structure based on the Group's legal entities
• Deutsche Post AG
• Deutsche Postbank AG
Structure in accordance with brand names used in customer communication
• Deutsche Post • DHL
Deutsche Post World Net Annual Report 2008
KfW Bankengruppe (KfW), Frankfurt am Main, is our largest shareholder, holding around 30.5% of the share capital. Th e Federal Republic of Germany holds an indirect stake in Deutsche Post AG via KfW. According to the notifi cations we have received pursuant to Sections 21 ff . of the Wertpapierhandelsgesetz (WpHG – German securities trading act), KfW and the German government are the only shareholders who own more than 10 % of the share capital, either directly or indirectly.
Th e members of the Board of Management are appointed and replaced in accordance with the relevant legal provisions (Sections 84 and 85 of the Aktiengesetz (AktG – German stock corporation act) and Section 31 of the Mitbestimmungsgesetz (MitbestG – German co-determination act)). In accordance with Section 84 of the AktG and Section 31 of the MitbestG, members of the Board of Management are appointed by the Supervisory Board for a maximum of fi ve years. Th ey may be re-appointed or have their term of offi ce extended, in each case for a maximum of fi ve years. Article 6 of the Articles of Association stipulates that the Board of Management must have at least two members. Beyond that, the number of Board members is determined by the Super visory Board, which may also appoint a chairman and deputy chairman of the Board of Management. Details of changes on the Board of Management during the year under review are reported in Business activities and organisation.
In accordance with Section 119 (1), No. 5 and Section 179 (1), sentence 1 of the AktG, amendments to the Articles of Association are adopted by resolution of the AGM. In accordance with Article 21 (2) of the Articles of Association in conjunction with Sections 179 (2) and 133 of the AktG, such amendments generally require a simple majority of the votes cast and a simple majority of the share capital represented. In cases where the law requires a larger majority for amendments to the Articles of Association, that majority is decisive.
Under Article 14 (7) of the Articles of Association, the Supervisory Board has the authority to resolve amendments to the Articles of Association in cases where the amendments aff ect only the wording. In addition, AGM resolutions passed on 5 June 2003 (Contingent Capital II), 18 May 2005 (2005 authorised capital) and 8 May 2007 (Contingent Capital III) authorised the Supervisory Board to amend the wording of the Articles of Association to refl ect the respective share issue or the use of authorised capital and following the expiry of the respective authorisation period.
Subject to the consent of the Supervisory Board, the Board of Management is authorised to issue up to 174,796,228 new no-par value registered shares in exchange for non-cash contributions in the period to 17 May 2010 and thereby increase the company's share capital by up to € 174,796,228 (2005 authorised capital, Article 5 (2) of the Articles of Association).
Page 24
Shareholders' pre-emptive subscription rights are disapplied. It is standard business practice in Germany to use authorised capital as acquisition currency. Th e 2005 authorised capital allows the company to acquire companies and shareholdings fl exibly and without recourse to the capital market. Th e authorised capital is equivalent to less than 15% of the share capital. At the AGM on 21 April 2009, the Board of Management and the Supervisory Board will propose the replacement of the 2005 authorised capital with the 2009 authorised capital in the amount of € 240 million.
New no-par value shares may only be issued from Contingent Capital II ( Article 5 (3) of the Articles of Association) in order to service the subscription rights granted under the 2003 Stock Option Plan. To this end, the company's share capital has been contingently increased by up to € 2,726,658. Up to 2,726,658 Deutsche Post AG shares are still available for subscription under the 2003 Stock Option Plan. It is no longer possible to issue new stock options under the plan.
On the basis of an AGM resolution passed on 8 May 2007, the Board of Management is authorised, subject to the consent of the Supervisory Board, to issue bonds with warrants, convertible bonds and / or income bonds or a combination thereof ( hereinaft er referred to collectively as "bonds with warrants and / or convertible bonds") on one or more occasions in the period to 7 May 2012 up to a total nominal value of € 1 billion and in doing so grant option and / or conversion rights on new shares with a total notional value of up to € 56 million. To this end, the share capital has been contingently increased by up to € 56 million (Contingent Capital III, Article 5 (4) of the Articles of Association). When issuing bonds with warrants and/or convertible bonds, shareholders' pre-emptive subscription rights may only be disapplied subject to the terms of the aforementioned authorising resolution and with the consent of the Supervisory Board. Th e details are contained in the motion under agenda item 7 adopted at the AGM on 8 May 2007.
It is standard business practice amongst publicly listed companies in Germany to authorise the issue of bonds with warrants and / or convertible bonds. Th is allows the company to be fl exible and prompt in fi nancing its activities and gives it the scope it requires to take advantage of favourable market situations quickly and at short notice, for example, by enabling it to off er the company's shares or bonds with warrants /convertible bonds as consideration in a business combination or when acquiring companies or interests in companies. To date, the Board of Management has not made use of this authorisation.
Finally, at the AGM on 6 May 2008, the company was authorised to buy back shares representing up to 10 % of the share capital at that date during the period to 31 October 2009. At no time may these shares together with the shares already repurchased and still held by the company represent more than 10 % of the share capital. Th e shares may be purchased through the stock market, a public off er, a public call for off ers of sale from the company's shareholders or by some other means in accordance with Section 53 a of the AktG. Th e Board of Management may use the authorisation for any purpose permitted by law, in particular to retire the repurchased shares without a further AGM resolution and with the consent of the Supervisory Board. Th e details are contained in the motion under agenda item 6 adopted at the AGM on 6 May 2008.
It is standard business practice amongst publicly listed companies in Germany for the AGM to each year authorise the company to buy back shares. At the AGM on 21 April 2009, the Board of Management and the Supervisory Board will propose that this authority be granted for a further year.
investors.dpwn.com
Any public off er to acquire shares in the company is governed solely by the law and the Articles of Association, including the provisions of the Wertpapiererwerbsund Übernahmegesetz (WpÜG – German securities acquisition and takeover act). Th e AGM has not authorised the Board of Management to undertake any action within the former's authority to block possible takeover bids.
If a takeover occurs, Board of Management members Hermann Ude and Bruce Edwards are each entitled to resign their offi ce as a member of the Board of Management for good cause within a period of six months following the change in control aft er giving three months' notice as of the end of the month and to terminate their Board of Management contracts (right to early termination). In the event of the right to early termination being exercised or a Board of Management contract being terminated by mutual consent under the same conditions, the Board of Management member is entitled to payment to compensate the remaining term of his Board of Management contract. Such payment is limited to the cap pursuant to the recommendation of No. 4.2.3 of the German Corporate Governance Code as amended on 6 June 2008. Th e agreements are outlined in the Remuneration Report.
Th e basic features of the remuneration system for the Board of Management and the Supervisory Board are described in the Corporate Governance Report under Remuneration Report. Th e latter also forms part of the Group Management Report.
Growth in the global economy slowed appreciably in 2008. To start with, the world markets appeared robust but, as the year went on, the fragility emanating from the United States spread to an increasing number of countries and regions. Th e situation was made much worse by the extremely high oil price and very weak US dollar. When the fi nancial market crisis escalated in September, the downward trend accelerated. Global economic output rose by only 3.4 % (previous year: 5.2%), the international exchange of goods by 4.8% (Global Trade Navigator) – the lowest growth since 2002.
| % | Gross domes- tic product |
Exports | Domestic demand |
|
|---|---|---|---|---|
| USA | 1.3 | 6.5 | − 0.1 | |
| Japan 1) | − 0.4 | 2.5 | − 0.7 | |
| China | 9.0 | 17.2 | n / a | |
| Euro zone 1) | 0.9 | 1.5 | 0.8 | |
| Germany | 1.3 | 3.9 | 1.6 |
1) Estimates as at 2 February 2009; source: Postbank Research, national statistics.
Page 122
In the United States, the housing market crisis, the weakness of the fi nancial markets and the at times very high oil prices have led to fl agging domestic trade. Private consumption stagnated overall, even shrinking in the second half of the year. Th e economy was propped up by foreign trade, although this also began to suff er as a result of the global recession in the further course of the year. Gross domestic product (GDP) grew by as little as 1.3% (previous year: 2.0%), the smallest increase since the recession of 2001.
Even Asia was unable to buck the global trend. Although the continent's emerging markets recorded the highest growth at nearly 8%, this still fell well short of the prioryear fi gure (+ 10.6%). In China, GDP increased by 9.0 % and exports improved by 17.2%. Th e trade surplus climbed to some US \$ 295 billion. Th e country is also retaining its appeal to foreign investors, whose direct investments actually rose to around US \$ 92 billion.
Since the Japanese economy depends heavily on exports, it has been particularly hard hit by the global slowdown. GDP fell by 0.4%, which means Japan was already clearly in recession in 2008.
Aft er a good start to the year, the euro zone economy has been slowing since the spring. Private consumption and investments have fallen, whilst unemployment increased. Moreover, the strong euro proved to be a drag on exports. Th e crisis on the fi nancial markets hugely intensifi ed the recessive trends in the autumn; GDP only grew by another 0.9% (previous year: 2.6%).
Germany also suff ered a downturn following the dynamic start to the year. Foreign trade put a damper on growth and private consumption stagnated. Despite a noticeable drop in unemployment and increased incomes, German citizens nevertheless maintained consumption at a constant level. At + 1.3%, GDP growth was higher than in the euro zone as a whole but still well below the prior-year level (+ 2.5%).
Brent Crude spot price and euro / US dollar exchange rate in 2008
Th e average annual oil price was around 34 % higher than in 2007 but prices were wildly erratic. In the fi rst half of the year, international oil prices soared. A barrel (159 litres) of Brent Crude climbed from just under US \$ 100 at the start of the year to a peak of US \$ 145. In the second half of 2008, the recessive trends caused energy demand to fall sharply. In December, the oil price dropped to around US \$ 40 per barrel, its lowest level since 2004.
In the fi rst six months of 2008, the US dollar was under immense downward pressure. Th e weak US economy and the crisis on the fi nancial markets prompted the Federal Reserve to reduce its key interest rate seven times in 2008 from 4.25 % to a range of between 0 % and 0.25 %. Since the European Central Bank (ECB) initially held its rate steady at 4 %, even raising it to 4.25 % in July, the euro's interest rate advantage over the US dollar increased, bringing it to an all-time high of US \$ 1.60. Th is trend shift ed in the second half of the year. Economic weaknesses and falling price pressure provoked the ECB to lower its key interest rate as far as 2.5 %. Th is meant the euro once again depreciated in value against the dollar, closing the year at US \$ 1.40. Measured against the pound sterling, the euro posted a 30.1 % gain.
In the euro zone, capital market returns rose in the fi rst half of the year but fell sharply thereaft er. At the end of the year, ten-year German treasury bonds were yielding just under 3 %, some 1.4 percentage points less than at the end of 2007. In the same period, the return on ten-year US treasury bonds fell by 1.8 percentage points to only 2.2 %. Although the interest rates have fallen steeply, the climate for corporate bonds has deteriorated. Th e fi nancial market crisis has unsettled investors to such an extent that risk premiums have leapt right up, even for high-quality corporate bonds.
International trade depends to a large extent on how dynamic global economic development is. Hence, although it did grow again in 2008, this growth was clearly below the prior-year levels on almost all major trade lanes. North American imports even declined.
Furthermore, the growth structure shift ed. A look at the trade fl ows between Asia Pacifi c and the United States or Europe shows that imports on these lanes are growing faster than exports. At the same time, trade fl ows within Asia – the second largest domestic market aft er Europe – are growing much faster than trade fl ows within Europe.
| % Import Export |
Asia Pacifi c | Europe | Latin America | North America |
|---|---|---|---|---|
| Asia Pacifi c | 9 | 7 | 9 | – 2 |
| Europe | 12 | 2 | 7 | – 3 |
| Latin America | 7 | 4 | 4 | – 3 |
| North America | 5 | 5 | 6 | – 2 |
Compound annual growth rate 2007 – 2008
Source: Global Trade Navigator; as at December 2008.
31
Th e following diagram shows the volumes of the most important international trade fl ows.
We operate worldwide and are represented in over 220 countries and territories, including all major economic regions. Th e following overview shows the overall market as well as the courier, express and parcel (CEP) markets relevant to us; the regions refl ect our business structure. Th e relevant parameters and our market shares are detailed in the Divisions chapter. Page 52 ff.
| Global | Europe | USA | Asia |
|---|---|---|---|
| • Cross-border mail market (2008): € 10.4 bn 1) • Air freight (2007): 20.9 m tonnes 3) • Ocean freight (2007): 29.6 m TEU 6) • Contract logistics (2007): € 206 bn 8) |
• German mail communi cation market (2008): € 6.5 bn 1) • CEP international (2007): € 15.3 bn 4) • Road transport (2007): € 163.7 bn 7) |
• Global mail (2008): € 50 bn 1) • CEP international (2007): € 7.5 bn 5) |
• CEP international (2007): € 5.9 bn 2) |
1) Company estimates. 2) Country base: AU, CN, HK, ID, IN, JP, KR, NZ, MY, PH, SG, TH, TW, VN; international shipments < 1,000 kg. Source: AT Kearny, TMS 2008. 3) Data are based solely on export freight tonnes; source: Global Insight, Global Trade Navigator. 4) Country base: A, B, BG, CH, CZ, D, DK, E, FIN, GB, GR, H, I, IRL, L, N, NL, PL, RO, S, SK, SLO; international shipments < 1,000 kg. 5) New market portrayal: these fi gures are estimates for outbound international shipments < 1,000 kg. Source: MRSC in co-operation with Colography Group 2008. 6) Twenty-foot equivalent unit. 7) Total for 14 European countries, excluding bulk and specialities transport. Source: MRSC, freight reports 2007 and 2008, Eurostat 2007. 8) Company estimates based on Datamonitor input.
Deutsche Post World Net Annual Report 2008
Economic developments and the shift in customers' behaviour have prompted us to re-examine the most important factors determining our business. Four trends that have proven to be stable and irreversible in a range of scenarios are making a strong impact on our business:
In view of our leading market position, a large number of our services are subject to sector-specifi c regulation under the German postal act. Further information on this Note 54 issue and legal risk is contained in the Notes to the consolidated fi nancial statements.
Th e economic decline has aff ected the entire logistics sector, including many of our customers. We are nonetheless convinced that our strong brands and global reach will serve us well in the diffi cult times ahead. Th e Group spent 2008 solving key strategic issues and thus laying the foundation for future growth in our core competencies.
For our subsidiary, Deutsche Postbank AG, we have found a reliable partner for the future in Deutsche Bank. We also succeeded in establishing attractive conditions for the transaction despite the diffi cult market climate. In so doing, the Group has set a new course for the future. We will be shift ing focus to our core competencies – mail, express and logistics – and gradually exiting the fi nancial sector. Deutsche Post and Postbank will nonetheless continue to share retail outlets even beyond 2012.
Another decision of far-reaching consequence involved our express business in the United States, where we have initiated restructuring activities in order to reduce the losses there and alleviate risk for our Group. We will also be concentrating on our core competencies in this market: shipments to and from the US. We are confi dent that this is the best way for us to serve customers in the US, which continues to be an impor tant market. Th is decision will also give our company room to move forward and attain profi table performance on a reliable basis. Th e restructuring will not aff ect the other DHL business units in the United States. We will continue to invest in these businesses in the future.
We take our responsibility to our customers' needs, our employees, our investors and society very seriously. A vital part of this responsibility is ensuring that our operations manage ment is geared towards profi table, sustained growth. To reach this goal, we have launched several Group-wide initiatives:
1 First choice for customers Th e better we know our customers' needs, the better we are able to respond to them. For this reason, many of our business units have surveyed customers to fi nd out how satisfi ed they are with our services. As part of our First Choice programme, we systematically evaluate the survey fi ndings, which we use to improve specifi c aspects of our service quality. Every hour, we have more than one million interactions with customers – opportunity enough to give them a good impression of our services.
Th e success of this programme proves us right: All organisational units that have implemented these initiatives have demonstrably higher levels of customer satisfaction. In 2008, this resulted in additional Group revenues. Moreover, those business units operating under the DHL brand and Global Business Services succeeded in reducing their costs.
Employees, page 76
Capital Market, page 39
Sustainability, page 77
2 Every ONE counts Th is was the motto of our second Group-wide employee survey, which aims to measure and support employee commitment. It also shows management how familiar employees are with key strategic issues and how strongly they identify with them. Th is helps us increase transparency – a central focus of our corporate and leadership culture.
We deliver the mail in Germany and are the global market leader in logistics. In the future, we intend to build on these two pillars of our business. We want to maintain our position as Die Post für Deutschland (the postal service for Germany) whilst making optimum use of the global strength of our logistics business.
Th e Deutsche Post brand stands for a company that sets global standards in quality, technology and effi ciency and has already proven itself able to very successfully meet the challenges inherent in this mature market. Th e mail business therefore represents the foundation upon which our international expansion rests. Our goal is to continue operating highly profi tably in the MAIL Division and to enhance our range of services by adding communications products.
Th e DHL brand stands for a comprehensive product portfolio and worldwide logis tics presence. Our EXPRESS, Global FORWARDING /FREIGHT and SUPPLY CHAIN / CIS divisions operate in attractive market segments, and we see no need for signifi cant portfolio adjustments. Our goal is to continue taking advantage of excellent growth oppor tunities in the logistics industry. Th ere is undoubtedly room for improving our capacity in this sector. For this reason, we plan to more closely integrate our joint capabilities to allow us to off er our customers services and solutions that are customised to fi t their needs precisely.
As part of our Roadmap to Value capital markets programme, we have introduced EBIT aft er asset charge (EAC) as our new performance metric from 1 January 2008. Th is metric is an additional guideline for managers at all levels and in all areas of activity, helping them to make decisions that focus their operating businesses on sustained value growth.
Unlike EBIT, the performance indicator so far, EAC takes into account the cost of tied-up capital. In other words, it refl ects profi t generated over and above the cost of capital. Managers' incentives have also been tied to the new indicator, which complements the previous EBIT-based bonus scheme.
Th e weighted average cost of capital (WACC) is defi ned as the weighted average net cost of interest-bearing liabilities and equity, taking into account sector-specifi c risk factors in a beta factor.
| Equity cost of capital | Debt cost of capital | ||
|---|---|---|---|
| Risk-free rate of return | 4.2 % | Risk-free rate of return | 4.2 % |
| Risk premium on equity | 3.9 % | Average risk premium on debt | 1.2 % |
| = Market risk premium 5.0 % × Beta factor 0.78 (specific risk premium for the Group) |
|||
| 8.1 % | 5.4 % | ||
| Tax effect | 1.8 % | ||
| 9.9 % | |||
| Weighting at market rates | 70 % | Weighting at market rates | 30 % |
| Group cost of capital 8.5 % |
In addition to the cost of capital, the net asset base makes up the second component of the calculation. Th is is identifi ed by including assets required for business operations and subtracting liabilities that do not incur a cost of capital. Goodwill is included in the net asset base, as value is created only if the required cost of capital is earned on the entire initial investment, which also includes goodwill.
Capital Market, page 39
Th e EAC is calculated in the "Postbank at equity" scenario, in which Postbank is treated as an investment accounted for using the equity method. In 2008, EAC stood at € – 2,115 million, primarily because EBIT was depressed by non-recurring items of € – 2,977 million.
| € m | 2007 restated |
2008 | + / – % |
|---|---|---|---|
| EBIT | 2,133 | – 567 | – 126.6 |
| Asset charge | 1,735 | 1,548 | – 10.8 |
| EBIT after asset charge (EAC) | 398 | – 2,115 | – |
EBIT after asset charge (EAC – Postbank at equity)
Compared with the previous year, the asset charge fell by €187 million because we were able to signifi cantly improve the net asset base. Th is was mainly due to two factors: real estate disposals and a sharp reduction in working capital, both of which are elements of our Roadmap to Value programme. Th e weighted average cost of capital was set at 8.5 % at the beginning of 2008 and has remained unchanged since then.
2008 was a hard year for the international stock markets. Th e US subprime crisis, a faltering US economy and rising oil prices sent prices into steep decline right from the fi rst half of the year. Th e stock markets were dominated by fears that the economic slowdown in the United States would spread to Asia and most of all to Europe. Th e DAX shed a fi ft h of its value in the fi rst half-year alone. Th e situation worsened dramatically with the insolvency of the US investment bank Lehman Brothers in September. More major banks began to struggle from then on. Governments around the world found themselves forced to put together rescue packages, especially as the crisis began to aff ect other parts of the economy. Th e stock exchanges suff ered heavily: Over the course of the year, the DAX lost 40.4 % of its value, the Dow Jones 33.8 % and the EURO STOXX 50 44.4 %.
| 2004 | 2005 | 2006 | 2007 | 2008 | + / – % | ||
|---|---|---|---|---|---|---|---|
| Year-end closing price | € | 16.90 | 20.48 | 22.84 | 23.51 | 11.91 | – 49.3 |
| High | € | 19.80 | 21.23 | 23.75 | 25.65 | 24.18 | – 5.7 |
| Low | € | 14.92 | 16.48 | 18.55 | 19.95 | 7.18 | – 64.0 |
| Number of shares | millions | 1,112.8 | 1,193.9 | 1,204.0 1) | 1,208.2 1) | 1,209.0 1) | 0.1 |
| Market capitalisation as at 31 December | € m | 18,840 | 24,425 | 27,461 | 28,388 | 14,399 | – 49.3 |
| Average trading volume per day | shares | 2,412,703 | 3,757,876 | 5,287,529 | 6,907,270 | 7,738,509 | 12.0 |
| Annual performance with dividend | % | 6.4 | 24.1 | 14.9 | 6.9 | – 45.5 | – |
| Annual performance excluding dividend | % | 3.4 | 21.2 | 11.5 | 2.9 | – 49.3 | – |
| Beta factor 2) | 0.84 | 0.75 | 0.80 | 0.68 | 0.81 | – | |
| Earnings per share 3) | € | 1.44 | 1.99 | 1.60 | 1.15 | – 1.40 | – |
| Cash fl ow per share 4) | € | 2.10 | 3.23 | 3.28 | 4.27 | 1.60 | – 62.5 |
| Price / earnings ratio 5) | 11.7 | 10.3 | 14.3 | 20.4 | – 8.5 | – | |
| Price / cash fl ow ratio 4), 6) | 8.1 | 6.4 | 7.0 | 5.5 | 7.4 | – | |
| Dividend | € m | 556 | 836 | 903 | 1,087 | 725 7) | – 33.3 |
| Payout ratio | % | 34.8 | 37.4 | 47.1 | 78.6 | – | – |
| Dividend per share | € | 0.50 | 0.70 | 0.75 | 0.90 | 0.60 7) | – 33.3 |
| Dividend yield | % | 3.0 | 3.4 | 3.3 | 3.8 | 5.0 | – |
1) Increase due to exercise of stock options, Note 39. 2) From 2006: Beta 3 years. Source: Bloomberg. 3) Based on consolidated net profi t excluding minorities, Note 22.
4) Cash fl ow from operating activities. 5) Year-end closing price / earnings per share. 6) Year-end closing price/cash fl ow per share. 7) Proposal.
| 2007 | 2008 | + / – % | |||
|---|---|---|---|---|---|
| Deutsche Post | € | 23.51 | 11.91 | − 49.3 | |
| TNT | € | 28.25 | 13.76 | − 51.3 | |
| FedEx | US \$ | 89.17 | 64.15 | − 28.1 | |
| UPS | US \$ | 70.72 | 55.16 | − 22.0 | |
| Kuehne + Nagel | CHF | 104.61 | 67.55 | − 35.4 |
1) Closing prices on last trading day.
1) Rebased on the closing price of Deutsche Post shares on 28 December 2007.
Our share price twice escaped the downtrend in the fi rst half of the year: aft er publication of the preliminary results for 2007 on 23 January and aft er publication of the results for the fi rst quarter of 2008 on 13 May. Following the announcement of the programme to realign our US express activities on 28 May, however, the share price fell continuously, as the candlestick graph shows. Indeed, our shares performed markedly worse over the rest of the year than the applicable indices and the share prices of our competitors. Deutsche Post shares closed the year at € 11.91, a 49.3 % drop in value. Th e average number of shares traded on Xetra was 7.7 million, representing a 12 % increase on the previous year.
Candlestick graph / 30-day moving average
More than half of analysts – 63 %, compared with 75 % the year before – still advised investors to buy Deutsche Post shares, 23 % to hold and 14 % to sell. Th eir average price target was down from € 26 to € 14 per share.
Our ownership structure has scarcely changed from a year ago: KfW continues to hold 30.5 %, leaving a 69.5 % free fl oat, the largest share of which (35 %) is held in the USA. In response to this trend, our Investor Relations department has had an offi ce in New York from the beginning of 2009.
Investors showed particular interest during the year under review in the situation in the US express business, the future of Postbank, the issue of minimum wages in the German postal sector and progress on the Roadmap to Value. Our investor rela tions team and management communicated intensively and successfully with inves tors and analysts at international conferences and in numerous one-on-one meetings. We took fi rst place in the transport sector in the highly regarded Pan- European Survey published by Th omson Reuters Surveys. Th e jury voted both Frank Appel best CEO and John Allan best CFO in the sector.
In November 2007, we initiated an extensive capital markets programme geared towards achieving a sustained increase in enterprise value. On the basis of organic growth, the Group aims to improve profi tability, increase cash generation and give shareholders a larger stake in the resulting benefi ts. Investors and analysts are provided with extensive infor mation so that they can reliably assess the Group's performance.
Progress on the Roadmap to Value
| Goal | Outcome |
|---|---|
| Profi tability 1 |
• Operational improvement initiatives achieve € 0.5 billion. • Additional € 1 billion cost reduction programme launched for 2009 and 2010. • Restructuring of US express activities decided and started. |
| 2 Cash generation |
• Real estate disposals amount to € 1.35 billion versus € 1 billion target. • Working capital increased. • New performance metric adopted: EBIT after asset charge. • Capital expenditure fell considerably below the prior-year level. |
| Payout to shareholders 3 |
• € 0.90 per share dividend for 2007 proposed, approved and distributed. |
| Transparency 4 |
• SERVICES segment unbundled. • Cash flow and capital expenditure disclosed by division. • Volumes disclosed for express activities. • Postbank reported under "discontinued operations". |
| Organic growth 5 |
• DHL attaining strong growth in developing regions. • Healthy growth rates on business with customers served by Global Customer Solutions. |
1) In 2005 KfW issued a convertible bond in Japan for private investors (volume: 55.6 million shares). Investors can convert this bond until January 2010.
On 1 April 2008, the Group sold a portfolio of around 1,300 properties located mainly in Germany to US investor Lone Star for € 1 billion in cash. Th e contract took economic eff ect on 1 July 2008. Th e majority of the properties will be leased back.
On 1 July 2008 the European Court of First Instance annulled a 2002 decision by the European Commission that had ordered Deutsche Post to repay € 907 million in purported state aid and interest. Th erefore, on 1 August 2008 the German government repaid the sum of € 1,067 million to Deutsche Post AG.
On 12 September 2008, Deutsche Post agreed to sell a minority shareholding in Postbank to Deutsche Bank for a total value of € 4.8 billion. Th e transaction of the fi rst tranche will be fi nalised in the fi rst quarter of 2009. Deutsche Bank and Deutsche Post adjusted the structure of the sales agreement aft er the reporting date.
Deutsche Post, as the majority shareholder of Deutsche Postbank AG, has participated in full in Postbank's capital increase. On 27 October 2008, Deutsche Post stated its commitment to subscribe for the rights issue of 54.8 million shares at the subscription price in line with its stake in Postbank of 50 % plus one share. Deutsche Post has also agreed to subscribe for all shares that are not taken up by the market at the subscription price. As a result of this measure, Deutsche Post's stake in Postbank increased to 62.35 % for the time being.
On 10 November 2008, the Group announced that it would withdraw from the domestic express business in the USA at the start of 2009. Th e international express off ering in the US will be maintained at the current level. Total costs for restructuring the US express business now amount to around € 3 billion, of which the majority were recorded in 2008.
40
Report on post-balance sheet date events, page 93
Th e current reporting format is the one that will apply to the Group in the future following the agreed sale of Postbank. Th e Pension Service has been reallocated from the FINANCIAL SERVICES Division to the MAIL Division, as they share a regulatory environ ment that is almost the same. Th e remaining segment consists only of Postbank and is thus reported under "discontinued operations". We report our other activities as "continuing operations".
With eff ect from 1 January 2008, we unbundled the SERVICES Division, allocated the costs of Global Business Services to the operating units and gave the MAIL Division responsibility for the retail outlets. We now report a more narrowly defi ned unit, Corporate Center / Other. In addition, we split up the LOGISTICS Division into the new Global FORWARDING / FREIGHT Division and the new SUPPLY CHAIN / CIS Division. Th e prior-year amounts have been restated accordingly. Details can be found in the Segment reporting disclosures.
In the reporting year, the main changes to our portfolio were as follows:
Consolidated revenue from continuing operations increased by 0.8 % to € 54,474 million in fi nancial year 2008 (previous year: € 54,043 million). However, this fi gure was reduced by negative currency eff ects of € 2,168 million. As a globally operating logistics group, we generated, with 69.2 %, the majority of our revenue outside of Germany, an increase of 0.1% over the previous year.
Consolidated revenue for continuing operations
| € m | ||
|---|---|---|
| 37,709 | 16,765 | 54,474 |
| 2008 | ||
| 37,365 | 16,678 | 54,043 |
| 2007 | ||
| Abroad Germany |
Note 10
Note 3
Non-recurring items impacted profi t or loss from continuing operations in both the reporting year and the prior year. In the year under review, the repayment awarded in the state aid proceedings in the amount of € 572 million had a positive impact on earnings. However, the announced withdrawal from the domestic US express business has already reduced earnings by € 2,117 million. An impairment test led to a loss totalling € 610 million on the goodwill of Supply Chain / CIS. In addition, we discontinued use of the Exel brand, which was written off in full in the amount of € 382 million. Non-recurring expenses of € 440 million were also incurred for restructuring activities in other divisions. In 2007, the sale of Vfw AG generated non-recurring income of € 59 million. Earnings for 2007 were reduced by € 594 million due to the impairment loss on the assets of the express business in the Americas region.
Other operating income increased from € 2,343 million to € 2,736 million, primarily due to the repayment received in the state aid proceedings.
Th e drastic rise in oil prices in the fi rst half of the year made transport and aircraft fuel more expensive. Th is was a signifi cant factor in the increase in our materials expense from € 30,703 to € 31,979.
Staff costs increased by 4.8 % to € 17,990 million, due largely to restructuring activities.
Depreciation, amortisation and impairment losses increased by € 466 million to € 2,662 million, up from € 2,196 million in the prior year. Th e year under review was impacted above all by the write-down on goodwill and the Exel brand. In 2007, negative eff ects were mainly due to the impairment losses on non-current assets of the express business in the Americas region.
Th e increase in other operating expenses of € 961 million to € 5,146 million was primarily the result of the aforementioned restructuring activities.
Profi t or loss from operating activities (EBIT) from continuing operations fell by € 2,700 million from the previous year's fi gure of € 2,133 million to € – 567 million. In the reporting period, EBIT from continuing operations contained income of € 572 million from the state aid proceedings, restructuring costs of € 2,557 million and impairment losses of € 992 million. Th e prior-year fi gure included non-recurring income of € 59 million from the sale of Vfw AG and an impairment loss of € 594 million on the express business in the Americas region. Adjusted for these items, EBIT fell by 9.7 % to € 2,410 million.
Net fi nance costs improved by € 446 million to € 499 million (previous year: € 945 million). Th is was due in particular to the interest component of the repayment we received from the state aid proceedings.
Profi t or loss before income taxes from continuing operations declined by 189.7 % to € – 1,066 million. However, income tax increased from € 173 million to € 200 million. Profi t or loss from continuing operations thus amounted to € – 1,266 million, a decline of 224.7 % on the previous year.
Note 12
Note 16
Consolidated EBIT for continuing operations
Discontinued operations generated a net loss of € 713 million, down 183.1 % on the prior-year fi gure of a net profi t of € 858 million. Adjusted for tax income of € 150 million, net fi nance costs of € 73 million and income from the reversal of negative goodwill arising from the increase in our share in Postbank in the amount of € 81 million, EBIT from discontinued operations came to € – 871 million. Th e decline is largely the result of one-time factors arising from the intensifying international fi nancial market crisis, as described in the Notes.
Combining profi t or loss from continuing and discontinued operations results in a consolidated net loss of € 1,979 million, or € 3,852 million less than in 2007. Of this fi gure, € – 1,688 million is attributable to Deutsche Post shareholders – a decrease of € 3,071 million – whilst minority interests fell from € 490 million to € – 291 million. Th is signifi cant decline was primarily the result of Deutsche Post's share in Postbank losses. Basic and diluted earnings per share fell from € 1.15 to € – 1.40. Earnings per share from continuing operations fell from € 0.79 in the prior year to € – 1.10, and earnings per share from discontinued operations dropped from € 0.36 to € – 0.30.
A proposal will be made for the payment of a dividend per share of € 0.60 (previous year: € 0.90) at the Annual General Meeting on 21 April 2009. Th e total dividend will amount to € 725 million. Based on the year-end closing price of Deutsche Post shares, the net dividend yield is 5.0 %. Th e dividend will be distributed on 22 April 2009 and is tax-free for shareholders resident in Germany.
Th e Group's fi nancial management activities include cash and liquidity management; interest rate, currency and commodity price risk management; overseeing the Group's fi nancing; issuing guarantees and letters of support and liaising with the rating agencies. Since the requirements and processes of the Deutsche Postbank Group diff er fundamentally from those of the remainder of the Group, the remarks below refer exclusively to an analysis in which Postbank is presented on an equity-accounted basis; in other words, cash fl ows are shown without the Deutsche Postbank Group.
First and foremost, we seek to control risk and to manage processes centrally. Responsibility rests with Corporate Finance, which is supported by three Regional Treasury Centres in Bonn (Germany), Fort Lauderdale (USA) and Singapore. Th ese centres act as interfaces between headquarters and the operating companies, advise the companies on all fi nancial management issues, and ensure compliance with the Groupwide guidelines. Th ese guidelines and processes comply with the Gesetz zur Kontrolle und Transparenz im Unternehmensbereich (KonTraG – German law on control and transparency in business) of 27 April 1998.
Note 21
1) Proposal.
Our principal goal is to minimise fi nancial risks and the cost of capital, whilst safeguarding the Group's lasting fi nancial stability and fl exibility. In order to maintain its unrestricted access to the capital markets, the Group continues to seek a credit rating appropriate to the sector. We therefore monitor the development of our operating cash fl ows against adjusted debt particularly closely. Adjusted debt refers to the Group's net debt, allowing for pension obligations that are not directly capital-backed and liabilities under operating leases.
Cash and liquidity management is a central activity overseen by the Corporate Treasury on behalf of our subsidiaries, whose operations span the globe. More than 80 % of the Group's external revenue is consolidated in cash pools and used to balance internal liquidity needs. In countries where this practice is ruled out for legal reasons, internal and external borrowing and investment are arranged centrally by Corporate Treasury. In this context, we observe a balanced banking policy in order to avoid depending excessively on individual banks. Our subsidiaries' intragroup revenue is also pooled and managed by the in-house bank with a view to avoiding external bank charges and margins (inter-company clearing). Payment transactions are made in accord ance with uniform guidelines as well as by way of standardised processes and IT systems.
Th e Group's unsecured committed credit lines total around € 3.1 billion, of which € 449 million had been used as at 31 December 2008. Our banking policy seeks to spread the volume of transactions widely and to foster long-term business relationships with fi nancial institutions. Alongside the customary equal treatment clauses and termination rights, the relevant loan agreements do not contain any further undertakings concerning the Group's fi nancial indicators. Average drawings on credit lines came to only around 17 % in 2008 (previous year: 4.4 %).
Th e Group manages fi nancial market risk by making use of both primary and derivative fi nancial instruments. Interest rate risks are managed exclusively via interest rate swaps. Currency risks are hedged using forward transactions, cross-currency swaps and options. However, we pass on most of the risk arising from commodity fl uctuations to our customers through operating measures. Th e parameters, responsibilities and controls governing the use of derivatives are established in internal guidelines.
Th e Group covers its fi nancing requirements by maintaining a balanced ratio of equity to liabilities. Th is ensures our fi nancial stability whilst providing adequate fl exibility. Our most important source of funds is net cash from operating activities. We cover our borrowing requirements via a number of independent fi nancing sources, including confi rmed bilateral credit lines, bonds and structured fi nancing trans actions, and operating leases. Most of the borrowings are taken out centrally in order to leverage economies of scale and specialisation benefi ts and to minimise the cost of capital.
The Group's primary currency in which debt is denominated is the euro. A portion of the euro debt, however, is translated into foreign currencies by way of derivative fi nancial instruments in order to cover our operating companies' liquidity requirements. When such transactions are taken into account, the portion of the Group's net debt denominated in euros was 55 % (previous year: 51 %), and the US dollar share was 40 % (previous year: 18 %). Th e larger share in US dollars is a result of the increased fi nan cial requirements of our American subsidiaries.
Deutsche Post AG provides collateral as necessary by issuing letters of support or guarantees for the loan agreements, leases and supplier contracts entered into by Group companies. Th is practice allows better conditions to be negotiated locally. Such collateral is provided and monitored centrally.
Credit ratings represent an independent and current assessment of a company's credit standing. Th e ratings are based on a quantitative analysis and measurement of fi nancial reports and the underlying planning data. Qualitative factors, such as industry- specifi c features and the company's market position and range of products and services, are also taken into account. Th e creditworthiness of our Group is reviewed on an ongoing basis by international rating agencies Standard & Poor's and Moody's Investors Service. We believe that it is suffi cient to receive ratings from two independent ratings agencies. We thus decided, for reasons of economy, to terminate the agreement with the third agency (Fitch Ratings) as at 31 December 2008.
| Moody's Investors Service | Standard & Poor's | |
|---|---|---|
| Long-term | A3 | BBB + |
| Outlook | Negative | Negative |
| Short-term | P – 2 | A – 2 |
| Date of most recent review | 25 November 2008 | 11 November 2008 |
Standard & Poor's has issued a long-term credit rating of BBB+ together with a negative outlook. Th is places us at the upper end of category BBB, which is the ranking for companies whose capacity to meet their fi nancial commitments is considered adequate. Th e outlook is an assessment of the direction the rating is likely to take in the medium term. Our short-term credit rating according to Standard & Poor's is a solid A–2.
Moody's ranks our long-term creditworthiness as A3, which is in the lower range of category A. Th e current outlook is negative. Th e agency gives us the second highest possible short-term credit rating, namely P–2.
Detailed analyses by the rating agencies and full information on the rating categories are contained on our website.
investors.dpwn.com
45
As of the balance sheet date, the Group (excluding Postbank) had cash and cash equivalents in the amount of € 1,350 million (previous year: € 1,339 million) at its disposal. A large portion of this is accounted for by subsidiaries in countries where foreign exchange transactions are unrestricted. In 2008, the main sources of non-recurring cash infl ows related to the sale of real estate to US investor Lone Star (€ 942 million) and the repayment received in the state aid proceedings (€ 1,067 million). Th ese cash infl ows were off set by non-recurring cash outfl ows of € 1 billion for our participation in the capital increase at Deutsche Postbank AG.
Th e fi nancial liabilities reported in our balance sheet break down as follows:
Financial liabilities (Postbank at equity)
| € m | |
|---|---|
| 2008 | |
| Bonds | 2,019 |
| Due to banks | 1,080 |
| Finance lease liabilities | 531 |
| Liabilities to Group companies | 184 |
| Other fi nancial liabilities | 283 |
| 4,097 |
Th e largest single items under fi nancial liabilities are the two listed bonds of Deutsche Post Finance B. V. Also of signifi cance are the two municipal bonds taken out to fund investments at the airports in Wilmington, Delaware, and Cincinnati, Ohio, in the US, project fi nancing received from the European Investment Bank for mail sorting centres in Germany and an IT centre in the Czech Republic. Further information on the reported financial liabilities is contained in the Notes.
In addition to borrowings, operating leases are an important source of funding for the Group. We use operating leases to fi nance real estate as well as aircraft , vehicle fl eets and IT equipment, as shown in the following table:
| € m | 2008 |
|---|---|
| Land and buildings | 6,313 |
| Technical equipment and machinery | 68 |
| Other equipment, offi ce and operating equipment | 560 |
| Aircraft | 194 |
| 7,135 |
Th e main driver for the increase in operating lease obligations in 2008 was the sale and leaseback agreements entered into for portions of the real estate portfolio sold to Lone Star. Th e sale was part of our Roadmap to Value capital markets programme aimed at cash generation, amongst other things.
One major funding initiative in 2008 was the commercial paper programme we launched in January, which provided us with short-term fi nancing and supple mented our bilateral credit lines. Th e average drawdown on the facility was around € 160 million in the year under review.
47
Th e Group's capital expenditure (capex) amounted to € 1,727 million at the end of December 2008 (previous year: € 2,070 million). Of this fi gure, € 1,419 million was attributable to investments in property, plant and equipment and € 308 million to intan gible assets excluding goodwill. We fell signifi cantly below the prior-year level with a decline of 16.6 %. Th e decrease was most evident in the fourth quarter (– 39.8 %). Invest ments in property, plant and equipment related mainly to advanced payments and assets under development (€ 445 million), transport equipment (€ 255 million), technical equipment and machinery (€ 231 million), IT equipment (€ 148 million) and other operating and offi ce equipment (€ 107 million).
Our regional investments focused mainly on Europe, the Americas and Asia. In Europe, our investment activities were centred in Germany, the UK and Belgium. In Asia, the focus was on India, Singapore and South Korea.
| € m | ||
|---|---|---|
| 1,419 | 308 1,727 | |
| 2008 | ||
| 1,792 | 278 2,070 | |
| 2007 | ||
| Property, plant and equipment Intangible assets (not including goodwill) |
| € m | MAIL EXPRESS |
FORWARDING/ FREIGHT |
SUPPLY CHAIN/ CIS |
Corporate Center / Other |
Continuing operations |
Discontinued operations |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 1) | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | |
| Capex | 325 | 282 | 721 | 727 | 69 | 94 | 496 | 390 | 459 | 234 | 2,070 | 1,727 | 140 | 71 |
| Depreciation on assets | 447 | 346 | 1,034 | 542 | 98 | 105 | 363 | 1,345 | 254 | 324 | 2,196 | 2,662 | 161 | 179 |
| Capex vs. depreciation ratio | 0.73 | 0.82 | 0.70 | 1.34 | 0.70 | 0.90 | 1.37 | 0.29 | 1.81 | 0.72 | 0.94 | 0.65 | 0.87 | 0.40 |
1) Depreciation including write-down on goodwill and the Exel brand.
| € m | EXPRESS | FORWARDING / FREIGHT |
SUPPLY CHAIN/ CIS |
Corporate Center / | Other | Continuing operations |
Discontinued operations |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 1) | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | |
| Capex | 129 | 113 | 236 | 195 | 22 | 29 | 168 | 104 | 301 | 74 | 856 | 515 | 76 | 11 |
| Depreciation on assets | 124 | 93 | 705 | 208 | 25 | 30 | 88 | 1,101 | 67 | 130 | 1,009 | 1,562 | 46 | 80 |
| Capex vs. depreciation ratio | 1.04 | 1.22 | 0.33 | 0.94 | 0.88 | 0.97 | 1.91 | 0.09 | 4.49 | 0.57 | 0.85 | 0.33 | 1.65 | 0.14 |
1) Depreciation including write-down on goodwill and the Exel brand.
Capital expenditure in the MAIL Division decreased from € 325 million to € 282 million. Th ese investments related in particular to internally generated intangible assets (€ 106 million), other operating and offi ce equipment (€ 61 million), IT equipment (€ 40 million) and technical equipment and machinery (€ 39 million).
In the domestic mail business, most of our purchases were of machinery and equipment for processing standard and compact letters and fl at mail more effi ciently. We also replaced internally generated soft ware and licences as well as transport equipment.
In the domestic parcel business, technical equipment and IT were upgraded and the number of Packstations was increased by 500 to around 1,400 Pack stations. Th is allows customers to post and collect parcels around the clock. We have also established a new type of automatic station, Post 24 / 7, at 55 locations in Berlin and Bonn. Post 24 / 7 stations off er a wide range of features such as Packstations, Paketboxes, mail boxes, stamp vending machines and, in some cases, cash dispensers and bank account statement printers.
Th e retail outlet network of Deutsche Post has been reorganised. In the retail outlets themselves, the IT systems have been upgraded and expanded.
In the international mail business we are continuing to work on a uniform soft ware platform.
In the EXPRESS Division, capital expenditure increased slightly from € 721 million to € 727 million and was mainly allocated to advanced payments and property, plant and equipment under development (€ 268 million), technical equipment and machinery (€ 103 million), aircraft (€ 94 million), transport equipment (€ 55 million), leasehold improvements (€ 48 million), IT equipment (€ 45 million) and other operating and offi ce equipment (€ 21 million). Investments in intangible assets related mainly to advanced payments and intangible assets under development (€ 31 million) as well as purchased soft ware (€ 30 million). Th e expenditures again focused on our worldwide network of aircraft , and on establishing and expanding hubs in Europe and Asia.
In Europe, the new hub was completed at Leipzig / Halle Airport and the vehicle fl eet was modernised, especially in the Benelux countries.
In the Asia Pacifi c region, we expanded our hubs in China, South Korea and Singapore.
In the EEMEA region, investments centred on the growth markets of Russia and the Middle East, whilst in the International Americas region the focus was on Canada and Mexico.
In the Global FORWARDING / FREIGHT Division, capital expenditure totalled € 94 million (previous year: € 69 million), of which € 54 million related to the Global Forwarding Business Unit. A total of € 12 million of this fi gure was allocated to IT equipment, € 8 million to leasehold improvements, € 7 million to advanced payments and property, plant and equipment under development, and € 7 million to other operating and offi ce equipment. Th e investments focused on building facilities and the IT infrastructure.
Funds of € 40 million were invested in the Freight Business Unit, particularly for the replacement of vehicles in the UK, Benelux, Italy and Germany and the expansion of terminals.
In the SUPPLY CHAIN / CIS Division, capital expenditure decreased by 21.4 % to € 390 million, of which € 340 million was attributable to the Supply Chain Business Unit. We used the available funds to invest in new and more effi cient technologies and to expand warehousing facilities.
In the United Kingdom, for instance, substantial funds were invested in transport equipment, warehouses and the associated technology, as well as in providing solutions for new and existing customers.
In continental Europe, we primarily expanded warehousing capacity to support new business.
In the Americas region, funds were allocated mainly to new business and building maintenance.
Th e Corporate Information Solutions Business Unit purchased modern printing technology for € 37 million.
Cross-divisional investments fell from € 459 million to € 234 million and concentrated mainly on vehicle purchases and IT. Th e prior-year fi gure includes the reversal of a purchase agreement concluded with Viterra Logistik Immobilien GmbH & Co. KG. Th e relevant properties were brought into Deutsche Post Immo bilienentwicklung Grundstücksgesellschaft mbH & Co. Logistikzentren KG in December 2007. Deutsche Post Fleet GmbH invested € 160 million in new and replacement vehicles. A total of € 41 million was allocated to IT, particularly for improving the IT infrastructure , security systems and soft ware licences.
Net cash from operating activities (Postbank at equity) increased signifi cantly by € 554 million year-on-year to € 3,362 million. Net cash before changes in working capital was slightly below the prior-year level at € 120 million. Th e decrease in EBIT was negatively aff ected in particular by increased non-cash additions to provisions. EBIT was also reduced, amongst other things, by non-cash write-downs on goodwill and intangible assets, which were added back in the depreciation / amortisation of non-current assets item. EBIT was strengthened amongst other things by the € 572 million repayment from the state aid proceedings which impacted cash fl ow. Th e reduction in working capital was a key factor in the increase in net cash from operating activities. In particular, the reduction in receivables and other assets contributed to the improve ment.
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| Cash and cash equivalents as at 31 December | 1,339 | 1,350 |
| Change in cash and cash equivalents | − 422 | 11 |
| Net cash from operating activities | 2,808 | 3,362 |
| Net cash used in investing activities | 1,310 | 914 |
| Net cash used in fi nancing activities | 1,901 | 2,386 |
At € 914 million, net cash used in investing activities was € 396 million less than in the previous year. Cash was used above all for the capital increase at Postbank, to acquire Flying Cargo Ltd. and for the joint venture with New Zealand Post. We also increased our interests in Exel-Sinotrans Freight Forwarding and Williams Lea. Proceeds from the disposal of non-current assets stemmed primarily from real estate disposals. In addition, interest on the repayment awarded in the state aid proceedings led to a cash infl ow of € 495 million.
| Free cash fl ow | ||||||||
|---|---|---|---|---|---|---|---|---|
| € m | ||||||||
| 2,448 | ||||||||
| 2008 | ||||||||
| 1,498 | ||||||||
| 2007 |
Th e increase in net cash from operating activities and the decrease in net cash used in investing activities resulted in a signifi cant improvement in free cash fl ow, which increased by € 950 million to € 2,448 million (previous year: € 1,498 million).
Net cash used in fi nancing activities amounted to € 2,386 million (previous year: € 1,901 million). At € 1,087 million, the higher dividend paid to our shareholders for fi nan cial year 2007 accounted for the largest share. In addition, the repayment of fi nan cial liabilities led to a cash outfl ow of € 658 million.
Due to the changes described in the cash fl ows from the individual activities, cash and cash equivalents increased slightly compared with the previous year, from € 1,339 million to € 1,350 million.
Th e structure of the consolidated balance sheet changed fundamentally as at 31 December 2008 due to the announced sale of Postbank. All assets and liabilities asso ciated with this segment have been reclassifi ed as assets held for sale and liabilities asso ciated with assets held for sale. In contrast, this did not aff ect the balance sheet as at 31 December 2007.
Total assets increased by € 27,544 million to € 262,964 million, particularly as a result of Postbank's successful sales activities, which are refl ected in the aforementioned items.
Non-current assets declined from € 25,764 million to € 20,517 million, primarily because Postbank's non-current assets were reclassifi ed and intangible assets were reduced by impairment losses in the SUPPLY CHAIN / CIS Division. Furthermore, the sale of real estate to Lone Star, which was completed as at 1 July 2008, reduced property, plant and equipment by € 842 million. Th is is also the main reason for the decrease in investment property from € 187 million to € 32 million. At € 1,033 million, deferred tax assets were at the prior-year level (€ 1,040 million).
Th e 15.6 % rise in current assets to € 242,447 million is likewise due primarily to the reclassifi cation of Postbank's assets. Receivables and other assets decreased by € 1,091 million to € 8,715 million, mainly because we improved receivables management. Cash and cash equivalents declined by € 3,333 million, principally due to a fall in Postbank's cash reserve.
Equity attributable to Deutsche Post AG shareholders decreased from € 11,035 million to € 7,826 million. Th e capital base declined due to the dividend payment for fi nancial year 2007 (€ 1,087 million), the adjusted revaluation reserve (€ 41 million), currency translation losses (€ 500 million) and the consolidated net loss (€ 1,688 million).
51
Th e € 32,945 million rise in current and non-current liabilities to € 242,276 million is primarily attributable to Postbank, which further expanded its operations. Th is served to increase liabilities associated with assets held for sale. Moreover, this item contains the reclassifi ed provisions from discontinued operations. Current and non-current provisions declined accordingly, whereas in particular the restructuring measures led to an increase. All in all, this item decreased from € 12,276 million to € 10,836 million. Financial liabilities were reduced considerably by € 6,084 million to € 4,097 million. € 5,474 million of this reduction relates to Postbank's reclassifi ed subordinated debt. In addition, loan obligations were repaid and the fi nancial liabilities to Williams Lea minority shareholders were reduced. Other current and non- current liabilities declined from € 5,462 million to € 5,112 million.
When calculating the "Postbank at equity" balance sheet indicators, Postbank is treated as an investment accounted for using the equity method.
Net debt comprises fi nancial liabilities less cash and cash equivalents, current fi nan cial instruments, long-term deposits and fi nancial liabilities to minority shareholders of Williams Lea. Since fi nancial liabilities decreased whilst cash and cash equivalents were nearly unchanged, net debt declined from € 2,858 million as at 31 December 2007 to € 2,412 million.
Net gearing – the ratio of net debt to the sum of equity and net debt combined – increased from 20.4 % to 23.3 %.
| Dynamic gearing ratio | years | 1.0 | 0.7 |
|---|---|---|---|
| Net interest cover | 7.1 | 4.2 | |
| Net gearing | % | 20.4 | 23.3 |
| Net debt | € m | 2,858 | 2,412 |
| Ratio of equity to non-current assets | % | 46.9 | 36.6 |
| Equity ratio | % | 31.4 | 23.8 |
| 2007 | 2008 |
Net interest cover is calculated by dividing EBIT by net interest paid / received and shows the ratio of EBIT to net interest obligations. It declined from 7.1 to 4.2.
Th e dynamic gearing ratio is an indicator of internal fi nancing capacity and expresses the average number of years required to pay outstanding debt using the whole of the cash fl ow generated in the year under review. As net debt has dropped and operating cash fl ow has increased, the dynamic gearing ratio has further improved from an average of 1.0 to 0.7 years.
Non-current financial liabilities
EBIT and revenue by operating division
| € m | 2007 restated |
2008 | + / – % | Q4 2007 | Q4 2008 | + / – % |
|---|---|---|---|---|---|---|
| Profi t from operating activities (EBIT) | 1,976 | 2,253 | 14.0 | 706 | 491 | – 30.5 |
| Revenue | 14,569 | 14,393 | – 1.2 | 4,075 | 3,895 | – 4.4 |
| of which Mail Communication | 6,096 | 6,031 | – 1.1 | 1,620 | 1,600 | – 1.2 |
| Dialogue Marketing | 2,914 | 2,856 | – 2.0 | 824 | 781 | – 5.2 |
| Press Services | 822 | 826 | 0.5 | 216 | 214 | – 0.9 |
| Parcel Germany | 2,558 | 2,583 | 1.0 | 748 | 763 | 2.0 |
| Global Mail | 2,102 | 1,997 | – 5.0 | 653 | 510 | – 21.9 |
| Retail Outlets | 836 | 815 | – 2.5 | 213 | 229 | 7.5 |
| Pension Service | 85 | 89 | 4.7 | 19 | 21 | 10.5 |
| Consolidation / Other | – 844 | – 804 | 4.7 | – 218 | – 223 | – 2.3 |
| Return on sales 1) | 13.6 | 15.7 | – | 17.3 | 12.6 | – |
| EXPRESS | ||||||
| Loss from operating activities (EBIT) | – 272 | – 2,144 | – | – 437 | – 2,194 | – |
| Revenue | 13,874 | 13,637 | – 1.7 | 3,757 | 3,282 | – 12.6 |
| of which Europe | 6,667 | 6,631 | – 0.5 | 1,902 | 1,633 | – 14.1 |
| Americas | 4,165 | 3,559 | – 14.5 | 1,036 | 712 | – 31.3 |
| Asia Pacifi c | 2,576 | 2,746 | 6.6 | 681 | 723 | 6.2 |
| EEMEA (Eastern Europe, Middle East, Africa) | 1,021 | 1,176 | 15.2 | 276 | 310 | 12.3 |
| Consolidation / Other | – 555 | – 475 | 14.4 | – 138 | – 96 | 30.4 |
| Return on sales 1) | – | – | – | – | – | – |
| GLOBAL FORWARDING / FREIGHT 2) | ||||||
| Profi t from operating activities (EBIT) | 409 | 389 | – 4.9 | 156 | 79 | – 49.4 |
| Revenue | 12,959 | 14,179 | 9.4 | 3,440 | 3,611 | 5.0 |
| of which Global Forwarding | 9,410 | 10,585 | 12.5 | 2,522 | 2,744 | 8.8 |
| Freight | 3,646 | 3,710 | 1.8 | 947 | 899 | – 5.1 |
| Consolidation/Other | – 97 | – 116 | – 19.6 | – 29 | – 32 | – 10.3 |
| Return on sales 1) | 3.2 | 2.7 | – | 4.5 | 2.2 | – |
| SUPPLY CHAIN / CIS 2) | ||||||
| Profi t / loss from operating activities (EBIT) | 577 | – 675 | – | 190 | – 1,012 | – |
| Revenue | 14,317 | 13,718 | – 4.2 | 3,703 | 3,535 | – 4.5 |
| of which Supply Chain | 13,099 | 12,469 | – 4.8 | 3,382 | 3,209 | – 5.1 |
| Corporate Information Solutions | 1,214 | 1,243 | 2.4 | 312 | 332 | 6.4 |
| Consolidation / Other | 4 | 6 | 50.0 | 4 | – 2 | – |
| Return on sales 1) | 4.0 | – | – | 5.1 | – | – |
1) EBIT / revenue.
2) The LOGISTICS Division was split into the new GLOBAL FORWARDING / FREIGHT and SUPPLY CHAIN / CORPORATE INFORMATION SOLUTIONS divisions.
The prior-year fi gures were restated accordingly.
Every single working day, we deliver around 70 million letters. Th is makes us Europe's largest postal enterprise. We off er all types of products and services to both private and business customers, ranging from standard letters to merchandise and including special services such as cash on delivery (COD) and registered mail. Letters can be franked using traditional stamps, by purchasing postage online and now even via text message. Stamps remain popular collectors' items and more than one million stamp collectors have our new stamp designs delivered to them postage-paid every month. We also sell German collectors' coins under a contract with the German government. Alongside our standard products, we develop tailor-made mail solutions for our business customers. We digitalise their incoming mail, for example, and deliver it to the internal recipients electronically.
Traditionally, our mail business has focused on Germany. Since being fully liberalised at the start of 2008, however, the German letter mail market has faced heightened competition. Moreover, the domestic market for mail communication is shrinking as conventional mail is being replaced increasingly by electronic communication media. In the reporting year, the market decreased by 2 % to around € 6.5 billion (previous year: € 6.6 billion). We succeeded in increasing our market share to 87.7 % (previous year: 87.2 %) thanks to our high quality and fl exible prices.
Companies wishing to target specifi c customers make use of traditional dialogue marketing tools. We provide technical solutions that not only allow customers to plan and create advertising mail easily but also to calculate and optimise postage. One key factor in the success of direct advertising is the availability of address lists that have been checked, purged and updated. We off er online tools and services that can be used to ensure the quality of addresses. In addition, we develop solutions for multi-channel customer dialogue. Our services range from consulting and concept development all the way to media planning and purchasing as well as the production and dispatch of advertising material. We thus combine dialogue marketing with conventional advertising. We also conduct market research to measure the impact of such advertising.
Dialogue marketing is the part of the advertising market that is relevant to us. Th e market for advertising mailings and telephone and e-mail marketing is currently being shaped by the trend amongst companies in Germany to limit advertising expenditures. In 2008, this market had a volume of € 20.4 billion, a decrease of 2.1 % year on year. Th e tense economic situation has put pressure on traditional mail-order companies, causing them to lower their advertising budgets. We have maintained our share of 13.4 % in this highly fragmented market.
• Distribution of newspapers and magazines • Special services
Market volume: 9.3 billion items
87.7 % Deutsche Post Competition 12.3 %
Source: company estimates.
Source: company estimates.
Market volume: 17.8 billion items
11.4 % Deutsche Post Competition 88.6 %
Source: company estimates.
Market volume: approx. € 6.5 billion
38 % DHL Competition 62 %
Source: company estimates.
Market volume: € 10.4 billion 1)
| A 14 % DHL | ||
|---|---|---|
| B 14 % USPS | ||
| C | 9 % Royal Mail | |
| D | 7 % La Poste | |
| E | 6 % SPI | |
| F | 5 % TNT/ Spring | |
| G 45 % Other | ||
Source: company estimates, UPU statistics 2008, annual reports from USPS, Royal Mail, La Poste, SPI and TNT, other calculations and estimates.
We deliver newspapers and magazines nationwide on the day specifi ed by the customer. Our Press Services Business Unit off ers two products. Publishers traditionally mail their subscribed publications as "preferred periodicals", whereas companies that distribute customer or employee magazines via Deutsche Post usually send these items as "standard periodicals". As an additional service, we off er electronic address updating as well as complaint and quality management.
According to studies, the market for press services had a total volume of 17.8 billion items in 2008 or 0.6 % fewer items than in the previous year. Our competitors in this market are the companies that deliver regional daily newspapers. Although both the number of pages and the weight of newspapers and magazines have decreased because of diminishing advertising content, we nonetheless succeeded in achieving higher average prices for these items on the market. We maintained our market share of 11.4 %.
We deliver around 2.5 million parcels within Germany every day. An important part of this process is making customer access to our services as simple as possible. Our private customers are able to send and collect parcels and small packets around the clock from practically everywhere thanks to our around 14,000 retail outlets, 1,400 Pack stations and 1,000 Paketboxes. Th ey can even take care of the related steps online, such as purchasing packaging materials, buying postage and printing labels for parcels, placing parcel collection orders and tracking items. For business customers, we develop customised solutions for their particular sector. We support mail-order companies, for instance, by transporting their merchandise to consumers and provide solu tions for facilitating returns. Business customers can register online and start sending and tracking parcels immediately.
In 2008, the market volume of the parcel business totalled around € 6.5 billion, which represents a year-on-year rise of 3 %. Several very capable providers compete for shares in this highly contested sector, including DPD, Hermes, UPS and GLS. Business is benefi ting from the rising popularity of e-commerce, whilst sales in the traditional mail-order segment are declining. In the year under review, we stabilised our share at around 38 %.
We deliver mail across borders, serve the domestic markets of countries outside of Germany and also provide special services beyond mail transport. We serve business customers in key domestic mail markets, including the USA, the Netherlands, the UK, Spain and France.
In 2008, the global market for cross-border mail had a volume of around € 10 billion – nearly the same as in the previous year. Business in 2008 was shaped by the economic crisis in the United States and a tough competitive environment. We lost market share due to our decision to focus strictly on earnings and therefore to cut ties with unprofi table customers. We expect a total market share of a good 13 % for 2008.
Our goal is to continue operating highly profi tably in order to compensate for the threat of a diminishing market share. To accomplish this, we plan to systematically expand our range of services, secure quality leadership, reinforce our position abroad and, where possible, make our transport and delivery network prices and costs more fl exible.
Deutsche Post has immensely expanded its services in recent years. We now provide our customers with services at every link in the mail value chain and off er solutions for electronic communication. We have pulled ahead of the competition by speeding up the development of innovative products. One of the key areas we are focusing on is making our services more user-friendly and easily accessible. Private customers can now design their own envelopes and stamps online and pay for the postage by text message.
We operate the largest network of fi xed-location retail outlets in Germany, consisting of some 14,000 outlets. Th is is around one-sixth more locations than required by legislators. We are also expanding our successful co-operation with retailers. Th is allows us to off er our customers more convenient access to our services along with longer opening hours. In addition, by 2010 we will have expanded our network of around 1,400 Packstations to a total of 2,400 machines.
We survey our customers regularly to determine their level of satisfaction with the scope and quality of our services. Current studies conducted by MRSC and Deutsches Institut für Servicequalität (the German institute for service quality) confi rm that for the second year in succession customers in all segments – private customers, small and large businesses as well as key accounts – are even more satisfi ed than the year before.
In most EU countries, mail monopolies will end in 2011, with some not ending until 2013. Th e policy agreed on by the European Council is intended to prevent member states from using universal service obligations to create market entry barriers for competitors. We will be following the developments in mail markets abroad very closely and reviewing any market entry opportunities.
Th e Bundesnetzagentur (German federal network agency) continues to regulate our mail prices. Although we will keep postage prices stable within Germany, we will be simplifying price structures for mail to other countries. Modelled on our domestic portfolio, in the future we plan to off er an international fl at-mail product of up to 500 g.
In recent years we have made our transport network costs more fl exible in order to respond rapidly to volume changes. For example, we can decrease the number of night-time mail cargo fl ights and reduce outsourced operations such as transport by lorry at any time. State-of-the-art IT systems enable us to more accurately predict new orders and to optimise capacity utilisation to refl ect traffi c volumes. We have also further increased the fl exibility of our staff costs over the past two years.
Page 81
Since the start of the financial year 2008, we have been reporting on the Deutsche Post retail outlets as part of the MAIL Division. Th e prior-year fi gures have been restated in view of structural changes in the way costs are allocated in connection with the unbundling of the SERVICES Division. Th e Corporate Information Solutions Business Unit is now reported on as part of the SUPPLY CHAIN / CIS Division. Th e Pension Service has been transferred from the FINANCIAL SERVICES Division to the mail business as they share a regulatory environment that is almost the same.
In the year under review, revenue amounted to € 14,393 million – only slightly under the previous year's high fi gure of € 14,569 million. In a German mail market that is now fully liberalised, we have regained shares from competitors and in the international mail business we have taken a consistent profi t-based approach to our business that has included cutting ties with unprofi table customers. As in the past, currency eff ects were minimal in the reporting period, only pushing revenue down by € 66 million.
Th e German letter mail market has been fully liberalised since the start of 2008. In the Mail Communication Business Unit, revenue declined year-on-year from € 6,096 million to € 6,031 million. Th e market is shrinking steadily as a result of increasing use of electronic means of communication. Although competition is becoming more intense, we have secured market shares with competitive products and services and regained lost customers. In a year-on-year comparison, sales volumes increased slightly due to the fact that the second half had 1.7 additional working days.
In the regulated mail sector, we kept prices stable although the infl ation rate underlying the price cap procedure increased. According to a comparative study we conducted, our postage rates rank amongst the lowest in Europe. Th e survey took account of both the nominal price for sending a standard letter (20 g) by the fastest method and key macroeconomic factors, such as purchasing power and labour costs.
Mail Communication: sales
| Total | 8,112 | 8,184 | 0.9 | 2,131 | 2,167 | 1.7 |
|---|---|---|---|---|---|---|
| Private customer letters | 1,348 | 1,328 | – 1.5 | 402 | 400 | – 0.5 |
| Business customer letters | 6,764 | 6,856 | 1.4 | 1,729 | 1,767 | 2.2 |
| 2007 | 2008 | + / – % | Q 4 2007 | Q 4 2008 | + / – % | |
| mail items (millions) |
Performance in the Dialogue Marketing Business Unit was shaped in 2008 by the trend amongst companies in Germany to restrict advertising expenditures. Traditional mail-order companies came under especially intense pressure as a consequence of the economic situation. Th is evidenced itself in declining volumes for addressed and unaddressed advertising mail in the fourth quarter. For this reason, revenue for full-year 2008 (€ 2,856 million) did not quite reach the high level of the previous year (€ 2,914 million).
| mail items (millions) | ||||||
|---|---|---|---|---|---|---|
| 2007 | 2008 | + / – % | Q 4 2007 | Q 4 2008 | + / – % | |
| Addressed advertising mail | 6,782 | 6,912 | 1.9 | 1,948 | 1,947 | – 0.1 |
| Unaddressed advertising mail | 4,650 | 4,940 | 6.2 | 1,363 | 1,343 | – 1.5 |
| Total | 11,432 | 11,852 | 3.7 | 3,311 | 3,290 | – 0.6 |
Revenue in the Press Services Business Unit increased slightly over the prioryear period, from € 822 million to € 826 million. Although quantities edged down, both item weights and average prices increased.
Th e Parcel Germany Business Unit pushed up revenue by 1.0 % year-on-year, from € 2,558 million to € 2,583 million. Th e fourth quarter was particularly strong. Th e growing signifi cance of e-commerce is refl ected in increased sales volumes on the part of our business and private customers. However, our customers with traditional mail-order businesses are suff ering from the economic trend in Germany – their sales volumes are dropping.
| items (millions) | ||||||
|---|---|---|---|---|---|---|
| 2007 | 2008 | + / – % | Q 4 2007 | Q 4 2008 | + / – % | |
| Business customer parcels | 646 | 661 | 2.3 | 179 | 189 | 5.6 |
| Private customer parcels | 107 | 112 | 4.7 | 35 | 37 | 5.7 |
| Total | 753 | 773 | 2.7 | 214 | 226 | 5.6 |
With around 14,000 outlets, we have the largest network of fi xed-location retail outlets in Germany, where our customers are able to meet their postal and oft en banking needs. We are continually expanding our network to make access to our services as simple as possible for customers. Revenue generated by the outlets fell from € 836 million to € 815 million, mainly due to lower internal revenues.
Our international mail business registered a revenue decline of 5.0 %, from € 2,102 million in 2007 to € 1,997 million in 2008. Th e decrease was particularly noticeable in the fourth quarter. In addition to negative currency eff ects of € 66 million, revenues suff ered especially from the discontinuation of DHL @ home – a product for mail-order companies in the US. We no longer off er this product aft er reducing our Express transport network.
| 2007 | 2008 | + / – % | Q 4 2007 | Q 4 2008 | + / – % |
|---|---|---|---|---|---|
| 7,457 | 7,364 | – 1.2 | 2,121 | 1,936 | – 8.7 |
With € 2,253 million in fi nancial year 2008, EBIT surpasses our earnings fi gure for the previous year (€ 1,976 million), primarily thanks to the boost of € 572 million from the repayment awarded in the EU state aid proceedings. Without the repayment, EBIT would have fallen by 14.9 % year-on-year due to the negative impact of increased costs and the aforementioned market environment. Operating cash fl ow amounted to € 2,235 million (previous year: € 1,946 million); the return on sales was 15.7 %.
Th e EXPRESS Division transports time-sensitive documents and goods reliably from door to door via fi xed routes and using standardised workfl ows. Our network spans more than 220 countries and territories in which more than 100,000 employees serve over eight million customers.
In 2008 we expanded our reach for time-critical shipments. We now off er delivery before either 10.30 am or 12.00 pm in all major countries in the Americas region. In Europe and Asia, we increased capacities for delivering prior to 12.00 pm in numerous countries, thus fortifying our already strong market position. In Eastern Europe, the Middle East and Africa, we have the most extensive coverage for premium deliveries, which reach their destination countries by the quickest possible route. We guarantee faster transit times than our competitors on the world's central trade lanes, especially to and from Asia.
As a global network operator, we are well aware that the quality of our services is crucial in determining business success. Th erefore, continuous improvement of our service levels is a must for us.
Our three product lines – DHL Same Day, DHL Time Defi nite and DHL Day Defi nite – off er customers courier and express services in each of the three standard time segments.
Normally, our customers make use of our customer service numbers or the inter net when ordering transport services. In Germany, we leverage the Deutsche Post retail outlets. We also maintain more than 30,000 Servicepoints outside of Germany, where ad hoc customers can drop off and pick up shipments and have them packed at no extra charge. Th e prices are standardised by weight class.
At a time when the environmental impact of business is a live issue, particularly with respect to the logistics sector, we are thus far the only express service provider to off er climate-neutral shipping products – our GoGreen programme.
Historically, the global express market has grown at an average of 6% to 8% each year. Although growth has now slowed notably in line with the general economic downturn – decreasing from 3.7 % in 2007 to 2.8 % in 2008 – our business is still driven by globalisation. We maintain a strong position in all parts of the world and are the market leader in international express shipments in all regions outside of the United States.
2008 proved to be highly unusual, with the economic downturn accelerating during the course of the year, our gradual exit from the domestic US express business and strongly fl uctuating fuel prices.
| • Europe |
|---|
| • Americas |
| • Asia Pacific |
| • EEMEA (Eastern Europe, Middle East and Africa) |
| • Same Day DHL |
| • DHL Time Definite |
| • DHL Day Definite |
Page 82
Market volume: € 7.5 billion 1) A 9 % DHL B 24 % FedEx C 17 % UPS D 2 % USPS E 48 % Other A B
1) New market portrayal: These fi gures are estimates for outbound international shipments < 1,000 kg.
Source: MRSC in co-operation with Colography Group 2008.
Market volume: € 15.3 billion 2)
| A 25 % DHL | ||
|---|---|---|
| B 18 % UPS | ||
| C 15 % TNT | ||
| D | 7 % FedEx | |
| E | 4 % La Poste (incl. DPD, Geopost) | |
| F | 2 % Royal Mail (incl. GLS) | |
| G 29 % Other |
1) Country base: A, B, BG, CH, CZ, D, DK, E, FIN, GB, GR, H, I, IRL, L, N, NL, P, PL, RO, S, SK, SLO. 2) These fi gures are based on all shipments < 1,000 kg.
As the largest express market in the Americas, the United States holds a unique position. It is connected to the world's principal trade lanes and some 49 % of all DHL shipments are billed there, where nearly half of our 200 largest customers are based.
Aft er the takeover of Airborne in 2003, we worked to make our domestic business in the United States a success and to establish DHL as the third major player in this duopoly market. However, today we must concede that our positive operational achievements did not translate into fi nancial success. Ultimately, the weak US economy, exacerbated by expectations of a global recession, increased pressure to such an extent that we were forced to fi nd a viable solution in the interests of our shareholders, employees and customers.
In November 2008, we decided to exit the US domestic express business by the beginning of 2009. We are re-focusing fully on our core competency – the international express business. In the future, the United States will remain an integral part of our global network, the scope and capacity of which guarantee us a leading position in the express market. In the year under review, our share of 9 % (2007) in the US international express market allowed us to again remain competitive and to solidify our market position.
In the international express business in Latin and Central America, DHL is the market leader with a share of 36 % (2007) and is growing robustly. Although inter national volume growth has slowed as a result of the poor US economy, the domestic express markets experienced dynamic growth, particularly in Mexico and Venezuela.
In 2007, the European market for courier, express and parcel (CEP) services increased to € 15.3 billion, up from € 12.1 billion a year earlier. E-commerce was responsible for most of this growth, whilst the addition of Eastern European countries to the region during the reporting period also played a role.
In 2008, the economy negatively impacted volume growth. Moreover, air express shipments continued to decrease in favour of more economical ground transport.
We maintained our leading position in Europe's international CEP market, even broadening our position in Eastern Europe. In terms of growth, we outperformed the market on many trade lanes, especially to and from Asia and Eastern Europe.
We expanded our services in time-defi nite deliveries, which we now off er in 55 countries. In Europe, we are presently able to deliver to more than 94 % (previous year: 80 %) of all business addresses by 12.00 pm.
Th is success is in large part thanks to our new intercontinental hub at Leipzig / Halle Airport, which we put into operation as scheduled in May 2008, following just three years of planning and construction. Th e Group invested around € 300 million in the facility, where each working day some 60 aircraft take off and land and around 1,500 tonnes of freight are handled. Th is has enabled us to increase the number of direct fl ights within Europe and beyond. We maintain connections to 46 countries on three continents.
Asia continues to be a key driving force for growth in the world. Th e con sumer goods and high-tech sectors are particularly signifi cant in this region, accounting for more than two-thirds of the international express business. Aft er years of strong growth, three factors are currently slowing the further expansion of the Asian express market. Asian exports are suff ering from the economic slowdown in the United States. Th e supply chains that feed internal trade within Asia are changing. And an increasing number of goods are being carried by ship so that our shipment volume fell as a result in the year under review.
DHL nonetheless posted strong growth again and maintained its leading position in 2008 in Asia's international express markets – including the region's 14 largest economies – where we hold by far the largest market share (34 %).
In 2008 we greatly expanded the reach of our time-defi nite network: In 13 Asian countries we deliver by 12.00 pm, thereby dominating the most signifi cant intra-Asian trade lanes. In addition, since last autumn we have off ered day-defi nite delivery within Asia.
Our international position – which has been strengthened by our trans-Pacifi c partnership with Polar Air – is complemented by our presence in key Asian domestic markets. Th e ground-based transport services off ered by Blue Dart in India saw encouraging growth, as did domestic business in China and Australia.
In recent years we have invested more than US \$ 2.2 billion in the region. We established dedicated infrastructure, upgraded existing hubs and gateways and expanded our dedicated air traffi c network.
In the year under review we had another year of double-digit volume growth in the 88 countries making up the EEMEA region (Eastern Europe, the Middle East and Africa). Russia and the United Arab Emirates developed into growth markets along with other emerging markets in this region, particularly Saudi Arabia, Turkey, Ukraine and Kazakhstan. As the market leader, our network puts us in an excellent position to benefi t from further growth of these import markets.
We continued to expand our service in 2008, particularly in Russia. We now off er overnight delivery to Moscow and St. Petersburg from all of Europe's major cities and economic centres.
Day-defi nite road transport in the Middle East, North Africa and Turkey was likewise expanded, enabling us to acquire new contracts in the automotive sector and the consumer goods industry.
| Market volume: € 5.9 billion 2) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| A 34 % DHL | |||||||||||
| B 24 % FedEx | |||||||||||
| C 12 % UPS | |||||||||||
| D | 8 % TNT | ||||||||||
| E 22 % Other |
1) Country base: AU, CN, HK, ID, IN, JP, KR, NZ, MY, PH, SG, TH, TW, VN. 2) These fi gures are based on shipments < 1,000 kg. Source: AT Kearney, TMS 2008.
Our main objective is to increase profi tability and generate further organic growth despite the economic downturn. Our strategy for achieving this goal is to remain the preferred provider in the international express business – across all products and regions. In the United States, we are reorganising our international business. We are also investing in growth markets whilst at the same time taking actions to counterbalance the foreseeable economic decline. We continued to expand the global organisation under uniform management last year, putting us in an excellent position to tackle these goals.
Our strategy revolves around the international air traffi c network. Competitive pricing and fi rst-rate service on all the major trade lanes is our objective. Th is is why one of our plans is to launch intercontinental day-defi nite delivery. We are continuously upgrading our service standards to facilitate customer access to our services. For instance, we are developing electronic solutions to enable customers to determine the location of their shipments at any time using their computers or mobile phones. One such solution is ProView, which is already used by more than 50,000 customers in some 40 countries.
We will continue to off er competitive international express services in the USA in the future. Employees based in and outside of the country will structure the reorganisation such as to reinforce our position as international shipping experts and ensure that customers receive high service quality. We will thus continue to pose an attractive alternative to our two main competitors in the US express market.
We are further augmenting our presence in growth markets. To do so, we are making infrastructure investments such as the construction and expansion of air hubs, particularly in the Asia Pacifi c region. In 2008, we enlarged the central Asian hub at the airport in Hong Kong, which represented a major milestone. In addition, we are continuing to take advantage of our strong potential in many domestic markets outside of the USA. We see growth opportunities in the domestic express markets in Latin and South America as well as in China and India.
As the operator of a network spanning the entire globe, we are always looking for ways to make this network more effi cient. We use modern aircraft such as the Boeing 777 to optimise fuel consumption and reduce our per-unit costs, and we are continuing to improve capacity utilisation. Moreover, we constantly review all areas to determine how productivity can be raised.
Revenue in the EXPRESS Division declined by 1.7 % in 2008 to € 13,637 million (previous year: € 13,874 million). Business was impacted by negative currency eff ects amounting to € 620 million. Measured in local currencies, we attained organic revenue growth of 2.4 %. Revenue outside the US grew by 3.9 %, resulting in large part from surcharges we collected for higher fuel costs.
In a deteriorating economic environment, daily shipment volumes in the Time Defi nite International product line decreased by 2.4 % compared with the previous year. Th e daily volumes in the Time Defi nite Domestic product line performed well in our regions outside the US and achieved a year-on-year increase of 7.0 %. However, this could not fully compensate for the continuing volume decline in the United States.
| € m per day | ||||||
|---|---|---|---|---|---|---|
| 2007 | 2008 | + / – % | Q 4 2007 | Q 4 2008 | + / – % | |
| Time Defi nite International | 27.3 | 28.6 | 4.8 | 29.0 | 28.0 | – 3.4 |
| Time Defi nite National | 10.4 | 9.8 | – 5.8 | 10.8 | 8.3 | – 23.1 |
| Day Defi nite National | 10.3 | 10.1 | – 1.9 | 11.2 | 9.4 | – 16.1 |
| thousands of items per day | ||||||
|---|---|---|---|---|---|---|
| 2007 | 2008 | + / – % | Q 4 2007 | Q 4 2008 | + / – % | |
| Time Defi nite International | 528.6 | 515.8 | – 2.4 | 546.1 | 501.8 | – 8.1 |
| Time Defi nite National | 1,355.2 | 1,193.9 | – 11.9 | 1,373.3 | 944.7 | – 31.2 |
| Day Defi nite National | 1,327.2 | 1,250.8 | – 5.8 | 1,440.3 | 1,068.1 | – 25.8 |
In Europe, revenue stabilised at € 6,631 million, close to the previous year's fi gure of € 6,667 million. Th e total fi gure contains negative currency eff ects in the amount of € 159 million, attributable primarily to our UK and Nordic countries business. Th e underlying organic growth for the region was 2.1 %. Th e new EU members as well as France and the Scandinavian countries achieved good organic growth in 2008.
In the year under review, the overall trend in the Americas region was shaped by the poor economic conditions and our gradual exit from the domestic express business in the US. Revenue slipped by 14.5 % to € 3,559 million (previous year: € 4,165 million), including negative currency eff ects in the amount of € 281 million. Measured in local currency, revenue decreased by 7.8 %, largely resulting from the ongoing restructuring activities in our US business. Business in Latin America was once again encouraging with organic growth in the double digits. In the United States, however, revenue declined in organic terms year-on-year by 13.4 %. Shipment volumes in our domestic product lines were particularly hard hit by the weak US economy and our decision to cease domestic activities.
Revenue in the Asia Pacifi c region increased by 6.6 % to € 2,746 million (previous year: € 2,576 million). Changes in the euro exchange rate gave rise to negative currency eff ects in the amount of € 111 million. Although the rate of growth in the region slowed mainly in the second half of 2008, we posted organic revenue growth of 9.1 %. Domestic shipment volumes continued to rise in this region.
In the EEMEA region (Eastern Europe, the Middle East and Africa), revenue increased by 15.2 % to € 1,176 million (previous year: € 1,021 million). Th is translates into organic growth of 22.3 % aft er factoring in the negative currency eff ects of € 73 million. Once again, we achieved the highest growth rates in all of our product lines in the Middle East and Russia.
EBIT declined by € 1,872 million in 2008, from € – 272 million in the previous year to € – 2,144 million. Th e drop in EBIT was mainly due to restructuring activities, which led to non-recurring expenses of € 2,358 million. Most of these expenses were related to the realignment of our US business, which accounted for € 2,096 million of non-recurring expenses. Losses in the US continued to rise in 2008. Outside the US, our earnings from operating activities and aft er adjustment for restructuring costs were satisfactory. Th e eff ect of a declining economy was mainly felt in the last quarter of 2008. Th e unfavourable economic trend led to lower volumes, which we were able to off set by implementing several cost reduction initiatives. Operating cash fl ow, which includes the cash outfl ow for restructuring activities and the losses from the US business, fell from € 1,001 million to € 263 million.
In March 2008, the LOGISTICS Division was dissolved and replaced by the new GLOBAL FORWARDING/FREIGHT Division and the new SUPPLY CHAIN / CIS Division. Th e business units of the division are still called Global Forwarding and Freight.
DHL, with its Global Forwarding and Freight business units, is the world's largest provider of air and ocean freight services and one of the leading overland freight forwarders in Europe and the Middle East. Our job as a freight forwarder is to plan and implement global transport solutions for our customers, to supply the necessary capacity and to co-ordinate the fl ow of goods in more than 150 countries. To do so, we rely on the competence of our around 41,000 qualifi ed employees along with our many reliable partners.
Our business model involves us acting as a broker between the customer and the carriers. We combine demand from diff erent customers in order to reach a volume that allows us to buy cargo space and charter capacity from airlines, shipping companies and freight carriers at competitive prices. We also make use of the air freight capacity of the EXPRESS Division. Since we purchase transport services rather than providing them ourselves, we are able to operate our business with a very low level of fi xed assets.
DHL is the world market leader in the air and ocean freight sector. Around 30,000 employees in 150 countries work to ensure that shipments of all kinds are transported to their destination by air or by sea. We also support our customers by providing special transport-related services: We store customers' goods, collect them, deliver them, handle customs formalities and insure the load. In this way, we guarantee the safety of the goods even beyond national borders.
Our customer base consists of large-scale enterprises along with small and medium- sized businesses operating primarily in the technology, pharmaceutical, automotive, mechanical engineering and commerce sectors. We also plan and implement major logistics projects, in particular for the petroleum and energy industry and the aviation and aerospace sector.
Th e fastest way to transport goods is by air. In the year under review, the air freight market decreased by 4 % in contrast to 4 % growth in the previous year. However, we continued to expand our presence in growth markets such as Asia, Africa and the Middle East, where we are the clear market leader with a share of 11.9 % (2007). Th is fi gure cannot be compared with the prior year, since market volume is now reported in tonnes transported rather than in revenues as it was previously the case.
| 11.9 % | |
|---|---|
| DHL | |
| 6.2 % | |
| DB Schenker | |
| 4.5 % | |
| Panalpina | |
| 3.9 % | |
| Kuehne + Nagel |
1) Data are based solely on tonnes of export freight. Source: Global Insight, Global Trade Navigator, annual reports, press releases and company estimates.
Market volume for forwarding: 29.6 million TEU 1)
Kuehne + Nagel 4.9 % DB Schenker
3.0 %
Expeditors
1) Estimated share of overall market controlled by forwarders.
Source: Global Insight, Global Trade Navigator, annual reports, press releases and company estimates.
Market volume: € 163.7 billion 1)
| 3.0 % | ||
|---|---|---|
| DB Schenker | ||
| 2.0 % | ||
| DHL | ||
| 1.5 % DSV (excluding ABX) |
||
| 1.2 % | ||
| Geodis | ||
| 1.2 % | ||
| Dachser |
1) Total for fourteen European countries, excluding bulk and specialties transport.
Source: MRSC freight reports 2007 and 2008, Eurostat 2007, annual reports, press releases, company websites, estimates, analyst reports.
When transporting goods by sea, transit times are longer than for air transport but the costs are lower. We are the global leader in both less-than-container-load (LCL) and full-container-load (FCL) shipments. According to our estimates, this market grew by 3 % to 4 % in 2008. We slightly expanded our share of the market.
In times of economic uncertainty, customers become more cost-conscious. At the same time, they want integrated, safe and fast transport solutions. One such solution is our SeAir product, which combines these two modes of transport. Th is service is considerably faster than ocean shipping but at signifi cantly lower prices than air freight. Th e product has been well received by the market and in the year under review, we increased volume by 27 %.
Our business activities in the major economic regions were highly successful. In Europe, for example, our Airfreight Plus product combines the speed of express shipping with the customised service of a freight forwarder and guarantees day-defi nite, door-to-door delivery of heavy goods in 32 European countries. Customers benefi t from late collection times and next-day delivery. In addition, specially trained personnel ensure that temperature-sensitive shipments are processed quickly with minimum holding times.
Freight is the second-largest overland freight forwarder in Europe with around 11,000 employees in 53 countries. Our business model is similar to that of Global Forwarding: We see ourselves as a broker of freight capacity. In the overland transport business we provide full-truckload, part-truckload and less-than-truckload services. We also off er combined services with other carriers, especially rail transport companies. Moreover, our range of services includes the handling of customs formalities and the provision of insurance.
DHL is one of the leading providers of trade fair, exhibition and event logistics. Along with trade fair transport, our range of services includes customised full- service solutions for exhibitors, international trade fair organisers, event management and staging companies as well as event agencies.
In 2007, the European market for road transport grew by 4.2 % (previous year: around 3.5 %). We maintained our share of 2.0 %.
We are well positioned in our markets due to our air freight, ocean freight and road transport services. Our goal is to continue to grow steadily and organically at a rate above the industry average. To this end, we pursue three approaches:
All in all, our freight forwarding business saw encouraging growth in 2008. Revenue grew by 9.4 % to € 14,179 million (previous year: € 12,959 million). Th is fi gure includes negative currency eff ects of more than € 400 million as well as minor acquisitions in the Global Forwarding Business Unit. Organically, our revenue grew by 11.2 %.
Th e Global Forwarding Business Unit generated revenue of € 10,585 million (previous year: € 9,410 million). Th us, revenues grew by 12.5 % year-on-year despite negative currency eff ects. Organic revenue growth was 14.6 %. Gross profi t in the business unit totalled € 2,222 million. Our earnings from operating activities (EBIT) increased slightly despite the decline in gross margins and diffi cult economic conditions. We succeeded in optimising both operating expenses and overhead costs on an ongoing basis. If the restructuring provisions recognised in the reporting year are discounted, earnings increased year-on-year.
Air freight volumes saw a slight decrease of 2.7 % in fi nancial year 2008 compared with the previous year; this was followed by a stronger decrease, however, in the fourth quarter (16.3 %). Th e decrease refl ected the overall market, which declined by 4 % in the reporting period. In November and December alone, air freight market volumes dropped year-on-year by 13.5 % and 22.9% respectively, due to the sharp deceleration of growth in global trade. As a consequence, freight rates on many trade lanes experienced sharp declines and capacities were reduced. However, since fuel surcharges, amongst others, were signifi cantly higher than in 2007, we nonetheless posted a revenue increase of 12 %. Our business remained robust in the Middle East, Africa and South-East Asia in particular.
| Total | 9,410 | 10,585 | 12.5 | 2,522 | 2,744 | 8.8 |
|---|---|---|---|---|---|---|
| Other | 1,587 | 1,779 | 12.1 | 444 | 479 | 7.9 |
| Ocean freight | 3,014 | 3,418 | 13.4 | 810 | 924 | 14.1 |
| Air freight | 4,809 | 5,388 | 12.0 | 1,268 | 1,341 | 5.8 |
| 2007 | 2008 | + / – % | Q 4 2007 | Q 4 2008 | + / – % | |
| € m |
| thousands | |||||||
|---|---|---|---|---|---|---|---|
| 2007 | 2008 | + / – % | Q 4 2007 | Q 4 2008 | + / – % | ||
| Air freight | Tonnage | 4,409 | 4,291 | − 2.7 | 1,203 | 1,007 | – 16.3 |
| Ocean freight | TEU1) | 2,764 | 2,882 | 4.3 | 873 | 754 | – 13.6 |
1) Twenty-foot equivalent units.
Market growth in the ocean freight business also suff ered from a very weak fourth quarter. We estimate the market to have grown by only 3 % to 4 % in the year under review. However, we outperformed the market on the whole with growth of 4.3 % despite a fourth-quarter volume decline of 13.6 %. Th anks to a favour able trend in freight rates, revenue rose by 13.4 % in 2008. We increased revenues in Latin America, North Asia and Europe in particular.
Our industrial projects business, which we have been focussing on for two years, made another above-average contribution to growth, especially in Asia, North America, the Middle East and Africa.
Th e Freight Business Unit reported revenue of € 3,710 million for the year as a whole (previous year: € 3,646 million) and organic growth of 2.6 % compared with the previous year. Th e business performed well in the Benelux countries, in Eastern Europe and in Germany. Gross profi t amounted to € 955 million, around the same as in the prior year.
| Cash conversion rate | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| EBIT | |||||||||||||
| Operating cash flow |
Division EBIT declined to € 389 million from € 409 million in the previous year. Th e fi gure for 2008 includes restructuring provisions amounting to more than € 40 million. Additionally, adjusted for negative currency eff ects of nearly € 20 million as well as acqui sitions, the business performed well with earnings growth of 6 %. Th anks to our eff ective cost management, we held our ground well in a diffi cult and volatile market environment. Return on sales (excluding restructuring provisions) remained stable compared with the previous year at 3 %.
Operating cash fl ow amounted to € 630 million (previous year: € 217 million). Th e fi gure greatly increased because we are consistently implementing our Roadmap to Value initiatives. Working capital and the cash conversion rate both improved. Th e cash conversion rate measures the proportion of operating earnings that are con verted to cash fl ow.
In March 2008, the LOGISTICS Division was dissolved and replaced by the new GLOBAL FORWARDING / FREIGHT Division and the new SUPPLY CHAIN / CORPORATE INFORMATiON SOLUTIONS Division (hereinaft er SUPPLY CHAIN / CIS). Th e Corporate Information Solutions Business Unit was previously reported under the MAIL Division. Th e prior-year fi gures were restated.
In 65 countries all over the world the division focuses on customer-orientated solutions along the entire supply chain. We provide warehousing, distribution, transport and value-added services along with corporate information solutions. We have long-standing business relationships with our customers in most mature markets, oft en going back for more than 20 years. Our success rests on understanding the individual needs of our customers and off ering them solutions that add value to their business.
In the retail, fashion and consumer goods industries, customers need highly fl exible supply chains that allow them to react quickly to market trends. We operate warehouses, provide packaging services and manage transportation networks all the way from the source of supply to retail shelves.
In the healthcare industry, it is necessary to keep a constant eye on inventories and provide high levels of product visibility along each step of the supply chain – not least to meet the numerous regulatory requirements. We therefore provide a strictly controlled environment consisting of purpose-built, highly-secure facilities strategically located throughout the world.
Th e logistical challenge of the technology sector lies in ever shorter product life cycles, which necessitate quick changes in production and distribution locations. Our off ering comprises inbound to manufacturing logistics, distribution and warehousing, assembly and returns logistics. We also generate economies of scale for our customers with the help of shared-user warehouses and hubs.
Th e automotive industry demands effi cient and co-ordinated supply chains in order to ensure timely delivery of components across the globe. We provide this service for many prominent automotive suppliers in all major markets where we operate. Considering the fact that this industry is currently suff ering, we are working even harder with most of our key customer to further optimise supply chains and thereby reduce costs.
In the Corporate Information Solutions Business Unit, we provide customised solutions for both digital and print information, ranging from draft ing and printing communications materials to outsourcing business processes. Th is helps our customers to improve internal processes, focus communication and reduce costs – in short, to be more profi table. We are specialised in industries such as insurance, retail, automotive, consumer goods, pharmaceutical, fi nancial services, legal, consulting, publishing and the public sector. In business process outsourcing (BPO), we are the market leader.
Market volume: € 206 billion 1)
| 6.4 % | |||
|---|---|---|---|
| DHL | |||
| 1.7 % | |||
| CEVA | |||
| 1.4 % | |||
| Kuehne + Nagel | |||
| 1.3 % | |||
| Wincanton | |||
| 1.3 % | |||
| UPS SCM |
1) Company estimates based on Datamonitor input.
DHL is the world leader in outsourced contract logistics with a market share of 6.4 % (2007). We are one of only a few globally operating companies in this fragmented market. Th e size of the outsourced contract logistics market is estimated to be € 206 billion. Our leading position allows us to leverage global competences to better serve our customers in the local markets where we operate.
Th e market for document management and BPO is likewise highly fragmented, being shaped by just a few specialists off ering either a very limited set of services or occupying exclusive niches. Th anks to our broad range of international services and excellent customer base, we lead this market under our Williams Lea brand.
In the year under review, we witnessed a diffi cult economic climate aff ecting our customers, especially in the fi nancial and automotive sectors. We also see the current economic climate, however, as an opportunity because an increasing number of companies look to outsource their logistics requirements and information processes during challenging economic times.
Our goal is to achieve good fi nancial results whilst supplying high-quality services. We intend to continue improving innovation, quality and productivity, whilst providing career development opportunities for our employees, and to be a socially responsible organisation.
We anticipate profi table growth in the middle single digits over the long term in our two largest markets, Europe and North America. In the developing markets of Asia, Latin America and Eastern Europe, we have active sales and marketing organisations aimed at continuing to selectively expand our presence. In 2008, we succeeded in increasing revenue by nearly 20 % in these key emerging economies.
We will continue to standardise our business models and deliver services to our customers more effi ciently.
Revenue in the SUPPLY CHAIN / CIS Division declined by 4.2 % to € 13,718 million (previous year: € 14,317 million). However, adjusted for negative currency eff ects of € 1,061 million and other inorganic items, the division achieved organic growth of 2.8%.
Th e Supply Chain Business Unit generated revenue of € 12,469 million (previous year: € 13,099 million) with revenue growth of 1.9% aft er excluding negative currency and other inorganic eff ects. Th e organic growth in our regions is tempered by customer losses and soft volumes resulting from the global economic environment. Th e Corporate Information Solutions Business Unit reported revenue of € 1,243 million (previous year: € 1,214 million). When excluding negative currency eff ects we maintained double-digit organic revenue growth, principally due to new business acquired in the previous year. Th is was partially off set by reduced volume levels in document management and in marketing solutions business as a result of the economic downturn.
In the Supply Chain Business Unit we signed new contracts worth € 1.1 billion (annual revenues) with existing and new customers. Th e renewal rate for contracts remained constant at more than 90 %.
In fi nancial year 2008, the division registered a loss of € 675 million before interest and taxes (previous year: profi t of € 577 million). Th is fi gure includes restructuring expenses of € 124 million and write-downs on the value of the Exel brand amounting to € 382 million, which is a result of the Group's new branding strategy to use the DHL brand. Moreover, an impairment test as prescribed by IAS 36 resulted in an impairment loss of € 610 million.
Th ese non-recurring items, along with the sale of Vfw AG in 2007 and negative currency eff ects, led to a decrease in the division's organic EBIT of 5.5 %, particularly as a consequence of the negative impact on the Corporate Information Solution's business in the fi nancial sector. By contrast, the Supply Chain Business Unit saw organic growth of 5.7 %, well ahead of organic revenue growth.
Operating cash fl ow amounted to € 481 million (previous year: € 319 million). Effi cient working capital management and, in particular, a stronger focus on customer payment terms contributed to a signifi cant improvement in cash fl ow.
Total revenue: € 12,469 million
| A 27 % Retail & fashion | |
|---|---|
| B 26 % Consumer goods | |
| C 15 % Technology | |
| D 13 % Healthcare | |
| E | 6 % Automotive |
| F | 13 % Chemicals / industry/other |
On 12 September 2008, Deutsche Post agreed to sell a minority shareholding in Deutsche Postbank AG to Deutsche Bank AG in the fi rst quarter of 2009. We have adapted our reporting structure accordingly. Th e Pension Service was transferred from the FINANCIAL SERVICES Division to the mail business. Th e remaining segment consists only of Postbank and has therefore been reported under "discontinued operations" since the third quarter of 2008.
Th e Deutsche Postbank Group was impacted by one-time charges as a result of the global fi nancial market crisis, especially in the second half of 2008. In addition to other factors, Postbank's earnings situation was noticeably impacted by the write-downs on Postbank's exposure to investment bank Lehman Brothers and Icelandic banks as well as the decrease in equity holdings to be recognised in profi t or loss – announced as an eff ort to reduce capital market-related risks and portfolios.
With respect to net interest income and net fee and commission income – Postbank's customer business-related core income fi gures – the bank either reached or exceeded the previous year's fi gure. By contrast, net trading income and net income from investment securities declined signifi cantly as a consequence of the fi nancial crisis.
In spite of a clear rise in the rate of infl ation and several special factors, administrative expenses were only slightly higher than the prior year level. Th e allowance for losses on loans and advances rose, however, due to the eff ects of the fi nancial market crisis.
Th us, profi t or loss from operating activities (EBIT) from discontinued operations fell by € 1,931 million from € 1,060 million in 2007 to € – 871 million in the year under review.
In line with this, the profi t or loss aft er tax from discontinued operations in 2008 was € – 713 million, well below the prior-year fi gure of € 858 million.
Postbank's operating business performed well in all major product segments despite a continued diffi cult climate in the German retail banking business.
Deutsche Postbank AG provides details of its business performance in 2008 in ir.postbank.com its own annual report, to be published on 9 March 2009.
People are the driving force behind logistics. Our company has qualifi ed and dedicated employees around the world working towards its success. As at 31 December 2008, the Group employed 451,515 people (full-time equivalents). Although the total number of employees remained nearly the same as the previous year, the number of civil servants dropped further to 51,304. Staff costs increased by 4.8 % year-on-year, from € 17,169 million to € 17,990 million.
In the MAIL Division, the number of employees fell by 1.9 % to 142,674. Th e number of full-time equivalents declined primarily in Germany aft er we increased productivity there. Staff reductions also resulted from the further reorganisation of the retail outlet network.
Measured against the previous year, the number of people employed in the EXPRESS Division fell by 3.9 % to 108,275. Th is can be primarily attributed to restructuring our US business. By contrast, the number of full-time equivalents in the Global FORWARDING / FREIGHT segment rose by 5.9 % to 41,499, precipitated by acquisitions and organic growth. Th e increase in the SUPPLY CHAIN / CIS Division of 2.2 % to 143,786 is also a result of organic growth.
Th e number of employees in the Corporate Center / Other unit fell by 1.7 % as a result of streamlining eff orts in the service departments such as IT, Accounting and Real Estate. Th e staff level there was 15,281 at the end of the year under review.
| 2007 | 2008 | + / – % | |
|---|---|---|---|
| Continuing operations | |||
| At year-end | |||
| Headcount 1) | 512,147 | 512,536 | 0.1 |
| Full-time equivalents 2) | 453,626 | 451,515 | − 0.5 |
| By segment | |||
| 145,458 3) | 142,674 | − 1.9 | |
| EXPRESS | 112,727 | 108,275 | − 3.9 |
| GLOBAL FORWARDING / FREIGHT | 39,200 3) | 41,499 | 5.9 |
| SUPPLY CHAIN / CIS | 140,694 3) | 143,786 | 2.2 |
| Corporate Center / Other | 15,547 3) | 15,281 | − 1.7 |
| By region | |||
| Germany | 170,258 | 167,816 | − 1.4 |
| Europe (excluding Germany) | 133,137 | 136,649 | 2.6 |
| North, Central and South America | 87,185 | 78,212 | − 10.3 |
| Asia Pacifi c | 51,852 | 55,182 | 6.4 |
| Other | 11,194 | 13,656 | 22.0 |
| Average for the year | |||
| Headcount | 500,252 | 511,292 | 2.2 |
| Hourly workers and salaried employees | 443,584 | 456,149 | 2.8 |
| Civil servants | 52,809 | 51,304 | − 2.9 |
| Trainees | 3,859 | 3,839 | – 0.5 |
| Full-time equivalents | 447,626 | 456,716 | 2.0 |
| Discontinued operations | 21,474 3) | 21,127 | − 1.6 |
Number of employees
1) Including trainees. 2) Excluding trainees. 3) Restated.
Deutsche Post World Net Annual Report 2008
Note 14
Employees by regional split 1) , 2)
| A 37.2 % | Germany | |
|---|---|---|
| B 30.3 % | Europe (excluding Germany) | |
| C 17.3 % | North, Central and South America | |
| D 12.2 % | Asia Pacifi c | |
| E | 3.0 % | Other |
| D C |
E A |
|
| B |
1) Full-time equivalents as at 31 December 2008. 2) Continuing operations.
We employ people in more than 220 countries and territories across the globe. Th eir regional distribution is illustrated by the adjacent diagram. Germany remains the country with the largest number of employees, although the workforce there is diminishing. In the rest of Europe, in Asia and the other regions, the number of employees has risen dramatically in some cases; in America, however, the number has fallen due to restructuring of the express business.
On 30 April 2008, Deutsche Post AG and the trade union Verdi reached an agreement in their collective-bargaining negotiations for the around 130,000 Deutsche Post AG employees. Th e employment pact for employees covered by the collective bargaining agreement, which rules out layoff s, was extended to 30 June 2011. In addition, these employees received a one-time payment of € 200 for the months of May to October 2008 and a 4 % wage increase eff ective 1 November 2008. Beginning in December 2009, wages will rise another 3.0 %. Employees subject to collective-bargaining agreements will continue to work a 38.5 hour work week. In return, paid breaks have been reduced by 48 minutes per week. Th e collective agreement will end on 30 June 2010. New collective agreements were also concluded for the around 5,500 staff members in subsidiaries.
We look aft er the health and well-being of our workforce – if nothing else to help maintain their performance on the job. To do this, we developed a Group-wide programme based on the Corporate Health Policy we adopted in the previous year. Th e programme comprises, for example, the Health Promotion Award, with which we recognise exemplary health initiatives each year. At 6.6 %, the illness rate at Deutsche Post AG in Germany remains once again at a low level (previous year: 6.3 %). In December 2008 we were awarded the German Corporate Health Award for our corporate health manage ment. Th e award was granted by the EU Commission and the BKK Bundesverband (German federal association of company health insurance funds) as part of the Move Europe campaign. Th e certifi cation of our occupational health and safety organisation's quality management system was renewed.
We successfully continued the road safety campaign we started last year. Th e Global Road Safety Initiative showcased information on safe and considerate driving practices and helped keep the annual accident rate at a consistently low level. Th e initiative also supported our climate protection programme. Th e initiative received special recognition in the form of the 2008 DuPont Safety Awards, which it won for the category "most innovative approach". We will continue the campaign until at least the end of 2009.
We view the training of young people as an investment in the future and an important contribution to our socio-political commitment. In 2008, we hired around 1,600 trainees in Germany. Th e spectrum of 17 traineeships ranges from courier, express and mail services to studies at Berufsakademien (German universities of co-operative education). We were able to off er employment to all eligible trainees in the 2008 class, clearly surpassing the 30 % target for trainees in classes 2007 to 2009 set forth in the training pact made with Verdi.
We foster our particularly capable trainees in our top trainee programme, which is intended for the top 5 % of our around 3,800 trainees and Berufs akademie students in Germany. We guarantee permanent employment to participants who success fully complete the training programme, creating an additional incentive for performance and commitment.
Perspektive Gelb is our programme to help youths who are fi nding it diffi cult to obtain apprenticeships to broaden their horizons with a traineeship at Deutsche Post. As in previous years, the programme provided 300 trainee positions. In the year under review, we hired just under 90 % of the 263 participants in the 2007 class.
Th e new initiative Discover Logistics aims to present logistics as an exciting industry of the future and showcase DHL as an attractive employer. In the year under review, 8,500 users from 122 countries signed up for dhl-discoverlogistics.com, an online platform.
Our online career portal has once again proven to be a fi tting recruiting tool in the age of the internet. Each year, we advertise more than 16,000 jobs online and our database already includes over half a million candidates. As in 2007, the Swedish market research institute Potentialpark Communication ranked our career portal as number one in Germany and Europe in their Top Employer Web Benchmark 2008 ranking.
We continued to expand the courses off ered on the internet and intranet in the area of continued professional development. Currently, around 50,000 employees are taking advantage of the over 1,000 courses which range from general management skills to specifi c Group initiatives and our Code of Conduct. Th e online training platform mylearningworld.net is an important component of our education concept. Th at is why we will expand the courses off ered and we anticipate a considerable rise in demand. Our executive development website is geared towards top managers and executives.
Finding and fostering qualifi ed and dedicated future leaders within our own ranks is absolutely vital to our company. Th is is why we developed Group-wide talent programmes to systematically cultivate our top potentials. One of the programmes, for example, gives select candidates the opportunity to complete an executive MBA degree at an external business school. Our international mentoring programme helps junior staff members, in particular our female employees, with professional development.
| A 58.4 % Courier, express and postal | ||
|---|---|---|
| services specialists | ||
| C 12.6% Forwarding and logistics services | ||
| specialists | ||
| D | 6.8 % | Berufsakademie students |
| E | 7.1 % | Warehouse logistics specialists |
1) Number of trainees, annual average: 3,839. 2) Continuing operations.
dpwn.com / career
Th e International Business Leadership Programme is specially designed for managers. In 2008, 135 top staff members met to establish networks, learn about business strategies and further develop their leadership skills.
Our internal talent broker – a position we created last year – assisted in over 150 upper management placement processes, raising the internal placement rate to 86.9 % from 83.9 % in the previous year. Our goal of fi lling 90 % of all positions in upper management from our own ranks was thereby nearly achieved.
Th e purpose of Diversity Management is to encourage diversity in our workforce, a principle rooted in our seven Corporate Values and the Code of Conduct. We are developing special programmes and other initiatives to ensure equal opportunities for all employees. In this spirit we held, for example, a contest in 2008 on making workplaces accessible for people with a disability, which resulted in a host of examples of successful integration of our disabled co-workers. Furthermore, we have expanded our training programme in order to continue to anchor the idea of diversity in our Group's day-to-day activities.
We cultivate an open dialogue. It is critical to our success on the road to becoming our customers', employees' and shareholders' fi rst choice. In September 2008, we conducted the second Group-wide employee opinion survey. Th e response rate was 76 % – an 11 % increase over 2006. Participants responded to questions concerning customer orientation, employee dedication and active leadership, pointing to existing strengths and potential for improvements. Th e results will be evaluated at the team level, where they will be discussed and followed up on.
Our "360-degree feedback" also relies on open dialogue. Th is anonymous process allows managers to learn how supervisors, colleagues and employees assess their leadership skills. In 2008, around 1,300 managers took advantage of this tool for self- refl ection and personal development. Th e target groups will be expanded in 2009.
In the reporting period, employees of Deutsche Post AG submitted 214,442 suggestions for making workfl ows more effi cient, reducing repair and energy costs, and improving environmental protection. Th e benefi t to the company totalled € 261 million (previous year: € 246 million). Th e focus was on environmental protection. Staff members in the MAIL Division alone developed more than 11,200 ideas on how fuel, electricity, water and gas can be saved. Th e Group benefi ted by over € 0.6 million from these environmental ideas. In 2009, our goal is to entrench Idea Management even more fi rmly into the Group around the world.
1) Total of 1,042 fi rst and second-level managers as at 31 December 2008. 2) Continuing operations.
1) Continuing operations.
Th e Group's GoGreen programme was developed to establish a systematic approach to achieving our climate protection target. We aim to reduce our carbon footprint for every letter posted, every container shipped and every square metre of warehouse space used by 30 % below 2007 levels by the year 2020. As the largest global logistics company, this target makes us the fi rst major company in our industry to set a quantifi able target that includes emissions from outsourced transport services. As an interim target, we are striving to improve our carbon effi ciency by 10 % by the year 2012.
We determine and calculate our greenhouse gas emissions using a carbon dioxide (CO2) monitoring process based on the internationally recognised standard Greenhouse Gas (GhG) Protocol. For 2007, CO2 emissions resulting directly from our own sources and indirectly from purchased energy amounted to some eight million tonnes (previous year: 7.4 million tonnes). CO2 emissions from outsourced transport services were calculated for the fi rst time and were estimated to be around 23 million tonnes.
How are we to achieve the climate protection target?
Procurement, page 80
Our performance in terms of sustainability was once again monitored by rating agencies in 2008. Sustainable Asset Management gave us a rating of 65 / 100 (previous year: 74 / 100). Th is drop is primarily due to a change in the rating method. Th e average score for transport and logistics companies was 50 points. Th e FTSE 4 Good Index confi rmed our company's membership. We also remain in the Advanced Sustainability Performance Index Eurozone maintained by the French rating agency Vigeo and in the KLD Global Climate 100 Index. Th e Carbon Disclosure Project gave us – the only logistics company included in its Leadership Index of the foremost 67 companies – a rating of 66 / 100 (previous year: 60 / 100).
Supplementary sustainability information on initiatives and key performance indicators, which are not part of the Group Management Report, are described in our second Sustainability Report, which was published in June 2008. It was prepared for the fi rst time on the basis of the Global Reporting Initiative (GRI) Sustainability Reporting Guide lines, with the additional GRI Sector Supplement for the Logistics and Transport Sector. Based on our own assessment, it achieved the GRI level B +. Th e next report to be published in the second quarter of 2009 will include key performance indicators for 2008.
Our partnership with the United Nations Development Programme (UNDP) and the United Nations Offi ce for the Co-ordination of Humanitarian Aff airs (OCHA) still forms one of the cornerstones of our socio-political commitment. We have extended this partnership until 31 December 2010. Our disaster relief organisation comprises three well-trained teams in Singapore, Panama and Dubai, covering the Asia Pacifi c region, the Americas, the Middle East and Africa, and thus the areas of the world most frequently visited by catastrophe. Th ese disaster response teams co-ordinate logistics for incoming aid at local airports in order to help avoid supply bottlenecks. In 2008, we once again demonstrated our logistical capabilities in a crisis during a three-week operation in Myanmar. Together with the UNDP, we launched the GARD (Get Airports Ready for Disasters) programme in Indonesia in 2008. Th is training programme prepares airport managers and employees for emergencies.
Since 2006, we have been supporting the United Nations Children's Fund (UNICEF) in the global struggle against infant mortality by providing fi nancial aid and logistical support as well as through our employees' personal commitment. In three focal countries – India, Peru and Kenya – we are helping UNICEF to improve healthcare for children and mothers living in rural areas. In India, we sponsor a programme to combat malnutrition and infant mortality. In Peru, we are helping to set up primary healthcare for pregnant women and children in the indigenous population. In Kenya, we are involved in educating the population about health risks and prevention. A volunteer programme is also run in Kenya. For the third year in a row, we invited 13 company employees to volunteer to spend two weeks there, gathering information and providing assistance. Th ey also support our partnership as UNICEF ambassadors on their return home.
Our social responsibility fi nds expression in several hundred regional and local initiatives. Following natural disasters in Asia and South America, we transported and distributed aid supplies. Our employees help to educate schoolchildren or join in beach clean-up eff orts. We also use Fair Trade products as giveaways and we sponsor school and cultural projects in Bonn, the home of our corporate headquarters.
We are planning to expand our involvement in education policy. As a founding partner of Teach First Deutschland, an initiative originating from the USA and the UK, we aim to help children and young people to realise their academic potential and strengthen their feeling of self-worth. As a basis for our future partnership, we made an agreement in November 2008. We see this as a contribution towards improving equality of opportunity and quality in the German education system and as a means of securing the next generation of professionals.
In 2008, the Group centrally purchased goods and services with a total value of € 9.0 billion (previous year: € 10.3 billion). Currency eff ects – largely in relation to the US dollar and pound sterling – reduced the purchasing volume as expressed in euros. We also pooled volumes and as a result achieved better terms. Th e individual units generally continue to procure their own transport services, although Procurement has a greater involvement than previously.
Th e following examples show how we selectively pooled expenses and thereby achieved better terms and conditions. Th e acquisition of personal computers was put out to tender globally. As a result, prices fell substantially and, at the same time, performance improved. We entered into a € 350 million European co-operation agreement with Telefónica for telecommunications services outside Germany. Th anks to optimised telecommunications, we anticipate savings of more than € 150 million over the next fi ve years.
We fi tted some 100 warehouses in North America with more effi cient lighting. Th is reduced electricity costs by more than US \$ 6 million and improved the lighting and hence the working conditions.
Procurement is a centralised function in the Group. Th e heads of Global Sourcing and their sixteen product group managers work closely with regional procurement managers and report to the head of Corporate Procurement. Th is allows us to pool our needs worldwide whilst satisfying the service and quality requirements of internal customers.
In 2007, we began to reorganise Procurement's regional structure. Strategic procurement and operational order processing are increasingly carried out by regional competence centres.
Volume: € 9.0 billion
D E
Our success depends on the skills and calibre of our employees. For this reason, we extended our Fit4 Procurement programme in the year under review and conducted subject-specifi c training courses focusing primarily on how to manage virtual global teams.
Th e principal procurement initiatives during the year attached a high priority to environmental aspects of our business. For instance, we purchased computers that are certifi ed as environmentally friendly and energy-effi cient. In Germany, we switched most of our electricity supply to renewable energies; 100 % of the electricity consumed by our corporate headquarters and more than 60 % of the electricity consumed by our branches now comes from eco-friendly sources. In addition to the percentages of renewable energy that make up the power supply in Germany, this is realised indirectly by purchasing certifi cates from the Renewable Energy Certifi cate System (RECS).
Since 2008, our Green Team – made up of procurement managers from various regions and product groups – takes care of the environmental aspects of procurement. Th ey have drawn up a Green Procurement Policy that requires all our major sup pliers to provide information about any activities that impact the environment and to specify their carbon footprint. Furthermore, the team works together with suppliers to develop energy-saving solutions.
We have stepped up our co-operation with our internal business partners and increased the First Choice activities. For example, we improved both our internal workfl ows and the interfaces with internal partners and suppliers. An example is the assignment of temporary staff at the DHL facility in Brussels where we are now able to locate the right specialist more quickly when needed, resulting in lower recruitment costs.
Together with its business partners, Procurement regularly reviews the service quality of our key suppliers in order to identify and eliminate potential weaknesses at an early stage. We rely primarily on strategic partnerships to optimise costs and ensure high quality and fl exibility in the supply chain. In the reporting year, nine suppliers were the best at meeting these requirements. We recognised them at our fi rst Global Supplier Day for exceptional, substantially improved and innovative services.
Since 2008, all standard contracts have included our Code of Conduct for suppliers. In this way, we ensure that all the major companies we work with meet our ethical and environmental standards.
As a service provider, the Group does not engage in research and development activities in the strict sense, and therefore has no signifi cant expenses to report in this connection.
We use all available technical and operational tools to ensure high-quality and effi cient mail processing. In Germany, we maintain a nationwide transport and delivery network consisting of 82 mail centres that process an average of some 70 million items per working day and 33 parcel centres with a handling volume of more than 2.5 million parcels per working day. We have kept the high level of automation in our mail business at over 90 %.
Market research and processed complaints tell us that our customers expect us to achieve the highest possible quality standards. Customers evaluate the quality of our services based on whether posted items reach their destinations quickly, reliably and undamaged. To satisfy these requirements, we manage quality on the basis of a system audited by the Technischer Überwachungsverein Nord (TÜV Nord – technical inspection association for northern Germany) and certifi ed for compliance with ISO every year. We also undergo voluntary performance evaluations from Quotas, a quality research institute.
As in the previous year, in 2008 we again attained excellent results in letter transit times within Germany. More than 95 % of the letters posted during our daily opening hours or before fi nal post box collection reached their recipients the very next day.
In addition, as Germany's fi rst parcel service provider, we sought review and certifi cation of our internal delivery measurement system for parcel delivery from TÜV Rheinland. Th e review determined that nearly 90 % of the deliveries we pick up from business customers reach their destination on the next day.
For international letters, transit times are specifi ed by the Universal Postal Union. According to European Union (EU) specifi cations, 85 % of all cross-border items posted within the EU must be delivered within three days of posting. Once again, we signifi cantly exceeded this fi gure, reaching a level of 96 % as in previous years.
Our service network is the largest in Germany. Th e heart of this network is made up of our around 14,000 retail outlets. We also off er our customers some 2,200 points of sale for letter and parcel postage and around 6,200 machines such as Packstations, Paketboxes and stamp dispensers. Th anks to our co-operation with retailers, we have extended our average weekly opening times by one hour to 43 hours compared with the previous year. Th is fi gure was only 18 hours per week before we began working with partner outlets. For years, retail outlet customers have been giving us consistently high marks via Kundenmonitor Deutschland (customer monitor for Germany), the largest study of retail customer satisfaction in Germany. Our partner-operated loca tions in particular have received ratings approaching the high ratings of the retail sector. Ninety percent of all customers are served within three minutes, as confi rmed by test customers from TNS Infratest, which we hire to conduct anonymous tests of the retail outlets around 30,000 times per year.
We regard working practices that protect the environment as a key yardstick of quality. In Germany, we employ TÜV Nord-certifi ed environmental management systems in both our mail and parcel businesses. As part of our GoGreen initiative, we off er private and business customers climate-neutral shipping options.
| • Households: 39 million |
|---|
| • Business customers: 3 million |
| • Retail outlet customers: 2 to 3 million per working day |
| • Domestic letters: 70 million per working day |
| • Domestic parcels: 2.5 million per working day |
| • International items: 7,457 million |
| • Production facilities: 162 |
| • Retail outlets: 13,650 |
| • Sales points: 2,200 |
| • Packstations: 1,400 |
| • Paketboxes: 1,000 |
| • Postage stamp vending machines: 3,700 |
| • Weekly opening times: 43 hours on average |
Th e overriding goal of our quality endeavours in the fi eld of express delivery is to satisfy our customers. Our Group-wide First Choice initiative ensures that we meet customers' high demands for speed and reliability. We are focusing above all on operating performance and customer contact.
Th e ability to deliver on time is an important quality indicator in the express business. Our central quality measuring programmes allow us to determine the punctuality of deliveries, to analyse delays in individual process stages and to seek ways of accelerating delivery to customers. For this purpose, we have set up global, regional and national teams that work closely together.
For a global network operator, it is equally crucial to maintain a consistently high quality of service. We therefore regularly monitor compliance with our workfl ows in the quality control centres that we have established worldwide, and we have developed a quality shipment monitoring system that we use to measure and improve our service quality.
In 2008, we made the following quality advances:
In terms of safety, we have long been at the fore in Europe, and now we are also leading in the implementation of safety-relevant processes and installations. Th e Transported Asset Protection Association (TAPA) has certifi ed 42 of our locations, more than any other of our European competitors. Globally, over 170 of our locations have already been certifi ed.
As freight forwarders, we measure the quality of our services above all in terms of how satisfi ed our customers are. In 2008, we surveyed more than 15,000 customers in more than 50 countries, both online and by telephone, as part of our First Choice initiative. Th e results of the survey were incorporated into some 400 specifi c improvement projects. On the whole, our customers have observed signifi cant improvements in those areas in which they interface with us.
An average increase of 8% was measured in customer loyalty compared with the previous year.
Frequently, we work out specifi c improvements together with our customers. For instance, we succeeded in reducing processing times for certain brokered activities from eleven to two days for one customer, which led to substantial cost savings on both sides.
Once again, we received a number of awards in 2008. For example, we were named Freight Forwarder of the Year by Australian magazine Lloyd's List DCN for having improved our services through strict quality management and implementation of our First Choice methodology.
In addition, the logistics magazine Supply Chain Asia named us Airfreight Forwarder of the Year 2008.
Our top goal in terms of quality is to have satisfi ed customers with which we maintain long-term, close business relationships.
Th e key to good performance is having dedicated and motivated employees. We intend to achieve this goal with a host of initiatives included in our First Choice programme. To this end, we emphasise active occupational safety programmes at our facilities, use a variety of measures to increase productivity levels, train our employees in process improvement and manage projects professionally.
As a result of these and other programmes, we have reduced the number of workrelated accidents compared with the previous year. We held more than 600 process improve ment workshops in the year under review in which employees and in some cases customers analysed and improved daily workfl ows. Th e overall employee satisfaction level as measured by our employee opinion survey achieved a higher score than in the previous year.
In the year under review, the Supply Chain Business Unit was able to renew over 90 % of existing customer contracts.
We approach our customers regularly and systematically in order to ascertain their needs and their level of satisfaction. Our survey results show that in 2008, more than 70 % of our customers named DHL as their fi rst-choice provider.
Well-established and well-managed brands are amongst the most valuable assets of any company, domestic or international, especially in the service sector. Th ey also give us a competitive edge in the labour market. Th at is why the Group continues to invest in building and expanding its brands. Following the agreed sale of Postbank, we are conducting our core businesses under the Deutsche Post and DHL identities. In 2008, we focused on increasing our customers' awareness of these brands and their respective performance pledges. We also decided to stop using the Exel brand.
In recent years, we have enhanced our brands' visual appeal, reworked and realigned the corporate design and provided service employees with identifying corporate clothing. Creating independent images has been a priority.
Brand manuals describe how Deutsche Post and DHL are positioned and defi ne the tone required for eff ective branding. We have developed in-house measures designed to help all employees become active ambassadors for their brand, employing a variety of internal media to raise their awareness and motivation. Furthermore, a multi lingual internet platform was created for DHL employees, which uses a modern, inter active approach to encourage enthusiasm for the brand. Any time our customers come into contact with us and our services, they should experience a consistent and positive brand image.
Our businesses face tough competition both domestically and internationally. Clear positioning facilitates purchasing and investment decisions for potential and existing customers.
Guided by market research, we invested some € 80 million in the year under review (previous year: € 120 million) in further building our brands. In line with its global presence, around half of that was spent on the DHL brand, for which we launched an international campaign with television commercials and advertisements in business-related media. Additional communication channels included sponsoring, direct marketing, trade fair presentations, press relations and sales support.
Customer retention, customer loyalty and brand recognition are amongst the benchmarks for our success. Market studies confi rm that Deutsche Post has for years enjoyed awareness of around 95 % amongst private and business target groups in Germany. Awareness of DHL continues to rise and currently stands at about 93 % amongst international express delivery and logistics target groups.
Brands are a vital factor in creating value. In 2008, the market research institute Semion Brand-Broker valued the Deutsche Post brand at € 14,517 million, reconfi rming our outstanding position amongst the top five best-known German companies. Factors analysed included fi nancial value, brand protection, brand image and brand strength.
All business involves opportunities and risks. Our Group-wide opportunity and risk management system gives us a head start in dealing with potential changes and events. Th e process developed to serve this system is built around uniform methods to identify and analyse key trends and to communicate them to management. Clear presentation of opportunities, risks and possible countermeasures helps sustain the com pany's ongoing success.
Opportunities and risks are identifi ed and reviewed across the Group every quarter as part of controlling processes. Internal or external factors can cause positive or negative deviations from target. Major impacts of unforeseen events may trigger an ad hoc announcement.
Opportunity and risk analysis involves investigating major infl uencing factors as well as compiling action plans to avoid risks and make use of opportunities. Early warning indicators are determined to ensure timely detection of critical situations. Th e potential impact of a range of factors on Group earnings is evaluated using scenarios and each potential risk is assigned to one or more managers who take appropriate action as necessary.
Note 51.1
Th e Group uses a soft ware application to collate and communicate individual risks. Th is multi-level reporting system ensures that managers are involved across various layers of the hierarchy, and the process is closely dovetailed with controlling to ensure regular exchange between controlling and management. Central risk control is organisationally part of Corporate Controlling and keeps the Board of Management abreast of key opportunities and risks in each division.
Postbank's risk control system complies with the bank-specifi c regulatory requirements in accordance with the Kreditwesengesetz (German banking act), the Solvabilitätsverordnung (German solvency regulation), the Liquiditätsverordnung (German liquidity regulation) and the Minimum Requirements for Risk Management (MaRisk, laid down by Bundesanstalt für Finanzdienstleistungsaufsicht or BaFin, Germany's federal fi nancial supervisory authority). Until the agreed sale of Postbank to Deutsche Bank, Postbank remains integrated into the Group's opportunity and risk control process.
Th e risks set out in the following are those which we presently consider to have a signifi cant potential negative impact on our net assets, fi nancial position and results of operations. Th ey are not necessarily the only risks to which the Group is exposed. Our business activities could also be adversely aff ected by risks of which we are currently unaware or which we do not yet consider to be material.
Our business success depends critically on the fi nancial health of our cus tomers. Th e uncertain economic outlook in the wake of the fi nancial crisis poses considerable potential risks for us and for the entire logistics sector. Many factors are at play here, including whether individual countries put together economic stimulus packages and what eff ect these produce. It is therefore hard to say anything about the duration and scope of the crisis.
Th e fi nancial impact of any drop in revenue is minimised by our extensive costcutting programme. Starting in 2009, the Group aims to lower indirect costs substantially – by € 1 billion by 2010. We also plan to increase our share of important domestic and international express and logistics markets. Th e restructuring of our US express business considerably reduces our cyclical risk in this hard-hit market.
Risks associated with the general business environment primarily arise from the fact that the Group and its subsidiaries provide some of their services in a regulated market. Our statutory exclusive licence was abolished in Germany on 1 January 2008. However, the Postgesetz (German postal act) has allowed exceptions enabling competitors to operate within the weight and price ceilings laid down in our exclusive licence from January 1998 onwards. As a result, around 55 % of the revenue generated by competitors in 2007, the last year of the exclusive licence, was within the weight ceilings stipulated in the exclusive licence. By the end of the year, the regulatory authority (Bundesnetzagentur – Federal Network Agency) had issued licences to around 2,500 competitors.
On 7 November 2007, the regulatory authority announced a benchmark decision specifying the conditions that apply from 2008 until the end of 2011 to regulation under the price cap procedure for mail prices requiring approval. Th is stipulates the key factors applicable to mail prices as being the general rate of infl ation and the expected productivity growth rate for Deutsche Post AG. Prices have to be lowered if the infl ation rate in the reference period is less than the productivity growth rate specifi ed by the regulatory authority. Mail prices requiring approval remain largely unchanged in 2009. Th e regulatory authority accepted an application from Deutsche Post AG to this eff ect on 13 October 2008.
Th e third EU Postal Directive came into force on 27 February 2008. Th e Directive requires most EU member states to open up their markets by 2011, although the nine most recent members plus Greece and Luxembourg have an option to delay opening their markets until 2013. Until then, the previous limits continue to apply across the EU, with reservable services restricted to a maximum of 50 grams or two-and-a-half times the standard letter price. It is now possible to plan with certainty for the future regarding the date by which all national monopolies in Europe must fall.
Whilst liberalisation of postal markets poses risks for Deutsche Post AG due to increased competition in Germany, it also opens up new opportunities in other European postal markets. In 2008, cross-border mail in Europe between Deutsche Post AG and 14 other Western European postal operators was governed by the REIMS III agreement and with another eight Eastern European postal companies by the REIMS EAST agreement. REIMS III is the successor to REIMS II and came into force retroactively from 1 January 2008.
Discussions continue regarding the extent to which postal services should be exempt from value-added tax (VAT). An amendment to the Umsatzsteuergesetz (German value-added tax act) currently in preparation will reduce the VAT exemption for Deutsche Post AG. A bill to this eff ect was adopted by the German cabinet on 24 September 2008 and is set to become law on 1 January 2010. Under the new rules, a VAT exemption will only apply to specifi c universal services pursuant to the EU Postal Directive that are not subject to individual agreement or provided on special terms, for example, at discount rates. Th e VAT exemption is to apply to any enterprise providing all of these services nationwide in Germany. Th e German legislative process may be aff ected by a European Court of Justice (ECJ) decision expected for the second quarter of 2009. On 15 January 2009, the ECJ Advocate General delivered her opinion in the case concerned, which relates to the VAT exemption for postal services in the United Kingdom. Th e German bill has yet to be passed by the Bundestag and Bundesrat.
Concurring with Deutsche Post AG, the regulatory authority considers that the prices it approved are net prices not including VAT. VAT could therefore be added to the approved prices. However, it cannot be ruled out that the application of VAT would lead to a decrease in revenue and earnings.
At the European level, the scope of the VAT exemption for postal services is also the subject of infringement proceedings initiated against the Federal Republic of Germany by the European Commission on 10 April 2006. Th e Commission announced in its decision at the proceedings on 24 July 2007 that the VAT exemption for postal universal services provided by Deutsche Post AG was too broad and called on the German government to amend the applicable law. Germany responded to the European Commission at the proceedings that it considers the current VAT exemption to be in compliance with applicable law.
Th e Federal Republic of Germany is planning a major revision of its Bundesdatenschutzgesetz (BDSG – Federal data protection act). Parliamentary hearings have now begun following a cabinet resolution in December 2008. Under the current Act, postal addresses contained in data relating to groups of persons and "compiled in lists or otherwise combined" may be used for advertising purposes except where consumers explicitly withhold consent. If the revision leads to signifi cant restrictions, it will directly aff ect our marketing business in Germany and may cause substantial loss of revenue and earnings.
By agreeing to sell a stake in Postbank and withdrawing from the US domestic express market, we are strategically repositioning ourselves to concentrate in the future on our core competencies of mail, express and logistics.
Th e goal of the MAIL Division in the liberalised German mail market is to minimise losses in revenue and earnings. Competitors primarily aim to entice business customers away from Deutsche Post. Th e division plans to secure its revenue through rigorous customer focus. We continue to improve on our already very high service quality. In 2008, in the course of deregulation, we gained greater fl exibility in pricing mail comprising more than 50 items, allowing us to retain or win back key accounts. Apart from competition, revenue losses also loom as a result of ongoing digitisation. Conventional mail is increasingly giving way to electronic forms of communication, and we are responding by incorporating electronic communication into our own range of products and services.
Th e commercial situation of the EXPRESS Division varies from region to region. Th e division has expanded its international activities outside North America. In the US domestic market, however, fi erce competitive pressure posed too great a risk for the Group. Th e infrastructure there was costing over US \$ 5 billion a year, whilst express shipment volumes were falling. Combined with the global economic downturn, the situation was no longer tenable. We therefore announced our withdrawal from the domestic express business in the USA on 10 November 2008. Th is will cut annual costs to below US \$ 1 billion and signifi cantly reduce the risks for our express activities in the long term. We will refocus our US operations fully on the international express business. Restructuring will cost some € 3 billion spread over two years. Th e majority of this amount has already been recorded in 2008.
Page 81
Th e LOGISTICS Division was restructured in March 2008, creating two new divisions: Global FORWARDING/FREIGHT focuses on activities with low capital commitment. Th e division brokers and optimises transport capacity. SUPPLY CHAIN/CIS off ers customised logistical and industry solutions at every link in the supply chain, plus outsourcing solutions for purposes such as address and document management. Both divisions aim for organic and profi table growth. Th is depends on the fi nancial health of our customers and trading partners, who have recently suff ered from the economic slowdown, and some of whom could even be threatened with insolvency. We endeavour to contain the eff ects of this development by improving processes and cutting costs. We are also expanding our service portfolio for new sectors. Th e crisis also harbours the opportunity, however, that customers may be more ready to outsource their requirements. Rapidly growing cost pressure on our customers could boost this tendency.
Our global operations require a highly advanced operating infrastructure. Posting and collection, sorting, transport, warehousing, delivery and information technology must all meet high standards. Speed and reliability are key success factors in meeting our excellent standards of quality.
In the MAIL Division, for example, extensive automation ensures profi cient and consistent service. Since downtime can severely disrupt the transport of mail items and merchandise, key infrastructure – sorting and conveyor systems, air hubs and data centres – is continuously monitored. Detailed process, emergency and contingency plans minimise the probability of business interruptions and of major fi nancial consequences.
Th e EXPRESS Division is the market leader in the international express business in all markets outside the US. Whilst we have pulled out of the US domestic market, US international business remains a vital part of our global express network. At the same time, we are substantially reducing our infrastructure costs there. We illustrate the fi nancial impact of these changes in the paragraphs on business strategy risks. Progress on the restructuring is monitored on an ongoing basis; it is expected to be fi nished by mid-2009. Transitioning our international customers to a standardised IT platform is going to be a key challenge during the fi rst two quarters of 2009. We also aim to reduce costs and raise productivity outside the United States in order to off set the fi nancial impact of the recession and the fi erce competition. Moreover, we plan to make greater use of cross- divisional synergies and to improve our range of products and services.
Satisfi ed customers are a core goal for all divisions. Loss of customers could jeopardise the attainment of our revenue and earnings targets. In the logistics business, the risk of losing major accounts is particularly signifi cant. Under our First Choice programme, we are rigorously aligning processes to customer needs. At the same time, we are also aiming to improve cost effi ciency, which in some instances requires capital expenditure. Investment decisions in excess of € 10 million are made by the Corporate Investment Committee. A lower threshold of € 5 million applies to capital expenditures in Global Business Services. Approved projects are closely monitored, allowing material risks to be detected early at the Board level and appropriate action to be taken.
Monitoring developments in environmental policy is an integral part of the Group-wide risk management process. We do not currently know of any environmental risks with signifi cant potential fi nancial implications for the Group over the period to 2011. During 2008, however, the debate advanced within the EU on the adoption of an emissions trading system for air transport and we expect that air transport will be included in emissions trading by 2012. Th e fi nancial impact will depend heavily on how the emissions trading system is set up. It also remains to be seen what volume of emission allowances will be needed and at what price they will trade. It is therefore not yet possible to estimate reliably the specifi c fi nancial consequences of emissions trading for air transport in Europe. In our opinion, however, the Group is generally well placed to minimise the fi nancial risks by virtue of its GoGreen programme.
Like any other company, we have to compete for highly qualifi ed specialists and managers. Workforce fl uctuation can lead to losses of expertise and customer relationships. Action is taken on various fronts to counter this risk.
We promote initial and further training for our workforce and identify outstanding managerial talent. Upcoming talent is nurtured in various ways, including through international educational opportunities, the Group's own university and challenging responsibilities. We off er performance-based pay packages with performance assessment which is standardised Group-wide, linked to human resources development activities tailored for each employee target group. Th is enhances the Group's attractiveness overall along with our prospects in the competition for highly qualifi ed specialists and managers. We aim at all times to be the fi rst choice for customers and our workforce. Our success in this regard is repeatedly borne out by Group-wide employee surveys. An element of fi nancial risk remains despite these measures, although we do not estimate this risk to be great.
On 30 January 2009, we discontinued our domestic express business in the USA and are now concentrating on international business in that market. We began the restructuring process in November 2008, which will further reduce the number of employees there by 9,500. As reported in connection with business strategy risks, the overall cost of the restructuring, including severance payments, will run to some € 3 billion and the majo rity of this cost has already been recorded in 2008.
Information technology is a key success factor for our logistics and service processes. Systems must be accessible and available at all times; unauthorised access to data and data manipulation must be prevented, and it is important to ensure that soft ware is not delivered with defects or too late.
Sustainability, page 77
Various precautions are taken to minimise the probability of occurrence for IT risks. We will have two main data centres in future – in Malaysia and the Czech Republic. Important applications and data are replicated between our data centres in real time. We have detailed emergency plans and disaster recovery centres in place. Due to the use of redundant systems, the risk of major business interruptions is considered to be low despite the closure of our data centre in the USA.
We continuously improve our security mechanisms to fend off unauthorised data access and data manipulation. Our IT is organised with data security as a prime objective. Plans and strategies to this end take into consideration the workforce, networks and applications. Th e success of IT security depends critically on employees observing security guidelines and we have therefore acted to raise risk awareness. Amongst other things, we have set up an Information Security Knowledge Centre – an interactive platform with key information on IT security. Th anks to the action taken, we do not expect any signifi cant fi nancial consequences from this risk.
Our services require the use of frequently updated and in some cases newly developed soft ware. Delays and functional defi ciencies can never be entirely avoided, however, when developing complex new soft ware and putting it into operation. Th is risk is reduced by an effi cient project management system spanning the entire process from soft ware design to introduction. We expect only minor fi nancial impacts in individual business units.
Information on financial risk management is provided in the Notes.
Information on legal risks is provided in the Notes.
Our insurance strategy separates insurable risks into two categories. Th e fi rst category comprises risks with a high probability of occurrence and low individual cost. Th ese risks are insured via what is known as a captive – an insurance company owned by the Group, which is able to cover such risks at a lower cost than external insurers. Th is category accounts for the majority of insurance expenses. Besides achieving major savings, this also makes for cost stability as the Group is unaff ected by changes in the availability and price of outside insurance. Th e second category consists of risks that have a low probability of occurrence but could entail high losses, such as air transport risks. Th ese risks are transferred to external insurers.
Note 51.2
Note 54
Natural disasters or accidents involving aircraft could have a negative impact particularly on our air-based express operations and the cost of external insurance. As most of our insurance expenditure is incurred in relation to events that have a high degree of predictability – that is, a high probability of occurrence but low individual cost – the eff ects of such disasters on the size of insurance premiums or on the availability of insurance to cover them are limited.
Audits are currently under way at DHL Express (USA) and Airborne Inc. in line with the unclaimed property laws in the United States. Under these laws, unclaimed property must either be returned to its rightful owner or the home country of the most recent owner or, if this is not known, the country in which the company is domiciled.
In the course of its expansion, the Group has recognised signifi cant amounts of goodwill. According to IAS 36, goodwill must be tested for impairment at least once a year. If goodwill is determined to be impaired, an impairment loss must be recognised.
As a service provider, we do not conduct research and development in the narrower sense. Th ere are therefore no material risks to report in this area.
Th e Group faces signifi cant risks relating to general operating conditions and liberalisation of the German mail market. Th e global fi nancial crisis and fi erce competition are also capable of signifi cantly aff ecting Group earnings. Th e majority of the cost of restructuring the US business has already been recorded in 2008.
In the past fi nancial year, there were no identifi able risks for the Group which, individually or collectively, cast doubt upon the company's ability to continue as a going concern. Nor are any such risks apparent in the foreseeable future. For a descrip tion of the risk position of Postbank please also refer to the Postbank Group's risk report.
Note 26
Chief Financial Offi cer John Allan (60) has decided to leave the company of his own volition. Following the extension of his contract in early 2008, Mr Allan will make use of a contractual option enabling him to end his current term of offi ce on 30 June 2009.
On 7 January 2009, Deutsche Post World Net entered into a services agreement worth nearly € 350 million with Spanish telecommunications provider Telefónica. Th e telecommunications company will provide mobile, fi xed voice and data services to 125,000 company employees at 2,400 sites in 28 European countries outside Germany, starting in spring 2009. We expect to save over € 150 million over the fi ve-year term of the agreement.
On 14 January 2009, Deutsche Post AG and Deutsche Bank AG agreed on an improved transaction structure for Deutsche Bank's acquisition of Deutsche Postbank AG shares based on the previous purchase price. Th e transaction was closed on 25 February 2009. Th e contract now comprises three tranches. Deutsche Post received the proceeds of the whole transaction on the day of the closing and thus three years earlier than expected. Th e cash value of the transaction is now € 4.9 billion.
As a fi rst step, Deutsche Bank acquires 50 million Postbank shares – corresponding to a stake of 22.9 % – in a non-cash capital increase. Upon entry of the capital increase in the commercial register, Deutsche Post acquires a shareholding of around 8 % in Deutsche Bank. Deutsche Post can dispose of over half of this holding from the end of April 2009; the other half may be disposed of from mid-June. It has been agreed that mechanisms designed to avoid market disturbances will be applied to any such sales. A certain amount of hedging has been carried out for the interim.
At the same time, Deutsche Bank fully underwrote, in a second tranche, mandatory exchangeable bonds issued by Deutsche Post. Aft er three years, these bonds – including interest payments accrued – will be exchanged for 60 million Postbank shares, or a 27.4 % stake. Th e bonds are zero-coupon bonds with a 4% accrued interest per year. Th e cash value of the bonds at the time of the closing is € 2.6 billion.
Put and call options remain in place for the remaining 26.4 million shares (or 12.1 %). Deutsche Bank pays a cash collateral for the options amounting to the cash value of € 1.1 billion at the time of the closing. Th e exercise periods are now set between the 36 th and 48 th month aft er closing. Th rough the collateralisation of the put option and the subscription to the mandatory exchangeable bonds, Deutsche Post receives € 4.2 billion in direct liquid funds, of which € 3.1 billion were received by Deutsche Post on 2 January 2009 and a further €1.1 billion on 25 February 2009.
At the start of 2009, the global economy fi nds itself in a major recession. Governments and central banks on both sides of the Atlantic have taken extensive action to counteract the negative impact of the fi nancial market crisis on the eco n omy but uncertainty remains unusually high. Th e International Monetary Fund (IMF) expects global economic output to grow by only 0.5 % in 2009 – recession level for the global economy. In this climate, global trade is likely to shrink or grow only slightly (IMF: – 2.8 %, OECD: 1.8 %).
| 2008 | 2009 | |
|---|---|---|
| Global trade volume | 4.1 | –2.8 |
| Real gross domestic product | ||
| Global | 3.4 | 0.5 |
| Industrial nations | 1.0 | − 2.0 |
| Emerging markets | 6.3 | 3.3 |
| Central and Eastern Europe | 3.2 | – 0.4 |
| Former CIS states | 6.0 | – 0.4 |
| Emerging markets in Asia | 7.8 | 5.5 |
| Middle East | 6.1 | 3.9 |
| Latin America and the Caribbean | 4.6 | 1.1 |
| Africa | 5.2 | 3.4 |
Source: IMF, World Economic Outlook, October 2008; update, January 2009.
In the United States, even the economic measures planned by the government hardly seem suffi cient to prevent a decline in GDP (IMF: − 1.6 %, OECD: − 0.9 %, Postbank Research: − 1.1 %).
Due to its high dependency on exports, the Japanese economy is likely to be badly hit by the global downturn. It faces a slump of between − 0.1 % (OECD) and − 3.1 % (Postbank Research). In China, GDP is expected to continue its advance but, at 6.7 % (IMF), at a clearly slower rate than in previous years.
Th e downswing in the euro zone looks set to continue. Over the course of the year, the ECB's substantial interest rate reductions, the lower oil price, the weaker euro and the economic measures planned by the countries should gradually start to take eff ect. Nevertheless, GDP is expected to fall for the fi rst time in the history of the monetary union (European Commission: − 1.9 %, Postbank Research: − 1.6 %).
In all likelihood, the German economy will also contract substantially. Th is will notably aff ect exports and corporate investments and, as a consequence, jobs and private consumption. Opinions about whether and how far GDP could fall vary widely (German government: –2.25%, Kiel Institute for the World Economy: − 2.7 %, Postbank Research: − 1.9% ).
Th e situation on the oil market will be determined by the extent of the global recession. Th e average oil price is expected to fall drastically in 2009 compared with the previous year.
Th e US Federal Reserve is likely to leave its key interest rate at its extremely low level this year.
Th e combination of a weak economy and falling infl ation has given the ECB scope to reduce its key interest rate further to 2 % at the beginning of the year. Th e ECB will probably lower its interest rates still further. By contrast, market interest rates are likely to increase moderately.
Demand for mail in Germany depends on the economic climate and the extent to which electronic media continue to take the place of the conventional letter. We expect the domestic market for mail communication to continue shrinking. We have also prepared ourselves to lose market shares to competitors.
Th e German advertising market likewise takes its cue from the economy, meaning that stagnation can be expected in 2009. Although the trend towards targeted advertising is likely to continue, companies will increasingly resort to the more economical forms of advertising that we off er. We intend to consolidate our position in the liberalised market for paper-based advertising and to expand our share in the advertising market as a whole.
Th e market for press services is likely to contract somewhat because of the increasing use of new media. We are seeking to maintain our revenue position here too by drawing on rising subscription fi gures and higher average prices.
Th e expected economic downturn will also impact the international mail market. We plan to counteract this trend by tapping into new areas of business related to our core competency – mail delivery.
In the parcel market, two current trends will continue. For business customers, pressure on traditional mail-order companies will persist with shipment volumes expected to drop. Th e private customer segment will benefi t from e-commerce, an area in which we intend to protect our position.
Th e sustained contraction of the global economy can be expected to have a substantial impact on the international express market in 2009. Th e downward trend is likely to be felt the most in terms of international shipping volumes and in Europe. In Asia and the emerging markets, the market is also not likely to grow as robustly as in recent years.
In the United States, we will continue to implement the agreed restructuring measures and will maintain a network of some 100 stations for our international services even aft er our exit from the domestic express business. Service will actually improve for more than 70 % of international shipments to and from the major urban centres, where we shall off er the latest collection and earliest delivery times of any of our competitors. Moreover, we will continue to develop our international range of services.
Preparations for the launch of cargo carrier AeroLogic in the summer of 2009 are making good progress. AeroLogic is a joint venture between DHL Express and Luft hansa Cargo whose offi ces will be located at Leipzig / Halle Airport. Flight operations will commence in the summer of 2009 with new Boeing 777 aircraft , all fully capable of ful fi lling the company's performance and environmental standards. During the week, the cargo carriers will fl y to Asia and at the weekends they will supplement the Luft hansa Cargo fl eet. Th is arrangement benefi ts both partners by increasing capacity and fl exibility. Customers benefi t from shorter transit times and lower per-unit costs.
We have ordered six Boeing 767 cargo planes, particularly for our connections between the USA and Europe and the emerging markets. Th ree of the planes will be delivered in 2009 and commence operations under DHL Air UK.
In Asia, the new northern Asia hub in Pudong will add to capacity in Hong Kong starting in 2010 and will cover additional geographical regions, such as the extensive area encompassing the Yangtze River delta.
For customers with less time-critical shipping requirements who nonetheless wish to take advantage of our reliable service, we have developed a new product called Economy Select. In 2009, we will off er this product on major trade lanes, particularly those to and from Europe.
In the coming year we plan to implement suitable solutions that will limit the impact of the anticipated economic downturn and gain additional market share. As part of this process, we will focus in particular on the important customer group of small and medium-sized enterprises (SME). We are aware that in times of economic diffi culty, it is especially these customers who need a competent logistics service provider to help reduce haulage distances and transport costs. We will also expand our competence in certain industries. In 2009, we will focus on the transport of perishable goods such as fl owers and food, the pharmaceuticals industry and the technology sector.
Our First Choice initiative has shown us the progress that can be achieved with the help of dedicated employees and methodical processes. Following the GLOBAL FORWARDING / FREIGHT Board, all managers in our worldwide organisation will have successfully completed the appropriate qualifi cation programmes by June 2009. Henceforth, a certifi cate of completion will be a prerequisite for our employees to be promoted.
We will also be supporting our employees in gaining specialist qualifi cations even more energetically than in the past. In 2009, we will establish a Forwarding Academy for this purpose, which will link employees all over the world via online training programmes and forums suited to their level of competence.
In order to maintain our success in the current economic climate, we are working even more closely with our customers, reviewing options for additional cost reductions and searching for new ways to improve our customers' businesses in the various industries and regions where we operate.
We have launched a number of key initiatives that will help improve our fi nan cial performance in the coming years. For instance, we will optimise operational workfl ows, make supporting functions more effi cient, optimise operating assets and continue to effi ciently manage the portfolio. We intend to use these measures to further improve our earnings, working capital and cash fl ow as part of our Roadmap to Value.
Since the fourth quarter of 2008 global economic conditions have deteriorated in an unprecedented way across all industries and regions. We are preparing our businesses to cope with this downturn, the length of which is diffi cult to determine.
To mitigate adverse eff ects from materially lower business volumes our initiatives aim at reducing operating costs and also all indirect and overhead costs. We will also continue to rigorously manage the business to maintain a solid cash position by applying a tight policy on capex and M & A as well as further improving our working capital position.
Th e restructuring of our US express business is being executed according to plan. At this point in time, we have no reason to deviate from our target of reducing the loss of that business on an annualised basis to no more than US \$ 400 million by the fi nal quarter of the year 2009.
At the time of preparing the Group Management Report, economic visibility is currently limited, which makes it diffi cult to provide reliable guidance for the Group and its divisions. We will issue fresh guidance when economic prospects become clearer.
As announced we withdrew from the domestic US express business at the start of 2009 and will restructure our organisation accordingly. We will also streamline our management structure for sales and production in our MAIL Division with a view to improving our process management, optimising our costs and harmonising our approach to the customer.
We plan to make fewer investments in 2009. Property, plant and equipment will again attract the larger portion of spending, and more than three quarters will be allocated to the MAIL, EXPRESS and SUPPLY CHAIN / CIS divisions.
Funds allocated to the MAIL Division will be slightly higher than in the previous year and are planned predominantly for the domestic mail and parcel business. We plan to purchase machinery for processing standard and compact letters and fl at mail more effi ciently. In addition, we intend to install additional Packstations and continue modernising our retail outlets.
In the EXPRESS Division, we will signifi cantly scale back capital expenditure – in view of the foreseeable economic slowdown, amongst other things – and concentrate on the Europe and Asia Pacifi c regions. We will continue to expand and upgrade our hubs and service centres in Europe and Asia to improve our infrastructure. We will also focus on our aircraft fl eet, as before.
In the Global FORWARDING/FREIGHT Division, capital expenditure in 2009 will be below the prior-year level. In the Global Forwarding Business Unit, a major project is planned that will involve replacing an IT application. We also want to improve building facilities and IT infrastructure, especially in Asia and North America. In the Freight Business Unit, we plan to expand our branch network, improve IT equipment and purchase additional security systems. Th ese measures will focus primarily on Germany, Benelux and Scandinavia.
Capital expenditure will also decline in the SUPPLY CHAIN/CIS Division, with the majority of funds being allocated to the Supply Chain Business Unit. We will develop customised solutions for expanding our business with existing and new customers with a focus on the United Kingdom, continental Europe and the USA. In the Corporate Information Solutions Business Unit, we will develop customised solutions for the printing business and buy new printing machines, particularly in Germany.
Cross-divisional capital expenditure is expected to continue declining in 2009. As in the previous year, such investments are mainly planned for new vehicles and IT systems.
Over the coming year, we aim to increase our use of IT applications that can make the procurement of goods and services more effi cient. Our Global eProcurement Tool GeT, which so far has been used primarily in Germany and the United States, is also to be made available to users all across Europe in the future. In addition, we intend to continue pooling our operational procurement activities.
Opportunity management is integrated into the Group-wide opportunity and risk control process. Th e organisation of this process is described in the risk report.
It is currently hard to say how the general economic situation will develop and what fi nancial impact it will have on our Group. We are safeguarding against negative impacts by improving workfl ows and cutting costs. Beginning in 2009, we aim to lower indirect costs by € 1 billion by 2010 in a Group-wide cost-cutting drive. We are also adding to our portfolio of services for new sectors to reduce sectoral dependence.
Th e current diffi cult economic situation also harbours opportunities in that it may make customers more willing to outsource. We expect that we will benefi t in a weak economy from our leading market position and the trust vested in our customer relationships. As trust is important in a crisis, we expect that customers will prefer to stay with the provider they know.
Risks, page 85
Awareness of climate change and environmental responsibility is increasing. Customers are interested in environment friendly products and even in setting up entire supply chains that are ecologically sensitive. We are conscious of our responsibilities as the largest company in our industry, and as such we have developed climate- neutral products under our Group-wide GoGreen programme.
We have begun to reduce the size of our shareholding in Postbank and have set a new course for our express activities in the United States. We will focus in the future on our core businesses of mail, express and logistics.
Our activities are geared to organic growth, capitalising on the global platform and the presence we have built up in growth regions in recent years. Th e roadmap for the future is thus clearly defi ned. All necessary steps are in place to position the Group for future growth. Our Roadmap to Value capital markets programme is gaining traction and will boost the effi ciency of our processes and our earning power. Th is will help us to safely weather the international economic crisis.
We accept our social responsibilities through, amongst other things, disaster aid, our partnership with UNICEF and the GoGreen programme. Th ese programmes are not designed to reap short-term gains, but to enhance awareness of and trust in the Deutsche Post and DHL brands. Th e sustainability of our products and services will assume long-lasting importance as a marketing factor both for our customers and their own.
Th e MAIL Division can build on excellent standards of quality to hold its own against competitors and regain lost customers. A broad range of multi-channel communication solutions holds added scope for further growth. Th ese include consulting services in dialogue marketing, value-added services based on mail, and transport and international delivery. By continuously improving the cost of our transport and delivery network and making the cost structure more fl exible, we are able to respond faster to changes in mail volumes. Providing automated points of sale gives customers easier access to our services whilst reducing our costs. We can also use the internet to make our products and services even more attractive.
Whilst the EXPRESS Division restructures its US activities, we continue to extend our market lead in the international express business. We are developing a uniform range of international time-defi nite and domestic day-defi nite express services in Europe for 2009. Our expansion in Eastern Europe is going well. Th e Asia Pacifi c region remains a growth engine, albeit with declining growth rates. We run domestic express businesses profi tably in various parts of the world. We also safeguard our processes with global network standards and exercise rigorous cost control.
Th e Global fORWARDING / FREIGHT Division boasts a broad service port folio and worldwide multimodal transport services. Individual sectors may provide additional potential for growth. We expect to reap savings by concentrating on strongly frequented routes and making selective use of carriers. Precise targets are set for produc tivity and workfl ow improvements to force down direct operating costs. Growth prospects in the logistics business are buoyed by capacity expansion, our range of indus try solutions and improved processes.
Capital Market, page 39
Page 81
Th e SUPPLY CHAIN / CIS Division views the currently adverse economic climate as an opportunity to make use of companies' greater readiness to outsource. We help companies streamline their logistics processes and cut costs. As leading providers in contract logistics, we have the experience and strong competitive edge needed to further expand our business. Th e corporate information solutions segment also presents growth opportunities in the form of rising demand for global and integrated solutions. We are making ourselves less reliant on the banking, fi nancial services and legal sectors and are developing services for other industries.
Combining cross-divisional services across the Group worldwide means in-house service units can work closely together with business units and tap into available synergies. Major savings can be gained by aggregating procurement volumes. We are consolidating our IT infrastructure, closing the data centre in Scottsdale, Arizona, and transferring its operating functions to the Prague and Cyberjaya data centres. We are also creating global IT functions focusing on customer relationships and project implementation. Th e potential annual savings in IT run into the triple-digit millions.
Any internet sites referred to in the Group Management Report do not form part of the report.
This Annual Report contains forward-looking statements that relate to the business, financial performance and results of operations of Deutsche Post AG. Forward-looking statements are not historical facts and may be identified by words such as "believes", "expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets" and similar expressions. As these statements are based on current plans, estimates and projections, they are subject to risks and uncertainties that could cause actual results to be materially different from the future development, performance or results expressly or implicitly assumed in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as at the date of this presentation. Deutsche Post AG does not intend or assume any obligation to update these forward-looking statements to reflect events or circumstances after the date of this Annual Report.
The NIZA NAVIGATION SYSTEM (NiZA is the German acronym for "navigation in delivery and collection") will be installed in a total of 450 DHL Parcel Germany delivery vehicles by summer 2009. Th e system ensures that new employees not yet familiar with the area can fi nd their destinations, and it will enable DHL to reduce labour costs, fuel consumption and CO2 emissions.
Symbol: Load centre of gravity
| 103 | REPORT OF THE SUPERVISORY BOARD | |
|---|---|---|
| 109 | SUPERVISORY BOARD | |
| Members Committees |
109 109 |
|
| 111 | BOARD OF MANAGEMENT | |
| 112 | MANDATES HELD BY THE BOARD OF MANAGEMENT |
|
| 113 | MANDATES HELD BY THE SUPERVISORY BOARD |
|
| 114 | CORPORATE GOVERNANCE REPORT | |
| Remuneration Report | 116 |
Prof. Dr Wulf von Schimmelmann, Chairman
Th e Group continued to expand its leading position in nearly all areas of business and is well equipped for the future.
Th e reporting year was marked by two decisions that represent a turning point in our history. In September 2008, Deutsche Post agreed to gradually sell its stake in Postbank to Deutsche Bank. In the future, the Group plans to concentrate on mail, express and logistics activities and to exit the fi nancial services sector. We also decided to restructure the US express business, making the fi nal decision in November 2008 aft er having begun weighing our options in May. We discontinued domestic air and ground transport operations in the US express segment as at 30 January 2009. However, we will continue off ering international express services in the United States.
Our strategic corporate initiatives – Roadmap to Value, First Choice and GoGreen – have been well received. Th ese programmes have already led to encouraging progress in increasing enterprise value, customer satisfaction and environmental protection.
Th e Supervisory Board again devoted close attention to the strategic focus and business performance of the Group in all areas in 2008. We discussed in detail the restructuring of the US express business and the sale of Deutsche Postbank AG. Other topics of particular signifi cance were the eff ects of the fi nancial crisis on the company's transactions, the company's participation in the capital increase of Deutsche Postbank AG, the progress made by our Roadmap to Value capital markets programme and personnel changes in the management of Deutsche Post AG.
All major decisions aff ecting the company were discussed in detail with the Board of Management, which informed us in a timely and comprehensive manner on all key issues relating to planning and business development. We received regular reports on the risk situation and risk management, major business transactions and projects in the individual divisions as well as on strategic measures and the company's future direction. In particular, all measures requiring the consent of the Supervisory Board were discussed in depth. Th e Board of Management kept the chairman of the Supervisory Board continuously updated on all key transactions and major impending decisions, both at the Supervisory Board meetings and between meetings. We prepared our approval for business measures in the relevant committees. Th e chairs of the committees reported regularly on the committees' work at the Supervisory Board meetings.
Five meetings were held in the fi rst half of the year and four in the second half. No member of the Supervisory Board was absent from more than half of the meetings. At all of its meetings, the Supervisory Board concerned itself with issues of corporate strategy, the business performance of the divisions and risk management.
In a special meeting held on 18 February 2008, the Supervisory Board accepted the resignation of Dr Klaus Zumwinkel from his post as Chairman of the Board of Management and appointed Dr Frank Appel as the new Chairman of the Board of Management.
At the financial statements meeting held on 4 March 2008, we discussed and approved the annual and consolidated fi nancial statements for 2007, following in-depth discussions between the auditors and the Finance and Audit Committee and the chairman of the Supervisory Board. We also reviewed the effi ciency of the Supervisory Board's work based on an updated questionnaire. Further topics involved the new appointments of Bruce Edwards and Hermann Ude as members of the Board of Management and the related adjustment of business responsibilities. Th e LOGISTICS Division was split into Global Forwarding, Freight, headed by Hermann Ude, and Supply Chain, Corporate Information Solutions, headed by Bruce Edwards. Responsibility for Global Mail was transferred to the MAIL Division, which is headed by Jürgen Gerdes. We also approved an increase in our stake in Williams Lea at this meeting.
At the meeting on 5 May 2008, we dealt in detail with the situation of the US express business.
Th e terms of offi ce of the employee representatives appointed to the Supervisory Board by the assembly of delegates pursuant to the Mitbestimmungsgesetz (MitbestG – German co-determination act) commenced upon the close of the AGM of Deutsche Post AG on 6 May 2008. At the Supervisory Board meeting directly following the AGM, Andrea Kocsis was re-elected deputy chair of the Supervisory Board, deputy chair of the Executive Committee and chair of the Personnel Committee. Wolfgang Abel was appointed member and deputy chair of the Finance and Audit Committee, Th omas Koczelnik and Helga Th iel were appointed members of the Finance and Audit Committee, Rolf Bauermeister and Stefanie Weckesser were appointed members of the Executive Committee, Th omas Koczelnik was appointed member of the Personnel Committee and Rolf Bauermeister was additionally appointed member of the Mediation Committee of the Super visory Board of Deutsche Post AG by the employee representatives.
In another special meeting on 28 May 2008, we approved the restructuring of the US express business following extensive discussions.
In June 2008 we approved in a written resolution the request of Dr Wolfgang Klein to step down temporarily as member of the Board of Management of Deutsche Post AG in order to avoid any potential confl icts of interest that might arise during a possible reorgani sation of the shareholder structure of Deutsche Post AG. Th e duties of the Board of Management members were reallocated to allow Dr Frank Appel to assume responsibility for the FINANCIAL SERVICES Division in addition to his position as chairman of the Board of Management for the time during which Dr Klein had ceased active participation.
In the Supervisory Board meeting of 12 September 2008, we dealt in detail with the situation of the express business in the US. We also approved the gradual sale of the shares in Postbank to Deutsche Bank. Th e contracting parties subsequently negotiated a contract that best serves the interests of both sides. Th e new contract stipulates that Deutsche Post will receive the entire proceeds from the transaction on the closing date – i. e., three years earlier than originally anticipated – including the proceeds from the Postbank shares that will not be transferred until a later date. Th is has not increased overall transaction risk. We approved the changes in the transaction structure on 14 January 2009.
In another special meeting on 26 October 2008, the Supervisory Board addressed in detail the proposed share purchase to ensue from a possible capital increase of Deutsche Postbank AG and approved the subscription of 100 % of the shares issued.
In a special meeting that followed on 10 November 2008, we approved our exit from the domestic US express business, including the costs that this will entail. In the future, Deutsche Post World Net will focus on its international core competencies in the US express market. Th e exit from the market occurred as planned in January 2009. As a result, costs arising from the express business in the US will decrease by more than 80 %, whilst competitive standing will improve substantially given that 71 % of all international deliveries from US metropolitan areas will be able to be processed more quickly. We also accepted Dr Wolfgang Klein's resignation from the Board of Management and approved the related adaptation of the bylaws.
In the last meeting of the Supervisory Board on 16 December 2008, we approved the business plan for 2009 and agreed to focus on an updated plan in February 2009. We also took note of the plan for 2010 and 2011. At the same meeting Dr Jürgen Weber announc ed his resignation, eff ective 31 December 2008. Prof. Dr Wulf von Schimmelmann was elected unanimously as Dr Weber's successor. Furthermore, we submitted the Declaration of Compliance with the 2008 German Corporate Governance Code and passed a resolution giving global authorisation for the award of loans by Postbank.
Th e Executive Committee met nine times during the year under review. Agenda items focused on Board of Management and Supervisory Board business as well as the further development of the company's corporate governance.
Th e Personnel Committee met twice and concentrated primarily on the First Choice and GoGreen programmes and the Group's involvement in educational initiatives.
The Finance and Audit Committee met ten times, with meetings chaired by Prof. Dr Ralf Krüger. Th e committee discussed the acquisition and disposal of com panies, which was subsequently also addressed in the plenary sessions of the Super visory Board, as well as the Group's business plan for the period from 2009 to 2011. It also examined the annual and consolidated fi nancial statements, discussed the interim reports and dealt with the review of the interim fi nancial reports for the fi rst half of the year. Th e auditors attended the committee's fi nancial statements meeting. Accounting and risk monitoring, as well as co-operation with the auditors, were also discussed in detail. Additionally, a number of real estate transactions were approved. Furthermore, individual Board of Manage ment members gave presentations on the business performance of their respective divisions for discussion by the com mittee. Key topics included the US express business, the mail business in Germany and the transaction involving Postbank. Th e committee also deliberated on the organisation of compliance activities and the compliance tools applied in the Group.
Th e Nomination Committee met three times during the year under review. At its meetings, the committee resolved to recommend Prof. Dr Wulf von Schimmelmann as a suitable candidate for the Supervisory Board's nomination to the 2008 AGM.
It was not necessary for the Mediation Committee, which must be formed pursuant to Section 27 (3) of the Mitbestimmungsgesetz, to meet in the year under review.
Th e following changes were made to the Supervisory Board of Deutsche Post AG in 2008: Eff ective 6 May 2008, employee representatives Frank von Alten-Bockum, Marion Deutsch, Dirk Marx, Silke Oualla-Weiß and Margrit Wendt left the Supervisory Board, Heinrich Josef Busch, Th omas Koczelnik, Anke Kufalt, Andreas Schädler and Helga Th iel were newly elected and Wolfgang Abel, Rolf Bauermeister, Annette Harms, Andrea Kocsis and Stefanie Weckesser were re-elected. Prof. Dr Wulf von Schimmelmann was appointed member of the Supervisory Board by the court on 6 August 2007 and on 6 May 2008 was appointed shareholder representative for fi ve years by the 2008 AGM. At the Supervisory Board meeting on 16 December 2008, he was elected chairman of the Supervisory Board eff ective 1 January 2009 and Andrea Kocsis was confi rmed as deputy chair. Ingrid Matthäus-Maier resigned her seat eff ective 31 August 2008. On 1 September, Dr Ulrich Schröder was appointed to the Supervisory Board by the court as a shareholder representative. Th e appointment will be submitted to the shareholders for ratifi cation at the AGM on 21 April, 2009. Dr Jürgen Weber resigned his seat on the Supervisory Board and thus his position as chairman as at 31 December 2008.
The following changes occurred on the company's Board of Management: On 18 February 2008, Dr Klaus Zumwinkel resigned from offi ce. Th e Supervisory Board accepted his resignation and, on the same day, unanimously appointed Dr Frank Appel as new chairman of the Board of Management. Dr Frank Appel initially assumed responsibility for the chairman's board department in addition to his previous duties. Bruce Edwards and Hermann Ude were appointed members of the Board of Management eff ective 4 March 2008. Dr Wolfgang Klein stepped down from his position on the Board of Manage ment of Deutsche Post until further notice eff ective 25 June 2008, and Dr Frank Appel assumed responsibility for the FINANCIAL SERVICES Division for this period in addition to his other duties as chairman of the Board of Management. On 10 November 2008, Dr Wolfgang Klein resigned his seat on the Board of Management of Deutsche Post AG.
In December 2008, the Board of Management and the Supervisory Board submitted an updated Declaration of Conformity pursuant to Section 161 of the Aktien gesetz (Germany stock corporation act) and published it on the company's website. Th e previous declarations can also be viewed on this website. In fi nancial year 2008, Deutsche Post AG complied with all recommendations of the German Corporate Governance Code as amended on 14 June 2007. Th e company plans to continue complying with the recommendations of the Code as amended on 6 June 2008. Further information on corporate governance within the company, including the remuneration of the Board of Management and the Supervisory Board members, is contained in the Corporate Governance Report on page 114.
Th e auditors appointed by the AGM, PricewaterhouseCoopers Aktiengesellschaft Wirtschaft sprüfungsgesellschaft (PwC), Düsseldorf, audited the annual and consolidated fi nancial statements for fi nancial year 2008, including the respective management reports, and issued unqualifi ed audit opinions.
Following a detailed preliminary assessment by the Finance and Audit Committee, the Supervisory Board reviewed the annual and consolidated fi nancial statements and the management reports for fi nancial year 2008 in the fi nancial statements meeting on 25 February 2009. Th e auditors' reports were made available to all Supervisory Board members and were discussed in detail at the meeting with the Board of Management and the auditors in attendance. Th e audit included a review of the Board of Management's proposal for the appropriation of the unappropriated surplus. Th e Supervisory Board concurred with the results of the audit of the annual and consolidated fi nancial statements and the management reports, and at today's meeting approved the annual and consolidated fi nancial statements for fi nancial year 2008 aft er detailed discussion with the Board of Management and the auditor's representative. Based on the fi nal outcome of the examination of the annual and consolidated fi nancial statements, the management reports and the proposal for the appropriation of the unappropriated surplus by the Supervisory Board and the Finance and Audit Committee, there are no objections to be raised. Th e Supervisory Board endorses the Board of Management's proposal for the appropriation of the unappropriated surplus and the payment of a dividend of €0.60 per share.
We would like to thank the Board of Management and all the employees of the Group for their commitment and successful eff orts throughout 2008. Th e Supervisory Board would particularly like to thank Dr Klaus Zumwinkel for his extraordinary service for the Group.
Bonn, 25 February 2009 Th e Supervisory Board
Prof. Dr Wulf von Schimmelmann Chairman
Prof. Dr Wulf von Schimmelmann Chairman (since 1 January 2009)
Management Consultant
Managing Partner, E. Breuninger GmbH & Co.
Management Consultant
State Secretary, Federal Ministry of Finance
Management Consultant
Managing Partner, ROI Verwaltungs gesellschaft mbH
President of Deutsche Schutzvereinigung für Wertpapierbesitz e. V. (until 10 October 2008)
Dr Ulrich Schröder (since 1 September 2008) Chairman of the Board of Managing Directors, KfW Bankengruppe
Managing Director, E Toime Consulting Ltd.
Left in fi nancial year 2008:
Ingrid Matthäus-Maier (until 31 August 2008) Member of the Board of Managing Directors, KfW Bankengruppe
Chairman (until 31 December 2008) Chairman of the Supervisory Board, Deutsche Lufthansa AG
Deputy Chair of the ver.di National Executive Board and Head of the Federal Postal Services, Forwarding Companies and Logistics section, ver.di National Executive Board
Wolfgang Abel (since 18 February 2008) Regional Head of the Regional Postal Services, Forwarding Companies and Logistics section, ver.di Hamburg Regional District
Rolf Bauermeister (since 18 February 2008) Head of the Postal Services, Co-Determination and Youth departments, National Head of the Postal Services group, ver.di National Administration
Heinrich Josef Busch (since 6 May 2008) Chair of Group and Company Chair Committee, Deutsche Post AG
Deputy Chair of Works Council, Deutsche Postbank AG, Hamburg
Thomas Koczelnik (since 6 May 2008) Chair of Group Works Council, Deutsche Post AG
Anke Kufalt (since 6 May 2008) Member of Works Council, DHL Global Forwarding GmbH, Hamburg
Andreas Schädler (since 6 May 2008) Chair of Central Works Council, Deutsche Post AG
Member of ver.di National Executive Board (Postal Services, Forwarding Companies and Logistics) and Member of Central Works Council, Deutsche Post AG (until 3 June 2008) Deputy Chair of Central Works Council, Deutsche Post AG (since 4 June 2008)
Member of Works Council, parcel delegate, Augsburg Mail Branch
Frank von Alten-Bockum (until 6 May 2008) Managing Director, Deutsche Post AG (until 31 August 2008)
Marion Deutsch (until 6 May 2008) Deputy Chair of Works Council, Deutsche Post AG, Saarbrücken Mail Branch
Silke Oualla-Weiß (until 6 May 2008) Chair of Works Council, DHL Express Betriebs GmbH, Düsseldorf (Dortmund offi ce)
Margrit Wendt (until 6 May 2008) Chair of European Works Council Forum Chair of Deutsche Post World Net Forum
(in accordance with Section 27 (3)
Born in 1961, member of the Board of Management since 2002, appointed until October 2012, Chairman of the Board of Management since 18 February 2008, since then responsible for Corporate Executives, Corporate Communications, Corporate Development, the Corporate Offi ce and Corporate Organisation as well as Corporate Public Policy and Sustainability. He is also responsible for Corporation Regulation Management, operational management of the Group-wide First Choice initiative and has cross-divisional responsibility for the Group's 100 biggest customers (Global Customer Solutions).
Born in 1948, member of the Board of Management since 2006, appointed until December 2010 (but has resigned, eff ective 30 June 2009), responsible for Finance including Controlling, Corporate Accounting and Reporting, Investor Relations, Corporate Finance, Corporate Internal Audit / Security, Taxes and Global Business Services.
SUPPLY CHAIN /CIS
Born in 1955, member of the Board of Management since 4 March 2008, appoint ed until December 2011, responsible for the SUPPLY CHAIN/CIS Division.
Born in 1964, member of the Board of Management since 2007, appointed until June 2010, responsible for the MAIL Division.
Born in 1955, member of the Board of Management since 2005, resigned eff ective 25 February 2009, was previously responsible for the EXPRESS Division.
PERSONNEL
Born in 1952, member of the Board of Management since 2000, appointed until March 2010, responsible for Personnel, including Corporate Compensation Policies / Labour Law, Human Resources and Human Resources Development.
GLOBAL FORWARDING / FREIGHT
Born in 1961, member of the Board of Management since 4 March 2008, appointed until March 2011, responsible for the Global FORWARDING / FREIGHT Division.
EXPRESS
Born in 1955, member of the Board of Management since 26 February 2009, appointed until Februar 2012, responsible for the EXPRESS Division.
| Dr Frank Appel | John Allan | Dr Wolfgang Klein |
|---|---|---|
| Chairman | Finance, Global Business Services | FINANCIAL SERVICES |
| (since 18 February 2008) LOGISTICS, MAIL International |
Bruce Edwards (since 4 March 2008) | |
| (until 4 March 2008) FINANCIAL SERVICES |
SUPPLY CHAIN / CIS Jürgen Gerdes |
John P. Mullen EXPRESS |
| (25 June to 10 November 2008) | MAIL and PARCEL Germany | Walter Scheurle |
| Dr Klaus Zumwinkel Chairman (until 18 February 2008) |
(until 4 March 2008) MAIL (since 5 March 2008) |
Personnel |
A DR FRANK APPEL Board of Management Deutsche Post World Net
FINANCIAL SERVICES
(until 10 November 2008, mandate suspended between 25 June 2008 and 10 November 2008)
John P. Mullen
Hermann Ude (since 4 March 2008) GLOBAL FORWARDING / FREIGHT
since 20 June 2008
• Bundesanstalt für Post und Telekommunikation (Administrative Board)
Chair since 1 January 2009
Ingrid Matthäus-Maier (until 31 August 2008)
Dr Jürgen Weber (until 31 December 2008)
• Deutsche Postbank AG
Helga Thiel (since 6 May 2008)
• PSD Bank Köln eG
Frank von Alten-Bockum (until 6 May 2008)
Dirk Marx (until 6 May 2008)
• Bundesanstalt für Post und Telekomm unikation (Administrative Board)
113
until 28 September 2008
In December 2008, the Board of Management and Supervisory Board issued an unqualifi ed Declaration of Conformity for the seventh consecutive year. It confi rms that since the previous Declaration of Conformity, Deutsche Post has complied with the recommendations of the German Corporate Governance Code as amended on 14 June 2007. We also implemented the suggestions set forth in the Code, with one exception: Th e Annual General Meeting can only be viewed on the internet until the start of the general debate. In the future, we will comply with the recommendations of the Govern ment Commission on the German Corporate Governance Code as amended on 6 June 2008.
As a German public limited company, Deutsche Post operates under a dual management system. Th e Board of Management is responsible for the management of the company, and is appointed, overseen and advised by the Supervisory Board. After Dr Klaus Zumwinkel resigned as chairman of the Board of Management, Dr Frank Appel was appointed chairman on 18 February 2008. Bruce Edwards and Hermann Ude were appointed to the Board of Management eff ective 4 March 2008. On 25 June 2008, Dr Wolfgang Klein stepped down from his position on the Board of Management until further notice. On 10 November 2008, he left the Board of Management of Deutsche Post AG. Th e duties of the individual Board members were reallocated accordingly.
Dr Frank Appel initially assumed the duties of chairman of the Board of Management in addition to his other Board responsibilities. On 4 March 2008, the LOGISTICS Division – for which Dr Frank Appel had been responsible – was split into the new board depart ments of Global Forwarding, Freight, headed by Hermann Ude, and Supply Chain, Corporate Information Solutions, headed by Bruce Edwards. Global Mail was integrated into the MAIL Division, which is headed by Jürgen Gerdes. Aft er Dr Wolfgang Klein ceased active participation on the Board of Management of Deutsche Post, Dr Frank Appel assumed Board responsibility for the FINANCIAL SERVICES Division from 25 June to 10 November 2008 in addition to his duties as chairman of the Board of Management.
Th e Supervisory Board comprises twenty members, who are listed on page 109. Ten shareholder representatives are elected at the AGM, whilst a further ten are elected by employees in accordance with the provisions of the Mitbestimmungs gesetz ( MitbestG – German co-determination act). An overview of additional mandates held by Board of Management and Supervisory Board members in those supervisory boards and bodies of other companies that are required by law may be found on pages 112 and 113. Th e Supervisory Board's report on its activities in fi nancial year 2008 is pub lished on page 103.
At the AGM on 6 May 2008, Prof. Dr Wulf von Schimmelmann was elected to the Supervisory Board for a fi ve-year term on an individual basis. In March 2008, an assembly of delegates elected new employee representatives to the Supervisory Board pursuant to the MitbestG. Th eir terms of offi ce began upon the close of the AGM on 6 May 2008. Frank von Alten-Bockum, Marion Deutsch, Dirk Marx, Silke Oualla-Weiß and Margrit Wendt left the Supervisory Board, and Wolfgang Abel, Heinrich Josef Busch, Rolf Bauermeister, Annette Harms, Th omas Koczelnik, Andrea Kocsis, Anke Kufalt, Andreas Schädler, Helga Th iel and Stefanie Weckesser were either newly elected or re-elected. Ingrid Matthäus-Maier resigned her seat eff ective 31 August 2008. On 1 September 2008, Dr Ulrich Schröder was appointed to the Supervisory Board by the court as a shareholder representative. Th e appointment will be submitted to the shareholders for ratifi cation by voting at the AGM to be held on 21 April 2009. Dr Jürgen Weber resigned his seat on the Supervisory Board and thus the offi ce of Supervisory Board chairman eff ective 31 December 2008. On 16 December 2008, the members of the Supervisory Board elected Prof. Dr Wulf von Schimmelmann chairman of the Super visory Board starting 1 January 2009. On 18 February 2009, Prof. Dr Henning Kagermann was appointed by the court to the Supervisory Board as a shareholder representative. He will be recom mended to the 2009 AGM for election.
Th e majority of Supervisory Board members of Deutsche Post AG are independent as recommended by the German Corporate Governance Code, with which Deutsche Post is thus in compliance.
Th e Supervisory Board has formed a total of fi ve committees. In addition to the Mediation Committee required by the MitbestG, these include the Executive Com mittee, the Finance and Audit Committee, the Personnel Committee and the Nomination Committee recommended by the Code. A list of members of these committees may be found on page 109. Th e Supervisory Board's report on the committees' activities in the year under review is found on page 103.
We are committed to open communication with our shareholders. All relevant dates are displayed on our website, including the publication dates for the annual report and interim reports. Th e website also contains up-to-date information about our shares and share price movements, as well as announcements regarding the purchase and sale of company shares and related fi nancial instruments pursuant to Article 15 a of the Wertpapierhandelsgesetz (WpHG - German securities trading act).
Members of the Board of Management and Supervisory Board are required to disclose immediately any potential confl icts of interest to the Supervisory Board. Outside activities pursued by members of the Board of Management are subject to the approval of the Supervisory Board.
All Group employees are expected to comply with statutory and internal regulations. Based on the company's corporate values, the Board of Management therefore introduced a Code of Conduct. All of our executives must indicate their willingness to uphold the Code of Conduct by signing a declaration of commitment. As part of our Group-wide compliance system, we have set up a Global Values Offi ce and Regional Values Offi ces to provide advice on and monitor implementation of compliance processes. We have also established a Clearing Committee made up of members of our investors.dpwn.com
Legal, Human Resources and Internal Audit departments. Th e committee meets regularly to consult on specifi c issues related to compliance management. Employees can also report any violations to the complaints hotline. In the event of infringements, suitable measures will be taken; these may include action under labour and disciplinary law if appropriate. Compliance with the Code of Conduct is an issue regularly addressed by the Internal Audit department, which is part of the Finance Board Department. Th e subject of compliance is discussed at regular intervals by the Supervisory Board's Finance and Audit Committee.
Our opportunity and risk management system ensures that any risks are identifi ed early on. Th e system is continuously refi ned and updated to refl ect the latest developments. Further details can be found in our risk report starting on page 85.
Th e Group accounts are prepared in accordance with International Financial Reporting Standards (IFRS). PricewaterhouseCoopers Aktiengesellschaft Wirtschaft sprüfungsgesellschaft (PwC), Düsseldorf, was appointed by the AGM as the auditor of the annual and consolidated fi nancial statements for the fi nancial year 2008 and to review the half-year fi nancial report. Before engaging the auditors, the Supervisory Board took steps to ensure that the existing relationships between the auditors and the company or its executive and controlling bodies did not call into question the auditors' independence.
Th e remuneration report also forms part of the Group Management Report.
Th e total remuneration paid to Board of Management members is determined by the Supervisory Board or its Executive Committee, which is headed by the chairman of the Supervisory Board. Aft er holding consultations, the Supervisory Board decides on the remuneration system for the Board of Management – including the main contractual elements – based on the recommendation submitted by the Executive Committee. Th e remuneration system is regularly reviewed by the Supervisory Board. Th e remuneration of the Board of Management refl ects the size and global reach of the company, its economic and fi nancial situation and the roles fulfi lled by the individual members. It is set to ensure competitiveness with comparable German and international companies, thus providing an incentive for the Board of Management members to deliver maximum performance and achieve results. Th e Supervisory Board conducts regular reviews to determine whether the remuneration paid to the Board of Management is appropriate, taking into account the company's results, the industry in which it operates and its future prospects.
Th e remuneration of the Board of Management is performance-based and comprises fi xed and variable elements as well as long-term incentives.
Components not linked to performance are the basic salary, fringe benefi ts and pension commitments. Th e basic salary is paid monthly. Fringe benefi ts comprise mainly the use of company cars, the reimbursement of travel expenses, a telephone allowance and supplements for insurance premiums as well as special allowances and benefi ts for assignments outside the home country.
Th e annual bonus is a variable, performance-linked element. Th e Supervisory Board or its Executive Committee exercises its due discretion to determine the annual bonus on the basis of the company's performance. Th e amount of the bonus refl ects the extent to which predefi ned targets are achieved, missed or exceeded. Since 2008, a new performance indicator – EBIT aft er asset charge – has been included in the target agreements along with profi t or loss from operating activities (EBIT). Achievement of the upper target for the fi nancial year is rewarded with the maximum annual bonus. Th e maximum annual bonus opportunity is 100 % of the annual basic salary. In addition, the Supervisory Board may elect to award an appropriate special bonus for extraordinary achievement.
As a variable remuneration component with long-term incentive eff ect, the Board of Management members receive stock appreciation rights (SAR) issued on the basis of a long-term incentive plan.
Th e remuneration paid to active members of the Board of Management in fi nancial year 2008 totalled € 11.89 million (previous year: € 15.70 million). Th is amount comprised €9.01 million in non-performance-related components (previous year: € 8.68 million) and € 2.88 million in bonuses (previous year: € 7.02 million). Th e members of the Board of Management were granted a total of 1,725,000 SAR in fi nancial year 2008 with a total value of € 4.78 million (previous year: € 6.37 million) at the time of issue (1 July 2008).
Th e following table presents the total remuneration paid to the active Board of Management members:
| € | Not linked to performance Performance-related | ||||
|---|---|---|---|---|---|
| Active board members | Basic salary | Fringe benefi ts | Variable | Total | |
| Dr Frank Appel (chairman since 18 Feb. 2008) | 1,429,205 | 28,387 | 0 | 1,457,592 | |
| John Allan | 1,046,580 | 593,906 | 0 | 1,640,486 | |
| Bruce Edwards (since 4 March 2008) | 715,760 | 40,331 | 0 | 756,091 | |
| Jürgen Gerdes | 715,000 | 37,222 | 0 | 752,222 | |
| John P. Mullen | 1,139,871 | 767,765 | 0 | 1,907,636 | |
| Walter Scheurle | 860,000 | 23,891 | 0 | 883,891 | |
| Hermann Ude (since 4 March 2008) | 590,067 | 12,603 | 0 | 602,670 |
| € | Value of SAR on grant date |
Change in value of total SAR granted from 2006 to 2008 on 31 Dec. 2008 |
|
|---|---|---|---|
| Active board members | Number of SAR | (1 July 2008) | compared with value on grant date |
| Dr Frank Appel (chairman since 18 Feb. 2008) | 345,000 | 955,650 | – 1,995,050 |
| John Allan | 230,000 | 637,100 | – 420,650 |
| Bruce Edwards (since 4 March 2008) | 230,000 | 637,100 | – 527,064 |
| Jürgen Gerdes | 230,000 | 637,100 | – 895,664 |
| John P. Mullen | 230,000 | 637,100 | – 1,895,000 |
| Walter Scheurle | 230,000 | 637,100 | – 1,895,000 |
| Hermann Ude (since 4 March 2008) | 230,000 | 637,100 | – 422,076 |
Th e remuneration of the members of the Board of Management who left in 2008 breaks down as follows:
Dr Wolfgang Klein left the Board of Management of Deutsche Post AG eff ective 10 November 2008. As in previous years, he only received remuneration in fi nancial year 2008 from Deutsche Postbank AG. His total remuneration breaks down as follows: basic salary of € 751,042; fringe benefi ts in the amount of € 24,833 and variable remuneration (one-time special payments) of € 2,400,000, which was off ered and paid by Postbank. Th e share attributable to fi nancial year 2007 was € 150,000. Dr Wolfgang Klein's total proportionate remuneration for fi nancial year 2008 was € 3,175,875. Dr Wolfgang Klein did not receive any stock appreciation rights.
Dr Klaus Zumwinkel left the Board of Management of Deutsche Post AG eff ective 18 February 2008. His total remuneration breaks down as follows: basic salary of € 207,265, fringe benefi ts in the amount of € 26,596 and variable remuneration of € 480,184 (€ 272,920 of this is attributable to a bonus share for fi nancial year 2007 that was paid in 2008). Dr Klaus Zumwinkel's total proportionate remuneration for fi nancial year 2008 was € 714,045.
In 2006, the Executive Committee of the Supervisory Board adopted the Long-Term Incentive Plan 2006 (LTIP 2006), which was based closely on the lapsed stock option plan 2003 (SOP 2003). On 1 July 2006, the members of the Board of Management were for the fi rst time awarded SAR under this plan instead of the stock options granted in previous years.
Each SAR entitles the holder to receive a cash settlement equal to the diff erence between the issue price of the SAR and the average closing price of the Deutsche Post shares for the last fi ve trading days before the exercise date. As in the past, the members of the Board of Management must each invest 10 % of their annual target salary in Deutsche Post shares per tranche. Th e number of SAR to be issued to the members of the Board of Management is determined by the Supervisory Board or its Executive Committee as each tranche is issued. Th e other essential features of the previous stock option plan have been retained. Following a three-year lock-up period that begins on the date of issue, the SAR, like the stock options, may be exercised in full or in part within a period of two years provided an absolute or relative performance target has been achieved at the end of the lock-up period. Any SAR not exercised during this twoyear period expire.
To determine how many – if any – of the SAR granted may be exercised, the average share price or the average index level is compared for the reference period and for the performance period. Th e reference period, as in the past, comprises the twenty consecutive trading days prior to the issue date. Th e performance period is the last sixty trading days before the end of the lock-up period. Th e average share price (closing price) is calculated as the average of the closing rates of Deutsche Post shares in Deutsche Börse AG's Xetra electronic trading system.
As in the past, the absolute performance target is achieved if the closing price of Deutsche Post shares exceeds the issue price by at least 10 %, 15 %, 20 % or 25 %. Th e relative performance target is tied to the performance of the shares in relation to the performance of the Dow Jones STOXX 600 Index (SXXP; ISIN EU0009658202). Th e target is met if the share price is not outperformed by the index during the performance period or if it outperforms the index by at least 10 %.
A maximum of four out of every six SAR can be "earned" via the absolute performance target and a maximum of two via the relative performance target. If neither an absolute nor relative performance target is met by the end of the lock-up period, the SAR of the related tranche will expire and no replacement or compensation of any kind will be provided. Th e table below presents further details of the tranches of the LTIP 2006:
| Tranche 2006 | Tranche 2007 | Tranche 2008 | |
|---|---|---|---|
| Issue date | 1 July 2006 | 1 July 2007 | 1 July 2008 |
| Issue price | € 20.70 | € 24.02 | € 18.40 |
| Expiry of lock-up period | 30 June 2009 | 30 June 2010 | 30 June 2011 |
Th e table below provides detailed information on the individual tranches of the expired stock option plan:
Note 55
Stock options
| SOP 2003 | |||
|---|---|---|---|
| Tranche 2003 | Tranche 2004 | Tranche 2005 | |
| Issue date | 1 August 2003 | 1 July 2004 | 1 July 2005 |
| Exercise price | € 12.40 | € 17.00 | € 19.33 |
| Expiry of lock-up period | 31 July 2006 Exercisable at 6 / 6 |
30 June 2007 Exercisable at 4 / 6 |
30 June 2008 |
| Expiry of exercise period | 31 July 2008 | 30 June 2009 | Expired at the end of the lock-up period |
Any options of Tranche 2003 that had not been exercised expired at the end of the exercise period on 1 August 2008, with no replacement or compensation provided. Th e options of Tranche 2005 had already expired at the end of the lock-up period on 1 July 2008 – with no replacement or compensation – because the associated absolute and relative targets had not been met.
Th e members of the Board of Management have direct pensions commitments on the basis of their individual contracts, providing for benefi ts in case of permanent disability, death or retirement. If the contract of a member ends aft er at least fi ve years of service on the Board of Management, the entitlements acquired will vest. Members are entitled to benefi ts due to permanent disability aft er at least fi ve years of service. Eligibility for retirement benefi ts begins at the age of 55 at the earliest, or age 60 in the case of John P. Mullen and age 62 for Jürgen Gerdes. Th e members of the Board of Management may choose between ongoing pension payments and a lump sum payment. Th e benefi t amount depends on the pensionable income and the pension level derived from the years of service.
Pensionable income consists of the annual basic salary, which is calculated using the average salary over the last twelve months of employment. Members of the Board of Management appointed for the fi rst time between 2002 and 2007 attain a pension level of 25 % aft er fi ve years of service on the Board of Management. Th e maximum pension level of 50 % is attained aft er ten years of service. For active Board of Management members appointed prior to 2002, the maximum pension level is 60 %. Depending on the individual contractual arrangements, the pension level increases gra dually based on either the period of service or the periods of appointment on the Board of Management. Subsequent pension benefi ts increase or decrease to refl ect changes in the consumer price index in Germany.
| Pension commitments | |||
|---|---|---|---|
| Pension level on 31 Dec. 2008 % |
Maximum pension level % |
Service cost for pension obligation Financial year 2008 € |
|
| Dr Frank Appel, Chairman (since 18 February 2008) |
25 | 50 | 444,897 1) |
| Jürgen Gerdes 2) | 0 | 50 | 112,312 |
| John P. Mullen | 35 | 50 | 546,824 |
| Walter Scheurle | 30 | 60 | 528,795 |
| Dr Wolfgang Klein 3) (until 9 November 2008) | 60 | 60 | 180,264 |
| Dr Klaus Zumwinkel, Chairman (until 17 February 2008) |
75 | 0 4) | |
| Total | 1,813,092 | ||
1) Increase in benefi ts due to assumption of chairmanship of the Board of Management.
2) Minimum period not yet complete. In the event of immediate entitlement, the provisions of the existing pension plan apply.
3) The pension commitment is owed by Deutsche Postbank AG.
4) Ongoing fi nancing complete.
Th e pension commitment made to Dr Wolfgang Klein relates to his function as chairman of the Management Board of Deutsche Postbank AG and is owed in its entirety by Deutsche Postbank AG. Th e commitment therefore varies in certain respects from the arrangements described above that relate to Deutsche Post AG; the basic structure is, however, identical. Th e benefi t amount depends on the pensionable income and the pension level derived from the years of service. Dr Wolfgang Klein has already attained the maximum pension level of 60 %. According to his contract, retirement benefi ts are generally paid from the age of 62 or, if the employment contract is not renewed, aft er reaching the age of 55. A bridge allowance will be paid for a two-year period in addition to the retirement benefi ts if he leaves the employ of the company upon reaching the age of 62 or due to permanent disability. Subsequent adjustments to his retirement benefi ts will be based on the percentage change in the highest pay scale group specifi ed in the collective agreement covering the Association of German Public Sector Banks.
Upon his appointment to the Board of Management, John Allan was not included in the pension scheme for members of the Board of Management. Due to his past contractual relationship with Exel, he will receive a taxable annual lump-sum payment of € 363,017, in addition to the remuneration paid, which he may use to secure his own pension coverage. Th is amount is contained in the individual breakdown of fringe benefi ts.
Th e pension commitment system was restructured in fi nancial year 2008. Starting on 4 March 2008, newly appointed Board of Management members will receive pension commitments based on a defi ned contribution plan rather than the previous commitments which were based on fi nal salary.
Under the new defi ned contribution pension plan, each year the company pays a uniform amount of 25 % of the annual basic salary into a virtual pension account for the Board of Management member concerned. Th e maximum contribution period is 15 years. Interest is paid on the pension capital at the rate applicable to pension provisions recognised for tax purposes (currently 6 % annually) until the pension is drawn or the Board of Management member leaves the company. Th e retirement benefi ts are paid out in a lump sum in the amount of the value accumulated in the pension account. Th e benefi ts fall due when the Board of Management member reaches the age of 62 or in the case of invalidity or death. Th e pension benefi ciary may opt to receive a pension in lieu of a lump-sum payment. If this option is exercised, the capital is converted to a pension on the basis of the relevant tax base, taking into account the individual data of the surviving dependents and a future pension increase of 1 %. If the Board of Management member leaves the company before the benefi ts fall due, the pension account will be maintained at the balance existing at the time the member left the company. Th e account will no longer accrue interest and no further contributions will be paid.
The new pension system is applicable to Board of Management members Hermann Ude and Bruce Edwards, who were appointed in 2008. Th e pension commitment made to Hermann Ude contains an arrangement guaranteeing him a minimum benefi t in the amount of the benefi ts payable to him had his former pension commitment been continued using the assessment basis applicable at the time of his appointment to the Board of Management.
| € | Total contribution for 2008 |
Pension account balance as at 31 Dec. 2008 |
Service cost for pension obligation Financial year 2008 |
|---|---|---|---|
| Hermann Ude 1) | 465,3612) | 486,149 | 133,647 |
| Bruce Edwards 1) | 134,063 | 140,052 | 137,565 |
| Total | 271,212 |
Pension commitments under the new system: individual breakdown
1) Member of the Board of Management since 4 March 2008.
2) Including starting balance of € 331,298 to replace his previous pension commitment.
Benefi ts paid to former members of the Board of Management or their surviving dependants amounted to € 43.1 million (restated prior-year fi gure: € 10.28 million). Th e defi ned benefi t obligations (DBO) for current pensions calculated under IFRS amount to € 25.3 million (previous year: € 27.0 million).
In accordance with the recommendation of No. 4.2.3 of the German Corporate Governance Code as amended on 6 June 2008, the Board of Management contracts of Hermann Ude and Bruce Edwards contain a provision stipulating that in the event of premature termination of a Board of Management member's contract without good cause, the severance payment may compensate no more than the remaining term of the contract. Th e severance payment is limited to the value of two years' remuneration (severance payment cap). Future Board of Management contracts or extension to existing Board of Management contracts will contain comparable provisions.
In the event of a change in control, Hermann Ude and Bruce Edwards are each entitled to resign their offi ce as a member of the Board of Management for good cause within a period of six months following the change in control, aft er giving three months' notice as of the end of the month, and to terminate their contract with the Board of Management (right to early termination). Future Board of Management contracts or extensions to existing Board of Management contracts will contain comparable provisions.
Th e contractual provisions stipulate that a change of control exists if a shareholder has acquired control within the meaning of Section 29 (2) of the Wertpapier er werbsund Übernahmegesetz (WpÜG – German securities acquisition and takeover act) via possession of at least 30% of the voting rights, including the voting rights attributable to such shareholder by virtue of acting in concert with other shareholders as set forth in Section 30 of the WpÜG, or if a control agreement has been concluded with the company as an independent entity in accordance with Section 291 of the Aktiengesetz (AktG – German stock corporation act) and such agreement has taken eff ect, or if the company has merged with another legal entity outside of the Group pursuant to Section 2 of the Umwandlungsgesetz (German reorganisation and transformation act), unless the value of such other legal entity as determined by the agreed conversion rate is less than 50 % of the value of the company.
In the event the right to early termination is exercised or a Board of Management contract is terminated by mutual consent under the same conditions, the Board of Management member is entitled to payment to compensate the remaining term of his Board of Management contract. Such payment is limited to 150 % of the severance payment cap pursuant to the recommendation of No. 4.2.3 of the German Corporate Governance Code as amended on 6 June 2008. Th e amount of the payment is reduced by 25 % if the Board of Management member has not reached the age of 60 upon leaving the company. If the remaining term of the Board of Management contract is less than two years and the Board of Management member has not reached the age of 62 upon leaving the company, the payment will correspond to the severance payment cap.
Board of Management contracts of Herman Ude and Bruce Edwards contain a non-compete clause eff ective for two years aft er the end of the contract. For the duration of the restraint on competition, they receive 50 % of their last contractually stipulated basic salary as compensation each month. Any other earned income is generally deducted from the compensation paid during the period of restraint on competition, provided such other income – together with the compensation payment – exceeds the last annual basic salary paid on a monthly basis. Th e amount of the compensation payment itself is deducted from any severance payments or pension payments. Prior to or concurrent with cessation of the Board of Management contract, the company may declare its waiver of adherence to the non-compete clause. In such case, the company will be released from the obligation to pay compensation due to a restraint on competition six months aft er receipt of such declaration.
Moreover, additional contractual provisions have been stipulated for the following members of the Board of Management: Th e Board of Management contract with John Allen provides the option of terminating his employment contract, which currently extends until 31 December 2010, upon six months' notice as of the end of the quarter, though no earlier than 30 June 2009. Mr Allen has made use of this option and will leave the company at his own request as at 30 June 2009. His contract contains a noncompete clause eff ective for two years aft er cessation of the contract. He will receive 50 % of his basic salary for the duration of the two-year period. Any other income exceeding half of the basic salary will be credited against any such amount.
Dr Frank Appel, John Allan and John P. Mullen will receive their contractual remuneration until the end of the regular term of their contracts in the event their Board of Management contracts are terminated prematurely by Deutsche Post AG for good cause, provided such cause is not related to a serious breach of duty. Apart from the aforementioned arrangements, no member of the Board of Management has been promised any further benefi ts upon termination of employment.
Dr Klaus Zumwinkel left the Board of Management eff ective 18 February 2008. His contract of employment was terminated as at 29 February 2008 (end of day). Aft er such date, he did not receive any basic salary or bonus share for the remainder of his original contract term (until 30 November 2008). His pension entitlement is calculated on the basis of the original contract term. As compensation for a non-compete clause eff ective for one year following the cessation of his contract, Dr Klaus Zumwinkel was granted 385,000 SAR in Tranche 2008. As at the issue date (1 July 2008), the SAR had a fair value of € 1,066,450.
In accordance with Article 17 of the Articles of Association of Deutsche Post AG as adopted by the AGM, the annual remuneration of the members of the Supervisory Board comprises a fi xed component, a short-term performance-related component and a performance-related component with a long-term incentive eff ect.
Th e fi xed component amounts to € 20,000 and the short-term performance related component to € 300 for every € 0.03 by which the consolidated net profi t per share exceeds the amount of € 0.50 in the fi nancial year in question. In 2008, neither short-term performance-related remuneration nor performance-related remuneration with a long-term incentive eff ect was paid.
For fi nancial year 2008, the members of the Supervisory Board are entitled to annual performance-related remuneration with a long-term incentive eff ect of € 300 for every 3 % by which the consolidated net profi t per share for fi nancial year 2010 exceeds the consolidated net profi t per share of fi nancial year 2007. Th e remuneration falls due for payment at the end of the 2011 AGM. Taken individually, the two variable components may not exceed the amount of the fi xed remuneration of € 20,000.
Th e chairman of the Supervisory Board receives double the remuneration, and his deputy one and a half times the remuneration. Th e chairman of a Supervisory Board committee also receives double the remuneration, whilst a member of a committee receives one and a half times the remuneration. Th is does not apply for member ship on the Mediation and Nomination Committee. Members who only belong to the Supervisory Board and its committees for part of the year receive corresponding compensation on a pro rata basis. Th e members of the Supervisory Board are entitled to claim out-of-pocket expenses incurred in the exercise of their offi ce. Any value-added tax on the Supervisory Board remuneration and out-of-pocket expenses is reimbursed. In addition, each member of the Supervisory Board attending a meeting receives an attendance allowance of € 500 for each plenary meeting of the Supervisory Board or committee meeting. In fi nancial year 2008, the total remuneration of the Supervisory Board amounted to approximately € 0.7 million (previous year: € 0.9 million). Th e table below provides a breakdown of the remuneration:
| € | Fixed | Attendance | |
|---|---|---|---|
| Current members | component | allowance | Total |
| Prof. Dr Wulf von Schimmelmann (chairman since 1 January 2009) | 20,000.00 | 5,000.00 | 25,000.00 |
| Dr Jürgen Weber (chairman until 31 December 2008) | 70,000.00 | 13,500.00 | 83,500.00 |
| Andrea Kocsis (deputy chair) | 60,000.00 | 12,500.00 | 72,500.00 |
| Heinrich Josef Busch (since 6 May 2008) | 13,333.33 | 2,500.00 | 15,833.33 |
| Willem G. van Agtmael | 20,000.00 | 4,000.00 | 24,000.00 |
| Frank von Alten-Bockum (until 6 May 2008) | 6,666.67 | 2,000.00 | 8,666.67 |
| Hero Brahms | 40,000.00 | 10,500.00 | 50,500.00 |
| Marion Deutsch (until 6 May 2008) | 6,666.67 | 2,000.00 | 8,666.67 |
| Werner Gatzer | 40,000.00 | 14,500.00 | 54,500.00 |
| Annette Harms | 20,000.00 | 5,000.00 | 25,000.00 |
| Rolf Bauermeister (since 18 February 2008) | 24,166.67 | 7,500.00 | 31,666.67 |
| Prof. Dr Ralf Krüger | 40,000.00 | 10,000.00 | 50,000.00 |
| Dirk Marx (until 6 May 2008) | 13,333.33 | 4,000.00 | 17,333.33 |
| Ingrid Matthäus-Maier (until 31 August 2008) | 13,333.33 | 3,000.00 | 16,333.33 |
| Roland Oetker | 30,000.00 | 9,000.00 | 39,000.00 |
| Silke Oualla-Weiß (until 6 May 2008) | 6,666.67 | 2,000.00 | 8,666.67 |
| Harry Roels | 20,000.00 | 4,500.00 | 24,500.00 |
| Wolfgang Abel (since 18 February 2008) | 24,166.67 | 8,500.00 | 32,666.67 |
| Dr Ulrich Schröder (since 1 September 2008) | 6,666.67 | 2,000.00 | 8,666.67 |
| Elmar Toime | 20,000.00 | 4,500.00 | 24,500.00 |
| Stefanie Weckesser | 26,666.67 | 7,500.00 | 34,166.67 |
| Margrit Wendt (until 6 May 2008) | 13,333.33 | 5,000.00 | 18,333.33 |
| Andreas Schädler (since 6 May 2008) | 13,333.33 | 3,000.00 | 16,333.33 |
| Helga Thiel (since 6 May 2008) | 20,000.00 | 6,500.00 | 26,500.00 |
| Thomas Koczelnik (since 6 May 2008) | 26,666.67 | 7,000.00 | 33,666.67 |
| Anke Kufalt (since 6 May 2008) | 13,333.33 | 3,000.00 | 16,333.33 |
| Total | 535,000.00 | 139,000.00 | 674,000.00 |
On the basis of a now terminated contract, Prof. Dr Wulf von Schimmelmann re ceived compensation in the amount of € 384,444 for consultancy activities outside of his work on the Supervisory Board.
As at 31 December 2008, the shares in Deutsche Post AG held by the Board of Management and Supervisory Board amounted to less than 1 % of the company's share capital.
C
REVERSE LOGISTICS is the process of collecting, handling and transporting used, damaged, unwanted and end-of-life goods and /or packaging for disposal, recycling or recovery. It can also refer to the return of reusable transit equipment (pallets, containers etc.) to a point further up the supply chain (upstream ).
| 127 | INCOME STATEMENT |
|---|---|
| 128 | BALANCE SHEET |
| 129 | CASH FLOW STATEMENT |
| 130 | STATEMENT OF CHANGES IN EQUITY |
| 131 | SEGMENT REPORTING |
| 132 | NOTES |
| 1 Basis of accounting | 132 |
|---|---|
| 2 Consolidated group | 132 |
| 3 Signifi cant transactions | 135 |
| 4 New developments in international | |
| accounting under IFRS | 136 |
| 5 Restatements of prior-period amounts | 138 |
| 6 Currency translation | 138 |
| 7 Accounting policies | 138 |
| 8 The exercise of judgement in applying the accounting policies |
144 |
| 9 Consolidation methods | 145 |
| 10 Segment reporting disclosures | 146 |
| Income statement disclosures | |
| 148 | |
| 148 | |
| 149 | |
| 14 Staff costs / employees | 149 |
| 15 Depreciation, amortisation and | |
| 150 | |
| 150 | |
| 151 | |
| 151 | |
| 151 | |
| 152 | |
| 152 | |
| 152 | |
| 152 | |
| 152 | |
| 152 | |
| Balance sheet disclosures | |
| 153 | |
| 155 | |
| 11 Revenue 12 Other operating income 13 Materials expense impairment losses 16 Other operating expenses 17 Net income from associates 18 Net other fi nance costs 19 Income taxes 20 Profi t / loss from continuing operations 21 Profi t / loss from discontinued operations 22 Consolidated net profi t / loss for the period 23 Minorities 24 Earnings per share 25 Dividend per share 26 Intangible assets 27 Property, plant and equipment |
| 28 Investment property | 156 |
|---|---|
| 29 Non-current fi nancial assets | 156 |
| 30 Other non-current assets | 156 |
| 31 Deferred taxes | 157 |
| 32 Inventories | 157 |
| 33 Income tax assets and obligations | 158 |
| 34 Receivables and other assets | 158 |
| 35 Receivables and other securities from | |
| fi nancial services | 158 |
| 36 Financial instruments | 159 |
| 37 Cash and cash equivalents | 159 |
| 38 Assets held for sale and liabilities associated | |
| with assets held for sale | 159 |
| 39 Issued capital | 160 |
| 40 Other reserves | 161 |
| 41 Retained earnings | 162 |
| 42 Equity attributable to Deutsche Post AG shareholders |
162 |
| 43 Minority interest | 162 |
| 44 Provisions for pensions and other | |
| employee benefi ts | 162 |
| 45 Other provisions | 169 |
| 46 Financial liabilities | 170 |
| 47 Other liabilities | 172 |
| 48 Trade payables | 172 |
| 49 Liabilities from fi nancial services | 172 |
| Cash fl ow disclosures | |
| 50 Cash fl ow disclosures | 173 |
| Other disclosures | |
| 51 Financial instruments | 175 |
| 52 Contingent liabilities | 188 |
| 53 Other fi nancial obligations | 188 |
| 54 Litigation | 189 |
| 55 Share-based remuneration | 190 |
| 56 Related-party disclosures | 192 |
| 57 Signifi cant subsidiaries, joint ventures and | |
| associates | 195 |
| 58 Auditor's fees 59 Making use of Section 264 (3) HGB |
196 196 |
| 60 Declaration of Conformity with the German Corporate Governance Code |
196 |
| 61 Signifi cant events after the balance sheet date | 196 |
| 62 Miscellaneous | 197 |
| 63 Additional information: consolidated fi nancial | |
| statements including the Deutsche Postbank Group | |
| at equity (Postbank at equity) | 197 |
200 AUDITOR'S REPORT
| Continuing operations Revenue 11 € m 54,043 54,474 Other operating income 12 € m 2,343 2,736 Total operating income € m 56,386 57,210 Materials expense 13 € m – 30,703 – 31,979 Staff costs 14 € m – 17,169 – 17,990 Depreciation, amortisation and impairment losses 15 € m – 2,196 – 2,662 Other operating expenses 16 € m – 4,185 – 5,146 Total operating expenses € m – 54,253 – 57,777 Profi t / loss from operating activities (EBIT) € m 2,133 – 567 Net income from associates 17 € m 3 2 Other fi nancial income € m 103 621 Other fi nance costs € m – 1,051 – 1,122 Net other fi nance costs 18 € m – 948 – 501 Net fi nance costs € m – 945 – 499 Profi t / loss before income taxes € m 1,188 – 1,066 Income tax expense 19 € m – 173 – 200 Profi t / loss from continuing operations 20 € m 1,015 – 1,266 Discontinued operations Profi t / loss from discontinued operations 21 € m 858 – 713 Consolidated net profi t / loss for the period 22 € m 1,873 – 1,979 attributable to Deutsche Post AG shareholders € m 1,383 – 1,688 Minorities 23 € m 490 – 291 Basic earnings per share 24 € 1.15 – 1.40 of which from continuing operations € 0.79 – 1.10 of which from discontinued operations € 0.36 – 0.30 Diluted earnings per share 24 € 1.15 – 1.40 of which from continuing operations € 0.79 – 1.10 of which from discontinued operations € 0.36 – 0.30 |
Note | 2007 restated 1) |
2008 |
|---|---|---|---|
1) See Note 5.
As at 31 December
| € m | 2007 | 2008 | |
|---|---|---|---|
| Note | restated 1) | ||
| ASSETS | |||
| Intangible assets | 26 | 14,226 | 11,627 |
| Property, plant and equipment | 27 | 8,754 | 6,676 |
| Investment property | 28 | 187 | 32 |
| Investments in associates | 203 | 61 | |
| Other non-current fi nancial assets | 857 | 574 | |
| Non-current fi nancial assets | 29 | 1,060 | 635 |
| Other non-current assets | 30 | 497 | 514 |
| Deferred tax assets | 31 | 1,040 | 1,033 |
| Non-current assets | 25,764 | 20,517 | |
| Inventories | 32 | 248 | 269 |
| Income tax assets | 33 | 312 | 191 |
| Receivables and other assets | 34 | 9,806 | 8,715 |
| Receivables and other securities from fi nancial services | 35 | 193,920 | 0 |
| Financial instruments | 36 | 72 | 50 |
| Cash and cash equivalents | 37 | 4,683 | 1,350 |
| Assets held for sale | 38 | 615 | 231,872 |
| Current assets | 209,656 | 242,447 | |
| Total assets | 235,420 | 262,964 | |
| EQUITY AND LIABILITIES | |||
| Issued capital | 39 | 1,207 | 1,209 |
| Other reserves | 40 | 875 | 439 |
| Retained earnings | 41 | 8,953 | 6,178 |
| Equity attributable to Deutsche Post AG shareholders | 42 | 11,035 | 7,826 |
| Minority interest | 43 | 2,778 | 2,026 |
| Equity | 13,813 | 9,852 | |
| Provisions for pensions and other employee benefi ts | 44 | 5,989 | 4,685 |
| Deferred tax liabilities | 31 | 1,569 | 833 |
| 45 | |||
| Other non-current provisions | 3,015 | 2,511 | |
| Non-current provisions | 46 | 10,573 | 8,029 |
| Non-current fi nancial liabilities | 8,625 | 3,318 | |
| Other non-current liabilities | 47 | 361 | 367 |
| Non-current liabilities Non-current provisions and liabilities |
8,986 19,559 |
3,685 11,714 |
|
| Current provisions Current fi nancial liabilities |
45 46 |
1,703 1,556 |
2,807 779 |
| Trade payables | 48 | 5,384 | 4,980 |
| 49 | |||
| Liabilities from fi nancial services | 33 | 187,787 | 0 |
| Income tax liabilities | 47 | 473 | 351 |
| Other current liabilities | 5,101 | 4,745 | |
| Liabilities associated with assets held for sale | 38 | 44 | 227,736 |
| Current liabilities | 200,345 | 238,591 | |
| Current provisions and liabilities | 202,048 | 241,398 | |
| Total equity and liabilities | 235,420 | 262,964 |
1) See Note 5.
| € m | 2007 | 2008 | |
|---|---|---|---|
| Note | restated 1) | ||
| Net profi t / loss before taxes | 1,188 | – 1,066 | |
| Net fi nance costs | 945 | 499 | |
| Profi t / loss from operating activities (EBIT) | 2,133 | – 567 | |
| Depreciation / amortisation of non-current assets | 2,196 | 2,662 | |
| Net income from disposal of non-current assets | – 226 | – 76 | |
| Non-cash income and expense | 47 | 217 | |
| Change in provisions | – 877 | 838 | |
| Change in other assets and liabilities | – 146 | – 20 | |
| Income taxes paid | – 278 | – 325 | |
| Net cash from operating activities before changes in working capital | 2,849 | 2,729 | |
| Changes in working capital | |||
| Inventories | 10 | – 50 | |
| Receivables and other assets | – 657 | 583 | |
| Receivables / liabilities from fi nancial services Liabilities and other items |
0 606 |
0 100 |
|
| Net cash from operating activities due to continuing operations | 2,808 | 3,362 | |
| Net cash from / used in operating activities due to discontinued operations | 2,343 | – 1,423 | |
| Total net cash from operating activities | 50.1 | 5,151 | 1,939 |
| Proceeds from disposal of non-current assets | |||
| Subsidiaries and other business units | 62 | 0 | |
| Property, plant and equipment and intangible assets | 625 | 1,421 | |
| Other non-current fi nancial assets | 131 | 162 | |
| 818 | 1,583 | ||
| Cash paid to acquire non-current assets | |||
| Subsidiaries and other business units | – 261 | – 1,417 | |
| Property, plant and equipment and intangible assets | – 1,930 | – 1,660 | |
| Other non-current fi nancial assets | – 152 | – 92 | |
| – 2,343 | – 3,169 | ||
| Interest received | 112 | 570 | |
| Dividend Postbank | 103 | 103 | |
| Current fi nancial instruments | 0 | – 1 | |
| Net cash used in investing activities due to continuing operations | – 1,310 | – 914 | |
| Net cash from investing activities due to discontinued operations | 257 | 473 | |
| Total net cash used in investing activities | 50.2 | – 1,053 | – 441 |
| Proceeds from issuance of non-current fi nancial liabilities | 552 | 176 | |
| Repayments of non-current fi nancial liabilities | – 452 | – 497 | |
| Change in current fi nancial liabilities | – 857 | – 337 | |
| Other fi nancing activities | 153 | – 148 | |
| Dividend paid to Deutsche Post AG shareholders | – 903 | – 1,087 | |
| Dividend paid to other shareholders | – 56 | – 80 | |
| Issuance of shares under stock option plan | 73 | 21 | |
| Interest paid | – 411 | – 434 | |
| Net cash used in fi nancing activities due to continuing operations | – 1,901 | – 2,386 | |
| Net cash from fi nancing activities due to discontinued operations | 114 | 918 | |
| Total net cash used in fi nancing activities | 50.3 | – 1,787 | – 1,468 |
| Net change in cash and cash equivalents | 2,311 | 30 | |
| Effect of changes in exchange rates on cash and cash equivalents | – 46 | – 53 | |
| Changes in cash and cash equivalents associated with assets held for sale | 0 | 0 | |
| Changes in cash and cash equivalents due to changes in consolidated group | 27 | 2 | |
| Cash and cash equivalents at beginning of reporting period | 2,391 | 4,683 | |
| Total cash and cash equivalents at end of reporting period | 50.4 | 4,683 | 4,662 |
| Less cash and cash equivalents due to discontinued operations at end of reporting period | 3,352 | 3,416 | |
| Plus cash and cash equivalents of continuing operations at Deutsche Postbank AG at end of reporting period | 8 | 104 | |
| Cash and cash equivalents due to continuing operations at end of reporting period | 1,339 | 1,350 |
1) See Note 50.
| € m | Other reserves | Equity attribut | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Issued capital |
Capital reserves |
IAS 39 reserves |
Revaluation reserve |
Currency translation reserve |
Retained earnings |
able to Deutsche Post AG shareholders |
Minority interest |
Total equity | |
| Note | 39 | 40 | 40 | 40 | 40 | 41 | 42 | 43 | |
| Balance at 1 January 2007 1) | 1,202 | 2,037 | – 58 | 0 | – 451 | 8,473 | 11,203 | 2,714 | 13,917 |
| Capital transactions with owner | |||||||||
| Capital contribution from retained earnings | 0 | 0 | |||||||
| Dividend | – 903 | – 903 | – 159 | – 1,062 | |||||
| Stock option plans (exercise) | 5 | 68 | 73 | 73 | |||||
| Stock option plans (issuance) | 14 | 14 | 14 | ||||||
| – 816 | – 159 | – 975 | |||||||
| Other changes in equity not recognised in income |
|||||||||
| Currency translation differences | – 446 | – 446 | – 23 | – 469 | |||||
| Other changes | – 289 | – 289 | – 244 | – 533 | |||||
| – 735 | – 267 | – 1,002 | |||||||
| Changes in equity recognised in income | |||||||||
| Consolidated net profi t 1) | 1,383 | 1,383 | 490 | 1,873 | |||||
| Total changes in equity recognised in income and not recognised in income |
648 | 223 | 871 | ||||||
| Balance at 31 December 2007 | 1,207 | 2,119 | – 347 | 0 | – 897 | 8,953 | 11,035 | 2,778 | 13,813 |
| Balance at 1 January 2008 | 1,207 | 2,119 | – 347 | 0 | – 897 | 8,953 | 11,035 | 2,778 | 13,813 |
| Capital transactions with owner | |||||||||
| Capital contribution from retained earnings | 0 | 0 | |||||||
| Dividend | – 1,087 | – 1,087 | – 196 | – 1,283 | |||||
| Stock option plans (exercise) | 2 | 19 | 21 | 21 | |||||
| Stock option plans (issuance) | 4 | 4 | 4 | ||||||
| – 1,062 | – 196 | – 1,258 | |||||||
| Other changes in equity not recognised in income |
|||||||||
| Currency translation differences | – 500 | – 500 | 14 | – 486 | |||||
| Other changes | 33 | 8 | 0 | 41 | – 279 | – 238 | |||
| – 459 | – 265 | – 724 | |||||||
| Changes in equity recognised in income | |||||||||
| Consolidated net loss | – 1,688 | – 1,688 | – 291 | – 1,979 | |||||
| Total changes in equity recognised in income and not recognised in income |
– 2,147 | – 556 | – 2,703 | ||||||
| Balance at 31 December 2008 | 1,209 | 2,142 | – 314 | 8 | – 1,397 | 6,178 | 7,826 | 2,026 | 9,852 |
| € m | GLOBAL | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| FORWARDING / | SUPPLY CHAIN / | Corporate Center / | Continuing | Discontinued | ||||||||||
| MAIL 1) | EXPRESS 1) | FREIGHT 1) | CIS 1) | Other 1) | operations | operations | ||||||||
| 1 January to 31 December | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 |
| External revenue | 14,281 | 14,186 | 13,367 | 13,184 | 12,157 | 13,453 | 14,138 | 13,552 | 100 | 99 | 54,043 | 54,474 | 10,335 | 11,226 |
| Internal revenue | 288 | 207 | 507 | 453 | 802 | 726 | 179 | 166 – 1,776 – 1,552 | 0 | 0 | 0 | 0 | ||
| Total revenue | 14,569 | 14,393 | 13,874 | 13,637 | 12,959 | 14,179 | 14,317 | 13,718 – 1,676 – 1,453 | 54,043 | 54,474 | 10,335 | 11,226 | ||
| Profi t / loss from operating activities | ||||||||||||||
| (EBIT) | 1,976 | 2,253 | – 272 – 2,144 | 409 | 389 | 577 | – 675 | – 557 | – 390 | 2,133 | – 567 | 1,060 | – 871 | |
| Net income from associates | 0 | 0 | 3 | 2 | 0 | 0 | 0 | 0 | 0 | 0 | 3 | 2 | 0 | 0 |
| Segment assets 2) | 4,819 | 3,683 | 9,160 | 8,878 | 7,078 | 6,887 | 8,779 | 6,460 | 431 | 944 | 30,267 | 26,852 197,374 227,364 | ||
| Investments in associates 2) | 22 | 22 | 174 | 32 | 6 | 6 | 0 | 0 | 1 | 1 | 203 | 61 | 0 | 0 |
| Segment liabilities including | ||||||||||||||
| non-interest-bearing provisions 2) | 2,352 | 2,412 | 3,520 | 3,149 | 2,344 | 2,305 | 3,115 | 2,900 | – 433 | 873 | 10,898 | 11,639 188,676 218,730 | ||
| Segment investments | 346 | 296 | 961 | 995 | 200 | 221 | 892 | 515 | 343 | 148 | 2,742 | 2,175 | 150 | 71 |
| Depreciation, amortisation and | ||||||||||||||
| write-downs | 447 | 346 | 1,034 | 542 | 98 | 105 | 363 | 1,345 | 254 | 324 | 2,196 | 2,662 | 161 | 179 |
| Other non-cash expenses | 74 | 360 | 105 | 1,900 | 37 | 63 | 127 | 201 | 112 | 111 | 455 | 2,635 | 507 | 539 |
| Employees 3) | 149,602 146,184 108,655 112,420 | 39,651 | 41,602 134,110 141,060 | 15,608 | 15,450 447,626 456,716 | 22,497 | 22,175 |
| € m | Europe excluding | Continuing | Discontinued | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Germany 1) | Germany 1) | Americas 1) | Asia Pacifi c 1) | Other regions | operations | operations | ||||||||
| 1 January to 31 December | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 |
| External revenue | 16,678 | 16,765 | 19,463 | 19,129 | 10,443 | 10,171 | 5,714 | 6,292 | 1,745 | 2,117 | 54,043 | 54,474 | 10,335 | 11,226 |
| Segment assets 2) | 6,146 | 5,483 | 13,926 | 11,829 | 5,855 | 4,935 | 3,823 | 3,940 | 517 | 665 | 30,267 | 26,852 197,374 227,364 | ||
| Segment investments | 900 | 689 | 1,011 | 682 | 512 | 428 | 245 | 308 | 74 | 68 | 2,742 | 2,175 | 150 | 71 |
1) Prior-year fi gures restated (see Note 10).
2) As at 31 December.
3) Average FTE.
Disclosures on the segment reporting can be found in Note 10.
1 Basis of accounting As a listed company, Deutsche Post AG prepared its consolidated fi nancial statements in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU and the provisions of commercial law to be additionally applied in accordance with Section 315 a (1) of the Handelsgesetzbuch (HGB – German commercial code). Th e fi nancial statements represent an annual fi nancial report within the meaning of the Transparenzrichtlinie-Umsetzungsgesetz (TUG – Transparency directive implementing act) (Section 37 v of the Wertpapierhandelsgesetz (WpHG – German securities trading act)) dated 5 January 2007.
Th e requirements of the standards applied have been satisfi ed in full, and the consolidated fi nancial statements therefore provide a true and fair view of the Group's net assets, fi nancial position and results of operations.
Th e consolidated fi nancial statements consist of the income statement, balance sheet, cash fl ow statement, statement of changes in equity as well as the Notes. In order to improve the clarity of presentation, various items in the balance sheet and in the income statement have been combined. Th ese items are disclosed and explained separately in the Notes. Th e income statement has been classifi ed in accordance with the nature of expense method.
Th e accounting policies, as well as the explanations and disclosures in the Notes to the IFRS consolidated fi nancial statements for fi nancial year 2008, are generally based on the same accounting policies used in the 2007 consolidated fi nancial statements. Exceptions to this are the changes in international accounting under IFRS described in Note 4 that have been required to be applied by the Group since 1 January 2008 and the restatement of priorperiod amounts ( Note 5). Th e accounting policies are explained in Note 7.
Th e fi nancial year of Deutsche Post AG and its consolidated subsidiaries is the calendar year. Deutsche Post AG, whose registered offi ce is in Germany, is entered in the commercial register of the Bonn Local Court.
Th ese consolidated fi nancial statements were authorised for issue by a resolution of the Board of Management of Deutsche Post AG dated 25 February 2009.
The consolidated financial statements are prepared in euros (€). Unless otherwise stated, all amounts are given in millions of euros (€ million, € m).
In addition to Deutsche Post AG, the consolidated fi nancial statements for the period ended 31 December 2008 generally include all German and foreign operating companies in which Deutsche Post AG directly or indirectly holds a majority of voting rights, or whose activities it can in some other way control. Th e companies are consolidated from the date on which the Group is able to exercise control.
Th e companies listed in the table below are consolidated in addition to the parent company Deutsche Post AG.
| 2007 | 2008 | |
|---|---|---|
| Number of fully consolidated companies (subsidiaries) |
||
| German | 113 | 106 |
| Foreign | 857 | 854 |
| Number of proportionately consolidated joint ventures |
||
| German | 1 | 1 |
| Foreign | 12 | 18 |
| Number of companies accounted for at equity (associates) |
||
| German | 3 | 3 |
| Foreign | 18 | 12 |
Th e list of the Group's shareholdings in accordance with Section 313 (2) Nos. 1 to 4 and (3) of the HGB is published in the Electronic Federal Gazette. In addition, a complete list of Deutsche Post AG's shareholdings has been fi led with the commercial register of the Bonn Local Court. A list of the signifi cant subsidiaries, joint ventures and associates included in the consolidated fi nancial statements is presented in Note 57.
The following table gives an overview of the significant acquisitions, increases in shareholdings and new company formations required to be included in fi nancial year 2008:
| Equity interest % | Inclusion method | Date of acquisition/ initial inclusion |
Notes | |
|---|---|---|---|---|
| EXPRESS | ||||
| Proportionately | ||||
| Express Couriers Australia Pty Ltd., Australia | 50 | consolidated | February 2008 | Formed |
| Fully consolidated based on | ||||
| Polar Air Cargo Worldwide Inc., USA | 49 | Fully consolidated | November 2008 | contractual arrangements |
| SUPPLY CHAIN/CIS | ||||
| Increase in shareholding | ||||
| Williams Lea Holdings Plc, United Kingdom | 96 | Fully consolidated | April 2008 | (30 %) |
| DHL Logistics (China) Co. Ltd., China (formerly | Increase in shareholding | |||
| Exel-Sinotrans Freight Forwarding Co. Ltd., China) | 100 | Fully consolidated | April 2008 | (50 %) |
In February 2008, Deutsche Post Beteiligungen Holding GmbH, Germany, formed Express Couriers Australia Pty Ltd., Australia, with a view to entering into a 50 / 50 joint venture with New Zealand Post, New Zealand. By 30 June, the joint venture had taken over business units from DHL Global Forwarding, Australia. At the same time, New Zealand Post acquired a 50 % interest in the company. At the beginning of July, the joint venture acquired New Zealand Post Australia Pty Ltd. and its subsidiaries for € 55 million. A further € 23 million was spent to acquire the assets and operations of Hills Transport Pty Ltd., Hills Express Pty Ltd., Aufast Couriers Pty Ltd. and VFCC Services Pty Ltd.
In June 2007, the Group acquired a 49 % interest in the US company Polar Air Cargo Worldwide, Inc. (Polar Air Cargo), a leading provider of global air freight services. Under the terms of its contractual arrangements that took eff ect at the end of October 2008, the company predominantly provides services to the Group and has therefore been fully consolidated since November 2008. Polar Air Cargo was previously included in the consolidated fi nancial statements as an associate. Provisional goodwill of € 100 million arose on its full consolidation. Th e fi nal purchase price allocation will be presented in a later set of fi nancial statements, as not all the necessary information is available at the present time.
| € m | Fair value from preliminary purchase price allocation 1) |
|---|---|
| Intangible assets | 1 |
| Property, plant and equipment | 0 |
| Current assets and cash and cash equivalents | 137 |
| Non-current liabilities | – 1 |
| Current liabilities | – 103 |
| Net assets acquired | 34 |
1) Corresponds to the carrying amount.
Since November, the company has contributed € 25 million to consolidated revenue. It has signifi cant service relationships with the Group.
On 31 December 2007, FC (Flying Cargo) International Transportation Ltd., Israel, was acquired for € 85 million. Flying Cargo is the Israeli market leader in air and ocean freight. In the fi rst quarter of 2008, the former shareholders were paid the equivalent of € 65 million, of which € 45 million related to the fi rst tranche of the purchase price and € 20 million to the repayment of loans by former shareholders. Th e remainder of the purchase price is expected to be paid in 2010. Goodwill of € 74 million arose on the company's initial consolidation. Th e purchase price allocation was completed as at 30 September 2008 and is as follows:
| Goodwill | 74 |
|---|---|
| Less net assets measured at fair value | 11 |
| Acquisition costs | 85 |
| 31 December 2007 | |
| € m |
| € m | Carrying | ||
|---|---|---|---|
| amount | Adjustments | Fair value | |
| Intangible assets | 1 | 13 | 14 |
| of which software and licences | 1 | 0 | 1 |
| of which customer list | 0 | 11 | 11 |
| of which brand | 0 | 2 | 2 |
| Property, plant and equipment | 1 | 0 | 1 |
| Current assets and cash and cash equivalents |
40 | 0 | 40 |
| Current liabilities | – 36 | 0 | – 36 |
| Deferred taxes | – 5 | – 3 | – 8 |
| Net assets acquired | 1 | 10 | 11 |
In fi nancial year 2008, Flying Cargo contributed € 183 million to consolidated revenue and € 27 million to consolidated EBIT.
In the second quarter of 2008, Deutsche Post Beteiligungen Holding GmbH, Germany, increased its stake in Williams Lea Holdings plc., UK, from 66 % to 96 % for a purchase price of € 220 million. Th e fi nancial liability for the remaining outstanding shares fell to € 29 million.
In April 2008, DHL Exel Supply Chain Hong Kong acquired from Sinotrans Air Transportation Development, China, the remaining 50 % of the shares in their joint venture, Exel-Sinotrans Freight Forwarding Co. Ltd., China, for € 61 million and has since been the sole owner. Th e company has been renamed DHL Logistics (China) Co. Ltd. It was previously accounted for in the consolidated fi nancial statements as a proportionately consolidated joint venture. Goodwill of € 31 million arose on its full consolidation. Th e purchase price allocation is as follows:
| Goodwill | 31 |
|---|---|
| Less proportionate net assets measured at fair value | – 30 |
| Cost of the investment (second tranche) | 61 |
| 1 April 2008 | |
| € m |
| € m | Carrying | ||
|---|---|---|---|
| amount | Adjustments 1) | Fair value | |
| Intangible assets | 33 | 24 | 57 |
| of which customer list | 32 | 24 | 56 |
| Property, plant and equipment | 6 | 0 | 6 |
| Current assets and cash and cash equivalents |
94 | 0 | 94 |
| Current liabilities | – 81 | 0 | – 81 |
| Deferred taxes | – 10 | – 7 | – 17 |
| Total net assets (100 %) | 42 | 17 | 59 |
| Proportionate net assets acquired | 21 | 9 | 30 |
1) Adjustments to customer relationships of € 12 million and adjustments to deferred taxes of € 4 million relate to the 50 % interest held previously. These amounts were recognised in the revaluation reserve (see Note 40.4).
Th e remaining 50 % of the shares of the company purchased contributed € 92 million to consolidated revenue. Th e company has signifi cant service relationships with the Group. If the remaining 50 % of the shares had been acquired as at January 2008, the company would have contributed € 106 million to consolidated revenue.
During fi nancial year 2008, the Group also made further acquisitions which neither individually nor in the aggregate had a signifi cant eff ect on the Group's net assets, fi nancial position and results of operations.
| € m | Fair value at the date of acquisition 1) |
|---|---|
| ASSETS | |
| Non-current assets | 15 |
| Current assets | 46 |
| Cash and cash equivalents | 14 |
| 75 | |
| EQUITY AND LIABILITIES | |
| Non-current liabilities | – 6 |
| Current liabilities | – 44 |
| – 50 | |
| Acquisition costs | 83 |
| Goodwill | 58 |
1) Corresponds to the carrying amount.
Th e insignifi cant acquisitions contributed a total of € 116 million to consolidated revenue and € – 4 million to consolidated EBIT. If all the companies had been fully consolidated as at January 2008, the amounts would have changed only insignifi cantly.
In fi nancial year 2008, a total of € 390 million was spent on acquiring subsidiaries, net of the cash and cash equivalents acquired (previous year: € 261 million). Th e purchase prices of the acquired companies were paid by transferring cash and cash equivalents. Further details about cash fl ows can be found in Note 50.
Th e following table shows the disposal and deconsolidation eff ects of fully consolidated companies. Th ere were no signifi cant disposals in fi nancial year 2008.
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| Disposal effects | ||
| Intangible assets | 7 | 0 |
| Property, plant and equipment | 15 | 1 |
| Non-current fi nancial assets | 3 | 0 |
| Inventories | 1 | 0 |
| Receivables and other assets | 154 | 11 |
| Receivables from fi nancial services | 2,546 | 0 |
| Cash and cash equivalents | 47 | 2 |
| IAS 39 reserves | – 6 | 0 |
| Provisions | – 1,807 | – 3 |
| Trade payables and other liabilities | – 139 | – 8 |
| Liabilities from fi nancial services | – 31 | 0 |
| Financial liabilities | – 2 | 0 |
| Deferred taxes, net | – 6 | 0 |
| Revenue | 51 | 12 |
| Effect of deconsolidation | 456 | – 1 |
Th e following table provides information about the balance sheet and income statement items attributable to the signifi cant joint ventures included in the consolidated fi nancial statements:
| € m | ||
|---|---|---|
| 2007 1) | 2008 1) | |
| BALANCE SHEET | ||
| Intangible assets | 48 | 65 |
| Property, plant and equipment | 8 | 13 |
| Receivables and other assets | 93 | 37 |
| Cash and cash equivalents | 18 | 8 |
| Trade payables and other liabilities | – 93 | – 37 |
| Provisions | – 2 | – 2 |
| Financial liabilities | – 20 | – 42 |
| INCOME STATEMENT | ||
| Revenue 2) | 352 | 208 |
| Profi t from operating activities (EBIT) | 19 | 8 |
1) Proportionate amounts.
2) Revenue excluding internal revenue.
Th e consolidated joint ventures relate primarily to Express Couriers Ltd. (New Zealand), Express Couriers Australia Pty Ltd. (Australia) and Bahwan Exel LLC (Oman). DHL Logistics (China) Co. Ltd., China (formerly Exel-Sinotrans Freight Forwarding Co. Ltd.) was included in the income statement items until March 2008 inclusive. Since April 2008, it has been included in the consolidated fi nancial statements as a fully consolidated company.
In addition to the acquisitions and disposals cited in Note 2, the following signifi cant transactions aff ected the Group's net assets, fi nancial position and results of operations in fi nancial year 2008:
In September 2008, steps were initiated to sell the Deutsche Postbank Group following the decision taken by manage ment on 12 September 2008. Th e agreement between Deutsche Bank AG and Deutsche Post AG was adjusted in January 2009. Further information can be found in Note 61 (Signifi cant events aft er the balance sheet date). Th e agreement entered into in September provided for the sale of a 29.75 % minority stake in Deutsche Postbank AG to Deutsche Bank AG for € 2.79 billion or € 57.25 per share. Approval was granted by the relevant regulatory and competition authorities and by the German government in November. Furthermore, mutual call and put options for additional shares in Deutsche Postbank AG have been agreed. Deutsche Post AG has granted Deutsche Bank AG the option of acquiring an additional 18.0 % of the shares of Deutsche Postbank AG for € 55.00 per share. Th is option can be exercised between 12 and 36 months aft er the acquisition of the 29.75 % stake has been completed. At the same time, Deutsche Post AG has been granted a put option: It is entitled to sell its remaining stake of 20.25 % plus one share in the Deutsche Postbank Group to Deutsche Bank AG for € 42.80 per share. Deutsche Post AG can exercise its option between 21 and 36 months aft er the sale of its minority stake to Deutsche Bank has been completed. In addition, Deutsche Post AG has granted Deutsche Bank AG a right of fi rst refusal for its remaining shares in the Deutsche Postbank Group. Deutsche Bank can pay for the stakes from both options in cash or fully or partially with its own shares. In accordance with IAS 39.2 (g), the options do not fall within the scope of IAS 39 and therefore do not aff ect accounting. As at 31 December 2008, the fair values of the options amounted to €–49 million and € 1,220 million.
In addition, Deutsche Post AG participated as majority shareholder in a capital increase carried out by Deutsche Postbank AG in November 2008. Deutsche Post AG undertook to purchase all shares not subscribed for by other investors, in addition to its existing interest. As a result, its shareholding in Deutsche Postbank AG increased to 62.35 %. Th e capital increase gave rise to negative goodwill amounting to € 81 million which was reversed to income. Further explanations can be found in Notes 21 and 38.
In November 2008, the Group announced that it would withdraw from the domestic US express business at the beginning of 2009. Th e Group will concentrate on its international core competencies in the US express market in future and will discontinue its domestic air and ground express business at the end of January 2009. However, the full range of the Group's international products will continue to be off ered in the USA. Th e total restructuring costs will amount to around US\$3.9 billion, spread over two years. Expenses in the amount of € 2,117 million were already incurred for the planned measures in fi nancial year 2008.
As a result of the impairment test in respect of the Supply Chain Cash Generating Unit (CGU – smallest identifi able group of assets), an impairment loss amounting to € 436 million was recognised. Th e CGU's recoverable amount of € 2,939 million was less than its carrying amount of € 3,375 million. A further impairment loss of € 174 million was recognised on goodwill for the CIS CGU, since its carrying amount of € 814 million was higher than its recoverable amount of € 640 million. Th e Group also resolved to discontinue using the Exel brand. As at 31 December 2008, the brand name was fully written down in an amount of € 382 million. Further details can be found in Note 26 (Intangible assets).
On 1 July 2008, the European Court of First Instance in Luxembourg annulled the European Commission's state aid ruling of 2002. At the time, the Commission had ordered Deutsche Post AG to repay alleged state aid and interest amounting to € 907 million to the Federal Republic of Germany. Th e Commission had ruled that, between 1994 and 1998, Deutsche Post AG misused state aid intended to fi nance the universal service as a cross-subsidy to cover its costs in the competitive market segment where it carries parcels for business customers. Deutsche Post AG appealed against the ruling in the same year. In August 2008, Deutsche Post AG received € 1,067 million back from the German federal government on the basis of this ruling. Information on subsequent developments can be found in Note 54 (Litigation).
The sale of Deutsche Post AG real estate to US investor Lone Star took economic eff ect on 1 July 2008. Th e real estate comprised properties located mainly in Germany with a residual carrying amount of € 927 million. Th e fi rst payment of the purchase price amounting to € 250 million was made in June 2008; a further € 661 million was paid in December. Th e Group will lease back the majority of the properties under operating leases. In the course of the period, the properties were reported as assets held for sale. Th e impairment losses of € 25 million arising from their measurement under IFRS 5 were reported under other operating expenses.
Th e following table presents an overview of the impact of signifi cant non-recurring items on profi t or loss from operating activities (EBIT) in fi nancial year 2008 (at Group level):
| Signifi cant non-recurring items | ||
|---|---|---|
| -- | ---------------------------------- | -- |
| € m | 1 January to 31 December 2008 |
|---|---|
| Profi t from operating activities (EBIT) before non-recurring items | 2,410 |
| Repayment of state aid | +572 |
| Restructuring and reorganisation expenses for the US express business |
– 2,117 |
| Impairment of goodwill in the SUPPLY CHAIN / CIS Division | – 610 |
| Restructuring and reorganisation expenses (other areas of the Group) |
– 440 |
| Exel brand name fully written down | – 382 |
| Loss from operating activities (EBIT) after non-recurring items | – 567 |
Th e following standards, changes to standards and interpretations are required to be applied on or aft er 1 January 2008:
On 13 October 2008, the IASB published amendments to IAS 39 (Financial Instruments: Recognition and Measurement) and to IFRS 7 (Financial Instruments: Disclosures) to refl ect current develop ments in the fi nancial markets. As a result of the amendments, it is now possible, subject to certain conditions, to reclassify fi nancial assets at fair value through profi t or loss to other categories. Furthermore, fi nancial assets in the available-for-sale category may also be reclassifi ed as loans and receivables in future, subject to certain conditions. Th ese amendments were adopted into European law by the Commission of the European Communities by way of Commission Regulation (EC) No. 1004/2008 dated 15 October 2008 and entered into eff ect on 17 October 2008. Th e Deutsche Postbank Group has made use of these amendments. Further details can be found in Note 38.
IFRS 8 (Operating Segments), which supersedes the existing IAS 14 (Segment Reporting), contains new provisions relating to the presentation of segment reporting. IFRS 8 requires segment reporting to be based on the management approach. Under this approach, the defi nition of the segments and the disclosures for each segment are based on the information used internally by management for the purposes of allocating resources to the components of the entity and assessing their performance. Application of IFRS 8 is mandatory for periods beginning on or aft er 1 January 2009. Th e fi rst-time application of IFRS 8 is not expected to have any signifi cant eff ects on the consolidated fi nancial statements.
IAS 23 (Borrowing Costs), which was revised in 2007, requires borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets to be capitalised. Th e existing option to recognise borrowing costs immediately as an expense will no longer be available. Application of IAS 23 (as revised in 2007) is mandatory for fi nancial years beginning on or aft er 1 January 2009. Application of the new provisions will have no signifi cant eff ects on the consolidated fi nancial statements.
In January 2008, the IASB issued a revision of IFRS 2 (Sharebased Payment). Th e revision clarifi es that vesting conditions are service conditions and performance conditions only. Cancellations of the payment plan (annulment) should receive the same accounting treatment irrespective of whether the payment plan is cancelled by the entity or by another party. Previously, IFRS 2.28 applied explicitly only to cancellations by the entity. Application of the revision is mandatory from 1 January 2009. Th e fi rst-time application of the revised Standard will have no signifi cant eff ects on the consolidated fi nancial statements.
IFRIC 11 (IFRS 2 Group and Treasury Share Transactions) clarifi es the issue of how IFRS 2 should be applied to share-based payment arrangements involving the grant of the entity's own equity instruments or equity instruments of another entity within the same group. Th e Interpretation is eff ective for fi nancial years beginning on or aft er 1 March 2007. As part of the endorsement by the European Union, application of the Interpretation is not mandatory as of the date of initial application envisaged by the IASB, but only starting in fi nancial year 2009. Th e fi rst-time application of IFRIC 11 is not expected to have any signifi cant eff ect on the consolidated fi nancial statements.
IFRIC 13 (Customer Loyalty Programmes) sets out the accounting treatment of revenues arising in connection with customer loyalty programmes operated by the manufacturers or service providers themselves or by third parties. As part of the endorsement by the European Union, application of the Interpretation is not mandatory as of the date of initial application envisaged by the IASB, but only starting in fi nancial year 2009. Th e fi rst-time application of the Interpretation will not have any signifi cant eff ects on the consolidated fi nancial statements.
IFRIC 14 (IAS 19 – Th e Limit on a Defi ned Benefi t Asset, Minimum Funding Requirements and their Interaction) was issued on 5 July 2007 and supplements the existing provisions of IAS 19 relating to the limit on the measurement of a defi ned benefi t asset (IAS 19.58 ff .). In addition, the Interpretation sets out how the requirement to limit a defi ned benefi t asset should be applied in the event of statutory or contractual minimum funding requirements. As part of the endorsement by the European Union in December 2008, application of the Interpretation is not mandatory as of the date of initial application envisaged by the IASB, but only starting in fi nancial years beginning on or aft er 31 December 2008. Th e fi rst-time application of IFRIC 14 is not expected to have any signifi cant eff ects on the consolidated fi nancial statements.
Th e revision of IAS 1 (Presentation of Financial Statements) is intended to improve users' ability to analyse and compare the information given in fi nancial statements. Th e changes relate mainly to revised designations for the income statement, balance sheet and cash fl ow statement, the introduction of a statement of certain nonowner changes in equity and the obligation to publish an opening balance sheet for the earliest period presented that is aff ected by a retrospective change of accounting policy or restatement. Application of the revised Standard is mandatory for fi nancial years beginning on or aft er 1 January 2009. Th e fi rst-time application of the revised Standard will have no signifi cant eff ects on the presentation of the consolidated fi nancial statements.
In February 2008, the IASB issued amendments to IAS 32 (Financial Instruments: Disclosure and Presentation). Th e revision permits puttable instruments to be classifi ed as equity in certain circum stances. Th e revision of the Standard is intended to allow German partnerships to classify their partnership capital as equity in IFRS consolidated fi nancial statements. Application of the revised Standard is mandatory for periods beginning on or aft er 1 January 2009. Th e revised Standard will not apply to the consolidated fi nancial statements.
In May 2008, the IASB issued amendments relating to IFRS 1 (First-Time Adoption of International Financial Reporting Standards) and to IAS 27 (Consolidated and Separate Financial Statements). Th e amendment to IFRS 1 provides that, in the IFRS opening balance sheet of its separate fi nancial statements, an entity may report the carrying amount of its investment in subsidiaries, jointly controlled entities and associates either at the fair value of the investment at the date of transition to IFRS or at its carrying amount at that date resulting from previously applied accounting principles, instead of at cost. Th e amendments to IAS 27 remove the defi nition of the cost method. Th e requirement to recognise distributions of profi ts arising before the date of acquisition of the subsidiary as a reduction of the cost of the investment therefore no longer applies. In addition, when a new parent company is formed as a result of a reorganisation, the cost of its investment in the previous parent company is measured at the carrying amount of its share of the equity items shown in the separate fi nancial statements of the previous parent company at the date of the reorganisation. Th e amendments must be applied prospectively for fi nancial years beginning on or aft er 1 January 2009. Th e amendments will not aff ect the consolidated fi nancial statements since the Group is not applying the requirements of IFRS for the fi rst time.
In May 2008, the IASB issued Improvements to International Financial Reporting Standards 2008, the fi rst standard resulting from its annual improvement process which is intended to deal with minor amendments to existing IFRS. Th e Standard is divided into two parts containing amendments to 19 IFRS and mainly comprises clarifi cations of existing provisions. Part I contains amendments that may result in changes for presentation, recognition, or measurement purposes. Part II contains amendments representing terminology or editorial changes. Unless provided otherwise in the individual case, the amendments are eff ective for fi nancial years beginning on or aft er 1 January 2009. A signifi cant eff ect on the consolidated fi nancial statements is not expected as a result of the above.
Th e IASB and the IFRIC have issued further Standards and Interpretations whose application is not yet mandatory for fi nancial year 2008. Th e application of these IFRS is dependent on their adoption by the European Union.
Th e revised versions of IFRS 3 (Business Combinations) and IAS 27 (Consolidated and Separate Financial Statements) contain the following amendments: For the purpose of accounting for acquisitions of less than 100 % of the shares of an entity, an option is introduced which allows the entire amount of goodwill arising on the acquisition to be recognised, i. e. including the portion attributable to minorities (the "full goodwill method"). In addition, acquisitions and partial disposals of shares where control is retained are accounted for as equity transactions with owners, and gains or losses are not recognised. Th e full amount of the transaction costs associated with the acquisition is recorded as an expense. Application of the revised Standards is mandatory for business combinations in fi nancial years beginning on or aft er 1 July 2009. Th e eff ects on the consolidated fi nancial statements are currently being assessed.
In July 2008, amendments to IAS 39 (Financial Instruments: Recognition and Measurement) were published relating to eligible hedged items in the context of hedge accounting. Th e purpose of the amendments was to provide guidance for use in designating hedging instruments, since inconsistencies occur in practice in particular with respect to accounting for a one-sided risk and for infl ation as a component of a hedged item. Retrospective application of the amendments is mandatory for fi nancial years beginning on or aft er 1 July 2009. Th e eff ects on the consolidated fi nancial statements are currently being assessed.
In November 2008, a clarifi cation was issued with respect to the eff ective date of the amendments published in October relating to the rules for reclassifi cations of fi nancial assets. According to the clarifi cation, reclassifi cations made on or aft er 1 November 2008 are eff ective from that date and may not be applied retrospectively. Reclassifi cations made before 1 November 2008 may be applied retro spectively to 1 July 2008 or a later date. Th e rule permitting reclassifi cations may not be applied at a date before 1 July 2008. Th e clarifi cation applies only to the Deutsche Postbank Group, which has made use of the reclassifi cation option (see Note 38).
IFRIC 12 (Service Concession Arrangements) sets out the accounting treatment for arrangements whereby public-sector bodies grant contracts for the supply of public services to private operators. In order to supply these services, the private operator makes use of infrastructure that remains within the control of the publicsector grantor. Th e private operator is responsible for the construction, operation and maintenance of the infrastructure. Application of the Interpretation is mandatory for fi nancial years beginning on or aft er 1 January 2008. Th e Interpretation has not yet been adopted by the European Union and was therefore not applied by the Group in fi nancial year 2008. Th e fi rst-time application of IFRIC 12 is not expected to have any signifi cant eff ect on the consolidated fi nancial statements of Deutsche Post AG.
IFRIC 15 (Agreements for the Construction of Real Estate), published in July 2008, addresses the issue of whether real estate developers should apply IAS 11 (Construction Contracts) or IAS 18 (Revenue). It also clarifi es the date at which revenue from real estate construction should be recognised. Retrospective application of IFRIC 15 is mandatory for fi nancial years beginning on or aft er 1 January 2009. Th e Interpretation will not apply to the consolidated fi nancial statements.
IFRIC 16 (Hedges of a Net Investment in a Foreign Operation) clarifi es that the foreign currency risk arising between the functional currency of the foreign operation and the functional currency of a parent entity may be designated as a hedged risk. Th e hedging instruments may be held by any entity within the Group. Foreign currency diff erences arising from the measurement of the hedging instrument are recognised directly in equity in accordance with IAS 39. Th e date at which gains and losses are reclassifi ed from equity to profi t or loss is governed by IAS 21. Th e Interpretation is eff ective for fi nancial years beginning on or aft er 1 October 2008. Th e Interpretation must be applied prospectively. IFRIC 16 will have no eff ect on the consolidated fi nancial statements since hedges of a net investment in a foreign operation already comply with the provisions of the Interpretation.
IFRIC 17 (Distributions of Non-cash Assets to Owners) was issued on 27 November 2008. Th e Interpretation provides that a liability to distribute a non-cash dividend must be recognised at the date at which the distribution is no longer at the discretion of the entity (this may be when the dividend is authorised or when it is announced, depending on the statutory provisions in the particular country). Application of the Interpretation is mandatory for annual periods beginning on or aft er 1 July 2009. Th is Interpretation will not apply to the consolidated fi nancial statements of Deutsche Post AG.
In accordance with IAS 1.35, the eff ects of foreign currency hedging are reported under net fi nance costs/net fi nancial income on a net basis, as this better refl ects the economic substance of the transactions.
Clarity of the cash fl ow statement was improved. Further information can be found in Note 50. Th e prior-year fi gures were restated accordingly.
Th e method of reporting income tax provisions and income tax liabilities was also changed. Th ey are now shown on a combined basis as income tax obligations. Th e prior-year fi gures were restated accordingly.
During financial year 2008, Deutsche Postbank Group changed its method of measuring building fi nance loans reported at fair value by introducing additional measurement parameters. Th is resulted in an optimisation of the procedure for calculating fair value. Th e retrospective adjustments to net profi t required led to changes in loans and advances to customers, deferred taxes and retained earnings.
| € m | 2007 | Adjustments | 2007 restated |
|---|---|---|---|
| Restatement of Deutsche Postbank Group fi gures |
|||
| Deferred tax assets | 1,020 | +20 | 1,040 |
| Receivables and other securities from fi nancial services |
|||
| (loans and advances to customers) | 193,986 | – 66 | 193,920 |
| Retained earnings | 8,976 | – 23 | 8,953 |
| Minority interest | 2,801 | – 23 | 2,778 |
| Profi t/loss from discontinued operations |
|||
| Consolidated net profi t for the period | 1,885 | – 12 | 1,873 |
| of which attributable | |||
| to Deutsche Post AG shareholders | 1,389 | – 6 | 1,383 |
| of which attributable to minorities | 496 | – 6 | 490 |
| Reclassifi cations | |||
| Income tax provisions | 334 | – 334 | 0 |
| Income tax liabilities | 139 | – 139 | 0 |
| Income tax obligations | – | + 473 | 473 |
In keeping with the presentation of the Deutsche Postbank Group as a discontinued operation in accordance with IFRS 5, all amounts in the income statement relating to Deutsche Postbank Group, both for the year under review and for the previous year, were reclassifi ed and reported under profi t/loss from discontinued operations. Further details can be found in Note 21.
Th e fi nancial statements of consolidated companies prepared in foreign currencies are translated into euros (€) in accordance with IAS 21 using the functional currency method. Th e functional currency of foreign companies is determined by the primary economic environment in which they mainly generate and use cash. Within the Group, the functional currency is predominantly the local currency. In the consolidated fi nancial statements, assets and liabilities are therefore translated at the closing rates, whilst income and expenses are generally translated at the monthly closing rates. Th e resulting currency translation diff erences are taken directly to equity. In fi nancial year 2008, currency translation diff erences amounting to € 500 million (previous year: € 446 million) were recognised directly in equity (see also the statement of changes in equity).
Goodwill arising from business combinations aft er 1 January 2005 is treated as an asset of the acquired company and carried in the functional currency of the acquired company accordingly.
Th e exchange rates for the currencies that are signifi cant for the Group were as follows:
| Closing rates | Average rates | ||||
|---|---|---|---|---|---|
| Currency | Country | 2007 EUR 1 = |
2008 EUR 1 = |
2007 EUR 1 = |
2008 EUR 1 = |
| USD | USA | 1.4708 | 1.40920 | 1.37145 | 1.474175 |
| CHF | Switzerland | 1.65708 | 1.48967 | 1.64364 | 1.579211 |
| GBP | UK | 0.73558 | 0.97230 | 0.68441 | 0.80463 |
| SEK | Sweden | 9.41621 | 10.92292 | 9.25393 | 9.687032 |
Th e carrying amounts of non-monetary assets recognised in the case of consolidated companies operating in hyperinfl ationary economies are generally indexed in accordance with IAS 29 and thus refl ect the current purchasing power at the balance sheet date.
In accordance with IAS 21, receivables and liabilities in the single-entity fi nancial statements of consolidated companies that have been prepared in local currencies are translated at the closing rate as at the balance sheet date. Currency translation diff erences are recognised in other operating income and expenses in the income statement. In fi nancial year 2008, income of € 269 million (previous year: € 262 million) and expenses of € 269 million (previous year: € 266 million) resulted from currency translation diff erences. In contrast, currency translation diff erences relating to net investments in a foreign operation are recognised in equity.
Th e consolidated fi nancial statements are prepared on the basis of historical costs, with the exception of specifi c fi nancial instruments to be recognised at their fair value.
Revenue and income from banking transactions, as well as other operating income, is generally recognised when services are rendered, the amount of revenue and income can be reliably measured and in all probability the economic benefi ts from the transactions will fl ow to the Group. Operating expenses are recognised in the income statement when the service is utilised or when the expenses are incurred.
Intangible assets are measured at amortised cost. Intangible assets reported include internally generated and purchased intangible assets and purchased goodwill.
Internally generated intangible assets are capitalised at cost, if it is probable that their production will generate an infl ow of future economic benefi ts and the costs can be reliably measured. In the Group, this concerns internally developed soft ware. If the criteria for capitalisation are not met, the expenses are recognised immediately in the income statement in the year in which they are incurred. In addition to direct costs, the production cost of internally developed soft ware includes an appropriate share of allocable production overhead costs. Any borrowing costs incurred are not included in production costs. Value-added tax arising in conjunction with the acquisition or production of intangible assets is included in the cost if it cannot be deducted as input tax. Capitalised soft ware is amortised using the straight-line method over useful lives of between two to fi ve years.
Intangible assets are amortised using the straight-line method over their useful lives. Licences are amortised over the term of the licence agreement. Capitalised customer relationships are amortised using the straight-line method over a period of 5 to 18 years. Impairment losses are recognised in accordance with the principles described in the section headed "Impairment".
Intangible assets with indefi nite useful lives (e. g. brand names) are not amortised but are tested for impairment annually or whenever there are indications of impairment. Impairment testing is carried out in accordance with the principles described in the section headed "Impairment".
Property, plant and equipment is carried at cost, reduced by accumulated depreciation and valuation allowances. In addition to direct costs, production costs include an appropriate share of allocable production overhead costs. Borrowing costs are not included in the production costs. Th ey are expensed directly. Value-added tax arising in conjunction with the acquisition or production of items of property, plant or equipment is included in the cost if it cannot be deducted as input tax. Depreciation is generally charged using the straight-line method. Th e Group uses the estimated useful lives indicated below for depreciation. If there are indications of impairment, the principles described in the section headed "Impairment" are applied.
years
| 2007 | 2008 | |
|---|---|---|
| Buildings | 5 to 50 | 5 to 50 |
| Technical equipment and machinery | 3 to 10 | 3 to 10 |
| Passenger vehicles | 4 to 6 | 4 to 6 |
| Trucks | 5 to 8 | 5 to 8 |
| Aircraft | 15 to 20 | 15 to 20 |
| Other vehicles | 3 to 8 | 3 to 8 |
| IT systems | 3 to 8 | 3 to 8 |
| Other operating and offi ce equipment | 3 to 10 | 3 to 10 |
At each balance sheet date, the carrying amounts of intangible assets, property, plant and equipment, and investment property are reviewed for indications of impairment. If there are any such indications, an impairment test must be carried out. For this purpose, the recoverable amount of the relevant asset is determined and compared with its carrying amount.
In accordance with IAS 36, the recoverable amount is the asset's fair value less costs to sell or its value in use, whichever is higher. Th e value in use is the present value of the pre-tax cash fl ows expected to be derived from the asset in future. Th e discount rate used is a pre-tax rate refl ecting current market conditions. If the recoverable amount cannot be determined for an individual asset, the recoverable amount is determined for the smallest identifi able group of assets (CGU) to which the asset in question can be allocated and which generates independent cash fl ows. If the recoverable amount of an asset is lower than its carrying amount, an impairment loss is recognised immediately in respect of the asset. If, aft er an impairment loss has been recognised, a higher recoverable amount is determined for the asset or the CGU at a later date, the impairment loss is reversed up to a carrying amount which does not exceed the recoverable amount. Th e increased carrying amount attributable to the reversal of the impairment loss is limited to the carrying amount that would have been determined (net of amortisation or depreciation) if no impairment loss had been recognised in the past. Th e reversal of the impairment loss is recognised in the income statement. Impairment losses recognised in respect of goodwill may not be reversed.
Since January 2005, goodwill has been accounted for using the "impairment-only approach" in accordance with IFRS 3. Th is stipulates that goodwill must be subsequently measured at cost, less any cumulative adjustments from impairment losses. Purchased goodwill is therefore no longer amortised and instead is tested for impairment annually in accordance with IAS 36, regardless of whether any indication of possible impairment exists, as in the case of intangible assets with an indefi nite useful life. In addition, the obligation remains to conduct an impairment test if there is any indication of impairment. Goodwill resulting from company acquisitions is allocated to the identifi able groups of assets (CGU or groups of CGU) that are expected to benefi t from the synergies of the acquisition. Th ese groups represent the lowest reporting level at which the goodwill is monitored for internal management purposes. Th e carrying amount of a CGU to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the unit may be impaired. Where impairment losses are recognised in connection with CGU to which goodwill has been allocated, the existing carrying amount of the goodwill is reduced fi rst. If the amount of the impairment loss exceeds the carrying amount of the goodwill, the diff erence is allocated to the remaining non-current assets in the CGU.
A lease fi nancing transaction is an agreement in which the lessor conveys to the lessee the right to use an asset for a specifi ed period in return for a payment or a number of payments. In accordance with IAS 17, benefi cial ownership of leased assets is attributed to the lessee if the lessee bears substantially all the risk and rewards incident to ownership of the leased asset. To the extent that benefi cial ownership is attributable to the Group, the asset is capitalised at the date on which use starts, either at fair value or at the present value of the minimum lease payments if this is less than the fair value. A lease liability in the same amount is recognised under noncurrent liabilities. Th e lease is measured subsequently at amortised cost using the eff ective interest method. Th e depreciation methods and estimated useful lives correspond to those of comparable purchased assets.
For operating leases, the Group as the lessor reports the leased asset at amortised cost as an asset under property, plant and equipment. Th e lease payments recognised in the period are shown under other operating income. As a lessee, the lease payments made are recognised as lease expense under materials expense.
Investments in associates are carried at equity in accordance with IAS 28 (Accounting for Investments in Associates). Based on the cost of acquisition at the time of purchase of the investments, the carrying amount of the investment is increased or reduced to refl ect the share of earnings, dividends distributed and other changes in the equity of the associates attributable to the investments of Deutsche Post AG or its consolidated subsidiaries. Th e goodwill contained in the carrying amounts of the investments is accounted for in accordance with IFRS 3. Investments in companies accounted for using the equity method are written down as impaired if the recoverable amount falls below the carrying amount.
A fi nancial instrument is any contract that gives rise to a fi nancial asset of one entity and a fi nancial liability or equity instrument of another entity. Financial assets include in particular cash and cash equivalents, trade receivables, originated loans and receivables, and primary and derivative fi nancial assets held for trading. Financial liabilities include contractual obligations to deliver cash or another fi nancial asset to another entity. Th ese mainly comprise trade payables, liabilities to banks, liabilities arising from bonds and fi nance leases, and derivative fi nancial liabilities.
Th e Group applied the fair value option for the fi rst time for fi nancial year 2006. Under this option, fi nancial assets or fi nancial liabilities may be measured at fair value through profi t or loss on initial recognition if this eliminates or signifi cantly reduces a measurement or recognition inconsistency (accounting mismatch). Th e Group made use of the option in order to avoid accounting mismatches. Th e Deutsche Postbank Group applies the fair value option solely in relation to specifi c building fi nance loan portfolios that are hedged by interest rate derivatives. Th e use of the fair value option avoids an accounting mismatch that arises from reporting the loans at amortised cost whilst changes in the fair value of the hedging instruments are recognised in profi t or loss. In another case, the fair value option has been applied in order to neutralise the eff ects on the income statement of a liability indexed to share prices that is linked to fi nancial instruments which would originally have been classifi ed as available for sale. Th e cash fl ows arising from the contract vary depending on the movement in the index. Under the terms of IAS 39, changes in the fair value of the related fi nancial assets would have had to be reported directly in equity. As a result of applying the fair value option, the eff ects of changes in the fair value of both fi nancial instruments off set each other in the income statement.
Financial assets are accounted for in accordance with the provisions of IAS 39 which distinguishes between four categories of fi nancial instruments.
Available-for-sale fi nancial instruments are non-derivative fi nancial assets and are carried at their fair value where this can be measured reliably. If a fair value cannot be determined, they are carried at cost. Changes in fair value between reporting dates are generally recognised in the revaluation reserve in equity. Th e reserve is reversed to income either upon disposal or if the fair value falls below cost more than temporarily. If, at a subsequent balance sheet date, the fair value has increased objectively as a result of events occurring aft er the impairment loss was recognised, the impairment loss is reversed in the appropriate amount. Impairment losses recognised in respect of unquoted equity instruments may not be reversed. Available-for-sale fi nancial instruments are allocated to non-current assets unless the intention is to dispose of them within 12 months of the balance sheet date. In particular, investments in unconsolidated subsidiaries, fi nancial instruments and other equity investments are reported in this category.
Financial instruments are classifi ed as held to maturity if there is an intention to hold the instrument to maturity and the economic conditions for doing so are met. Held-to-maturity fi nancial instruments are non-derivative fi nancial assets that are measured at amortised cost using the eff ective interest method.
Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments which are not quoted on an active market. Unless held for trading, they are recognised at cost or amortised cost at the balance sheet date. Th e carrying amounts of money market placements correspond approximately to their fair values due to their short maturity. Loans and receivables are considered current assets if their maturity is not more than 12 months aft er the balance sheet date; otherwise, they are recognised as noncurrent assets. If the recoverability of receivables is in doubt, they are recognised at amortised cost, less appropriate specifi c allowances. A write-down on trade receivables is recognised if there are objective indications that the amount of the outstanding receivable cannot be collected in full. Th e write-down is recognised in the income statement via a valuation account.
All fi nancial instruments held for trading and derivatives that do not satisfy the criteria for hedge accounting are assigned to the category "at fair value through profi t or loss". Th ey are generally measured at fair value. All changes in fair value are recognised in income. All fi nancial instruments in this category are accounted for at the trade date. Assets in this category are recognised as current assets if they are either held for trading or will likely be realised within 12 months of the balance sheet date.
To avoid variations in net profi t resulting from changes in the fair value of derivative fi nancial instruments, hedge accounting is applied where possible and economically useful. Gains and losses from the derivative and the related hedged item are simultaneously recognised in income. Depending on the hedged item and the risk to be hedged, the Group uses fair value hedges and cash fl ow hedges.
Th e carrying amounts of fi nancial assets not carried at fair value through profi t or loss are tested for impairment at each balance sheet date and whenever there are indications of impairment. Th e amount of any impairment loss is determined by comparing the carrying amount and the fair value. If there are objective indications of impairment, an impairment loss is recognised in the income statement under other operating expenses or net fi nance costs. Impairment losses are reversed if there are objective reasons arising aft er the balance sheet date indicating that the reasons for impairment no longer exist. Th e increased carrying amount resulting from the reversal of the impairment loss may not exceed the carrying amount that would have been determined (net of amortisation or depreciation) if the impairment loss had not been recognised.
Impairment losses are recognised within the Group if the debtor is experiencing signifi cant fi nancial diffi culties, it is highly probable that the debtor will be the subject of bankruptcy proceedings, there ceases to be an active market for a fi nancial instrument, there are material changes in the issuer's technological, economic, legal or market environment, or the fair value of a fi nancial instrument falls below its amortised cost for a signifi cant period.
A fair value hedge hedges the fair value of recognised assets and liabilities. Changes in the fair value of both the derivatives and the hedged item are simultaneously recognised in income.
A cash fl ow hedge hedges the fl uctuations in future cash fl ows from recognised assets and liabilities (in the case of interest rate risks), highly probable forecast transactions as well as unrecognised fi rm commitments that entail a currency risk. Th e eff ective portion of a cash fl ow hedge is recognised in the hedging reserve in equity. Ineff ective portions resulting from changes in the fair value of the hedging instrument are recognised directly in income. Th e gains and losses generated by the hedging transactions are initially recognised in equity and are then reclassifi ed into profi t or loss in the period in which the asset acquired or liability assumed aff ects profi t or loss. If a hedge of a fi rm commitment subsequently results in the recognition of a non-fi nancial asset, the gains and losses recognised directly in equity are included in the initial carrying amount of the asset (basis adjustment).
Hedges of net investments (net investment hedges) in foreign entities are treated in the same way as cash fl ow hedges. Th e gain or loss from the eff ective portion of the hedge is recognised in equity, whilst the gain or loss attributable to the ineff ective portion is recognised directly in income. Th e gains or losses taken directly to equity continue to be recognised in equity until the disposal or partial disposal of the net investment. Detailed information on hedging transactions can be found in Note 51.2.
Regular way purchases and sales of fi nancial assets are recognised at the settlement date. A fi nancial asset is derecognised if the rights to receive the cash fl ows from the asset have expired. Upon transfer of a fi nancial asset, a review is made under the disposal rules pursuant to IAS 39 as to whether the asset should be derecognised. A disposal gain/loss arises upon disposal. Th e remeasurement gains/ losses recognised directly in equity in prior periods must be reversed as at the disposal date. Financial liabilities are derecognised if the payment obligations arising from them have expired.
In accordance with IAS 40, investment property is property held to earn rentals or for capital appreciation or both, rather than for use in the supply of services or for administrative purposes or for sale in the normal course of the company's business. It is measured in accordance with the cost model. Depreciable investment property is depreciated over a period of between 5 and 50 years. Th e fair value is determined on the basis of expert opinions. Impairment losses are recognised in accordance with the principles described under the section headed "Impairment".
Inventories are assets that are held for sale in the ordinary course of business, are in the process of production, or are consumed in the production process or in the rendering of services. Th ey are measured at the lower of cost and net realisable value. Valuation allowances are charged for obsolete inventories and slow-moving goods.
In accordance with IAS 20, government grants are recognised at their fair value only when there is reasonable assurance that the conditions attaching to them will be complied with and that the grants will be received. Th e grants are reported in the income statement and are generally recognised as income over the periods in which the costs which they are intended to compensate are incurred. Where the grants relate to the purchase or production of assets, they are reported as deferred income and recognised in the income statement over the useful lives of the assets.
Assets held for sale are assets available for sale in their present condition and whose sale is highly probable. Th ey may consist of individual non-current assets, groups of assets (disposal groups) or components of an entity (discontinued operations). Liabilities intended to be disposed of together with the assets in a single transaction form part of the disposal group or discontinued operation and are also reported separately as liabilities associated with assets held for sale. Assets held for sale are no longer depreciated or amortised, but are recognised at the lower of their fair value less costs to sell and the carrying amount. Gains and losses arising from the remeasurement of individual non-current assets or disposal groups classifi ed as held for sale are reported in the profi t or loss from continuing operations until the fi nal date of disposal. Gains and losses arising from the measurement to fair value less costs to sell of discontinued operations classifi ed as held for sale are reported in the profi t or loss from discontinued operations. Th is also applies to the profi t or loss from operations of these components of an entity and the gain or loss on disposal.
For fi nancial year 2008, receivables and other securities as well as liabilities from fi nancial services are reported in the assets held for sale and liabilities associated with assets held for sale balance sheet items. Financial year 2007 is the last year for which the operating activities of the Deutsche Postbank Group are presented in the balance sheet items receivables and other securities from fi nancial services and liabilities from fi nancial services.
Whether or not there is an active market for a fi nancial instrument is relevant for assessing the accounting policies for the fi nancial instrument in question. According to IAS 39.AG71, a fi nancial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. If the conditions mentioned do not exist, there is an inactive market.
Loans and advances to other banks and customers are generally recognised at amortised cost ("loans and receivables" category). Th is category also includes money market lendings. Premiums and discounts including transaction costs are recognised in the income statement under net interest income. Interest accrued on loans and advances as well as premiums and discounts are reported together with the loans and advances to which they relate under the relevant balance sheet items. Premiums and discounts are deferred using the eff ective interest method.
Identifi able credit risks are covered by specifi c valuation allowances (or collective valuation allowances). In addition, portfolio-based valuation allowances are recognised for groups of fi nancial assets with similar default risk profi les in respect of risks that have arisen but have not yet been identifi ed. Th e amounts of the allowances are determined on the basis of Basel II parameters (expected default rates and probability). Th e allowance for losses on loans and advances is deducted from assets as a separate balance sheet item. It comprises the allowance for losses on loans and advances to other banks and customers.
Trading assets comprise securities and derivatives with positive fair values acquired for the purpose of generating a profi t from short-term fl uctuations in market prices or dealing margins. Th ey also include the positive fair values of banking book derivatives and derivatives associated with hedged items measured under the fair value option. Th ese transactions are recognised at the trade date. Trading assets are measured at their fair values. Remeasurement gains and losses as well as gains or losses on the sale or disposal of trading assets are recognised in net trading income. If there are publicly quoted market prices on an active market as defi ned by IAS 39. AG 71 ff ., these are generally used as the fair value; if this is not the case, fair value is determined using recognised valuation models.
Investment securities are composed of bonds not held for trading and other fi xed-income securities, equities and other nonfi xed-income securities. Investment securities are recognised at the settlement date and are measured at cost at the time of initial recognition. Held-to-maturity bonds and securities not listed on an active market are carried at amortised cost. Premiums and discounts are allocated directly to the fi nancial instruments and deferred over the remaining maturity using the eff ective interest method.
Liabilities and subordinated debt are carried at amortised cost (IAS 39.47). Th e carrying amount of hedged liabilities that meet the requirements for hedge accounting is adjusted for the gains and losses from changes in fair value attributable to the hedged risk. Premiums, discounts and issue costs are recognised in net interest income by applying the eff ective interest method.
Trading liabilities comprise derivatives with negative fair values that were acquired for the purpose of generating a profi t from short-term fl uctuations in market prices or dealing margins. Th ey also include the negative fair values of banking book derivatives. Remeasurement gains and losses as well as gains or losses realised on the settlement of trading liabilities are recognised in net trading income. Derivatives carried under trading liabilities are recognised at the trade date.
Cash and cash equivalents comprise cash, demand deposits and other short-term liquid fi nancial assets with an original maturity of up to three months and are carried at their principal amount. Overdraft facilities used are recognised in the balance sheet as amounts due to banks.
In accordance with IFRS 2, the stock option plan for executives is measured using investment techniques based on option pricing models. The objective is to determine a fair value for options. A stochastic simulation model is used for this purpose, which assumes a logarithmic normal distribution of the returns on Deutsche Post shares and the Dow Jones EURO STOXX Total Return Index and is therefore based on the same fundamental assumption as the Black-Scholes model. Th e options are measured at fair value on the grant date. Th e fair value thus calculated for probable options is recognised in income under staff costs and allocated over the term of the options.
Stock appreciation rights (SAR) issued to members of the Board of Management and executives are measured on the basis of a recognised option pricing model in accordance with IFRS 2. Th e amount determined for SAR that will probably not lapse is recognised in income under staff costs to refl ect the services rendered as consideration during the vesting period (lock-up period). A provision is recognised for the same amount.
In a number of countries, the Group maintains defi ned benefi t pension plans based on the pensionable compensation and length of service of employees. Most of these benefi t plans are funded through external pension funds. Provisions for pensions are measured using the projected unit credit method prescribed by IAS 19 for defi ned benefi t plans. In accordance with IAS 19.92, actuarial gains and losses are recognised only to the extent that they exceed the greater of 10 % of the present value of the obligations and of the fair value of plan assets. Th e excess is allocated over the expected remaining working lives of active employees and recognised in income. Th e interest component of pension expenses is reported under net fi nance costs /net fi nancial income.
Th e Group also contributes to a number of defi ned contribution plans. Contributions to these defi ned contribution pension plans are recognised as staff costs when they are due. In 2008, employer contributions amounting to € 154 million were paid in respect of these plans (previous year: € 175 million).
Pension plans for civil servant employees in Germany
In addition to the state pension system operated by the statutory pension insurance funds, to which contributions for hourly workers and salaried employees are remitted in the form of nonwage costs, Deutsche Post AG and Deutsche Postbank AG pay contributions to defi ned contribution plans in accordance with statutory provisions.
Until 2000, Deutsche Post AG and Deutsche Postbank AG each operated a separate pension fund for their active and former civil servant employees. Th ese funds were merged with the pension fund of Deutsche Telekom AG to form the joint special pension fund Bundes-Pensions-Service für Post und Telekommunikation e. V. (BPS-PT).
Under the provisions of the Gesetz zur Neuordnung des Postwesens und der Telekommunikation (PTNeuOG – German posts and telecommunications reorganisation act), Deutsche Post AG and Deutsche Postbank AG make benefi t and assistance payments via a special pension fund to retired employees or their surviving dependants who are entitled to benefi ts on the basis of a civil service appointment. Th e amount of the payment obligations of Deutsche Post AG and Deutsche Postbank AG is governed by Section 16 of the Postpersonalrechtsgesetz (Deutsche Bundespost former employees act). Since 2000, both companies have been legally obliged to pay into this special pension fund an annual contribution of 33 % of the pensionable gross compensation of active civil servants and the notional pensionable gross compensation of civil servants on leave of absence. In the year under review, Deutsche Post AG paid contributions of € 560 million (previous year: € 560 million) and Deutsche Postbank AG paid contributions of € 114 million (previous year: € 111 million) to Bundes-Pensions-Service für Post und Telekommunikation e. V.
Under the PTNeuOG, the federal government takes appropriate measures to make good the diff erence between the current payment obligations of the special pension fund on the one hand, and the current contributions of Deutsche Post AG and Deutsche Postbank AG, or the return on assets on the other, and guarantees that the special pension fund is able at all times to meet the obligations it has assumed in respect of its funding companies. Where the federal government makes payments to the special pension fund under the terms of this guarantee, it cannot claim reimbursement from Deutsche Post AG and Deutsche Postbank AG.
Pension plans for hourly workers and salaried employees
Th e benefi t obligations for the Group's hourly workers and salaried employees relate primarily to pension obligations in Germany and signifi cant funded obligations in the UK, the Netherlands, Switzerland and the USA. Th ere are various commitments to individual groups of employees. Th e commitments usually depend on length of service and fi nal salary (e. g. the UK), are based on the amount of contributions paid (e. g. Switzerland), or take the form of a fl at-rate contribution system (e. g. Germany). Th e obligations for defi ned benefi t plans are measured using the projected unit credit method prescribed by IAS 19. Future obligations are determined using actuarial principles and on the basis of actuarial and economic assumptions. Th e expected benefi ts are built up over the entire length of service of the employees, taking into account changes in key parameters.
The majority of the defined benefit plans in Germany relate to Deutsche Post AG. Th e defi ned benefi t obligations of the Deutsche Postbank Group are almost entirely related to pension plans in Germany.
Other provisions are recognised for all legal or constructive obligations to third parties existing at the balance sheet date that have arisen as a result of past events, are expected to result in an outfl ow of future economic benefi ts and whose amount can be measured reliably. Th ey represent uncertain obligations that are carried at the best estimate of the expenditure required to settle the obligation. Provisions with more than one year to maturity are discounted at market rates of interest that refl ect the risk, region and time until settlement of the obligation. Th e table below shows a sample of the interest rates applied:
| Region | 1 to 6 years | More than 6 years |
|---|---|---|
| Euro zone | 5.25 % | 5.50 % |
| UK | 5.50 % | 5.75 % |
| Switzerland | 4.00 % | 4.25 % |
| Japan | 2.00 % | 2.50 % |
| Latin America and Africa | 18.75 % | 19.50 % |
For the home savings business (Deutsche Postbank Group), provisions are recognised, based on the diff erent tariff s and conditions applicable to the contracts, for uncertain liabilities relating to reimbursements of arrangement fees and for retroactively payable interest rate bonuses where loans have not been taken up or there has been a change in the applicable interest rate or tariff of the contract. Th ese provisions are calculated as a percentage of the total potential liability, based on the statistical data available relating to customer behaviour and taking into account the general environment likely to aff ect the business in the future.
Th e technical reserves (insurance) consist mainly of outstanding loss reserves and IBNR (incurred but not reported claims) reserves. Outstanding loss reserves represent estimates of ultimate obligations in respect of actual claims or known incidents expected to give rise to claims, which have been reported to the company but have yet to be fi nalised and presented for payment. Outstanding loss reserves are based on individual claim valuations carried out by the company or its ceding insurers. IBNR reserves represent estimates of ultimate obligations in respect of incidents taking place on or before the balance sheet date which have not been reported to the company but will nonetheless give rise to claims in the future. Such reserves also include provisions for potential errors in settling outstanding loss reserves. Th e company carries out its own assessment of ultimate loss liabilities using actuarial methods and also commissions an independent actuarial study of these each year as a means of verifying the reasonableness of its estimates.
On initial recognition, fi nancial liabilities are carried at fair value less transaction costs. Th e price determined on a price-effi cient and liquid market or a fair value determined using the treasury risk management system deployed within the Group is taken as the fair value. In subsequent periods the fi nancial liabilities are measured at amortised cost. Any diff erences between the amount received and the amount repayable are recognised in income over the term of the loan using the eff ective interest method.
Trade payables and other liabilities are carried at amortised cost. Th e fair value of the liabilities corresponds more or less to their carrying amount.
In accordance with IAS 12, deferred taxes are recognised for temporary diff erences between the carrying amounts in the IFRS fi nancial statements and the tax accounts of the individual entities. Deferred tax assets also include tax reduction claims which arise from the expected future utilisation of existing tax loss carryforwards and which are likely to be realised. In compliance with IAS 12.24 (b) and IAS 12.15 (b), deferred tax assets or liabilities were only recognised for temporary diff erences between the carrying amounts in the IFRS fi nancial statements and in the tax accounts of Deutsche Post AG and Deutsche Postbank AG where the diff erences arose aft er 1 January 1995. No deferred tax assets or liabilities can be recognised for temporary diff erences resulting from initial diff erences in the opening tax accounts of Deutsche Post AG and Deutsche Postbank AG as at 1 January 1995. Further details on deferred taxes from tax loss carryforwards can be found in Note 19.
In accordance with IAS 12, deferred tax assets and liabilities are calculated by using the tax rates applicable in the individual countries at the balance sheet date or announced for the time when the deferred tax assets and liabilities are realised. Th e tax rate of 29.8 % applied to German Group companies comprises the corporation tax rate plus the solidarity surcharge, as well as a municipal trade tax rate which is calculated as the average of the diff erent municipal trade tax rates. Foreign Group companies use their individual income tax rate to calculate deferred tax items. Th e income tax rates applied for foreign companies range from 15 % to 48 %.
Income tax assets and liabilities are measured at the amounts for which repayments from or payments to the tax authorities are expected to be received or made.
Contingent liabilities represent possible obligations whose existence will be confi rmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise. Contingent liabilities also include certain obligations that will probably not lead to an outfl ow of resources embodying economic benefi ts, or where the amount of the outfl ow of resources embodying economic benefi ts cannot be measured with suffi cient reliability. In accordance with IAS 37, contingent liabilities are not recognised as liabilities (see Note 52).
Th e preparation of IFRS-compliant consolidated fi nancial statements requires the exercise of judgement by management. All estimates are reassessed on an ongoing basis and are based on historical experience and expectations with regard to future events that appear reasonable under the given circumstances. Th is applies to the following matters in particular:
In the case of certain contracts, a decision must be made whether they should be accounted for as derivatives or as executory contracts. Financial assets are classifi ed under four categories, namely, held-to-maturity investments, loans and receivables, available-for-sale fi nancial assets and fi nancial assets at fair value through profi t or loss. In measuring the provisions for pensions and other employee benefi ts, there are diff erent options for recognising actuarial gains and losses. For this purpose, the Group applies the "corridor method" in accordance with IAS 19.92 (10 % corridor). With respect to assets held for sale, it must be determined whether the assets are available for sale in their present condition and whether their sale is highly probable. If that is the case, the assets and the associated liabilities are reported and measured as assets held for sale and liabilities associated with assets held for sale.
Th e preparation of the consolidated fi nancial statements in accordance with IFRS requires assumptions and estimates to be made that aff ect the amounts of the assets and liabilities included in the balance sheet, the amounts of income and expenses, and the disclosures relating to contingent liabilities.
Amongst other things, these assumptions relate to the recognition and measurement of provisions. When determining the provisions for pensions and other employee benefi ts, the discount rate used is an important factor that has to be estimated. It is based on the rate of return on high-quality corporate bonds. Due to the fi nancial market crisis, the risk premiums for corporate bonds rose markedly compared with government bonds. Th e market returns on which the calculated rate of interest is based also rose as a result. An increase or reduction of one percentage point in the discount rate used would result in a reduction or increase of around € 850 million in the pension obligations of pension plans in Germany. A similar change in the discount rate used to measure the pension obligations of the Group companies in the UK would result in a reduction or increase of around € 350 million. Since actuarial gains and losses are only recognised if they exceed 10 % of the higher of the defi ned benefi t obligation and the fair value of the plan assets, changes in the discount rate used for the Group's benefi t plans generally have little or no eff ect on the expense or the carrying amount of the provisions recognised in the following fi nancial year.
Th e Group has operating activities around the globe and is subject to local tax laws. Management can exercise judgement when calculating the amounts of current and deferred taxes. Although management believes that it has made a reasonable estimate relating to tax matters that are inherently uncertain, there can be no guarantee that the actual outcome of these uncertain tax matters will correspond exactly to the original estimate made. Any diff erence between actual events and the estimate made could have an eff ect on tax liabilities and deferred taxes in the particular period in which the matter is fi nally decided. Th e amount recognised for deferred tax assets could be reduced if the estimates of planned taxable income or the tax benefi ts achievable as a result of tax planning strategies are revised downwards, or in the event that changes to current tax laws restrict the extent to which future tax benefi ts can be realised.
Goodwill is regularly reported in the Group's balance sheet as a consequence of business combinations. When an acquisition is initially recognised in the consolidated fi nancial statements, all identifi able assets, liabilities and contingent liabilities are measured at their fair values at the date of acquisition. One of the most important estimates this requires is the determination of the fair values of these assets and liabilities at the date of acquisition. Land, buildings and offi ce equipment are generally valued by independent experts, whilst securities for which there is an active market are recognised at the quoted exchange price. If intangible assets are identifi ed in the course of an acquisition, then their measurement is based on the opinion of an independent external expert valuer, depending on the type of intangible asset and the complexity involved in determining its fair value. Th e independent expert determines the fair value using appropriate valuation techniques, normally based on expected future cash fl ows. In addition to the assumptions about the development of future cash fl ows, these valuations are also signifi cantly aff ected by the discount rates used.
Impairment testing for goodwill is based on assumptions with respect to the future. Th e Group carries out these tests annually and also whenever there are indications that goodwill may have become impaired. Th e recoverable amount of the CGU must then be calculated. Th is amount is the higher of fair value less costs to sell and value in use. Th e determination of value in use requires adjustments and estimates to be made with respect to forecasted future cash fl ows and the discount rate applied. Although management believes that the assumptions made for the purpose of calculating the recoverable amount are appropriate, possible unforeseeable changes in these assumptions – e. g. a reduction in the EBIT margin, an increase in the cost of capital, or a decline in the long-term growth rate – could result in an impairment loss that could negatively aff ect the Group's net assets, fi nancial position and results of operations.
Pending legal proceedings in which the Group is involved are disclosed in Note 54. Th e outcome of these proceedings could have a signifi cant eff ect on the net assets, fi nancial position and results of operations of the Group. Management regularly analyses the information currently available about these proceedings and recognises provisions for probable obligations including estimated legal costs. Internal and external legal advisers participate in making this assessment. In deciding on the necessity for a provision, management takes into account the probability of an unfavourable outcome and whether the amount of the obligation can be estimated with suffi cient reliability. Th e fact that an action has been launched or a claim asserted against the Group, or that a legal dispute has been disclosed in the Notes, does not necessarily mean that any provision recognised for the associated risk is adequate.
All assumptions and estimates are based on the circumstances prevailing and assessments made at the balance sheet date. For the purpose of estimating the future development of the business, a realistic assessment was also made at that date of the economic environment likely to apply in the future to the diff erent sectors and regions in which the Group operates. In the event of developments in this general environment that diverge from the assumptions made, the actual amounts may diff er from the estimated amounts. In such cases, the assumptions made and, where necessary, the carrying amounts of the relevant assets and liabilities are adjusted accordingly.
At the date of preparation of the consolidated fi nancial statements, there is no indication that any signifi cant change in the assumptions and estimates made will be required, so that on the basis of the information currently available it is not expected that there will be any signifi cant adjustments in fi nancial year 2009 to the carrying amounts of the assets and liabilities recognised in the fi nancial statements.
Th e consolidated fi nancial statements are based on the IFRS fi nancial statements of Deutsche Post AG and the subsidiaries, joint ventures and associates included in the consolidated fi nancial statements, prepared in accordance with uniform accounting policies as at 31 December 2008 and audited by independent auditors.
Acquisition accounting for subsidiaries included in the consolidated fi nancial statements uses the purchase method of accounting. Th e cost of the acquisition corresponds to the fair value of the assets given up, the equity instruments issued and the liabilities incurred or assumed at the transaction date, plus any costs directly attributable to the acquisition.
Joint ventures are proportionately consolidated in accordance with IAS 31. Assets and liabilities, as well as income and expenses, of jointly controlled companies are included in the consolidated fi nancial statements in proportion to the interest held in these companies. Proportionate acquisition accounting as well as recognition and measurement of goodwill use the same methods as applied to the consolidation of subsidiaries.
Companies on which the parent can exercise signifi cant infl uence (associates) are accounted for in accordance with the equity method using the purchase method of accounting. Any goodwill is recognised under investments in associates.
Intra-Group revenue, other operating income and expenses as well as receivables, liabilities and provisions between consolidated companies are eliminated. Inter-company profi ts or losses from intra-Group deliveries and services not realised by sale to third parties are eliminated.
Segment reporting was prepared in accordance with IAS 14 (Segment Reporting). Th e presentation of specifi c data from the consolidated fi nancial statements is classifi ed by divisions and regions, based on the Group's internal reporting and organisational structure. Segment reporting is designed to enable a transparent view of the earnings power, net assets and fi nancial position of the individual components of the Group's activities and regions. Information on the individual restructuring measures and restatements of prioryear fi gures can be found in Note 10.1.
Refl ecting the Group's predominant organisational structure, the primary reporting format is based on the divisions. Th e Group distinguishes between the following divisions:
In addition to the transport and delivery of written communications, the MAIL Division is positioning itself as an end-to-end service provider for the management of written communications. Th e division comprises the following business units: Mail Communication, Dialogue Marketing, Press Services, Parcel Germany, Global Mail and the retail outlets. Th e Pension Service was transferred from the FINANCIAL SERVICES Division to the mail business. Corporate Information Solutions was transferred from the MAIL Division to the SUPPLY CHAIN / CIS Division. Th e prior-year fi gures were restated accordingly.
Th e EXPRESS Division off ers international and national courier and express services to business and private customers. Th e division comprises the Express Europe, Express Americas, Express Asia Pacifi c and Express EEMEA business units.
Th e LOGISTICS Division was dissolved in March 2008 and replaced by the new GLOBAL FORWARDING / FREIGHT Division and the new SUPPLY CHAIN / CIS Division. Th e activities of the GLOBAL FORWARDING / FREIGHT Division comprise the transportation of goods by rail, road, air and sea. Th e division's business units are Global Forwarding and Freight. Th e prior-year fi gures were restated accordingly.
Th e LOGISTICS Division was dissolved in March 2008 and replaced by the new GLOBAL FORWARDING / FREIGHT Division and the new SUPPLY CHAIN / CIS Division. Th e Corporate Information Solutions Business Unit was previously reported in the MAIL Division. Th e division specialises in contract logistics and provides warehousing and ground-based transport services as well as sector-based value-added services along the entire supply chain. Th e division also off ers end-to-end solutions for corporate information and communications management. Th e division's business units comprise Supply Chain together with Corporate Information Solutions. Th e prioryear fi gures were restated accordingly.
Th e costs of Global Business Services have been allocated in full to the operating divisions since the beginning of 2008. Deutsche Post AG's retail outlets were transferred to the MAIL segment. As the services area did not retain any signifi cant opportunities and risks, it was no longer a segment within the meaning of IAS 14. Th e SERVICES segment was therefore dissolved. Th e remaining items of this segment and the entire Corporate Center are now reported in the Corporate Center / Other column. Th e Corporate Center / Other column also includes the consolidation of intersegment transactions. Th e prior-year fi gures were restated accordingly.
Th e FINANCIAL SERVICES Division consists of the Deutsche Postbank Group's activities. In view of the announced sale of the Deutsche Postbank Group, the segment is presented as a discontinued operation. Th e Pension Service previously allocated to the FINANCIAL SERVICES segment was transferred to the mail business. Th e prior-year fi gures were restated accordingly.
Reconciliation of segment amounts to consolidated amounts
Th e reconciliation column contains the eff ects of consolidation adjustments and the amounts from the diff ering defi nitions of segment items compared with the corresponding item for the Group.
| 2007 54,043 |
Total of continuing operations 2008 54,474 |
2007 | Reconciliation 2008 |
|||
|---|---|---|---|---|---|---|
| Consolidated amount | ||||||
| 2007 | 2008 | |||||
| 0 | 0 | 54,043 | 54,474 | |||
| 3,288 | 3,232 | – 3,288 | – 3,232 | 0 | 0 | |
| 57,331 | 57,706 | – 3,288 | – 3,232 | 54,043 | 54,474 | |
| 3,582 | 3,907 | – 1,239 | – 1,171 | 2,343 | 2,736 | |
| – 34,801 | 3,142 | 2,822 | – 30,703 | – 31,979 | ||
| – 18,001 | 11 | 11 | – 17,169 | – 17,990 | ||
| – 6,716 | 1,374 | 1,570 | – 4,185 | – 5,146 | ||
| – 2,662 | 0 | 0 | – 2,196 | – 2,662 | ||
| – 567 | 0 | 0 | 2,133 | – 567 | ||
| 3 | 2 | 0 | 0 | 3 | 2 | |
| – 948 | – 501 | |||||
| – 173 | – 200 | |||||
| 858 | – 713 | |||||
| 1,873 | – 1,979 | |||||
| 1,383 | – 1,688 | |||||
| 490 | – 291 | |||||
| – 33,845 – 17,180 – 5,559 – 2,196 2,133 |
External revenue is the revenue generated by the divisions from non-Group third parties. Internal revenue is revenue generated with other divisions. If comparable external market prices exist for services or products off ered internally within the Group, these market prices or market-oriented prices are used as transfer prices (arm's length principle). Th e transfer prices for services for which no external market exists are generally based on incremental costs.
Th e expenses for IT services provided in the IT service centres are allocated to the divisions by cause. Th e additional costs resulting from Deutsche Post AG's universal postal service obligation (nationwide retail outlet network, delivery every working day), and from its obligation to assume the compensation structure as the legal successor to Deutsche Bundespost, are allocated to the MAIL Division.
Segment assets are composed of non-current assets (excluding non-current financial assets) and current assets (excluding income tax receivables, cash and cash equivalents and current fi nancial instruments). Purchased goodwill is allocated to the divisions.
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| Total assets | 235,420 | 262,964 |
| Investment property | – 187 | – 32 |
| Non-current fi nancial assets | – 1,060 | – 635 |
| Other non-current assets | – 413 | – 449 |
| Deferred tax assets | – 1,040 | – 1,033 |
| Income tax assets | – 312 | – 191 |
| Receivables and other assets | – 142 | – 548 |
| Financial instruments | – 72 | – 50 |
| Cash and cash equivalents | – 4,683 | – 1,350 |
| Total | 227,511 | 258,676 |
| FINANCIAL SERVICES assets | – 197,244 | – 231,824 |
| Total segment assets | ||
| (continuing operations) | 30,267 | 26,852 |
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| Total equity and liabilities | 235,420 | 262,964 |
| Equity | – 13,813 | – 9,852 |
| Non-current provisions | – 10,573 | – 8,029 |
| Non-current liabilities | – 8,986 | – 3,685 |
| Current provisions | – 359 | – 303 |
| Current liabilities | – 2,238 | – 1,733 |
| Total | 199,451 | 239,362 |
| FINANCIAL SERVICES liabilities | – 188,553 | – 227,723 |
| Total segment liabilities (continuing operations) | 10,898 | 11,639 |
Th e segment investments relate to intangible assets (including purchased goodwill) and property, plant and equipment. Depreciation, amortisation and write-downs relate to the segment assets allocated to the individual divisions. Other non-cash expenses relate primarily to expenses from the recognition of provisions.
Th e allocation of external revenue is based on the location of the customers. Only revenue generated from non-Group third parties is disclosed. Segment assets are allocated according to the location of the assets. Th ey are composed of the non-current assets (excluding non-current fi nancial assets) and current assets (excluding income tax receivables, cash and cash equivalents and current fi nancial instruments) of the individual regions. Segment assets also include purchased goodwill, which is generally allocated on the basis of the domicile of the Group companies. Segment investments are also allocated on the basis of the location of the assets. Th ey include investments in intangible assets (including purchased goodwill) and property, plant and equipment.
| € m | 2007 restated 1) |
2008 |
|---|---|---|
| Revenue | 54,043 | 54,474 |
1) Change in presentation of the Deutsche Postbank Group (see Notes 3 and 5).
As in the prior-year period, there was no revenue in fi nancial year 2008 that was generated on the basis of barter transactions. Th e increase in revenue amounting to € 1,296 million in the FORWARDING / FREIGHT Division contrasted with a decline of € 586 million in the SUPPLY CHAIN / CIS Division.
Th e further classifi cation of revenue by division and the allocation of revenue to geographical regions is presented in the segment reporting.
| € m | 2007 | 2008 |
|---|---|---|
| restated 1) | ||
| Income from prior-period billings | 80 | 626 |
| Income from currency translation differences | 262 | 269 |
| Income from the reversal of provisions | 192 | 253 |
| Rental and lease income | 155 | 178 |
| Insurance income | 176 | 173 |
| Income from work performed and capitalised | 163 | 168 |
| Gains on disposal of non-current assets | 275 | 147 |
| Income from the derecognition of liabilities | 54 | 128 |
| Income from fees and reimbursements | 153 | 103 |
| Income from derivatives | 7 | 86 |
| Reversals of impairment losses on receivables and | ||
| other assets | 85 | 66 |
| Commission income | 78 | 66 |
| Income from loss compensation | 27 | 23 |
| Income from payments recoveries on receivables | ||
| written off | 17 | 9 |
| Subsidies | 11 | 8 |
| Income from the sale of Vfw AG, Germany | 59 | 0 |
| Miscellaneous | 549 | 433 |
| Other operating income | 2,343 | 2,736 |
1) Change in presentation of the Deutsche Postbank Group (see Notes 3 and 5).
Th e € 572 million increase in income from prior-period billings relates to the operating component of the state aid repayment. In June 2008, the provision for the funding of shortfalls in the Postal Civil Service Health Insurance Fund was reversed in the amount of € 61 million.
Miscellaneous other operating income includes a large number of smaller individual items.
| € m | 2007 restated 1) |
2008 |
|---|---|---|
| Cost of raw materials, consumables and supplies, and of goods purchased and held for resale |
||
| Fuel | 928 | 968 |
| Aircraft fuel | 601 | 781 |
| Packaging material | 397 | 390 |
| Goods purchased and held for resale | 1,292 | 1,352 |
| Offi ce supplies | 96 | 79 |
| Spare parts and repair materials | 90 | 92 |
| Other expenses | 112 | 100 |
| 3,516 | 3,762 | |
| Cost of purchased services | ||
| Transportation costs | 18,450 | 19,483 |
| Cost of temporary staff | 2,469 | 2,321 |
| Expenses from non-cancellable leases | 1,685 | 1,735 |
| Expenses from cancellable leases | 471 | 469 |
| Other lease expenses (incidental expenses) | 166 | 185 |
| Maintenance costs | 1,023 | 994 |
| IT services | 772 | 764 |
| Commissions paid | 313 | 343 |
| Expenses for the use of Postbank branches | 511 | 484 |
| Other purchased services | 1,327 | 1,439 |
| 27,187 | 28,217 | |
| Materials expense | 30,703 | 31,979 |
1) Change in presentation of the Deutsche Postbank Group (see Notes 3 and 5).
Materials expense includes expenses of € 305 million relating to restructuring and reorganisation measures within the Group.
Th e rise in the materials expense mainly resulted from higher transportation expenses in the Global Forwarding Business Unit. Th e expenses for the use of Postbank branches related to commission payments to Deutsche Postbank Filialvertrieb AG, mostly in connection with sales services provided for the mail business. Other purchased services include a large number of individual items.
| 2007 | 2008 |
|---|---|
| restated 1) | |
| 14,138 | 14,104 |
| 14 | 4 |
| 2 | 0 |
| 21 | 0 |
| 2,150 | 2,382 |
| 881 | 1,504 |
| 17,169 | 17,990 |
1) Change in presentation of the Deutsche Postbank Group (see Notes 3 and 5).
Staff costs include expenses of € 959 million relating to restructuring and reorganisation measures within the Group.
Retirement benefi t expenses include € 557 million (previous year: € 560 million) relating to contributions by Deutsche Post AG to Bundes-Pensions-Service für Post und Telekommunikation e. V. Further details can be found in Note 7.
Staff costs relate mainly to wages, salaries and compensation, as well as all other benefi ts paid to employees of the Group for their services in the year under review. Social security contributions relate in particular to statutory social security contributions paid by employers.
Retirement benefi t expenses relate to current and former employees or their surviving dependants. Th ese expenses consist of additions to pension provisions, employer contributions to supplementary occupational pension plans and retirement benefi t payments by employers for their employees. Th e increase is mainly attributable to the obligations assumed as part of the restructuring measures in the USA in relation to compensation payments.
Th e average number of the Group's employees in the year under review, classifi ed by employee group, was as follows:
| Employees | 500,252 | 511,292 |
|---|---|---|
| Deutsche Postbank Group: 673 (previous year: 610) | 3,859 | 3,839 |
| Trainees | ||
| Civil servants Deutsche Postbank Group: 8,028 (previous year: 8,363) |
52,809 | 51,304 |
| Deutsche Postbank Group: 15,459 (previous year: 15,578) | 443,584 | 456,149 |
| Hourly workers and salaried employees | ||
| 2007 | 2008 |
Th e number of full-time equivalents as at 31 December 2008 was 451,515 employees; 21,127 employees of the Deutsche Postbank Group must be added to this (31 December 2007: 453,626 employees plus 21,474 employees of the Deutsche Postbank Group). Th e employees of companies acquired or disposed of during the year under review were included ratably. Th e number of employees of consolidated joint ventures amounted to 1,709 on a proportionate basis (previous year: 2,152).
| € m | 2007 | 2008 |
|---|---|---|
| restated 1) | ||
| Amortisation of intangible assets, | ||
| excluding the impairment of goodwill | 509 | 826 |
| Depreciation of property, plant and equipment | ||
| Land and buildings | 487 | 203 |
| Technical equipment and machinery | 498 | 338 |
| Other equipment, operating and offi ce equipment, | ||
| vehicle fl eet | 568 | 480 |
| Aircraft | 126 | 202 |
| Advance payments | 6 | 3 |
| 1,685 | 1,226 | |
| Depreciation / amortisation of other non-current assets | 2 | 0 |
| 2,196 | 2,052 | |
| Impairment of goodwill | 0 | 610 |
| Depreciation, amortisation | ||
| and impairment losses | 2,196 | 2,662 |
1) Change in presentation of the Deutsche Postbank Group (see Notes 3 and 5).
Depreciation, amortisation and impairment losses include expenses of € 144 million relating to restructuring and reorganisation measures within the Group.
Depreciation, amortisation and impairment losses include € 213 million (previous year: € 612 million) in respect of write-downs. Of that amount, € 79 million relates to intangible assets (previous year: € 97 million) and € 9 million to land and buildings (previous year: € 253 million), whilst € 125 million relates to the remaining property, plant and equipment (previous year: € 262 million).
In addition, the Exel brand name was fully written down in fi nancial year 2008 in the amount of € 382 million since the use of the brand was discontinued.
Impairment of goodwill amounting to € 436 million related to the goodwill of Supply Chain, whilst € 174 million related to CIS. Further details can be found in Note 3.
At segment level, the amounts of impairment losses on noncurrent assets (excluding impairment of goodwill) were as follows:
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| 3 | 4 | |
| EXPRESS | 596 | 125 |
| GLOBAL FORWARDING / FREIGHT | 0 | 0 |
| SUPPLY CHAIN / CIS | 13 | 19 |
| Corporate Center / Other | 0 | 65 |
| Write-downs | 612 | 213 |
In the Americas region of the EXPRESS Division in the previous year, intangible assets (excluding goodwill) were written down fully in the amount of € 90 million whilst items of property, plant and equipment were written down by € 504 million to their fair value less costs to sell.
As at 1 July 2008, accompanying the division of the Express Americas CGU into the International Americas CGU and the US Express CGU, impairment losses were no longer recognised for the Express Americas CGU as a whole and continued to be recognised only for the US Express CGU. Th e reason for this was the decision by management, aft er considering the restructuring options, to treat the US Express region and the International Americas region diff erently. Business operations would be restructured only in the USA, on the basis of diff erentiation between domestic business products and international business products. As a result of this decision, impairment losses were no longer recognised in respect of the International Americas CGU. Impairment losses amounting to € 81 million were recognised for non-current assets in the year under review in respect of the US Express CGU.
| € m | 2007 | 2008 |
|---|---|---|
| restated 1) | ||
| Travel and training costs | 483 | 450 |
| Closure costs | 53 | 411 |
| Other business taxes | 371 | 378 |
| Warranty expenses, refunds | ||
| and compensation payments | 365 | 326 |
| Write-downs of current assets | 227 | 321 |
| Cost of purchased cleaning, | ||
| transport and security services | 297 | 302 |
| Consulting costs | 292 | 272 |
| Telecommunication costs | 298 | 269 |
| Expenses from currency translation differences | 266 | 269 |
| Expenses from derivatives | 4 | 221 |
| Offi ce supplies | 221 | 207 |
| Legal costs | 86 | 167 |
| Other public relations expenses | 151 | 163 |
| Entertainment and corporate hospitality expenses | 165 | 163 |
| Advertising expenses | 189 | 142 |
| Insurance costs | 135 | 118 |
| Additions to provisions | 5 | 112 |
| Expenses for disposal of non-current assets | 109 | 92 |
| Prior-period other operating expenses | 41 | 85 |
| Services provided by the Federal Posts | ||
| and Telecommunications Agency | 71 | 70 |
| Expenses for public relations | ||
| and customer support | 98 | 70 |
| Commissions paid | 61 | 64 |
| Contributions and fees | 30 | 37 |
| Audit costs | 36 | 36 |
| Monetary transaction costs | 34 | 35 |
| Donations | 17 | 18 |
| Miscellaneous | 80 | 348 |
| Other operating expenses | 4,185 | 5,146 |
1) Change in presentation of the Deutsche Postbank Group (see Notes 3 and 5).
Other operating expenses include expenses of € 1,140 million that relate to restructuring and reorganisation measures within the Group.
Miscellaneous other operating expenses include a number of individual items.
Taxes other than income taxes are either recognised under the related expense item or, if no specifi c allocation is possible, under other operating expenses.
Investments in companies on which a significant influence can be exercised and which are accounted for using the equity method contributed € 2 million (previous year: € 3 million) to net fi nance costs.
| € m | 2007 | 2008 |
|---|---|---|
| restated 1) | ||
| Financial income | ||
| Interest income | 69 | 576 |
| Income from other equity investments and fi nancial instruments |
14 | 15 |
| Income from currency translation differences | 13 | 23 |
| Other fi nancial income | 7 | 7 |
| 103 | 621 | |
| Finance costs | ||
| Interest expenses | – 986 | – 1,064 |
| of which interest cost on discounted provisions for pensions and other provisions |
– 652 | – 690 |
| Cost of loss absorption | – 1 | 0 |
| Write-downs on fi nancial instruments | – 2 | – 30 |
| Expenses from currency translation differences | – 57 | – 8 |
| Other fi nance costs | – 5 | – 20 |
| – 1,051 | – 1,122 | |
| Net other fi nance costs | – 948 | – 501 |
1) Change in presentation of the Deutsche Postbank Group (see Notes 3 and 5).
Th e increase in fi nancial income refl ects the interest component of the repayment of state aid amounting to € 495 million.
| € m | 2007 restated 1) |
2008 |
|---|---|---|
| Current income tax expense | – 384 | – 352 |
| Current recoverable income tax | 5 | 25 |
| – 379 | – 327 | |
| Deferred tax income from temporary differences |
201 | 140 |
| Deferred tax expense (previous year: tax income) from the reduction in deferred tax assets from tax |
||
| loss carryforwards | 5 | – 13 |
| 206 | 127 | |
| Income tax expense | – 173 | – 200 |
1) Change in presentation of the Deutsche Postbank Group (see Notes 3 and 5).
Despite the decline in the profi t from continuing operations, which was due mainly to the restructuring expenses in the USA, there was no eff ect on the tax expense because little or no income tax was paid as a result of the loss generated, and no deferred tax assets were recognised in respect of the resulting tax loss carryforwards.
Th e reconciliation to the eff ective income tax expense is shown below, based on consolidated net profi t before income taxes and the expected income tax expense:
| € m | 2007 restated 1) |
2008 |
|---|---|---|
| Profi t / loss from continuing operations | ||
| before income taxes | 1,188 | – 1,066 |
| Expected income tax expense | 474 | – 318 |
| Deferred tax assets not recognised for initial differences |
– 735 | – 420 |
| Deferred tax assets of German Group companies not recognised for tax loss carryforwards and |
||
| temporary differences | 346 | 469 |
| Deferred tax assets of foreign Group companies not recognised for tax loss carryforwards and |
||
| temporary differences | 98 | 424 |
| Changes in tax rates at German Group companies | 18 | 0 |
| Effect of current taxes from previous years | – 9 | – 45 |
| Tax-exempt income and non-deductible expenses | 67 | 118 |
| Differences in tax rates at foreign companies | – 86 | – 30 |
| Other | 0 | 2 |
| Effective income tax expense | ||
| from continuing operations | 173 | 200 |
1) Change in presentation of the Deutsche Postbank Group (see Notes 3 and 5).
Th e diff erence between the expected and the eff ective income tax expense is due in particular to temporary diff erences between the carrying amounts in the IFRS fi nancial statements and in the tax accounts of Deutsche Post AG resulting from initial diff erences in the opening tax accounts as at 1 January 1995. In accordance with IAS 12.15 (b) and IAS 12.24 (b), the Group did not recognise any deferred tax assets on these temporary diff erences, which relate mainly to property, plant and equipment as well as to provisions for pensions and other employee benefi ts. Th e remaining temporary differences between the carrying amounts in the IFRS fi nancial statements and in the opening tax accounts amount to € 2.0 billion as at 31 December 2008 (previous year: € 3.4 billion).
Th e eff ects from deferred tax assets of German Group companies not recognised on tax loss carryforwards and temporary diff erences relate primarily to Deutsche Post AG and members of its consolidated tax group. Eff ects from deferred tax assets of foreign companies not recognised on tax loss carryforwards and temporary diff erences relate primarily to the Americas region.
Eff ects from deferred tax assets not recognised amounting to € 585 million (previous year: € 122 million) were due to the reversal of a write-down of deferred tax assets recognised in a prior period. Th e income tax expense was reduced by an amount of € 17 million (previous year: € 51 million) as a result of the utilisation of tax losses not previously refl ected in the fi nancial statements.
A deferred tax asset in the amount of € 332 million was recognised in the balance sheet as, based on tax planning, realisation of the tax asset is probable, and losses of the current period are largely due to non-recurring items.
In fi nancial year 2008, German Group companies were not aff ected by tax rate changes. In the previous year, such changes resulted from the 2008 business tax reform. Th e change in the tax rate in some foreign tax jurisdictions did not lead to any signifi cant eff ects.
Th e eff ective income tax expense includes prior-period tax expenses from German and foreign companies in the amount of € 45 million (previous year: € 9 million).
Th e loss from continuing operations in fi nancial year 2008 amounted to € 1,266 million (previous year: profi t of € 1,015 million). It was mainly impacted by restructuring measures in the US business and the impairment losses recognised on intangible assets in the Supply Chain and CIS units.
Th e income and expenses of the Deutsche Postbank Group are presented separately as a discontinued operation in accordance with IFRS 5:
| € m | 2007 | 2008 |
|---|---|---|
| restated 1) | ||
| Income from banking transactions (revenue) | 10,335 | 11,226 |
| Other operating income | 477 | – 998 |
| Total operating income | 10,812 | 10,228 |
| Expenses from banking transactions (materials expense) |
– 7,061 | – 8,270 |
| Staff costs | – 1,311 | – 1,337 |
| Depreciation, amortisation and impairment losses | – 161 | – 179 |
| Other operating expenses | – 1,219 | – 1,313 |
| Total operating expenses | – 9,752 | – 11,099 |
| Profi t / loss from operating activities (EBIT) | 1,060 | – 871 |
| Net fi nance costs | – 65 | – 73 |
| Profi t / loss before taxes from discontinued operations |
995 | – 944 |
| Attributable tax expense | – 137 | 150 |
| Profi t / loss after taxes from discontinued operations |
858 | – 794 |
| Reversal of negative goodwill (arising from increase in equity investment) |
0 | +81 |
| Profi t / loss from discontinued operations | 858 | – 713 |
1) Prior-year fi gures restated due to change in presentation of the Deutsche Postbank Group.
In fi nancial year 2008, the crisis on the fi nancial markets impacted net trading income, net income from investment securities and the allowance for losses on loans and advances. Amongst other things, the Deutsche Postbank Group recognised write-downs amounting in total to € 423 million as a result of its exposure to Lehman Brothers, the US investment bank under chapter 11 protection, and to Icelandic banks. In addition, earnings were aff ected by valuation allowances of € 97 million (previous year: € 18 million) on equity and retail funds, and of € 156 million (previous year: € 112 million) on structured credit products. Charges of € 786 million were also determined in relation to the remeasurement of embedded derivatives from the structured credit substitution business.
In fi nancial year 2008, the Group generated a consolidated net loss for the period of € 1,979 million (previous year: net profi t of € 1,873 million, restated). Of the consolidated net loss, € 1,688 million (previous year: net profi t of € 1,383 million, restated) is attributable to Deutsche Post AG shareholders. Th e main reasons for the net loss for the period were the restructuring expenses in the US business and the loss for the period incurred by the Deutsche Postbank Group.
Th e net loss of € 291 million attributable to minorities represented a decline of € 781 million year-on-year.
Basic earnings per share are computed in accordance with IAS 33 (Earnings per Share) by dividing consolidated net profi t by the average number of shares. Basic earnings per share for fi nancial year 2008 were €– 1.40 (previous year: € 1.15).
| 2007 restated 1) |
2008 | ||
|---|---|---|---|
| Consolidated net profi t/loss attribut able to Deutsche Post AG shareholders Weighted average number |
€ m | 1,383 | – 1,688 |
| of shares outstanding | Number 1,205,101,455 1,208,617,943 | ||
| Basic earnings per share | € | 1.15 | – 1.40 |
| of which from continuing operations | € | 0.79 | – 1.10 |
| of which from discontinued operations | € | 0.36 | – 0.30 |
1) Prior-year fi gures restated due to change in presentation of the Deutsche Postbank Group.
To compute diluted earnings per share, the average number of shares outstanding is adjusted for the number of all potentially dilutive shares. Th ere were 2,726,658 stock options for executives as at the reporting date (previous year: 13,184,482), of which none were dilutive (previous year: 2,489,720).
| 2007 restated 1) |
2008 | ||
|---|---|---|---|
| Consolidated net profi t / loss attributable to Deutsche Post AG shareholders |
€ m | 1,383 | – 1,688 |
| Weighted average number of shares outstanding |
Number 1,205,101,455 1,208,617,943 | ||
| Potentially dilutive shares | Number | 2,489,720 | 0 |
| Weighted average number of shares for diluted earnings |
Number 1,207,591,175 1,208,617,943 | ||
| Diluted earnings per share | € | 1.15 | – 1.40 |
| of which from continuing operations | € | 0.79 | – 1.10 |
| of which from discontinued operations | € | 0.36 | – 0.30 |
1) Prior-year fi gures restated due to change in presentation of the Deutsche Postbank Group.
A dividend per share of € 0.60 is being proposed for fi nancial year 2008. Based on the 1,209,015,874 shares recorded in the commercial register as at 31 December 2008, this corresponds to a dividend distribution of € 725 million. Further details on the dividend distribution can be found in Note 42.
26 Intangible assets
26.1 Overview
| € m | Advance | ||||||
|---|---|---|---|---|---|---|---|
| Internally | Other | payments and | |||||
| generated | purchased | intangible | |||||
| intangible assets |
Purchased brand names |
Purchased customer lists |
intangible assets |
Goodwill | assets under development |
Total | |
| Cost | |||||||
| Balance at 1 January 2007 | 1,185 | 898 | 1,040 | 1,828 | 11,743 | 130 | 16,824 |
| Additions to consolidated group | 0 | 11 | 78 | 5 | 296 | 0 | 390 |
| Additions | 136 | 0 | 0 | 114 | 121 | 101 | 472 |
| Reclassifi cations | 16 | 0 | 0 | 13 | 0 | – 39 | – 10 |
| Disposals | – 27 | 0 | – 70 | – 147 | – 1 | – 36 | – 281 |
| Currency translation differences | – 12 | – 51 | – 62 | – 40 | – 389 | – 3 | – 557 |
| Balance at 31 December 2007 / 1 January 2008 | 1,298 | 858 | 986 | 1,773 | 11,770 | 153 | 16,838 |
| Additions to consolidated group | 0 | 3 | 54 | 4 | 180 | 0 | 241 |
| Additions | 129 | 0 | 0 | 142 | 118 | 74 | 463 |
| Reclassifi cations | 38 | 0 | 0 | 103 | 0 | – 120 | 21 |
| Disposals | – 455 | – 318 | – 176 | – 604 | – 649 | 8 | – 2,194 |
| Currency translation differences | 0 | – 133 | – 73 | – 16 | – 230 | – 7 | – 459 |
| Balance at 31 December 2008 | 1,010 | 410 | 791 | 1,402 | 11,189 | 108 | 14,910 |
| Amortisation and impairment losses / reversals | |||||||
| Balance at 1 January 2007 | 582 | 0 | 88 | 1,044 | 440 | 18 | 2,172 |
| Additions to consolidated group | 0 | 0 | 0 | 2 | 0 | 0 | 2 |
| Amortisation | 146 | 0 | 83 | 261 | 0 | 0 | 490 |
| Impairment losses | 54 | 0 | 0 | 30 | 0 | 13 | 97 |
| Reclassifi cations | – 8 | 0 | 0 | 8 | 0 | 0 | 0 |
| Reversal of impairment losses | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Disposals | – 10 | 0 | 0 | – 105 | 0 | 0 | – 115 |
| Currency translation differences | – 5 | 0 | 7 | – 35 | 0 | – 1 | – 34 |
| Balance at 31 December 2007 / 1 January 2008 | 759 | 0 | 178 | 1,205 | 440 | 30 | 2,612 |
| Additions to consolidated group | 0 | 0 | 0 | 1 | 0 | 0 | 1 |
| Amortisation | 113 | 382 | 90 | 213 | 0 | 0 | 798 |
| Impairment losses | 64 | 0 | 0 | 11 | 610 | 4 | 689 |
| Reclassifi cations | – 1 | 0 | 0 | – 1 | 0 | 0 | – 2 |
| Reversal of impairment losses | – 2 | 0 | 0 | – 6 | 0 | 0 | – 8 |
| Disposals | – 258 | 0 | – 28 | – 496 | – 9 | 0 | – 791 |
| Currency translation differences | 6 | 0 | – 22 | – 1 | 0 | 1 | – 16 |
| Balance at 31 December 2008 | 681 | 382 | 218 | 926 | 1,041 | 35 | 3,283 |
| Carrying amount at 31 December 2008 | 329 | 28 | 573 | 476 | 10,148 | 73 | 11,627 |
| Carrying amount at 31 December 2007 | 539 | 858 | 808 | 568 | 11,330 | 123 | 14,226 |
Purchased soft ware, concessions, industrial rights, licences and similar rights and assets are reported under purchased intangible assets. Internally generated intangible assets relate to development costs for internally developed soft ware.
Th e net disposals mainly relate to the reclassifi cation of the balance sheet items of the Deutsche Postbank Group as assets held for sale in accordance with IFRS 5.
Th e addition in terms of purchased customer lists relates mainly to DHL Logistics China (€56 million – value at the time of purchase price allocation). Th e BHW customer list recognised in earlier years (previous year: €156 million) was reclassifi ed in the amount of €145 million in accordance with IFRS 5.
Changes in brand names relate to the Exel brand name, which was written down in full in the amount of € 382 million, and the reclassifi cation of the BHW brand name (€ 319 million) in accordance with IFRS 5.
Goodwill additions and/or additions from changes to the consolidated group primarily relate to DHL Logistics China (€ 31 million) and to Polar Air Cargo (provisional goodwill of € 100 million).
| € m | |||||
|---|---|---|---|---|---|
| Total goodwill: 10,1481) (previous year: 11,330) | |||||
| Segment level / group of CGU | |||||
| EXPRESS | GLOBAL FORWARDING / FREIGHT |
SUPPLY CHAIN / CIS | Discontinued operation FINANCIAL SERVICES |
||
| 4,103 (previous year: 3,912) | |||||
| CGU level | |||||
| MAIL National | Global Forwarding | Supply Chain | FINANCIAL SERVICES | ||
| 37 (previous year: 30) | 3,443 (previous year: 3,326) | 1,550 (previous year: 2,147) | 0 (previous year: 639) | ||
| MAIL International | Freight Europe | Corporate Information Solutions |
1) Goodwill from reconciliation amounts to €– 114 million (previous year: €– 114 million).
Th e structure of the CGU was changed compared with the previous year because the LOGISTICS Division was restructured in March 2008 and allocated between two board departments. As a result, the LOGISTICS Division was dissolved and replaced by the new Global FORWARDING / FREIGHT Division and the new SUPPLY CHAIN / CIS Division. Due to the new reporting structure, the goodwill attributable to the former LOGISTICS segment was allocated to the aff ected CGU in the two new logistics segments. For reasons of comparability, the prior-year fi gure was restated on a pro-forma basis.
At the same time, Corporate Information Solutions (CIS) was allocated to the newly established SUPPLY CHAIN / CIS Division since both CIS and Supply Chain provide customised logistics solutions. In the previous year, CIS was reported in the MAIL International CGU as part of the MAIL Division.
For the purposes of the impairment test carried out annually in accordance with IAS 36, the Group determines the recoverable amount of a CGU on the basis of its value in use. Th is calculation is based on projections of free cash fl ow that are fi rst discounted at a rate corresponding to the post-tax cost of capital. Pre-tax discount rates are then determined iteratively.
The cash flow projections are based on management's adopted detailed budgets for EBIT and capital expenditure with a three-year planning horizon (2009 to 2011). Th e perpetual annuity (value added from 2012 on) is calculated using a long-term growth rate, which is determined for each CGU separately and which is shown in the table below. Th e growth rate used refl ects expectations regarding industry growth for the CGU, but does not exceed the estimated long-term growth rate for the countries with the highest contribution to earnings in the relevant CGU. Th e cash fl ow forecasts are based both on historical amounts and the anticipated future general market trend. In addition, the forecasts take into account growth in the respective national business operations and in international trade, and the ongoing trend towards outsourcing logistics activities. Cost estimates for the transportation network and services also have an impact on value in use.
Th e pre-tax cost of capital is based on the weighted average cost of capital. Th e (pre-tax) discount rates for the individual CGU and the growth rates assumed in each case for the perpetual annuity are shown in the following table:
| % | Discount rates | Growth rates | |||
|---|---|---|---|---|---|
| 2007 | 2008 | 2007 | 2008 | ||
| SUPPLY CHAIN / CIS | |||||
| Supply Chain | 10.4 | 11.1 | 3.0 | 2.5 | |
| Corporate Information Solutions | n / a | 11.3 | n / a | 2.0 | |
| GLOBAL FORWARDING / FREIGHT | |||||
| Freight Europe | 11.1 | 11.1 | 1.5 | 2.0 | |
| Global Forwarding | 10.8 | 11.2 | 2.5 | 2.5 | |
| National | 11.5 | n / a | 0.0 | n / a | |
| International | 10.9 | 11.4 | 1.0 | 1.0 | |
| EXPRESS | 9.9 | 10.6 | 2.7 | 2.5 |
On the basis of these assumptions and the impairment tests carried out for the individual CGU to which goodwill was allocated, it was established that, with the exception of the CGU in the SUPPLY CHAIN / CIS Division, the recoverable amounts of the CGU exceeded their carrying amounts.
An impairment loss of € 436 million was recognised in respect of the Supply Chain CGU as a result of the impairment testing of goodwill as at 31 December 2008. An impairment loss was also recognised for the Corporate Information Solutions (CIS) CGU as at 31 December 2008 in the amount of € 174 million. A total impairment loss of € 610 million was therefore determined for the SUPPLY CHAIN / CIS segment, largely caused by the general deterioration in the economic environment in 2008. More unfavourable assumptions of the essential valuation parameters – e. g. a lower EBIT margin, higher cost of capital or lower long-term growth rates – would have resulted in higher impairment losses.
As at 31 December 2008, the MAIL National CGU met all of the criteria set out in IAS 36.99 and a detailed recalculation of the recoverable amount was therefore not required. Th ere is no risk of impairment for this CGU as at 31 December 2008.
| € m | Land and buildings |
Technical equipment and machinery |
Other equipment, operating and offi ce equipment |
Aircraft | Vehicle fl eet and transport equipment |
Advance payments, assets under development |
Total |
|---|---|---|---|---|---|---|---|
| Cost | |||||||
| Balance at 1 January 2007 | 7,579 | 3,901 | 3,306 | 1,282 | 2,006 | 182 | 18,256 |
| Additions to consolidated group | 42 | 31 | 38 | 56 | 9 | 2 | 178 |
| Additions | 358 | 346 | 412 | 117 | 277 | 349 | 1,859 |
| Reclassifi cations | – 75 | 60 | 34 | – 7 | 14 | – 137 | – 111 |
| Disposals | – 521 | – 170 | – 291 | – 55 | – 219 | – 84 | – 1,340 |
| Currency translation differences | – 115 | – 92 | – 68 | – 26 | – 41 | – 7 | – 349 |
| Balance at 31 December 2007 / 1 January 2008 | 7,268 | 4,076 | 3,431 | 1,367 | 2,046 | 305 | 18,493 |
| Additions to consolidated group | 46 | 15 | 21 | 0 | 25 | 2 | 109 |
| Additions | 141 | 231 | 285 | 94 | 255 | 447 | 1,453 |
| Reclassifi cations | 80 | 169 | 42 | 44 | 31 | – 390 | – 24 |
| Disposals | – 2,597 | – 219 | – 1,328 | – 73 | – 873 | – 55 | – 5,145 |
| Currency translation differences | – 89 | – 91 | – 53 | 4 | – 88 | – 13 | – 330 |
| Balance at 31 December 2008 | 4,849 | 4,181 | 2,398 | 1,436 | 1,396 | 296 | 14,556 |
| Depreciation and impairment losses | |||||||
| Balance 1 January 2007 | 2,356 | 2,592 | 2,478 | 384 | 1,066 | – 8 | 8,868 |
| Additions to consolidated group | 19 | 22 | 26 | 15 | 4 | 0 | 86 |
| Depreciation | 255 | 309 | 362 | 126 | 201 | 0 | 1,253 |
| Impairment losses | 253 | 190 | 47 | 0 | 19 | 6 | 515 |
| Reversal of impairment losses | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Reclassifi cations | – 57 | 33 | – 5 | – 7 | – 2 | – 1 | – 39 |
| Disposals | – 206 | – 126 | – 254 | – 25 | – 167 | 0 | – 778 |
| Currency translation differences | – 37 | – 47 | – 50 | – 10 | – 22 | 0 | – 166 |
| Balance at 31 December 2007 / 1 January 2008 | 2,583 | 2,973 | 2,604 | 483 | 1,099 | – 3 | 9,739 |
| Additions to consolidated group | 24 | 12 | 15 | 0 | 11 | 0 | 62 |
| Depreciation | 208 | 278 | 293 | 164 | 198 | 0 | 1,141 |
| Impairment losses | 9 | 60 | 21 | 38 | 3 | 3 | 134 |
| Reversal of impairment losses | – 1 | 0 | 0 | 0 | 0 | 0 | – 1 |
| Reclassifi cations | 10 | 1 | – 4 | 2 | – 3 | – 5 | 1 |
| Disposals | – 881 | – 127 | – 1,152 | – 65 | – 827 | – 1 | – 3,053 |
| Currency translation differences | – 19 | – 40 | – 38 | 1 | – 45 | – 2 | – 143 |
| Balance at 31 December 2008 | 1,933 | 3,157 | 1,739 | 623 | 436 | – 8 | 7,880 |
| Carrying amount at 31 December 2008 | 2,916 | 1,024 | 659 | 813 | 960 | 304 | 6,676 |
| Carrying amount at 31 December 2007 | 4,685 | 1,103 | 827 | 884 | 947 | 308 | 8,754 |
Advance payments relate only to advance payments on items of property, plant and equipment where the Group has paid advances in connection with uncompleted transactions. Assets under development relate to items of property, plant and equipment in progress at the balance sheet date for whose production internal or thirdparty costs have already been incurred. Items of property, plant and equipment pledged as collateral amount to less than € 1 million as in the prior year.
Th e net disposals mainly relate to the reclassifi cation of the balance sheet items of the Deutsche Postbank Group as assets held for sale in accordance with IFRS 5.
Th e following assets are carried as non-current assets resulting from fi nance leases:
| Finance leases | 632 | 592 |
|---|---|---|
| Vehicle fl eet and transport equipment | 7 | 11 |
| Aircraft | 491 | 444 |
| Other equipment, operating and offi ce equipment | 35 | 31 |
| Technical equipment and machinery | 35 | 27 |
| Land and buildings | 62 | 76 |
| Intangible assets | 2 | 3 |
| 2007 | 2008 | |
| € m |
Th e corresponding liabilities from fi nance leases are included under fi nancial liabilities (see Note 46).
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| Cost | ||
| Balance at 1 January | 157 | 260 |
| Additions to consolidated group | 0 | 0 |
| Additions | 20 | 1 |
| Reclassifi cations | 122 | 2 |
| Disposals | – 37 | – 219 |
| Currency translation differences | – 2 | 1 |
| Balance at 31 December | 260 | 45 |
| Impairment losses | ||
| Balance at 1 January | 35 | 73 |
| Additions to consolidated group | 0 | 0 |
| Impairment losses | 2 | 1 |
| Changes in fair value | 0 | 0 |
| Reclassifi cations | 39 | 1 |
| Disposals | – 3 | – 62 |
| Currency translation differences | 0 | 0 |
| Balance at 31 December | 73 | 13 |
| Carrying amount at 31 December | 187 | 32 |
Th e change in this balance sheet item is mostly due to the disposal of property by Deutsche Post AG as a result of the sale of the portfolio to the investor Lone Star and to the reclassifi cation of the amounts relating to the Deutsche Postbank Group (previous year: € 73 million), which are reported under assets held for sale in accordance with IFRS 5. In fi nancial year 2008, € 18 million of investment property related to Exel Inc., USA, and € 14 million to Deutsche Post AG (previous year: € 99 million). Rental income for this property amounted to € 1 million (previous year: € 9 million), whilst the related expenses also amounted to € 1 million (previous year: € 9 million). Th e fair value amounted to € 78 million (previous year: € 187 million).
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| Investments in associates | 203 | 61 |
| Other non-current fi nancial assets | ||
| Available-for-sale fi nancial assets | 733 | 427 |
| Held-to-maturity fi nancial assets | 10 | 10 |
| Loans | 114 | 137 |
| Non-current fi nancial assets | 1,060 | 635 |
Write-downs on other equity investments amounting to € 30 million (previous year: € 4 million) were included in the income statement because they were impaired.
Compared with the market rates of interest prevailing at 31 December 2008 for comparable fi nancial assets, most of the housing promotion loans are low-interest or interest-free loans. Th ey are recognised in the balance sheet at a present value of € 19 million (previous year: € 18 million). Th e principal amount of these loans totals € 24 million (previous year: € 25 million). As in the previous year, investments in associates and other investees were not subject to restraints on disposal.
| 2007 | 2008 | |
|---|---|---|
| Pension assets | 247 | 262 |
| Derivatives | 27 | 51 |
| Sureties provided | 33 | 55 |
| Miscellaneous | 190 | 146 |
| Other non-current assets | 497 | 514 |
Th e derivatives – interest rate swaps / fair value hedges – primarily relate to bonds issued by Deutsche Post Finance, the Nether lands, and were entered into with external banks. Further information on pension assets can be found in Note 44.
| € m | ||
|---|---|---|
| 2007 1) | 2008 | |
| Deferred tax assets for German tax loss carryforwards | ||
| of which corporation tax and solidarity surcharge | 80 | 1 |
| of which trade tax | 70 | 1 |
| Deferred tax assets | ||
| for foreign tax loss carryforwards | 77 | 40 |
| 227 | 42 | |
| Deferred tax assets for temporary differences | 813 | 991 |
| Total deferred tax assets | 1,040 | 1,033 |
| Deferred tax liabilities | ||
| for temporary differences | 1,569 | 833 |
1) Prior-year fi gures restated due to restatement of the Deutsche Postbank Group (see Note 5).
| Maturity structure | |||||||
|---|---|---|---|---|---|---|---|
| € m | Less than 1 year |
1 to 2 years | 2 to 3 years | 3 to 4 years | 4 to 5 years | More than 5 years |
Total |
| 2008 | |||||||
| Deferred tax assets for tax loss carryforwards | 2 | 3 | 0 | 0 | 0 | 37 | 42 |
| Deferred tax assets for temporary differences | 282 | 95 | 69 | 36 | 36 | 473 | 991 |
| Deferred tax liabilities for temporary differences | 488 | 86 | 41 | 24 | 29 | 165 | 833 |
| 2007 | |||||||
| Deferred tax assets for tax loss carryforwards | 10 | 9 | 86 | 84 | 4 | 34 | 227 |
| Deferred tax assets for temporary differences | 220 | 67 | 38 | 20 | 285 | 183 | 813 |
| Deferred tax liabilities for temporary differences | 12 | 18 | 7 | 417 | 542 | 573 | 1,569 |
Th e following deferred tax assets and liabilities for temporary diff erences result from diff erences in the carrying amounts of individual balance sheet items:
| € m | 2007 | 2008 | ||
|---|---|---|---|---|
| Assets Liabilities | Assets Liabilities | |||
| Intangible assets | 72 | 701 | 98 | 294 |
| Property, plant and equipment | 17 | 75 | 61 | 38 |
| Non-current fi nancial assets | 26 | 0 | 47 | 2 |
| Other non-current assets | 14 | 37 | 9 | 29 |
| Receivables and other securities | ||||
| from fi nancial services | 414 | 2,205 | 0 | 0 |
| Other current assets | 143 | 10 | 29 | 41 |
| Provisions | 434 | 131 | 338 | 245 |
| Financial liabilities | 4 | 0 | 293 | 1 |
| Liabilities from fi nancial services | 1,653 | 97 | 0 | 0 |
| Other liabilities | 31 | 313 | 167 | 250 |
| 2,808 | 3,569 | 1,042 | 900 | |
| Netting of deferred tax assets and liabilities |
||||
| of which for tax loss carryforwards | 0 | – 5 | 0 | – 16 |
| of which for temporary differences | – 1,995 | – 1,995 | – 51 | – 51 |
| Carrying amount | 813 | 1,569 | 991 | 833 |
Standard costs for inventories of postage stamps and spare parts in freight centres amounted to € 12 million (previous year: € 12 million). Th ere was no requirement to charge signifi cant valuation allowances on these inventories.
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| Finished goods and goods purchased | ||
| and held for resale | 59 | 57 |
| Spare parts for aircraft | 6 | 6 |
| Raw materials and supplies | 164 | 187 |
| Work in progress | 18 | 17 |
| Advance payments | 1 | 2 |
| Inventories | 248 | 269 |
No deferred tax assets were recognised for tax loss carryforwards of around € 16.3 billion (previous year: € 11.7 billion) and for temporary diff erences of around € 696 million (previous year: € 1.2 billion), as it can be assumed that the Group will not be able to use these tax loss carryforwards and temporary diff erences within the framework of tax planning. Most of the loss carry forwards are attributable to Deutsche Post AG. It will be possible to utilise these tax loss carryforwards for an indefi nite period of time. For foreign companies, the signifi cant loss carryforwards will not lapse before 2020.
Deferred taxes have not been recognised for temporary differences of € 386 million (previous year: € 468 million) relating to earnings of German and foreign subsidiaries because these temporary diff erences will probably not reverse in the foreseeable future.
All income tax assets are current and have maturities of less than one year.
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| Income tax assets | 312 | 191 |
| Income tax obligations | 473 | 351 |
Income tax liabilities and income tax provisions are presented on a combined basis as income tax obligations with retrospective eff ect for the previous year. Income tax assets amounting to € 35 million (previous year: € 70 million) and income tax obligations amounting to € 92 million (previous year: € 55 million) relate to Deutsche Post AG.
€ m
| 2007 | 2008 | |
|---|---|---|
| Trade receivables | 6,377 | 5,591 |
| Prepaid expenses | 1,038 | 676 |
| Current derivatives | 52 | 475 |
| Deferred revenue | 558 | 462 |
| Current tax receivables | 461 | 450 |
| Income from cost absorption | 83 | 71 |
| Receivables from sales of assets | 196 | 56 |
| Creditors with debit balances | 63 | 51 |
| Receivables from insurance business | 32 | 37 |
| Receivables from Group companies | 53 | 34 |
| Receivables from employees | 30 | 29 |
| Rent receivables | 17 | 25 |
| Receivables from loss compensation (recourse claims) | 19 | 17 |
| Receivables from cash on delivery | 18 | 15 |
| Receivables from residential housing construction pools |
14 | 13 |
| Receivables from private postal agencies | 7 | 13 |
| Land rights | 22 | 10 |
| Miscellaneous other assets | 766 | 690 |
| Receivables and other assets | 9,806 | 8,715 |
Th e decline in receivables and other assets mainly refl ects the reclassifi cation of the amounts relating to the Deutsche Postbank Group as assets held for sale in accordance with IFRS 5.
€ 341 million of the tax receivables (previous year: € 317 million) relates to VAT, € 43 million (previous year: € 60 million) to customs duties and levies, and € 66 million (previous year: € 84 million) to other tax receivables. Miscellaneous other assets include a large number of individual items. Further information on derivatives can be found in Note 51.2 ff.
| € m | 2007 | 2008 |
|---|---|---|
| restated 1) | ||
| Loans and advances to other banks | ||
| (loans and receivables) | ||
| of which fair value hedges: 1,516 | 24,581 | |
| Loans and advances to customers | ||
| of which secured by land charges: 50,372 | ||
| Loans and advances to customers (loans and receivables) |
||
| of which fair value hedges: 1,356 | 84,133 | |
| Loans and advances to customers (held to maturity) | 456 | |
| Loans and advances to customers (fair value option) | 7,044 | |
| 91,633 | ||
| Allowance for losses on loans and advances | ||
| Loans and advances to other banks | 0 | |
| Loans and advances to customers | – 1,154 | |
| – 1,154 | ||
| Trading assets | ||
| Bonds and other fi xed-income securities | 4,139 | |
| Held-for-trading building loans held for sale | 209 | |
| Equities and other non-fi xed-income securities | 161 | |
| Positive fair value of trading derivatives | 5,155 | |
| Positive fair value of banking book derivatives | 131 | |
| Positive fair value of derivatives in connection | ||
| with underlyings relating to the fair value option | 141 | |
| 9,936 | ||
| Hedging derivatives (positive fair values) | ||
| Assets | 265 | |
| Liabilities | 156 | |
| 421 | ||
| Investment securities | ||
| Bonds and other fi xed-income securities | ||
| Investment securities (loans and receivables) | ||
| of which fair value hedges: 5,447 | 26,600 | |
| Held to maturity | 730 | |
| Available for sale | ||
| of which fair value hedges: 14,633 | 38,755 | |
| 66,085 | ||
| Equities and other non-fi xed-income securities | ||
| Available for sale | 2,418 | |
| 68,503 | ||
| Receivables and other securities | ||
| from fi nancial services | 193,920 | 0 |
1) Prior-year fi gure restated due to the Deutsche Postbank Group restatement (see Note 5).
In fi nancial year 2007, € 65,649 million of the investment securities related to listed securities. Changes in the fair value of unhedged available-for-sale securities were charged to the revaluation reserve in the amount of € – 515 million. € 24 million reported in the revaluation reserve was reversed to income in fi nancial year 2007 as a result of the disposal of investment securities and the recognition of impairment losses. In addition, impairment losses of € 130 million were recognised in fi nancial year 2007 to refl ect developments in the values of fi nancial instruments. Of this amount, € 112 million related to structured credit products and € 18 million to write-downs in respect of retail funds.
Th e maturity structure of the receivables and other securities from fi nancial services in fi nancial year 2007 was as follows:
| € m | Payable on demand |
Less than 3 months |
3 months to 1 year |
1 year to 2 years |
2 years to 3 years |
3 years to 4 years |
4 years to 5 years |
More than 5 years |
Total |
|---|---|---|---|---|---|---|---|---|---|
| 2007 | 4,534 | 27,630 | 17,123 | 17,979 | 13,640 | 12,792 | 16,349 | 85,027 | 195,074 |
Current fi nancial instruments fell by € 22 million year-onyear to € 50 million.
37 Cash and cash equivalents
| Cash and cash equivalents | 4,683 | 1,350 |
|---|---|---|
| Other cash and cash equivalents | 148 | 270 |
| Cash equivalents | 46 | 56 |
| Bank balances | 3,061 | 658 |
| Money in transit | 920 | 346 |
| Cash | 508 | 20 |
| 2007 | 2008 | |
| € m |
Th e change in this balance sheet item is largely due to the reclassifi cation of assets of the Deutsche Postbank Group in accordance with IFRS 5.
Th e amounts reported under these items relate mainly to the following matters:
| € m | Assets | Liabilities | ||
|---|---|---|---|---|
| 2007 | 2008 | 2007 | 2008 | |
| Deutsche Postbank Group | 0 | 231,824 | 0 | 227,736 |
| Deutsche Postbank Group – BHW Bank's credit card and sales fi nancing business | 565 | 0 | 44 | 0 |
| DHL Express (France) SAS – land/buildings | 26 | 0 | 0 | 0 |
| Deutsche Post AG – real estate | 18 | 31 | 0 | 0 |
| DHL Supply Chain, Spain – buildings | 0 | 15 | 0 | 0 |
| Other | 6 | 2 | 0 | 0 |
| Assets held for sale, liabilities associated with assets held for sale | 615 | 231,872 | 44 | 227,736 |
Th e Deutsche Postbank Group's sale of the credit card and fi nancing business of BHW Bank AG was completed in the fi rst quarter of 2008. Th e acquirer was Landesbank Berlin. In the third quarter, the IT equipment reported in the course of the period as assets held for sale was reclassifi ed as property, plant and equipment. At the end of July, it was announced that eff orts to outsource the IT infrastructure to Hewlett-Packard Services had been discontinued.
Th e assets and liabilities of the Deutsche Postbank Group are presented as assets held for sale and liabilities associated with assets held for sale in accordance with IFRS 5.
| € m | |
|---|---|
| 31 December 2008 | |
| ASSETS | |
| Intangible assets | 1,400 |
| Property, plant and equipment | 900 |
| Investment property | 73 |
| Non-current fi nancial assets | 111 |
| Deferred tax assets | 557 |
| Income tax assets | 162 |
| Current receivables and other assets | 810 |
| Receivables and other securities from fi nancial services | 224,394 |
| Cash and cash equivalents | 3,417 |
| Total ASSETS | 231,824 |
| Non-current provisions | 2,111 |
|---|---|
| Non-current fi nancial liabilities | 5,431 |
| Deferred tax liabilities | 831 |
| Current provisions | 30 |
| Income tax provisions | 186 |
| Current fi nancial liabilities | 310 |
| Current liabilities | 960 |
| Liabilities from fi nancial services | 217,877 |
| Total EQUITY AND LIABILITIES | 227,736 |
Further details relating to the fi nancial instruments and the presentation of the risk position of the Deutsche Postbank Group can be found in Note 51.1.
| € m | Equity attributable |
||
|---|---|---|---|
| to Deutsche | |||
| Post AG | Minority | ||
| shareholders | interest | Total equity | |
| IAS 39 revaluation reserve | – 259 | – 263 | – 522 |
| Currency translation reserve | – 76 | – 55 | – 131 |
| – 335 | – 318 | – 653 |
In the third quarter, the Deutsche Postbank Group altered its intention to hold a portion of the bonds in its portfolio as available for sale, and now intends to hold them for the foreseeable future. It has therefore reclassifi ed foreign currency bonds with a principal amount of € 1.6 billion from the available-for-sale category to the loans-and-receivables category at a fair value of € 1.5 billion with eff ect from 1 July 2008 in accordance with IAS 39.50 E. Furthermore, the Deutsche Postbank Group has reclassifi ed a portfolio consisting primarily of foreign government, bank and corporate bonds with a principal amount of € 33.2 billion from the available-for-sale category to the loans-and-receivables category at a fair value of € 32.9 billion with eff ect from 1 October 2008.
As at 31 December 2008, all reclassifi ed bonds had a fair value of € 35.8 billion and a carrying amount of € 35.8 billion ( reclassifi cation was not allowed in the prior year). Prior to their dates of reclassifi cation, the changes in fair value recognised in the revaluation reserve for the bonds that were reclassifi ed amounted to € – 405 million (previous year: € – 358 million). Had the Deutsche Postbank Group not changed its intention to hold the bonds as available for sale, the fair value reserve would have been reduced by a further € 97 million by 31 December 2008.
Given a nominal weighting of the reclassifi ed bonds, the eff ective interest rate calculated on the basis of their restated cost as at the date of reclassifi cation was 4.30 %. Th e estimated cash fl ows that Postbank anticipates as at the reclassifi cation date amount to € 44.9 billion. As at 31 December 2008, there was no impairment identifi ed for the reclassifi ed bonds. No bonds were sold.
Th e Deutsche Postbank Group had irrevocable loan commitments amounting to € 23,205 million (previous year: € 23,480 million) and guarantee obligations of € 1,296 million (previous year: € 1,428 million).
KfW Bankengruppe (KfW), formerly Kreditanstalt für Wiederaufb au, owns approximately 30.5 % of the share capital of Deutsche Post AG. Th e percentage of free-fl oating shares amounts to 69.5 %.
| Share capital as at 31 December | 1,207,470,598 | 1,209,015,874 |
|---|---|---|
| Free fl oat | 839,193,240 | 840,738,516 |
| KfW | 368,277,358 | 368,277,358 |
| 2007 | 2008 |
Th e issued capital increased by € 2 million in fi nancial year 2008 from € 1,207 million to € 1,209 million. It is now composed of 1,209,015,874 no-par value registered shares (ordinary shares), with each individual share having a notional interest of € 1 in the share capital. Th e increase in issued capital is attributable to the servicing of stock options from the 2003 Stock Option Plan.
| As at 31 December | 1,207,470,598 | 1,209,015,874 |
|---|---|---|
| SOP tranches – contingent capital | 5,150,738 | 1,545,276 |
| Exercise of options from 2002, 2003, 2004 | ||
| As at 1 January | 1,202,319,860 | 1,207,470,598 |
| 2007 | 2008 | |
| € |
| Amount (thousands of €) |
Purpose | |
|---|---|---|
| 2005 authorised capital | 174,796 | To increase share capital against non-cash contributions |
| Contingent Capital II | 2,727 | 2003 Executive Stock Option Plan |
| Contingent Capital III | 56,000 | Exercise of option/conversion rights |
By way of a resolution adopted by the Annual General Meeting on 6 May 2008, the company is authorised to acquire, until 31 October 2009, own shares of up to a total of 10 % of the share capital existing at the date the resolution is adopted. Th e authorisation permits the Board of Management to exercise it for any purpose authorised by law, particularly to pursue the goals mentioned in the resolution of the Annual General Meeting. Deutsche Post AG did not hold any own shares on 31 December 2008.
Th e equity ratio stood at 23.8 % in fi nancial year 2008 (previous year: 31.4 %). Corporate capital is controlled by the net gearing ratio which is defi ned as net debt divided by the total of equity and net debt. Th e ratio in 2008 was 23.3 % (previous year: 20.4 %). All ratios are based on Postbank being carried at equity.
| € m | 2007 restated 1) |
2008 |
|---|---|---|
| Aggregate fi nancial liabilities | 4,978 | 4,097 |
| Less fi nancial instruments | – 74 | – 50 |
| Less cash and cash equivalents | – 1,339 | – 1,350 |
| Less long-term deposits | – 456 | – 256 |
| Less fi nancial liabilities to minority shareholders of Williams Lea |
– 251 | – 29 |
| Net debt | 2,858 | 2,412 |
| Plus total equity | 11,181 | 7,937 |
| Total equity plus net debt | 14,039 | 10,349 |
| Net gearing ratio in % | 20.4 | 23.3 |
1) Prior-year fi gure restated due to Deutsche Postbank Group restatement.
| 2007 | 2008 | |
|---|---|---|
| Capital reserve | 2,119 | 2,142 |
| Revaluation reserve in accordance with IAS 39 | – 251 | – 254 |
| Hedging reserve in accordance with IAS 39 | – 96 | – 60 |
| Revaluation reserve in accordance with IFRS 3 | 0 | 8 |
| Currency translation reserve | – 897 | – 1,397 |
| Other reserves | 875 | 439 |
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| Capital reserve as at 1 January | 2,037 | 2,119 |
| Additions | 82 | 23 |
| of which exercise of stock option plans | 68 | 19 |
| of which issuance of stock option plans | 14 | 4 |
| Capital reserve as at 31 December | 2,119 | 2,142 |
Th e measurement of the 2003 Stock Option Plan resulted in staff costs for the stock options in the amount of € 4 million in fi nancial year 2008 (previous year: € 14 million); this amount was charged to capital reserves. Further details of the stock option plans can be found in Note 55.
The revaluation reserve contains gains and losses from changes in the fair values of available-for-sale fi nancial instruments that have been taken directly to equity. Th is reserve is reversed to income either when the assets are sold or otherwise disposed of, or if the fair value of the assets falls permanently below their cost.
| with IAS 39 as at 31 December | – 251 | – 254 |
|---|---|---|
| Revaluation reserve in accordance | ||
| Reversed to income | 61 | 450 |
| Changes in consolidated group | 3 | 11 |
| Deferred taxes recognised directly in equity | 88 | 29 |
| Additions (+) / disposals (–) | – 438 | – 495 |
| Currency translation differences | – 1 | 2 |
| As at 1 January | 36 | – 251 |
| 2007 | 2008 | |
| € m |
In fi nancial year 2008, available-for-sale fi nancial instruments in the amount of € 450 million (previous year: € 61 million) were reversed to income, whilst the reserve was reduced by € 495 million (previous year: € 438 million) as a result of the remeasurement of available-for-sale fi nancial instruments. Th e revaluation reserve relates almost entirely to gains or losses on the fair value remeasurement of fi nancial instruments of the Deutsche Postbank Group.
Th e hedging reserve is adjusted by the eff ective portion of a cash fl ow hedge. Th e hedging reserve is released to income when the hedged item is settled.
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| As at 1 January | – 94 | – 96 |
| Additions | – 42 | – 126 |
| Disposals | 40 | 162 |
| Hedging reserve in accordance with IAS 39 | ||
| as at 31 December | – 96 | – 60 |
Th e change in the hedging reserve is mainly the result of the increase in unrealised gains from hedging future operating currency transactions. In the fi nancial year, unrealised and realised losses of € 148 million were taken from the hedging reserve and recognised in operating profi t, and unrealised and realised profi ts of € 5 million were recognised in net fi nance costs / net fi nancial income. Deferred taxes also aff ected the hedging reserve.
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| As at 1 January | 0 | 0 |
| Changes not recognised in income | 0 | 8 |
| Revaluation reserve in accordance with IFRS 3 as at 31 December |
0 | 8 |
Th e currency translation reserve includes the translation gains and losses generated when consolidating subsidiaries accounted for in foreign currency.
| Currency translation reserve as at 31 December | – 897 | – 1,397 |
|---|---|---|
| Changes not recognised in income | – 446 | – 500 |
| As at 1 January | – 451 | – 897 |
| 2007 | 2008 | |
| € m |
Th e change is due to the decrease in exchange rates for major foreign currencies.
Retained earnings contain the undistributed consolidated profi ts generated in prior periods. Changes in the reserves during the fi nancial year are also presented in the statement of changes in equity.
| € m | 2007 restated 1) |
2008 |
|---|---|---|
| As at 1 January | 8,473 | 8,953 |
| Dividend payment | – 903 | – 1,087 |
| Consolidated net profi t or loss for the period | 1,383 | – 1,688 |
| Retained earnings as at 31 December | 8,953 | 6,178 |
1) Prior-year fi gure restated due to Deutsche Postbank Group restatement.
Th e equity attributable to Deutsche Post AG shareholders in fi nancial year 2008 amounted to € 7,826 million (previous year: € 11,035 million).
Dividends paid to the shareholders of Deutsche Post AG are based on the unappropriated surplus of € 1,093 million reported in the annual fi nancial statements of Deutsche Post AG prepared in accordance with the German commercial code. Th e amount of € 368 million remaining aft er deduction of the planned total dividend of € 725 million will be carried forward.
A dividend of € 1,087 million was paid for fi nancial year 2007 and € 251 million was transferred to retained earnings. Th e dividend is tax-exempt for shareholders resident in Germany. No capital gains tax (investment income tax) will be withheld on the distribution.
Minority interest includes adjustments for the interests of non-Group shareholders in the consolidated equity from acquisition accounting, as well as their interests in profi t and loss. Th e interests relate primarily to the following companies:
| € m | 2007 restated 1) |
2008 |
|---|---|---|
| Deutsche Postbank Group | 2,633 | 1,914 |
| DHL Sinotrans International Air Courier Ltd., China | 60 | 67 |
| Other companies | 85 | 45 |
| Minority interest | 2,778 | 2,026 |
1) Prior-year fi gure restated due to Deutsche Postbank Group restatement.
Th e information below on pension obligations is broken down into the following areas: Germany (excluding Postbank), UK (excluding Postbank), Other (excluding Postbank) and the Deutsche Postbank Group. Th e Deutsche Postbank Group disclosures are presented in their entirety as at 31 December 2008 with the respective amounts then being reclassifi ed in a separate line in accordance with IFRS 5.
| € m | Deutsche | ||||
|---|---|---|---|---|---|
| United | Postbank | ||||
| Germany | Kingdom | Other | Group | Total | |
| 31 December 2008 | |||||
| Provisions for pensions and other employee benefi ts | 4,299 | 183 | 203 | 1,149 | 5,834 |
| Pension assets | 0 | – 120 | – 142 | 0 | – 262 |
| Net pension provisions | 4,299 | 63 | 61 | 1,149 | 5,572 |
| Reclassifi cation in accordance with IFRS 5 | 0 | 0 | 0 | – 1,149 | – 1,149 |
| Net pension provisions | 4,299 | 63 | 61 | 0 | 4,423 |
| 31 December 2007 | |||||
| Provisions for pensions and other employee benefi ts | 4,383 | 267 | 196 | 1,143 | 5,989 |
| Pension assets | 0 | – 127 | – 120 | 0 | – 247 |
| Net pension provisions | 4,383 | 140 | 76 | 1,143 | 5,742 |
Th e majority of the Group's defi ned benefi t obligations relate to plans in Germany and the UK. In addition, signifi cant pension plans are provided in other euro zone countries, Switzerland and the US. Th e actuarial measurement of the main benefi t plans was based on the following assumptions:
| % | United | Other | |||
|---|---|---|---|---|---|
| Germany | Kingdom | euro zone | Switzerland | US | |
| 31 December 2008 | |||||
| Discount rate | 5.75 | 6.50 | 5.75 | 2.75 | 6.00 |
| Future salary increase | 2.50 | 3.00 – 4.75 | 2.00 – 4.00 | 3.00 | 4.00 |
| Future infl ation rate | 2.00 | 3.25 | 2.00 | 1.50 | 2.50 |
| 31 December 2007 | |||||
| Discount rate | 5.50 | 5.75 | 5.50 | 3.25 | 6.00 |
| Future salary increase | 2.50 | 3.00 – 4.75 | 2.00 – 4.00 | 3.00 | 3.75 |
| Future infl ation rate | 2.00 | 3.25 | 2.00 | 1.50 | 2.50 |
For the German Group companies, longevity was calculated using the Richttafeln 2005 G mortality tables published by Klaus Heubeck. For the British benefi t plans, longevity was based on the mortality rates used in the last funding valuation. Th ese are based on mortality analyses specifi c to the plan and include a premium for an expected increase in future life expectancy. Other countries used their own mortality tables.
Th e following average expected return on plan assets was used to compute the expenses for the period:
| % | United | Other | |||
|---|---|---|---|---|---|
| Germany | Kingdom | euro zone | Switzerland | US | |
| 2008 | |||||
| Average expected return on plan assets | 3.75 – 4.25 | 4.50 – 7.25 | 5.00 – 7.00 | 4.25 | 7.50 |
| 2007 | |||||
| Average expected return on plan assets | 3.25 – 4.25 | 4.50 – 7.25 | 5.00 – 7.00 | 4.25 | 7.50 |
Th e expected return on plan assets was determined by taking into account current long-term rates of return on bonds (government and corporate) and then applying to these rates a suitable risk premium for other asset classes based on historical market returns and current market expectations.
| € m | Germany | United Kingdom |
Other | Deutsche Postbank Group |
Total |
|---|---|---|---|---|---|
| 2008 | |||||
| Present value of defi ned benefi t obligations at 31 December for wholly or partly funded benefi ts |
3,558 | 2,677 | 1,301 | 660 | 8,196 |
| Present value of defi ned benefi t obligations at 31 December for unfunded benefi ts | 3,123 | 7 | 187 | 733 | 4,050 |
| Present value of total defi ned benefi t obligations at 31 December | 6,681 | 2,684 | 1,488 | 1,393 | 12,246 |
| Fair value of plan assets at 31 December | – 1,992 | – 2,594 | – 1,257 | – 392 | – 6,235 |
| Unrecognised net gains (+) / losses (–) | – 388 | – 28 | – 171 | 148 | – 439 |
| Unrecognised past service cost | – 2 | 0 | 0 | 0 | – 2 |
| Asset adjustment for asset limit | 0 | 1 | 1 | 0 | 2 |
| Net pension provisions at 31 December | 4,299 | 63 | 61 | 1,149 | 5,572 |
| Pension assets at 31 December | 0 | 120 | 142 | 0 | 262 |
| Provisions for pensions and other employee benefi ts at 31 December | 4,299 | 183 | 203 | 1,149 | 5,834 |
| Reclassifi cation in accordance with IFRS 5 | 0 | 0 | 0 | – 1,149 | – 1,149 |
| Provisions for pensions and other employee benefi ts at 31 December | 4,299 | 183 | 203 | 0 | 4,685 |
| 2007 | |||||
| Present value of defi ned benefi t obligations at 31 December for wholly or partly funded benefi ts |
3,686 | 3,743 | 1,250 | 698 | 9,377 |
| Present value of defi ned benefi t obligations at 31 December for unfunded benefi ts | 3,237 | 9 | 177 | 729 | 4,152 |
| Present value of total defi ned benefi t obligations at 31 December | 6,923 | 3,752 | 1,427 | 1,427 | 13,529 |
| Fair value of plan assets at 31 December | – 1,914 | – 4,048 | – 1,418 | – 392 | – 7,772 |
| Unrecognised net gains (+) / losses (–) | – 622 | 435 | 26 | 108 | – 53 |
| Unrecognised past service cost | – 4 | 0 | 0 | 0 | – 4 |
| Asset adjustment for asset limit | 0 | 1 | 41 | 0 | 42 |
| Net pension provisions at 31 December | 4,383 | 140 | 76 | 1,143 | 5,742 |
| Pension assets at 31 December | 0 | 127 | 120 | 0 | 247 |
| Provisions for pensions and other employee benefi ts at 31 December | 4,383 | 267 | 196 | 1,143 | 5,989 |
| € m | Germany | United Kingdom |
Other | Deutsche Postbank Group |
Total |
|---|---|---|---|---|---|
| 2008 | |||||
| Present value of total defi ned benefi t obligations at 1 January | 6,923 | 3,752 | 1,427 | 1,427 | 13,529 |
| Current service cost, excluding employee contributions | 77 | 65 | 52 | 25 | 219 |
| Employee contributions | 14 | 21 | 13 | 3 | 51 |
| Interest cost | 366 | 197 | 70 | 78 | 711 |
| Benefi t payments | – 504 | – 163 | – 74 | – 84 | – 825 |
| Past service cost | 29 | – 12 | 1 | – 2 | 16 |
| Curtailments | 0 | 0 | – 14 | 0 | – 14 |
| Settlements | 0 | 0 | 0 | 0 | 0 |
| Transfers | 19 | 38 | – 4 | – 1 | 52 |
| Acquisitions / divestitures | 0 | 0 | – 5 | 0 | – 5 |
| Actuarial gains (–) / losses (+) | – 243 | – 335 | – 15 | – 53 | – 646 |
| Currency translation effects | 0 | – 879 | 37 | 0 | – 842 |
| Present value of total defi ned benefi t obligations at 31 December | 6,681 | 2,684 | 1,488 | 1,393 | 12,246 |
| Reclassifi cation in accordance with IFRS 5 | 0 | 0 | 0 | – 1,393 | – 1,393 |
| Present value of total defi ned benefi t obligations at 31 December | 6,681 | 2,684 | 1,488 | 0 | 10,853 |
| 2007 | |||||
| Present value of total defi ned benefi t obligations at 1 January | 7,899 | 4,198 | 1,511 | 1,597 | 15,205 |
| Current service cost, excluding employee contributions | 105 | 102 | 58 | 34 | 299 |
| Employee contributions | 0 | 22 | 13 | 0 | 35 |
| Interest cost | 339 | 206 | 59 | 72 | 676 |
| Benefi t payments | – 490 | – 194 | – 69 | – 71 | – 824 |
| Past service cost | – 40 | 1 | 4 | – 14 | – 49 |
| Curtailments | – 26 | 0 | – 43 | 0 | – 69 |
| Settlements | 0 | 0 | – 19 | 0 | – 19 |
| Transfers | 5 | 0 | 23 | 4 | 32 |
| Acquisitions | 2 | 37 | 6 | 16 | 61 |
| Actuarial gains (–) / losses (+) | – 871 | – 257 | – 76 | – 210 | – 1,414 |
| Currency translation effects | 0 | – 363 | – 40 | – 1 | – 404 |
| Present value of total defi ned benefi t obligations at 31 December | 6,923 | 3,752 | 1,427 | 1,427 | 13,529 |
| € m | Germany | United Kingdom |
Other | Deutsche Postbank Group |
Total |
|---|---|---|---|---|---|
| 2008 | |||||
| Fair value of plan assets at 1 January | 1,914 | 4,048 | 1,418 | 392 | 7,772 |
| Employer contributions | 215 | 56 | 44 | 7 | 322 |
| Employee contributions | 0 | 21 | 13 | 0 | 34 |
| Expected return on plan assets | 74 | 243 | 82 | 16 | 415 |
| Gains (+) / losses (–) on plan assets | – 8 | – 760 | – 273 | – 6 | – 1,047 |
| Benefi t payments | – 203 | – 162 | – 62 | – 17 | – 444 |
| Transfers | 0 | 36 | 0 | 0 | 36 |
| Acquisitions | 0 | 0 | 0 | 0 | 0 |
| Settlements | 0 | 0 | – 11 | 0 | – 11 |
| Currency translation effects | 0 | – 888 | 46 | 0 | – 842 |
| Fair value of plan assets at 31 December | 1,992 | 2,594 | 1,257 | 392 | 6,235 |
| Reclassifi cation in accordance with IFRS 5 | 0 | 0 | 0 | – 392 | – 392 |
| Fair value of plan assets at 31 December | 1,992 | 2,594 | 1,257 | 0 | 5,843 |
| 2007 | |||||
| Fair value of plan assets at 1 January | 1,852 | 4,177 | 1,374 | 381 | 7,784 |
| Employer contributions | 200 | 67 | 45 | 16 | 328 |
| Employee contributions | 0 | 22 | 13 | 0 | 35 |
| Expected return on plan assets | 71 | 272 | 79 | 17 | 439 |
| Gains (+) / losses (–) on plan assets | – 10 | 62 | – 11 | – 7 | 34 |
| Benefi t payments | – 199 | – 193 | – 53 | – 26 | – 471 |
| Transfers | 0 | 0 | 17 | 1 | 18 |
| Acquisitions | 0 | 26 | 0 | 11 | 37 |
| Settlements | 0 | 0 | – 12 | 0 | – 12 |
| Currency translation effects | 0 | – 385 | – 34 | – 1 | – 420 |
| Fair value of plan assets at 31 December | 1,914 | 4,048 | 1,418 | 392 | 7,772 |
Due to the crisis on the fi nancial markets all other plans – mainly with the exception of the German benefi t plans – generated a negative return in 2008; the total return (before exchange losses) was at approximately – 8 % (around € 630 million). Exchange losses in the British benefi t plans in particular reduced the plan assets expressed in euros additionally by around 11 % (around € 840 million). An equally large gain is, however, recognised on the benefi t obligations.
Th e plan assets are composed of fi xed-income securities (33 %; previous year: 32 %), equities and investment funds (28 %; previous year: 36 %), real estate (20 %; previous year: 16 %), cash and cash equivalents (11 %; previous year: 9 %), insurance contracts (6 %; previous year: 5 %) and other assets (2 %; previous year: 2 %). 84 % of the real estate (previous year: 81 %) has a fair value of € 1,041 million (previous year: € 1,040 million) and is owner-occupied by Deutsche Post AG.
Th e funded status is recognised with the amounts of the Deutsche Postbank Group included.
| € m | 2005 | 2006 | 2007 | 2008 |
|---|---|---|---|---|
| Total | Total | Total | Total | |
| Present value of defi ned benefi t | ||||
| obligations at 31 December | 14,501 | 15,205 | 13,529 | 12,246 |
| Fair value of plan assets at 31 December | – 7,049 | – 7,784 | – 7,772 | – 6,235 |
| Funded status | 7,452 | 7,421 | 5,757 | 6,011 |
Excluding the amounts of the Deutsche Postbank Group would result in a present value of defi ned benefi t obligations of € 10,853 million as at 31 December 2008, a fair value of plan assets of € 5,843 million and a funded status of € 5,010 million in total.
Th e gains and losses are recognised with the amounts of the Deutsche Postbank Group included.
| € m | 2005 | 2006 | 2007 | 2008 |
|---|---|---|---|---|
| Total | Total | Total | Total | |
| Actual return on plan assets | 187 | 448 | 473 | – 632 |
| Expected return on plan assets | 129 | 391 | 439 | 415 |
| Experience gains (+) / losses (–) | ||||
| on plan assets | 58 | 57 | 34 | – 1,047 |
Excluding the amounts of the Deutsche Postbank Group would result in an actual return on plan assets of €– 642 million for fi nancial year 2008 (previous year: € 463 million), an expected return on plan assets of € 399 million (previous year: € 422 million) and experience gains (+) / losses (–) on plan assets of €– 1,041 million (previous year: € 41 million).
The total actuarial gains and losses on defined benefi t obligations are recognised with the amounts of the Deutsche Postbank Group included.
| € m | 2005 | 2006 | 2007 | 2008 |
|---|---|---|---|---|
| Total | Total | Total | Total | |
| Experience gains (+) / losses (–) on defi ned benefi t obligations |
12 | – 226 | 116 | 11 |
| Gains (+) / losses (–) on defi ned benefi t obligations arising from changes in |
||||
| assumptions | – 1,080 | 488 | 1,298 | 635 |
| Total actuarial gains (+) / losses (–) on defi ned benefi t obligations |
– 1,068 | 262 | 1,414 | 646 |
Excluding the amounts of the Deutsche Postbank Group would result, in fi nancial year 2008, in experience gains on defi ned benefi t obligations of € 11 million (previous year: € 83 million), gains on defi ned benefi t obligations of € 582 million arising from changes in assumptions (previous year: € 1,121 million) and € 593 million of total actuarial gains on defi ned benefi t obligations (previous year: € 1,204 million).
| € m | United | Deutsche Postbank |
|||
|---|---|---|---|---|---|
| Germany | Kingdom | Others | Group | Total | |
| 2008 | |||||
| Net pension provisions at 1 January | 4,383 | 140 | 76 | 1,143 | 5,742 |
| Pension expense | 399 | 3 | 57 | 78 | 537 |
| Benefi t payments | – 301 | – 1 | – 12 | – 67 | – 381 |
| Employer contributions | – 215 | – 56 | – 44 | – 7 | – 322 |
| Employee contributions | 14 | 0 | 0 | 3 | 17 |
| Acquisitions / divestitures | 0 | 0 | – 5 | 0 | – 5 |
| Transfers | 19 | 2 | – 4 | – 1 | 16 |
| Currency translation effects | 0 | – 25 | – 7 | 0 | – 32 |
| Net pension provisions at 31 December | 4,299 | 63 | 61 | 1,149 | 5,572 |
| Reclassifi cation in accordance with IFRS 5 | 0 | 0 | 0 | – 1,149 | – 1,149 |
| Net pension provisions at 31 December | 4,299 | 63 | 61 | 0 | 4,423 |
| 2007 | |||||
| Net pension provisions at 1 January | 4,524 | 174 | 125 | 1,115 | 5,938 |
| Pension expense | 343 | 39 | – 1 | 81 | 462 |
| Benefi t payments | – 291 | – 1 | – 16 | – 45 | – 353 |
| Employer contributions | – 200 | – 67 | – 45 | – 16 | – 328 |
| Employee contributions | 9 | 0 | 0 | 3 | 12 |
| Acquisitions | 2 | 11 | 6 | 5 | 24 |
| Transfers | – 4 | 0 | 6 | 0 | 2 |
| Currency translation effects | 0 | – 16 | 1 | 0 | – 15 |
| Net pension provisions at 31 December | 4,383 | 140 | 76 | 1,143 | 5,742 |
Payments amounting to € 583 million are expected with regard to net pension provisions in 2009 (€ 275 million of this relates to the Group's expected direct pension payments and € 308 million to expected employer contributions to pension funds, excluding the Deutsche Postbank Group).
| € m | Germany | United Kingdom |
Others | Deutsche Postbank Group |
Total |
|---|---|---|---|---|---|
| 2008 | |||||
| Current service cost, excluding employee contributions | 77 | 65 | 52 | 25 | 219 |
| Interest cost | 366 | 197 | 70 | 78 | 711 |
| Expected return on plan assets | – 74 | – 243 | – 82 | – 16 | – 415 |
| Recognised past service cost | 31 | – 12 | 1 | – 2 | 18 |
| Recognised actuarial gains (–) / losses (+) | – 1 | – 4 | 42 | – 7 | 30 |
| Effects of curtailments | 0 | 0 | 16 | 0 | 16 |
| Effects of settlements | 0 | 0 | 0 | 0 | 0 |
| Effects of asset limit | 0 | 0 | – 42 | 0 | – 42 |
| Pension expense | 399 | 3 | 57 | 78 | 537 |
| Pension expense from discontinued operations | 0 | 0 | 0 | – 78 | – 78 |
| Pension expense from continuing operations | 399 | 3 | 57 | 0 | 459 |
| 2007 | |||||
| Current service cost, excluding employee contributions | 105 | 102 | 58 | 34 | 299 |
| Interest cost | 339 | 206 | 59 | 72 | 676 |
| Expected return on plan assets | – 71 | – 272 | – 79 | – 17 | – 439 |
| Recognised past service cost | – 39 | 1 | 4 | – 14 | – 48 |
| Recognised actuarial gains (–) / losses (+) | 42 | 2 | – 2 | 5 | 47 |
| Effects of curtailments | – 33 | 0 | – 39 | 0 | – 72 |
| Effects of settlements | 0 | 0 | – 8 | 1 | – 7 |
| Effects of asset limit | 0 | 0 | 6 | 0 | 6 |
| Pension expense | 343 | 39 | – 1 | 81 | 462 |
| Pension expense from discontinued operations | 0 | 0 | 0 | – 81 | – 81 |
| Pension expense from continuing operations | 343 | 39 | – 1 | 0 | 381 |
In accordance with IAS 19.92, actuarial gains and losses are recognised only to the extent that they exceed the greater of 10 % of the present value of the obligations or of the fair value of plan assets. Th e excess amount is spread over the expected remaining working lives of active employees and recognised in the income statement.
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| Other provisions, of which non-current: | ||
| 2,511 (previous year: 3,015) | 4,718 | 5,318 |
| € m | Other | Technical | ||||
|---|---|---|---|---|---|---|
| employee benefi ts |
Restructuring provisions |
reserves (insurance) |
Postage stamps |
Miscellaneous provisions |
Total | |
| As at 1 January 2008 | 1,469 | 360 | 489 | 500 | 1,900 | 4,718 |
| Changes in consolidated group | 0 | – 5 | 0 | 0 | 7 | 2 |
| Utilisation | – 610 | – 205 | – 68 | – 500 | – 1,155 | – 2,538 |
| Currency translation differences | – 3 | – 19 | – 30 | 0 | – 68 | – 120 |
| Reversal | – 28 | – 59 | 0 | 0 | – 211 | – 298 |
| Interest cost added back | 42 | 5 | 2 | 0 | 8 | 57 |
| Reclassifi cation | – 40 | – 54 | 0 | 0 | – 917 | – 1,011 |
| Additions | 452 | 1,924 | 104 | 500 | 1,528 | 4,508 |
| As at 31 December 2008 | 1,282 | 1,947 | 497 | 500 | 1,092 | 5,318 |
Th e provision for other employee benefi ts primarily covers workforce reduction expenses (severance payments, transitional benefi ts, partial retirement, etc.).
Th e restructuring provisions comprise all expenses resulting from the restructuring measures within the US express business as well as in other areas of the Group. Th ese are measures which relate primarily to termination benefi t obligations to employees (partial retirement programmes, transitional benefi ts) and expenses from the closure of terminals, for instance.
Th e technical reserves (insurance) mainly consist of outstanding loss reserves and IBNR reserves; further details can be found in Note 7.
Th e provision for postage stamps covers outstanding obligations to customers for mail and parcel deliveries from postage stamps sold but still unused by customers, and is based on studies by market research companies. It is measured at the nominal value of the stamps issued.
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| Tax provisions | 256 | 328 |
| Litigation costs | 84 | 117 |
| Risks from business activities | 141 | 95 |
| Postal Civil Service Health Insurance Fund | 97 | 31 |
| Welfare benefi ts for civil servants | 29 | 25 |
| Staff-related provisions | 25 | 22 |
| Home savings business (Deutsche Postbank Group) | 710 | 0 |
| Other provisions | 558 | 474 |
| Miscellaneous provisions | 1,900 | 1,092 |
Th e decrease in miscellaneous provisions mainly results from reclassifying the amounts of the Deutsche Postbank Group in accordance with IFRS 5.
Of the tax provisions, € 227 million (previous year: € 133 million) are accounted for by VAT, € 15 million (previous year: € 27 million) by customs and duties and € 86 million (previous year: € 96 million) by other tax provisions.
Risks from business activities comprise obligations such as expected losses and warranty obligations. Miscellaneous other provisions include a large number of individual items, none of which exceeds € 30 million.
| € m | Less than | 1 to 2 | 2 to 3 | 3 to 4 | 4 to 5 | More than | |
|---|---|---|---|---|---|---|---|
| 1 year | years | years | years | years | 5 years | Total | |
| 2008 | |||||||
| Other employee benefi ts | 276 | 219 | 166 | 112 | 126 | 383 | 1,282 |
| Restructuring provisions | 1,045 | 71 | 44 | 27 | 510 | 250 | 1,947 |
| Technical reserves (insurance) | 186 | 73 | 17 | 15 | 15 | 191 | 497 |
| Postage stamps | 500 | 0 | 0 | 0 | 0 | 0 | 500 |
| Miscellaneous provisions | 800 | 61 | 52 | 21 | 14 | 144 | 1,092 |
| 2,807 | 424 | 279 | 175 | 665 | 968 | 5,318 | |
| 2007 | |||||||
| Other employee benefi ts | 299 | 242 | 191 | 187 | 135 | 415 | 1,469 |
| Restructuring provisions | 161 | 121 | 31 | 24 | 14 | 9 | 360 |
| Technical reserves (insurance) | 144 | 81 | 19 | 17 | 16 | 212 | 489 |
| Postage stamps | 500 | 0 | 0 | 0 | 0 | 0 | 500 |
| Miscellaneous provisions | 599 | 540 | 190 | 125 | 101 | 345 | 1,900 |
| 1,703 | 984 | 431 | 353 | 266 | 981 | 4,718 | |
Financial liabilities represent all interest-bearing obligations of the Group not classifi ed as liabilities from fi nancial services.
| Financial liabilities, of which non-current: 3,318 (previous year: 8,625) |
10,181 | 4,097 |
|---|---|---|
| Other fi nancial liabilities, of which non-current: 229 (previous year: 5,466) |
6,561 | 283 |
| Liabilities to Group companies, of which non-current: 121 (previous year: 42) |
65 | 184 |
| Finance lease liabilities, of which non-current: 499 (previous year: 551) |
625 | 531 |
| Due to banks, of which non-current: 450 (previous year: 616) |
978 | 1,080 |
| Bonds, of which non-current: 2,019 (previous year: 1,950) |
1,952 | 2,019 |
| € m | 2007 | 2008 |
Th e following table contains further details on the company's major bonds.
| 2007 | 2008 | ||||||
|---|---|---|---|---|---|---|---|
| Nominal coupon | Issue volume | Issuer | Carrying amount € m |
Fair value € m |
Carrying amount € m |
Fair value € m |
|
| Bond 2002 / 2012 | 5.125 % | € 679 million | Deutsche Post Finance B. V. | 677 | 686 | 712 | 710 |
| Bond 2003 / 2014 | 4.875 % | € 926 million | Deutsche Post Finance B. V. | 952 | 916 | 958 | 933 |
Th e bonds issued by Deutsche Post Finance B. V. are fully guaranteed by Deutsche Post AG.
Th e following table contains the terms and conditions of signifi cant individual contracts reported under amounts due to banks:
| Bank | Interest rate | End of term | Carrying amount 2007 € m |
Carrying amount 2008 € m |
|
|---|---|---|---|---|---|
| Deutsche Post International B. V., Netherlands | European Investment Bank Luxembourg | 4.923 | 12 / 2011 | 112 | 117 |
| Deutsche Post International B. V., Netherlands | European Investment Bank Luxembourg | 3-month fl oater | 06 / 2011 | 57 | 40 |
| Deutsche Post International B. V., Netherlands | European Investment Bank Luxembourg | 5.81 | 02 / 2011 | 34 | 19 |
| Deutsche Post AG, Germany | DZ Bank | 4.565 | 12 / 2010 | 200 | 200 |
| Deutsche Post AG, Germany | SEB AG 3.100 |
01 / 2009 | 0 | 249 | |
| 403 | 625 |
Th e above-mentioned liabilities due to banks are fully guaranteed by Deutsche Post AG.
Finance lease liabilities mainly relate to the following items:
| € m | ||||||
|---|---|---|---|---|---|---|
| Leasing partner | Interest rate | Maturity | Asset | 2007 | 2008 | |
| DHL Aviation (Netherlands B.V.) (formerly DHL Operations B.V., Netherlands) |
Barclays Mercantile Business Financing Limited, |
|||||
| London | 3.745 % | 2027 / 2028 | 16 aircraft | 382 | 289 | |
| Deutsche Post AG, Germany | T-Systems Enterprise Services GmbH, Germany |
– | 2011 | IT equipment | 33 | 13 |
Th e leased assets are recognised in property, plant and equipment at carrying amounts of € 592 million (previous year: € 632 million). Th e diff erence between the carrying amounts of the assets and the liabilities results from longer economic useful lives of the assets compared with a shorter repayment period for the rental. Th e notional amount of the minimum lease payments totals € 869 million (previous year: € 1,084 million).
| € m | Present value Liabilities from fi nance leases |
Minimum lease payments Notional amount |
|||
|---|---|---|---|---|---|
| 2007 | 2008 | 2007 | 2008 | ||
| Less than 1 year | 74 | 32 | 78 | 34 | |
| 1 to 5 years | 137 | 137 | 182 | 168 | |
| More than 5 years | 414 | 362 | 824 | 667 | |
| Total | 625 | 531 | 1,084 | 869 |
| € m | |||
|---|---|---|---|
| 2007 | 2008 | ||
| Loan notes due to Exel's former shareholders | Deutsche Post AG | 126 | 77 |
| Loan from Deutsche-Post-Betriebsrenten-Service e.V. | Deutsche Post AG | 347 | 0 |
| Loans from Bundes-Pensions-Service für Post und Telekommunikation | Deutsche Post AG | 42 | 0 |
| Subordinated debt | Deutsche Postbank Group | 5,603 | 0 |
| Miscellaneous fi nancial liabilities | Other Group companies | 443 | 206 |
| Other fi nancial liabilities | 6,561 | 283 |
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| Other liabilities, of which non-current: 367 | ||
| (previous year: 361) | 5,462 | 5,112 |
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| Tax liabilities | 841 | 672 |
| Derivatives, of which non-current: 103 (previous year: 97) |
157 | 652 |
| Compensated absences | 420 | 440 |
| Incentive bonuses | 391 | 430 |
| Payable to employees and members of executive bodies |
486 | 345 |
| Deferred income, of which non-current: 48 | ||
| (previous year: 41) | 453 | 313 |
| Wages, salaries, severance | 312 | 244 |
| Liabilities from the sale of residential building loans, of which non-current: 113 (previous year: 106) |
234 | 222 |
| Social security liabilities | 223 | 195 |
| Debtors with credit balances | 71 | 95 |
| Overtime claims | 98 | 93 |
| Accrued interest | 59 | 58 |
| Other compensated absences | 65 | 57 |
| COD liabilities | 78 | 51 |
| Liabilities to Group companies | 69 | 37 |
| Insurance liabilities | 41 | 29 |
| Liabilities from cheques issued | 8 | 20 |
| Accrued rentals | 25 | 20 |
| Accrued insurance premiums for damages and similar liabilities |
17 | 18 |
| Liabilities for damages, of which non-current: 3 | ||
| (previous year: 2) | 20 | 17 |
| Other liabilities to customers | 5 | 2 |
| Liabilities from defi ned contribution pension plans | 5 | 0 |
| Settlement offered to BHW minority shareholders | 39 | 0 |
| Liabilities from commissions and premiums | 43 | 0 |
| Liabilities to Bundes-Pensions-Service für Post und Telekommunikation e.V. |
4 | 0 |
| Miscellaneous other liabilities, of which non-current: 100 (previous year: 115) |
1,298 | 1,102 |
| Other liabilities | 5,462 | 5,112 |
Th e increase in the derivatives' fair value mainly results from exchange rate fl uctuations and an increase in the portfolio's volume. Further details on derivatives can be found in Note 51.2.
Of the tax liabilities, € 349 million (previous year: € 341 million) are accounted for by VAT, € 199 million (previous year: € 181 million) by customs and duties and € 124 million (previous year: € 319 million) by other tax liabilities.
Th e liabilities from the sale of residential building loans relate to obligations of Deutsche Post AG to pay interest subsidies to borrowers to off set the deterioration in borrowing terms in conjunction with the assignment of receivables in previous years as well as pass-through obligations from repayments of principal and interest for residential building loans sold.
Miscellaneous other liabilities include a large number of individual items.
| Maturity structure of other liabilities | 5,462 | 5,112 |
|---|---|---|
| More than 5 years | 147 | 132 |
| 4 to 5 years | 36 | 85 |
| 3 to 4 years | 30 | 54 |
| 2 to 3 years | 20 | 52 |
| 1 to 2 years | 128 | 44 |
| Less than 1 year | 5,101 | 4,745 |
| 2007 | 2008 | |
| € m |
Short maturities or market interest rates means that there are no signifi cant diff erences between the carrying amounts and fair value of primary fi nancial instruments. Th ere is no signifi cant interest rate risk because most of these instruments bear fl oating rates of interest at market rates.
€ 954 million of the trade payables amounting to € 4,980 million (previous year: € 5,384 million) relate to Deutsche Post AG (previous year: € 930 million). Trade payables primarily have a maturity of less than one year. Th e reported carrying amount of trade payables corresponds to their fair value.
In fi nancial year 2008, liabilities from fi nancial services, which solely relate to the Deutsche Postbank Group, are recognised under assets classifi ed as held for sale and under liabilities associated with assets held for sale (see Note 38).
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| Deposits from other banks | 61,146 | |
| of which payable on demand: 3,292 | ||
| of which fair value hedges: 783 | ||
| Due to customers | 110,616 | |
| of which payable on demand: 26,589 | ||
| of which fair value hedges: 4,542 | ||
| Securitised liabilities | 9,558 | |
| of which fair value hedges: 5,797 | ||
| Trading liabilities | ||
| Negative fair values of trading derivatives | 4,955 | |
| Negative fair values of banking book hedging derivatives |
330 | |
| Negative fair values of derivatives in connection with underlyings relating to the fair value option |
308 | |
| Delivery obligations for short sales of securities | 1 | |
| 5,594 | ||
| Hedging derivatives (negative fair values) | 873 | |
| Liabilities from fi nancial services | 187,787 | 0 |
Th e maturity structure of liabilities from fi nancial services for fi nancial year 2007 is as follows:
| € m | Payable on demand |
Less than 3 months |
3 months to 1 year |
1 to 2 years | 2 to 3 years | 3 to 4 years | 4 to 5 years | More than 5 years |
Total |
|---|---|---|---|---|---|---|---|---|---|
| 2007 | 29,802 | 88,244 | 13,067 | 8,547 | 4,115 | 4,829 | 7,391 | 31,792 | 187,787 |
50 Cash fl ow disclosures Th e cash fl ow statement for continuing operations is prepared in accordance with IAS 7 (Cash Flow Statements) and discloses the cash fl ows in order to present the source and application of cash and cash equivalents. It distinguishes between cash fl ows from operating, investing and fi nancing activities. Cash and cash equivalents are composed of cash, cheques and bank balances with a maturity of not more than three months, and correspond to the cash and cash equivalents reported on the balance sheet. Th e eff ects of currency translation and changes in the consolidated group are adjusted when calculating cash and cash equivalents. Since the Deutsche Postbank Group no longer forms part of continuing operations, the changes in cash and cash equivalents from the individual activities at the Deutsche Postbank Group were reported separately
To enhance the clarity of the cash fl ow statement, its structure was changed. Proceeds from divestitures and cash paid to acquire investments in companies now only include fully or proportionally consolidated companies. Accordingly, the line items were renamed proceeds from disposal of and cash paid to acquire subsidiaries and other business units. Th e other non-current assets item was split into two new items. Cash receipts and payments are now reported separately for property, plant and equipment and intangible assets and for other non-current fi nancial assets. Th e latter item also includes infl ows and outfl ows from companies accounted for at equity. Th e dividend received from Deutsche Postbank AG is now recognised separately under net cash from / used in investing activities. Proceeds from and cash paid to acquire foreign currency derivatives were extracted from the interest received or interest paid items and reclassifi ed to other fi nancing activities. Financial liabilities were split into current and non-current fi nancial liabilities, non-current fi nancial liabilities being further subdivided into borrowing and repayment. Th e prior-year fi gures were restated accordingly.
Cash fl ows from operating activities are calculated by adjusting net profi t before taxes for net fi nance costs / net fi nancial income and non-cash factors, as well as taxes paid, changes in provisions and changes in other assets and liabilities (net profi t before changes in working capital). Adjustments for changes in working capital (excluding fi nancial liabilities) result in net cash from or used in operating activities. Net cash from operating activities can be broken down into net cash from operating activities before changes in working capital and net cash from changes in working capital.
Net cash from operating activities before changes in working capital (continuing operations) amounts to € 2,729 million, thus being largely on the previous year's level (€2,849 million). EBIT was impacted in particular by higher non-cash additions to provisions. In addition, EBIT was reduced by non-cash impairment losses recognised on goodwill and intangible assets which were added back in the depreciation/amortisation of non-current assets item. Th e € 572 million cash repayment from state aid proceedings had an off setting eff ect. Th e reduction in working capital in particular resulted in a higher cash infl ow from operating activities. Th e reduction of receivables and other assets was a main contributor to this development. Overall, net cash from operating activities (continuing operations) increased by € 554 million year-on-year to € 3,362 million. A cash outfl ow from operating activities of € 1,423 million was reported for discontinued operations (previous year: cash infl ow of € 2,343 million).
| € m | 31 December | 31 December |
|---|---|---|
| 2007 | 2008 | |
| restated 1) | ||
| Expense from remeasurement of assets | 54 | 153 |
| Income from remeasurement of liabilities | – 26 | – 4 |
| Staff costs relating to stock option plan | 14 | 4 |
| Other | 5 | 64 |
| Other non-cash income and expense | 47 | 217 |
1) Presentation of the Deutsche Postbank Group differs (see Notes 3 and 5).
Cash fl ows from investing activities mainly result from cash received from disposals of non-current assets and cash paid for investments in non-current assets. Net cash in the amount of € 914 million was used in investing activities in the year under review, thus falling by € 396 million below the previous year's amount (previous year: € 1,310 million).
Proceeds from disposal of non-current assets increased in particular because of the sale of a real estate portfolio to US investor Lone Star (€ 942 million). Cash paid to acquire non-current assets also rose from € 2,343 million in the previous year to € 3,169 million in the year under review. Th is is due to Deutsche Post AG's share in Deutsche Postbank AG's capital increase, which is refl ected in an increase in cash paid for subsidiaries and other business units. Furthermore, cash was paid to acquire Flying Cargo (€ 65 million) and to acquire shares in the companies Williams Lea (€ 220 million) and DHL Logistics (China) Co. Ltd. (€ 61 million). Of the increase in interest received, € 495 million relates to the repayment under the state aid proceedings.
Th e following assets and liabilities were acquired upon the acquisition of companies (see also Note 2):
| € m | ||
|---|---|---|
| 2007 | 2008 1) | |
| Non-current assets | 98 | 23 |
| Receivables and other securities | ||
| from fi nancial services | 26 | 0 |
| Current assets (excluding cash and cash equivalents) | 212 | 174 |
| Provisions | – 70 | – 1 |
| Other liabilities | – 214 | – 305 |
1) Continuing operations.
Investing activities (discontinued operations) resulted in a cash infl ow of € 473 million compared with € 257 million in the previous year.
Free cash fl ow is the aggregate of net cash from operating activities and net cash used in investing activities. Free cash fl ow is considered to be an indicator of how much cash is available to the company for dividend payments or the repayment of debt. Since net cash from operating activities rose and net cash used in investing activities fell, free cash fl ow (continuing operations) improved signifi cantly increasing from € 1,498 million in the previous year to € 2,448 million in fi nancial year 2008.
Net cash used in fi nancing activities (continuing operations) rose year-on-year by € 485 million to € 2,386 million (previous year: € 1,901 million). At € 497 million, the repayment of non-current fi nancial liabilities was almost at the prior-year level (€ 452 million), whereas long-term borrowing decreased year-on-year: As a result, cash infl ows amounted to € 176 million, € 376 million below the prioryear level. Th e change in current fi nancial liabilities led to a decrease in cash outfl ows of € 520 million (€ 337 million in the year under review compared with € 857 million in the previous year). Th e cash infl ows and outfl ows from foreign currency derivatives are reported under other fi nancing activities: A net cash infl ow of € 153 million was recognised in the previous year in contrast to a net cash outfl ow of € 148 million in fi nancial year 2008. Th e dividend payment to shareholders of € 1,087 million – another increase – accounts for the largest share of cash paid as part of fi nancing activities. At € 434 million, interest payments are slightly above the prior-year fi gure (€ 411 million).
Cash infl ows from fi nancing activities (discontinued operations) amounted to € 918 million, which represents an € 804 million year-on-year increase.
Th e cash infl ows and outfl ows described above produced cash and cash equivalents (continuing operations) of € 1,350 million (see Note 37). Th is is a slight year-on-year increase of € 11 million. Currency translation diff erences reduced cash and cash equivalents by € 53 million; changes in the consolidated group, by contrast, brought an increase of € 2 million.
Financial instruments are contractual obligations to receive or deliver cash and cash equivalents. In accordance with IAS 32 and IAS 39, these include both primary and derivative fi nancial instruments. Primary fi nancial instruments include in particular bank balances, all receivables, liabilities, securities, loans and accrued interest. Examples of derivatives include options, swaps, and futures.
Th e Deutsche Postbank Group accounts for most of the fi nancial instruments in the Group. Th e risks and derivatives of the Deutsche Postbank Group's fi nancial instruments are therefore presented separately below.
Taking risks in order to generate earnings is the core function of the Deutsche Postbank Group's business activities. One of the Deutsche Postbank Group's core competencies is to assume normal banking risks within a strictly defi ned framework, whilst at the same time maximising the potential return arising from them. In the process, each of the relevant risks is carefully identifi ed, continuously measured and monitored as well as regularly reported. To this end, the Deutsche Postbank Group has established a risk manage ment organisation as the basis for risk and earnings-based overall bank management.
In accordance with the requirements of MaRisk (Minimum Requirements for Risk Management), the risk strategy is consistent with the business strategy and takes into account all signifi cant business areas and types of risk. In addition to an overarching, groupwide risk strategy, Deutsche Postbank AG's Management Board has resolved specifi c risk strategies for market, credit, liquidity and operational risk.
Operational responsibility for risk management is spread across several units in the Deutsche Postbank Group, primarily the Financial Markets Board Department, domestic / foreign credit management and the credit functions of the retail banking business and, at a decentralised level, the subsidiaries BHW Bausparkasse AG, BHW Bank AG, Deutsche Postbank International S. A. and PB Capital Corp., as well as the London branch.
Risk Controlling, which is part of the Finance Board Department, is the independent, group-wide risk monitoring unit. Risk Controlling is authorised to make decisions regarding the methods and models applied in risk identifi cation, measurement and limitation. Risk Controlling, together with the risk control units at BHW Bau sparkasse AG, BHW Bank AG, Deutsche Postbank Inter national S. A., PB Capital Corp. subsidiaries and the London branch, is responsible for operational risk control and reporting at Group level.
Th e Internal Audit unit is a key element of the Deutsche Postbank Group's business and process-independent monitoring system. In terms of the Postbank's organisational structure, it is assigned to the chairman of the Management Board and reports independently to the whole Management Board. Th e Postbank Group Management Board is responsible for risk strategy, the appropriate organisation of risk management, monitoring the risk content of all transactions and risk control. In conjunction with the Risk Committees, the Deutsche Postbank Management Board has defi ned the underlying strategies for activities on the fi nancial markets and the other business sectors of the Group.
Th e Deutsche Postbank Group distinguishes between the following risk types:
Th e risks described below are assessed as being the material negative factors currently aff ecting the net assets, fi nancial position and results of operations of the Deutsche Postbank Group. However, these are not necessarily the only risks to which the Deutsche Postbank Group is exposed. Risks of which it is currently unaware or which it does not yet consider to be material could also negatively impact business activities.
In view of the ongoing fi nancial market crisis, which has been marked by extreme volatility on the money and capital markets, and a clear slowdown in the overall economic development in many parts of the world, uncertainty about future developments has risen considerably and is presenting an extreme challenge to risk management at banks. Economic risk-bearing capacity and regulatory capital ratios will remain under pressure in the entire sector. Against the backdrop of the unprecedented dynamics of the economic slowdown and the as yet uncertain eff ectiveness of both the economic stimulus plans being implemented across the world and concerted actions by central banks, future risk development is hard to assess. Th e Deutsche Postbank Group accepts normal banking risk within a defi ned framework strictly refl ecting its risk-bearing capacity. Th e relevant risks are measured and monitored continuously and reported regularly to the Deutsche Postbank Group management.
Th e market disruptions have had a clearly negative impact on capital market portfolios and thus on the earnings situation of the Deutsche Postbank Group in fi nancial year 2008. Th e risk profi le of the Deutsche Postbank Group in 2008, which is focused on a well-diversifi ed retail portfolio and, by comparison, is relatively conservative, could not prevent the recognition of signifi cant charges on the credit side and in the market price risk area. Despite the measures taken to reduce capital market portfolios and risk, considerable risk potential remains. Th e risks emanating from the Postbank portfolio of structured credit products are systematically and thoroughly analysed for potential default and continuously monitored and managed in a dedicated project structure. Th e entire portfolio is subjected to regular impairment tests. In view of the ongoing disruptions on the capital markets and the clear economic downturn, the Deutsche Postbank Group expects further negative eff ects during the course of the year.
Th e economic slowdown and the resulting slump in real estate markets could lead to higher default rates in the customer lending business. Th is is especially true for commercial real estate fi nancing in some foreign markets where the challenging environment is expected to continue. So far, only a very few signs of payment irregularities have been noticeable in the portfolio. Th e relevant portfolios are closely monitored so that measures to limit the risk can be taken early on when needed.
Th e loan portfolios in the retail banking business are largely well collateralised and highly granular. From a credit risk perspective, there have been no conspicuous developments despite the clear economic downturn in Germany. Should the decline continue or accelerate, potential repercussions for borrowers cannot be ruled out.
Th anks to its comparatively stable refi nancing basis from customer deposits, the Deutsche Postbank Group's liquidity position is sound. However, due to the massive crisis of confi dence and the still limited absorptive capacity of the capital market, the Deutsche Postbank Group is also making use of the comprehensive refi nancing facilities provided by the central bank. Th ere have been and still are no identifi able risks among the risk types described that could jeopardise the Deutsche Postbank Group's continued existence as a going concern.
Th e Deutsche Postbank Group uses derivatives for hedging purposes as part of its asset/liability management policy. Derivatives are also used for trading. Foreign currency derivatives are mainly used in the form of currency forwards, currency swaps, cross-currency swaps and currency options. Interest rate derivatives mainly consist of interest rate swaps, forward rate agreements, interest futures and interest options; in isolated cases, forward transactions in fi xed-interest securities were conducted. Equity derivative contracts are signed in particular in the form of stock options and equity / index futures. Only a few credit default swap contracts were entered into. Credit default swaps are basically the result of derivatives separated from synthetic CDOs. Th e notional amounts represent the gross volume of all sales and purchases and serve as a reference value for determining reciprocally agreed settlement payments; they do not represent recognisable receivables or liabilities. Th e fair values of the individual contracts were calculated using recognised valuation models and do not refl ect any netting agreements. Th e derivatives portfolio is classifi ed by economic purpose as follows:
| € m | Notional amounts | Positive fair values | Negative fair values | ||||
|---|---|---|---|---|---|---|---|
| 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | ||
| Trading derivatives | 518,853 | 665,517 | 5,427 | 15,853 | 5,593 | 16,987 | |
| Hedging derivatives | 34,052 | 46,557 | 421 | 474 | 873 | 2,693 | |
| Total | 552,905 | 712,074 | 5,848 | 16,327 | 6,466 | 19,680 |
Th e following table presents the open interest rate and foreign currency forward transactions and option contracts of the Deutsche Postbank Group at the balance sheet date.
| € m | 2007 | 2008 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Fair value | Fair value | ||||||||
| Notional amount |
Positive fair values |
Negative fair values |
Notional amount |
Positive fair values |
Negative fair values |
||||
| Trading derivatives | |||||||||
| Currency derivatives | |||||||||
| OTC products | |||||||||
| Currency forwards | 2,273 | 35 | 50 | 4,858 | 168 | 106 | |||
| Currency swaps | 22,518 | 202 | 270 | 32,129 | 907 | 859 | |||
| Total portfolio of currency derivatives | 24,791 | 237 | 320 | 36,987 | 1,075 | 965 | |||
| Interest rate derivatives | |||||||||
| OTC products | |||||||||
| Interest rate swaps | 469,220 | 5,142 | 5,046 | 601,810 | 14,405 | 15,034 | |||
| Cross-currency swaps | 146 | 4 | 5 | 384 | 59 | 10 | |||
| FRAs | 5,723 | – | 2 | 12,028 | 18 | 11 | |||
| OTC interest rate options | 673 | 1 | 1 | 866 | 3 | 3 | |||
| Other interest-related contracts | 871 | 3 | 2 | 117 | 1 | 1 | |||
| Exchange-traded products | |||||||||
| Interest rate futures | 9,893 | – | – | 4,938 | – | – | |||
| Interest rate options | 490 | 1 | – | – | – | – | |||
| Total portfolio of interest rate derivatives | 487,016 | 5,151 | 5,056 | 620,143 | 14,486 | 15,059 | |||
| Equity / index derivatives | |||||||||
| OTC products | |||||||||
| Equity options (long / short) | 453 | 10 | 66 | 337 | 20 | 11 | |||
| Exchange-traded products | |||||||||
| Equity / index futures | 117 | – | – | 5 | – | – | |||
| Equity / index options | 259 | 2 | 1 | 25 | 1 | – | |||
| Total portfolio of equity/index derivatives | 829 | 12 | 67 | 367 | 21 | 11 | |||
| Credit derivatives | |||||||||
| Credit default swaps | 6,217 | 27 | 150 | 8,020 | 271 | 952 | |||
| Total portfolio of credit derivatives | 6,217 | 27 | 150 | 8,020 | 271 | 952 | |||
| Total portfolio of derivatives held for trading | 518,853 | 5,427 | 5,593 | 665,517 | 15,853 | 16,987 | |||
| of which banking book derivatives | 15,416 | 131 | 330 | 29,051 | 459 | 1,576 | |||
| of which derivatives in connection with underlyings relating to the fair value option |
12,767 | 141 | 308 | 24,994 | 185 | 772 | |||
| Hedging derivatives | |||||||||
| Fair value hedges | |||||||||
| Interest rate swaps | 32,560 | 410 | 621 | 41,967 | 346 | 2,641 | |||
| Cross-currency swaps | 1,338 | 10 | 252 | 1,068 | 117 | 51 | |||
| Credit default swaps | 154 | 1 | – | 169 | 11 | 1 | |||
| Other interest-related contracts | – | – | – | 3,353 | – | – | |||
| Total portfolio of hedging derivatives | 34,052 | 421 | 873 | 46,557 | 474 | 2,693 | |||
| Total portfolio of derivatives | 552,905 | 5,848 | 6,466 | 712,074 | 16,327 | 19,680 |
Th e following table provides an overview of the recognised derivative assets and liabilities, structured by remaining maturity:
| € m | Hedging derivatives | Trading and banking book derivatives | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2007 | 2008 | 2007 | 2008 | ||||||||
| Positive fair values |
Negative fair values |
Positive fair values |
Negative fair values |
Positive fair values |
Negative fair values |
Positive fair values |
Negative fair values |
||||
| Less than 3 months | 45 | 138 | 113 | 391 | 316 | 508 | 4,736 | 5,251 | |||
| 3 months to 1 year | 5 | 39 | 60 | 32 | 144 | 211 | 356 | 401 | |||
| 1 to 2 years | 18 | 131 | 54 | 58 | 147 | 233 | 404 | 467 | |||
| 2 to 3 years | 15 | 67 | 8 | 139 | 205 | 201 | 456 | 537 | |||
| 3 to 4 years | 7 | 29 | 9 | 162 | 197 | 193 | 659 | 788 | |||
| 4 to 5 years | 23 | 69 | 12 | 178 | 270 | 336 | 958 | 1,310 | |||
| More than 5 years | 308 | 400 | 218 | 1,733 | 4,148 | 3,911 | 8,284 | 8,233 | |||
| 421 | 873 | 474 | 2,693 | 5,427 | 5,593 | 15,853 | 16,987 |
Th e following table presents the positive and negative fair values of derivatives by counterparties:
| € m | 2007 | 2008 | |||
|---|---|---|---|---|---|
| Positive fair values |
Negative fair values |
Positive fair values |
Negative fair values |
||
| Banks in OECD countries | 5,720 | 6,132 | 15,994 | 18,769 | |
| Public institutions in OECD countries | – | – | – | – | |
| Other counterparties in OECD countries | 117 | 250 | 305 | 564 | |
| Counterparties outside the OECD | 11 | 84 | 28 | 347 | |
| 5,848 | 6,466 | 16,327 | 19,680 |
Fair values of fi nancial instruments carried at amortised cost or at the hedged fair value
Fair values of fi nancial instruments which are carried at amortised cost or at the hedged fair value are compared with the carrying amounts in the following table:
| € m | 2007 | 2008 | |||
|---|---|---|---|---|---|
| Carrying | Carrying | ||||
| amount | Fair value | amount | Fair value | ||
| Assets | |||||
| Cash reserve | 3,352 | 3,352 | 3,417 | 3,417 | |
| Loans and advances to other banks (loans and receivables) | 24,581 | 24,510 | 20,368 | 20,176 | |
| Loans and advances to customers (loans and receivables) | 85,159 | 85,414 | 96,281 | 99,667 | |
| Loans and advances to customers (held to maturity) | 456 | 456 | 340 | 340 | |
| Allowance for losses on loans and advances | – 1,184 | – 1,184 | – 1,232 | – 1,232 | |
| Investment securities (loans and receivables) | 26,600 | 25,922 | 66,859 | 67,754 | |
| Investment securities (held to maturity) | 730 | 731 | 186 | 186 | |
| Liabilities | |||||
| Due to banks | 61,146 | 60,935 | 64,523 | 64,209 | |
| Due to customers | 110,740 | 110,335 | 117,336 | 117,873 | |
| Securitised liabilities and subordinated debt | 15,161 | 14,753 | 22,078 | 20,496 |
A fair value is generally determined for all fi nancial instruments. Exceptions are transactions due on demand and savings deposits with an agreed withdrawal notice of less than one year. If there is an active market for a fi nancial instrument (e. g. stock exchange), the fair value is expressed by the market or quoted exchange price at the balance sheet date. If there is no active market, the fair value is determined by an established valuation technique. Th e valuation techniques used incorporate the major factors establishing a fair value for the fi nancial instruments using valuation parameters which are the result of the market conditions at the balance sheet date. Th e cash fl ows used under the present value method are based on the contractual data of the fi nancial instruments.
Th e Group faces fi nancial risks from its operating activities that may arise from changes in exchange risks, commodity prices and interest rates. Th e Group uses both primary and derivative fi nancial instruments to manage these fi nancial risks. Th e use of derivatives is limited to the management of primary fi nancial risks. Any use for speculative purposes is not permitted under the Group's internal guidelines.
Th e fair values of the derivatives used may be subject to signifi cant fl uctuations depending on changes in exchange rates, interest rates or commodity prices. Th ese fl uctuations in fair value should not be assessed separately from the hedged underlying transactions, since derivatives and hedged transactions form a unity with regard to their off setting value development.
Th e range of actions, responsibilities and controls necessary for using derivatives has been clearly established in the Group's internal guidelines. Suitable risk management soft ware is used to record, assess and process fi nancing transactions as well as to regularly assess the eff ectiveness of the hedging relationships. To limit counterparty risk from fi nancial transactions, the Group only enters into transactions with prime-rated banks. Each counterparty is assigned a counterparty limit, the use of which is regularly monitored. Th e Group's Board of Management receives regular internal information on the existing fi nancial risks and the hedging instruments deployed to limit them. Th e fi nancial instruments used are accounted for in accordance with IAS 39.
Liquidity in the Group is managed in a largely centralised system to ensure a continuous supply of cash for the Group companies. Liquidity reserves consist of bilateral credit lines committed by banks in the amount of € 3.1 billion (previous year: € 4.2 billion). In addition, the Group issued a commercial paper programme in the amount of € 1 billion. Th us, the Group continues to have suffi cient funds to fi nance necessary investments.
Th e maturity structure of primary fi nancial liabilities to be applied within the scope of IFRS 7 based on cash fl ows is as follows:
| € m | Less than | More than | ||||
|---|---|---|---|---|---|---|
| 1 year | 1 to 2 years | 2 to 3 years | 3 to 4 years | 4 to 5 years | 5 years | |
| As at 31 December 2008 | ||||||
| Financial liabilities | 126 | 543 | 457 | 906 | 145 | 2,020 |
| Other liabilities | 0 | 64 | 11 | 15 | 15 | 109 |
| Non-current liabilities | 126 | 607 | 468 | 921 | 160 | 2,129 |
| Financial liabilities | 780 | 0 | 0 | 0 | 0 | 0 |
| Trade payables | 4,980 | 0 | 0 | 0 | 0 | 0 |
| Other liabilities | 377 | 0 | 0 | 0 | 0 | 0 |
| Current liabilities | 6,137 | 0 | 0 | 0 | 0 | 0 |
| As at 31 December 2007 | ||||||
| Financial liabilities | 189 | 371 | 448 | 319 | 851 | 2,275 |
| Other liabilities | 0 | 106 | 10 | 14 | 9 | 85 |
| Non-current liabilities | 189 | 477 | 458 | 333 | 860 | 2,360 |
| Financial liabilities | 928 | 0 | 0 | 0 | 0 | 0 |
| Trade payables | 5,210 | 0 | 0 | 0 | 0 | 0 |
| Other liabilities | 355 | 0 | 0 | 0 | 0 | 0 |
| Current liabilities | 6,493 | 0 | 0 | 0 | 0 | 0 |
Cash fl ows which fall within the scope of IFRS 7 were not included in the table.
Derivative fi nancial instruments entail both rights and obligations. Th e contractual arrangement defi nes whether these rights and obligations can be off set against each other, thus resulting in a net settlement or whether both parties to the contract will have to fully perform under their obligations (gross settlement). Th e maturity structure of payments under derivative fi nancial instruments is as follows:
| Maturity structure – remaining maturities | |||
|---|---|---|---|
| -- | ------------------------------------------- | -- | -- |
| € m | ||||||
|---|---|---|---|---|---|---|
| Less than 1 year |
1 to 2 years | 2 to 3 years | 3 to 4 years | 4 to 5 years | More than 5 years |
|
| As at 31 December 2008 | ||||||
| Derivative receivables – gross settlement | ||||||
| Cash outfl ows | – 4,332 | – 111 | – 43 | – 50 | – 21 | – 153 |
| Cash infl ows | 4,763 | 128 | 54 | 56 | 21 | 180 |
| Net settlement | ||||||
| Cash infl ows | 40 | 0 | 0 | 0 | 0 | 0 |
| Derivative liabilities – gross settlement | ||||||
| Cash outfl ows | – 5,461 | – 72 | – 69 | – 47 | – 12 | – 193 |
| Cash infl ows | 4,914 | 52 | 51 | 35 | 9 | 123 |
| Net settlement | ||||||
| Cash outfl ows | – 13 | 0 | 0 | 0 | 0 | 0 |
| As at 31 December 2007 | ||||||
| Derivative receivables – gross settlement | ||||||
| Cash outfl ows | – 1,685 | – 16 | – 15 | – 15 | – 16 | – 160 |
| Cash infl ows | 1,730 | 16 | 16 | 16 | 16 | 191 |
| Net settlement | ||||||
| Cash infl ows | 7 | 2 | 0 | 0 | 0 | 0 |
| Derivative liabilities – gross settlement | ||||||
| Cash outfl ows | – 1,810 | – 116 | – 185 | – 113 | – 91 | – 212 |
| Cash infl ows | 1,739 | 97 | 166 | 94 | 77 | 180 |
| Net settlement | ||||||
| Cash outfl ows | – 6 | – 7 | 0 | 0 | 0 | 0 |
Currency risk and currency management
Th e Group's global activities expose it to currency risks from planned and completed transactions in foreign currencies. All currency risks are recognised and managed centrally in Corporate Treasury. For this purpose, all Group companies report their foreign currency risks to Corporate Treasury, which calculates a net position per currency on the basis of these reports, hedging it externally where applicable. Currency forwards, currency swaps and currency options are used to manage the risk. Th e notional amount of outstanding currency forwards and swaps was around € 10,531 million as at the reporting date (previous year: € 3,745 million). Th e corresponding fair value was €– 101 million (previous year: €– 31 million). Th ese transactions were used to hedge planned and recorded operational risks and to hedge internal and external fi nancing and investments. Fair value hedge accounting was not used substantially.
In addition, currency options with a notional amount of € 460 million (previous year: € 460 million) and a fair value of € 11 million (previous year: €– 11 million) were used to hedge operational currency risks and risks arising from investing activities. Th e Group also held cross-currency swaps with a notional amount of € 269 million (previous year: € 299 million) and a fair value of €– 28 million (previous year: €– 12 million) to hedge long-term foreign currency fi nancing.
Currency risks resulting from translating assets and liabilities of foreign operations into the Group's currency (translation risk) were not hedged as at 31 December 2008.
Th e fair value of currency forwards was measured on the basis of current market prices, taking forward premiums and discounts into account. Th e currency options were measured using the Black-Scholes option pricing model. Of the unrealised gains from currency derivatives that were recognised in equity as at 31 December 2008 in accordance with IAS 39, a gain of € 77 million (previous year: loss of € 17 million) is expected to be recognised in income in the course of 2009.
IFRS 7 requires a company to disclose a sensitivity analysis, showing how profi t or loss and equity are aff ected by hypothetical changes in exchange rates at the reporting date. In this process, the hypothetical changes in exchange rates are analysed in relation to the portfolio of fi nancial instruments not denominated in their functional currency and being of a monetary nature. It is assumed that the portfolio as at the reporting date is representative for the whole year.
Eff ects of hypothetical changes in exchange rates on the translation risk do not fall within the scope of IFRS 7. Th e following assumptions are taken as a basis for the sensitivity analysis:
Primary monetary fi nancial instruments used by Group companies were either denominated directly in the functional currency or the currency risk was transferred to Deutsche Post AG at the exchange rates Deutsche Post AG has guaranteed. Exchangerate-induced changes therefore have no eff ect on profi t or loss and equity of the Group companies. Some isolated Group companies are not legally entitled to participate in in-house banking. Th ese companies hedge their currency risks from primary monetary fi nancial instruments linked with Deutsche Post AG by using derivatives. Th e internal derivatives are consolidated in the Group. Th e risk remaining at Group level is taken into account when computing the net position.
Hypothetical changes in exchange rates aff ect the fair values of the external derivatives used by Deutsche Post AG with changes in fair value reported in profi t or loss; they also aff ect the currency results from the measurement at the closing date of the in-house bank balances denominated in foreign currency, balances from external bank accounts as well as internal and external loans extended by Deutsche Post AG. In addition, hypothetical changes in exchange rates aff ect equity and the fair values of those derivatives used to hedge off -balance-sheet obligations and highly probable future currency transactions – designated as cash fl ow hedges.
A 10 % appreciation of the euro against all currencies as at 31 December 2008 would have reduced profi t by € 1 million (previous year: € 8 million). Th ese hypothetical eff ects on profi t or loss are mainly the result of a sensitivity to changes in the euro against SGD (€– 15 million; previous year: €– 2 million), USD (€ 3 million; previous year: €– 18 million), BHD (€ 3 million; previous year: € 5 million) and CNY (€ 5 million; previous year: € 4 million). A depreciation of the euro would have approximately the opposite sensitivities.
A 10 % appreciation of the euro would have changed the hedging reserve accounted for in equity by € 17 million (previous year: €– 25 million). Th e hypothetical change in equity is mainly the result of the euro's sensitivity to the USD (€– 48 million; previous year: €– 76 million), GBP (€ 18 million; previous year: € 14 million) and JPY (€ 13 million; previous year: € 7 million). A currency depreciation would aff ect equity in the amount of €– 11 million (previous year: € 25 million).
Most of the risks arising from the purchase of fuels and fuel oil are passed on to customers via surcharges and contract clauses. As in the previous year there was no additional hedging using derivatives at the reporting date.
Th e Group's primary debt currency is the euro. Part of it is exchanged for foreign currencies using derivative fi nancial instruments to cover the liquidity needs of the respective operations. Taking into account these transactions, the euro's portion in the Group's fi nancial liabilities was 55 % (previous year: 51 %) and that of the US dollar 40 % (previous year: 18 %). Th e rise in the portion of the US dollar was due to the higher fi nancial requirements of the American subsidiaries
Th e fair value of interest rate hedging instruments was calculated on the basis of the discounted expected future cash fl ows using the Group's treasury risk management system.
As at 31 December 2008 the Group had entered into interest rate swaps with a notional volume of € 1,197 million (previous year: € 1,209 million). Th e fair value of this interest rate swap position was €– 8 million (previous year: €– 24 million). As in the previous year there were no interest rate options at the reporting date.
Th e Group slightly reduced the share of instruments with short-term interest lock-ins in the course of 2008. Overall, the ratio of instruments with short-term interest rate lock-ins to instruments with long-term interest rate lock-ins was well balanced. Th e eff ect of interest rate changes on the Group's fi nancial position continues to be immaterial.
A sensitivity analysis is performed to present the interest rate risks in accordance with IFRS 7. Th is method is used to determine the eff ects hypothetical changes in market interest rates have on interest income, interest expense and on equity at the reporting date. Th e following assumptions are taken as a basis for the sensitivity analysis:
Primary variable-interest fi nancial instruments are subject to interest rate risks and will therefore have to be included in the sensitivity analysis. Primary variable-interest fi nancial instruments which have been transformed into fi xed-income fi nancial instruments in a cash fl ow hedge are not included. Changes in market interest rates in derivative fi nancial instruments used as a cash fl ow hedge aff ect equity by a change in far values and must therefore be included in the sensitivity analysis. Fixed-interest fi nancial instruments measured at amortised cost are not subject to interest rate risk.
Designated fair value hedges of interest rate exposures are not included in the sensitivity analysis because the interest-related changes in the fair value of the hedged item and the hedging transaction almost fully off set each other in profi t or loss for the period. Only the variable portion of the hedging instrument aff ects net fi nance costs / net fi nancial income and must be included in the sensitivity analysis.
Interest rate derivatives outside the scope of a hedging relationship which would aff ect net fi nance costs / net fi nancial income due to changes in market rates were not recognised as at 31 December 2008.
If the market interest rate level as at 31 December 2008 had been 100 basis points higher, profi t would have decreased by € 12 million (previous year: € 13 million). A market rate level 100 basis points lower would have had the opposite eff ect. A change in the market interest rate level by 100 basis points would have aff ected the fair values of the interest rate derivatives recognised in equity. A rise in interest rates would have resulted in unrecognised gains in equity of € 38 million (previous year: € 16 million); a reduction would have had the opposite eff ect.
Th e credit risk incurred by the Group is the risk that counterparties fail to meet their obligations arising from operating activities and from fi nancial transactions. To minimise credit risk from fi nancial transactions, the Group only enters into transactions with prime-rated counterparties. Each counterparty is assigned a counterparty limit, the use of which is regularly monitored. An impairment test is performed at the balance sheet dates to see whether, due to the individual counterparty's credit rating, an impairment loss is to be recognised for the positive fair values. Th is was not the case for any of the counterparties as at 31 December 2008.
Default risks are continuously monitored in the operating business. Th e aggregate carrying amounts of fi nancial assets represent the maximum default risk. Trade receivables amounting to € 5,591 million (previous year: € 6,377 million) are due within one year. Th e following table gives an overview of past-due receivables:
| € m | Neither | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Carrying amount before |
impaired nor due as at at |
Past due at reporting date and not impaired | |||||||
| impairment loss |
the reporting date |
Less than 30 days |
31 to 60 days | 61 to 90 days | 91 to 120 days |
121 to 150 days |
151 to 180 days |
More than 180 days |
|
| As at 31 December 2008 | |||||||||
| Trade receivables | 5,788 | 3,594 | 1,196 | 401 | 125 | 63 | 31 | 17 | 32 |
| As at 31 December 2007 | |||||||||
| Trade receivables | 6,595 | 4,373 | 1,168 | 361 | 152 | 80 | 43 | 28 | 65 |
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| Gross receivable | ||
| As at 1 January | 6,651 | 6,595 |
| Changes | – 56 | – 807 |
| As at 31 December | 6,595 | 5,788 |
| Valuation allowances | ||
| As at 1 January | – 256 | – 218 |
| Changes | 38 | 21 |
| As at 31 December | – 218 | – 197 |
| Carrying amount as at 31 December | 6,377 | 5,591 |
All other fi nancial loans and receivables are neither past due nor impaired. Th ese assets are expected to be collectible at any time.
Th e following table gives an overview of the derivatives used in the Group (excluding Deutsche Postbank Group) and their fair values. Derivatives with amortising notional volumes are reported in the full amount at maturity.
| € m | Fair values 2008 according to maturity | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2007 | 2008 | Assets | Liabilities | |||||||||||||||
| Notional | Notional | Fair value | Fair value | Total fair | Less than |
Up to 2 |
Up to 3 |
Up to 4 |
Up to 5 |
More than 5 |
Less than |
Up to 2 |
Up to 3 |
Up to 4 |
Up to 5 |
More than 5 |
||
| amount Fair value | amount | of assets | of liabilities | value | 1year | years | years | years | years | years | 1year | years | years | years | years | years | ||
| Interest rate products | ||||||||||||||||||
| Interest rate swaps | 1,209 | – 24 | 1,197 | 46 | – 54 | – 8 | 0 | 0 | 0 | 33 | 0 | 13 | 0 | 0 | 0 | 0 | 0 | – 54 |
| of which cash fl ow hedges | 367 | – 13 | 354 | 12 | – 54 | – 42 | 0 | 0 | 0 | 0 | 0 | 12 | 0 | 0 | 0 | 0 | 0 | – 54 |
| of which fair value hedges | 842 | – 11 | 843 | 34 | 0 | 34 | 0 | 0 | 0 | 33 | 0 | 1 | 0 | 0 | 0 | 0 | 0 | 0 |
| of which held for trading | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Other | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 1,209 | – 24 | 1,197 | 46 | – 54 | – 8 | 0 | 0 | 0 | 33 | 0 | 13 | 0 | 0 | 0 | 0 | 0 | – 54 | |
| Currency derivatives | ||||||||||||||||||
| Currency forwards | 1,768 | – 40 | 5,927 | 152 | – 436 | – 284 | 149 | 3 | 0 | 0 | 0 | 0 – 417 | – 8 | – 7 | – 3 | – 1 | 0 | |
| of which cash fl ow hedges | 1,063 | – 41 | 961 | 77 | – 50 | 27 | 74 | 3 | 0 | 0 | 0 | 0 | – 31 | – 8 | – 7 | – 3 | – 1 | 0 |
| of which net investment hedges |
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| of which held for trading | 705 | 1 | 4,966 | 75 | – 386 | – 311 | 75 | 0 | 0 | 0 | 0 | 0 – 386 | 0 | 0 | 0 | 0 | 0 | |
| Currency options | 460 | – 11 | 460 | 19 | – 8 | 11 | 19 | 0 | 0 | 0 | 0 | 0 | – 8 | 0 | 0 | 0 | 0 | 0 |
| of which cash fl ow hedges | 460 | – 11 | 460 | 19 | – 8 | 11 | 19 | 0 | 0 | 0 | 0 | 0 | – 8 | 0 | 0 | 0 | 0 | 0 |
| Currency swaps | 1,977 | 9 | 4,604 | 306 | – 123 | 183 | 306 | 0 | 0 | 0 | 0 | 0 – 123 | 0 | 0 | 0 | 0 | 0 | |
| of which cash fl ow hedges | 311 | 1 | 261 | 28 | – 5 | 23 | 28 | 0 | 0 | 0 | 0 | 0 | – 5 | 0 | 0 | 0 | 0 | 0 |
| of which held for trading | 1,666 | 8 | 4,343 | 278 | – 118 | 160 | 278 | 0 | 0 | 0 | 0 | 0 – 118 | 0 | 0 | 0 | 0 | 0 | |
| Cross-currency swaps | 299 | – 12 | 269 | 3 | – 31 | – 28 | 0 | 0 | 0 | 0 | 0 | 3 | 0 | 0 | – 12 | – 19 | 0 | 0 |
| of which cash fl ow hedges | 203 | 17 | 193 | 3 | – 12 | – 9 | 0 | 0 | 0 | 0 | 0 | 3 | 0 | 0 | – 12 | 0 | 0 | 0 |
| of which fair value hedges | 95 | – 29 | 76 | 0 | – 19 | – 19 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | – 19 | 0 | 0 |
| of which held for trading | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 4,505 | – 54 | 11,260 | 480 | – 598 | – 118 | 474 | 3 | 0 | 0 | 0 | 3 – 548 | – 8 | – 19 | – 22 | – 1 | 0 |
Due to major changes in internal fi nancing and investments, the fourth quarter of 2008 saw a signifi cant need to adjust the relevant currency hedging transactions. As a result, there was a massive increase in the notional volume of external derivatives compared with 31 December 2007. It will drop signifi cantly again aft er the respective hedges become due in the fi rst half of 2009.
Interest rate swaps were used to hedge the fair value risk of fi xed-interest euro-denominated liabilities. Th e fair values of these interest rate swaps amount to € 34 million (previous year: €– 11 million). Th e signifi cant increase in the fair values compared with 2007 is explained by the change in market rate levels. As at 31 December 2008, a € 30 million (previous year: € 35 million) adjustment was made to the carrying amount of the underlying hedged item arising from an interest rate swap unwound in the past. Th e adjustment to the carrying amount is amortised over the remaining term of the liability using the eff ective interest method, and reduces future interest expense.
In addition, cross-currency swaps were used to hedge liabilities in foreign currency against negative changes in the market, with the liability being transformed into a variable-interest eurodenominated liability. Th is hedged the fair value risk of the interest and currency component. Th e fair value of this interest rate swap position was €– 19 million as at 31 December 2008 (previous year: €– 29 million).
Th e following table provides an overview of the gains and losses arising from the hedged items and the respective hedging transactions:
€ m
| 2007 | 2008 | |
|---|---|---|
| Gains (–) / losses (+) on hedged items | – 20 | 56 |
| Gains (–) / losses (+) on hedging transactions | 19 | – 56 |
| Balance (ineffective portion) | –1 | 0 |
Th e Group uses currency forwards and currency swaps to hedge the future cash fl ow risks from foreign currency revenue and expenses. Th e fair values of currency forwards and currency swaps amounted to € 74 million (previous year: €– 2 million) as at the reporting date. In addition, there were currency options used to hedge operating risks at the reporting date at a fair value of € 13 million (previous year: € 0 million). Th e underlyings will be recognised in the income statement in 2009.
Currency forwards with a fair value of €– 26 million (previous year: €– 37 million) as at the reporting date were entered into to hedge the currency risk of future lease payments and annuities denominated in foreign currencies. Th e payments for the underlyings are made in instalments, with the fi nal payment due in 2013.
Cash fl ow risks arise from the contracted aircraft purchases in connection with future payments in US dollars. Th ese risks were hedged using forwards and options. Th e fair value of cash fl ow hedges as at 31 December 2008 amounted to €– 1 million (previous year: €– 11 million) for currency options and € 3 million (previous year: €– 1 million) for currency forwards. Th e aircraft will be added in 2009 and 2010. Gains or losses on hedges are off set against cost and recognised in profi t or loss upon the amortisation of the asset.
Risks arising from fi xed-interest foreign currency investments were hedged using synthetic cross-currency swaps, with the investments being transformed into fi xed-interest euro investments. Th ese synthetic cross-currency swaps hedge the currency risk, and their fair values at the balance sheet date amounted to € 15 million (previous year: € 26 million). Th e investments relate to internal Group loans which mature in 2014.
Th e Group is exposed to cash fl ow risks arising from variable interest rate liabilities. Th ese risks were hedged using an interest rate swap which off sets the interest rate risk in the underlying. Th e fair value of the respective cash fl ow hedge amounted to €– 53 million as at 31 December 2008 (previous year: €– 15 million). Th e hedged liability becomes due in 2037. In addition, a fi xed-interest currency liability was transformed into a fi xed-interest euro-denominated liability using a cross-currency swap. Th e fair value of the derivative was €– 12 million (previous year: €– 7 million).
Th e Group classifi es fi nancial instruments in relation to the respective balance sheet items. Th e following table reconciles the balance sheet items to the categories given in IAS 39 and the respective fair values:
| € m | ||||||
|---|---|---|---|---|---|---|
| Carrying amount | Carrying amount measured in accordance with IAS 39 | |||||
| Financial assets and liabilities recognised at fair value through profi t or loss Available-for-sale fi nancial assets |
||||||
| Trading | Fair value option | |||||
| Fair value | Fair value | Fair value | Amortised cost | |||
| ASSETS | ||||||
| Non-current fi nancial assets | 635 | 158 | ||||
| Other non-current assets | 514 | 38 | ||||
| Receivables and other assets | 8,715 | 353 | ||||
| Financial instruments | 50 | 13 | ||||
| Cash and cash equivalents | 1,350 | |||||
| Total assets | 11,264 | 353 | 38 | 0 | 171 | |
| EQUITY AND LIABILITIES | ||||||
| Non-current fi nancial liabilities 1) | – 3,318 | |||||
| Other non-current liabilities | – 367 | |||||
| Current fi nancial liabilities | – 779 | |||||
| Trade payables | – 4,980 | |||||
| Other current liabilities | – 4,745 | – 504 | ||||
| Total equity and liabilities | – 14,189 | – 504 | 0 | 0 | 0 |
1) Some of the bonds included in fi nancial liabilities were designated as a hedged item in a fair value hedge and are thus subject to a basis adjustment.
Accounting is therefore neither fully at fair value nor at amortised cost.
| Fair value of fi nancial instruments under IFRS 7 |
Outside the scope of IFRS 7 |
Other fi nancial instruments outside the scope of IAS 39 |
||||
|---|---|---|---|---|---|---|
| Liabilities from fi nance leases |
Derivatives designated as hedging instruments |
Held-to-maturity fi nancial assets |
Loans and receivables / Other fi nancial liabilities |
|||
| Amortised cost | Fair value | Amortised cost | Amortised cost | |||
| 574 | 61 | 10 | 406 | |||
| 144 | 370 | 51 | 55 | |||
| 6,392 | 2,323 | 122 | 5,917 | |||
| 50 | 37 | |||||
| 1,350 | 1,350 | |||||
| 8,510 | 2,754 | 0 | 173 | 10 | 7,765 | |
| – 3,293 | – 103 | – 499 | – 2,716 | |||
| – 250 | – 117 | – 103 | – 147 | |||
| – 779 | 0 | – 32 | – 747 | |||
| – 4,980 | – 4,980 | |||||
| – 1,034 | – 3,711 | – 45 | – 485 | |||
| – 10,336 | – 3,931 | – 531 | – 148 | 0 | – 9,075 |
| € m |
|---|
186
| Carrying amount | Carrying amount measured in accordance with IAS 39 | |||||
|---|---|---|---|---|---|---|
| Financial assets and liabilities recognised at fair value through profi t or loss |
Available-for-sale fi nancial assets | |||||
| Trading | Fair value option | |||||
| Fair value | Fair value | Fair value | Amortised cost | |||
| ASSETS | ||||||
| Non-current fi nancial assets | 1,060 | 431 | 301 | |||
| Other non-current assets | 497 | 66 | ||||
| Receivables and other assets | 9,806 | 25 | ||||
| Receivables and other securities from fi nancial services 2) |
193,920 | 9,936 | 7,043 | 41,174 | ||
| Financial instruments | 72 | 19 | ||||
| Cash and cash equivalents | 4,683 | |||||
| Assets held for sale | 615 | |||||
| Total assets | 210,653 | 9,961 | 7,109 | 41,624 | 301 | |
| EQUITY AND LIABILITIES | ||||||
| Non-current fi nancial liabilities 1) | – 8,625 | |||||
| Other non-current liabilities | – 361 | |||||
| Current fi nancial liabilities | – 1,556 | |||||
| Trade payables | – 5,384 | |||||
| Liabilities from fi nancial services | – 187,787 | – 5,594 | ||||
| Other current liabilities | – 5,101 | – 16 | ||||
| Total equity and liabilities | – 208,814 | – 5,610 | 0 | 0 | 0 |
1) Some of the bonds included in fi nancial liabilities were designated as a hedged item in a fair value hedge and are thus subject to a basis adjustment.
Accounting is therefore neither fully at fair value nor at amortised cost.
2) Restatement of the prior-year fi gure due to the Deutsche Postbank Group restatement (see Note 5).
| Other fi nancial instruments outside the scope of IAS 39 |
Outside the scope of IFRS 7 |
Fair value of fi nancial instruments under IFRS 7 |
|||
|---|---|---|---|---|---|
| Loans and receivables / Other fi nancial liabilities |
Held-to-maturity fi nancial assets |
Derivatives designated as hedging instruments |
Liabilities from fi nance leases |
||
| Amortised cost | Amortised cost | Fair value | Amortised cost | ||
| 115 | 10 | 203 | 857 | ||
| 28 | 403 | 94 | |||
| 6,679 | 26 | 3,076 | 6,730 | ||
| 134,160 | 1,186 | 421 | 193,493 | ||
| 52 | 1 | 72 | |||
| 4,683 | 4,683 | ||||
| 565 | 50 | 565 | |||
| 146,254 | 1,197 | 475 | 0 | 3,732 | 206,494 |
| – 7,823 | – 551 | – 251 | – 8,403 | ||
| – 224 | – 97 | – 40 | – 337 | ||
| – 1,482 | – 74 | 0 | – 1,556 | ||
| – 5,384 | – 5,384 | ||||
| – 181,320 | – 873 | – 186,763 | |||
| – 510 | – 44 | – 4,531 | – 570 | ||
| – 196,743 | 0 | – 1,014 | – 625 | – 4,822 | 203,013 |
If there is an active market for a fi nancial instrument (e. g. stock exchange), the fair value is expressed by the market or quoted exchange price at the balance sheet date. Th e valuation technique used incorporates the major factors establishing a fair value for the fi nancial instruments using valuation parameters which are derived from the market conditions at the balance sheet date. Th e fair values of other non-current receivables and fi nancial investments held to maturity with remaining maturities of more than one year equal the present values of the payments related to the assets, taking into account the current interest rate parameters.
Most of the cash and cash equivalents, trade receivables and other receivables have short remaining maturities. Th us, their carrying amounts at the reporting date are largely equivalent to their fair values. Trade payables and other liabilities generally have short maturities; the amounts carried in the balance sheet are similar to their fair values.
Th e fi nancial assets classifi ed as available for sale include shares in partnerships and corporations in the amount of € 158 million (previous year: € 301 million) for which a fair value cannot be determined reliably. Th e shares in these companies are not quoted on an active market; they are therefore recognised at cost. Th ere are no plans to sell a material number of the available-for-sale fi nancial assets recognised as at 31 December 2008 in the near future. No signifi cant shares measured at cost were sold in the fi nancial year. In the previous year, shares in the amount of € 68 million were sold at a disposal loss of € 3 million.
No assets were reclassified in financial years 2008 and 2007.
Th e net gains and losses from fi nancial instruments classifi ed in accordance with the measurement categories of IAS 39 are composed as follows:
| Net gains and losses of the measurement categories | |||||||
|---|---|---|---|---|---|---|---|
| -- | -- | -- | -- | -- | -- | ---------------------------------------------------- | -- |
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| Loans and receivables | 175 | 214 |
| Held-to-maturity fi nancial assets | 0 | 0 |
| Financial assets and liabilities recognised at fair value through profi t or loss |
||
| Trading | – 375 | – 181 |
| Fair value option | – 20 | 18 |
| Other fi nancial liabilities | – 110 | – 26 |
Th e net gains and losses mainly consist of the eff ects of valuation allowances, fair value measurement and disposals (disposal gains / losses). Dividends and interest are not taken into account for the fi nancial instruments recognised in profi t or loss at fair value. Details of net gains or losses on the fi nancial assets available for sale can be found in Note 40. Income and expense from interest and commission agreements of the fi nancial instruments not measured at fair value through profi t or loss are explained in the income statement disclosures.
Th e Group's contingent liabilities total € 1,828 million (previous year restated: € 645 million; the amounts attributable to the Deutsche Postbank Group are reported in Note 38). € 84 million of the contingent liabilities relates to guarantee obligations (previous year, restated: € 100 million) and € 87 million to liabilities from litigation risks (previous year: € 204 million). Other contingent liabilities rose (€ 1,378 million; previous year: € 112 million) primarily as a result of another case of formal state aid proceedings (see Note 54 Litigation) accounted for in these fi nancial statements.
In addition to provisions, liabilities and contingent liabilities , there are other fi nancial obligations amounting to € 7,274 million (previous year: € 7,041 million) from non-cancellable operating leases as defi ned by IAS 17.
Th e Group's future non-cancellable payment obligations under leases are attributable to the following asset classes:
| Land and buildings | 6,310 | 6,452 |
|---|---|---|
| Technical equipment and machinery | 164 | 68 |
| Other equipment, operating and offi ce equipment | 96 | 49 |
| Transport equipment | 306 | 501 |
| Aircraft | 165 | 194 |
| Miscellaneous | 0 | 10 |
| Leases | 7,041 | 7,274 |
Th e increase in lease obligations is due to the lease-back agreements for portions of the real estate portfolio sold to investor Lone Star. Lease obligations include € 404 million of future lease obligations from the US express business, which were recognised under restructuring provisions as onerous contracts. € 139 million (previous year: € 156 million) of the leasing obligations relates to the Deutsche Postbank Group.
| Maturity structure of minimum lease payments | 7,041 | 7,274 |
|---|---|---|
| Year 6 after reporting date and thereafter | 2,555 | 2,404 |
| Year 5 after reporting date | 561 | 533 |
| Year 4 after reporting date | 700 | 717 |
| Year 3 after reporting date | 871 | 994 |
| Year 2 after reporting date | 1,069 | 1,174 |
| Year 1 after reporting date | 1,285 | 1,452 |
| 2007 | 2008 | |
| € m |
Th e present value of discounted minimum lease payments is € 5,554 million (previous year: € 5,326 million), based on a discount factor of 6.00 % (previous year: 5.75 %). Overall, rental and lease payments of € 2,389 million (previous year, restated: € 2,322 million) arose, of which € 1,735 million (previous year, restated: € 1,685 million) relates to non-cancellable leases. € 3,006 million (previous year: € 2,468 million) of the future lease obligations from non-cancellable leases relates primarily to Deutsche Post Immobilien GmbH.
Th e purchase obligation for investments in non-current assets amounted to € 150 million (previous year: € 332 million).
Due to the market-leading position of Deutsche Post AG, a large number of its services are subject to sectoral regulation under the Postgesetz (German postal act). Th e regulatory authority approves or reviews prices in particular, formulates the terms of downstream access and conducts general checks for market abuse. Any resulting proceedings may lead to a drop in revenue and earnings.
Legal risks arise from, amongst other things, appeals pending before the administrative courts against the regulatory authority's July 2002 ruling concerning the conditions for the price cap procedure, from appeals against price approvals granted under the price cap procedure for the years 2003, 2004 and 2008, and from appeals against other price approval decisions handed down by the regulatory authority.
European Commission competition proceedings were initiated on the basis of a complaint made by the Deutsche Verband für Post und Telekommunikation (German association for posts and telecommunications) about allegedly excessive mail prices. In these proceedings, Deutsche Post AG has presented detailed evidence to support its argument that the prices are reasonable.
Conditions determined by the regulator oblige Deutsche Post AG to allow customers and competitors downstream access to its network. Proceedings are still pending before the administrative courts against the relevant rulings by the regulatory authority. Depending on the outcome of the proceedings, the Group could be faced with further losses of revenue and earnings. As regards the special problem of downstream access for so-called consolidators, the European Court of Justice decided defi nitely on 6 March 2008 that access must be granted under European law. Based on an enforce able order by the Bundeskartellamt (German federal antitrust authority), Deutsche Post AG had granted the consolidators access as early as 2005. Th e expiry of the exclusive license will eliminate the access issue.
In response to a complaint from a third party, the EU Commission made requests for information to the German government concerning an allegation by the Monopolkommission (German monopoly commission). Th e allegation is that Deutsche Post AG contravenes the prohibition of state aid under the EC Treaty by allowing Deutsche Postbank AG to use Deutsche Post outlets at below-market rates. In the opinion of Deutsche Post AG and Deutsche Postbank AG, this allegation is incorrect and the fee paid by Deutsche Postbank AG complies with the provisions on competition and state aid stipulated in EU law. Th e EU Commission is also asking the Federal Republic of Germany to comment on the sale of its entire interest in Deutsche Postbank AG to Deutsche Post AG in 1999. However, the EU Commission has already investigated the acquisition of Deutsche Postbank AG as part of the state aid proceedings that were concluded with the ruling dated 19 June 2002. At the time, it explicitly concluded that the acquisition of Postbank involved "no grant of state aid".
Th e German government has already argued before the EU Commission that the allegations are in its opinion unfounded. Nevertheless, with regard to the two allegations relating to the requests for information, no assurance can be given that the EU Commission will not fi nd that the facts of the case constitute state aid.
On 12 September 2007, the EU Commission initiated a formal investigation against the Federal Republic of Germany concerning possible subsidies. Th e investigation will focus on whether the Federal Republic of Germany, using state resources, overcompensated Deutsche Post AG or its legal predecessor Deutsche Bundespost POSTDIENST for the cost of providing universal services between 1989 and 2007 and whether the company was thereby granted state aid incompatible with EU law. According to the decision opening the investigation, the Commission intends to examine all public transfers, public guarantees, statutorily granted exclusive rights, the price regulation of letter services and the public funding of civil servants' pensions during the period in question. Also to be investigated is the cost allocation within Deutsche Post AG and its predecessor between the regulated letter service, the universal service and competitive services. Th is also relates to co-operation agreements between Deutsche Post AG and Deutsche Postbank AG as well as between Deutsche Post AG and the business parcel service marketed by DHL Vertriebs GmbH.
Deutsche Post AG and Deutsche Postbank AG hold that the new investigation lacks any factual basis. All public transfers associated with the privatisation of Deutsche Bundespost, the public guarantees and the funding of pension obligations formed part of the subject matter of the state aid proceedings closed by the decision of 19 June 2002. Th at decision did not identify the measures concerned as incompatible state aid. Deutsche Post AG and Deutsche Postbank AG are further of the opinion that the statutorily granted exclusive rights and the regulated letter prices do not fulfi l the legal criteria to be considered a form of state aid in the fi rst place. Deutsche Post AG also considers the internal allocation of costs with its subsidiaries to be consistent with EU state aid rules and the case law of the European Court of Justice. Nonetheless, based on an overall appraisal, the possibility of the Commission fi nding a case of incompatible state aid cannot be ruled out.
Th e European Court of First Instance ruled on 1 July 2008 that the EU Commission's ruling of 19 June 2002, obliging Deutsche Post AG to repay state aid allegedly received, was void. As a result of the EU Commission's decision, Deutsche Post AG had to pay a total of € 907 million to the Federal Republic of Germany in January 2003 (€ 572 million of alleged state aid plus interest), although it had immediately appealed against this decision. In accordance with the ruling of the European Court of First Instance, Germany repaid this amount plus interest to Deutsche Post AG; Deutsche Post AG received the total amount of € 1,067 million from Germany on 1 August 2008.
Th e EU Commission appealed against the decision of the European Court of First Instance before the European Court of Justice. Deutsche Post AG expects the appeal to off er only little prospect of success. It cannot be ruled out, however, that the European Court of Justice allows the appeal, with the European Court of First Instance having to decide the issue again. Despite the continuing litigation, the 2002 ruling of the EU Commission could possibly become eff ective again; the total amount received as a result of the decision by the European Court of First Instance dated 1 July 2008 would have to be paid again to the Federal Republic of Germany.
With its decision of 23 July 2008, the EU Commission closed its investigation opened on 22 November 2006 with regard to possible state aid in connection with the construction of the DHL European air hub at Leipzig / Halle Airport. Th e Commission concluded that public investment amounting to some € 350 million to fi nance the new southern runway is compatible with European law on state aid. At the same time, it considers the fi nancial guarantees granted by Saxony to the benefi t of DHL as inadmissible. If the grants are statutorily incompatible state aid they will have to be paid back by DHL in the opinion of the EU Commission. DHL, the Leipzig / Halle Airport and the state of Saxony appealed against this ruling before the European Court of First Instance. Neither the ineff ectiveness of the liability regime nor the possibly existing repayment obligation will aff ect the daily operating business of DHL.
In October 2007, DHL Global Forwarding, along with all other major players in the freight forwarding industry, received a request for information from the Competition Directorate of the European Commission, a subpoena from the US Department of Justice's Antitrust Division and information requests from competition authorities in other jurisdictions in connection with a formal investigation into the setting of surcharges and fees in the international freight forwarding industry. In January 2008, an antitrust class action law suit was initiated in the New York district court on behalf of purchasers of freight forwarder services in which Deutsche Post AG and DHL are named as defendants. Th is civil law suit appears to be based on the fact that anti-trust investigations are on-going, but not on any known outcome or quantifi ed loss. Th e Group is not able to predict or comment on the outcome of the investigations or the merits of the class action law suit, but believes its fi nancial exposure in relation to both is limited and has not, therefore, taken any provision in its accounts.
On the basis of the 2003 Stock Option Plan (SOP) resolved by the Annual General Meeting on 5 June 2003, no further options will be granted under the previous 2000 plan. Options were granted under the 2003 SOP for the fi rst time on 1 August 2003 (Tranche 2003). Th e second tranche (Tranche 2004) was granted to executives on 1 July 2004. Th e third – and last – tranche under this plan (Tranche 2005) was granted on 1 July 2005.
Th e 2003 SOP allows for a larger number of participants and a change in the percentage distributions of the stock options among the diff erent groups of participants, in addition to an increase in the total stock options to be issued. Th e grant of stock options to members of the Board of Management and executives in Group management level 2 still requires participants to invest in shares of Deutsche Post AG. Participants in Group management levels 3 and 4 receive stock options without any requirement to buy shares.
| Number | Stock appreciation | |
|---|---|---|
| Stock options | rights (SAR) 1) | |
| Tranche 2003 | ||
| Board of Management | 1,096,236 | 0 |
| Other senior executives | 11,953,356 | 731,736 |
| Tranche 2004 | ||
| Board of Management | 841,350 | 0 |
| Other senior executives | 8,486,946 | 1,116,374 |
| Tranche 2005 | ||
| Board of Management | 829,362 | 0 |
| Other senior executives | 9,233,310 | 1,216,320 |
1) Due to legal restrictions SAR were granted in some countries instead of stock options. Due to the fair value determined for the SAR no amounts were added to the provisions in 2008 (previous year: € 2 million).
Th e stock options can only be exercised within a two-year period following the expiration of a lock-up period of three years aft er the relevant grant date. Th e options can only be exercised if the absolute or the relative performance targets have been satisfi ed at the end of the lock-up period. Unexercised options lapse aft er the end of the exercise period.
Th e average price or average index performance during two periods (reference period = exercise price; performance period = fi nal price) is compared to establish whether and to what extent the performance targets have been satisfi ed. Th e reference period is the 20 consecutive trading days prior to the grant date. Th e performance period is the last 60 trading days before the end of the lock-up period. Th e average price is calculated as the average closing price of Deutsche Post shares in Deutsche Börse AG's Xetra trading system.
Th e absolute performance target depends on the performance of Deutsche Post shares during the performance period, and is deemed to have been satisfi ed if the increase in the price of Deutsche Post shares exceeds 10, 15, 20, or 25 % or more (expressed as the fi nal price divided by the exercise price). Th e relative performance target is tied to the performance of the shares versus the performance of the Dow Jones STOXX Total Return Index. Th e relative performance target is satisfi ed if the performance of Deutsche Post shares during the above-mentioned period matches the performance of the Index or outperforms it by at least 10 %.
For every six options, a maximum of four may be earned on the basis of the absolute performance target, and a maximum of two on the basis of the relative performance target. Th e respective stock options of the tranche concerned lapse without compensation if the absolute or the relative performance targets are not satisfi ed by the end of the lock-up period. Each option entitles the holder either to purchase one share in the company or to receive a cash settlement in the amount of the diff erence between the issue price and the average price of the Deutsche Post shares during the last fi ve trading days prior to the exercise date, at the respective Board member's discretion.
Information on the individual tranches is presented in the following tables:
| SOP 2003 | |||||
|---|---|---|---|---|---|
| Stock options | Tranche 2003 | Tranche 2004 | Tranche 2005 | ||
| Grant date | 1 August 2003 | 1 July 2004 | 1 July 2005 | ||
| Stock options granted | 13,049,592 | 9,328,296 | 10,062,672 | ||
| SAR granted | 731,736 | 1,116,374 | 1,216,320 | ||
| Exercise price | € 12.40 | € 17.00 | € 19.33 | ||
| Lock-up expires | 31 July 2006 | 30 June 2007 | 30 June 2008 | ||
| Dividend yield Deutsche Post AG | 2.55% | 3.05% | 3.22% | ||
| Dividend yield Dow Jones Euro Stoxx Index | 1.4% | 1.7% | 2.06% | ||
| Yield volatility of Deutsche Post AG share | 39.3% | 28.9% | 17.07% | ||
| Yield volatility of Dow Jones Euro Stoxx Index | 32.1% | 14.8% | 10.10% | ||
| Number | |||||
| Outstanding stock options as at 1 January 2008 | 1,197,538 | 3,170,940 | 8,816,004 | ||
| Outstanding SAR as at 1 January 2008 | 117,124 | 267,980 | 695,076 | ||
| Stock options exercised | 1,133,452 | 411,824 | 0 | ||
| SAR exercised | 117,124 | 18,752 | 0 | ||
| Stock options lapsed | 64,086 | 32,458 | 8,816,004 | ||
| of which lapsed before end of the lock-up period | 0 | 0 | 191,208 | ||
| of which lapsed because performance targets not met | 0 | 0 | 8,624,796 | ||
| of which lapsed after end of lock-up period | 64,086 | 32,458 | 0 | ||
| SAR lapsed | 0 | 16,660 | 695,076 | ||
| of which lapsed before end of the lock-up period | 0 | 0 | 13,032 | ||
| of which lapsed because performance targets not met | 0 | 0 | 682,044 | ||
| of which lapsed after end of lock-up period | 0 | 16,660 | 0 | ||
| Outstanding stock options as at 31 December 2008 | 0 | 2,726,658 | 0 | ||
| Outstanding SAR as at 31 December 2008 | 0 | 232,568 | 0 | ||
| Exercisable stock options as at 31 December 2008 | 0 | 2,726,658 | 0 | ||
| Exercisable SAR as at 31 December 2008 | 0 | 232,568 | 0 | ||
Unexercised options from Tranche 2003 lapsed without compensation following the expiration of the exercise period on 1 August 2008. Th e options from Tranche 2005 lapsed without compensation following the expiration of the lock-up period on 1 July 2008 because the absolute and relative performance targets tied to them were not achieved.
Stock options outstanding as at 31 December 2008 have an average remaining maturity of 0.5 years. Th e weighted average exercise price of the stock options from tranches 2003 and 2004 exercised in the fi nancial year is € 13.63 (previous year: € 14.28). Th ese options were settled at the weighted average share price of € 19.69 (previous year: € 23.33).
Starting in fi nancial year 2002, the SOP has been measured using investment techniques by applying option pricing models (fair value measurement). Th e expense of € 4 million for options attributable to fi nancial year 2008 (previous year: € 14 million) was recognised under staff costs. No staff costs were recognised for SAR in 2008 (previous year: € 2 million). Further details on share-based payments for members of the Board of Management can be found in Note 56.
Th e 2006 SAR Plan supersedes the 2003 SOP described above, under which options could last be issued in 2005. As at 3 July 2006, selected executives received stock appreciation rights (SAR) under the new plan. Th is gives executives the chance to receive a cash payment within a defi ned period in the amount of the diff erence between the respective closing price of Deutsche Post shares on the previous day and the fi xed issue price, if demanding performance targets are met.
Th e fair value of the 2006 SAR Plan and the 2006 Long-Term Incentive Plan (LTIP) for Board members was determined using a stochastic simulation model. As a result, no expense had to be recognised for fi nancial year 2008 (previous year: € 20.8 million). Of the € 35 million of provisions recognised in prior periods for this purpose € 27 million were reversed in fi nancial year 2008. Additional details on the 2006 SAR Plan and the 2006 LTIP can be found in the Corporate Governance Report. Th e remuneration report (see Page 116) contained in the Corporate Governance Report also forms part of the Group Management Report. Further details on share-based remuneration of members of the Board of Management can be found in Note 56.
All companies classifi ed as related parties that are controlled by the Group or on which the Group can exercise signifi cant infl uence are recorded in the list of shareholdings together with information on the equity interest held, their equity and their net profi t or loss for the period, broken down by division. Th e list of shareholdings is fi led with the commercial register of the Bonn Local Court.
Deutsche Post AG and Deutsche Postbank AG have a variety of relationships with the Federal Republic of Germany and other companies controlled by the Federal Republic of Germany.
Th e federal government is a customer of Deutsche Post AG and as such uses the company's services. Deutsche Post AG's business relationships are entered into with the individual public authorities and other government agencies as independent individual customers. Th e services provided to the respective individual customers are immaterial to the overall revenue of Deutsche Post AG.
Th e Federal Republic of Germany manages its interest in Deutsche Post AG and exercises its shareholder rights via the Bundesanstalt für Post und Telekommunikation ("Bundesanstalt") which has legal capacity and falls under the supervision of the German Federal Ministry of Finance. Th e Gesetz über die Errichtung einer Bundes anstalt für Post und Telekommunikation or Bundesanstalt Post Gesetz (BAnstG – German act to establish a Deutsche Bundespost Federal Posts and Telecom munications Agency or Federal Posts and Telecommunica tions Agency act) transferred specifi c legal rights and duties to the Bundesanstalt that relate to matters jointly aff ecting Deutsche Post AG, Deutsche Postbank AG and Deutsche Telekom AG. In addition, the Bundesanstalt manages the Postal Civil Service Health Insurance Fund, the recreation programme, the Versorgungsanstalt der Deutsche Bundespost ("VAP") and the welfare service for Deutsche Post AG, Deutsche Postbank AG, Deutsche Telekom AG and the Bundesanstalt. Th e coordination and administration tasks are performed on the basis of agency agreements. In 2008, Deutsche Post AG was invoiced for € 64 million (previous year: € 65 million) in instalment payments relating to services provided by the Bundesanstalt, and Deutsche Postbank AG was invoiced for € 8 million (previous year: € 4 million).
Relationships with the German Federal Ministry of Finance
In fi nancial year 2001, the Bundesministerium der Finanzen (BMF – German Federal Ministry of Finance) and Deutsche Post AG entered into an agreement that governs the terms and conditions of the transfer of income received by Deutsche Post AG from the levying of the settlement payment under the Gesetze über den Abbau der Fehlsubventionierung im Wohnungswesen (German acts on the reduction of misdirected housing subsidies) relating to housing benefi ts granted by Deutsche Post. In fi nancial year 2008, Deutsche Post AG paid to the federal government the aggregate amount of approximately € 0.68 million for fi nancial year 2007 and around € 0.60 million in monthly instalments relating to fi nancial year 2008. As agreed, the fi nal settlement for fi nancial year 2008 will be made by 1 July 2009.
Deutsche Post AG also entered into an agreement with the BMF dated 30 January 2004 relating to the transfer of civil servants to German federal authorities. Under this agreement, civil servants are seconded with the aim of transferring them initially for six months, and are then transferred permanently if they successfully complete their probation. Once a permanent transfer is completed, Deutsche Post AG contributes to the cost incurred by the federal government by paying a fl at fee. In 2008, this initiative resulted in six permanent transfers (previous year: 33) and two secondments with the aim of a permanent transfer (previous year: 2)
Relationships with Deutsche Telekom AG and its subsidiaries
In fi nancial year 2008, the Group provided goods and services for Deutsche Telekom AG amounting to € 0.35 billion (previous year: € 0.4 billion). Th ese were mainly transportation services for letters and parcels. In the same period, the Group purchased goods and services (including IT products and services) worth € 0.4 billion (previous year: € 0.4 billion) from Deutsche Telekom. Deutsche Tele kom AG and Deutsche Postbank AG have also entered into a master loan agreement for € 0.6 billion (previous year: € 0.6 billion). In 2008, Deutsche Telekom AG had an issue of two loan notes placed by Deutsche Postbank International S.A. Luxembourg for € 50 million each and a term to maturity of 6 years each.
Bundes-Pensions-Service für Post
und Telekommuni kation e. V.
Information on the Bundes-Pensions-Service für Post- und Telekom munikation e. V. can be found in Note 7.
Th e real estate, with a fair value of € 1,041 million (previ ous year: € 1,040 million), of which Deutsche Post Betriebsrenten Service e. V. (DPRS), Deutsche Post Pensionsfonds GmbH & Co. KG, Deutsche Post Betriebsrenten-Service e. V. & Co. Objekt Gronau KG and Deutsche Post Grundstücks Vermietungsgesellschaft beta mbH Objekt Leipzig KG are the legal or benefi cial owners, is exclusively let to Deutsche Post Immobilien GmbH. Rental expense for Deutsche Post Immobilien GmbH amounted to € 58.0 million in 2008 (previous year: € 56.4 million). Th e rent was always paid on time. Th erefore no expense was incurred for valuation allowances on receivables and for bad debt losses in 2008 and none is expected to be incurred in future years. Th ere were no sales relationships between external authorities and a Group company of Deutsche Post AG in 2008.
Relationships with unconsolidated companies and associates
In addition to the consolidated subsidiaries, the Group has direct and indirect relationships with a large number of unconsolidated subsidiaries and associates deemed to be related parties to the Group, in the course of its ordinary business activities. In the course of these activities, all transactions for the provision of goods and services entered into with unconsolidated companies were conducted on an arm's length basis at standard market terms and conditions. Transactions were conducted in fi nancial year 2008 with major related parties, resulting in the following items in the consolidated fi nancial statements:
| € m | ||
|---|---|---|
| 2007 | 2008 | |
| Receivables | 43 | 4 |
| Loans | 17 | 12 |
| Receivables from in-house banking | 6 | 2 |
| Financial liabilities | – 45 | – 45 |
| Liabilities | – 57 | – 3 |
| Liabilities from in-house banking | – 15 | – 9 |
In accordance with IAS 24, the Group also reports on transactions between the Group and related parties or members of their families. Related parties are defi ned as the Board of Management, Supervisory Board, heads of corporate departments or business departments (second-level executives) and the members of their families.
Th ere were no reportable transactions between members of the Board of Management and their families and the Group in fi nancial year 2008. In some cases, members of the Supervisory Board were involved in legal transactions with Deutsche Post AG. Th ese mainly related to services rendered in a volume of € 0.4 million, and loans granted by Deutsche Postbank AG. In a few cases, second-level executives indicated to have concluded agreements with Deutsche Post AG. Th e transactions mainly consisted of rendering consulting and other services. Th e volume of these transactions was approximately € 0.8 million. Deutsche Postbank AG granted loans to the second-level executives in the total amount of € 2.4 million. Th e terms to maturity vary between 3 and 15 years. Unless a variable interest rate was agreed, the rate is between 3.2 % and 5.6 %. Th e amount of the loans was € 2.2 million as at 31 December 2008.
The remuneration of key management personnel of the Group requiring disclosure under IAS 24 comprises the remuneration of the active Board of Management and Supervisory Board members. Th e active members of the Board of Management and the Supervisory Board were remunerated as follows:
| thousands of € | ||
|---|---|---|
| 2007 | 2008 | |
| Short-term employee benefi ts | ||
| (less share-based remuneration) | 16,599 | 12,565 |
| Post-employment benefi ts | 4,066 | 2,084 |
| Termination benefi ts | 8,363 | 0 |
| Share-based remuneration | 3,571 | 926 |
| Total | 32,599 | 15,575 |
Th e post-employment benefi ts are recognised as the service cost resulting from the pension provisions for active members of the Board of Management. Th e share-based remuneration amount relates to the share-based remuneration expense recognised in fi nancial year 2008. It is itemised in the following table:
| thousands of € | 2007 | 2008 | |||||
|---|---|---|---|---|---|---|---|
| Stock options | SAR | Total | Stock options | SAR | Total | ||
| Dr Frank Appel, Chairman | 161 | 431 | 592 | 43 | 167 | 210 | |
| John Allan | 0 | 35 | 35 | 0 | 84 | 84 | |
| Bruce Edwards | – | – | – | 0 | 73 | 73 | |
| Jürgen Gerdes | 11 | 105 | 116 | 11 | 96 | 107 | |
| John P. Mullen | 106 | 431 | 537 | 43 | 131 | 174 | |
| Walter Scheurle | 161 | 431 | 592 | 43 | 131 | 174 | |
| Hermann Ude | – | – | – | 11 | 73 | 84 | |
| Dr Wolfgang Klein (until 9 November 2008) | 0 | 0 | 0 | 0 | 0 | 0 | |
| Dr Klaus Zumwinkel (until 17 February 2008) | 242 | 647 | 889 | 9 | 11 | 20 | |
| Prof. Dr Edgar Ernst (until 30 June 2007) | 139 | 289 | 428 | – | – | – | |
| Dr Hans-Dieter Petram (until 30 June 2007) | 118 | 146 | 264 | – | – | – | |
| Prof. Dr Wulf von Schimmelmann (until 30 June 2007) | 118 | 0 | 118 | – | – | – | |
| Share-based remuneration | 1,056 | 2,515 | 3,571 | 160 | 766 | 926 |
Further details on the share-based remuneration of the Board of Management in financial year 2008 are presented in the following table:
| Number | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Dr Frank Appel |
John Allan |
Bruce Edwards |
Jürgen Gerdes |
Dr Wolfgang Klein 1) |
John P. Mullen |
Walter Scheurle |
Hermann Ude |
Dr Klaus Zumwinkel 2) |
|
| SOP | |||||||||
| Outstanding stock options | |||||||||
| as at 1 January 2008 | 163,560 | 0 | 0 | 42,814 | 17,272 | 114,844 | 138,560 | 40,376 | 245,342 |
| Stock options granted | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Stock options lapsed | 97,572 | 0 | 0 | 25,542 | 0 | 97,572 | 97,572 | 24,060 | 146,358 |
| Stock options exercised | 0 | 0 | 0 | 0 | 17,272 | 0 | 15,000 | 0 | 0 |
| Outstanding stock options as at 31 December 2008 |
65,988 | 0 | 0 | 17,272 | 0 | 17,272 | 25,988 | 16,316 | 98,984 |
| Exercisable stock options as at 31 December 2008 |
65,988 | 0 | 0 | 17,272 | 0 | 17,272 | 25,988 | 16,316 | 98,984 |
| Weighted average settlement price in € Not exercised Not exercised Not exercised Not exercised | 22.68 Not exercised | 23.33 Not exercised Not exercised | |||||||
| Weighted average exercise price in € | Not exercised Not exercised Not exercised Not exercised | 17.00 Not exercised | 17.00 Not exercised Not exercised | ||||||
| Weighted average term to maturity in years |
0.5 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 | |||
| SAR | |||||||||
| Outstanding SAR as at 1 January 2008 |
430,000 | 55,000 | 170,508 | 244,172 | 0 | 430,000 | 430,000 | 107,262 | 645,000 |
| SAR granted | 345,000 | 230,000 | 230,000 | 230,000 | 0 | 230,000 | 230,000 | 230,000 | 0 |
| SAR lapsed | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| SAR exercised | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Outstanding SAR as at 31 December 2008 |
775,000 | 285,000 | 400,508 | 474,172 | 0 | 660,000 | 660,000 | 337,262 | 645,000 |
| Exercisable SAR as at 31 December 2008 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Weighted average settlement price in € Weighted average exercise price in € |
All SAR granted are still in their lock-up period | ||||||||
| Weighted average term to maturity in years |
1.67 | 2.30 | 1.78 | 1.78 | n / a | 1.53 | 1.53 | 2.02 | 1.01 |
1) Until 9 November 2008. 2) Until 17 February 2008.
Board of Management remuneration
Th e total remuneration paid to the active members of the Board of Management in fi nancial year 2008 including the components with long-term incentive eff ect totalled € 16.7 million (previous year: € 22.1 million). Of this amount, € 9.0 million (previous year: € 8.7 million) relates to components not linked to performance (fi xed salary and fringe benefi ts), € 2.9 million (previous year: € 7.0 million) for performance-linked components (variables) and € 4.8 million (previous year: € 6.4 million) to components with long-term incentive eff ect (SAR). Th e number of SAR amounted to 1,725,000 (previous year: 1,375,000).
The remuneration of former members of the Board of Management or their surviving dependants amounted to € 43.1 million in the year under review (previous year: € 10.28 million; the prior-year fi gures were restated following application of German Accounting Standard (DRS) 17. Th e defi ned benefi t obligations (DBO) for current pensions calculated under IFRS amount to € 25.3 million (previous year: € 27.0 million).
Th e total remuneration of the Supervisory Board in fi nancial year 2008 amounted to approximately € 0.67 million (previous year: € 0.9 million); € 0.5 million of this amount was attributable to the fi xed component (previous year: € 0.6 million) and € 0.1 million attendance allowances (previous year: € 0.1 million). In fi nancial year 2007, € 0.2 million was paid as a short-term performance- related remuneration. Based on an agreement that has been terminated in the meantime, Prof. Dr von Schimmelmann was paid € 384,000 in fi nancial year 2008 for consulting services rendered beyond his activities for the Supervisory Board.
Further information on the itemised remuneration of the Board of Management and the Supervisory Board can be found in the Corporate Governance Report. Th e remuneration report contained in the Corporate Governance Report also forms part of the management report.
Effective 31 December 2008, shares held by the Board of Manage ment and the Supervisory Board of Deutsche Post AG amounted to less than 1 % of the company's share capital.
For the transactions of Board of Management and Supervisory Board members involving securities of the company notifi ed to Deutsche Post AG in accordance with Section 15a of the Wertpapierhandelsgesetz (WpHG – German securities trading act), please refer to the website of the company.
| Equity interest and share of voting rights % |
Revenue € m | ||||
|---|---|---|---|---|---|
| Country | 31 December 2007 | 31 December 2008 | 2007 1) | 2008 1) | |
| Signifi cant subsidiaries | |||||
| Continuing operations | |||||
| DHL Vertriebs GmbH & Co. OHG | Germany | 100.00 | 100.00 | 1,597 | 1,630 |
| Global Mail Inc. | US | 100.00 | 100.00 | 556 | 486 |
| DHL Global Mail (UK) Ltd. | UK | 100.00 | 100.00 | 172 | 146 |
| DHL Global Mail Services (France) SAS | France | 100.00 | 100.00 | 3 | 1132) |
| Deutsche Post Customer Service Center GmbH | Germany | 100.00 | 100.00 | 69 | 74 |
| Interlanden B.V. | Netherlands | 100.00 | 100.00 | 73 | 74 |
| Deutsche Post Selekt Mail Nederland C.V. | Netherlands | 51.00 | 51.00 | 65 | 57 |
| Deutsche Post Com GmbH | Germany | 100.00 | 100.00 | 40 | 47 |
| Deutsche Post Global Mail (Australia) Pty Ltd. | Australia | 100.00 | 100.00 | 29 | 33 |
| Deutsche Post Adress GmbH & Co. KG | Germany | 51.00 | 51.00 | 33 | 32 |
| Güll GmbH | Germany | 51.00 | 51.00 | 33 | 31 |
| EXPRESS, GLOBAL FORWARDING / FREIGHT, SUPPLY CHAIN / CIS | |||||
| Exel Europe Ltd. | UK | 100.00 | 100.00 | 3,283 | 3,049 |
| DHL Express (USA) Inc. | US | 100.00 | 100.00 | 3,127 | 2,486 |
| Air Express International USA Inc. | US | 100.00 | 100.00 | 1,848 | 1,735 |
| DHL Freight GmbH Exel Inc. |
Germany US |
100.00 100.00 |
100.00 100.00 |
1,434 1,508 |
1,482 1,332 |
| Danzas Z.F. Freight Agency Co. Ltd. | China | 49.00 | 49.00 | 719 | 1,041 3) |
| DHL Global Forwarding GmbH | Germany | 100.00 | 100.00 | 964 | 1,016 |
| DHL Express (Sweden) AB | Sweden | 100.00 | 100.00 | 957 | 948 |
| DHL Express (Italy) S. r. L. | Italy | 100.00 | 100.00 | 891 | 895 |
| DHL Global Forwarding (UK) Ltd. | UK | 100.00 | 100.00 | 687 | 673 |
| DHL Solutions GmbH | Germany | 100.00 | 100.00 | 623 | 666 |
| DHL Global Forwarding (Hong Kong) Ltd. | China | 100.00 | 100.00 | 628 | 641 |
| DHL Express (UK) Ltd. | UK | 100.00 | 100.00 | 714 | 623 |
| DHL Express Germany GmbH | Germany | 100.00 | 100.00 | 581 | 595 |
| DHL Global Forwarding (France) SAS | France | 100.00 | 100.00 | 477 | 534 |
| Exel UK Ltd. | UK | 100.00 | 100.00 | 708 | 531 |
| DHL Global Forwarding (Italy) S. p. A. | Italy | 100.00 | 100.00 | 479 | 527 |
| DHL Express Iberia S. L. (Group) | Spain | 100.00 | 100.00 | 533 | 525 |
| Exel Transportation Services Inc. | US | 100.00 | 100.00 | 490 | 525 |
| DHL Express (Netherlands) B.V. | Netherlands | 100.00 | 100.00 | 682 | 524 |
| DHL International (UK) Ltd. | UK | 100.00 | 100.00 | 607 | 522 |
| DHL Sinotrans International Air Courier Ltd. | China | 51.68 | 51.68 | 458 | 491 |
| DHL Logistics (Brazil) Ltda. | Brazil | 100.00 | 100.00 | 398 | 479 |
| DHL Logistics (China) Co., Ltd. | China | 50.00 | 100.00 | 211 | 443 4) |
| DHL Logistics (Schweiz) AG | Switzerland | 100.00 | 100.00 | 400 | 431 |
| DHL Exel Supply Chain (Spain) S. L. | Spain | 100.00 | 100.00 | 420 | 423 |
| Williams Lea Limited | UK | 66.15 | 95.96 | 484 | 417 |
| DHL Danzas Air & Ocean (Netherlands) B.V | Netherlands | 100.00 | 100.00 | 397 | 396 |
| DHL Global Forwarding (Sweden) AB | Sweden | 100.00 | 100.00 | 411 | 394 |
| SCM Supply Chain Management Inc. | Canada | 100.00 | 100.00 | 400 | 391 |
| Discontinued operations | |||||
| Deutsche Postbank AG (Group) | Germany | 50.00 + 1 share | 62.35 | 10,344 | 11,226 |
| Significant joint ventures 5) | |||||
| Express Couriers Ltd. | New Zealand | 50.00 | 50.00 | 84 | 86 |
| Bahwan Exel LLC | Oman | 50.00 | 49.00 | 22 | 32 |
| Express Couriers Australia Pty Ltd. | Australia | – | 50.00 | – | 28 6) |
| Signifi cant associates | |||||
| Air Hong Kong Ltd. | China | 40.00 | 40.00 |
1) IAS amounts reported in single-entity fi nancial statements. 2) January 2008: Koba SA merged with DHL Global Mail Services (France) SAS. 3) Due to contractual arrangements, full consolidation in accord ance with IAS 27.13 b. 4) Fully consolidated since April 2008. Previous year: proportionate amounts. 5) Proportionate amounts. 6) Established in February 2008.
Th e following fees for services rendered by the auditor of the consolidated fi nancial statements, PricewaterhouseCoopers Aktiengesellschaft Wirtschaft sprüfungsgesellschaft , in fi nancial year 2008 and in the fi nancial year before, were recognised as expense:
For fi nancial year 2008, Deutsche Post AG has exercised the simplifi cation options allowed by Section 264 (3) of the HGB for the following companies:
DHL Solutions Großgut GmbH
DHL Solutions Retail GmbH
On 16 December 2008, the Board of Management and the Supervisory Board of Deutsche Post AG together published the Declaration of Conformity with the German Corporate Governance Code for fi nancial year 2008 required by Section 161 of the Aktiengesetz (AktG – German stock corporation act). Th e Board of Management and the Supervisory Board of Deutsche Postbank AG, whose fi nancial statements are included in the consolidated fi nancial statements of Deutsche Post AG, made the Declaration of Conformity on 28 November 2008. Th e Declarations of Conformity can be accessed online at www.corporate-governance-code.de and at www.dpwn.com or www.postbank.com.
On 14 January 2009, Deutsche Bank AG and Deutsche Post AG announced an adjustment to the structure of the Postbank shareacquisition contract. Deutsche Bank AG and Deutsche Post AG agreed on an improved transaction structure for Deutsche Bank's acquisition of Deutsche Postbank AG shares based on the previous purchase price. Th e contract now comprises three tranches. Under this new contractual structure, Deutsche Post AG received the proceeds of the whole transaction on the day of closing (25 February 2009) and thus far earlier than originally agreed. Th e cash value of the transaction is € 4.9 billion.
As a fi rst step, Deutsche Bank acquires 50 million Postbank shares – a stake of 22.9 % – in a non-cash capital increase. Upon entry of the capital increase in the commercial register, Deutsche Post acquires a shareholding of approximately 8 % in Deutsche Bank. Deutsche Post can dispose over half of this holding from the end of April. Th e other half may be disposed of from mid-June. It has been agreed that mechanisms designed to avoid market disturbances will be applied to any such sales. A certain amount of hedging has been carried out for the interim.
At the same time, Deutsche Bank fully underwrote, in a second tranche, mandatory exchangeable bonds issued by Deutsche Post. Aft er three years, these bonds – including interest payments accrued – will be exchanged for 60 million Postbank shares, or a 27.4 % stake. Th e bonds are zero- coupon bonds with a 4 % accrued interest per year. Th e cash value of the bonds at the time of the closing is € 2.6 billion.
Put and call options remain in place for the remaining 26.4 million shares (or 12.1 %). A cash collateral is paid for the options amounting to the cash value of € 1.1 billion at the time of the closing. Th e exercise periods are now set between the 36 th and 48 th month aft er closing. Th rough the collateralisation of the put option and the subscription to the mandatory exchangeable bonds, Deutsche Post receives € 4.2 billion in direct liquid fi nds, of which € 3.1 billion were received by Deutsche Post on 2 January 2009 and a further € 1.1 billion on 25 February 2009.
Th e Group and the Spanish telecommunications operator Telefónica signed a telecoms service agreement in January 2009 to manage services across 28 European countries over the next fi ve years. Telefónica will thus become the Group's primary fi xed and mobile telecommunications provider in Europe. Th e agreement is expected to help save over € 150 million in costs over the period. Subject to the antitrust authorities' regular approval and aft er conclusion of the transaction, the services will be managed by a dedicated service centre in Prague and is expected to go live in early summer of 2009. Due to a long-term agreement signed with Deutsche Telekom, Germany is exempted from this arrangement made with Telefónica.
In addition to the consolidated fi nancial statements with their full inclusion of the Deutsche Postbank Group, consolidated fi nancial statements were prepared including the Deutsche Postbank Group at equity, since the activities of the Deutsche Postbank Group diff er substantially from the ordinary activities of the other companies in the Group. Th e Deutsche Postbank Group was excluded from full consolidation in the following consolidated fi nancial statements as at 31 December 2008. Th e Deutsche Postbank Group is accounted for in these supplemental fi nancial statements only as a fi nancial investment carried at equity. Th e accounting treatment in these fi nancial statements diff ers from the standards required by the IFRS to the extent that the Deutsche Postbank Group was not fully consolidated, as required by IAS 27, but was accounted for at equity.
Th e cash fl ow statement including Postbank at equity is based on the consolidated fi nancial statements including Postbank at equity. Th is means that the cash fl ows of the Deutsche Postbank Group are eliminated, but the cash fl ows between the Group companies and the Deutsche Postbank Group are re-included. In addition, net income from the measurement of the Deutsche Postbank Group at equity is included as non-cash income in net cash from operating activities. Th e dividend paid by Deutsche Postbank AG to Deutsche Post AG is included in cash fl ows from investing activities. All other items are treated in the same way as in the consolidated cash fl ow statement. Further disclosures relating to the cash fl ow statement can be found in Note 50.
1 January to 31 December
| € m | 2007 1) |
2008 |
|---|---|---|
| restated | ||
| Revenue | 54,043 | 54,474 |
| Other operating income | 2,343 | 2,736 |
| Total operating income | 56,386 | 57,210 |
| Materials expense | – 30,703 | – 31,979 |
| Staff costs | – 17,169 | – 17,990 |
| Depreciation, amortisation and impairment losses | – 2,196 | – 2,662 |
| Other operating expenses | – 4,185 | – 5,146 |
| Total operating expenses | – 54,253 | – 57,777 |
| Profi t / loss from operating activities (EBIT) | 2,133 | – 567 |
| Net income from associates | 3 | 2 |
| Net income from measurement of Deutsche Postbank Group at equity | 429 | – 357 |
| Other fi nancial income | 103 | 621 |
| Other fi nance costs | – 1,051 | – 1,122 |
| Net other fi nance costs | – 948 | – 501 |
| Net fi nance costs | – 516 | – 856 |
| Profi t / loss before income taxes | 1,617 | – 1,423 |
| Income tax expense | – 173 | – 200 |
| Consolidated net profi t / loss for the period | 1,444 | – 1,623 |
| attributable to Deutsche Post AG shareholders | 1,383 | – 1,688 |
| Minorities | 61 | 65 |
| 1) See Note 5. |
| € m | 2007 restated 1) |
2008 |
|---|---|---|
| ASSETS | ||
| Intangible assets | 12,792 | 11,627 |
| Property, plant and equipment | 7,826 | 6,676 |
| Investment property | 115 | 32 |
| Investments in associates | 203 | 61 |
| Investments in Deutsche Postbank Group | 1,639 | 2,173 |
| Other non-current fi nancial assets | 754 | 574 |
| Non-current fi nancial assets | 2,596 | 2,808 |
| Other non-current assets | 497 | 514 |
| Deferred tax assets | 537 | 1,033 |
| Non-current assets | 24,363 | 22,690 |
| Inventories | 248 | 269 |
| Income tax assets | 195 | 191 |
| Receivables and other assets | 9,377 | 8,715 |
| Financial instruments | 74 | 50 |
| Cash and cash equivalents | 1,339 | 1,350 |
| Assets held for sale | 50 | 48 |
| Current assets | 11,283 | 10,623 |
| Total assets | 35,646 | 33,313 |
| EQUITY AND LIABILITIES | ||
| Issued capital | 1,207 | 1,209 |
| Other reserves | 875 | 439 |
| Retained earnings | 8,953 | 6,178 |
| Equity attributable to Deutsche Post AG shareholders | 11,035 | 7,826 |
| Minority interest | 146 | 111 |
| Equity | 11,181 | 7,937 |
| Provisions for pensions and other employee benefi ts | 4,846 | 4,685 |
| Deferred tax liabilities | 467 | 833 |
| Other non-current provisions | 2,073 | 2,511 |
| Non-current provisions | 7,386 | 8,029 |
| Non-current fi nancial liabilities | 3,822 | 3,318 |
| Other non-current liabilities | 365 | 367 |
| Non-current liabilities | 4,187 | 3,685 |
| Non-current provisions and liabilities | 11,573 | 11,714 |
| Current provisions | 1,680 | 2,807 |
| Current fi nancial liabilities | 1,156 | 779 |
| Trade payables | 5,211 | 4,980 |
| Income tax liabilities | 352 | 351 |
| Other current liabilities | 4,493 | 4,745 |
| Liabilities associated with assets held for sale | 0 | 0 |
| Current liabilities | 11,212 | 10,855 |
| Current provisions and liabilities | 12,892 | 13,662 |
| Total equity and liabilities | 35,646 | 33,313 |
1) See Note 5.
| € m | 2007 | 2008 |
|---|---|---|
| restated 1) | ||
| Net profi t / loss before taxes | 1,617 | – 1,423 |
| Net fi nance costs excluding net income from measurement at equity | 945 | 499 |
| Net income from measurement at equity | – 429 | 357 |
| Profi t / loss from operating activities (EBIT) | 2,133 | – 567 |
| Depreciation / amortisation of non-current assets | 2,196 | 2,662 |
| Net income from disposal of non-current assets | – 226 | – 76 |
| Non-cash income and expense | 47 | 217 |
| Change in provisions | – 877 | 838 |
| Change in other assets and liabilities | – 146 | – 20 |
| Income taxes paid | – 278 | – 325 |
| Net cash from operating activities before changes in working capital | 2,849 | 2,729 |
| Changes in working capital | ||
| Inventories | 10 | – 50 |
| Receivables and other assets | – 657 | 583 |
| Liabilities and other items | 606 | 100 |
| Net cash from operating activities | 2,808 | 3,362 |
| Proceeds from disposal of non-current assets | ||
| Subsidiaries and other business units | 62 | 0 |
| Property, plant and equipment and intangible assets | 625 | 1,421 |
| Other non-current fi nancial assets | 131 | 162 |
| 818 | 1,583 | |
| Cash paid to acquire non-current assets | ||
| Subsidiaries and other business units | – 261 | – 424 |
| Property, plant and equipment and intangible assets | – 1,930 | – 1,660 |
| Other non-current fi nancial assets | – 152 | – 1,085 |
| – 2,343 | – 3,169 | |
| Interest received | 112 | 570 |
| Dividend Postbank | 103 | 103 |
| Current fi nancial instruments | 0 | – 1 |
| Net cash used in investing activities | – 1,310 | – 914 |
| Proceeds from issuance of non-current fi nancial liabilities | 552 | 176 |
| Repayments of non-current fi nancial liabilities | – 452 | – 497 |
| Change in current fi nancial liabilities | – 857 | – 337 |
| Other fi nancing activities | 153 | – 148 |
| Dividend paid to Deutsche Post AG shareholders | – 903 | – 1,087 |
| Dividend paid to other shareholders | – 56 | – 80 |
| Issuance of shares under stock option plan | 73 | 21 |
| Interest paid | – 411 | – 434 |
| Net cash used in fi nancing activities | – 1,901 | – 2,386 |
| Net change in cash and cash equivalents | – 403 | 62 |
| Effect of changes in exchange rates on cash and cash equivalents | – 46 | – 53 |
| Changes in cash and cash equivalents due to changes in consolidated group | 27 | 2 |
| Cash and cash equivalents at beginning of reporting period | 1,761 | 1,339 |
| Cash and cash equivalents at end of reporting period | 1,339 | 1,350 |
1) See Note 50.
To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated fi nancial statements give a true and fair view of the assets, liabilities, fi nancial position and profi t or loss of the Group, and the management report of the Group includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group.
Bonn, 25 February 2009 Deutsche Post AG Th e Board of Management Dr Frank Appel John Allan Bruce Edwards Jürgen Gerdes John P. Mullen Walter Scheurle Hermann Ude
We have audited the consolidated fi nancial statements prepared by Deutsche Post AG, Bonn, comprising the income statement, the balance sheet, cash fl ow statement, statement of changes in equity and the notes to the consolidated fi nancial statements, together with the group management report for the business year from 1 January to 31 December 2008. Th e preparation of the consolidated fi nancial statements and the group management report in accordance with the IFRS, as adopted by the EU, and the additional requirements of German commercial law pursuant to Section 315 a (1) HGB ("Handelsgesetzbuch"; German Commercial Code) and supplementary provisions of the articles of incorporation are the responsibility of the parent Company's Board of Managing Directors. Our responsibility is to express an opinion on the consolidated fi nancial statements and on the group management report based on our audit.
We conducted our audit of the consolidated fi nancial statements in accordance with Section 317 HGB and German generally accepted standards for the audit of fi nancial statements promulgated by the Institut der Wirtschaft sprüfer (Institute of Public Auditors in Germany) (IDW) and additionally observed the International Standards on Auditing (ISA). Th ose standards require that we plan and perform the audit such that misstatements materially aff ecting the presentation of the net assets, fi nancial position and results of operations in the consolidated fi nancial statements in accordance with the applicable fi nancial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. Th e eff ectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated fi nancial statements and the group management report are examined primarily on a test basis within the framework of the audit. Th e audit includes assessing the annual fi nancial statements of those entities included in consolidation, the determination of the entities to be included in consolidation, the accounting and consolidation principles used and signifi cant estimates made by the Company's Board of Managing Directors, as well as evaluating the overall presentation of the consolidated fi nancial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion based on the fi ndings of our audit the consolidated fi nancial statements comply with the IFRS as adopted by the EU and the additional requirements of German commercial law pursuant to Section 315 a (1) HGB and supplementary provisions of the articles of incorporation and give a true and fair view of the net assets, fi nancial position and results of operations of the Group in accordance with these requirements. Th e group management report is consistent with the consolidated fi nancial statements and as a whole provides a suitable view of the Group's position and suitably presents the opportunities and risks of future development.
Düsseldorf, 13 February 2009 and 25 February 2009
PricewaterhouseCoopers Aktiengesellschaft Wirtschaft sprüfungsgesellschaft
Klaus-Dieter Ruske Hans-Joachim Holte Wirtschaft sprüfer Wirtschaft sprüfer (German Public Auditor) (German Public Auditor)
STAMPIT – DIGITAL FRANKING: Our customers are able to buy stamps for their mail via the internet, whether it be for a letter, package or parcel. Th e two-dimensional barcode can be printed out from their computer using a standard printer. Th e barcode contains all the important information about the item, such as the type of product, date, postage amount and parts of the recipient's address.
| 203 | INDEX |
|---|---|
| 204 | GLOSSARY |
| 206 | CONTACTS |
| III | 8-YEAR REVIEW |
| IV | EVENTS |
| A | E | Q |
|---|---|---|
| Air freight 31, 65 ff., 83 |
Earnings per share 23, 37, 43, 127, 152 |
Quality 81 ff. |
| Annual General Meeting 25 ff., 43, 105 ff., |
EBIT after asset charge 35 f., 39, 117 |
|
| 114 ff., 160 f. | EXPRESS 24, 33, 40, 59 ff., 82, 89, 95 ff., |
R |
| Auditor's report 200 |
132, 146 | Rating 45, 78 |
| Regulation 32, 86 ff., 189 f. |
||
| B | F | Remuneration of the Board of Management |
| Balance sheet 50 f., 128, 136 ff., 144 ff., 153 ff. | First Choice 13, 33, 80 ff., 89, 96, 204 |
116 ff., 194 |
| Board of Management 17 f., 25 ff., 104 ff., |
Free fl oat 39, 160 |
Remuneration of the Supervisory Board |
| 111, 114 ff., 190 ff., 199 | Freight 24 f., 41, 65 ff., 83, 99, 146 |
123 f., 194 |
| Bonds 44, 46, 170 |
Responsibility statement 199 |
|
| Brands 25, 33, 71, 84, 99, 135, 150, 153 |
Retail outlets 33, 41, 53 ff., 58, 81, 146, 189 |
|
| G | Return on sales 23, 52, 58, 68 |
|
| C | Global Business Services 24 f., 33, 41, 146 |
Risk management 85 ff., 116, 175 ff., 179 ff. |
| Global economy 28 ff., 94 ff. |
Roadmap to Value 23, 34, 35 f., 39, 99 |
|
| Capital expenditure 39, 47 ff., 97 f. Cash conversion rate 68 |
Global Forwarding 24, 65 ff., 83, 96, 146 |
|
| GLOBAL FORWARDING / FREIGHT 24 f., 65 ff., |
||
| Cash fl ow 49 f., 58, 64, 68, 71, 173 f., 184 |
83, 96, 99, 131, 146 | S |
| Cash fl ow statement 129, 173 f., 197, 199 |
Global Mail 24, 31, 53, 58, 146 |
Segment reporting 131, 146 ff. |
| Collective agreements 23, 74 |
GoGreen 8 f., 34, 59, 77, 81, 90, 99 f., 204 |
Share capital 25 ff., 124, 160, 194 |
| Consolidated net profi t / loss 17, 23, 43, 50, 127, 152 |
Shareholder structure 39 |
|
| Consolidated revenue 41 |
I | Share price 38 f. |
| Illness rate 74 |
Staff costs 42, 73, 127, 149, 197 |
|
| Continuing operations 23, 41, 127, 131 |
Income statement 127, 148 ff., 197 |
Stock option plan 27, 118 f., 142, 149, |
| Contract logistics 10, 24, 31, 69 ff., 83, 97, 100, 146, 204 |
Investments 23, 44, 47 ff., 49, 89, 97 f., |
160 f., 190 f. |
| Corporate governance 25, 28, 106 f., 114 ff., |
133 ff., 140, 151, 156, 174, 195 | Supervisory Board 25 ff., 103 ff., 109, 113 ff., 123 f. 193 f. |
| 122, 196 | Supervisory Board committees 104 ff., 109, 115 | |
| Corporate Information Solutions 24 ff., 69 ff., |
M | SUPPLY CHAIN / CIS 23, 24 f., 50, 69 ff., 83, |
| 100, 146, 154 f. | MAIL 24, 34, 41, 53 ff., 81, 88 f., 95, 99, |
96 f., 100, 131, 133, 146 |
| Credit lines 44, 179 |
131, 146 | |
| Mail Communication 53, 56, 95, 146 |
||
| D | Mandates 112 f. |
T |
| Declaration of Conformity 106, 107, 114, 196 | Market shares 53 ff., 65 f., 70 |
Trade fl ows 30 f. |
| Dialogue Marketing 53, 57, 146 |
||
| Discontinued operations 25, 39, 41, 72, |
W | |
| 127, 146 | O | WACC 35 f., 154 |
| Dividend 23, 37, 39, 43, 108, 152, 162 |
Ocean freight 24, 31, 65 ff., 83 |
Working capital 23, 39, 49, 68, 71, 97, 173 f. |
| Opportunities 85 ff., 98 ff. |
||
| Outlook 94 ff. |
||
| Outsourcing 32, 69 f., 89, 154, 205 |
||
| P | ||
| Pension Service 25, 41, 53, 56, 72, 146 |
||
| Postbank 23, 25, 33, 39 ff., 43, 72, 93 f., 135, 146, 152, 196 |
||
| Postbank at equity 46, 49, 51, 161, 197 ff. |
||
| Press Services 24, 54, 57, 146 |
||
Sealed, reusable metal box for carrying goods.
Performance of complex logistics and logisticsrelated tasks along the value chain by a service provider. Services tailored to the particular industry and customer are provided under contracts lasting several years.
Delivery of express shipments on a specifi ed day.
Market-orientated activities which draw on direct communications to selectively reach target groups through a personal, individualised approach and to enter into dialogue.
Process fl ows in the sales channel from producers via wholesalers / retailers to consumers.
Legal framework for the postal markets in the member states of the European Union.
In accordance with the German postal act, Deutsche Post AG had the exclusive licence until the end of 2007 to commercially transport certain items. The exclusive licence expired with effect from 1 January 2008.
(Bundesnetzagentur) National regulator for electricity, gas, telecommunications, post and railway. Previously the Regulatory Authority for Telecommunications and Posts (Regulierungsbehörde für Telekommunikation und Post).
Group-wide programme aimed at improving service quality and enhancing customer focus.
Shipments which completely fi ll a container.
Customer relationship management organisation for the Group's largest and most important global clients.
Deutsche Post World Net's climate protection programme.
Main transhipment base. Collection centre for the transhipment and consolidation of fl ows of goods.
Transport chain integrating different modes of transport, often combining road and rail.
Loads that will not fi ll a container by themselves and are therefore grouped for ocean transport.
The subcontracting of tasks to external service providers.
Parcel machine where parcels and small packets can be deposited and collected around the clock.
Postbox for franked parcels and small packets (maximum dimensions: 50 × 40 × 30 cm).
The study of stamps. Systematic collection of postage stamps.
The purpose of the German postal act, which took effect on 1 January 1998, is to promote postal competition through regulation and ensure the nationwide provision of appropriate and suffi cient postal services. The postal act includes regulations on licensing, price control and the universal service.
A press product of which more than 30 % consists of journalistic reporting.
Procedure whereby the Federal Network Agency approves prices for certain mail products. The agency approves prices on the basis of parameters it stipulates in advance, which set the average changes in these prices within baskets of services defi ned by the agency.
Same-day delivery of express shipments.
Letter measuring max. 235 × 125 × 5 mm and weighing up to 20 g.
A press product of which no more than 30 % consists of journalistic reporting.
A series of connected resources and processes from sourcing materials to delivering goods to consumers.
Twenty-foot equivalent unit. Standardised container unit measuring 20 feet in length (1 foot = approximately 30 cm).
Delivery of express shipments at a specifi ed time.
Services which go beyond core services offered and thus create added value.
Tel.: +49 (0) 228 182- 6 36 36 Fax: +49 (0) 228 182- 6 31 99 E-mail: ir @ deutschepost.de
Tel.: +49 (0) 228 182- 99 44 Fax: +49 (0) 228 182- 98 80 E-mail: pressestelle @ deutschepost.de
E-mail: ir @ deutschepost.de Online: investors.dpwn.com
GeT and DHL Webshop Mat. no. 675- 602- 211
On 10 March 2009, in German and English.
Deutsche Post Foreign Language Services et al.
The English version of the Annual Report 2008 of Deutsche Post AG constitutes a translation of the original German version. Only the German version is legally binding, in so far as this does not conflict with legal provisions in other countries.
| 8-year review 2001 to 2008 | ||||
|---|---|---|---|---|
| -- | ---------------------------- | -- | -- | -- |
| € m | 2001 restated |
2002 restated |
2003 restated |
2004 restated |
2005 restated |
2006 restated |
2007 restated |
2008 |
|---|---|---|---|---|---|---|---|---|
| Revenue | ||||||||
| 11,707 | 12,129 | 12,495 | 12,747 | 12,878 | 15,290 | 14,569 | 14,393 | |
| EXPRESS | 6,421 | 14,637 | 15,293 | 17,557 | 16,831 | 13,463 | 13,874 | 13,637 |
| LOGISTICS | 9,153 | 5,817 | 5,878 | 6,786 | 9,933 | 24,405 | – | – |
| GLOBAL FORWARDING / FREIGHT | – | – | – | – | – | – | 12,959 | 14,179 |
| SUPPLY CHAIN / CIS | – | – | – | – | – | – | 14,317 | 13,718 |
| FINANCIAL SERVICES | 8,876 | 8,676 | 7,661 | 7,349 | 7,089 | 9,593 | – | – |
| SERVICES | – | – | – | – | 3,874 | 2,201 | – | – |
| Divisions total | 36,157 | 41,259 | 41,327 | 44,439 | 50,605 | 64,952 | 55,719 | 55,927 |
| Corporate Center / Other (until 2004: Other / Consolidation; until 2006: Consolidation) |
– 2,778 | – 2,004 | – 1,310 | – 1,271 | – 6,011 | – 4,407 | – 1,676 | – 1,453 |
| Continuing operations | – | – | – | – | – | – | 54,043 | 54,474 |
| Discontinued operations | – | – | – | – | – | – | 10,335 | 11,226 |
| Total | 33,379 | 39,255 | 40,017 | 43,168 | 44,594 | 60,545 | – | – |
| Profi t / loss from operating activities before goodwill amortisation (EBITA) |
||||||||
| 1,960 | 2,144 | 2,082 | 2,085 | 2,030 | 2,094 | 1,976 | 2,253 | |
| EXPRESS | 176 | 270 | 365 | 373 | 411 | 288 | – 272 | – 2,144 |
| LOGISTICS | 159 | 173 | 206 | 281 | 346 | 751 | – | – |
| GLOBAL FORWARDING / FREIGHT | – | – | – | – | – | – | 409 | 389 |
| SUPPLY CHAIN / CIS | – | – | – | – | – | – | 577 | – 65 |
| FINANCIAL SERVICES | 522 | 679 | 568 | 716 | 869 | 1,004 | – | – |
| SERVICES | – | – | – | – | 679 | – 229 | – | – |
| Divisions total | 2,817 | 3,266 | 3,221 | 3,455 | 4,335 | 3,908 | 2,690 | 433 |
| Corporate Center / Other (until 2004: Other / Consolidation; until 2006: Consolidation) |
– 270 | – 297 | – 246 | – 84 | – 131 | – 36 | – 557 | – 390 |
| Continuing operations | – | – | – | – | – | – | 2,133 | 43 |
| Discontinued operations | – | – | – | – | – | – | 1,060 | – 871 |
| Total | 2,547 | 2,969 | 2,975 | 3,371 | 4,204 | 3,872 | – | – |
| Profi t / loss from operating activities (EBIT) | ||||||||
| 1,958 | 2,138 | 2,067 | 2,072 | 2,030 | 2,094 | 1,976 | 2,253 | |
| EXPRESS | 126 | – 79 | 152 | 117 | – 23 | 288 | – 272 | – 2,144 |
| LOGISTICS | 42 | 80 | 116 | 182 | 346 | 751 | – | – |
| GLOBAL FORWARDING / FREIGHT | – | – | – | – | – | – | 409 | 389 |
| SUPPLY CHAIN / CIS | – | – | – | – | – | – | 577 | – 675 |
| FINANCIAL SERVICES | 520 | 678 | 567 | 714 | 863 | 1,004 | – | – |
| SERVICES | – | – | – | – | 679 | – 229 | – | – |
| Divisions total | 2,646 | 2,817 | 2,902 | 3,085 | 3,895 | 3,908 | 2,690 | – 177 |
| Corporate Center / Other (until 2004: Other / Consolidation; until 2006: Consolidation) |
– 270 | – 297 | – 246 | – 84 | – 131 | – 36 | – 557 | – 390 |
| Continuing operations | – | – | – | – | – | – | 2,133 | – 567 |
| Discontinued operations | – | – | – | – | – | – | 1,060 | – 871 |
| Total | 2,376 | 2,520 | 2,656 | 3,001 | 3,764 | 3,872 | – | – |
| Consolidated net profi t / loss for the period | 1,587 | 1,590 | 1,342 | 1,740 | 2,448 | 2,282 | 1,873 | – 1,979 |
| Cash fl ow/investments / depreciation and amortisation | ||||||||
| Total cash fl ow from operating activities | 3,059 | 2,967 | 3,006 | 2,336 | 3,624 | 3,922 | 5,151 | 1,939 |
| Total cash fl ow from investing activities | – 2,380 | – 2,226 | – 2,133 | – 385 | – 5,052 | – 2,697 | – 1,053 | – 441 |
| Total cash fl ow from fi nancing activities | – 619 | 147 | – 304 | – 493 | – 1,288 | – 865 | – 1,787 | – 1,468 |
| Investments | 3,468 | 3,100 | 2,846 | 2,536 | 6,176 | 4,066 | 2,343 | 3,169 |
| Depreciation and amortisation | 1,285 | 1,893 | 1,693 | 1,821 | 1,961 | 1,771 | 2,196 | 2,662 |
| 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | ||
|---|---|---|---|---|---|---|---|---|---|
| restated | restated | restated | restated | restated | restated | restated | |||
| Assets and capital structure | |||||||||
| Non-current assets 1) | € m | 12,304 | 14,536 | 15,957 | 17,027 | 25,223 | 26,074 | 25,764 | 20,517 |
| Current assets | |||||||||
| (until 2003: including deferred tax assets) 1) | € m | 144,397 | 148,111 | 138,976 | 136,369 | 147,417 | 191,624 | 209,656 | 242,447 |
| Equity (excluding minority interest) | € m | 5,353 | 5,095 | 6,106 | 7,242 | 10,624 | 11,220 | 11,035 | 7,826 |
| Minority interest | € m | 75 | 117 | 59 | 1,623 | 1,791 | 2,732 | 2,778 | 2,026 |
| Current and non-current provisions | € m | 10,971 | 12,684 | 12,673 | 12,441 | 12,161 | 14,233 | 12,276 | 10,836 |
| Current and non-current liabilities 2) | € m | 8,770 | 11,900 | 12,778 | 15,064 | 19,371 | 20,850 | 21,544 | 242,276 |
| Total assets | € m | 156,701 | 162,647 | 154,933 | 153,396 | 172,640 | 217,698 | 235,420 | 262,964 |
| Employees / staff costs (2007 / 2008: Continuing operations) |
|||||||||
| Total number of employees | |||||||||
| (headcount including trainees) | at 31 December | 321,369 | 371,912 | 383,173 | 379,828 | 502,545 | 520,112 | 512,147 | 512,536 |
| Full-time equivalents (excluding trainees) 3) | at 31 December | 283,330 | 334,952 | 348,781 | 340,667 | 455,115 | 463,350 | 453,626 | 451,515 |
| Average number of employees (headcount) | 323,298 | 375,890 | 375,096 | 381,492 | 393,463 | 507,641 | 500,252 | 511,292 | |
| Staff costs | € m | 11,246 | 13,313 | 13,329 | 13,840 | 14,337 | 18,616 | 17,169 | 17,990 |
| Staff cost ratio 4) | % | 33.7 | 33.9 | 33.3 | 32.1 | 32.2 | 30.7 | 31.8 | 33.0 |
| Key fi gures revenue / income / assets and capital structure |
|||||||||
| Return on sales 5) | % | 7.6 | 7.6 | 7.4 | 7.0 | 8.4 | 6.4 | 3.9 | – 1.0 |
| Return on equity (ROE) before taxes 6) | % | 45.9 | 35.5 | 34.2 | 29.2 | 28.7 | 21.6 | 8.6 | – 9.0 |
| Return on assets 7) | % | 1.5 | 1.6 | 1.7 | 1.9 | 2.3 | 2.0 | 0.9 | – 0.2 |
| Tax rate 8) | % | 26.1 | 14.3 | 29.9 | 20.2 | 19.8 | 19.7 | 14.0 | – |
| Equity ratio 9) | % | 3.4 | 3.1 | 3.9 | 5.8 | 7.2 | 6.4 | 5.9 | 3.7 |
| Net debt (Postbank at equity) 10) | € m | 1,750 | 1,494 | 2,044 | – 32 | 4,193 | 3,083 | 2,858 | 2,412 |
| Net gearing (Postbank at equity) 11) | % | 24.6 | 22.7 | 25.1 | – 0.4 | 28.1 | 21.4 | 20.4 | 23.3 |
| Dynamic gearing (Postbank at equity) 12) | years | 0.64 | 0.46 | 0.82 | 0.00 | 2.44 | 1.42 | 1.02 | 0.72 |
| Key share data | |||||||||
| (Diluted) earnings per share 13) | € | 1.42 | 0.59 | 1.18 | 1.44 | 1.99 | 1.60 | 1.15 | – 1.40 |
| (Diluted) earnings per share | |||||||||
| before extraordinary expense 13) | € | 1.42 | 1.41 | 1.18 | 1.44 | 1.99 | 1.60 | 1.15 | – 1.40 |
| Cash fl ow per share 13), 14) | € | 2.75 | 2.67 | 2.70 | 2.10 | 3.23 | 3.28 | 4.27 | 1.60 |
| Dividend distribution | € m | 411.74 | 445.12 | 489.63 | 556.40 | 835.71 | 903.00 | 1,087.34 | 725.41 15) |
| Payout ratio (distribution to consolidated net profi t) |
% | 26.11 | 67.54 | 37.41 | 34.82 | 37.39 | 47.13 | 78.62 | – |
| Dividend per share | € | 0.37 | 0.40 | 0.44 | 0.50 | 0.70 | 0.75 | 0.90 | 0.60 15) |
| Dividend yield (based on year-end | |||||||||
| closing price) | % | 2.5 | 4.0 | 2.7 | 3.0 | 3.4 | 3.3 | 3.8 | 5.0 |
| (Diluted) price / earnings ratio before extraordinary expense 16) |
10.6 | 7.1 | 13.9 | 11.7 | 10.3 | 14.3 | 20.4 | – 8.5 | |
| Number of shares carrying dividend rights | millions | 1,112.8 | 1,112.8 | 1,112.8 | 1,112.8 | 1,193.9 | 1,204.0 | 1,208.2 | 1,209.0 |
| Year-end closing price | € | 14.99 | 10.00 | 16.35 | 16.90 | 20.48 | 22.84 | 23.51 | 11.91 |
1) From 2004 balance sheet presented in accordance with the new IAS 1 as explained in item 5 of the Notes to the 2005 consolidated fi nancial statements. 2) Excluding liabilities from fi nancial services. 3) Until 2004 including trainees. 4) Staff costs / revenue. 5) EBITA / revenue; from 2004: EBIT/ revenue (2007 / 2008: continuing operations). 6) Profi t before income taxes (2007 / 2008 continuing operations) /average equity (from 2004 including minority interest). 7) EBIT (2007/2008: continuing operations) / average total assets. 8) Income tax expense / profi t before income taxes; including discontinued operations. 9) Equity (from 2004 including minority interest) / total assets. 10) Financial liabilities excluding cash and cash equivalents, current fi nancial instruments, long-term deposits, and fi nancial liabilities to minority shareholders of Williams Lea. 11) Net debt / net debt and equity (from 2004 including minority interest). 12) Net debt / cash fl ow from operating activities. 13) The weighted average number of shares for the period was used for the calculation. 14) Cash fl ow from operating activities. 15) To be proposed to the AGM. 16) Year-end closing price / earnings per share before extraordinary expense.
| 21 April 2009 | Annual General Meeting (Frankfurt am Main) |
|---|---|
| 6 May 2009 | Interim report on the fi rst quarter of 2009, investors conference call |
| 23 July 2009 | Press conference and investors conference on the fi rst half of 2009 |
| 31 July 2009 | Interim report on the fi rst half of 2009 |
| 5 November 2009 | Interim report on the fi rst nine months of 2009, investors conference call |
| 1) For more information on other events, updates and details of live webcasts, please visit investors.dpwn.com. |
| 25 March 2009 | Cheuvreux EMEA Conference (Paris) |
|---|---|
| 31 March – 1 April 2009 | Merrill Lynch All Stars Conference (New York) |
| 20 May 2009 | Wolfe Research Conference (New York) |
| 10 – 12 June 2009 | Exane BNP Paribas Conference (Paris) |
| 22 – 23 June 2009 | Goldman Business Services Conference (London) |
| 23 – 24 June 2009 | Deutsche Bank German Corporate Conference (Frankfurt am Main) |
| 14 – 15 September 2009 | Sanford C. Bernstein's Strategic Decisions Conference (London) |
| 22 – 24 September 2009 | UniCredit German Investment Conference (Munich) |
Provided your mobile phone has Quick Recognition (QR) software, you can photograph this code to directly access the investors portal on our website.
Deutsche Post AG Headquarters Investor Relations 53250 Bonn Germany www.dpwn.com
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