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Annual Report 1997
Annual Report
1997
Deutsche Post AG is a diversified international service provider in the
communications, transport and logistics markets.
As the largest postal services provider in Europe, we offer commercial as
well as private customers a broad spectrum of high-quality services that
range from the traditional delivery of letters and parcels to electronic
mail, all the way to an integrated, custom-tailored offering of complete
logistics solutions.
In optimizing its core business, Deutsche Post employs state-of-the-art
technology. Our goal is to increase continually our corporate value and –
in the interest of all involved – generate high value added. Within the
scope of the “Infrastrukturauftrag” (infrastructure services mandate) by
the state, Deutsche Post provides postal services at adequate prices
throughout the entire country.
Our most important corporate goals are:
• to reinforce our market leadership in domestic postal services;
• to open foreign markets for postal services, particularly in Europe;
• to maintain market leadership in service quality, also as measured
against international standards.
CORPORATE PROFILE

Table of contents

  • Page 1
    ...most important corporate goals are: • to reinforce our market leadership in domestic postal services; • to open foreign markets for postal services, particularly in Europe; • to maintain market leadership in service quality, also as measured against international standards. Annual Report 1997

  • Page 2
    ...-Systeme mbH, Ratingen Subscr. cap. DM 200,000 DPB DM 150,200 Deutsche Post Adress GmbH, Bonn Subscr. cap. DM 1,500,000 DPB DM 765,000 100 % IPP International Parcel Post GmbH, Bonn Subscr. cap. DM 50,000 IPS International Postal Service GmbH, Bonn Subscr. cap. DM 50,000 IMS International Mail...

  • Page 3
    ...the Chairman of the Board of Management ...The Board of Management ...Management Report ...Milestones 19 9 7 ...Review of Operations ...2 5 6 20 24 Letter Mail ...Freight Mail ...Postal Branches ...International Post ...Personnel ...Principal Subsidiaries ...Financial Statements 19 9 7 ... 25 34 40...

  • Page 4
    ...+ 3.0 % Equity ratio (%) 26.8 26.6 - 0.2 % Return on equity* (%) 6.5 9.3 + 2.8 % Number of employees** as of December 31 284,889 266,823 - 6.3 % Personnel expenses as % of total 68.4 68.2 - 0.2 % * Income from ordinary business activities, minus other taxes ** Including trainees S

  • Page 5
    ...progress toward achieving leadership in postal service quality in both Germany and Europe. Today, 93 percent of all letters mailed within Germany reach their destination the next day: 99 percent are received within two days. This translates into an average delivery time of 1.1 days - one of the best...

  • Page 6
    ... value-added chain of products - Acceptance, Transportation, Sorting and Delivery. As solutions provider we offer our customers innovative services, custom-made programs of cooperation and new logistics products. ePost, to cite one example, mailed 83.5 million letters last year - nearly three times...

  • Page 7
    ...in the European parcel mail market. Along with the ongoing improvement in our service quality and the expansion of our product range, we improved our cost structures, particularly for personnel. By the end of 1997, mostly through attrition and normal job turnover, we had reduced staff level by some...

  • Page 8
    ... NAGEMENT Dr. Helmut Benno Staab Marketing and Sales of Letter Services, "Pressepost", Postal Philately Dr. Günter W. Tumm Express Courier Parcel Services, International Post Dr. Klaus Zumwinkel Chairman of the Management Board Wolfhard Bender Production of Letter Services, Legal Affairs Dr. Hans...

  • Page 9
    6

  • Page 10
    ... to DM 1,492 million. Letter Mail Freight Mail International Mail Postal Retail Outlets Other 72.8% 2. 1% 1% 6. 7.7% 11. 3% We managed to stabilize revenue in the Freight Mail division by keeping prices unchanged. Business generated by new customers was an important factor in this accomplishment...

  • Page 11
    ...26,000 25,000 24,000 reported by Freight Mail, International Post and Postal Branches 23,000 1996 1997 remained stable at the respective previous year's level. Sales volume 22,000 21,560 millions of items 21,500 22,078 Marked increase in profit Profit on ordinary activities rose by a strong 30...

  • Page 12
    ... in proceeds and reduced the extraordinary loss to DM 913 million. In fiscal 1997, the corporation reported for the first time positive retained earnings of DM 103 million. Enhanced financial strength The company's financials continued to improve according to plan. Cash flow according to DVFA/SG...

  • Page 13
    ... 2,244 1,921 in DM millions 2,000 Net cash used for investing activities fell by DM 181 million to DM 311 million during 1997. This was mainly due to an above-average increase in proceeds from the sale of fixed assets totaling DM 1,715 million for the year, DM 213 million more than in fiscal 1996...

  • Page 14
    ... of indirect pension obligations vis-Ã -vis our employees. The increase in shareholders' equity with corresponding increase in assets raised the balance sheet total. In connection with the signing of our cooperation agreement with Postbank, Deutsche Post's annual shareholders' meeting voted on...

  • Page 15
    ... envisages a total of 83 centers and will be completed ahead of schedule in late 1998. As part of our efforts to increase the international orientation of our corporation, we have successfully concluded several acquisitions during the financial year. Deutsche Post Express und Transport GmbH (Bonn...

  • Page 16
    ... the leading parcel delivery service in Poland. We also succeeded in acquiring full ownership of Switzerland's G. P. Paketlogistik AG (Basel). In the European freight market, we will continue systematically to pursue our goal of offering top-quality service that invites international comparison. As...

  • Page 17
    ... the opening of Direct Marketing Centers; 29 of the 30 centers planned were already doing business by the end of the year. Thanks to these facilities, we won many new customers for our "Werbung per Post" (advertising by mail) service. One example of new services offered is our chocolate gift service...

  • Page 18
    ... Freight Mail, Express Mail and International Post. So far KEP/I has already made enormous progress. Service quality has risen throughout the Freight Mail division. In 1997, the average delivery time of a parcel within Germany was 1.2 days. Thanks to our new Internet service, business customers...

  • Page 19
    ... and sales concept. Successful new retail outlet concepts ("Center" branches, Shop-in-Shop branches, "PostPlus" stores and further expansion of the postal agency network) in conjunction with an employee training program, provide the foundation for attractive new products and greater customer service...

  • Page 20
    ... further productivity gains and enhanced service for our customers. The acquisition of a 22.5 percent stake in DHL International Ltd., the global market leader for international express courier services, planned for March 1998 marks a significant increase in the international activities of Deutsche...

  • Page 21
    ... is prepared to meet head-on. In this market Deutsche Post will bring to bear its distinct strength in current services offering, its ability to develop innovative services, its strong position and its ability to compete. We are determined to seize the new business opportunities and, in particular...

  • Page 22
    ...of Management's Report on Relations with Affiliated Companies ("Dependency Report"), closing statement The Board of Management closed the above report with the following statement: None of the transactions entered into in 1997 and described in this report were prejudicial to the Company's interests...

  • Page 23
    20

  • Page 24
    Milestones 1997 KEP/I restructured Reorganization of the Courier Express Parcel and International Post (KEP/I) division is complete. Its product focus: integrated logistics solutions Europewide. Deutsche Post aims to increase its market leadership by expanding its presence throughout Europe. ...

  • Page 25
    ...Parcel Post GmbH (IPP), International Mail Service GmbH (IMS) and International Postal Service GmbH (IPS). New letter processing centers Thirteen new letter processing centers are opened which brings the total number of these stateof-the-art centers to 45 and contributes to further quality and cost...

  • Page 26
    Still more letter processing centers The opening of another 13 letter processing centers increases their total number to 58. Today, nearly all of Germany's metropolitan areas are serviced by new state-of-the-art production facilities. Deutsche Post and Postbank meet the press Dr. Dieter Boening, ...

  • Page 27
    24

  • Page 28
    ...high level of competence is evidenced by the development and refinement of successful products and by the shortening of delivery times. LETTER MA IL Share of total revenue generated by Letter Mail Standing firm in the face of new - media competition Despite the growing competition from electronic...

  • Page 29
    ...of- the- art letter processing centers. Second, the strategy focuses on opening new market segments employing innovative, value- added products and services. On the w ay to becoming a high- tech business The Letter Mail division in 1997 systematically expanded the use Letter Mail net revenue 25,000...

  • Page 30
    ...the Key Account Management concept. A new department at headquarters and regional key account managers at our directorates are assigned to customers with large letter volume, customers in the mail- order business, public organizations, insurance companies and manufactures of brand- name products. We...

  • Page 31
    ... new sales promotion measures. Barcoding: a new service The latest in tracking- and- tracing technology provides information regarding the delivery of registered and COD letters. For tracking and tracing, letters must have a barcode label that can then be scanned into a data processing system...

  • Page 32
    ... office box network. In Germany today, some 1.5 million customers rent P.O. boxes. We are expanding our P.O. box facilities at easily accessible locations and expect even more customers to opt for picking up their mail prior to delivery time. Electronic mail service reports dramatic grow th ePost...

  • Page 33
    ... addresses generate unnecessary costs and have reverberations on the sender's image. We cross- check data files provided to us, correct them where necessary and ensure that our customers' letters reach each and every addressee. Other useful services have been developed by our "Post Direkt" business...

  • Page 34
    ...a product that offers optimized scheduled delivery, a streamlined accounting system and substantially enhanced data quality in the selection of target groups. Expert consulting services for small and medium- sized businesses Deutsche Post's Direct Marketing Centers have proven to be a good platform...

  • Page 35
    ... small numbers and thus are a hot item for collectors. The year also saw the launch of the collector's journal "postfrisch", aimed at raising customer loyalty levels. The journal is delivered free of charge to all 750,000 customers who order stamps regularly from our collector service. Stamp...

  • Page 36
    ... services even further and to continually modernize our core postal business. In addition, we will systematically develop our hybrid ePost product into a comprehensive range of electronic products. With our quality program we will direct our efforts even more selectively toward developing customer...

  • Page 37
    34

  • Page 38
    ... market share. With the introduction of a number of product innovations we have further improved our service quality. The employment of sophisticated logistics systems in our 33 freight processing centers has cut down delivery time within Germany to just 1.2 days on average in 1997. FREIGHT MA IL...

  • Page 39
    ... use of packing material is extremely well suited to the mailing of valuable goods. With our new "Scheckpaket" (cheque-on-delivery parcel service), it is possible to mail goods worth up to DM 20,000. We also offer private customers and small businesses a very convenient method of dispatching parcels...

  • Page 40
    ... to transport as much of its freight mail as possible by rail. Therefore, we use Deutsche Bahn freight trains for shipment per standardized containers with two-day delivery guarantee. State-of-the-art information technology is the heart of our logistics systems. Building on the experience gained in...

  • Page 41
    ... Mail As we expect freight mail volume in Germany to grow only slightly in the coming years, mainly due to economic circumstances, we give priority to high-quality standard services. As in 1997, corporate policy continues to focus on product innovations and on intelligent, sector-specific solutions...

  • Page 42
    ... station at freight processing center The Freight Mail division will continue to develop and market innovative services to stay competitive and to boost sales, particularly in the fast-growing European courier express parcel market. And we will continue to push ahead with the consolidation of...

  • Page 43
    40

  • Page 44
    ... some 15,300 stationary points of sale and 17,000 employees in our Mobile Postal Service (mail carriers offering an expanded range of services), Deutsche Post in 1997 had one of the largest sales networks in Germany at its disposal. Thanks to new sales vehicles such as postal agencies, more than 90...

  • Page 45
    ...opening hours as well as offering non-postal products, enabling us to cut costs significantly and to make use of synergies gained through collaboration with sales partners. Total number of postal sales offices 17,000 16,000 number 16,604 Following field tests in 1996, we added the "PostPlus store...

  • Page 46
    ...areas where we had closed small postal branches that Postal agencies 5,236 4,604 5,000 4,000 3,000 number number number were no longer economical. In light of the high level of customer satisfaction and cost advantages that this sales concept offers, we will establish postal agencies in locations...

  • Page 47
    ...and HDI, an insurance company, Deutsche Post in 1997 gained two powerful partners in the financial service segment. Our primary goal, however, is to strengthen Postbank's core business - i. e., its savings and checking accounts operations. Deutsche Post will employ specially trained sales people and...

  • Page 48
    ... sales network. In convenient downtown locations, the Centers will focus on providing customers with comprehensive advice on postal products as well as on financial services. The first 17 pilot Centers are to open in April 1998. Our plan is to develop high-powered Regional Centers out of the Center...

  • Page 49
    46

  • Page 50
    ... the global letter and freight mail market with customer- oriented products and services. During 1997, we expanded our international operations even further. IN TERN A TION A L POS T Share of total revenue Expansion - through innovation and acquisition Deutsche Post in 1997 initiated new trends...

  • Page 51
    ... solutions for standard letters, IMS' consulting service advises customers on how to conduct market- and client-focused direct marketing activities in foreign markets. IPP is in charge of product management for freight mail for business customers and for sales management of international freight...

  • Page 52
    ... its pan-European parcel mail business. Setting up a franchise system in Austria, obtaining a majority stake in market leader Servisco in Poland, taking a majority interest in Belgian Parcel Distribution and acquiring GP Paketlogistik in Switzerland are the first steps for the Europe-wide network to...

  • Page 53
    ... bags at the International Postal Center (IPZ) in Frankfurt having to set up their own infrastructure. In addition, IPS is responsible for product management of consignment. The establishment and/or acquisition of networks in the business-tobusiness parcel mail sector in Austria, Belgium, Poland...

  • Page 54
    ...Additional sales offices will be opened abroad to further expand our international letter mail business. Over the next few years, we plan to expand our international freight mail network. In the area of international value- added services we will extend our international consignment activities into...

  • Page 55
    52

  • Page 56
    ...of measures aimed at cutting personnel costs: shorter breaks, the elimination of hardship pay and the relinquishing of one free day during the year. As of December 31, 1997, Deutsche Post had a total of 266,823 employees. This represented another substantial drop in staffing level, down 18,066 over...

  • Page 57
    ...'s expense burden in this area. Performance - related pay: new developments Increasing competition in our business calls for modern compensation systems, i. e., the performance of the individual employee is increasingly important in determining compensation resulting in greater differentiation in...

  • Page 58
    ... focus on training In 1997, Deutsche Post again raised the number of traineeships, this time by some 7.0 percent to 2,100. Courses in computer science and systems electronics will be added to the in- house training curriculum in 1998. Every day, some 25,000 mail carriers make their deliveries by...

  • Page 59
    ... in Germany. We promote employee performance without regard to gender, as stipulated by our internal equal opportunity program. Focal points in 1997 were training and occupational re- integration for women who have been absent from the workforce while raising a family, employment during leaves of...

  • Page 60
    Affixing routing codes at the coding station of a freight processing center Central works agreement on quality management In light of how very important service quality is for what is, after all, a service enterprise, we negotiated a central works agreement with employee representatives to ensure ...

  • Page 61
    58

  • Page 62
    ...current business 15 10 5 0 year as well. The marketing of a reference database managed by Deutsche Post Direkt GmbH and a number of other supplementary databases will also buoy this growth. 1996 1997 MLC Systeme GmbH MLC is a fast-growing software company with core expertise using optimizing...

  • Page 63
    ...-Lieferdienst AG. EMS Kurierpost GmbH changed its name to Post Express GmbH effective as of July 1, 1997, when preparations got underway for the launch of a completely new, customer-oriented product line aimed at achieving a leading position in the fast-growing courier and express mail services

  • Page 64
    ... will soon be opening additional centers at other locations. In addition to industry- specific logistics solutions, which already exist for the shoe and clothing business, Kontraktlogistik will soon introduce specific logistics solutions for companies in the mail-order and multimedia industries...

  • Page 65
    ... do not only sell postal services but mail-related products and convenience articles as well. In response to the highly 15 favorable customer response to the PostPlus stores, DPSV has expanded at a rapid pace - from 19 stores to 80 during 1997. A total of 811 employees 4 10 5 generated DM 22...

  • Page 66
    Financial Statements 1997 63

  • Page 67
    ... 2 . Technical equipment and machinery 3 . Other equipment, plant and office equipment 4 . Advance payments and construction in progress 9,642,825 2,293,873 1,563,366 180,915 13,680,979 9,328,147 1,856,008 1,627,991 680,168 13,492,314 I I I . Financial assets 1 . Shares in affiliated companies...

  • Page 68
    ... earnings/accumulated loss (-) Shareholders' equity, total B . Accruals 1 . Pensions and similar obligations 2 . Taxation 3 . Other Accruals, total C . Payables 1 . Amounts owed to banks 2 . Trade payables 3 . Amounts owed to affiliated companies 4 . Amounts owed to companies in which participating...

  • Page 69
    ...costs 3. Other operating income 4. Cost of materials a) Supplies, consumables and merchandise b) Purchased services 958,058 2,679,214 3,637,272 990,765 2,271,426 3,262,191 5. Personnel expenses a) Wages, salaries...307 8. Financial income/ expense (- ), net 9. Profit on ordinary activities 10. ...

  • Page 70
    ... long-term borrowings Net cash used for financing activities 14,995 672,069 -657,074 1,097,225 2,414,926 -1,317,701 -1,082,230 -1,742,857 660,627 Change in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 124,929 1,982,084 2,107...

  • Page 71
    ... details are given in the notes. The comparative figures given in ( ) are those of the financial statements for the year ended December 31, 1996. II. Formats and Accounting Policies (1) Formats The formats used for the balance sheet and statement of income are based on those set out in sections 266...

  • Page 72
    ...DM 800 each excluding value added tax are written off completely and treated as disposals in the year of acquisition. Shares in affiliated companies are valued at cost. Valuation of the right to have Postbank shares transferred to Deutsche Post AG is based on a valuation report; in the balance sheet...

  • Page 73
    ...) of the historical rate or the year-end rate of exchange. III. Notes to the Balance Sheet and Statement of Income A. Notes to the balance sheet (1) Details of noncurrent assets are given in the schedule forming Appendix 1 to these notes. (2) A list of affiliated companies and companies in which...

  • Page 74
    ... and other assets, except for items totaling DM 1.6 (-) million, mature in less than one year from the balance sheet date. Receivables from affiliated companies include DM 70.2 (7.9) million of receivables for goods and services. Receivables from companies in which participating interest are held...

  • Page 75
    ... services relating to the sale of postage stamps, the letter mail and other reorganization concepts and miscellaneous personnel expenses. (14) The portions of accounts payable falling due in less than one year or more than five years from the balance sheet date are shown in the schedule forming...

  • Page 76
    ... of the Post Transformation Act and employee wages. (16) Under section 119 of the Sixth Book of the Code of Social Law, Deutsche Post AG acts as paying agency for social insurance authorities. Under the Ordinance Regulating the Postal Pension Payments Service, Deutsche Post AG's status relative to...

  • Page 77
    ... application of accruals, gains on disposal of noncurrent assets and rent received. (3) Cost of materials: cost of merchandise consisted almost entirely of the cost of phonecards sold. This caption also includes the cost of office supplies, printed matter and consumables. Cost of purchased services...

  • Page 78
    ... in the notes to the financial statements in accordance with Article 28(2) of the Implementation Act to the Commercial Code. IV. Other particulars (1) Numbers of employees The average numbers of employees during the year were as follows: 1997 Civil servants Wage earners Salaried staff 106,821...

  • Page 79
    ... notes to the financial statements Purchase or construction cost Jan. 1, 1997 ...Financial assets 1 . Shares in affiliated companies 2 . Loans to affiliated companies 3 . Participating interests 4 . Loans to companies in which participating interests are held 0 5 . Housing promotion...

  • Page 80
    Amortization, depreciation and write-downs Jan. 1, 1997 Charge for yearReclassifications Disposals Dec. 31, 1997 Net book value Dec. 31, 1997 Dec. 31, 1996 26,945 0 26,945 32,910 0 32,910 -1 0 -1 999 0 999 58,855 0 58,855 49,593 0 49,593 0 39,993 4,745 44,...

  • Page 81
    ... the notes to the financial statements Total Dec. 31, 1997 of which due within one after five year years Total Dec. 31, 1996 of which due within one after five year years Thousands of DM Amounts owed to banks Trade payables Amounts owed to affiliated companies of which for goods and services DM...

  • Page 82
    ... and Supervisory Board Appendix 3 to the notes to the financial statements 1. Members of the Board of Management Dr. Klaus Zumwinkel (Chairman) Dr. Helmut Benno Staab Dieter Seegers-Krückeberg (until January 31, 1997) Prof. Dr. Günter W. Tumm Wolfhard Bender Dr. Hans-Dieter Petram Horst Kissel...

  • Page 83
    80 Briefpost Auditors' Report After completion of our audit we expressed the following unqualified opinion on the financial statements of Deutsche Post AG for the year ended December 31, 1997: "The accounting and the annual financial statements, which we have audited in accordance with ...

  • Page 84
    ... of Management reports on the new Postal Act, on the status of the negotiations for further cooperation with Deutsche Postbank AG and on the envisaged strategic orientation of the company. The new Postal Act defines the regulatory framework of the postal markets in the Federal Republic of Germany...

  • Page 85
    ...Affairs held five meetings and discussed and agreed upon the 1996 Annual Financial Statement, the cornerstones of the corporate plan for fiscal 1998, the status of discussions on the new Postal Act, the capital interest in Deutsche Postbank AG, the economic situation of the freight mail segment, the...

  • Page 86
    ...the Board of Management and concurred with the management report. The financial statements have thus been formally adopted. During 1997, the composition ... retired member, the management team and all the staff of Deutsche Post AG for their commitment and for the success achieved in 1997. Bonn, May 11...

  • Page 87
    ...For a comparison with the 1995 annual financial statement, the figures provide for the following changes: Letter Mail Division: without electronic mail, philately and "InHausPost". International Post Division: including international electronic mail. Other revenue: including national electronic mail...

  • Page 88
    ...426 1,929 1,469 Debts 1) Financial income net 4,383 25 3,465 205 2,823 211 Personnel expenses - wages, salaries and other emoluments - social security contributions, pension expenses and other benefits 2) Personnel expenses as % of total Annual average workforce 3) (in numbers) Workforce as of...

  • Page 89
    ..., Frankfurt am Main Illustrations: Bengt Fosshag, Frankfurt am Main Photographs: Klaus Hagmeier, Frankfurt am Main Produced by: Public P3, Frankfurt am Main Printed by: Gütersloher Druckservice GmbH Publication No. 675-200-643 Translation: Deutsche Post AG Foreign Language Service Deutsche Post...