DHL 2003 Annual Report Download

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Annual Report 2003
Crossing Boundaries

Table of contents

  • Page 1
    Annual Report 2003 Crossing Boundaries

  • Page 2
    ...revenue The Board of Management intends to propose this at the Annual General Meeting Revenue by Corporate Division 28.4% MAIL â,¬11,934m 14.0% LOGISTICS â,¬5,878m 39.1% EXPRESS â,¬16,443m 18.5% FINANCIAL SERVICES â,¬7,813m Revenue by region 25.8% Europe excl. Germany â,¬10,334m 56.8% Germany...

  • Page 3
    ... the related applications from any location worldwide, and at any time. DHL starts the construction of an express freight terminal at Hong Kong International Airport. This new hub will soon serve the entire Asian region. June The Annual General Meeting of Deutsche Post AG resolves the distribution...

  • Page 4
    ... employees job security until 2008. In return, the Company expands its joint delivery system. In addition, 2 days which were previously holidays are abolished, and weekly working hours in deliveries can be increased to 48 hours on a voluntary basis. September As part of its annual review...

  • Page 5
    ... Corporate Divisions 34 38 42 46 Mail Express Logistics Financial Services Group Management Report 52 54 60 78 82 90 90 Overview Economic Environment Business Developments Employees Safeguarding the Future Events after the Close of the Fiscal Year Outlook Consolidated Financial Statements...

  • Page 6
    ...18 years. In return, employees have made concessions of their own, voluntarily agreeing to extend their weekly working hours to 48 in deliveries, and to work two holidays. At a time when working hours are the subject of acrimonious debate in Germany, ours is an example of two parties - a company and...

  • Page 7
    ... goal when we are the number one, not only in terms of revenue but also in terms of service quality and customer satisfaction. I am firmly convinced that we have the potential to achieve this. The fact that I am able to report to you on a successful year for Deutsche Post World Net is testament to...

  • Page 8
    Members of the Board of Management Left to right: Walter Scheurle, Prof. Wulf von Schimmelmann, Dr. Edgar Ernst, Dr. Hans-Dieter Petram, Dr. Klaus Zumwinkel, Dr. Peter E. Kruse, Dr. Frank Appel, Uwe R. Dörken 4

  • Page 9
    ... with a traineeship at Deutsche Bundespost. Starting in 1979, he worked full-time for Deutsche Postgewerkschaft. He has been a member of Deutsche Post AG's Board of Management since 2000. Uwe R. Dörken EXPRESS Americas, Asia, EMA A trained bank officer and business school graduate, Uwe R. Dörken...

  • Page 10
    ... bodies* Danzas Holding AG 1), Switzerland (Board of Directors) Deutsche Post Euro Express GmbH 1) (Advisory Board) Deutsche Post Global Mail GmbH 1) (Advisory Board until Jan. 1, 2003) DHL Worldwide Express B.V. 1), Netherlands (Board of Directors until Nov. 28, 2003) Guipuzcoana (Narrondo...

  • Page 11
    ...every meeting. A further key area of discussion was the progress of the integration projects in the EXPRESS Corporate Division. In the second half of the year, the decision was taken to examine the possibility of securing a listing for Deutsche Postbank AG on the Frankfurt Stock Exchange. 7 To our...

  • Page 12
    ... fees. The annual financial statements and consolidated financial statements for fiscal year 2003, the respective management reports, and the business plan for 2004 were discussed in detail. In addition, the Supervisory Board's resolutions on the acquisition and sale of equity investments and real...

  • Page 13
    ... by the court as of July 15, 2003. The Supervisory Board would like to thank its former members, the Board of Management and all Group employees for their commitment and successful efforts and their first-rate work in fiscal year 2003. Bonn, March 4, 2004 Josef Hattig Chairman The Supervisory...

  • Page 14
    ...'s General Works Council Alfred N. Schindler (until June 30, 2003) Chairman of the Board of Directors and CEO, Schindler Holding AG Silke Oualla-Weiß (from June 5, 2003) Chair of Works Council, DHL Worldwide Express GmbH, Dortmund Jürgen Sengera Ulrike Staake Managing Director, Deutsche Bank AG...

  • Page 15
    ... AG (Advisory Board) British American Tobacco (Industrie) GmbH (Supervisory Board from April 28, 2003) Dresdner Bank AG (Advisory Board) Gesellschaft für Stromwirtschaft mbH (Advisory Board) Hanover Acceptances Limited, London (Board from Dec. 2, 2003) RAG Trading International (Advisory Board) RWE...

  • Page 16
    ...companies 1) Group mandate Henry Hillmann (until June 5, 2003) Membership of comparable bodies** Iduna/Nova (Policyholders' Advisory Board) Committees The Supervisory Board established four committees from among its members: Executive... Dr. Manfred Overhaus Employee representatives Helmut Jurke (...

  • Page 17
    ... Supervisory Board Deutsche Post AG's goal for corporate governance is to generate a sustained increase in the Company's value while promoting the trust of investors, customers, employees, and the public in its management and supervision. We understand the need to optimally balance the division of...

  • Page 18
    ...a financial calendar on its website, in which all of the scheduled dates of recurring publications are listed, including the submission of the Annual Report and interim reports. The following additional information is also available on the Internet: all ad-hoc reports by the Company, all reports and...

  • Page 19
    ... of shares in the Company by members of the Board of Management and the Supervisory Board on its website immediately after they are received. As of December 31, 2003, there were no securities holdings that must be reported in accordance with section 6.6 of the German Corporate Governance Code. Risk...

  • Page 20
    ...our operational strengths - not just today, but in the long term. For this reason, we will continue our prudent, conservative financial strategy in future so that we can maintain Deutsche Post World Net's above-average credit rating. Our stock data 2002 2003 Change in % Year-end closing price High...

  • Page 21
    ... page 54 of the Group Management Report. In view of this scenario, we consider the development of Deutsche Post stock to be highly encouraging. Our share price rose by 63.5% to â,¬16.35 between the last day of trading in 2002 and the last trading day of the year under review. Our shares thus clearly...

  • Page 22
    ...domestic and foreign banks regularly issue derivative financial instruments such as warrants, equity discount certificates and equity-linked bonds on our shares. Our stock - key data ISIN 1) (International Securities Identification Number) German securities code number (WKN) Exchange symbol Reuters...

  • Page 23
    ... Anglo-American companies, when pension provisions are taken off the balance sheet and transferred to an external pension fund. The announcement of a merger agreement between our subsidiary DHL and Airborne, Inc. on March 25, 2003, led to some rating agencies placing our long- and short-term rating...

  • Page 24
    ... securities code number (WKN) 1) 2) Official Market, Frankfurt Stock Exchange As of April 22, 2003 ISIN replaces WKN Investor Relations intensified We further stepped up our communication with investors in the year under review. For the first time, we invited them to our Capital Markets Days...

  • Page 25
    ... shareholders from operations, taking into account the cost of capital used to generate revenue and profits. We use the Group's weighted average net cost of interest-bearing debt and equity expressed as a percentage, adjusted for division-specific risk factors, as the cost of capital. This rate is...

  • Page 26
    More than delivery - we bring the world together. 22

  • Page 27
    Thanks to DHL's international network, express deliveries reach even the most remote regions as fast as possible. Shrinking distances, crossing boundaries. 23 Corporate Strategy

  • Page 28
    More than money - we make dreams come true. 24

  • Page 29
    Postbank helps implement exciting ideas. Our easy-to-understand and cost-effective financial services turn visions into reality. 25 Corporate Strategy

  • Page 30
    More than paper - we are the gateway to success. 26

  • Page 31
    Direct marketing delivers targeted messages to customers. Our innovative solutions allow even small and medium-sized companies to penetrate new markets efficiently. 27 Corporate Strategy

  • Page 32
    More than employees - we are a team. 28

  • Page 33
    Our employees are the key to our success. More than 380,000 people work as part of Deutsche Post World Net's team across divisions and countries. 29 Corporate Strategy

  • Page 34
    ...of all cross-border goods in the world. To achieve our goal, we have extended our global reach and adopted a strategic focus on integrating existing networks and increasing our enterprise value. Brand architecture Group Corporate Divisions MAIL EXPRESS LOGISTICS FINANCIAL SERVICES Brands 30

  • Page 35
    ... World Net as a whole. We have created value in horizontal functions such as procurement, IT and Group-wide sales management, as well as within the MAIL and FINANCIAL SERVICES Corporate Divisions. We enjoyed considerable success in the area of procurement, where we established a global organization...

  • Page 36
    ... level when we merged the former administrative centers of Deutsche Post Euro Express, Danzas (Eurocargo), and DHL at our Brussels location in the year under review. To ensure a uniform customer approach, DHL is developing a sales strategy for our key clients with its international Global Customer...

  • Page 37
    ... private customer strategy. Within the Group, we offer our customers complementary services, such as logistics finance and joint retail outlet customer advice, in line with our one-stop shopping approach. To safeguard these positive synergy effects for the Group and for Postbank in the long term...

  • Page 38
    ... merely transport letters, but support our customers' business success. The development in the year under review of the markets relevant to the Corporate Division, the revenue and earnings situation, and investments are discussed in detail beginning on page 56 of the Group Management Report. 34

  • Page 39
    ...) to help them attract new subscribers. Our activities in the area of value added services form part of our Solutions Business. Until the end of July 2003, this Business Division was called Solutions International. Its operating units include PrintCom, Deutsche Post In Haus Service GmbH, and Merkur...

  • Page 40
    ... mail transit times in the long term, we introduced a comprehensive information system in 2003. This allows routes to be tracked and measured at various points using test letters. In the second half of the year under review, we started to expand our joint delivery system in rural areas. In cities...

  • Page 41
    ... rates largely at the same level as last year. As part of our STAR program, we will further improve the technical equipment at our mail centers in 2004: we will install another 202 carrier sequence barcode sorters, and further increase the use of address readers for letters. Joint delivery of mail...

  • Page 42
    ... is evident from the new DHL umbrella brand, under which Deutsche Post World Net now manages all express and logistics services. The development in the year under review of the markets relevant to the Corporate Division, the revenue and earnings situation, and investments are discussed in detail...

  • Page 43
    ... contracted for multi-parcel shipments or pallet distribution. A multi-parcel shipment is a number of parcels sent together in a single delivery, which is transported on the basis of a single transport agreement. 39 Corporate Divisions We combine air and ground transport for our customers

  • Page 44
    ... investment program to leverage the flourishing domestic Chinese market for express services, with the aim of successively connecting all of China's major economic centers. The whole Asian region will in future be served by a central hub that is currently being built at Hong Kong International...

  • Page 45
    ... of 2004, we will significantly increase the number of Packstations to a total of 650. We will also harmonize our product range. In the year under review, we defined three product lines for DHL Express - same-day, time-definite, and day-definite. This allows customers to decide exactly when they...

  • Page 46
    ...global network also allows us to support our customers in entering new markets. The development in the year under review of the markets relevant to the Corporate Division, the revenue and earnings situation, and investments are discussed in detail beginning on page 58 of the Group Management Report...

  • Page 47
    ... April 2003, the LOGISTICS Corporate Division has operated under the DHL umbrella brand, offering a wide range of logistics and value added services. The DHL Solutions Business Division, with 250 transshipment hubs and warehousing space totaling 1.8 million m 2, provides tailored logistics solutions...

  • Page 48
    ... is our work for BMW. For the distribution of its new vehicles in Korea, this car manufacturer turned to DHL Danzas Air & Ocean's complete service for vehicle storage, warehouse management, delivery, and customs clearance. The largest passenger car logistics center in the country has been opened for...

  • Page 49
    ... requirements of our customers. In the DHL Danzas Air & Ocean Business Division, we are already well positioned in China. We have the necessary licenses for our locations that allow us to operate and manage the related transactions independently. Additional licenses obtained in 2003 now also allow...

  • Page 50
    ... of the FINANCIAL SERVICES Corporate Division. Under the Postbank brand, we offer private customers, the self-employed and small businesses a comprehensive range of easy-to-understand, cost-effective banking products. As a multi-channel bank, Postbank can be accessed via all communication media. Our...

  • Page 51
    ... brand area. Postbank offers private customers a wide range of financial services through its Business Divisions: Services and Loans, Savings and Mutual Funds, Insurance Products, and Mortgages. Its offering in the area of loans is complemented by the activities of DSL Bank. In 2003, Postbank formed...

  • Page 52
    ...Service also offers products for occupational pension provision. The right approach for each target group Bank sales are focused on the retail outlets. This is where Postbank offers its private customers easy-to-understand products and services directly at the point of sale. For further information...

  • Page 53
    FINANCIAL SERVICES Retail outlet network: trends 2002 2003 Change in % Retail outlets Average weekly opening hours (per outlet) Proportion of customers served in open service outlets Employees in retail outlets Own retail outlets (employees in sales and advisory services) number in hours in % ...

  • Page 54
    ...form of higher interest rates. In the year under review, we also set up a direct portal combining all of Postbank's customer and account information. Since then, customers only have to access one site to call up their details and perform banking transactions. STAR value creation program: structural...

  • Page 55
    ... outlets, which currently number around 13,500, in terms of demand and profitability, and will gradually reduce them to the statutory level. Postbank's Management Board is examining all opportunities to secure a listing for Postbank on the Frankfurt Stock Exchange in 2004. A listing would enhance...

  • Page 56
    ... Total return on sales MAIL Revenue EBITA Return on sales EXPRESS Revenue EBITA Return on sales LOGISTICS Revenue EBITA Return on sales FINANCIAL SERVICES Income EBITA Other key figures Earnings per share Dividend per share Net debt (Postbank at equity) Return on equity before taxes Operating cash...

  • Page 57
    ... in the long term, and gives our employees job security for the coming years. As announced in last year's Annual Report, the environment in which we operate was impacted by two external decisions in 2003. On January 1, 2003, we reduced the prices of our key national mail products as ordered by the...

  • Page 58
    ... our shareholders share in this positive development, and plan distributing a dividend of â,¬0.44 per share or â,¬490 million in total, equivalent to a 10% year-on-year increase. Economic Environment Global economy recovered slightly in H2 The global economy experienced a weak start to 2003. The...

  • Page 59
    ... dollar was under pressure in 2003 due to the current account deficit in the USA. The euro bore the brunt of exchange rate changes, gaining a remarkable 20% against the US currency in the course of the year, and reaching an all-time high at US$1.25 towards the end of the year. 55 Management Report

  • Page 60
    ... of 2003. With a volume market share of 93.7% (previous year: 94.4%), we were nonetheless able to hold our own on the national mail communication market. However, our competitors also benefited from this market growth and achieved increases mainly via so-called higher-value regional letters in...

  • Page 61
    ...the related fuel factor costs put CEP companies under pressure in the year under review, as they were often only able to pass on price increases after a time-lag. In addition, the weak US dollar also held back corporate growth in Europe, in particular in the cross-border international business. With...

  • Page 62
    ...in 2003. Manufacturers and dealers also passed on the greater price pressure to their logistics service providers, at the same time as increasing the demands they place on them. Market share in contract logistics 2002 Market volume: â,¬130 billion in % Exel TPG Tibbett & Britten Ryder DHL Solutions...

  • Page 63
    .... Market share in air freight 2002 Market volume: â,¬21.4 billion in % Contract logistics: granting of longer-term logistics contracts to logistics service providers. DHL Danzas Air & Ocean Exel Nippon Express Schenker Bax Global Kühne & Nagel Panalpina Source: IATA/CNS and company estimates...

  • Page 64
    ... economies in the year under review. The acquisition of Corporación Cormar S.A. gave us the leading position in Central America. New business opportunities for specialized banks Conditions for German banks remained difficult in 2003. The number of insolvencies rose to record levels due to Germany...

  • Page 65
    ...express and logistics business helps us limit this risk, as revenues in local currency are generally offset by costs in the same local currency. In addition, we use various hedging instruments to limit these effects as far as possible. 61 Management Report In fiscal year 2003, Deutsche Post World...

  • Page 66
    ... revenue. EBITA thus fell by just 5.0% to â,¬2,036 million (previous year: â,¬2,144 million). The EXPRESS and LOGISTICS Corporate Divisions developed positively, recording sharp increases in earnings of 51.1% and 19.1% respectively. In the FINANCIAL SERVICES Corporate Division, profit from operating...

  • Page 67
    ... the year under review. The Board of Management is therefore proposing a dividend of â,¬0.44 per share to the Annual General Meeting. This corresponds to a total dividend of â,¬490 million, and an increase of exactly 10%. MAIL partly offsets price cuts MAIL Corporate Division 2002 1) 2003 Change in...

  • Page 68
    ... weak economic situation, sales volumes for business and private customers remained slightly below the prior-year level, as shown in the table below. Mail Communication (Deutsche Post AG share) in millions 2002 1) 2003 Change in % Business customer letters Private customer letters Total 1) 7,725...

  • Page 69
    .... This allowed us to extend our customer base and increase volume. Activities in the area of value added services are reported in the Business Division Solutions Business. Until the end of July of the year under review, it was known as Solutions International. Operating units recorded here, such as...

  • Page 70
    ... accounted for â,¬1,657 million. Business operations developed so well in all regions that we more than compensated for revenue shortfalls due to exchange rate losses of â,¬787 million. Revenue by region in â,¬m 2002 2003 Change in % Europe Americas Asia/Pacific Emerging Markets (EMA) Global Mail...

  • Page 71
    ... Corporate Division. Our activities in the LOGISTICS Corporate Division are now reported under the names DHL Solutions and DHL Danzas Air & Ocean. 67 Management Report Apart from the Alpine region, all countries generated positive growth. Growth in revenue in Germany was due to price increases...

  • Page 72
    ... largely due to successful cost management in Germany and Scandinavia in the DHL Solutions Business Division. Operating performance was also up on the previous year in the DHL Danzas Air & Ocean Business Division. However, it suffered greatly from foreign exchange losses. The return on sales rose to...

  • Page 73
    Business Developments FINANCIAL SERVICES reflect Postbank's success FINANCIAL SERVICES Corporate Division 2002 2003 Change in % Income 1) Profit from operating activities before goodwill amortization (EBITA) 2) Cost/income ratio Return on equity before taxes (RoE) Tier 1 ratio 3) 1) 2) 3) in â,¬m...

  • Page 74
    ... Accounting Standards, now: International Financial Reporting Standards (IFRS). Net fee and commission income rose slightly by 2.6% to â,¬467 million due to the positive development of the investment fund business, among other things (previous year: â,¬455 million). The allowance for losses...

  • Page 75
    ... private and business customers, the financial community, opinion-shapers and Group employees. The key concept and slogan was the term "more", which we used to explain the additional benefits of the new DHL brand: more expertise in all areas of logistics; more efficiency via integrated transport...

  • Page 76
    ... new design, making the brand a reality for our customers and employees. The total budget for the global advertising campaign and rebranding was â,¬138 million. Continued sound financial position A variety of factors influenced the Group's economic position in fiscal year 2003: On August 15, 2003...

  • Page 77
    ...'s business operations. After adjustment for the effect of the banking business, the Group's equity ratio was 21.9% in the year under review (previous year: 19.1%). Long-term deposits: in this context, these are long-term deposits used to secure aircraft leasing contracts. 73 Management Report

  • Page 78
    ... STAR restructuring provision, established in the previous year, was utilized. Liabilities primarily relate to liabilities from financial services. This contra account to receivables and other securities from financial services also fell as of the balance sheet date and was reduced by 7.2% to â,¬123...

  • Page 79
    ... for Deutsche Post World Net (Postbank at equity) financial position in â,¬m Jan.1-Dec. 31, 2002 Jan.1-Dec. 31, 2003 Change in cash and cash equivalents Net profit before changes in working capital Net cash from operating activities Net cash used in investing activities Net cash used in (from...

  • Page 80
    ... EXPRESS Corporate Division in 2003. In the FINANCIAL SERVICES Corporate Division too, we streamlined our management responsibility. The former structure of retail outlets with 25 branches was replaced by 10 sales directorates throughout Germany. At the same time, the number of business departments...

  • Page 81
    ... airline. Airborne, Inc. and ABX Air entered into service agreements. Thanks to this strategic acquisition, DHL now also has a close-knit ground and air transport network in the USA, the world's largest express market. DHL introduced organizational changes in the USA; this represents a major step in...

  • Page 82
    ..., the number of employees amounted to 322,959 at the end of the year under review, a year-on-year decrease of 1.4%. Change in workforce Dec. 31, 2002 Dec. 31, 2003 Change in % Corporate Divisions Mail 1) Express 1) Logistics 1) Financial Services 1) 2) Other/Consolidation 1) Group 1) Group 3) 133...

  • Page 83
    ... week of 38.5 hours until December 31, 2006. The ground-breaking package enables Deutsche Post AG to achieve a sustained improvement in cost structures. The increase in flexibility benefits our customers and substantially enhances our competitiveness, particularly in the EXPRESS Corporate Division...

  • Page 84
    ... increased to 13,049,592 and the number of SARs to 731,736. More added value from employee ideas Our employees systematically improve Group business processes by taking a critical, productive approach to existing workflows. Our ideas management program continued its success in the year under review...

  • Page 85
    ... reinforces the Group's image as an employer. We have extended the successful cooperation we established with the Wharton Business School in 2002. In total, around 300 third-level executives participated in the various programs in the year under review. 81 Management Report In 2003, we continued...

  • Page 86
    ...IAS 39. Financial risks in detail: Due to the Group's international presence, the management of exchange rate risks plays a central role in risk management. Group companies are obliged to hedge all local currency risks with Corporate Treasury . Corporate Treasury then calculates the net position for...

  • Page 87
    .... We employ primary and derivative financial instruments to optimize financing costs and to limit interest rate risks. We combine contracts with fixed and variable interest rate terms in a portfolio and adjust the ratio, where necessary, as part of our active interest rate management. Our Corporate...

  • Page 88
    ... to long-term, as the mail market is continuing to grow. Within the EXPRESS and LOGISTICS Corporate Divisions, the main opportunities - and also the main risks - are in the integration of the global DHL companies. In particular, we aim to counteract a temporary decline in revenue or even the loss of...

  • Page 89
    ... from changes in market prices and possible loan defaults. Postbank has an extensive set of instruments at its disposal for monitoring and managing risk, for instance in the areas of foreign exchange trading, securities trading, and lending. Postbank's Management Board has established a limit system...

  • Page 90
    ... risks relating to technical infrastructure other than temporary risks during the integration of DHL's global activities. We have reduced the possibility of potential business interruptions by systematically monitoring our sophisticated conveyor and sorting systems, and by taking a large number of...

  • Page 91
    ...corresponding consulting services. 5. Services In addition to the general consulting services, this group includes travel, marketing, and media. In terms of regions, central procurement is divided into four cross-divisional procurement organizations. They were established for the Germany, Europe and...

  • Page 92
    ...and transaction platform for Group procurement in the future. It will allow procurement employees to access all of the information relevant to them and use the related applications, such as the Project and Benefit Tracking System, from any location worldwide, and at any time. It provides transparent...

  • Page 93
    ... reduces costs. The automated Packstation service offers customers more flexibility in the EXPRESS Corporate Division: they can collect or post their parcels at any time from a Packstation near them, at one of currently 75 locations. In the year under review, the Group's Board of Management decided...

  • Page 94
    ... postal companies that is active on the national mail market and transports international business mail to and from the UK. From the summer of 2004, DHL and Lufthansa Cargo will jointly operate five international routes as part of a long-term strategic alliance. DHL and its customers will benefit...

  • Page 95
    ... the euro zone. In the current fiscal year, GDP growth here is expected to total 2%, and the figure for Germany should be only slightly lower. Overall, world trade is predicted to increase by around 8% in 2004. The recovery in the global economy will create a positive environment for equity markets...

  • Page 96
    ... on the logistics market. Customers are increasingly demanding strategic advice and additional value added services, up to and including financing and insurance. This is accompanied by the continuing trend towards outsourcing, from which the market for contract logistics will continue to profit. Air...

  • Page 97
    ... Corporate Division for example, we will reduce the EXPRESS Germany production branches from 33 to 13, without relinquishing the current production locations. At the same time, we will drastically streamline our administrative structure by merging the commercial management and personnel departments...

  • Page 98
    ... Financial Statements Creating added value. Our strategic acquisitions and operational strength enabled us to increase revenue and earnings despite the price reductions imposed at the start of the fiscal year. The success of our STAR value creation program in the course of the year exceeded...

  • Page 99
    ...Statement Income Statement For the period January 1 to December 31 in â,¬m Note Deutsche Post World Net 2002 Deutsche Post World Net 2003 Revenue and income from banking transactions Other operating income Total operating income Materials expense and expenses from banking transactions Staff costs...

  • Page 100
    ... Provisions Provisions for pensions and other employee benefits Tax provisions Other provisions 36 117 37 38 39 6,292 1,510 4,882 12,684 6,351 1,491 4,831 12,673 Liabilities Financial liabilities Trade payables Liabilities from financial services Other liabilities Total equity and liabilities...

  • Page 101
    ...: effect of changes in exchange rates on cash and cash equivalents Item restated due to reclassification of cash equivalents from receivables and other assets to cash and cash equivalents Downloadable spreadsheet. Online Annual Report http://investorrelations.dpwn.com 97 Financial Statements

  • Page 102
    ... Dividend Other changes in equity not recognized in income Currency translation differences Other changes Changes in equity recognized in income Appropriation to retained earnings Consolidated net profit Balance at Dec. 31, 2003 Downloadable spreadsheet. Online Annual Report http://investorrelations...

  • Page 103
    ... in Equity / Notes Notes to the Consolidated Financial Statements of Deutsche Post AG for the period ended December 31, 2003 1 Basis of accounting The consolidated financial statements of Deutsche Post AG for fiscal year 2003 were prepared in accordance with the International Financial Reporting...

  • Page 104
    ... DHL Express Canada Ltd., Canada Securicor Omega Holdings Ltd., UK Airborne, Inc., USA Narrondo Desarrollo, S.L. (Guipuzcoana), Spain 70 100 99 Jan. 1, 2003 Jan. 10, 2003 Mar. 1, 2003 Purchased Purchased Method of consolidation changed 100 July 1, 2003 Equity interest increased Jan. 15, 2003...

  • Page 105
    ... of Changes in Foreign Exchange Rates) using the functional currency method. The functional currency of all foreign companies of Deutsche Post World Net is the local currency, as the companies operate independently in terms of their financial and business activities, and organizational structures...

  • Page 106
    ... reflect the current purchasing power at the balance sheet date. In accordance with IAS 21, receivables and liabilities in the single-entity financial statements of consolidated companies that have been prepared in local currencies are translated at the closing rate. Currency translation differences...

  • Page 107
    .... Current financial instruments Current financial instruments are available-for-sale financial assets, and are carried at their fair values at the balance sheet date. Unrealized gains or losses from remeasurement are generally credited or charged directly to the revaluation reserve in equity. This...

  • Page 108
    ... liabilities The stock option plan for executives is measured using investment techniques by applying option pricing models. Options are measured at their fair value on the grant date. The option price thus calculated is recognized in income under staff costs and spread over the term of the...

  • Page 109
    ...-interest-bearing provisions Number of employees calculated as averages for fiscal years 2002 and 2003 (FTEs) Downloadable spreadsheet. Online Annual Report http://investorrelations.dpwn.com The decrease in revenue in the MAIL Corporate Division is largely due to the price cuts ordered as part of...

  • Page 110
    LOGISTICS FINANCIAL SERVICES The LOGISTICS Corporate Division comprises the DHL Danzas Air & Ocean and DHL Solutions Business Divisions. Customers are offered a one-stop end-to-end service: air and ocean freight, as well as customized logistics solutions. The former Eurocargo Business Unit was ...

  • Page 111
    ... from investment securities and insurance business (financial services) Income from prior-period billings Insurance income Income from loss compensation Income from fees and reimbursements Income from vehicle center services Income from personnel services Income from work performed and capitalized...

  • Page 112
    ... to the stock option plans for the Board of Management and other executives. Staff costs relate mainly to wages, salaries, and compensation, as well as all other benefits paid to employees of the Group for their services in the year under review. Social security contributions relate in particular...

  • Page 113
    ...Germany * DHL Airways Inc. (now ASTAR Air Cargo), USA -1 0 -1 1 -29 - 28 * The net profit/loss in the prior year is included in each case The increase in the net loss from associates is due to the loss on the sale of DHL Airways Inc., USA, in July 2003. 17 Net other finance costs The structure...

  • Page 114
    ... in the IFRS financial statements and in the opening tax accounts amount to â,¬5.6 billion as of December 31, 2003 (previous year: â,¬6.2 billion). The effects from section 8 b KStG (German Corporate Income Tax Act) relate primarily to special funds of the Deutsche Postbank group. The Other item...

  • Page 115
    ... in â,¬m Technical Land and equipment buildings and machinery Other equipment, operating and office equipment Advance payments and assets under development Aircraft Vehicle fleet and transport equipment Total Historical cost Opening balance at Jan. 1, 2003 Changes in consolidated group Additions...

  • Page 116
    ...in fiscal year 2003 are presented below: Noncurrent financial assets in â,¬m Investments in associates Investments in subsidiaries Available for sale Noncurrent financial instruments Other equity investments Loans Total Historical cost Opening balance at Jan. 1, 2003 Changes in consolidated group...

  • Page 117
    ...: Receivables and other securities from financial services in â,¬m 2002 2003 Trade receivables Prepaid expenses Tax receivables Derivatives Receivables from Group companies Receivables from sales of assets Rent receivable Receivables from employees and executive body members Creditors with debit...

  • Page 118
    ... year: â,¬19 million) of the equities and other non-fixed-income securities relate to securities listed on a stock exchange. Hedges with positive fair values that qualify for hedge accounting under IAS 39 are composed of the items shown in the table on the right. Hedging derivatives (fair value...

  • Page 119
    ...of investment securities and the recognition of impairment losses. Postbank issued letters of pledge to the European Central Bank for securities with a lending value of â,¬2 billion (previous year: â,¬13.3 billion) for open market operations. Open market operations at the balance sheet date amounted...

  • Page 120
    ... contributions. Shareholders' pre-emptive subscription rights have been disapplied. The Company did not exercise this authorization in fiscal year 2003. Under the Stock Option Plan 2000, eligible participants are granted stock options in annual tranches. Certain employees (Group management levels...

  • Page 121
    ... the stock option plan has been measured using investment techniques by applying option pricing models (fair value measurement). The expense of â,¬22 million attributable to fiscal year 2003, comprising â,¬21 million for the stock options and â,¬1 million for the SARs, was reported under staff costs...

  • Page 122
    ... 2002 2003 In a number of countries, Deutsche Post World Net maintains defined benefit pension plans on the basis of the pensionable compensation of employees and their length of service. Many of these benefit plans are funded through independent pension funds. The Group also maintains a number of...

  • Page 123
    ... are determined using actuarial principles and actuarial assumptions. The expected benefits are spread over the entire length of service of the employees, taking into account changes in key parameters. The significant defined benefit plans of Deutsche Post AG are funded via Versorgungsanstalt...

  • Page 124
    ... EXPRESS LOGISTICS Deutsche Postbank excl. excl. Total Post AG group DPAG DPAG 2002 2003 2003 2003 2003 Other 2002 Other 2003 Total 2003 Present value of obligations at Jan. 1 Service cost excl. employee contributions Employee contributions Interest cost Pension payments Past service cost Plan...

  • Page 125
    ... 2002 Deutsche EXPRESS LOGISTICS Deutsche Postbank excl. excl. Total Post AG group DPAG DPAG 2002 2003 2003 2003 2003 Other 2002 Other 2003 Total 2003 Service cost Interest cost Expected return on plan assets Recognized past service cost Amortized unrealized (gains)/losses Other Pension expense...

  • Page 126
    ... recoverable taxes. Changes in tax provisions in fiscal year 2003 are presented in the table on the right. Tax provisions 2003 in â,¬m Provisions for current taxes Deferred tax liabilities Total Opening balance at Jan. 1 Changes in consolidated group Utilization Reversal Currency translation...

  • Page 127
    ...the Group-wide STAR value creation program in the previous year, relating primarily to termination benefit obligations to employees (partial retirement programs, transitional benefits), expenses from the closure of terminals and subsequent impairment losses on noncurrent assets. The interest cost on...

  • Page 128
    ... Airport Board to finance a DHL hub in Cincinnati, USA. Deutsche Post World Net assumed the obligation to guarantee the bond. The following table contains the terms and conditions of significant individual contracts reported under amounts due to banks: Terms and conditions Carrying amount 2003 in...

  • Page 129
    ... financial services in â,¬m 2002 2003 Trade payables Trade payables are attributable to the following companies: Trade payables in â,¬m 2002 2003 Deposits from other banks thereof payable on demand: 243 (previous year: 1,139) thereof fair value hedges: 894 (previous year: 935) Due to customers...

  • Page 130
    ... Derivatives Payable to employees and members of executive bodies Incentive bonuses Social security liabilities Overtime claims COD liabilities Liabilities from acquisitions Other compensated absences Debtors with credit balances Advance payments received Insurance liabilities Housing management...

  • Page 131
    ... the year under review. 44.2 Net cash used in investing activities Cash flows from operating activities are calculated by adjusting net profit before taxes and extraordinary expense for non-cash factors, as well as taxes paid and changes in provisions (net profit before changes in working capital...

  • Page 132
    ...the responsible, earnings-driven management of risk. The Deutsche Postbank group measures this for its board departments and business divisions using the ratio of capital employed to earnings, expressed by the performance indicator RoE (return on equity). The Management Board of Deutsche Postbank AG...

  • Page 133
    ... was successfully placed for the first time as part of the Bank's credit portfolio management. The new requirements set out in the MAK were implemented within the Bank's structure and workflows as planned in the year under review. They will also be implemented within its IT systems in good time as...

  • Page 134
    ...group at the balance sheet date. Forward transactions and option contracts of the Deutsche Postbank group Fair value in â,¬m Notional amount 2002 Positive fair values 2002 Negative fair values 2002 Notional amount 2003 Positive fair values 2003 Negative fair values 2003 Trading derivatives Currency...

  • Page 135
    ... values must be disclosed for financial instruments carried at amortized cost or at the hedged fair value. If there is an active market for a financial instrument, the full fair value is expressed by the market or quoted exchange price; otherwise, the full fair value is calculated using investment...

  • Page 136
    ... Post World Net's mail, express and logistics business, and price increases can only be partly passed on to customers. Fuel worth â,¬130.6 million was hedged at the balance sheet date. The net fair value amounted to â,¬9.7 million. Interest rate risk and interest rate management Interest rate risk...

  • Page 137
    ... of the derivative financial instruments employed at other Deutsche Post World Net companies and their fair values: Fair values of derivatives in â,¬m Notional amount 2002 Net fair value 2002 Notional amount 2003 Net fair value 2003 Interest rate products OTC products Interest rate swaps FRAs...

  • Page 138
    ...of the Board of Management receive a variable remuneration component with a long-term incentive effect in the form of options under the Company's stock option plan. Further details can be found in note 33. In fiscal year, the remuneration paid to active members of the Board of Management amounted to...

  • Page 139
    ... lower limit and are not acquired as a component of remuneration. In line with their duty of disclosure as set out by section 15 a WpHG, the members of the Company's Board of Management and Supervisory Board disclosed the purchase of 48,800 shares of Deutsche Post AG in fiscal year 2003. The members...

  • Page 140
    ... Danzas S.A. Danzas ASG Eurocargo AB Danzas GmbH DHL International (UK) Ltd. Danzas S.p.A. DHL Danzas Air & Ocean Germany GmbH DHL Worldwide Express GmbH Van Gend & Loos B.V. Danzas AG DHL International S.A. Danzas Limited DANZAS Euronet GmbH Danzas Limited DHL Japan Inc. FINANCIAL SERVICES Deutsche...

  • Page 141
    ...6 contains the data for Deutsche Post World Net including Postbank at equity. This is calculated by measuring the Deutsche Postbank group at equity and adding columns 1 through 5. Column 8 contains the investments in the Deutsche Postbank group reported under noncurrent financial assets and measured...

  • Page 142
    ... Postbank group 2003 Consolidation of income and expense 2003 Consolidation of intercompany balances 2003 Deutsche Post World Net Postbank at equity 2003 Deutsche Post World Net Postbank at equity 2002 Other 2003 Revenue Other operating income Total operating income Materials expense Staff costs...

  • Page 143
    ... and liabilities Equity Issued capital Reserves Consolidated net profit 1,113 3,684 1,309 6,106 Minority interest Provisions Provisions for pensions and other employee benefits Tax provisions Other provisions 6,351 1,491 4,831 12,673 Liabilities Financial liabilities Trade payables Liabilities from...

  • Page 144
    ... and expense Net income from measurement at equity Change in provisions Taxes paid Net profit before changes in working capital Changes in working capital Inventories Receivables and other assets Receivables/liabilities from financial services Liabilities and other items Extraordinary expense from...

  • Page 145
    ... financial statements and the Group Management Report for the fiscal year from January 1 to December 31, 2003 satisfy the conditions required for the Company's exemption from its duty to prepare consolidated financial statements and the Group Management Report in accordance with German accounting...

  • Page 146
    ...and-a-half times the standard rate. Hub Collection center for the transshipment and consolidation of flows of goods in all directions. Cross-selling Existing customer contacts are leveraged to sell additional products and services from various Corporate Divisions. IATA International Air Transport...

  • Page 147
    ... deliverers pick up shipments from customers on their delivery rounds. Same day Delivery of express shipments on the day they were handed over to Deutsche Post. Multi-channel bank A bank that markets its products and services using several sales channels. STAR Deutsche Post World Net's Group-wide...

  • Page 148
    ...AG Headquarters Corporate Department Investor Relations, Corporate Communications 53250 Bonn Germany Responsible for ...Germany Printed by: Schoder Druck GmbH & Co. KG 86368 Gersthofen, Germany Mat. No. 675-200-146 English translation by: Deutsche Post Foreign Language Service et al. This Annual Report...

  • Page 149
    Group 7-Year Review 1997 - 2003 1997 1998 1999 2000 2001 2002 2003 Revenue and earnings Revenue MAIL MAIL share EXPRESS EXPRESS share LOGISTICS LOGISTICS share FINANCIAL SERVICES FINANCIAL SERVICES share Corporate Divisions total Other/Consolidation Total EBITDA Profit from operating activities ...

  • Page 150
    ...70 0.44 34.2 Dividend per share 9) Return on equity before taxes 10) 7) 8) 9) 10) Cash flow from operating activities Excluding liabilities from financial services To enhance comparability, the calculation was based on the number of shares after the increase in share capital and the conversion to...

  • Page 151
    ... of Management at http://investorrelations.dpwn.de All information is subject to correction and may be changed at short notice Environmental Report You can also download the PDF free of charge from our website www.dpwn.de. Naturally networked Deutsche Post World Net: Environmental Report 2003...

  • Page 152
    ... Relations 53250 Bonn Germany For information on Deutsche Post stock, please e-mail [email protected] Investor Relations Fax: +49 (0) 228 182- 63299 E-mail: [email protected] Press Office Fax: +49 (0) 228 182-9880 E-mail: [email protected] Deutsche Post World Net online: www.dpwn.com...