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Annual Report 2005
Making our customers
successful

Table of contents

  • Page 1
    Annual Report 2005 Making our customers successful

  • Page 2
    ... on sales1) FINANCIAL SERVICES Income Profit from operating activities (EBIT) Other key figures Consolidated net profit2) Operating cash flow (Postbank at equity) Net debt (Postbank at equity) Return on equity (RoE) before taxes Earnings per share Dividend per share Number of employees at December...

  • Page 3
    The Group at a glance Deutsche Post World Net ends 2005 as the global market leader for logistics. Our Deutsche Post, DHL and Postbank brands stand for a wide range of services for managing and transporting mail, goods and information. Over 500,000 employees in more than 220 countries and ...

  • Page 4
    ... the acquisition of Exel (UK), we are now the market leader for contract logistics as well. Measured by the number of customers and by products, Deutsche Postbank AG is the leading provider of financial services to private customers in Ger­ many. After the acquisition of BHW Holding in January...

  • Page 5
    ... Board 11 Executive Bodies 14 Corporate Governance Report 20 Deutsche Post Stock 24 Corporate Strategy 28 Milestones in 2005 The Group Group Management Report 33 Business and Environment 49 Revenue and Earnings Development 57 Net Assets and Financial Position 64 Employees 67 Sustainability 68 Risk...

  • Page 6
    ... is to deliver excellent service - for any product, at any time, any place. In addition to worldwide door-to-door services, we also offer comprehensive solutions. Our services are designed to meet the growing requirements of customers. We continually review and improve our structures and production...

  • Page 7
    ... design for its corporate wear. Within nine months, a total of 110,000 employees in more than 200 countries and territories receive around 1.4 million pieces of clothing. Consolidated Financial Statements High quality in mail production Deutsche Post meets the international standards for effective...

  • Page 8
    ...percent for the first time. 10 years of Deutsche Post AG 1995 From public agency to stock corporation 1996 Investment in modern logistics technology 1997 Start of globalization strategy 1999 European parcel network in place 2000 Deutsche Post AG goes public 2002 Acquisition of DHL and launch of STAR...

  • Page 9
    ... this in Asia: the expansion of our central air hub in Hong Kong, which we completed in 2005, gives us an excellent infrastructure. In all probability, transportation volumes on this fast-growing market will double in the next 15 years. Europe remains the main pillar of our business. In future, we...

  • Page 10
    ... the former competitors Deutsche Post World Net and Exel to form a powerful new company that focuses on the quality of its services and employees. Secondly, we must prove ourselves in the domestic and international mail business as well as in the global express business every single day. And thirdly...

  • Page 11
    ... Shareholders, Fiscal year 2005 was a success and it was marked by a series of major strategic decisions, namely the acquisition of Exel plc, the reorganization of the retail outlet network and the acquisition of BHW Holding AG, which was completed in the first weeks of the new year. Deutsche Post...

  • Page 12
    ... Board of Management, where he is responsible for the Group's expanded logistics activities, and the creation of the new corporate division in the shape of Services, headed by Dr. Appel, the meeting on December 20, 2005, was used to discuss the international strategy of the MAIL Corporate Division...

  • Page 13
    ... 1, 2005, Mr. John Mullen became a member of the Board of Management, where he is responsible for the Americas, Asia Pacific and Emerging Markets in the EXPRESS Corporate Division. Deutsche Post World Net Additional Information Consolidated Financial Statements Group Management Report The Group

  • Page 14
    ... for integrating Exel. Since the start of the year, Dr. Frank Appel has been in charge of Global Business Services, a new division that brings together internal services throughout the Group. He is also responsible for Global Customer Solutions. In fiscal year 2005, there were no changes in the...

  • Page 15
    ..., Deutsche Post AG, Express Branch, Munich, Operations/HUB, Augsburg Margrit Wendt Chair of Deutsche Post World Net's European Works Council Forum (since Jan. 1, 2005) Deutsche Post World Net Additional Information Consolidated Financial Statements Group Management Report The Group Executive...

  • Page 16
    ... 2010, responsible for finance including Corporate Controlling, Corporate Accounting and Reporting, Investor Relations, Corporate Finance, Corporate Internal Audit/Security, Taxes, as well as Corporate Functions Dr. Peter E. Kruse EXPRESS Europe Born in 1950, member of the Board of Management since...

  • Page 17
    ... EXPRESS Europe John Mullen EXPRESS Americas, Asia Pacific, Emerging Markets Dr. Hans-Dieter Petram MAIL Walter Scheurle Personnel Prof. Dr. Wulf von Schimmelmann Deutsche Post World Net Additional Information FINANCIAL SERVICES Consolidated Financial Statements Group Management Report The...

  • Page 18
    ... Supervisory Board and are responsible for the management of the company. Since the start of 2006, the Board of Management has consisted of nine members. There has been a reallocation of duties as part of the acquisition of Exel plc and the establishment of the new Global Business Services division...

  • Page 19
    ... related financial instruments. This means that there were no securities holdings that are required to be reported in accordance with section 6.6 of the German Corporate Governance Code. Deutsche Post World Net Additional Information Consolidated Financial Statements S1) Group Management Report...

  • Page 20
    ... million for additional compensation), and â,¬7.0 million from bonuses. The value attributable to fiscal year 2005 of the stock options granted to members of the Board of Management under the 2000 and 2003 stock option plans totaled â,¬3.2 million (previous year: â,¬3.1 million). Annual Report 2005

  • Page 21
    ... for only part of a fiscal year receive corresponding ratable remuneration. Deutsche Post World Net Additional Information Consolidated Financial Statements Group Management Report In addition, 829,362 stock options were granted to members of the Board of Management in 2005. The remuneration of...

  • Page 22
    ... elected by employees as set out in the members' respective employment contracts. Stock option plans Stock Option Plan 2000 The year 2000 was the first time that the Board of Management and Supervisory Board were authorized by the AGM to issue stock options to the company's executives. The first...

  • Page 23
    ...out of every six options granted may be exercised. Deutsche Post World Net Additional Information Consolidated Financial Statements Absolute performance target: this target is satisfied if the average closing share price for the last 60 trading days prior to expiration of the lock-up period (the...

  • Page 24
    20 Majority of shares held privately The international equity markets recorded strong price gains in 2005 - but our stock even managed to outperform them with an increase of more than 20%, and our dividend also rose significantly. Five years after its IPO, Deutsche Post AG is no longer majority-...

  • Page 25
    ...Our stock data Year­end closing price High Low Price/earnings1) Price/cash flow2), 3) Number of shares Market capitalization Beta factor4) Average trading volume5) Annual performance with dividend Annual performance excluding dividend Earnings per share Cash flow per share3) Equity Return on equity...

  • Page 26
    ... price was 900 pence in cash and 0.25427 Deutsche Post shares per Exel share. The new shares come from the authorized capital resolved by the 2005 Annual General Meeting and have been traded on the Frankfurt Stock Exchange since December 14, 2005. On the previous day, the listing of Exel shares...

  • Page 27
    Deutsche Post Stock 23 Annual General Meeting renews global authorization The Annual General Meeting on May 18, 2005 adopted the following key resolutions: • With the approval of the Supervisory Board, the Board of Management was authorized to increase the company's share capital by up to â,¬250...

  • Page 28
    24 Being number one is just the beginning 2005 marks the end of the three-phase strategy that has enabled us to restructure Deutsche Post World Net over the past fifteen years. After our successful turnaround, we focused on increasing our global presence and widening our range of services. We have...

  • Page 29
    ... the competitive edge. Only companies that master this business and at the same time have operational access to their customers' production processes can deliver the highest quality. The Group Additional Information Consolidated Financial Statements Group Management Report Deutsche Post World Net

  • Page 30
    ...cultures worked together to achieve a common goal. As a result, the Group has become an international company. We have learned to combine our wide range of skills and knowledge to benefit our customers and shareholders. And we have kept the promise we made to the capital markets. Annual Report 2005

  • Page 31
    ... in Europe and Asia in the long term. In the express business, with its major potential for automation, this means that the tighter the network, the faster, better and more cost-effectively we can operate it. In future, we want to offer customers our services from a single source. The success of...

  • Page 32
    ...weeks. December Deutsche Post acquires British company Exel. The global market leader for contract logistics ideally complements DHL's strengths in Europe. This acquisition makes us the world's leading logistics company. Deutsche Post's operational processes in mail production fulfill international...

  • Page 33
    ...year contract covers more than 300 DHL logistics facilities that hold thousands of spare parts for Sun's customer services network in more than 100 countries. Deutsche Post World Net Additional Information Consolidated Financial Statements Group Management Report of its socially responsibility...

  • Page 34
    ... strive to establish long-term business partnerships bringing lasting success to both sides. We know our customers, our markets and our competitors which is why we set the standards in the market. It is this knowledge about the global and local requirements of customers and markets that governs our...

  • Page 35
    Group Management Report Additional Information Electronic invoicing The online document service allows business customers to send invoices electronically. Working together with SAP, we have developed a platform for this purpose and launched it on the market. Round-the-clock parcel service ...

  • Page 36
    .../Value­added Services Internal revenue EXPRESS revenue of which Europe Americas Asia Pacific Emerging Markets (EMA) Other/consolidation LOGISTICS revenue of which DHL Global Forwarding (DHL Danzas Air & Ocean) DHL Exel Supply Chain (DHL Solutions) Other/consolidation FINANCIAL SERVICES income Group...

  • Page 37
    ... Post World Net MAIL EXPRESS LOGISTICS FINANCIAL SERVICES Deutsche Post World Net Additional Information Consolidated Financial Statements • Mail Communications • Direct Marketing • Press Distribution • Value­added Services • Mail International • Europe • Americas • Asia...

  • Page 38
    ... • Special services Press Distribution Value-added Services Mail International • Import and export of mail items • Cross­border mail • Domestic mail services in other countries • Special services • Distribution of newspapers • Address and document and magazines management • Special...

  • Page 39
    ...of the largest of its kind in Europe. In addition, we operate around 170 mail rooms for major companies throughout Germany. We digitally print high-volume personalized business mail, including invoices and reminders, and our portfolio is rounded off by individual lettershop services. Our Value-added...

  • Page 40
    ... weekly working hours in the year under review. In the year under review, we were able to improve further on the already excellent results we achieved in mail transit times in the previous year: in Germany, we delivered more than 95% of the letters that were handed to us during our daily opening...

  • Page 41
    ... The market volume for 2003 was restated to â,¬26.1 billion due to refined methods of analysis. Deutsche Post World Net Additional Information Source: Market Research Service Center in association with GfK 2005 Consolidated Financial Statements 20% DHL Group Management Report Our model of the...

  • Page 42
    ... CEP market for the Asia Pacific region was worth around â,¬20 billion. Our core market here is the International Express segment, with a total market volume of approximately â,¬3.4 billion. We have a 35% share of this segment. The core markets of Japan and China, including Hong Kong, account for...

  • Page 43
    .... Our new central air hub is being built at Leipzig/Halle Airport and is scheduled to start operations in 2008. The international EuroExpress and Eurapid Road Express road networks were merged, thus shortening transit times and standardizing our processes. We are integrating the delivery networks...

  • Page 44
    ... DHL Solutions). Business divisions and products DHL Global Forwarding • Air freight • Ocean freight • Major logistics projects DHL Exel Supply Chain • Value­added services along the entire value chain Number one in intercontinental freight business International air and ocean freight...

  • Page 45
    ... our volume above the market average, growth rates were down year-on-year. New ships were launched in the year under review, thus increasing overall capacity. In addition, the oil price hike sent the related surcharges levied by airlines and shipping companies to record levels. These are reported...

  • Page 46
    ...of the Year for the third time in Asia. We regard this as recognition of our ability to meet our customers' requirements, no matter how complex. Goals and strategy We aim to exploit the opportunities offered by the consolidation and globalization of the logistics industry. In acquiring Exel, we have...

  • Page 47
    ...home savings business. Following the acquisition of BHW Holding, Postbank will be the leading financial service provider for private customers in Germany. The expanded company will not only be market leader in terms of numbers of customers, but also in terms of key products. Group Management Report

  • Page 48
    ... third parties. Expertise in financial markets Postbank manages its money and capital market transactions in the Financial Markets Business Division. The division invests the bank's liquid funds in the financial markets and manages market price risk, in particular interest rate risk. Sales channels...

  • Page 49
    ... to business responsibilities: Latin America will be managed as a separate region in future and is no longer included in the Emerging Markets. Procurement Successful central procurement organization Deutsche Post World Net has a centrally managed procurement organization. Goods and services are...

  • Page 50
    ... profit in addition to the EBIT performance indicator as part of our value-based Group management. With economic profit we measure the value that we generate for our shareholders from operations, taking into account the total cost of capital used to generate revenue and profits. Annual Report 2005

  • Page 51
    ...in the consolidated financial statements were taken into account, and the actual tax rate was used to calculate taxes on net operating profit; the prior-period amounts were restated accordingly. For fiscal year 2006, the weighted average cost of capital after taxes at Group level is set unchanged at...

  • Page 52
    ... was quoted at US$1.18, representing a fall of 13.4% over the course of the year. The euro also fell slightly against sterling during 2005. The international equity markets recorded substantial price gains in 2005, although they were impacted by high oil prices and continual key rate increases in...

  • Page 53
    ... 49 Revenue and Earnings Development Overview Successful business development Deutsche Post World Net closed the 2005 fiscal year very successfully. Consolidated revenue rose by 3.3% to â,¬44,594 million and profit from operating activities (EBIT) increased by 25.1% to â,¬3,755 million. We...

  • Page 54
    ...) due to the increase in transportation costs observed in connection with the rise in volumes primarily in the Asia Pacific region, and in the LOGISTICS Corporate Division in particular. Acquisitions including Blue Dart, Koba and Express Couriers also contributed to the increase in materials expense...

  • Page 55
    ... letters in 2005 in accordance with the price-cap procedure. The prices for standard letters and postcards will remain unchanged at â,¬0.55 and â,¬0.45 respectively. Deutsche Post World Net Additional Information Consolidated Financial Statements Corporate divisions Group Management Report

  • Page 56
    ... media. Mail Communication (Deutsche Post AG share) mail items (millions) Business customer letters Private customer letters Total 7,515 1,459 8,974 7,216 1,398 8,614 -4.0 -4.2 -4.0 2004 2005 +/- % The Direct Marketing Business Division also experienced a difficult economic environment in the year...

  • Page 57
    ... performance, achieving an increase in revenue of 17.1% to â,¬7,949 million (previous year: â,¬6,786 million). Strong organic growth in both business divisions contributed to this. Business Deutsche Post World Net Additional Information Consolidated Financial Statements Group Management Report

  • Page 58
    ...logistics value-added services, which we report under Projects/other. We generated additional business from new and existing customers alike. DHL Global Forwarding: volumes thousands Air freight 1) Twenty­foot equivalent units 2004 Tonnage TEU1) 2,200 1,120 2005 2,380 1,240 +/- % 8.2 10.7 Ocean...

  • Page 59
    ... included the reversal of provisions for the Postal Civil Service Health Insurance Fund and the recognition of provisions for forthcoming integration measures. Additional Information Item 5 in the "Notes" section Deutsche Post World Net Consolidated Financial Statements Group Management Report

  • Page 60
    ... of air hubs on the west and east coasts of the United States. Additional investments were made in developing customized transportation and warehousing solutions. We also invested in the expansion of our network of Packstations in Germany. In the LOGISTICS Corporate Division, we invested primarily...

  • Page 61
    ... Deutsche Post Beteiligungen Holding GmbH now holding 100% of the shares. We had already announced this acquisition during the previous year; it gives us access to the French market for value-added services in the mail business. • Additionally, we acquired a majority interest in the Dutch company...

  • Page 62
    ... and other securities, as well as liabilities from financial services items, which both represent the operating business of Postbank in the consolidated balance sheet. Total assets were also influenced by the first-time consolidation of the Exel group in particular. Noncurrent assets increased by 43...

  • Page 63
    ... sheet as a result of the acquisition of the Exel group. In the period under review, equity was strengthened primarily as a result of the consolidated net profit for the year attributable to Deutsche Post AG shareholders in the amount of â,¬2,235 million. Equity increased by 41.5% from â,¬8,865...

  • Page 64
    ...(principally the acquisition of Exel (â,¬3,720 million)). This was offset by proceeds from disposals of â,¬1,663 million, primarily resulting from the sale of company holdings, in particular in Deutsche Post Retail GmbH (â,¬986 million). In the previous year, the main factor affecting cash flow from...

  • Page 65
    ... into account both the return expected by shareholders and the requirements for rating purposes. In 2005, the equity ratio amounted to 30% (previous year: 25%). In order to minimize the cost of capital and benefit from economies of scale and specialization, external financing measures, Group-wide...

  • Page 66
    ...by a factor of 20.1. This indicator is up by 9.5 percentage points on the previous year's value. The dynamic gearing ratio expresses the average number of years required to repay outstanding debt using the whole of the operating cash flow generated in the year under review. Accordingly, in 2005, net...

  • Page 67
    ... and disposal groups held for sale Current tax receivables Receivables and other assets Cash and cash equivalents including financial instruments Current assets Total assets EQUITY AND LIABILITIES Equity attributable to Deutsche Post AG shareholders Minority interest Equity Noncurrent provisions...

  • Page 68
    ... weekly working hours for mail carriers. As a result, it was possible to reduce the number of employees by 1.3% to 125,282. • After we had increased our holding in the Indian operator Blue Dart, the number of employees in the EXPRESS Corporate Division grew by 1.3% to 131,927. • In the LOGISTICS...

  • Page 69
    ... was agreed with the Group Works Council and a social plan drawn up for this change in operation. Group signs training pact Between 2005 and 2007, the Deutsche Post AG Group is offering 2,300 traineeships in Germany each year. This was agreed in a training pact signed by the company and the ver.di...

  • Page 70
    ...of health promotion activities, and how they are integrated into the company's structure. Its findings placed Deutsche Post World Net first in a list of 100 companies. More than 200,000 employee ideas Our idea management posted a new record in the year under review: Deutsche Post employees submitted...

  • Page 71
    ...on our website under "Sustainability". Best German company in the Good Company Ranking Deutsche Post World Net has received an award for the way in which it fulfills its social responsibilities. In the September 2005 Good Company Ranking drawn up by Manager Magazin, a German business publication, we...

  • Page 72
    ... to Corporate Controlling on a quarterly basis via the multi-level risk reporting system. Risk reporting to the Board of Management takes into account interactions between individual opportunities and risks. Should new opportunities and risks and significant changes in individual items arise...

  • Page 73
    ... are accounted for in accordance with IAS 39. Currency risks arise mainly from the international business of the MAIL, EXPRESS and LOGISTICS Corporate Divisions, a large percentage of which is conducted in foreign-currencies. These risks are managed centrally. All Group companies report their...

  • Page 74
    ... January 1, 2008. The MAIL Corporate Division has prepared itself for increased competition and potential loss of market share by fully modernizing its logistics and realigning products and services. We have also established a foothold in major international mail markets such as the USA, the UK, the...

  • Page 75
    ... air-based express operations. Higher insurance premiums could not be excluded in such an eventuality. Material opportunities and risks in the LOGISTICS Corporate Division are linked to the integration of logistics company Exel plc. Its geographical presence in the UK, the USA and Asia complements...

  • Page 76
    ...Last year, we started to restructure the retail outlet business in the FINANCIAL SERVICES Corporate Division. In a further step, Postbank will take over 850 retail outlets from Deutsche Post. These are mostly Postbank Centers, where Postbank is currently generating more than 80% of its new business...

  • Page 77
    ... the German federal government in response to a complaint by a third party. The allegation is that Deutsche Post AG contravenes the prohibition on state aid enshrined in the EU Treaty by allowing Deutsche Postbank AG to use Deutsche Post outlets at below-market rates. In our opinion, the fee paid by...

  • Page 78
    .... We intend to maintain and further extend our position in the highly-competitive express market. To do this we will require efficient transport networks that provide the capacity required to meet the exacting demands of our customers in respect of posting and delivery Annual Report 2005

  • Page 79
    ... added value is in the use of combined air and ground transport. Central air hubs play a key role. We will construct a new air hub for the European air express network in Leipzig to run alongside the air hubs in Hong Kong and Wilmington. The start of operations is planned for 2008. Additional risks...

  • Page 80
    ... is an international provider of value-added mail and document services and offers an extensive range of print, mailroom and document management products, as well as direct marketing services. Williams Lea is the best-placed company in these markets in the UK and Europe. In recent years it has...

  • Page 81
    ... to open up the market. We welcome this development and are hard at work preparing for further deregulation so that we can systematically exploit opportunities to enter and develop new markets. Consolidated Financial Statements Additional Information Deutsche Post World Net Group Management Report

  • Page 82
    ... for international mail. Further deregulation of foreign mail markets will open up new opportunities and will positively impact our development. We will persist in our strategy of positioning ourselves in all important markets, while increasingly focusing on value-added services in the mail business...

  • Page 83
    ... customers. We want to expand our domestic product range. We intend to develop additional express products in Asia and, as the first international express service provider on China's and India's domestic markets, we want to make further investments and grow quickly. DHL aims to become the employer...

  • Page 84
    .... In contract logistics, customers expect tailored end-to-end solutions that bring them added value and go beyond the mere performance of logistics processes at low unit costs. In addition, providers with country-specific knowledge will be successful - which is why in this area of business we are...

  • Page 85
    ...SERVICES Corporate Division, income is expected to rise, boosted by the addition of BHW. Dividend We plan to continue our current dividend policy and to share our good business development with our shareholders. Consolidated Financial Statements Additional Information Deutsche Post World Net Group...

  • Page 86
    ...Strategic opportunities We have made excellent preparations for increasing mail competition. In addition to our high quality standard and our highly efficient network with state-of-the-art mail centers, we will establish ourselves as a provider of solutions and value-added services for our customers...

  • Page 87
    ...the structure and workflows of the Services Department. In information technology, we are endeavoring to optimize the infrastructure, improve work processes and further reduce costs whilst maintaining our high quality standards. Group Management Report Deutsche Post World Net Additional Information...

  • Page 88
    Acting in an entrepreneurial way Entrepreneurial conduct constitutes the spirit of our Group. We demand and promote individual responsibility. Excellent people are the key to our success. We welcome motivated and loyal employees who strive for top performance. It is one of our core tasks to attract,...

  • Page 89
    ... region of Asia who stay with us for the long term. Additional Information Consolidated Financial Statements One billion parcels We have been working with the mail­order company Quelle for the past 78 years. Every day we deliver around 100,000 consignments for Quelle and 2005 saw the dispatch...

  • Page 90
    ... losses1) Other operating expenses1) Total operating expenses Profit from operating activities (EBIT) Net income from associates Net other finance costs Net finance costs Profit from ordinary activities Income tax expense1) Consolidated net profit for the year attributable to Deutsche Post AG...

  • Page 91
    ...) Financial instruments Cash and cash equivalents Current assets Total assets EQUITY AND LIABILITIES Issued capital Other reserves1) Retained earnings1) Equity attributable to Deutsche Post AG shareholders Minority interest1) Equity Provisions for pensions and other employee benefits Deferred tax...

  • Page 92
    ... in financial liabilities Dividend paid to Deutsche Post AG shareholders Dividend paid to other shareholders Issuance of shares under stock option plan Interest paid Net cash used in financing activities Net change in cash and cash equivalents Effect of changes in exchange rates on cash and cash...

  • Page 93
    ...adjustment1) Capital transactions with owner Issue of stock - Exel acquisition Dividend Other changes in equity not recognized in income Currency translation differences Other changes Changes in equity recognized in income Consolidated net profit Stock option plans Balance at December 31, 2005 1,193...

  • Page 94
    ... In addition to Deutsche Post AG, the consolidated financial statements for the period ended December 31, 2005 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...

  • Page 95
    ... On October 12, 2005, Deutsche Post World Net increased its 20% interest in the Dutch company MailMerge Nederland B.V. to 70% for a purchase price of â,¬2 million. MailMerge offers its customers end-toend solutions for business mail and is the largest specialist provider of delivery services to the...

  • Page 96
    ... purchase price relates to 75,203,772 no-par value shares originating from the capital increase. Exel was included in the consolidated financial statements as of December 31, 2005 at the following adjusted IFRS carrying amounts of the Exel group: Purchase price allocation from this acquisition is...

  • Page 97
    ...to Danzas DV LLC, Russia, and Express Couriers Ltd., New Zealand. 4 Significant transactions In addition to the acquisitions cited in note 3 "Consolidated group", the following significant transactions affected the Group's net assets, financial position and results of operations in fiscal year 2005...

  • Page 98
    ... of additional financial burdens for members of the Postal Civil Service Health Insurance Fund. Income in the amount of â,¬1,208 million was recognized on the reversal of the provision (see also note 11). 5 New developments in international accounting under IFRSs and the restatement of prior-year...

  • Page 99
    ...): Financial Instruments: Recognition and Measurement The retrospective initial application of the more detailed accounting treatment for impairment losses on equities set out by IAS 39.61 entailed the recognition of cumulative impairment losses on equities totaling â,¬430 million for fiscal year...

  • Page 100
    ...Deutsche Post World Net Cash Generating Units (CGUs) Segment level MAIL EXPRESS CGU level MAIL National MAIL International EXPRESS Europe EXPRESS Americas EXPRESS Asia Pacific EXPRESS EMA DHL Global Forwarding DHL EXEL Supply Chain Financial Services LOGISTICS FINANCIAL SERVICES Annual Report 2005

  • Page 101
    ... 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 sale in the ordinary course of business. It is measured at cost. Deutsche Post World Net Additional Information Consolidated Financial Statements

  • Page 102
    ...held for trading are measured at their fair values. Held-to-maturity and originated securities are measured at amortized cost, while securities of the "at fair value through profit or loss" and "available for sale" categories are measured at their fair values. Liabilities from financial services are...

  • Page 103
    ... Deutsche Post World Net Additional Information Consolidated Financial Statements Intragroup revenue, other operating income and expenses, as well as receivables, liabilities, and provisions between consolidated companies, are eliminated. Intercompany profits or losses from intragroup deliveries...

  • Page 104
    ... services, including payments, deposits, retail and corporate banking, fund products, and investment securities services. The FINANCIAL SERVICES Corporate Division also includes the retail outlets, the retail outlet networks of Deutsche Post Retail GmbH and the Pension Service. Annual Report 2005

  • Page 105
    ... The additional costs resulting from Deutsche Post AG's postal universal 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 Corporate...

  • Page 106
    ... costs resulting from organic growth in the LOGISTICS division in the Asia Pacific region in particular, and secondly to the acquisition of Blue Dart and Express Couriers. Other purchased services include a number of individual items that do not exceed â,¬10 million. Annual Report 2005

  • Page 107
    ... consist of additions to pension provisions, employer contributions to supplementary occupational pension plans and retirement benefit payments by employers for their employees. The average number of employees of Deutsche Post World Net in the year under review, classified by employee groups, was as...

  • Page 108
    ... Public relations expenses Legal, consulting and audit costs Travel and training costs Other business taxes Telecommunication costs Expenses from currency translation differences Offices supplies Addition to provisions Allowance for losses on loans and advances (financial services) Insurance costs...

  • Page 109
    ... financial statements and in the opening tax accounts amount to â,¬6.4 billion as of December 31, 2005 (previous year: â,¬5.0 billion). The effects from section 8 b of the KStG (German Corporate Income Tax Act) relate primarily to special funds, shares and equity interests of the Deutsche Postbank...

  • Page 110
    ... of KarstadtQuelle. â,¬5,459 million of the increase in goodwill relates to Exel (provisional goodwill from acquisition accounting; see note 3), â,¬85 million to Blue Dart, â,¬42 million to Express Couriers and â,¬18 million to GPL Gesellschaft für Privatkundenlogistik. Annual Report 2005

  • Page 111
    ... at the balance sheet date for whose production internal or third-party costs have already been incurred. Items of property, plant and equipment pledged as collateral have a total carrying amount of â,¬590 million. Deutsche Post World Net Additional Information Consolidated Financial Statements

  • Page 112
    ...â,¬131 million) of investment property relates to Deutsche Post AG and â,¬72 million (previous year: â,¬139 million) to the Deutsche Postbank group. Compared with the market rates of interest prevailing at December 31, 2005 for comparable financial assets, most of the housing promotion loans are low...

  • Page 113
    ... 2351) The derivatives - interest rate swaps/fair value hedges - relate to bonds issued by Deutsche Post Finance, Netherlands, and were entered into with external banks. The increase in pension assets is due to the acquisition of Exel's pension assets totaling â,¬117 million. Further information on...

  • Page 114
    ... that are held for sale: Companies held for sale â,¬m McPaper AG (McPaper), Berlin, Germany Deutsche Post Wohnen GmbH, Bonn (DP Wohnen), Germany DHL Express Denmark A/S, Denmark - buildings 24 2 2 28 2005 The maturity structure of deferred tax assets from tax loss carryforwards is as follows...

  • Page 115
    ... customers (available for sale) 47,017 20,528 2005 16,378 0 3,292 23,820 0 1,423 17,801 52,209 639 0 47,656 573 0 52,782 â,¬1,692 million of the â,¬2,421 million increase in trade receivables relates to the acquisition of Exel. Miscellaneous other assets include a number of individual items...

  • Page 116
    ... years 6,545 20,178 1,881 30,934 59,538 2005 Total 17,801 52,782 11,025 55,381 136,989 Maturities of receivables and other securities from financial services 2004 â,¬m Loans and advances to other banks Loans and advances to customers Trading assets/hedging derivatives Investment securities Payable...

  • Page 117
    ... in fiscal year 2005 to reflect developments in the values of financial instruments. Deutsche Post World Net Additional Information Consolidated Financial Statements â,¬52,788 million (previous year: â,¬41,756 million) of the investment securities relates to listed securities. Changes in...

  • Page 118
    ... in January 2005 Issue of new shares (servicing of Tranche 2002) - contingent capital Issue of new shares (acquisition of Exel) - 2005 authorized capital Closing balance 2005 1,112,800,000.00 4,629,967.00 75,203,772.00 1,192,633,739.00 By way of a resolution adopted by the Annual General Meeting on...

  • Page 119
    ... of shares relating to the acquisition of Exel can be found in note 3. The measurement of the 2000 and 2003 Stock Option Plans resulted in staff costs for the stock options in the amount of â,¬36 million in fiscal year 2005 (previous year: â,¬31 million); this amount was charged to capital reserves...

  • Page 120
    ...or losses on the fair value measurement of financial instruments of the Deutsche Postbank group. Dividends Dividends paid to the shareholders of Deutsche Post AG are based on the unappropriated surplus of â,¬1,814 million (previous year: â,¬1,301 million) reported in the annual financial statements...

  • Page 121
    ... defined contribution plans. 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 non-wage costs, Deutsche Post AG...

  • Page 122
    ...was determined by taking into account current long-term rates of return on bonds (government and corporate) and applying to these rates a suitable risk premium determined on the basis of historical market returns and current market expectations for a given plan's asset structure. Annual Report 2005

  • Page 123
    ... value of total defined benefit obligations at December 31 Fair value of plan assets at December 31 Unrecognized gains (+)/losses (-) Unrecognized past service cost Asset adjustment for asset limit Net pension provisions at December 31 Deutsche Post AG Deutsche Postbank group EXPRESS LOGISTICS...

  • Page 124
    ...of plan assets Deutsche Post AG Deutsche Postbank group EXPRESS LOGISTICS excluding excluding DPAG DPAG 2004 Fair value of plan assets at January 1 Employer contributions Employee contributions Expected return on plan assets Gains (+)/losses (-) on plan assets Pension payments Transfers Acquisitions...

  • Page 125
    ...11 -1,068 -11 Changes in net pension provisions Changes in net pension provisions Deutsche Post AG Deutsche Postbank group EXPRESS LOGISTICS excluding excluding DPAG DPAG 2004 Net pension provisions at January 1 Pension expense Pension payments Contributions to funds Acquisitions Transfers Currency...

  • Page 126
    122 Pension expense Pension expense Deutsche Post AG Deutsche Postbank group EXPRESS LOGISTICS excluding excluding DPAG DPAG 2004 Current service cost, excluding employee contributions Interest cost Expected return on plan assets Recognized past service cost Amortized unrealized gains (-)/losses ...

  • Page 127
    ... Group-wide STAR value creation program; these relate primarily to termination benefit obligations to employees (partial retirement programs, transitional benefits) and expenses from the closure of terminals. Deutsche Post World Net Additional Information Consolidated Financial Statements 1,738

  • Page 128
    ... by Deutsche Post AG. In connection with the acquisition of Exel, the latter's shareholders were also offered loan notes instead of Deutsche Post AG shares or cash. The loan notes in the amount of â,¬167 million are reported under other noncurrent financial liabilities. Annual Report 2005

  • Page 129
    ... year. All the financial liabilities relate to the following companies: Financial liabilities broken down by company 2004 â,¬m Deutsche Post Finance B.V., Netherlands Deutsche Post AG Deutsche Post International B.V., Netherlands Exel group DHL Operations B.V., Netherlands Other Group companies...

  • Page 130
    ...current residual maturity structure, these items only represent liable capital as defined by the Basel Capital Accord in the amount of â,¬2,389 million. A total of â,¬2,290 million (previous year: â,¬1,297 million) of the subordinated debt is hedged against changes in fair value. Annual Report 2005

  • Page 131
    ...) and Exel (â,¬1,454 million). Trade payables primarily have a maturity of less than one year. The reported carrying amount of trade payables corresponds to their fair value. 79,389 78,164 Maturities of liabilities from financial services 2005 â,¬m Deposits from other banks Due to customers...

  • Page 132
    ...­added tax liabilities Customs and duties liabilities Other tax liabilities 40 286 129 200 655 2005 All tax liabilities are current and have maturities of less than one year. 49 Liabilities included in disposal groups classified as held for sale This item relates to liabilities of the companies...

  • Page 133
    ...of Deutsche Post AG shares under the stock option plan led to a cash inflow of â,¬65 million. 50.4 Cash and cash equivalents Consolidated Financial Statements Additional Information The cash inflows and outflows described above produced cash and cash equivalents of â,¬2,084 million at year-end (see...

  • Page 134
    ...Operational risk • Model risk • Risk from shareholdings/risks from equity investments • Strategic risk Market price risk denotes the potential risk that may lead to losses in financial transactions from changes in interest rates, volatilities, exchange rates and equity prices. Changes in value...

  • Page 135
    ... faster processes for the intensive management of loans in default. The absolute increase in risk costs is mainly the result of the planned expansion of private customer business over recent years. The Deutsche Postbank group will continue to pursue its risk-sensitive business policy in the future...

  • Page 136
    ... held for trading of which banking book derivatives Hedging derivatives Fair value hedges Interest rate swaps Cross­currency swaps Equity options Other interest­related contracts Total portfolio of hedging derivatives Fair value hedges Cash flow hedges Credit default swaps Total portfolio of...

  • Page 137
    ... is expressed by the market or quoted exchange price; otherwise, the full fair value is calculated using investment techniques. Derivatives As a result of its operating activities, Deutsche Post World Net is exposed to financial risks that may result from changes in exchange rates, commodity prices...

  • Page 138
    ... expected future cash flows, using the Group's treasury risk management system. At December 31, 2005, Deutsche Post World Net had entered into interest rate swaps with a notional volume of â,¬1,765 million (previous year: â,¬2,373 million). The fair value of this interest rate swap position...

  • Page 139
    ... 0 0 0 0 -9 -7 -7 0 0 0 0 0 0 -34 -17 -17 0 -41 Fair value -12 -3 -9 0 -2 0 -2 0 -14 -36 -34 -2 -3 -3 -27 0 -27 -34 -17 -17 0 -100 0 0 0 0 0 0 0 0 0 0 33 21 12 -3 0 -3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -3 0 -3 Deutsche Post World Net Additional Information Consolidated Financial Statements

  • Page 140
    ...-currency swaps hedge the currency risk, and their fair values as of December 31, 2005 were â,¬-17 million (previous year: â,¬-12 million). The investments relate to internal Group loans which mature in 2014. The acquisition of Exel led to an increase in non-cancelable payment obligations under...

  • Page 141
    ... GmbH Express and Logistics companies Exel group Other Group companies (including Deutsche Postbank group) 2,230 1,959 n.a. 839 5,028 1,976 2,080 2,049 673 6,778 2004 2005 Relationships with the Bundesanstalt für Post und Telekommunikation (BAnst PT)) The Federal Republic of Germany manages its...

  • Page 142
    ... of the Board of Management and the Supervisory Board can be found in the Corporate Governance Report which forms part of the notes in this area. Relationships with Deutsche Telekom AG and its subsidiaries In fiscal year 2005, Deutsche Post World Net provided goods and services for Deutsche Telekom...

  • Page 143
    ...2005 Country MAIL Global Mail Inc. Interlanden B.V. Deutsche Post Global Mail (UK) Ltd. Deutsche Post In Haus Service GmbH Deutsche Post Customer Service Center GmbH EXPRESS/LOGISTICS DHL Express (USA) Inc. DHL Express Vertriebs GmbH & Co. OHG Air Express International USA Inc. DHL Freight GmbH DHL...

  • Page 144
    ... to the acquisition of Deutsche Post Retail GmbH. This change in ownership also means that around 9,600 employees will change employer, working directly for Postbank in future. The purchase price for the retail outlets amounted to â,¬986 million. Following completion of the share purchase agreement...

  • Page 145
    ... of Deutsche Post World Net to those of Deutsche Post World Net including Postbank at equity. Transactions between the Deutsche Postbank group and the other Group companies are included in the financial statements. Explanations to the reconciliation of the balance sheet As the starting point of...

  • Page 146
    ... of Deutsche Postbank group at equity Net other finance costs/financial income Net finance costs/financial income Profit or loss from ordinary activities Income tax expense Consolidated net profit or loss for the year attributable to Deutsche Post AG shareholders Minorities Deutsche Post World...

  • Page 147
    ... services Financial instruments Cash and cash equivalents Current assets Total assets EQUITY AND LIABILITIES Issued capital Other reserves1) Retained earnings1) Equity attributable to Deutsche Post AG shareholders Minority interest1) Equity Provisions for pensions and other employee benefits...

  • Page 148
    ... Net cash used in (previous year: net cash from) investing activities Change in financial liabilities Dividend paid to Deutsche Post AG shareholders Dividend paid to other shareholders Issuance of shares under stock option plan Interest paid Net cash used in financing activities Net change in cash...

  • Page 149
    ... Commercial Code) are the responsibility of the parent Company's Board of Managing Directors. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit. We conducted our audit of the consolidated financial statements...

  • Page 150
    ... social responsibility We are committed to goals that generate benefits for the communities where we work. We respect the traditions, structures and values of the countries where we operate. The protection of our environment is part of our corporate responsibility. We promote our employees' social...

  • Page 151
    ... natural gas for parcel delivery. By the end of 2006, the DHL Express fleet in Germany will include over 170 of these vehicles. Partner of the United Nations We have entered into a strategic part­ nership with two major UN organi­ zations. Improving procedures for international disaster response...

  • Page 152
    ... 1, 2005) • DHL Sinotrans International Air Courier Ltd.* (China, Board of Directors) • Express Couriers Ltd.* (New Zealand, Board of Directors) Dr. Hans-Dieter Petram • Deutsche Postbank AG* • HDI Industrie Versicherung AG • HDI Privat Versicherung AG • HDI Service AG • Deutsche Post...

  • Page 153
    ... 15, 2005) Margrit Wendt • Bundesanstalt für Post und Tele­ kommunikation (Administrative Board) • Membership of supervisory boards required by law • Membership of comparable supervisory bodies of German and foreign companies * Group mandate Deutsche Post World Net Additional Information

  • Page 154
    ...on licensing, price control and the universal service. As the dominant company in the market, Deutsche Post is obliged to make parts of the mail value chain available separately to customers and, under certain condi­ tions, other postal service providers. Full container load (FCL) Transport of full...

  • Page 155
    ... operates the largest philately mail­order business of all postal organizations in the world. Time-definite Delivery of express shipments at a speci­ fied time. Preferred periodical A press product of which more than 30% consists of journalistic reporting. Deutsche Post World Net Additional...

  • Page 156
    ...L LOGISTICS M MAIL Mail Communication Mail International of Management Mandates held by the Supervisory Board T Ten years of Deutsche Post AG 4 Mandates held by the Board V 149 Value­added Services 33 ff, 37, 40, 46 D Declaration of Conformity 8, 10, 14, 140 Direct Marketing Disposals Dividend...

  • Page 157
    ... - 17, 2006 DRKW Business Service Conference (London) Invest Trade Fair (Stuttgart) Deutsche Bank German Corporate Conference (Frankfurt am Main) Goldman Sachs Business Services Conference (London) IAM 2006 International Investors' Trade Fair (Düsseldorf) Further events, updates and information on...

  • Page 158
    8­Year Review 8-Year Review 1998 to 2005 â,¬m Revenue MAIL EXPRESS LOGISTICS FINANCIAL SERVICES Corporate divisions total Other/consolidation Total Profit or loss from operating activities before goodwill amortization (EBITA) MAIL EXPRESS LOGISTICS FINANCIAL SERVICES Corporate divisions total ...

  • Page 159
    8-Year Review 1998 to 2005 Employees/staff costs Total workforce (headcount including trainees) Workforce calculated as FTEs (including trainees) Average workforce Staff costs Staff costs ratio6) Key figures revenue/income/asset and capital structure Return on sales7) Return on equity (RoE) before ...

  • Page 160
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