Ad hoc: Deutsche Post presents Roadmap to Value11/08/2007
- Two-year profit-improvement program of 1 billion euros initiated
- Net working capital to be reduced by 700 million euros
- Asset sales to generate at least 1 billion euros in cash
- Dividend increase of 20 percent for 2007 to be proposed
- EBIT of around 4.2 billion euros for 2008 expected; EBIT forecast for 2009 at around 4.7 billion euros
Deutsche Post today presents its Roadmap to Value. In detail:
Profitability: The group has launched an EBIT improvement program targeting 1 billion euros throughout by the end of 2009. The program is expected to generate significant cost savings at the Corporate Center as well as in the operating divisions. The company is committed to focus on underperforming units and improve their profitability.
Cash generation: The introduction of a new value-based performance metric, EBIT after Asset Charge, will be a key element in enforcing a sustained focus on value generation throughout the group. Starting on January 1, 2008, management incentives will be tied to this new metric. Deutsche Post expects this new measure to contribute significantly to cash generation. In addition, the Group plans to free up cash by reducing its net working capital by 700 million euros by the end of 2009. Deutsche Post also targets at least 1 billion euros in proceeds from disposals of real estate and other assets in the next 24 months.
Payout to shareholders: Deutsche Post plans to propose a rise of the dividend to 90 cent per share for 2007. This is a 20 percent increase compared with 2006. In the following years, Deutsche Post intends to increase dividends in line with underlying earnings growth. In addition to that the Group will consider other methods of cash return such as share buybacks once proceeds from asset disposals reach 1 billion euros.
Transparency: Deutsche Post is committed to improve the transparency of its financial reporting for all capital markets audiences. The Group intends to create a stable and more comparable reporting structure and provides gradually additional disclosure. The SERVICES segment will be unbundled and all costs of Global Business Services will be allocated to the operating divisions. This will result in a more transparent ‚Corporate Center / Non-operating result' segment. The Group will provide a comprehensive set of pro-forma numbers reflecting the new reporting structure.
From now on, Deutsche Post World Net will give a detailed earnings outlook for the following year. This will reduce the volatility stemming from unexpected regional economic slowdowns and provide an outlook in line with the industry.
For 2008, the group expects an EBIT of about 4.2 billion euros. At the MAIL division, an EBIT of approximately 1.9 billion euros is expected. The EXPRESS division plans to reach an EBIT of about 0.65 billion euros, while the EBIT at the LOGISTICS division is expected to amount to about 1.05 billion euros. For the FINANCIAL SERVICES division, the Group forecasts an EBIT of at least 1.15 billion euros and for the SERVICES/ Corporate Center division it expects a loss of no more than 0.6 billion euros.
Because a guidance for 2009 has already been communicated to the capital markets, the Group makes an exception to the new rule and provides an update on its medium-term guidance today. Overall, Deutsche Post aims for an EBIT of about 4.7 billion euros in 2009. For the MAIL business, there is now a high degree of confidence that a maximum of between 10 and 20 percent of EBIT will be affected by the full opening of the German mail market compared with the 2006 level. Thus the company still expects the MAIL division to reach an EBIT of between 1.65 billion euros and 1.85 billion euros for 2009. For the EXPRESS division, Deutsche Post now forecasts an EBIT of between 0.9 billion euros and 1.1 billion euros. This range reflects the economic slowdown in the U.S., which has brought the recovery process in the Americas region to a halt in the third quarter. The management is vigorously engaged in restarting the recovery, however, it no longer expects the region to be profitable by the end of 2009. For the LOGISTICS division, an EBIT of between 1.15 billion euros and 1.25 billion euros is forecast, while the FINANCIAL SERVICES expects an EBIT of at least 1.2 billion euros.
Please note: Chairman and Chief Executive Officer Klaus Zumwinkel and Chief Financial Officer John Allan will present the Roadmap to Value at an Investors Conference in Frankfurt starting at 1.30 p.m. (CET). The conference will be broadcast on www.dpwn.com.