Deutsche Post DHL Group defines Global Forwarding IT renewal path and addresses potential earnings exposure to ensure success of Strategy 2020
- Adapted business-centric IT renewal path at Global Forwarding to open up the necessary flexibility to meet evolving industry needs; negative one-off effect of EUR 345 million
- Additional one-off effects of EUR 200 million mainly to address legal and regulatory aspects within the Group and to strengthen fundamentals for Strategy 2020
- Group 2015 EBIT guidance lowered to minimum EUR 2.40 billion; 2016 and 2020 guidance confirmed
Deutsche Post DHL Group, the world's leading mail and logistics company, has today decided on the further course of its IT renewal plan for the DHL Global Forwarding division. The Group recognized the need to weigh potential alternatives and will implement a step-by-step replacement and upgrade of its IT set-up. This could rely on a flexible IT architecture, potentially enhancing and converging existing systems and also incorporating advanced 'off-the-shelf' solutions that have been commercially proven within the freight forwarding sector.
Given the decreased likelihood that DHL Global Forwarding will be able to realize benefits from the New Forwarding Environment (NFE) system in its current state, the Group will recognize in the result of the first nine months of 2015 one-off effects of a total of EUR 345 million. This comprises a write-down of EUR 308 million of assets capitalized in relation to NFE and EUR 37 million of provisions which cover expenses for an expected roll back of NFE in the countries where it was piloted.
"As we have said previously, 2015 is a year of transition. Accordingly, we are taking all the measures we can to ensure that our business divisions are optimally positioned for success in the coming years. Our objective for a renewal of our forwarding business remains valid. We are now undertaking further measures to make this renewal business-centric," said Frank Appel, CEO, Deutsche Post DHL Group.
In the near-term, DHL Global Forwarding will pursue the business-centric IT renewal approach that best supports improvements in operating performance, such as enhancing shipment visibility through better capture, management and display of operational milestones, and reduction of paper work through greater use of a document management system which has already been proven in our U.S. business. The Group is still in discussion with vendors including the NFE implementation partner, and remains committed to allowing the NFE implementation partner the opportunity to fulfill its contractual obligations.
In addition to the above described measures, Deutsche Post DHL Group is also taking further action to address potential earnings exposure by recognizing in its outlook for 2015 further one-off effects of around EUR 200 million. This exposure relates among others to the current reassessment of legal and regulatory aspects in the Post - eCommerce - Parcel (PeP), Express and Global Forwarding, Freight divisions.
"As part of our transition from Strategy 2015 to Strategy 2020, we accept these short-term effects on our results in order to deliver long-term targets. We are taking these measures to underpin our earnings guidance for 2016 and 2020," said Frank Appel.
Based on the above described effects, the Group expects 2015 EBIT guidance to be a minimum of EUR 2.40 billion. PeP is expected to contribute a minimum of EUR 1.1 billion. The DHL divisions will contribute a minimum of EUR 1.65 billion. The earnings forecast for 2016 is not affected by the named measures: consolidated EBIT is expected to reach between EUR 3.4 billion and EUR 3.7 billion in 2016. The PeP division is likely to account for more than EUR 1.3 billion of this and the earnings contribution of the DHL divisions is forecasted to range from EUR 2.45 billion to EUR 2.75 billion.