Deutsche Post DHL Group confirms earnings targets
After a solid business performance in the past year, the Board of Management and the Supervisory Board are proposing a dividend increase to EUR 0.85 per share.
- After solid business performance in past year, dividend increase to EUR 0.85 per share proposed
- Group confirms short and medium-term earnings targets after moderate start to 2015
- CO2 efficiency in 2014 increased by 23% compared to 2007
- CEO Frank Appel at the Annual General Meeting: "Our Strategy 2020 gives us a roadmap for further improvement."
Frankfurt,Bonn - After a solid business performance in the past year and a moderate start to 2015, Deutsche Post DHL Group, the world's leading mail and logistics group, continues to face the future with confidence. Despite a challenging market and competitive environment, as well as significant investments in the long-term success of the company, the Group still expects that 2015 will be another year of growth for Deutsche Post DHL Group. At today's Annual General Meeting in Frankfurt, the company confirmed its targets for 2015, 2016 and 2020.
"We increased both revenue and operating profit once again in 2014. And we managed to do this despite only modest growth of the world economy. We achieved our targets and kept our promise," CEO Frank Appel said to shareholders. "Moreover we have big plans for this year and beyond. We are laying the foundation for the future: With our Strategy 2020 we have set our priorities for the coming years."
Financial year 2015 starts as expected
Despite still only moderate growth in the world economy and ambitious internal projects, Deutsche Post DHL Group increased its revenue in the first quarter. Consolidated net profit remained at a level nearly equal to that of the prior year. As reported on May 12 during the presentation of the first quarter results, consolidated revenue rose 8.8% year-on-year to reach EUR 14.8 billion (Q1 2014: EUR 13.6 billion) in the first three months of the current financial year. Adjusted for positive currency effects, the rise in revenue was 2.1% in the first quarter, with revenue improvements in all four divisions reflected in this figure. In particular, dynamic growth in revenue and volumes continued in the international express and German parcel business. The Group's operating profit experienced a slight 1.0% decline in the first quarter to EUR 720 million - primarily due to the weak earnings trend in the Global Forwarding, Freight, business and planned restructuring costs in the Supply Chain division.
After this moderate start to the year, CEO Frank Appel confirmed the targets for full-year 2015 that were announced in March. Operating profit is expected to increase to between EUR 3.05 billion to EUR 3.2 billion. The Post - eCommerce - Parcel (PeP) division is likely to contribute at least EUR 1.3 billion to this figure. The forecast for the DHL divisions also remains unchanged at between EUR 2.1 billion to EUR 2.25 billion. For Corporate Center/Other, the Group anticipates stable expenses of approximately EUR 350 million in 2015. The Group is also proceeding on the assumption that it will once again generate sufficient free cash flow to at least cover the dividend to be paid out for financial year 2014.
Strategy 2020 in focus
The current financial year marks a transition from the successful Strategy 2015 to the new Strategy 2020. The new strategy is an evolutionary step and based on three pillars: A focus on existing strengths, enhanced quality through improved interconnectedness and expansion through new growth drivers. Here the booming e-commerce business and global growth markets have strategic priority. That is why the Group is pressing ahead at PeP with further internationalization of the parcel business, which is profiting especially from the dynamic growth in e-commerce. "We want to be the global market leader in logistics for e-commerce," said Appel. To achieve this goal, the Group is exporting the successful model of its DHL Parcel business in Germany to other markets. The DHL Express division is continuing to make significant investments in the maintenance and expansion of its global network, primarily in emerging economies and growth regions, in order to further expand its leading market position.
By investing significantly in the optimal positioning of its businesses, even at the expense of short-term profit gains, Deutsche Post DHL Group is currently laying the foundations for the success of Strategy 2020 across all four of its divisions. An important step in this regard is the reorganization of DHL Global Forwarding, Freight, which requires substantial expenditures and binds resources. As announced at the presentation of the quarterly figures, the results to date of the transformation process will now be carefully reviewed. Appel, who has run the division in a dual role since the end of April, made statements to shareholders that left no doubt as to the need for the transformation. The course for future growth is also being charted at DHL Supply Chain - even if this does not involve a fundamental transformation. The optimization program currently underway in that division is mainly targeted at increased standardization of processes, greater efficiency, and the improved utilization of economies of scale globally.
The wide-ranging internal changes and investments in the future will temper the Group's earnings gains in the current year. For the following years, however, Deutsche Post DHL Group expects the earnings trend once again to be considerably more dynamic. For 2016, the company is maintaining its forecast of a rise in EBIT to between EUR 3.4 billion and EUR 3.7 billion. In the period from 2013 to 2020, the target year of the new strategy, operating profit is expected to rise annually by more than 8% on average.
"Our Strategy 2020 gives us a roadmap for our further improvement and organic growth," Appel said in summary and reaffirmed the clear aspiration that the Group associates with that plan: "When people think of logistics, we want them to think of Deutsche Post DHL Group."
Corporate responsibility as the foundation for long-term success
For the Group, responsible business practices remain an important factor of economic success. As a logistics company, Deutsche Post DHL Group creates connectivity and enables global trade. "We provide services that no modern society can do without," said Frank Appel. "We are a part of this world. That's why we work to preserve and improve it."
To make a positive contribution to the environment and society, the Group applies its core competences with clear purpose. Deutsche Post DHL Group aims to improve the CO2 efficiency of both the company and its subcontractors by a total of 30% by 2020. Thanks, for example, to the use of new modern vehicles and aircrafts, the company has made substantial progress toward achieving that goal as of 2014. Against the base year of 2007, CO2 efficiency has improved by 23%.
In addition, Deutsche Post DHL Group continues to be committed to working with international educational and aid organizations such as Teach for All and SOS Children's Villages. DHL employees serving in DHL Disaster Response Teams (DRTs) apply their logistics experience and skills to help deal with the impact of catastrophes around the world. Since 2005, the teams have deployed on more than 30 occasions. Recently, they coordinated incoming relief supplies at the international airport in Nepal after the country's devastating earthquake.
A look back at 2014: Revenue and operating profit increased once again
CEO Appel was satisfied with the company's economic performance in financial year 2014. Group revenue climbed 3.1% year-on-year to EUR 56.6 billion, with all four divisions contributing to the rise. Consolidated revenue grew organically by 4.2% in 2014. Above all, this development reflects sustained growth in volumes and revenue in the international express business and the German parcel business. Consolidated EBIT rose 3.5% or EUR 100 million to EUR 2.97 billion. As a result, operating profit in full year 2014 was near the middle of the target range of EUR 2.9 billion to EUR 3.1 billion. The EBIT contribution from the Post - eCommerce - Parcel (PeP) division was EUR 1.3 billion, as forecast, while the DHL divisions contributed EBIT of EUR 2.02 billion.
Consolidated net profit in financial year 2014 fell slightly from EUR 2.09 billion to EUR 2.07 billion compared with the previous year, due to one-time effects included in the prior-year earnings and a higher tax rate of 15.5% (2013: 14.0%). Similarly, basic earnings per share declined from EUR 1.73 in the previous year to EUR 1.71. Taking all one-time effects into consideration, basic earnings per share would have been EUR 1.64 in 2013.
Dividend increase of 6% proposed
Given the solid earnings trend in financial year 2014 and their confidence in the Group's future prospects, the Board of Management and the Supervisory Board have proposed to today's Annual General Meeting a dividend of EUR 0.85 per share, which represents a 6% increase compared with the previous year. The proposed dividend corresponds to a payout ratio of 50% of net profits. The ratio is exactly in the middle of the announced 40-60% target range.
Candidate for the Supervisory Board
The agenda of this year's shareholders' meeting includes the proposed reelection of a Supervisory Board member. The term of office of Roland Oetker, Managing Partner of ROI Verwaltungsgesellschaft mbH, will end at the close of this year's Annual General Meeting. The Supervisory Board recommends that Mr. Oetker be reelected for another period of office as a shareholder representative.