Half Time Report
Frank Appel (CEO); Melanie Kreis (CFO)
11 May 2017
PAGE 1
STRATEGY 2020 HALF TIME REPORT
1
2
Strategy 2020 Half Time Report (F. Appel, CEO)
A
Group Perspective
B
Divisional Agendas
C
Digitalization / Innovation
Strategy 2020 Cash Flow Considerations (M. Kreis, CFO)
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 2
STRATEGY 2020 HALF TIME REPORT
1
Strategy 2020 – 1st Half
On track and producing tangible results
Strategy 2020 – 2nd Half
The roadmap is clear - we know what we want to
achieve and how to get there
Financial Targets
We confirm our Strategy 2020 targets and guidance
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 3
STRATEGY 2020: VALID, ACHIEVABLE & IN FULL EXECUTION
FOCUS
We focus on what has made
us successful …
+
CONNECT
We connect across
the organization …
1. Logistics as our core
1. One global team
2. Committed to the needs
of our stakeholders &
our planet
2. Certified specialists
for everything we do
3. Connected approach in operations, commercial, green
solutions and shared services
3. A family of divisions
… to further expand margins.
… to achieve quality leadership &
service excellence.
+
As shown at
2014 CMD
GROW
We expend
in new segments …
1. Leader in eCommerce
related logistics
2. Accelerate footprint shift
towards emerging markets
3. Tap new market opportunities
for organic expansion
… to achieve sustainable abovemarket growth
Supported by our unchanged finance policy
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 4
STRUCTURAL MARKET TRENDS CONFIRMED AS IDENTIFIED IN 2014
As shown at
2014 CMD
These actionable trends have further strengthened since 2014 and continue to set the framework
for out strategic priorities
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 5
GLOBAL GDP GROWING, BUT BELOW HISTORIC TREND
…slightly slower than expected
GDP growth 2013–2016…
7
6In %
~5%
5
Emerging markets
 Well ahead of global GDP growth,
close to ~5% expectation
4
3
~2%
2
Mature markets
 Growing, but below
~2% expectation
1
0
Global
US
Western Europe
2013
2014
2015
APAC
BRICS
2016
Source: Bloomberg contributor composite, real GDP growth
GDP growth tailwind so far slightly weaker than expected
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 6
SLOWER GDP GROWTH, DGF ISSUES AND DSC SELECTIVITY
HAVE DRIVEN SLOWER GROWTH IN B2B MARKET SEGMENTS SO FAR
Outlook 2017–2020
Market growth assumption 2013–2020
Air
Freight
+2-3%
Ocean
Freight
+4-5%
Contract
Logistics
+5-6%
 Recovering towards more normalized market dynamics
 DGF further catching up after underperforming in 2014/15
Contract Logistics
Market vs. 2013 assumption growth
Below
AFR / OFR
Below
 Market expectation confirmed as outsourcing trend continues
 DSC to remain selective to keep focus on margin improvement
Below
DPDHL vs. market growth
Below
Below
Below
Growth contribution from B2B segments so far slower than expected
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 7
E-COMMERCE DRIVES EVEN STRONGER THAN EXPECTED GROWTH IN B2C
MARKET SEGMENTS, ALSO SUPPORTING EXPRESS GROWTH
Outlook 2017–2020
Market growth assumption 2013–2020
Parcel
Germany
Parcel Domestic
International
International
Express
+8%
+5-7%
+5-6%
Market vs. 2013 assumption growth
Above
Above
Above
 Market growth expectation confirmed at +5-7% p.a.
 Parcel Germany aiming to grow at least in line with market
International eCommerce - Parcel
 E-commerce will continue to drive strong growth in domestic
and cross-border markets, at least in line with initial assumption
 Parcel Europe and DHL eCommerce to further leverage ecommerce growth through selective and flexible expansion
Below
Express
Above
 Market growth in B2B driven by global GDP, with B2C as
additional growth engine
 DHL Express will continue to balance TDI volume
growth with disciplined yield management
DPDHL vs. market growth
Above
Parcel Germany
E-commerce contributes significantly to our growth momentum
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 8
SPECIFIC ACCOMPLISHMENTS ON THE WAY TO 2020
Become #1 e-commerce
related logistics provider
Goal
Achieved
 Expansion of domestic
and cross-border parcel
activities across Europe
and in selected
international markets
 Leverage of B2C growth
within TDI Express network
without margin dilution
More flexible cost
basis for PeP
 New wage agreement and
structure provide security
and perspective for
employees as well as more
competitive basis for
sustainable growth in
Parcel Germany
Focus on sustainable
profit growth
 Significant advances made
towards more streamlined,
efficient and profitable
organization in both DGF
and DSC
We have laid the groundwork for successful execution of Strategy 2020
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 9
STRATEGY 2020: PERFORMANCE VERSUS EBIT TARGETS SO FAR
2013 base
2020 targets
(CAGR 13–20)
PeP
1,286
~3%
3.9%
DHL
2,002
~10%
6.3%
1,083
-
12.6%
DGFF
478
-
-15.6%
DSC
441
-
9.1%
0.8%
<0.5%
2016: 0.6%
2,865
>8%
6.8%
EBIT, EUR m
EXP
CC/Other
(% of Group revenue)
Group
1)
CAGR 2013–2016
1) As previously communicated: adjusted for 2013 EBIT of ~EUR 60m from transfer of assets from DHL to PeP, effective on Jan 1, 2014
PeP, Express and Supply Chain fully on track, Group so far held back by DGFF
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 10
WE FOCUS ON WHAT HAS MADE US SUCCESSFUL…
… TO FURTHER EXPAND MARGINS
+
Asset intensive: Express and PeP
EBIT
Margin1)
Asset light: DGFF and DSC
EBIT
margin1)
11.0%
4.1%
8.1%
8.6%
2.7%
2.1%
4.4%
1.8%
Q4 2010
Q4 2016
PeP
Q4 2010
Express
Q4 2016
DSC
DGFF
1) Rolling 12 month EBIT margins, DGFF adjusted for NFE write-off in Q3 2015
Group margin of 6.1% is up +250bp since 2010; +110bp since 2013
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 11
WE FOCUS ON OUR PLANET –
MAKE SUSTAINABILITY A COMPETITIVE ADVANTAGE
2050 TARGET ZERO EMISSIONS - 30% REDUCTION ALREADY ACHIEVED IN 2017
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 12
WE CONNECT ACROSS THE ORGANIZATION…
… TO ACHIEVE QUALITY LEADERSHIP AND SERVICE EXCELLENCE
Employees certified
Certified International Specialist
DHL Express
Certified Supply Chain Specialist
DHL Supply Chain
Certified International Forwarder
DHL Global Forwarding
Certified Freight Specialist
DHL Freight
PeP Expert
Post – eCommerce – Parcel
Certified Logistics Professional
CC / GBS / CSI
100%
40%
50%
95%
20%
Crossdivisional
eCommerce
sales team
Vendor-neutral
eFulfillment
50%
We are a diversified, Certified, family of divisions
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 13
GROW: WE EXPAND IN NEW SEGMENTS…
… TO ACHIEVE SUSTAINABLE, ABOVE MARKET GROWTH
Domestic
Delivery
+
GROW
PRIORITY #1
Become the leader
in e-commerce
related logistics
X-Border
Delivery
Own presence
With partners
Significant progress in expanding our e-commerce logistics leadership position
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 14
TAPPING NEW E-COMMERCE LOGISTICS OPPORTUNITIES:
E-FULFILLMENT
DHL Vendor-neutral E-fulfillment
Seamless Logistics Management
Quality Fulfillment, Worldwide
Transactional pricing
Fast and Flexible Shipping
Customer Benefits
•
Significant overall cost savings through partnership for fulfillment and shipping
•
Quality improvement, control over branding, packaging and inventory data
•
Decreased shipping time through best-in-class supply chain technology and fulfillment
Using the full range of our cross-divisional experience and assets allows us to
differentiate in e-fulfillment and provide unique customer benefits
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 15
STRATEGY 2020 HALF TIME REPORT
1
2
Strategy 2020 Half Time report (F. Appel, CEO)
A
Group Perspective
B
Divisional Agendas
C
Digitalization / Innovation
Strategy 2020 Cash Flow Considerations (M. Kreis, CFO)
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 16
PEP: PERFORMANCE RECAP
Parcel growth driving PeP revenue and EBIT growth
Revenue, EUR m
18,000
EBIT, EUR m
Parcel Revenue
Post Revenue
1,800
PeP EBIT
16,000
1,700
14,000
2016 revenue mix
1,600
12,000
1,500
10,000
1,400
8,000
1,300
6,000
Parcel
42%
Post
58%
1,200
4,000
1,100
2,000
0
1,000
2010
2011
2012
2013
2014
2015
2016
We have reached the inflection point where Parcel growth outstrips Postal decline and
we resume absolute EBIT growth while investing in international expansion
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 17
MINIMIZING IMPACT OF CONTINUOUS MAIL DECLINE:
COST FLEXIBILITY IS THE KEY OBJECTIVE
Joint delivery helps to optimize delivery of
declining mail volumes
 ~50% of Parcel
deliveries done
through joint delivery
with mail
Revenue mix shift also reflected in delivery
staff development
93,400
103,700
+8,000
Headcount, t/o
+5,400
Dedicated Parcel
Joint Delivery
-3,100
Joint Delivery of
Parcels and Mail
Dedicated Mail or
Parcel Delivery
Population density, increasing order
Delivery workforce
Mail Delivery
2010
2016
 Increase in dedicated Parcel and joint delivery drives
net hiring since 2010, as a result of strong Parcel growth
 New wage structure provides competitive basis for
sustainable growth in Parcel Germany
Mail volume decline is a given, so our focus is on compensating measures in order to minimize
the impact and allow Parcel to drive PeP growth
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 18
DHL PARCEL EUROPE: ONE PARCEL NETWORK FOR EUROPE
22 countries
One network
DHL Parcel
Connect
Own presence
One product
With partners
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 19
DHL eCOMMERCE: OUR PRODUCTS AND NETWORKS
DHL eCommerce capabilities based on three core pillars
Global, multi-site eFulfillment
Current network:
• US, Mexico, India, Hong Kong, Australia, Germany
Domestic B2C delivery
and returns
•
Current network
- US, Chile
- India, Thailand, Malaysia
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
International day-definite
delivery and returns
•
Currently servicing 220 countries from 11
origin countries (US, Canada, Mexico, Hong
Kong, Singapore, China, India, Australia,
Japan, New Zealand, Malaysia)
PAGE 20
EXPANDING OUR INTERNATIONAL E-COMMERCE FOOTPRINT
Selected domestic assets combined with global cross-border delivery and vendor-neutral eFulfillment
Parcel Europe
One Parcel network for Europe
Domestic Delivery &
Cross-Border
Cross-Border Origin
Multi-user, vendor-neutral
eFulfillment facilities
In-bound/Out-bound Sorting
Distribution Center/Central Hub
DHL eCommerce
Selective, expanding footprint in the
Americas and Asia-Pacific
Quick and selective international expansion of e-commerce logistics – in and outside of Europe
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 21
PEP: ECONOMICS OF INTERNATIONAL PARCEL EXPANSION
BUILD
FILL
Before Strategy 2020
Revenue
International eCommerce - Parcel
Hamburg
Berlin
Munich
EARN
+11.4% CAGR
EUR m
1,975
1,623
1,680
2013
2014
2,241
 Strong revenue growth driven
by e-commerce trend and portfolio
expansion
 EBIT contribution by 2020 will also
depend on trajectory of further
portfolio expansion
 Positive but not yet significant
EBIT contribution in 2020
Today
2015
2016
Building profitable international Parcel capabilities to establish sustainable, profitable
e-commerce growth
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 22
PEP: CONCLUSION & MANAGEMENT PRIORITIES
1
We focus
On expanding our parcel activities, driven by ecommerce, while managing the postal decline
We differentiate
Through our expertise, innovation and diversified
customer base
We grow
Profitably as the global e-commerce logistics leader
PeP fully on track to deliver on ~3% EBIT CAGR target
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 23
EXPRESS: PERFORMANCE RECAP
11.0%
7.9%
8.7%
9.2%
10.1%
10.2%
1,548
1,391
916
540
592
1,083
642
691
752
• Steady growth in both TDI as a % of revenues and
in TDI shipments per day
• B2B continues to grow driven by global GDP, with B2C as
an additional growing TDI vertical
1,260
1,110
Focus on TDI
809
• Global TDI market leadership further expanded based on
unique international network and customer centricity
Focus on Yield
• Strong discipline on yield management
2011
2012
TDI SpD
2013
2014
EBIT, EUR m
2015
2016
• Supporting sustained growth in both EBIT margin and
absolute EBIT
EBIT Margin
Our focus on TDI and yield lead to sustained EBIT and EBIT margin growth
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 24
EXPRESS: FOR OUR INTERNATIONAL NETWORK, X-BORDER B2C
IS A PROFITABLE GROWTH DRIVER
Portion of B2C TDI shipments has increased
over time
>10%
We grow B2C profitably because 90% of the KPIs
perfectly suit our network
1)
2013
1)
>20%
2016
Our TDI product is attractive to e-tailers because we offer…
 Unparalleled global door-to-door network
 Fast customs clearance
 Flexible delivery options
 Highest service quality & customer service
SpD
Volume growth drives better utilization
of existing network
WpS
Lower weight per shipment
RpK
Higher RpK related to lower WpS
First mile
More pieces per stop at pickup
Hub sort
Better utilization of existing infrastructure,
with high degree of conveyables
Airlift
Better utilization of existing capacity,
with lower WpS being advantageous
Last mile
Residential delivery to private households
1) Indications based on medium to large B2C customers of top 30 countries
X-Border e-commerce has developed into an important TDI vertical and profitable growth driver
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 25
EXPRESS: WE ARE THE MOST GLOBAL – INFRASTRUCTURE
INVESTMENTS SUPPORT SUSTAINABLE EBIT GROWTH
Examples
LEJ Hub
expansion
EMA Hub
upgrade
Upgrade South
Asia Hub (SIN)
CVG New flyer sort
and ramp expansion
Upgrade TYO Hub
and new gateway
Upgrade
Southern Hub
Upgrade
BRU Hub
123 DHL Hubs/Gateways
Capital investment into hubs and automation drives service quality, customer satisfaction and
success. We invest and grow EBIT margins simultaneously
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 26
EXPRESS: CONCLUSION & MANAGEMENT PRIORITIES
1
We focus
On driving profitable growth through TDI expansion,
with x-border e-Commerce as an additional growth
engine
We differentiate
Through our insanely customer centric culture and
investments into our hub network and automation
We grow
We are investing for growth while further expanding
our operating margin
Express contribution towards ~10% DHL EBIT CAGR fully on track
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 27
DHL SUPPLY CHAIN PERFORMANCE RECAP
EBIT and EBIT margin development
CAGR
EBIT, EUR m
200
EBIT margin
+9.1%
600
400
ROCE (incl. Goodwill) development
572
441
465
449
4.1%
3.1%
+400BP
6%
4%
18%
14%
15%
13%
2013
2014
2015
2%
0
0%
2013
2014
2015
2016
Asset mix year-end 2016 (100% = EUR 3.1bn)
Intangible Assets
(mainly customer lists)
Operating Assets
(mainly fixed assets)
14%
2016
DHL Supply Chain with its assetlight business expanded its ROCE
and entered the EBIT margin
target band
13%
73%
Goodwill
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 28
DSC: STRONG PROGRESS ALONG STRATEGY 2020 AND OUR
“EARNINGS GROWTH MODEL”
Revenue
Sales
Gross profit
EBIT
GROW
FOCUS
CONNECT
Shift the portfolio to address
high margin segments
Drive standardization and reduce
complexity to increase efficiency
Creating an effective organization
globally to enable change
Focus sectors: Automotive, Life
Sciences & Healthcare1), Tech
Labor productivity
Overhead development
Revenue, EUR
CAGR
EBIT per FTE, EUR
+5%
2013
CAGR
Indirect cost, EUR
+9%
2016
2013
CAGR
-2%
2016
2013
2016
1) Excluding NHS Supply Chain
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 29
DHL SUPPLY CHAIN - #1 IN GLOBAL CONTRACT LOGISTICS
Europe
 ~66,000 Employees
 21 Countries
Americas
 ~50,000 Employees
 13 Countries
Middle East &Africa
 ~6,000 Employees
 9 Countries
Asia Pacific
 ~25,000 Employees
 14 Countries
DHL Supply Chain presence
Other DPDHL Group operations
Largest warehousing
provider with >25m sqm*
Present in more than
50 countries
Global revenue leader
with EUR 14bn in 2016
~1,500 customers across
the globe
* Including owned, leased and operated space
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 30
DHL SUPPLY CHAIN – A POWERHOUSE IN E-COMMERCE LOGISTICS
e-Commerce for Supply Chain
is more than B2C delivery
Omnichannel fulfillment
is standard practice
Vendor-neutral
e-fulfillment with
DHL eCommerce
DSC serves B2C and
B2B e-commerce
channels
Besides pure e-tailers,
traditional enterprise
is transitioning rapidly
to e-Commerce
New international
business model meets
high customer
demand
IT roadmap
We
are the contract
re-defined
logistics
in earlypartner
stagesfor
of Strategy
Bricks AND
2020
Clicks, across all sectors
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 31
DSC: CONCLUSION & MANAGEMENT PRIORITIES
1
We focus
On achieving our 2020 margin targets by driving
greater levels of scalability and standardization
We differentiate
Through our global presence, leading expertise
and innovation capabilities
We grow
By targeting higher margins and shifting our portfolio
along sector, geographic and product lines
Supply Chain contribution towards ~10% DHL EBIT CAGR fully on track
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 32
DGFF: PERFORMANCE RECAP
Revitalize core business and
re-empower our people

In progress
+
Initiation of recovery of GP
Conversion Ratio and EBIT Margin
Absolute DGF GP and % GP-to-EBIT Conversion
EUR m

+
In progress 
Gradual & modular
IT improvements
DGFF Operating EBIT and Rolling EBIT Margin
EUR m
2,655
2,526
2,399
2,434
2,419
514
478
3.3%
17.1%
2.1%
16.9%
10.3%
9.7%
287
5.1%
293
172
2012
2013
2014
2015
2016
2012
2013
2014
1)
2015
2016
1) 2015 EBIT adjusted for EUR -353m one-offs
Operating improvement to continue as we recover former levels of profitability in a normalizing
market environment
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 33
DGF: CUSTOMER SATISFACTION AND EMPLOYEE SURVEY SCORES
ARE PROOF POINTS OF SUCCESSFUL TURNAROUND MOMENTUM
Revitalize core business and
re-empower our people

2)
1)
DGF customer satisfaction score
DGF, Employee Opinion Survey
Active leadership
73
73
Employee engagement
80
71
75
73
68
2012
2014
2015
2016
1) No survey held in 2013
We have re-established our service quality,
with customer scores improving in all regions
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
2012
76
76
78
76
72
71
72
70
2013
2014
2015
76
2016
2) Overlap of previous and updated Group-wide questionnaire in 2015
Key indicators confirm reinforced commitment
PAGE 34
DGF: LABOR PRODUCTIVITY TURNAROUND CONTINUED IN Q1,
HOWEVER OFFSET BY GP PRESSURE
AFR, Q1 yoy change
OFR, Q1 yoy change
Volume (ton)
Volume (TEU)
13.9%
0,2%
2.3%
-10.6%
1)
FTE
0.4%
FTE
3.9%
-5.1%
2.5%
Labor productivity (ton/FTE)
-5,7%
Q1 2015
Q1 2016
1)
-0.2%
0.2%
Labor productivity (TEU/FTE)
9.6%
-0,2%
6.4%
2.5%
Q1 2017
-0.3%
2,8%
Q1 2015
Q1 2016
6.1%
Q1 2017
1) FTE on average, incl. temporary staff & overtime
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 35
DGF IT RENEWAL: IMPORTANT RE-ORIENTATION INITIATED WITH
STRATEGY 2020
October 2015: Decision taken to stop NFE and launch alternative plan
Best-of-breed, step-wise approach adopted under IRR
(IT Roadmap and Renewal)
Multiple initiatives underway focusing both on short- and long-term benefits
involving both business process and IT enhancements
Focus on leveraging proven, commercially available solutions; combined with
selected existing applications
In Jan 2016: Selection of “Cargowise One” (CW1) as preferred option for new
TMS; pilots starting in 2017
IT renewal roadmap clearly defined
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 36
DGF: IT RENEWAL ROADMAP APPROACH
LEGACY SYSTEMS
OPERATIONS
SALES
CRM Tool
Maintain/Upgrade CRM
Legacy Quote
tool 1
Legacy System
Legacy Quote
tool 2
Legacy System
Legacy Quote
tool 3
Legacy System
Harmonized Quotation Tool
Online Quotation Tool
EDM (US)
EDM Global Roll-out
Legacy Transport
Management System
LOGIS
Legacy
Legacy
Legacy
Legacy
Transport Mgmt System
(proof of concept)
Pilot
Roll Out
Maximize scope
of use,
integration,
automation
Operational Irregularities
Management
Shipment Visibility Tools
A lower-risk approach to a more streamlined and integrated future
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 37
DGF: NEW GLOBAL TMS TO ENTER IN PILOT PHASE
Prep/Pre-Config
Entry Criteria
Prototype
Entry Criteria
PoC Configuration
Entry Criteria
PoC Operation
Entry Criteria
Pilots
Entry Criteria
1
2
3
4
5
Prep/Pre-Config
PoC
Configuration
Prototype
PoC Operation
Pilots
Today
May 2016
Aug 2016
Nov 2016
DGF specific
system
configuration
DGF Global base
system ready for
PoC Configuration
with interfaces to
key DGF systems
Start of PoC
operations
DGF Global system
ready for full-scale
country pilot
Q4 2017
Start of
Rollout
IT roadmap
TMS
implementation
re-definedabout
in early
to move
stages
into
of Strategy
pilot phase,
2020
in line with planned roll-out by 2020
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 38
DGF: WE ARE MARKET LEADERS IN SIZE AND SCOPE
Europe
 ~9,000 Employees
 491) Countries
 2032) Locations
Asia Pacific
 ~9,000 Employees
 371) Countries
 2562) Locations
Americas
 ~8,000 Employees
 361) Countries
 3952) Locations
Middle East &Africa
 ~2,000 Employees
 591) Countries
 472) Locations
DGF Present
Other DPDHL operations
Regional Head Office
Present in more thanChile
190 countries
Uruguay ~30,000
highly
qualified employees
>2.0m AFR export
tons transported2)
>3.0m TEUs
transported2)
New Zealand
1) Including agent countries 2) as of 2016
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 39
DGFF: CONCLUSION & MANAGEMENT PRIORITIES
1
We focus
On profit improvement while executing the step-bystep implementation of our IT renewal plan
We differentiate
Through our size, scope, service quality and
commitment towards our customers
We grow
In line with market volumes while continuing to
improve GP/EBIT conversion towards benchmark
DGFF positioned to catch up on its contribution to 2020 targets
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 40
HALF TIME REPORT STRATEGY 2020
1
2
Strategy 2020 Half Time report (F. Appel, CEO)
A
Group Perspective
B
Divisional Agendas
C
Digitalization / Innovation
Strategy 2020 Cash Flow Considerations (M. Kreis, CFO)
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 41
STRATEGY 2020 IS DESIGNED TO CONTRIBUTE TO BOTH,
GLOBALIZATION AND DIGITALIZATION
GLOBALIZATION
DIGITALIZATION
Increased emerging markets footprint
Accelerating impact of automation
Growth in e-commerce boom market
New business models emerging
Global growth trends well addressed
Technologic development offers huge
opportunities to exploit and explore
In addition: Zero-emission logistics by 2050
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 42
NEW TECHNOLOGIES DRIVE BIG OPPORTUNITIES TO EXPLOIT AND
EXPLORE: INNOVATION IS THE SOLUTION
DHL Trend – Radar
 Identifying trends
 Assess potential industry impact
 Gauge relevance time horizon
Feeding into group and divisional
pipeline & strategy
In order to stay ahead of the curve, we have to be creative and willing to self-disrupt
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 43
DIGITALIZATION OFFERS FUNDAMENTAL OPPORTUNITIES TO IMPROVE
AND EXPAND CURRENT BUSINESS PORTFOLIO
Technology
exploitation
Apply digital technology in our
existing business footprint
to deliver superior customer
experience and increase efficiency
Business
exploration
i
I
Grow into future logistics verticals
by incubating ideas and investing in
new business models
Culture and Capabilities
Digitalization also requires adaptation of corporate culture and capabilities
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 44
TECHNOLOGY EXPLOITATION: ROBOTICS & AUTOMATION
MULTIPLE ROBOTICS PILOTS
 Collaborative robots for
packing & kitting
 Autonomous trolleys for
warehouse automation
 Task-to-person robots for
picking assistance
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 45
TECHNOLOGY EXPLOITATION: DRONES & UAV
MULTIPLE DRONE PILOTS
 For parcel delivery, also directly
to Parcel Locker for automated
delivery
 Within warehouses for inventory
management and stock-taking
 Around warehouse perimeter, for
security and incident
management
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 46
TECHNOLOGY EXPLOITATION: BIG DATA
DATA ANALYTICS APPLICATIONS
 Usage of internal data and automated
machine learning algorithms allow to
improve efficiency, increase revenue
and reduce costs
Some real-life examples:
 Predictive analytics as basis for
greater customer loyalty, lower churn
and thereby additional orders (PeP,
DGFF, EXP)
 Automated classification of shipments
helps to improve delivery performance
and customer satisfaction (EXP)
 Forecasting seasonal / daily volumes
to improve asset utilization and
workforce planning (DGFF, PeP, DSC,
EXP)
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 47
BUSINESS EXPLORATION: DISRUPTIVE DIGITAL TECHNOLOGY
SALOODO! FREIGHT PLATFORM
 Connects shippers and transport
providers on demand through
digital freight platform
 Fast and reliable way to manage
road freight within Germany or
from Germany throughout
Europe
 A dynamic transport quote
calculator assists transport
companies to make competitive
quotes for each shipment
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 48
BUSINESS EXPLORATION: EMISSION FREE DELIVERY
DHL STREETSCOOTER
Development Timeline:
2011
Commitment to own e-vehicle
2014
Acquisition of
Streetscooter GmbH
2016
First vehicles in delivery use
2017
Expansion of production,
also for external customers
2500
Streetscooters in
daily operating
use
Production
capacity to be
increased to
20,000/y
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 49
STRATEGY 2020 HALF TIME REPORT CONCLUSIONS
1
Global Macro and strategy
The economic background and our industry
assumptions – strategy remains valid & achievable
Divisional recap and priorities
Divisions on track: executing strategy while growing
EBIT and margins - DGFF still catching up
Financial KPIs and Cash Flow
Strong, improving cash generation allows healthy
balance of growth investments and shareholder returns
We confirm our 2020 strategic targets and guidance
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 50
STRATEGY 2020 HALF TIME REPORT
1
2
Strategy 2020 Half Time report (F. Appel, CEO)
A
Group Perspective
B
Divisional Agendas
C
Digitalization / Innovation
Strategy 2020 Cash Flow Considerations (M. Kreis, CFO)
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 51
STRATEGY 2020: FOCUS TOPIC CASH FLOW
Focus on cash flow generation
Continue to improve visibility and consistency in
elements of EBIT to OCF conversion
Effective capital allocation
Maintain stringent decision making process on capital
allocation to maintain healthy balance between growth
investments and shareholder returns
Commitment to Finance Policy
Free Cash Flow drivers support confirmed Finance
Policy
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 52
IMPROVED OCF GENERATION CREATES BASIS FOR BALANCED
INVESTMENT INTO GROWTH AND SHAREHOLDER RETURNS
1)
EUR, cumulative 2014 - 2016
~9.9bn
+1.6%
ROCE
increase
Increasing
dividend:
FY16 up
+31% vs
FY13
Excess
liquidity,
basis for
first-ever
SBB
program in
2016/17
~5.2bn
~3.0bn
Operating cash
flow
Net capex
spend
Dividend
~1.5bn
Excess liquidity
1) Adjusted for EUR 1bn pension funding in 2016
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 53
EBIT TO OCF BRIDGE 2013–2016
+
EBIT
-
D&A
CHANGE IN
1)
PROVISIONS
-
TAXES
+
CHANGE IN W/C
=
1)
OCF
EUR m
3,491
3,444 3,439
2,989 3,040
2,865 2,965
2,411
1,665
1,337 1,381
1,377
788
2013 2014 2015 2016
-89
-495
-500
-698
-21
-75
2013 2014 2015 2016
-561 -548 -585 -528
-799
1) 2016 provision change and OCF adjusted for EUR 1bn pension funding
EBIT growth is and remains the most important OCF driver
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 54
OCF: TOTAL CASH OUT FOR PENSION PLANS DECLINING, AS
EXPECTED
EUR m
Defined
contribution
(DC):
Cash out =
staff costs in
EBIT
Defined
Benefit
(DB):
Staff costs +
Change in
1)
provisions
2012
2013
2014
542
538
531
Civil
servants (in
GER)
Hourly
workers and
salaried
employees
mainly
outside GER
Hourly
workers and
salaried
employees
2015
516
317
286
Expected trend
2016
493
305
Steady decline: 50% cost reduction
expected by 2027 due to civil servants
going into retirement
Slight increase reflecting business growth
and selected shifts from DB to DC plans
276
238
566
468
Cash out with declining trend, reflecting
demographics and 2012/16 pension funding
431
457
428
410
282
268
264
266
Change in provisions (Cash out in excess of EBIT)
156
186
163
193
162
Current service costs (in staff costs)
1) Cash Out = benefit payments + employer contributions = staff costs + change in provisions, excluding one-offs
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 55
OCF: OTHER PROVISIONS DEVELOPED IN LINE WITH EXPECTATIONS,
WITH NO CHANGE IN TRENDS EXPECTED
Trend, as
expected1)
2012
2016
Other employee benefits
1,109
771
Further down reflecting net utilization
Restructuring provisions
681
253
US restructuring provisions further tailing off
Technical reserves
591
670
Increase with business growth
Postage stamps
450
242
Lower as letter volumes continue to decline
Tax provisions
127
113
No significant change expected
Miscellaneous provisions
667
772
No specific trend expected
Total
3,635
2,821
EUR m
OUTLOOK: drivers intact, trends expected to continue
Further decrease, although decelerating
1) IR Tutorial, Pension and Provisions Accounting, April 2013
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 56
OCF: MAINTAIN TIGHT MANAGEMENT OF WORKING CAPITAL ON
OUR GROWTH PATH
Key WC drivers: Receivables (DSO) & payables (DPO)
 Divisional business models and payment
mechanisms differ
 DPO-to-DSO gap widened, with positive contributions
from all Divisions
Group payment terms evolution
DPO
Days
2016 vs 2012
+13 days
+3 days
2012
 WC HAS REACHED VERY EFFICIENT LEVELS
Main objectives going forward:
 Keep WC increase below sales growth
 Improve overall OCF forecasting and reduce seasonality
DSO
2013
2014
2015
2016
Group WC change, in EUR m
EUR m
+788
-422
-89
-21
2012
2013
2014
-75
2015
2016
Working capital requires relentless focus. Nevertheless, expect slight increase, although below
sales growth as we continue our growth path
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 57
OCF TO FCF BRIDGE 2013–2016
OCF
1)
+
NET INTEREST
-
NET CAPEX
-
NET CASH M&A
=
FCF 1)
3,444 3,439
EUR m
2,989 3,040
1,724
1,669
1,345
1,444
238
2013 2014 2015 2016
-111
-143
-29
-5
-88
-2
-206
2013 2014 2015 2016
-1,204
1) 2016 provision change and OCF/FCF adjusted for EUR 1bn pension funding
-1,550
-1,701
-1,929
OCF increase allows to balance growth investments and rising shareholder returns
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 58
CAPEX: RECENT HISTORY AND OUTLOOK
Increase driven by
investments in B2C
national/international
+
2017 peak,
plateauing thereafter
Capex,
EUR m
+
Low levels
reflecting minimal
capital intensity
+
Slight upward trend
from new business –
still remains mostly
asset light
GROUP CAPEX
902
590
328
55
PeP
FY 2013
=
FY 2014
Express
FY 2015
FY 2016
Global Forwarding,
Freight
FY 2017e
Supply Chain
FY 2017
guidance
EUR ~2.3bn
FY 2018–2019
projection
Slight increase
vs. 2017
FY 18e-19e
1) 2016 provision change and OCF adjusted for EUR 1bn pension funding
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 59
CAPEX BY DIVISION – WHERE DOES IT GO?
2016 Capex,
EUR m
902
Other
590
Vehicles
Other
Hubs &
Gateways
Post
Parcel
International
Parcel
Germany
Aviation
328
55
Other
IT
Transportation
Other
Facilities
Warehousing
IT
PeP
Express
DGFF
DSC
We invest in infrastructure and improving customer service and satisfaction to foster
sustainable profit and cash flow growth
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 60
HOW DO WE DECIDE ON CAPEX? CAPITAL ALLOCATION PROCESS
Strategic fit of strategic initiatives with Group's overall strategy
(as defined by Corporate Board) based on e.g.
 Fit to DPDHL capabilities
 Provide a differentiated
offering to customer
 Clearly addresses identified
 Priority of targeted matrix cells
trends and business needs
Strategy
Focus of DPDHL lies on following financial targets
 Profitable growth
Overall risk profile based on
Evaluation
criteria
 Sunk investment until proof of concept
 Cash generation
 Capital efficiency
Financial KPIs best reflecting our financial targets
 Exit/residual cost
Financials
Risk
 Sensitivity of business case assumptions
 Other key risks
 NROI as high-level ranking/prioritization factor
 NPV as key optimization factor
 EBIT as control/reporting factor
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 61
CREATING VALUE FOR STAKEHOLDERS BY INVESTING FOR GROWTH
ROCE vs WACC
20.0%
19.5%
17.9%
17.9%
17.2%
16.0%
Spread of
ROCE vs
WACC
widening
13.4%
12.0%
8.0%
4.0%
2013
2014
ROCE (adj. for 1-offs)
2015
ROCE
2016
WACC (Internal View)
ROCE = LTM EBIT / (Average LTM Business Operating Assets + Goodwill)
We create value for all stakeholders through targeted growth investments
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 62
SUMMARY FREE CASH FLOW DRIVERS
Cash Flow Statement
Expected trend
Main Drivers
EBIT
Group EBIT guidance, 2017: EUR ~3.75bn; 2013-20: >8% CAGR
Depreciation
Gradual increase reflecting capex spend
Chg in provisions
Total provisions still expected to come further down through net utilization.
Cash-outs expected to trend flat to slightly down yoy
WC
Increasing as business grows but strong focus on working capital management
Income taxes
Increase reflecting EBIT growth
Net capex
Plateauing around current levels. Further small yoy increases possible subject to growth
opportunities, but no further significant step up expected
Net M&A
Remains opportunistic & bolt-on
FCF
Expect to generate excess liquidity every year (FCF > dividend payment)
EBIT increase allows to balance growth investments and rising shareholder returns
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 63
WE COMMIT TO OUR UNCHANGED FINANCE POLICY
Dividend of EUR 1.05 for FY2016
FINANCE POLICY
 Target / maintain rating BBB+
 Dividend payout ratio to remain
between 40–60% of net profit
(continuity and Cash Flow
performance considered)
 Excess liquidity will be used for
share buybacks and/or
extraordinary dividends
and/or
potential additional pension
funding (if not by other means)
EUR 1.05
Underlying Payout Ratio1)
EUR 0.65 EUR 0.70 EUR 0.70
59%
58%
53%
EUR 0.80
EUR 0.85 EUR 0.85
49%
50%
46%
48%
60%
40%
2010
2011
2012
2013
2014
2015
2016
Dividend payments of EUR ~1.27bn to DPDHL
shareholders on May 04, 2017
1) Adjusted for Postbank effects as well as non-recurring items when applicable
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 64
CFO CONCLUSION: STRATEGY 2020 FCF DRIVERS
Half Time Performance
2020 Goals for the second half
Sustained EBIT Growth momentum flowing
through to cash generation
!
Continue to deliver on EBIT and cash flow
generation
Significant investments in growth opportunities
!
Further refine visibility and planning &
controlling to support growth agenda
!
Maintain balance between shareholder returns
and growth investments
Commitment to current Group structure
Commitment to shareholder returns regarding
dividend growth and excess liquidity utilization
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 65
STRATEGY 2020 HALF TIME REPORT
1
Strategy 2020 Half Time Report (F. Appel, CEO)
2
Strategy 2020 Cash Flow Considerations (M. Kreis, CFO)
3
Conclusion Half Time Report (F. Appel, CEO)
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 66
INVESTING TO CREATE SUSTAINABLE GROWTH AND VALUE
We are delivering EBIT
and Cash Flow growth
We invest significantly to
fully utilize our sustainable
growth potential whilst
generating attractive
shareholder returns
We continue to innovate
and exploit & explore
digital opportunities
On track to deliver on 2020 strategic targets and guidance
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
PAGE 67
DPDHL INVESTMENT PROFILE
Global Powerhouse of Logistics
Clear Strategic Direction
Sustainable Growth Momentum
Our roadmap for margin and profit
improvement
Unique position for e-commerce
Increasing margins and returns
Investing For Growth
Delivering attractive returns
Divisional self-help agendas
Innovation, quality & customer
centricity
Committed to FCF growth and
improving shareholder returns
STRATEGY 2020 HALF TIME REPORT | LONDON | 11 MAY 2017
68
Half Time Report
Frank Appel (CEO); Melanie Kreis (CFO)
11 May 2017