Analyst Call, Q2 2016 results Lawrence Rosen – CFO DPDHL 03 August 2016 Q2 2016 HIGHLIGHTS Strong EBIT growth reflects continued good operating performance as well as prior year strike effect PeP EBIT strongly up, driven mainly by Parcel growth and stamp price increase while international parcel network investments continue Express EBIT growth reflects continued strong TDI volume development and yield management, offsetting FX headwinds DGFF: further operating improvements driven by turnaround measures while market growth remains subdued Supply Chain with further attractive new business wins while continuing to invest in its restructuring agenda Strong Q2 cash flow performance. Net debt increase reflecting usual timing of dividend payment as well as pension funding Key growth trends intact and delivering, 2016/20 EBIT guidance confirmed DPDHL GROUP | Q2 2016 RESULTS | 03 AUGUST 2016 PAGE 2 GROUP P&L Q2 2016 EUR m Revenue Q2 2015 Q2 2016 Chg. Management comments Reflecting negative FX, lower fuel prices and the new NHS contract structure. Excluding these effects, Group revenue is +4.1% above LY 14,700 14,190 -3.5% 537 752 +40.0% Strong increase reflects continued good growth in Parcel and Express, DGF turnaround as well as prior year one-off effects t/o PeP 75 247 >100% Best PeP Q2 EBIT since Q2 2008. Strong increase reflects very good operating performance in Post and Parcel as well as prior year strike effect t/o DHL 535 591 +10.5% Continued growth path in Express and turnaround in DGF; Supply Chain as planned with further restructuring charges -101 -78 +22.8% Reflects lower interest cost on provisions and positive FX effects Taxes -65 -94 -44.6% Increase due to higher EBIT, tax rate 14% as expected Cons. net profit1) 326 541 +66.0% Net profit and EPS increase as a result of strong EBIT growth and improved financial result EPS (in EUR)2) 0.27 0.45 +66.7% EBIT Financial result 1) Attributable to Deutsche Post AG shareholders; 2) Undiluted DPDHL GROUP | Q2 2016 RESULTS | 03 AUGUST 2016 PAGE 3 FREE CASH FLOW Q2 2016 Pension funding of EUR 1bn affects OCF and FCF; strong operating cash generation Q2 2015 Q2 2016 Pension funding Q2 2016 adj. Cash from operating activities before changes in Working Capital 335 -205 -1,000 795 Changes in Working Capital -69 44 - 44 Net cash from operating activities after changes in Working Capital 266 -161 -1,000 839 -382 -412 - -412 Net M&A 219 0 - 0 Net Interest -36 -27 - -27 2015 disposal proceeds of Sinotrans stake (DGF) and King´s Cross development stake (DSC) were recognized in net M&A 67 -600 -1,000 400 FFO/Debt at 25.2% (March 31: 26.5%) EUR m Net Capex Free Cash Flow DPDHL GROUP | Q2 2016 RESULTS | 03 AUGUST 2016 OCF is lower as a result of EUR 1bn pension funding which flows through the change in provisions (while proceeds from debt financing are not recognized in FCF) Excluding this effect, OCF significantly improved driven by EBIT increase as well as lower provision utilization and positive working capital contribution Cash out for Capex increasing as planned PAGE 4 NET DEBT (-)/LIQUIDITY (+) Q2 net debt increase sees usual Q2 pattern with annual DPDHL dividend payment of EUR 1.027bn as well as an increase due to pension funding and start of share buyback program -1,093 648 -1,021 -32 -956 Inc. EUR -1 bn pension funding effect -1,027 Net debt (Dec 31, 2015) OCF before change in W/C Changes in W/C Net capex Net interest in EUR m Incl. return of cash collateral from EU state aid EUR 378m and EUR -190m for share buy back program Dividend Paid -27 Net Other effects incl. M&A -3,508 Net debt (Jun 30, 2016) N.B: Net pension provision down to EUR 6.092 bn (from EUR 6.6 bn at end of Q1) reflecting EUR 1 bn funding and discount rate decline during Q2 (funding ratio now at 67% vs 62% at end of Q1) DPDHL GROUP | Q2 2016 RESULTS | 03 AUGUST 2016 PAGE 5 PeP: STRONG OPERATING PERFORMANCE IN ADDITION TO BASE EFFECTS Mail Communication revenue EUR m EUR m +3.9% 1,518 Dialogue Marketing revenue +1.0% 1,577 Q2 2016 Q2 2015 503 508 Q2 2015 Q2 2016 Parcel Germany revenue EUR m Parcel Germany volumes m units +15.3% 1,141 990 Q2 2015 Q2 2016 Parcel Europe revenue1) 255 286 Q2 2015 Q2 2016 DHL eCommerce revenue2) EUR m EUR m +12.2% +8.5% +18.1% 209 293 318 177 Q2 2015 Q2 2016 Q2 2015 Q2 2016 Business Highlights German Post and Parcel yoy comparison distorted by base effect from strike in Q2 15 and three additional working days. Mid-term Mail Communication volume guidance unchanged for 2-3% decline p.a. Letter price increase continues to more than compensate related elasticity effects Parcel Germany with continued strong growth in volume and revenue Expansion of international parcel activities continues to deliver strong growth contribution with organic growth of 20% in Europe and 11% in DHL eCommerce Postbus business sale effective as of Oct 31st 1) Parcel Europe ex Germany; 2) Parcel outside Europe DPDHL GROUP | Q2 2016 RESULTS | 03 AUGUST 2016 PAGE 6 DHL PARCEL: LARGEST PARCEL CENTER IN GERMANY JUST OPENED Cementing German Parcel market leadership Obertshausen highlights Sorting capacity of 50,000 parcels per hour 37,000 square meters of indoor floor space >6 kilometers of sorting and conveyor lines >400 sorting terminal points Additional service benefits for both senders and recipients Rapid throughput allows later cut-off, supporting even more flexible delivery options and times Even more detailed shipment tracking and shipment information DPDHL GROUP | Q2 2016 RESULTS | 03 AUGUST 2016 PAGE 7 DHL PARCEL: SAME-DAY B2C SERVICE SINCE 2012; TIME-WINDOW OFFERING EXPANDED SAME-DAY Established market leader Same-Day service launched in 2012 Available to 30m consumers in metropolitan areas today Attractive niche with broad customer base Monday-Saturday delivery, incl. temperature-controlled service NEW: desired time-window starting as early as 10am NEXT-DAY Evening time-window delivery (6-9pm), with recipient notification with 30 minute accuracy NEW: extension of time window delivery to nationwide coverage throughout Germany DPDHL GROUP | Q2 2016 RESULTS | 03 AUGUST 2016 PAGE 8 PeP – DIVISIONAL RESULTS Q2 2016 EUR m Q2 2015 Q2 2016 Chg. Management comments Strong revenue increase due to growing German and international parcel business, stamp price increase, last year’s strike effect as well as 3 additional working days. Growth excl. FX was +8.1% 3,712 4,000 +7.8% 75 247 >+100% Even adjusting for last year’s Q2 strike effect of ~EUR -100m, strong EBIT increase driven by Post & Parcel in Germany 70 248 >+100% Besides strike base effect, growth is driven by parcel business, stamp price increase and three additional working days 5 -1 n.a. As expected, international investments offsetting strong topline growth (+12.1%) and underlying profitability Operating Cash Flow 169 -601 n.a. Reflecting change of provisions from EUR 1bn pension funding, underlying improvement strong due to higher EBIT and good working capital management Capex 127 113 -11.0% Revenue EBIT PeP t/o Germany t/o International eCommerce - Parcel DPDHL GROUP | Q2 2016 RESULTS | 03 AUGUST 2016 Capex lower due to timing effects, still primarily oriented towards Parcel network expansion in Germany and Europe PAGE 9 EXPRESS: STRONG, BROAD-BASED TDI GROWTH CONTINUES Time Definite International (TDI)1) Revenues per day in EUR m Business Highlights +4.3% 43.8 42.0 Q2 2015 Q2 2016 Time Definite International (TDI) Shipments per day ‘000s +8.2% 820 758 Q2 2015 Q2 2016 Continued strong TDI volume growth of 8.2% as global B2B growth driven by our unparalleled international footprint and market share gains is supplemented by strong growth in cross-border B2C Volume growth continues to be supported by all regions: Americas (+9.0%), Europe (+8.9%), Asia/Pacific (+6.9%) and MEA (+6.6%) Growth in revenue/day remains well below volume/day due to significantly lower fuel surcharges yoy. Yield management initiatives continue to bear fruit, including additional countermeasures to manage FX headwinds 1) Currency translation impacts are eliminated. Data aggregated with same currency rate DPDHL GROUP | Q2 2016 RESULTS | 03 AUGUST 2016 PAGE 10 EXPRESS – DIVISIONAL RESULTS Q2 2016 EUR m Revenue Q2 2015 3,455 Q2 2016 3,523 Chg. Management comments +2.0% Strong TDI volume increase continues to drive Express growth. Revenue up +7.2% when adjusting for FX and lower fuel surcharges EBIT 376 420 +11.7% Strong EBIT growth driven by continued TDI volume growth as well as yield and cost initiatives. EBIT margin increase to a record level of 11.9%, supported by the low reported revenue growth Operating Cash Flow 262 400 +52.7% Reflecting good EBIT performance and working capital improvements Capex 154 205 +33.1% Acceleration in line with planned investments into international hub and gateway infrastructure upgrade DPDHL GROUP | Q2 2016 RESULTS | 03 AUGUST 2016 PAGE 11 GLOBAL FORWARDING, FREIGHT: FOCUS REMAINS ON TURNAROUND Business Highlights Air freight gross profit Air freight ‘000s Tons -4.7% EUR m -4.5% 933 889 246 235 Q2 2015 Q2 2016 Q2 2015 Q2 2016 Ocean freight ‘000s TEU1) Ocean freight gross profit EUR m +14.2% +3.1% 750 773 Q2 2015 Q2 2016 155 177 Q2 2015 Q2 2016 Air freight volume continues to decline as we retained our selective stance in overall subdued market Ocean volume growing close to market, showing some improvement in both Asia and Europe (import and export) Selective focus on profitable volumes continued to pay off with divisional GP up +1.4% Turnaround measures continue to drive improving performance on GP and EBIT level 1) Twenty Foot Equivalent Unit DPDHL GROUP | Q2 2016 RESULTS | 03 AUGUST 2016 PAGE 12 DGFF: TURNAROUND CLEARLY VISIBLE, BUT STILL MORE TO DO DGFF: EBIT margin and EBIT / GP conversion 2013/14: NFE implementation and organizational change 3.2% 2.0% 2.0% 13.2% 1.2% 8.4% 2013 2014 Q2 15: turnaround initiated; Q3 15: NFE write-down 1.5% 4.9% 6.0% 2015 (excl. one-offs) Q1 2016 7.6% Q2 2016 2016: Turnaround delivering; new IT plan launched EBIT Margin EBIT / GP conversion DGF performance trough in H1 2015; since then turnaround measures are delivering expected first benefits: - Restructuring measures taken in Q2 15 have lowered fixed cost base - NFE roll-back in pilot countries accomplished, operating performance improving but still well below historic highs - Revamped organization structures have lead to improved cost/service performance, although further improvement targeted New IT roll-out combines upgrade & simplification of existing IT landscape with new off-the-shelf TMS - Combined roll-out will be gradual over 2016-19e with expected EUR ~60m opex and EUR ~10m capex p.a Mid-term: back to 2013 historic divisional margins – long term: close EBIT/GP conversion gap DPDHL GROUP | Q2 2016 RESULTS | 03 AUGUST 2016 PAGE 13 GLOBAL FORWARDING, FREIGHT– DIVISIONAL RESULTS Q2 2016 EUR m Revenue Gross Profit EBIT Operating Cash Flow Capex Q2 2015 Q2 2016 Chg. Management comments 3,778 3,425 -9.3% Revenue decrease driven by lower freight rates, volume decline and FX effects. Decline of -3.1% if adjusted for FX and lower fuel prices 897 910 +1.4% Selective stance drives slight increase in GP despite volume decline in AFR 40 69 +72.5% EBIT increase driven by turnaround measures and GP focus 125 102 -18.4% Continued good conversion of EBIT into OCF 34 12 -64.7% Decrease due to expected yoy lower IT spend and timing of planned 2016 investments DPDHL GROUP | Q2 2016 RESULTS | 03 AUGUST 2016 PAGE 14 SUPPLY CHAIN: STEADY BUSINESS PROGRESS AND ORDER INTAKE New signings, EUR m1) Business Highlights 283 296 Q2 2015 Q2 2016 Changed accounting treatment of renewed NHS contract lead to EUR 480m of revenue no longer recognized in Q2 16 vs Q2 15 – basis effect to lapse as of Q4 16 1) Annualized revenue Revenue by sector Q2 2016 Others Retail Financial Services Engineering & Manufacturing Life Sciences & Healthcare 4% 5% 9% 25% 10% 11% Order intake slightly up yoy driving H1 intake on par with 2015. Main orders in Q2 signed in Automotive and Consumer sectors Gains from King´s Cross stake sale (EUR 63m in Q1 2016) as planned used for further restructuring expenses (Q2 16: EUR 16m, Q1 16: EUR 25m) 23% Technology 13% Consumer Automotive DPDHL GROUP | Q2 2016 RESULTS | 03 AUGUST 2016 PAGE 15 SUPPLY CHAIN – DIVISIONAL RESULTS Q2 2016 EUR m Revenue Q2 2015 4,045 Q2 2016 3,541 Chg. -12.5% Growth of +4.4% adjusted for FX, fuel and the change in revenue recognition of the NHS contract; reflecting new business wins Q2 2016 EBIT includes EUR 16m restructuring costs. Adjusted performance on par with previous year as restructuring benefits and base business growth was offset by yoy lower real estate gains EBIT 119 102 -14.3% Operating Cash Flow -34 155 >+100% 63 84 +33.3% Capex Management comments DPDHL GROUP | Q2 2016 RESULTS | 03 AUGUST 2016 Overall improvement in WC plus adverse phasing effects in previous year Capex increased in connection with new customer contracts PAGE 16 GUIDANCE CONFIRMED FOR 2016/ 2020 EUR bn 2016 2020 PeP > 1.3 ~ 3% CAGR 2013-20 DHL 2.45-2.75 ~ 10% CAGR 2013-20 CC/Other ~ -0.35 < 0.5% of group revenue Group 3.4-3.7 > 8% CAGR 2013-20 FY 2016: Free Cash Flow (excl. EUR 1bn pension funding recognition) to exceed dividend payment (FY15 dividend) Tax rate ~14% Gross Capex of around EUR 2.2bn DPDHL GROUP | Q2 2016 RESULTS | 03 AUGUST 2016 PAGE 17 WRAP UP Strong H1 2016 sets the stage for delivery of 2016 guidance E-commerce megatrend continues to drive PeP and Express volume and revenue growth Continued progress in operational and margin recovery at DGF Good FCF development; unchanged finance policy Clear agenda driven by our long-term strategic and financial goals: Leveraging growth in e-commerce and emerging markets, based on unrivalled, diversified business portfolio Clear roadmap for margin and profit improvement Flexible balance sheet and improving cash generation underpin investments and payout policy DPDHL GROUP | Q2 2016 RESULTS | 03 AUGUST 2016 PAGE 18 CAPITAL MARKETS TUTORIAL WORKSHOP London, Oct 7th, 2016 Hosted by Presented by MelanieKreis (Group CFO) Thomas Ogilvie(Group Head of Corporate Development) Achim Dünnwald (CEO DHL Parcel) Katja Herbst (CSO DHL Parcel) John Pearson (CEO DHL Express Europe) Charlie Dobbie (EVP Global Net Op´s, IT&Aviation DHL Express ) DPDHL GROUP | Q2 2016 RESULTS | 03 AUGUST 2016 PAGE 19
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