Deutsche Post DHL remains favoured name among logistics stocks · Deutsche Post DHL remains favoured name among logistics ... the first time for container traffic from Asia to Europe

January 18, 2012

Research Report: Sector update

Transport/Logistics

Deutsche Post DHL remains favoured name among logistics stocks

www.davy.ie Bloomberg: DAVY<GO> Research: +353 1 6148997 Institutional Equity Sales: +353 1 6792816 Davy Research

Stephen Furlong [email protected] / +353 1 6148924

Joshua Goldman, PhD [email protected] / +353 1 6148997

Freight data weak but US integrators continue to perform • Air freight markets have contracted mid-single-digits since

January 2011, according to the International Air Transport Association (IATA). Although there is no obvious inventory overhang, pessimistic expectations are driving down the need for air freight. The latest data also show declines (-3.75%) for the first time for container traffic from Asia to Europe. In a downturn, air cargo volumes typically fall earlier than container shipping volumes.

• However, in its Q2 earnings report, market bellwether FedEx maintained its FY2012 earnings guidance (32.6% growth at the mid point). Despite weak volumes, capacity adjustments on the Asian trade lane and, above all, power in the supply chain should lead to unit revenue rises through fuel surcharges, rate increases and product mix. UPS reports its Q4 results on January 31st, and we expect the KPIs to be positive due to capacity adjustments in the marketplace (2011 guided EPS $4.15-4.4) and 10-15% EPS growth from 2011-2016. Deutsche Post DHL is favoured name among logistics stocks

• TNT Express and PostNL have lost almost one-third and two-thirds of value respectively since the end-May demerger reference price. We have further adjusted downwards our underlying operating profit for TNT Express for FY2011 and FY2012 to €221m and €263m (from €230m and €308m) due to losses in Brazil, but we retain our 'neutral' rating given shareholder activism, the potential for newsflow on the Brazilian operations and franchise value in EMEA. With no cash dividend on offer, it is difficult to be positive about PostNL as a dividend play.

• Deutsche Post DHL remains our preferred logistics play. Its 7% dividend yield, net cash balance sheet, emerging market exposure and restructuring leave it well placed.

Please refer to important disclosures at the end of this report.

J&E Davy, trading as Davy is regulated by the Central Bank of Ireland. Davy is a member of the Irish Stock Exchange, the London Stock Exchange and Euronext. For branches in the UK, Davy is authorised by the Central Bank of Ireland and subject to limited regulation by the Financial Services Authority. Details about the extent of our regulation by the Financial Services Authority are available from us on request. All prices are as of close of business January 16th unless otherwise indicated. All authors are Research Analysts unless otherwise stated. For the attention of US clients of Davy Securities, this third-party research report has been produced by our affiliate, J & E Davy.

Ratings Deutsche Post DHL Outperform (26/01/11)

TNT Express Neutral (07/10/11)

Previously Outperform (16/06/11)

PostNL Neutral (16/06/11)

For full details of current and previous ratings see www.davy.ie/ratings.

Valuation Dec 11E Dec 12F Dec 13F

Deutsche Post

P/E 10.6 9.0 8.1

FCF yield (pre div) (%) 6.7 8.5 10.3

Dividend yield (%) 5.6 5.7 6.3

Price/book 1.4 1.3 1.2

EV/EBITDA 3.1 3.0 2.7

PostNL

P/E 5.6 5.4 4.8

Dividend yield (%) 7.0 N/A N/A


EV/EBITDA 4.1 4.1 3.8

Group interest cover (x) 3.2 3.3 3.7

Debt/EBITDA (x) 1.9 2.0 1.8

TNT Express P/E 42.4 26.4 14.5

FCF yield (pre div) (%) 1.1 1.4 4.6

Dividend yield (%) 0.9 1.5 2.8


EV/EBITDA 14.0 7.3 5.3

Group interest cover (x) 4.7 4.9 0.7

Debt/EBITDA (x) N/A N/A 0.3

Geographic/divisional analysis Dec11E Dec12F Dec13F

Deutsche Post operating profits (€m)

Mail 1103.6 1057.4 1050.3

Express 919.5 961.7 1142

Forwarding 416 390.2 433.3

Supply chain 406.8 445.5 468.4

Corporate/other -396.6 -397.3 -394.7

Total 2449.3 2457.5 2699.3

PostNL underlying cash op. inc. (€m) Mail NL 93 102 135.9

Parcels 88.3 96.7 84.6

International 4 10.8 28.7

Other -11 -14.2 -14.9

Total 174.3 195.3 234.3

TNT Express underlying operating profit (€m)

EMEA 372 333 373

Asia Pacific -34 10 55

Americas -123 -55 8

Other 6 -25 -11

Total 221 263 425

Source: Davy

mailto:[email protected]

mailto:[email protected]

Research Report: Transport/Logistics January 18, 2012

2 Davy Research

TNT Express – operationally challenged but restructurings to come

Next catalyst – FY results February 21st TNT Express had a difficult year in 2011 and looks exposed to macro news from Europe. EMEA, the main driver of the business, has been affected by negative mix as International Economy has grown but the premium product (International Express) has suffered volume declines. TNT Express has reported a reasonable pricing environment despite pressure on the product mix with base price increases for International Economy. A value assessment of its Brazilian operations is likely in Q4. Company guidance following its October 6th profit warning was as follows: • EMEA revenue to achieve muted growth with an underlying operating

margin of 8-9% (previous guidance was 9% or slightly above); • Asia Pacific's H2 2011 operating result to continue the H1 2011

trend; focus on optimising intercontinental capacity exposure; • the Americas' continuing negative performance to be addressed

through a full range of corrective measures; • other networks to perform somewhat below the prior-year level; • cash flow to be supported by tight cash capex and working capital

management; • annualised €50m cost savings, with expected related charges and write-

offs of €45-65m. Margin targets in EMEA were adjusted downwards; we assume margins at the bottom end of the range and dropping to 7.3% in FY2012 off static revenues (margins troughed in 2009 at c.6.9%). The sensitivity to margins in the European business would be that every 0.5% drives group operating income by c.€26m (10%). Medium-term targets (2015) remain at 10-11% operating margins. Despite the cyclical and potential structural decline in International Express (down c.4 percentage points since 2007), the company believes that its integrated road network can still deliver double-digit margins. Our underlying EBIT forecasts for 2012 are below a volatile consensus number (we have adjusted FY2011 down from €230m to €221m and FY2012 down from €308m to €263m; Reuters consensus operating profit is €227m and €296m for 2012 and 2013). The Americas losses reflect Brazilian losses of c.€25m a quarter, which are likely to continue into H1 2012 before either turnaround or exit. Asia Pacific should see an improvement with the reduction in capacity (up to two aircraft) on the China-Europe trade lane and the building of a day definite business in domestic China (almost one-quarter of turnover). The key swing factor will be Brazil, which is targeted to break-even in H2 2012. To do this, it probably needs to generate 20%-plus in revenues through rebuilding lost contracts and market share. Potential further significant write-downs could happen in Brazil, but we do not expect it to remain a lingering restructuring story.

TNT Express – key issues

• Volume and pricing in Europe – can margin targets be maintained despite trade-down in International Express?

• Brazil – value assessment in Q4; operational KPIs have improved but H2 2012 break-even target looms

• Asia – capacity optimisation and day definite growth in China domestic

• Shareholder activism on board


3 Davy Research

The group valuation is supported by the European franchise (17% of €20bn intra-Europe Express market), no net debt and the potential for shareholder activism. Some shareholders are looking for board changes, which could be brought up at the AGM on April 11th. TNT Express remains a potential consolidation play. We retain our 'neutral' rating. We value the company using peer comparison (using 6.9x EV/EBITDA) and cash flows adjusting for Brazilian losses. This brings us close to €6 even before assuming any bid premium or deliverability on medium-term goals. In a bid scenario, a 50% premium to the current price would add a further €3 per share to the valuation. PostNL – fate linked to TNT Express

Next catalyst – FY results February 27th At its Q3 results, PostNL discontinued its cash dividend and will instead pay a scrip dividend. This should help the company to stabilise its net debt level earlier than we had previously expected. It also upgraded its FY2011 underlying cash operating income to above €170m (previous guidance was the top end of the €130-170m range (Davy: €174m), which is mainly driven by better operational performance and the phasing out of the restructuring cash). Despite this, we feel the company still faces many financial challenges: • Renegotiation of the pension arrangements. Underfunding in

PostNL's pension funds had increased to almost €500m by the end of September 2011. PostNL CEO Harry Koorstra commented on this situation as follows: "PostNL will enter into a dialogue with the pension funds and the trade unions to discuss changes to the pension arrangements. The current arrangements put too much financial pressure on the company… We recognise the impactful nature of these steps and the unfortunate timing, but they are unavoidable under the present circumstances".

• The value of the 29.9% stake in TNT Express – this has declined significantly since demerger, resulting in total equity of €221m as of Q3 2011. However, this would be expected to become negative with the proposed revision to IAS19 (FY 2013), which deals with the treatment of pension actuarial gains and losses. This could have an estimated impact of c.€1bn.

At the full year results, we will look for updates on the following. • the expected rate of addressed mail volume declines in the Netherlands

(FY 2011 8-10%); • the impact of the increased stamp rate (implemented in January 2012).

The basic domestic rate for letters in the Netherlands will increase by 4c to 50c. For mail to European destinations, the basic rate for letters will increase to 85c, a 6c rise.

• progress in the German market since the ruling against Deutsche Post – it looks like PostNL will continue to operate in this region with a 2013 break-even target.

• Master Plan cost savings and implementation.

PostNL – key issues

• Renegotiation of pension arrangements

• Value of TNT Express stake

• Restructuring of the business through Master Plan

• Level of declines in Mail volumes


4 Davy Research

Given the newsflow surrounding TNT Express and the significant portion of PostNL's market value that its stake represents (currently c.€2.58 per share), we see PostNL's share price intricately linked to that of TNT Express. Long-term cash flows imply favourable valuations but, given the lack of a cash dividend stream and negative near-term cash flows, we set a short-term price target of €3 and retain our 'neutral' rating. Deutsche Post DHL – strong strategic position to be underlined

Next catalyst – FY results March 8th Deutsche Post DHL (DPDHL) has a focused management team that is delivering a more streamlined strategy. At its Q3 results, it upgraded guidance to above €2.4bn EBIT due to the strong momentum in parcels (volumes up 11.4%) in its mail division and continued strong double-digit performance in shipments in its DHL Express division. Its emerging market exposure (particularly intra-Asian trade) and restructuring over the last several years leave it well placed. It has a 7% dividend yield with a net cash balance sheet. Medium-term guidance is for stabilisation of the mail business at c. €1bn and for CAGR EBIT growth of 13-15% from 2010-2015 in DHL.

Mail It recently agreed with unions a 4% increase in wages for mail workers, valid until the end of March 2013, in line with expectations. Levers for EBIT stabilisation include long-term 5% market growth in parcels due to changing consumer behaviour towards e-commerce; the medium- to longer-term investments in digital services (e.g. e-postbrief); a new pricing regime; labour/network flexibility; productivity improvements; and overhead efficiency. The company is still assuming a structural decline of 3-5% in mail volumes and labour rate increases. We assume EBIT of €1.1bn in FY2011 and EBIT of €1.057bn in FY2012, broadly in line with consensus.

DHL businesses The DHL businesses are somewhat subject to economic growth variables and assume that their markets outgrow GDP and achieve benchmark/sector-leading operating margins by 2015 or earlier. Company assumptions are for global growth of c.3% with a focus on the emerging markets. Levers for cost flexibility include increasing the variable nature of the cost structure; optimising the fleet mix (owned aircraft, short-term, long-term leases); reducing discretionary spend; and having long-term contracts in the Supply Chain division (often with minimum volume guarantees). We assume €1.742bn EBIT (up 20%) in FY2011 and €1.8bn in FY2012 (a modest 3% growth). Consensus is c.€1.74bn and c.€1.85bn in FY2011 and FY2012 respectively).

Deutsche Post DHL – key issues

• Express division bucking trends of heavyweight air freight volume declines through self-measures, pricing initiatives and emerging market trade lanes – this should continue

• Pace of volume growth in letters and parcels and potential first sign of returns from digital investments

• Supply chain – volume and quality of contract business won

• Freight forwarding – emphasis on price and efficiency should see it outperform in a falling volume environment

• Healthy cash position should allow for 7% dividend yield and future potential returns


5 Davy Research

By division, the key areas to watch are: Express: self-help (by exiting the loss-making domestic express businesses), emerging market leadership and brand and cost flexibility should see DHL Express outperform. We assume EBIT of €920m in FY 2011 and €962m in 2012 (with 3% revenue growth in TDI, driven by modest volume and price increases). Volume growth for TDI remains strong – up 11% in Q3 – but we assume a slowdown in 2012 (median Express forecasts are €948m for FY2011 and c.€1bn for FY2012). Global Forwarding, Freight: this division is economically sensitive to declining freight volumes, albeit lower freight rates, improved purchasing terms and its concentration on selective growth in attractive business areas are all helping. We assume a 6% fall in EBIT in 2012 to €390m from €416m in FY2011 (consensus: €429m in FY2011 and €453m in FY2012). Supply Chain: three- to five-year contracts in this business make it defensive – annualised business wins should be over €1bn for 2011. The focus is on six key verticals – retail, consumer, life sciences & healthcare, energy, automotive and technology. We assume EBIT of €407m and €446m in FY2011 and FY2012 respectively, ahead of consensus (€367m and €395m). Overall, we believe our group EBIT forecasts of €2449m and €2457m in FY2011 and FY2012 are intact (consensus is €2476m and €2494m). Continuing deliverability on the business model should see the valuation discount to peers narrow. The group's cash flows and balance sheet support the dividend, and there is potential in future years for further special dividend returns if cash flows continue on their current trajectory. We continue to rate DPDHL 'outperform' with a €16.50 price target.

6 Davy Research


6 Davy Research

TNT Express

SUMMARY ACCOUNTS Dec09 Dec10 Dec11E Dec12F Dec13F I N C O M E S T A T E M E N T ( € M ) Revenue 6208.0 7053.0 7217.0 7355.0 7610.7 EBITDA 298.0 389.0 249.8 479.1 649.6 Depreciation 237.0 209.0 217.8 216.1 224.4 Amortisation of intangibles 0.0 0.0 0.0 0.0 0.0 Operating profit 61.0 180.0 32.0 263.0 425.2 Other income from operations 0.0 0.0 0.0 0.0 0.0 Share of associate / JV after-tax profits 0.0 0.0 0.0 0.0 0.0 PBIT before exceptionals 61.0 180.0 32.0 263.0 425.2 Group net interest -13.0 -37.0 -43.0 -43.0 -43.0 Other finance costs -13.0 -17.0 -17.3 -17.0 -17.0 Total finance costs -26.0 -54.0 -60.3 -60.0 -60.0 Exceptionals 0.0 0.0 0.0 0.0 0.0 PBT 35.0 126.0 -28.3 203.0 365.2 Tax -43.0 -57.0 -79.8 -69.0 -120.5 Minorities (incl. pref. divs.) -3.0 -3.0 0.0 -4.0 -7.3 Earnings (basic) -11.0 66.0 -108.1 130.0 237.4 Average no. of shares (m) - basic 542.0 542.0 542.0 542.0 542.0 Average no. of shares (m) - diluted 542.0 542.0 542.0 542.0 542.0 P E R S H A R E D A T A ( C ) EPS Basic -2.0 12.2 -19.9 24.0 43.8 EPS Diluted (Adj) 31.0 41.3 14.9 24.0 43.8 Cash EPS (Diluted) 74.7 79.9 55.1 63.9 85.2 Dividend 0.0 0.0 6.0 9.6 17.5 NBV 507.5 552.4 390.9 407.1 437.2 NBV (incl. amortisation of intangibles) 507.5 552.4 390.9 407.1 437.2 C A S H F L O W ( € M ) EBITDA 298.0 389.0 249.8 479.1 649.6 Change in working capital 128.0 -31.0 -60.0 -65.0 -67.0 Share-based payments 13.0 14.0 15.0 17.0 19.0 Other operating cashflows -23.0 -16.0 156.1 -25.2 -22.3 Cash generated from operations 416.0 356.0 360.9 405.9 579.2 Net capital expenditure -129.0 -143.0 -209.3 -257.4 -266.0 Operating cashflow 287.0 213.0 151.6 148.5 313.2 Net interest -44.0 -26.0 -35.0 -33.0 -33.0 Tax -34.0 -76.0 -80.0 -69.0 -121.0 Dividends from associates 0.0 0.0 0.0 0.0 0.0 Dividends to minorities 0.0 0.0 0.0 0.0 0.0 Free cash flow 209.0 111.0 36.6 46.5 159.2 Dividends to shareholders 0.0 0.0 -16.2 -42.2 -73.4 Acquisitions & investments 0.0 0.0 0.0 0.0 0.0 Business disposals 0.0 0.0 0.0 0.0 0.0 Share Issues / (Buybacks) 0.0 0.0 0.0 0.0 0.0 Translation differences 0.0 0.0 0.0 0.0 0.0 Other 491.0 -58.0 -538.5 -13.0 -12.9 Change in net cash / debt 700.0 53.0 -518.1 -8.6 72.9 B A L A N C E S H E E T ( € M ) Property, plant & equipment 1158.0 1153.0 1080.5 1121.8 1163.8 Intangible assets 1853.0 1892.0 1932.0 1972.0 2012.0 Investments in associates / jv's 0.0 0.0 0.0 0.0 0.0 Working capital 1279.0 228.0 233.3 237.8 246.0 Other 218.0 240.1 73.0 77.5 84.3 Capital Employed 4508.0 3513.1 3318.8 3409.1 3506.1 Financed by Equity capital & reserves 2751.0 2994.0 2118.7 2206.4 2370.0 Minority interests 3.0 8.0 0.0 0.0 0.0 Preference shares 0.0 0.1 0.0 0.0 0.0 Net Debt/(Cash) -396.0 -449.0 69.1 77.7 4.8 Deferred consideration/debt-related 0.0 0.0 0.0 0.0 0.0 Retirement benefit obligations 0.0 0.0 0.0 0.0 0.0 Net deferred tax 19.0 9.0 9.0 9.0 9.0 Other long-term liabilities 2131.0 951.0 1122.0 1116.0 1122.3 Capital Employed 4508.0 3513.1 3318.8 3409.1 3506.1 Intangibles amortised 0.0 0.0 0.0 0.0 0.0 Capital employed inc. intangibles 4508.0 3513.1 3318.8 3409.1 3506.1 Invested capital inc. intangibles 2358.0 2553.1 2187.8 2284.1 2374.8

GEOGRAPHIC ANALYSIS Dec11E Dec12F Dec13F Dec11E Dec12F Dec13F Underlying revenue (€m) Underlying op. profit (€m)

EMEA 4525.0 4547.0 4660.0 372.0 333.0 373.0 Asia Pacific 1781.0 1888.0 2001.0 -34.0 10.0 55.0 Americas 462.0 455.0 464.0 -123.0 -55.0 8.0 Other 445.4 451.3 471.4 6.0 -25.0 -11.0 Total 7213.4 7341.3 7596.4 221.0 263.0 425.0

CALENDAR Date Ex-Div Interims 01-08-11 Finals 21-02-11 AGM Updated 17-01-12

VALUATION Dec11E Dec12F Dec13F Dec11E Dec12F Dec13F Rel to Sector

P/E 42.4 26.4 14.5 2.8 2.0 1.3 Dividend Yield (%) 0.9 1.5 2.8 0.4 0.5 0.9 Free Cash Flow Yield (pre divs) (%) 1.1 1.4 4.6 Price / Book 1.62 1.56 1.45 0.7 0.8 0.8 EV / Revenue 0.49 0.48 0.45 EV / EBITDA 14.0 7.3 5.3 EV / EBITA 109.6 13.4 8.1 EV / Operating Cashflow 23.1 23.7 11.0 EV / Invested Capital 1.60 1.54 1.45 PEG (Hist P/E/4yr gwth) 4.70

PRICE PERFORMANCE (%) 1 Wk 1 Mth 3 Mths 6 Mths YTD 1 Yr Absolute 0.8 12.8 22.6 -11.5 9.7 N/A Rel to Amsterdam Exchange 0.3 5.9 18.4 -6.9 9.4 N/A Rel to E300 -0.9 5.3 16.6 -6.2 7.1 N/A Rel to E300 Ind. Transportation -0.6 4.3 14.7 -5.4 7.1 N/A

PRICE AND P/E HISTORY Price Hist P/E High Low Yr End High Low Average

2012 633 590 15.3 14.3 14.7 2011 1000 464 577 19.9 11.2 14.8

KEY RATIOS Dec09 Dec10 Dec11E Dec12F Dec13F G R O W T H

EPS Diluted (Adj) (%) 20.0 33.3 -63.9 60.7 82.6 Dividend (%) N/A N/A N/A 60.0 82.3 Revenue (%) -10.4 13.6 2.3 1.9 3.5 EBITDA (%) -46.4 30.5 -35.8 91.8 35.6 P R O F I T A B I L I T Y / A C T I V I T Y

EBITDA margin (%) 4.8 5.5 3.5 6.5 8.5 EBITA margin (%) 1.0 2.6 0.4 3.6 5.6 Revenue / Capital Employed (x) 1.18 1.76 2.11 2.19 2.20 R E T U R N

ROCE (before tax, ex. invs) (%) 1.2 4.5 0.9 7.8 12.3 ROE (after tax) (%) 4.7 7.8 3.2 6.0 10.4 Ret. on Inv. Cap. (after tax) (%) N/A 4.0 5.2 7.8 12.2 Cost of Equity (%) N/A N/A 7.5 6.6 6.6 F I N A N C I A L / G E N E R A L

EBITDA Int. Cover (x) 22.9 10.5 5.8 11.1 15.1 Group Interest Cover (x) 4.7 4.9 0.7 6.1 9.9 Debt / EBITDA (x) N/A N/A 0.3 0.2 0.0 Debt / Equity (%) N/A N/A N/A N/A N/A Debt / Free Cash Flow (x) N/A N/A N/A N/A N/A Avg. Cost of Debt (before tax) (%) N/A N/A N/A N/A N/A Ret. benefits deficit / market cap (%) N/A N/A N/A N/A N/A Dividend Cover (x) N/A N/A 2.5 2.5 2.5 Working Capital / Revenue (%) 20.6 3.2 3.2 3.2 3.2 Net Capex / Depreciation (%) 54.4 68.4 96.1 119.1 118.6 Tax rate (%) (unadjusted) N/A 45.2 N/A 34.0 33.0

CAGR(%) 5 Year 10 Year MAJOR SHAREHOLDERS % Revenue (%) N/A N/A PostNL NV 29.9 EBITDA (%) N/A N/A Alberta Investment Management 5.3 EPS Diluted (Adj) (%) N/A N/A Jana Partners 5.0 Cash EPS (Diluted) (%) N/A N/A Dividend (%) N/A N/A

Price (c) Shares (m) Mkt. Cap (€m) E.V. (€m) Mkt. Cap. / EV (%) Mkt. Weight (%) Free Float (%) Daily No. Shares Traded (m) Daily Value Traded (€m) 633 543.2 3439.5 3517.2 97.8 59.9 1.062 5.842

7 Davy Research


7 Davy Research

PostNL

SUMMARY ACCOUNTS Dec09 Dec10 Dec11E Dec12F Dec13F I N C O M E S T A T E M E N T ( € M ) Revenue 10402.0 4293.0 4318.0 4431.0 4582.0 EBITDA 1137.0 600.0 533.0 551.0 595.0 Depreciation 489.0 120.0 144.0 151.0 156.0 Amortisation of intangibles 0.0 0.0 0.0 0.0 0.0 Operating profit 648.0 480.0 389.0 400.0 439.0 Other income from operations 0.0 0.0 0.0 0.0 0.0 Share of associate / JV after-tax profits 0.0 0.0 0.0 0.0 0.0 PBIT before exceptionals 648.0 480.0 389.0 400.0 439.0 Group net interest -161.0 -106.0 -120.0 -120.2 -120.0 Other finance costs -19.0 -1.0 -734.0 0.0 0.0 Total finance costs -180.0 -107.0 -854.0 -120.2 -120.0 Exceptionals 0.0 0.0 0.0 0.0 0.0 PBT 468.0 373.0 -465.0 279.9 319.0 Tax -179.0 -91.0 -67.0 -69.6 -79.5 Minorities (incl. pref. divs.) -8.0 -4.0 0.0 0.0 0.0 Earnings (basic) 281.0 347.0 1627.0 210.3 239.5 Average no. of shares (m) - basic 366.3 373.5 377.1 377.1 377.1 Average no. of shares (m) - diluted 369.0 375.0 377.4 377.4 377.4 P E R S H A R E D A T A ( C ) EPS Basic 76.7 92.9 431.5 55.8 63.5 EPS Diluted (Adj) 136.3 100.8 53.5 55.7 63.5 Cash EPS (Diluted) 268.9 132.8 91.7 95.7 104.8 Dividend 53.0 57.0 21.0 0.0 0.0 NBV 562.3 661.7 73.2 130.8 196.0 NBV (incl. amortisation of intangibles) 562.3 661.7 73.2 130.8 196.0 C A S H F L O W ( € M ) EBITDA 1137.0 600.0 533.0 551.0 595.0 Change in working capital 251.0 -5.0 -51.0 -45.0 -40.0 Share-based payments 18.0 3.0 0.0 0.0 0.0 Other operating cashflows -313.0 -122.9 -209.0 -219.0 -198.0 Cash generated from operations 1093.0 475.1 273.0 287.0 357.0 Net capital expenditure -205.0 -91.0 -140.0 -200.7 -195.0 Operating cashflow 888.0 384.1 133.0 86.3 162.0 Net interest -131.0 -96.0 -120.0 -120.0 -120.0 Tax 83.0 -205.0 -67.4 -70.0 -80.0 Dividends from associates 0.0 0.0 26.9 27.9 34.0 Dividends to minorities 0.0 0.0 0.0 0.0 0.0 Free cash flow 840.0 83.1 -27.5 -75.8 -4.0 Dividends to shareholders -34.0 -78.0 -80.0 0.0 0.0 Acquisitions & investments -63.0 -4.0 0.0 0.0 0.0 Business disposals 0.0 0.0 114.6 0.0 0.0 Share Issues / (Buybacks) 2.0 2.0 0.0 0.0 0.0 Translation differences 1.0 0.0 0.0 0.0 0.0 Other -108.0 32.9 61.9 -0.2 0.0 Change in net cash / debt 638.0 36.0 69.0 -76.0 -4.0 B A L A N C E S H E E T ( € M ) Property, plant & equipment 1610.0 499.0 555.0 545.0 584.0 Intangible assets 2061.0 166.0 166.0 166.0 166.0 Investments in associates / jv's 0.0 0.0 0.0 0.0 0.0 Working capital -427.0 -427.0 -375.8 -330.7 -291.0 Other 1002.0 6574.5 1849.8 1942.7 1982.0 Capital Employed 4246.0 6812.5 2195.0 2323.0 2441.0 Financed by Equity capital & reserves 2060.0 2424.0 268.0 479.0 718.0 Minority interests 20.0 19.0 0.0 0.0 0.0 Preference shares 0.0 0.0 0.0 0.0 0.0 Net Debt/(Cash) 1106.0 1070.0 1001.0 1077.0 1081.0 Deferred consideration/debt-related 0.0 0.0 0.0 0.0 0.0 Retirement benefit obligations 292.0 231.0 231.0 231.0 231.0 Net deferred tax 158.0 303.0 306.0 306.0 306.0 Other long-term liabilities 610.0 2765.5 389.0 230.0 105.0 Capital Employed 4246.0 6812.5 2195.0 2323.0 2441.0 Intangibles amortised 0.0 0.0 0.0 0.0 0.0 Capital employed inc. intangibles 4246.0 6812.5 2195.0 2323.0 2441.0 Invested capital inc. intangibles 3186.0 3513.0 1269.0 1556.0 1799.0

DIVISIONAL ANALYSIS Dec11E Dec12F Dec13F Dec11E Dec12F Dec13F Underlying revenue (€m) Underlying cash op. inc. (€m)

Mail NL 2396.2 2264.0 2174.0 93.0 102.0 135.9 Parcels 608.4 645.0 684.0 88.3 96.7 84.6 International 1490.2 1699.0 1911.0 4.0 10.8 28.7 Other -167.4 -177.0 -187.0 -11.0 -14.2 -14.9 Total 4327.4 4431.0 4582.0 174.3 195.3 234.3

CALENDAR Date Ex-Div Interims 02-08-11 Finals 21-02-11 22-02-11 AGM 25-05-11 Updated 10-11-11


P/E 5.6 5.4 4.8 0.4 0.4 0.4 Dividend Yield (%) 7.0 0.0 0.0 2.6 N/A N/A Free Cash Flow Yield (pre divs) (%) N/A N/A N/A Price / Book 4.13 2.31 1.54 1.9 1.2 0.9 EV / Revenue 0.51 0.51 0.49 EV / EBITDA 4.1 4.1 3.8 EV / EBITA N/A 5.7 5.2 EV / Operating Cashflow 16.4 26.2 14.0 EV / Invested Capital 1.72 1.45 1.26 PEG (Hist P/E/4yr gwth) N/A

PRICE PERFORMANCE (%) 1 Wk 1 Mth 3 Mths 6 Mths YTD 1 Yr Absolute 11.6 34.2 -12.8 -46.0 22.7 -68.5 Rel to Amsterdam Exchange 11.1 26.0 -15.8 -43.2 22.4 -63.6 Rel to E300 9.8 25.2 -17.0 -42.8 19.8 -64.5 Rel to E300 Ind. Transportation 10.1 24.1 -18.4 -42.4 19.8 -60.4


2012 302 256 3.0 2.5 2.7 2011 963 203 246 16.2 2.0 8.5 2010 1089 817 916 16.6 12.4 14.3 2009 997 490 997 15.9 6.0 10.3 2008 1264 586 623 12.2 6.6 9.8 2007 1633 1162 1278 18.5 11.2 14.8


EPS Diluted (Adj) (%) -30.5 -26.1 -46.9 4.1 13.9 Dividend (%) -25.4 7.5 -63.2 N/A N/A Revenue (%) -6.7 -58.7 0.6 2.6 3.4 EBITDA (%) -17.7 -47.2 -11.2 3.4 8.0 P R O F I T A B I L I T Y / A C T I V I T Y


ROCE (before tax, ex. invs) (%) 12.1 9.9 56.6 17.7 18.4 ROE (after tax) (%) 26.5 19.9 175.4 56.3 40.0 Ret. on Inv. Cap. (after tax) (%) 12.0 12.9 108.9 21.3 19.6 WACC (%) 8.2 7.7 10.4 7.8 7.4 F I N A N C I A L / G E N E R A L

EBITDA Int. Cover (x) 7.1 5.7 4.4 4.6 5.0 Group Interest Cover (x) 4.0 4.5 3.2 3.3 3.7 Debt / EBITDA (x) 1.0 1.8 1.9 2.0 1.8 Debt / Equity (%) 53.2 43.8 373.5 224.8 150.6 Debt / Free Cash Flow (x) 1.3 12.9 N/A N/A N/A Avg. Cost of Debt (before tax) (%) 11.3 9.7 11.6 11.6 11.1 Ret. benefits deficit / market cap (%) 8.0 6.9 23.9 19.5 19.5 Dividend Cover (x) 2.6 1.8 2.5 N/A N/A Working Capital / Revenue (%) N/A N/A N/A N/A N/A Net Capex / Depreciation (%) 41.9 75.8 97.2 132.9 125.0 Tax rate (%) (unadjusted) 38.2 24.4 N/A 24.9 24.9

CAGR(%) 5 Year 10 Year MAJOR SHAREHOLDERS % Revenue (%) N/A N/A Alberta Investment Management 5.3 EBITDA (%) N/A N/A Jana Partners 5.1 EPS Diluted (Adj) (%) N/A N/A Morgan Stanley 4.7 Cash EPS (Diluted) (%) N/A N/A Blackrock 4.6 Dividend (%) N/A N/A UBS 3.7 TSR -22.0 -8.4


8 Davy Research


8 Davy Research

Deutsche Post DHL

SUMMARY ACCOUNTS Dec09 Dec10 Dec11E Dec12F Dec13F I N C O M E S T A T E M E N T ( € M ) Revenue 46431.0 51481.0 52711.0 53181.0 55354.0 EBITDA 1851.0 3131.0 3782.6 3790.6 4032.4 Depreciation 1620.0 1296.0 1333.2 1333.2 1333.2 Amortisation of intangibles 0.0 0.0 0.0 0.0 0.0 Operating profit 231.0 1835.0 2449.4 2457.4 2699.2 Other income from operations 0.0 0.0 0.0 0.0 0.0 Share of associate / JV after-tax profits 28.0 56.0 86.0 86.0 86.0 PBIT before exceptionals 259.0 1891.0 2535.4 2543.4 2785.2 Group net interest 0.0 0.0 0.0 0.0 0.0 Other finance costs 17.0 933.0 -693.0 -326.0 -312.0 Total finance costs 17.0 933.0 -693.0 -326.0 -312.0 Exceptionals 0.0 0.0 0.0 0.0 0.0 PBT 276.0 2824.0 1842.4 2217.4 2473.2 Tax -15.0 -194.0 -460.6 -554.3 -618.3 Minorities (incl. pref. divs.) -49.0 -89.0 -81.5 0.0 0.0 Earnings (basic) 644.0 2541.0 1300.3 1663.1 1854.9 Average no. of shares (m) - basic 1209.0 1209.0 1209.0 1209.0 1209.0 Average no. of shares (m) - diluted 1209.0 1209.0 1209.0 1209.0 1209.0 P E R S H A R E D A T A ( C ) EPS Basic 53.3 210.2 107.6 137.6 153.4 EPS Diluted (Adj) 102.2 111.0 116.4 137.6 153.4 Cash EPS (Diluted) 236.1 218.2 226.7 247.8 263.7 Dividend 60.0 65.0 69.0 71.0 78.0 NBV 676.3 869.4 912.0 980.7 1063.0 NBV (incl. amortisation of intangibles) 676.3 869.4 912.0 980.7 1063.0 C A S H F L O W ( € M ) EBITDA 1851.0 3131.0 3782.6 3790.6 4032.4 Change in working capital 481.0 -182.0 65.8 66.4 69.1 Share-based payments 0.0 0.0 0.0 0.0 0.0 Other operating cashflows -2577.0 -711.5 -652.0 -442.1 -442.0 Cash generated from operations -245.0 2237.5 3196.3 3414.9 3659.5 Net capital expenditure -913.0 -1288.0 -1600.0 -1500.0 -1500.0 Operating cashflow -1158.0 949.5 1596.3 1914.9 2159.5 Net interest -188.0 -124.0 -126.7 -90.4 5.8 Tax -339.0 -301.0 -460.6 -554.4 -618.3 Dividends from associates 0.0 0.0 0.0 0.0 0.0 Dividends to minorities -34.0 -73.0 0.0 0.0 0.0 Free cash flow -1719.0 451.5 1009.1 1270.2 1547.0 Dividends to shareholders -725.0 -725.0 -785.0 -807.5 -818.5 Acquisitions & investments 826.0 577.0 -200.0 -200.0 -200.0 Business disposals 0.0 0.0 0.0 0.0 0.0 Share Issues / (Buybacks) 0.0 0.0 0.0 0.0 0.0 Translation differences 0.0 0.0 0.0 0.0 0.0 Other 5774.0 -611.5 -0.1 -25.7 -41.5 Change in net cash / debt 4156.0 -308.0 24.0 237.0 487.0 B A L A N C E S H E E T ( € M ) Property, plant & equipment 6220.0 6130.0 6730.0 7230.0 7730.0 Intangible assets 11534.0 11848.0 11848.0 11848.0 11848.0 Investments in associates / jv's 1804.0 1884.0 1884.0 1884.0 1884.0 Working capital 7383.0 8864.0 8619.0 8787.0 8958.0 Other 3869.0 4426.0 4426.0 4426.0 4313.0 Capital Employed 30810.0 33152.0 33507.0 34175.0 34733.0 Financed by Equity capital & reserves 8176.0 10511.0 11026.0 11857.0 12852.0 Minority interests 97.0 185.0 0.0 0.0 0.0 Preference shares 0.0 0.0 0.0 0.0 0.0 Net Debt/(Cash) -1690.0 -1382.0 -1406.0 -1643.0 -2130.0 Deferred consideration/debt-related 0.0 0.0 0.0 0.0 0.0 Retirement benefit obligations 4574.0 4513.0 4313.0 4113.0 3913.0 Net deferred tax -682.0 -981.0 -1425.0 -1425.0 -1425.0 Other long-term liabilities 20335.0 20306.0 20999.0 21273.0 21523.0 Capital Employed 30810.0 33152.0 33507.0 34175.0 34733.0 Intangibles amortised 0.0 0.0 0.0 0.0 0.0 Capital employed inc. intangibles 30810.0 33152.0 33507.0 34175.0 34733.0 Invested capital inc. intangibles 6583.0 9314.0 9620.0 10214.0 10722.0

Dec11E Dec12F Dec13F Dec11E Dec12F Dec13F Revenue (€m) Operating Profits (€m)

Mail 13919.0 13733.0 13640.0 1103.6 1057.4 1050.3 Express 11651.0 12021.0 12817.0 919.5 961.7 1142.0 Forwarding 15006.0 15006.0 15756.0 416.0 390.2 433.3 Supply Chain 13266.0 13500.0 14193.0 406.8 445.5 468.4 Corporate/Other -1131.0 -1079.0 -1052.0 -396.6 -397.3 -394.7 Total 52711.0 53181.0 55354.0 2449.3 2457.5 2699.3

CALENDAR Date Ex-Div Interims 02-08-12 Finals 08-03-12 26-05-11 AGM 09-05-12 Updated 10-11-11


P/E 10.6 9.0 8.1 0.7 0.7 0.7 Dividend Yield (%) 5.6 5.7 6.3 2.1 2.1 2.1 Free Cash Flow Yield (pre divs) (%) 6.7 8.5 10.3 Price / Book 1.36 1.26 1.17 0.6 0.6 0.6 EV / Revenue 0.22 0.22 0.20 EV / EBITDA 3.1 3.0 2.7 EV / EBITA 4.8 4.7 4.1 EV / Operating Cashflow 7.3 6.0 5.1 EV / Invested Capital 1.41 1.31 1.20 PEG (Hist P/E/4yr gwth) 0.99

PRICE PERFORMANCE (%) 1 Wk 1 Mth 3 Mths 6 Mths YTD 1 Yr Absolute 2.4 11.3 16.5 -0.4 4.3 -7.2 Rel to DAX -1.0 2.1 11.8 15.6 -1.1 5.6 Rel to E300 0.7 3.9 10.8 5.5 1.8 4.6 Rel to E300 Ind. Transportation 1.0 2.9 8.9 6.4 1.8 16.6


2012 1257 1211 11.3 10.9 11.1 2011 1383 913 1188 25.5 8.2 10.3 2010 1446 1118 1270 25.5 6.0 11.8 2009 1379 665 1349 8.3 6.0 6.1 2008 2418 718 1191 20.4 6.4 14.4 2007 2565 1995 2351 16.4 12.1 14.0


EPS Diluted (Adj) (%) -4.3 8.7 4.8 18.2 11.5 Dividend (%) 0.0 8.3 6.2 2.9 9.9 Revenue (%) -14.8 10.9 2.4 0.9 4.1 EBITDA (%) 9.1 69.2 20.8 0.2 6.4 P R O F I T A B I L I T Y / A C T I V I T Y


ROCE (before tax, ex. invs) (%) 0.5 6.1 7.8 7.7 8.3 ROE (after tax) (%) N/A N/A N/A N/A N/A Ret. on Inv. Cap. (after tax) (%) N/A N/A N/A N/A N/A Cost of Equity (%) 8.1 7.5 7.5 6.6 6.6 F I N A N C I A L / G E N E R A L

EBITDA Int. Cover (x) N/A N/A N/A N/A N/A Group Interest Cover (x) N/A N/A N/A N/A N/A Debt / EBITDA (x) N/A N/A N/A N/A N/A Debt / Equity (%) N/A N/A N/A N/A N/A Debt / Free Cash Flow (x) N/A N/A N/A N/A N/A Avg. Cost of Debt (before tax) (%) N/A N/A N/A N/A N/A Ret. benefits deficit / market cap (%) 28.1 29.4 30.0 27.5 26.1 Dividend Cover (x) 1.7 1.7 1.7 1.9 2.0 Working Capital / Revenue (%) 15.9 17.2 16.4 16.5 16.2 Net Capex / Depreciation (%) 56.4 99.4 120.0 112.5 112.5 Tax rate (%) (unadjusted) 5.4 6.9 25.0 25.0 25.0

CAGR(%) 5 Year 10 Year MAJOR SHAREHOLDERS % Revenue (%) N/A N/A KfW Bankengruppe 30.5 EBITDA (%) N/A N/A Blackrock Group 3.2 EPS Diluted (Adj) (%) N/A N/A Cash EPS (Diluted) (%) N/A N/A Dividend (%) N/A N/A TSR -8.2 0.3


9 Davy Research

Important disclosures

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10 Davy Research

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