Cyclicality over Value
Sharp rebound, new risks The data released in June confirms a sharper-than-expected rebound in activity following the ''Great Lockdown''. New risks are, however, emerging and are becoming visible in the high frequency data in the US. The rise in Covid cases in the US and large EM countries may slow the recovery in the coming months. In July, we will watch for possible announcements in the US, the UK and France, and progress on the EU Recovery Fund. Looking further ahead, if more social distancing is required, economic data could start to disappoint in the US this autumn. Our risk appetite indicator, the OGRI, remained in negative territory in June despite the recent rally in risk assets. Cyclicality over Value STOXX 600 has risen 5.3% since end-May and outperformed US equities. Over the period, the Value factor outperformed Growth and Quality by respectively 93 and 215 bps. More strikingly, Cyclicals have outperformed defensives by 5.1%. The key drivers of this cyclical rebound - policy and sequential improvement in macro data - remain strong but we can see real tactical challenges emerging as the market eyes towards a complicated H2. In this setup, a preference for the most resilient businesses should be more pronounced. In spite of a continued rebound, this preference could limit the prospect of a large value rally in the near term. In term of portfolio implications, we aim to mitigate some of the build-up in volatility that could emerge. Our Key Ideas leads the way Our flagship list, Key Ideas, had a strong performance in June, beating the benchmark by more than 2%, for a third straight month of good performance. The Emerging Consumer list also had a strong month. We do not make changes to either list this month. However as we monitor risk appetite, we bring more exposure to Quality within our lists. In particular, we replace Societe Generale with Credit Agricole in our Deep value list and opt for LSE and Travis Perkins instead of...
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08 Jul 20
We''ll remember our 22nd CEO Conference for two reasons. First, it was the biggest ever: 100 CEOs and 2,100 investors taking over 16,000 seats. The second? No prizes for guessing. Next year we aim to combine our real and virtual worlds, and hope to see you in Paris... or on screen! The most up-to-date view from corporate Europe We''ve condensed and cleanly presented all the highlights from the management presentations. It''s your comprehensive guide to the key takeaways from 124 leading European companies. Who would you most like to sit beside the fireside with? Our most-attended presentation was, as last year, ASML, followed by L''Oreal, Danone, Michelin and Linde. See One for the Kidz for our ten-year view on ASML, L''Oreal, and more. Keynote speakers: a wide-angle view on unprecedented times Laurent Solly (Facebook) outlined his vision of tech opportunities, Joerg Kukies (German Finance Ministry) discussed globalisation and finance and Sir Martin Sorrell (S4 Capital) took the measure of consumer and citizen changes. Megatrends: change is accelerating Attendee after attendee observed that Covid-19 is both leading to transformations and ratcheting up existing trends, notably digitalisation. Watch this space. Good, bad or ugly? The answer was: ''Very good, actually'' If we had one big surprise, it was the number of positive messages. Managements clearly feel they are resilient, can grow and in some cases can acquire weaker rivals. ESG remains at the heart of our collective future Nothing in the current crisis seems to have dented the widespread desire by corporates to ramp up their environmental and social strategies.
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19 Jun 20
Reassuring figures and message
DPDHL reported a good set of FY19 results, with figures broadly in line with expectations in all lines. Both Express and P&P were the main growth drivers. A good surprise was in the dividend proposal of €1.25, reflecting a payout ratio of 59% (dividend yield of 5.5%). 2020 guidance was reaffirmed, but does not include any impact from the COVID-19, which looks like being too optimistic; the main reason is the complexity of quantifying it at this stage.
10 Mar 20
Strong operating performance
DPDHL reported a very good set of Q3 figures, with notably a solid organic revenue of 3.7% despite the challenging environment. This performance was driven by Express and P&P which benefited from the price hike in mail activities since July. Management confirmed its full-year guidance. We confirm our positive opinion on the stock.
13 Nov 19
Still in a transformation phase
As part of its Capital Markets Day, DPDHL presented its new plan called Strategy 2025 with new 2022 guidance and long-term divisional targets. We consider the 2022 targets are conservative, especially regarding the EBIT guidance based “on a cautious macro scenario”. The market reacted negatively as this clearly reflects slower EBIT growth between 2020 and 2020. The transformation is underway and appears to be on track. Patience is required. Buy rating confirmed.
03 Oct 19
The plan is on track, EBIT guidance tightened
DP DHL reported a good set of Q2 results. All divisions contributed to organic growth which has strengthened management’s confidence. With more clarity on the mail pricing regime, the management has now tightened the EBIT guidance for the full year. The productivity measures implemented by DP DHL are on track.
06 Aug 19
Express slows down
DP DHL reported Q1 results in line with expectations. The strong EBIT level was boosted by the recent supply chain deal and therefore, adjusted for this, profitability would have been much lower. The Express business is the growth driver for DP DHL, but it is also the most exposed to an economic downturn and/or political tensions. DP DHL is on track to be back in the race, but it is too early to say that headwinds are behind.
10 May 19
FY18 results in line, restructuring measures on track
DP DHL reported encouraging results roughly in line with consensus expectations. Once again, the good performance was driven by the Express activities while PeP continues to drag due to the ongoing restructuring measures but, they are on track with significant progress in all three pillars, i.e. pricing measures, direct (productivity) and indirect cost (restructuring). The outlook for 2019 is relatively cautious but, in line with our estimates. DP DHL remains a quality stock, in our view, though risks remain present.
07 Mar 19
Good Q3 results despite operating costs
Q3 key highlights: Revenue increased +1.4% to €14.8bn, thanks to all divisions The EBITDA margin stood at 8.2%, while the EBIT margin declined to 2.5% (-320bp) FCF declined due to higher capex (excluding leases assets) 2018 and 2020 guidance confirmed
07 Nov 18
New division underlines dedication to eCommerce
DPDHL has announced the establishment of a new business division called DHL eCommerce Solutions. The new division will include the DHL Parcel Europe and DHL eCommerce business units which were part of the Post-eCommerce-Parcel (PeP) division with the intention to promote even more strongly the eCommerce operations of DPDHL in an international context. PeP will be renamed Post & Parcel Germany and in the future only act in the German market. Ken Allen takes over responsibility as CEO and Board Member of the new division, DHL eCommerce Solutions, John Pearson will be appointed as new Board Member and CEO for DHL Express. Post & Parcel Germany will remain under the interim Leadership of Group CEO Frank Appel. The changes will come into effect on 1 January 2019.
17 Sep 18
Q2 with strong organic growth but lower profitability
Group revenues increased by 1.4% to €15.02bn; after adjustments for adverse FX effects and the Williams Lee Tag disposal, Deutsche Post reported a continued strong organic growth of +6.2%. EBIT, however, decreased by 11.2% to €747m based on the operating performance in the PeP division and the first measures to counterbalance this development. The EBIT margin fell therefore from 5.7% in the last quarter to 5.0% in Q2 2018. EBITDA, on the other hand, went up by €339m (+27.9%) to €1.55bn due to effects to the tune of +€508m from the adoption of IFRS 16. Management has already taken decisions to address issues and has confirmed the EBIT guidance for 2020 of above €5.0bn.
07 Aug 18
Q1 18 results not really exciting but IFRS 16 adopted
Revenues declined by 0.9% to €14.75bn EBITDA jumped 35.9% to €1.67bn and the EBITDA margin from 8.3% to 11.3% mainly attributable to IFRS 16 EBIT increased 2.3% and the EBIT margin improved from 5.9% to 6.1% Net debt jumped from €1.9bn to €11.9bn due to the adoption of the new accounting rule IFRS 16; equity ratio declined from 38.4% to 27.7% Management confirmed guidance for the current year
09 May 18
Strong organic growth across all divisions
Revenues increased 5.4% to €60.4bn and EBIT improved 7.2% to €3.7bn. The EBIT margin rose from 6.1% to 6.2%, mainly driven by the Express division. Dividend increase of 9.5% from €1.05 to €1.15 per share. Strong outlook for the current year with double-digit EBIT growth.
07 Mar 18
Valuation not at risk!
Warnings of strikes – the same procedure At present, Deutsche Post DHL is facing several warnings of strikes in two German counties. The trade conflict between DHL and the trade union ver.di is gaining momentum. Ver.di is asking for a pay increase of around 6%. In addition, trade union members want to be allowed to use part of the pay increase in lieu of time off. Around 130,000 employees of DHL are members of trade unions. So far, we do not expect DHL’s management to agree to the pay increase which would increase personnel costs by around €300m, or 1.5%. In general, we expect DHL’s management to offer an inflationary compensation of 1.8% plus a pay increase of 1.2% (1.7% max.) for a period of at least two years. The higher wages will then be compensated by efficiency gains but also increases in product prices. The impact on the P&L should be limited. DHL well prepared for a ban on driving in cities The vehicle fleet delivering mail and parcels in Germany will change in the long term. Assuming the Federal Administrative Court in Leipzig will allow cities to ban diesel-driven cars from the city, the supply chain, especially for DHL, UPS, Fedex or Hermes, might be at risk. In reality, there will be exemptions for buses, craftsmen and the whole public transport fleet of vehicles (police, etc.). We believe Deutsche Post DHL is already well prepared for a possible ban on entering cities. The DHL group has a fleet of 92,328 vehicles worldwide (2016 statistics) of which 24% belongs to Euro 4 and lower, 62% to Euro 5 and 14% to Euro 6. In Germany around 13,000 vans and 34,000 cars deliver mail and parcels. Around 5,000 battery-driven StreetScooters are part of the van fleet of 13,000. The replacement process is running according to plan. Initially a production capacity of 10,000 StreetScooters per year had been planned in 2017 but this number already reached 15,000 in September 2017.
23 Feb 18
The chicken crisis in the UK
In the UK, DHL was unable to deliver chickens to KFC, part of the YUM!Brands. According to the latest news, in the middle of February, DHL took over the supply contract from Bidvest. Bidvest distributed the chickens across the country via numerous logistic centres, whereas DHL is distributing the goods from one supply centre. DHL argued that, to a limited degree, the partner QSL is also responsible for the chicken shortage. Around 500 out of 850 restaurants in the UK were forced to close. According to the latest media news, the crisis is costing KFC more than €1.1m daily. DHL has already apologised for the disruption but hopes to return to normal service levels as soon as possible.
21 Feb 18
Solid performance in Q3 17!
The company reported Q3 17 results and confirmed guidance for the current year. Revenues increased 5.6% to €14.64bn (estimate: €15.9bn) and EBITDA grew 9.5% to €1.19bn. The EBITDA margin increased from 7.9% to 8.2%. EBIT grew 10.6% to €838m (estimate: €927m) and the EBIT margin increased from 5.4% to 5.7%. The operating performance was mainly driven by the Express and Supply Chain divisions. Net income improved 3.7% to €669m (estimate: €680m). In the first nine months revenues increased 5.8% to €44.35bn and EBITDA improved 8.1% to €3.64bn. The EBITDA margin increased from 8% to 8.2% and the EBIT margin from 5.7% to 5.8%. Net income increased 4.3% to €1.88bn. Management reiterated the EBIT guidance for the current year to reach €3.75bn compared to €3.49bn in 2016. In August 2017, Deutsche Post DHL Group and Advent International closed a contract whereby DPDHL will sell Williams Lea Tag Group to Advent. The deal will be closed in Q4 17.
13 Nov 17
It is time to say goodbye!
Deutsche Post acquired Williams Lea in 2006 and 2007. Williams Lea offers corporate information solutions and has a global network for the international transfer of large data and business process outsourcing. In March 2006, DHL acquired a stake of 66.15% in the company at a purchase price of €326m and in April 2008 Deutsche Post increased its stake in the company by 30% from 66% to 96% for a total of €220m. In 2006, Williams Lea generated total revenues of €737m with over 6,600 employees. The operating performance, however, with an EBIT of €14m was not really convincing. According to our latest estimates, the company generated total revenues of €1.4bn and an EBIT of around €30m. The EBIT margin hovering around 2% and the business model might have been the reason to sell the company to the financial investor Advent for a total of €500m (estimate). According to our estimates, management of Deutsche Post DHL paid at least around €836m for Williams Lea, Stationery Office (TS0) and TAG. In January 2007, Williams Lea acquired the “Stationery Office”, a market leader in public-sector printing services and document management in the UK for around €156m. Williams Lea also took over 2,500 employees of Deutsche Post’s document management business in Germany. In 2011, the company acquired the world’s largest independent marketing execution and production agency TAG for a total of €156m. In 2011, TAG generated revenues of €67m with over 2,500 employees (1,000 full time and 1,500 part time). EBIT reached €8m (an EBIT margin of 12%).
28 Aug 17
Operating performance in line with expectations
In Q2`17 revenues increased 4.4% to €14.81bn. EBITDA improved 12.5% to €919m and the EBITDA margin increased from 7.6% to 8.2%. EBIT increased 11.7% to €841m and the EBIT margin improved from 5.3% to 5.7%. Net income after taxes rose 11.3% to €602m and earnings per share fully diluted reached €0.49 compared to €0.43 in Q2`16.
08 Aug 17
Williams Lea up for sale?
According to the latest rumours, Deutsche Post DHL is planning to sell its UK subsidiary Williams Lea. The price is expected to range between €500m and just below €1bn. In 2012, Deutsche Post DHL acquired 75% of Williams Lea for around £370m and later the remaining 25% for around £200m. According to our estimates, DHL paid nearly €700m. In 2012, the company generated total revenues of €1.35bn and was part of the Supply Chain business division. In 2015, Williams Lea was merged with the division. The company is the market leader in outsourcing document management and marketing production. Its major customers are in the financial service industry, retail and consumer goods industry, pharmaceutical, publishing and the public sector.
24 Apr 17
Operating performance expected to improve further
Deutsche Post DHL reported solid results. Revenues declined by 3.2% to €57.3bn but EBIT jumped 44.8% to €3.56bn in 2016. The EBIT margin improved from 4.1% to 6.1%. Net profit after minorities jumped 71.4% from €1.54bn to €2.64bn. Due to the strong operating performance, which was in line with expectations, management increased the dividend by 23.5% from €0.85 to €1.05 per share.
08 Mar 17
E-commerce is the main performance driver
The company reported strong Q3 16 results, although revenues declined by 3.9% to €13.86bn. EBITDA jumped 30.4% to €1.09bn and the EBITDA margin improved from 5.8% to 7.9%. EBIT increased disproportionately from €196m to €754m and the EBIT margin increased from 1.4% to 5.4%. In Q3 15, the company wrote-off around €311m which was linked to the failed IT-project with SAP and IBM in the Global Forwarding, Freight division. Excluding this impairment, EBIT improved 48.7% from €507m to €754m. In the first nine months, revenues declined 4.5% to €41.9bn. EBITDA increased 23% to €3.37bn and the EBITDA margin increased from 6.2% to 8%. EBIT went up 63.8% to €2.4bn and the EBIT margin increased from 3.3% to 5.7%.
09 Nov 16
Kühne + Nagel has already reported Q3 16 results. According to the management the company suffered from the insolvency of the South Korean shipping company Hanjin at the end of August. This resulted in additional costs of around €7m (estimate) mainly due to higher freight rates which jumped to 50% in Q3 16. Hanjin has only a worldwide market share of around 1.3%. Latest research (19 October) from Alphaliner revealed a market share of 1.2% based on the shipping volume of 245,979 TEU. THe market leader with a market share of 15.3% is APM Maersk. The main reason for the increase is the year-end shopping-holiday season. Companies have shifted their goods (total value of €12.5bn) from Hanjin to other ocean freight operators. This shift has triggered the freight rate increase. Even without Hanjin, the overcapacity in the market will remain. Therefore we expect freight rates to normalise again but on a much lower level.
19 Oct 16
Excellent strategic move but too expensive!
Deutsche Post DHL is to acquire the UK company UK Mail Group for a total of €280m or £242.7m. Deutsche Post is offering a premium of around 43% or 440p (445.5p including the interim dividend – premium 45%) based on the last share price of 307p. In addition, the company will pay an interim dividend of 5.5pe or additional £m.
29 Sep 16
Solid operating performance
The company reported strong Q2`16 results. Revenues declined 3.5% to €14.2bn (estimate: €14.4bn). EBIT however jumped by 40% to €752m (estimate: €757m). The EBIT margin increased from 3.7% to 5.3%. Net income increased by 66% to €561m (estimate: €521m). All business divisions contributed positively to the operating performance. Germany saw the only revenue increase (by 6.3% to €4.31bn, mainly the PeP division) all the other regions posted revenue declines. In Europe -11.4% to €4.34bn, in the Americas -3% to €2.52bn and in the Asia/Pacific region -3.4% to €2.47bn. In other regions revenues dropped by 6.7% to €560m.
03 Aug 16
A very smart change in management
The CFO, Lawrence A Rosen, will leave the company at the end of September for personal reasons. Melanie Kreis, already a member of the management board, will take over the role as new CFO on 1 September 2016. In 2014, Melanie Kreis was appointed a member of the board with responsibility for human resources. She started her career at McKinsey and joined Deutsche Post DHL in 2004. She was responsible for M&A activities, acquired Exel in 2005 (€5.6bn acquisition price) and organised the sale of Deutsche Postbank successfully. In 2009, she headed the group controlling and, since 2013, was appointed CFO of the Express division upto 2014.
28 Jun 16
Solid start but still room for improvements
In Q1 16, revenues declined 6.1% to €13.87bn. The revenue decline was mainly driven by the revised revenue recognition terms of a contract with the National Health Service in the UK of around €465m. In addition, negative currency effects contributed €402m to lower revenues. Excluding these two effects revenues would have remained flat. EBIT however improved 21.1% to €872m and the EBIT margin increased from 4.9% to 6.3%. Net profit jumped 29.1% to €639m.
11 May 16
Guidance too optimistic!
Deutsche Post DHL reported final 2015 results. Revenues increased 4.6% to €59.23bn, mainly driven by positive currency effects. EBITDA declined 6.2% to €4.07bn and the EBITDA margin reached 6.9% compared to 7.7% in 2014. EBIT dropped 18.6% to €2.4bn and the EBIT margin declined from 5.2% to 4.1%. Net income dropped 25.6% to €1.54bn. Management proposed an unchanged dividend of €0.85 per share and a share buy-back programme worth €1bn. In the fourth quarter, revenues remained stable at around €15.3bn. The EBITDA margin increased from 8% to 8.7% and the EBIT margin from 5.9% to 6.2%. Net income declined 1.6% to €630m. EBIT in the Post-eCommerce-Parcel division increased by 14.6% to €425m, in Express by 2.6% to €580m, in Global Forwarding Freight by 39.4% to €99m and by 9.3% to €176m in the Supply Chain division.
10 Mar 16
Amazon entering the delivery market
Amazon has established its own parcel delivery centre near Munich. The centre is just in the middle of a testing process with local courier partners. The company is testing the new offer of same-day deliveries which is also offered by DHL. In addition, Amazon's management is trying to be become increasingly independent of Deutsche Post DHL by gaining control over the entire delivery process.
08 Jan 16
Currency and one-off items are driving the performance
In Q3 15, revenues increased 3% to €14.4bn. Currency adjusted revenues declined marginally also due to lower fuel charges. EBITDA declined 15.5% to €836m. EBIT plummeted 71% to €196m and the EBIT margin declined from 4.8% to 1.4%. Excluding one-off items of around €426m, EBIT still declined substantially by 8.1%. The transformation of the Global Forwarding Freight business into the New Forwarding Platform failed completely. Therefore management recognised an impairment loss of €308m and €37m additional costs related to the further transformation process. In addition, management identified an €81m exposure related to an expected increase in payments to the civil servant pension fund. The third quarter also includes a positive impact of €82m from the reversal of impairment losses related to the Cincinnati hub.
11 Nov 15
Error 723: Failed to retrieve data from the database
The company published a profit warning and revised guidance for the second time in a row. Management decided to write-down around €347m due to the unsuccessful implementation of a new software architecture in the business division Global Forwarding and Freight.
29 Oct 15
Expanding e-commerce activities to Austria
The company is planning to enter the Austrian market with its parcel delivery services. According to the company, infrastructure investments for parcel shops and parcel stations are expected to reach a low triple-digit number. We estimate infrastructure investments of around €150m. In September 2015, the service will already have started in some regions.
20 Aug 15
In Q2 15, revenues increased 7.3% to €14.7bn. EBIT however dropped 18% to €536m and the EBIT margin declined from 4.8% to 3.6%. Revenues of the PeP (Mail) division grew 1.9% to €3.71bn. EBIT plummeted 60% to €75m and the EBIT margin reached only 2% compared to 5.1% in Q2 14. Revenues of the Express division grew 11.8% to €3.46bn and EBIT improved 13.3% to €376m. The EBIT margin increased from 10.7% to 10.9%. The Global Forwarding Freight division also reported a weak operating performance. Revenues increased 4% to €3.8bn but EBIT dropped 60.4% to €40m. Also the performance of the Supply chain division suffered. The EBIT margin declined from 3% to 2.9% although revenues increased by 11.8% to €4bn.
06 Aug 15