The conference is now being recorded. Good afternoon, ladies and gentlemen, and welcome to today's DHL Conference Call. Let me now turn the floor over to your host, Mr. Martin Zieginberg.
Thank you, and hello and welcome to everyone. Thanks for joining on such short notice for our call on our measures introduced today. We have here with us Frank Apo, the group CEO and interim CEO of the Pepper Division who will take you through the presentation to acquaint you with the set of measures that we have introduced today for the PAC division going forward. We will, after that, have time for Q And A. For that Q And A, we will have also here available with us, Melanie Christ, the group CFO.
And given that we are all on the tight schedule, right over to you, Frank.
Hello from my side as well, and thank you for joining us on short notice. Of course, this is not the nicest discussion to have and definitely, surprising for you when we came out this morning. You know, and of course, we'll reflect as well what we said 4 weeks ago and what has changed and why we have now a more precise plan, what we want to do. So let's go into the presentation on Page 2. You see the bridge to the new PeP target for this year.
And that is a reflection of what I have learned in the last. So we have learned under my leadership somehow in check what is going on. So we definitely have a challenge in the operational performance, and I will explain that in a second, but equally, we also have to increase our investments in in OpEx to really improve the underlying performance. And that leads before one offs and restructuring expenses to $1,100,000. So the $150,000,000 are is costs, which we will continue also in 2019 2020 because we believe that this is necessary to improve and deliver what we have promised originally for 2020.
In addition, we have EUR 500,000,000 restructuring costs, which I will explain later on how that is constructed, and how we want to use that. So that leads to the 600,000,000 new reported guidance for this year in Pept. So where we are and what is the current state of our assessment? So it's good news and bad news. Good news is we still believe that the volume will continue to structurally grow, and we have grown quite nicely.
Prices in the mix and mad have kept stable but not increased and become later on to to that challenge. And what we think about that on the post side, volume decline has been lower than the most other postal operators but we didn't get, as you know, a stem price increase in January 2006. And that puts already some pressure if you see that to the operations. What the key learning is from the last 4 weeks, somehow in direct cost is, that you know, we are not able, currently to compensate factor cost increases for productivity gains And I believe that is happening because we have not really invested in OpEx. I'm not talking less about CapEx because we invested a lot of brick and mortar stuff and sorting equipment, but we have not sufficiently enabled the organization to improve productivity.
And that's something I have learned more after I look deeper into the detail. And I think that's a big lever going forward, and you will see that later. Besides of that, We have a tight labor and transport market which has led to price increases there too. And we have definitely due to the strong growth we have seen a stretched organization. And we have also a little bit imbalance in utilization of the capacity at the moment.
That puts all stress to the organization in addition that productivity is not improving. On the pro side, we also have, of course, the continuation of the decline, and that puts course, pressure on the fixed costs. In addition, we have a change in the mix, as we explained already, that puts additional pressure because we certain larger volumes can't be, can't be really, sorted in the same way as standard letters. Finally, indirect costs, as I mentioned already for Wix Secure, we have a challenge there. There is a challenge.
We've overhead buildup in the parcel area, which is not completely wrong, but we did it probably too fast on the other side. We have not mirrored and responded sufficiently to the reduced overhead in the cost side. So that's overall puts significant cost pressure on our operations and that led us to the conclusion, the overall target will not be achieved. This year. So the next page, you know that.
That's a good story on both sides. Our decline is much smaller than other places. And we have continued to grow very nicely, but this is these diverging trends put pressure on the operation. So that's the reason on Page 5, why we believe that we have to invest on an annual basis and continuously $150,000,000 to and this is not CapEx, that is OpEx, to really improve the performance. The reason for that is we were probably more focused on facilitating strong parcel growth and short term profitability than record productivity investments.
There are some missing elements in IT and operations to drive better customer service and higher efficiency and I will talk about in a second about the main pillars of what we think we should do. In addition, to get lower cost base and, getting a contribution pretty rapidly. We build up 500,000,000 restructuring expenses. Part of that has cash flow impact of us, even if we generate a cash benefit, as I explained later on. So on Page 6, you see the overarching themes, we will address.
So on the positive side, we will definitely more balanced growth in yields. We had many years of outperforming the market growth. And we think now with a tightening market, it's right to balance growth and yield better. We will go with a regulator for a to a price review, as we already told you, the productivity measures will be, of course, the core of that, and I'm confident now after I look in many details, there is plenty of opportunity to improve our productivity, but you have to address it in a very consistent way that's the reason why we need these SEK 100,000,000 to SEK 150,000,000. And that's the reason why we put it in the underlying run rate instead of in one offs.
And finally indirect costs, we have to restructure our overhead. We have too much overhead, and we will tackle that as well. Finally, as already announced. Usually, we had announced it for Q2. That's the amount of money you will see later on what we will put into corporate income.
So these are all measures, which will give us a better cost structure in other days for profitable growth overall. On the next page, you'll see pricing measures are and the pricing measures are different. You know, that addresses here on the parcel mainly, the business customers, We have to revisit in a tightening market what we can do to do price increases to customer by customers. There is a challenging issue of ship to profile. What we mean by that is if you give people discounts and they deliver significant less volume, of course, we have to adjust and collect the money, which we probably have not done, rigorously.
And that's one element which Express, I think, is doing very, very nicely, and I think we can learn from that. Finally, as I already said, the growth should be more in line with the market, different from the past where we grew always about the market. On the right side, we took already action for a small niche product, which is exist in Germany, and the regulatory part will follow the normal schedule as we already explained. On page 8, you see the different areas where we need more OpEx. So automation and digitization, people think in the straightaway always about, you know, investments in big IT projects and infrastructure.
No, we can do a lot, I think, with smarter analytic tools and to build up. We have already people who are doing analytics, but I think we can accelerate that. That comes with extra OpEx. And there is a lot of leverage in that. If you better forecast.
If you monitor your quality, even tighter than we do. Address for qualification, you might be surprised that we do that. It's enabling the sorting equipment to make less mistakes, which are still happening. And that is all not big amount of CapEx. It's more like training people understanding the processes better, and that will give us significant leverage.
The same as a constant dynamic group planning, even down to daily district definition, which will help quite a bit. Joint delivery is a common theme, which we can further extend. On the right side, you see not only the dynamic network utilization, that becomes more and more important, in particular, if you think that the product between mail and parcel, the quarter line between these 2 small, more diminishing. And finally, a big lever in a quite expensive cost, continuous improvement. We have to train our people through our first choice in certified programs, and that will give us a significant leverage to avoid waste in the day to day operations because there are no single silver bullets.
It's day to day management sticking to the standard operating see just enabling to identify, waste in the current circumstances. And that will give us enough flexibility. This is an ongoing process. You can never stop. And you know that, originally, the ideas came and were deployed mainly in and I think we can leverage them as well for capital deployment more.
Coming to the restructuring measures on Page 9, So that's one effect, which is, getting, you know, retiring the civil servants and we will only reach higher civil servants where we know that we don't need to replace them. And that has 2 effects. The first is then we have a one time hit because we more or less, build a provision for all the expected salaries payments in the future. On the other side, we will have an ongoing impact up to 160,000,000 per year. And the interesting thing is that the cash flows over the whole period of their early retirement, but the EBIT impact is now negative in the coming years, always positive.
So we see a shift from one time now into, you know, ongoing improvement and receiving a positive cash effect, as I explained in the next There will be further smaller restructuring measures to get to the more than EUR 200,000,000 target we are shooting for, but I'm very dented that this is all durable and executable. On the next page, you'll see more detail. And of course, investor relations can explain a bit more in detail. What you see here is If people stay until they retire and we don't need them actually because they are overhang or we take the money and and say, or we build an EBIT impact now. And then you see in the coming years, we have 0 impact on the bottom line.
And even a positive operating cash flow effect of 1 quarter roughly. And that's the reason why we decided to do that. We have identified enough civil servants, without telling you now precisely how many, but it will be a sizable member which we can take out of your overhead. We are not talking about operations. I think that's important because our operations is speeding up.
That means if we send somebody home, then we have to replace them with somebody and then the effect is negative. So finally, shift to corporate incubations. We, you know, we told you already, StreetScooter was the 1st Smart Trucking India, which we launched last week. Is another one. In total, we've also some central functions for that.
We are shooting now for 1,000,000. I think important to know here is that we assumed a lower number in the original guidance. So this number is higher than we gave you a guidance, what we expect for that. You have seen that we're building up capacity for the street scooter and that leads of the shortage for more higher losses, and that's the reason why this number is higher than Oricha anticipated. But for the Q2 release, we will report that now under corporate functions.
So altogether, you see on Page 12, the bridge You see here that the base 2018 excludes, despite the guidance, that includes one time EUR 100,000,000 from these, re pension restatement, So we are shooting for the first three pillars because this is, of course, revenue increase, price increases, stuff. Increased due to more volume, but also salary increases, the same for materials, we overall expect 1000000 to 1000000 net impact from that. For the productivity improvement, we assume and believe that we can make it happen additional 150 to 250 overhead would be north from 200, if the international parcel business will be between 0 and 100. As I said already before, it depends a little bit how successful we are on growing. But might lead to further investment in this area.
And then, of course, the number is lower. All we might end up at VCOQ, we are getting more possible if we can do both or it's just we want to show also some profitability to increase confidence. So that will be the bridge somehow, and that is where I'm very confident that this is, very confident that this is achievable. On Page 13, that leads to the restatement of our guidance. You see here what is including everything.
We go down from originally 4.15to3.2around3.2 with the different elements, PEP 0.6 coverage functions of $70,000,000 more. DHL stays at the same. If you exclude the restructuring one offs, then we are at 3.7. And then you see that we reassure today that the target for 2020 is absolutely achievable. Of course, the impact in PEP has impact on free cash flow as well.
We now say instead of above 1.5, but it will be above 1,000,000,000, including the debt financing of intercontinental fleet. And that's what is the new guidance, and we feel very comfortable that this is driven. So finally, summary. So we do note some fundamental readjustments. The program we now launched is that all elements, productivity overhead and pricing measures, focus is not on the short term, but to deliver our 2020.
That's the reason why we lowered the guidance for this year. You see the numbers we have this one off. And ongoing expenses, and that makes me sure that we really lay the foundation for future success in that division. It will be a challenging journey without a doubt. Nevertheless, I'm, as I said already 4 weeks ago, I was very confident in I remain equally or even more confident today because I think they've more in the detail and know now more than I knew already 4 weeks ago.
And the particular difference, if you're asking, what is your particular differences, I learned definitely a little bit more on the pricing and even more how little we really focus on continuous productivity improvements. And this is definitely my priority now going forward. And that leads to what I just explained. So thank you very much for listening. And now the floor is yours for any questions.
Yes. Operator, to initiate the Q And A, please.
Yes. Of course. If anybody would like to ask a question, please. And our first question comes from Mark McVicker who's calling from Barclays. Over to you.
Hi, Mark. Thank you.
Good afternoon, everybody. Probably have about a 100 questions, but I'll limit it to 3. First one, I think for you, Frank, when did you first start getting worried about the pet performance? I mean, I think you said at the Capital Markets Day, you weren't totally happy with Q4, which I think the slide is, you know, and are you satisfied that the sort of the flow of information up or the your early warning signals work as you had hoped for them to do, or do they just does it need tightening up
So should I answer them 1 by 1? So I'm happy to do that. So this is a good question. So I'm a person who's always worried, despite that the good run we had in the last years, but probably, I got more serious about what's going on late summer last year. And since some and your obvious balance, if I may, if I'm early and honest, your oldest balance is okay, there are worries, but on the other side, the numbers are still moving in the right direction.
That was probably the time, when I got more concerned about what's going on.
And then the And as you went through that, are you happy now that the data that you get out of that division? Good enough to allow you to really see where the problems are and tackle them.
Yes, absolutely. And the interesting thing is you know, the amount of data, which is available is massive, which sent me a signal that we have probably too much overhead, if you can, any question you ask an anchor. And but I this is the interesting thing. The deeper you go into that, the more opportunities I saw. And that's good news for me because my job was not to run the division.
So I asked, of course, certain questions, but not all questions. But what I see now is that there is plenty of opportunity in all angles. And that is very encouraging for me And that's the reason why I've said also to my colleagues, you know, let's now make a cut and go out instead of fizzling around and hoping, you know, it's just better too, because that helps me also internally. I say now we have a problem. Now we're working on that, but I'm very optimistic that we can go through that.
And And that's the reason why we said now it's the right timing instead of hoping and kissing and trying, you know, we need to get in the store and story is we have to turn everything around and when I look under the stone, I find something. And that is very encouraging.
Okay. And then the next question really was probably a very quick one. In terms of the early retirement of the extra civil servants, that you've identified. Do you have to get any further union agreements for that to happen, or is that already incorporated in the existing agreements that you have?
We don't need any agreement with you. I mean, we offer that somehow and the employees can accept or, you know, this is an offer. We can say you can go earlier home you will get a little bit less salary than in the past. And so that's actually 32%. But you don't have to work any longer.
And that's a voluntary program. We have done that already 2 years ago, and that worked very well. In the meantime, people get older and we found even more area. So I'm very optimistic that this is doable. We don't need any any agreement because that's in place.
That's a legal the law says you can do that and offer that to people.
And I think as Frank said, when we did it in 2016, there was huge interest I think the program is obviously going to be focused on people in the overhead areas where we do not need to replace and that makes economic so attractive despite the impetus we have to take in 2018.
Sorry. One one just one one just a quick question. And doing the numbers, however, sort of, in a rough and ready fashion says that your retained profit after the 500 a minute of restructuring is clearly going to be, quite materially down year on year in terms of thinking about the dividend, are you going to be prepared to step outside of the normal range of payout ratio to maintain the dividend. I know it's a question for the board early next year, but just in principle,
Yes. So I think, 1st of all, you have this headroom in the 40% to 60% corridor. We have also looked at one off and made adjustments for one offs in the past. And I think we are of course fully committed to the statement that dividend continuity is of absolute absence for us.
Okay. That's it.
Thank you. And we have all questions because, Mark, as you know, this is not in our sole control, but we are very confident that we will make our 2020 numbers. And if we are confident, then it would be a very weird discussion, if we not do what Melanie just said, that we look into that as a continuity in how we deal with that. And I'm very confident that we will make our numbers, and that's the reason why.
Of course,
we have to look into the underlying first, as Melanie said, but this is I'm very confident that we will see, as we have done that in the past, the continuation of our, our, finance policy in the right way.
Sure. Because the dividend is very much a medium term prospectus and Technosphere, a 1 year. Absolutely. Yeah. Absolutely.
That's brilliant. Thank you all very much.
Okay. Thanks, Mike. And the next caller, please.
Next up is Edward Stanford calling from HSBC.
Good afternoon, everybody. Two questions, please, if I may. Well, I suppose the first one for Frank. I mean, the last set of results that came at a difficult time for you. And essentially, you've only been in the job for a month and you had to stand up and express confidence in, in guidance for this year, which has proved to be a little difficult to sustain.
And you're now standing here expressing confidence in the 2020 guidance. Just do you now feel you have got to the bottom of the issues how confident are you that there will be no more surprises? That's question 1. Question 2, just a little bit interested in the early retirement program in the sense that what do these people actually do that you don't need to replace them?
So, you know, I feel very confident, you know, between end of April now, I spent majority of my time in digging into all elements We've a lot of people and kept them very busy. And if I listen to some, they say, okay, it's different how frankly it's fit, but we are definitely more busy now. So which is, I think good news for me, if I hear that. So, you know, I've I think I have really found if I wherever I look I found something, and I'm very confident that there are no hidden surprises left for me. And and that's the reason why I'm I'm I'm very confident.
On the On the other one, this is linked to the overhead reduction. The civil servants are not our youngest sponge of people anyway. And of course, I believe we can do this significantly less. And if we offer, you know, the early retirement we're really sure that this work, if there's anything left, it will be done by the remaining people and we will not hire any new and that will be very cautiously monitored. And we have done that already 2 years ago and we monitored that very tightly as well.
Yes. And I think it is connected to the fact that particularly in the postal area, I don't think we have made adjustment in the overhead number, in light of the decline in volume. And I think that's now an opportunity
Thanks very much.
Thanks, Ed. And the next caller please.
The next caller is Daniel Roeska, who's calling from Bernstein.
Hi, good afternoon, everybody. 3 of them may be fine. First one, it as you're turning stone, maybe what has kept the organization from reaching the same conclusions you're reaching kind of 6 months ago and then what kept them from executing the measures you're putting in place today 6 months ago. So what's changed over the past 6 months and what was missing to kind of reach that realization. Secondly then, with a as we a couple of years back, went through a similar episode at DHL Freight, you stated you're intent very early that you were looking for outside leadership to lead that business unit.
Could you comment a little bit on the medium to longer term, what changes you would like to see in the PDP leadership and how you think about setting that management team up for success in the medium term? And lastly, on the volume pricemix a little bit, how do you see volume and, kind of impact on prices from the mix shift in the business towards e commerce? And the pricing developed in the medium term, will the price increases you're trying to put through in the summer be sufficient to kind of keep prices stable or expand prices in the near term? Thanks.
Yes. So maybe on the first thing, And I said earlier, earlier, the challenge probably, you know, Mark asked me more when I got more aware the fundamental problem started probably already earlier. And it's a consequence, I think, our focus And I told you a few 4 weeks ago that I think that we are splitting that area of responsibility was a little bit that during was distracted from the day to day because that was home and you always are probably more easy when you see that. And trust that this is the right stuff is going on. And actually, that was not happening in the so that was not enough focus on that.
And that's not definitely different for myself. I focus that quite intensively. And I see that as well that the organization this responding positively to that different approach. And we have different characters as well. I'm a very, you know, clear with my expectations and, you know, I ask many questions as I always do, and I get a lot of answers, which is help So the leadership, of course, because you might ask the hidden question behind that, you know, I let it and then we need it for another year.
I think this will not happen here in this case. I have some ideas, but it's too early to talk about that. I will now focus to help this organization to a shine as it did in the past, for a long period And that is what they deserve and that they deserve as well that I show myself responsibility what is necessary to do. So I will do that, but of course, I will not do that forever. So on the volume side, there is some expect impact But as I already said, I think this is a little bit more tricky.
This is, you know, pricing is always the most difficult part, but I see from the first analyst also some opportunities, but it's too early to say what kind of levers we can fully pull, but there is an element of that. That has to be executed in a cautious way. Overall, the mark market is tightening and it's getting more of that everybody has difficulties to find enough labor and the capacity is not growing sufficiently for the e commerce. And that will help the market overall but the teacher is probably too early to say. We hinted to some elements, but there might be more, but that means a little bit more assessment also from my side.
Okay. Thanks.
Okay. Thanks, Daniel, on the next caller, please.
Next up, we have Tobias Tittic, who's calling from MainFirst Bank.
Yes. Good afternoon. 2 for me, please. Firstly, I mean, a lot of the things that you seem to be doing in mail sound like common sense if you're on a tight shop. So I'm just wondering whether you're controlling that clip a little bit and whether you draw any conclusions on how to control the business differently going forward to avoid those things and other divisions going forward because also it seems a little bit like a repetition of what happened in forwarding.
The second one is on your 2020 guidance. I mean, in my thinking, guidance should be somewhat a midpoint of realistic scenario. So maybe below that is that you think about 2020? Or does a lot go have to go right for you to meet 2020? And is the realistic midpoint maybe somewhere lower because but obviously, it's not where market expectations are at this point.
Thank you.
So, first of all, situation here is different from the DGF situation because that was a major transformation program. And therefore, the root causes are different. But you're right to be as that of course, you always have to ask as a CEO, how do you lead the organization? And I think you always have to find the right balance the right balance by trusting your divisional heads and checking sufficiently. And if you look over the period of 10 years, I think it works for 9.5 at least or 10 years or 10.5 years, we had 10.5 years, what's the right balance in build and experience trust.
And as I already said, what happened probably in the last period of UH's leadership, that there was a little bit defocus So therefore, I would not lay now with the controlling organization. I think that's what you have to take. What you have to and the other side has to do as a CEO that you realize with something going on that you have to change. And I think this is what we are doing. We should not not say the whole history was just a fake.
And your numbers are the numbers and your numbers were good. And when we started 10 years ago, nobody believed ever that we can make these numbers possible. So and that's proof of evidence that the right balance between cross and type management is right. Because on the other side, if you ever manage every division very tight, you will not get good performance. You wish people then people say why I'm short doing that.
So, but nevertheless, you know, there's also responsibility for my own side, but the root causes are very different. The other one was a fundamental transformation program, and this one is a more not enough focus on the long term existing business. So what I'm maybe referring to is that
basically, I mean, it sounds like you keep the guidance for a very long time and then there's a very substantial write down change in court, change in shift rather than maybe early warning indicators telling you to, modify things a little easier earlier on, and that this is this is what I may be referring to.
Yes, maybe if I could just add from the funds perspective. So first of all, I agree with Frank, I think the situation with NFE and forwarding different. I think ultimately, we had to come to the realization and forwarding that the transformation approach we had taken was simply the wrong one. This big monolithic IBM SAP system that was not the right approach. And once it's after the pilot that it was not the right approach, We took that decision to change fundamentally our IT renewal strategy and that led to the write off, in forwarding.
I think here, the situation is different. And I mean trust me, we are also having this in the finance team intense discussions on that question. Think the point is that PEP continued to deliver the numbers and to make the budget, I think that has now become apparent over last, for weeks particularly is, that, that was really at the expense of making necessary investments, particularly in the product area, to make us a future proof. And, yeah, of course, you could say, why didn't see that earlier on. As Frank said, there were warning signs, but yes, they delivered the number of the whole time and I think it really took this 8 week deep dive now on the Frank leadership to get to the bottom of the situation.
Okay. Thank you, Tobias.
We've got time.
And
we have the second one on the 2020 guidance, please.
Yes. So, as I dig into that, I'm really confident that this is a good number. So, and achievable number, So there's plenty of opportunity all over the place and that's the reason why we put these ranges in. So if you take the upper end, it would be more, but I would, you know, that's too early to commit, now even more than we already committed. But you know, I have, I'm very sure that this is doable, because you know, I see enough levers.
And it's, it's not the market. That's what I said already 4 weeks, we have a lot of market problem we have an insight problem, and that's an easier problem to tackle, and with that announcement, we create enough muscle and headroom for us to do something instead of trying to achieve the numbers and squeezing and squeezing, this gives us even if it's a disappointment, gives us enough opportunity to really do know something on a continuous space because don't forget, we invested a year $150,000,000 into proof of productivity. That's a quite a difference, one we have probably done in the last 2 years.
Okay.
Thank you.
Thanks Tobias and now the next caller please.
Next up, we have Joel Booman, who's calling from Berenberg.
Yes. Hi there. I've got 2. One is a very simple one, which I'll start off with, which is simply, will you take the full provision in the second quarter numbers?
No. It's all likelihood that will be more after the summer. So as Frank said, all the legal ingredients for the retirement program are in place, but we now have to go through define the right people in the right positions. So it's going to be more in the second half of the year.
Okay, thank you. And then just really coming back on this point around the 2020 guidance and your confidence in that which seems obviously really key here. I guess, I wanted to ask the extent to which you've or how you go about working out what the payoffs are on the incremental of investment that you're making? Especially given that you've highlighted that a lot of these cost saving programs are yet to be firmed up. I'm just curious to understand why you have so much confidence, and the stress test that you've done around the payoff on that investment?
The reason is because I have seen already a list of ideas, which were already on the plate, before I took over, but have been postponed. And they have not very long payback periods. So why, that happened? That's a good question. I asked that myself, probably because we wanted to deliver the numbers, that if I had known that, I definitely had decided differently, but I didn't know because I'm not deciding on prote guns, which generated $2,000,000 here and $3,000,000 there, but there isn't a longer list of these things because there is no silver bullet.
But on the other side, if I see that there are many ideas, it's more about executing that and taking the challenge and creating headroom. And that's the reason why we put this $150,000,000 to take the headroom and sort of discussing or we don't have any money because we have to deliver this number. Intentionally, we said, let's create some headroom so that we can do something about it. And that is what is happening. And that's the reason if I see the list and on the other side, funding, which is embedded in the guidance, I'm very confident that we will see significant improvement in productivity.
So that's the reason why I think there is no new we don't need a new think tank to do all things right. We just have to leverage the ideas the organization has
Okay. So just a follow-up quickly on that. These are ideas that were out there that had actually been quantified in terms of the long term payoff. It's simply weren't able to make the investment maybe to release that, that saving?
Yes, so there are this is different. And if you think about, of course, training and first choice, which is a continuous improvement. This is what we probably invest more in 2018 when get benefits. But if you have an organization, which is learned, in starting locally to take waste out. And I could tell you interesting anecdotal stories, but that's not the right level for discussion.
You will see what is possible if you really have the right mindset. And we have to invest into that. And we did, but not sufficiently. So that's the reason. That is something which then there are other ideas which have a very short time period.
And then there are 3rd category of ideas, of course, where we are changing fundamentally, and more looking for 2020 2021 than whatsoever. But in summary, all that should help us to get to the level which is necessary to deliver the 2020 goal.
If more time for a few more callers.
Okay. Next up, we have Andre Mueller, who's calling from Kepler Cheuvreux.
Hello?
Andre, you're on. Otherwise, not any longer operator, we might want to
Okay. Move on to the next one. Next up then, it's Andy Chu, who's calling from Deutsche Bank.
Thank you. Good afternoon, everyone. Just three questions from me, please. Just in terms of the the, pet bridge to 2020, are you able to help us in terms of the phasing of the profit step up from the 1,000,000,000 to to 1,700,000,000 is it going to be, you know, slightly sort of back end loaded towards 2020, obviously, you'll have the stamp price increase likely to come in 19, so maybe some help between the 1 and 1,700,000,000 I. E.
What 2019 pet, looks like. Secondly, just to, if you could just clarify that you've obviously you're happy with these sort the DHL divisions that there are no sort of early warning sort of signals in each of the 3 DHL divisions are there. Sort of performing, to plan. And the last question is just in terms of the last time, obviously, typically structuring charge was ahead of the the stamp price rise and review in 2015 and kind of feels that 3 years later, here we are with the sort of restructuring charge Is that just coincidence? And what you're doing here is basically nothing related to the stamp price increases.
It's just simply that you need to get the business into a much more profitable place? Thanks very much.
Yes. So with the phasing, You know, I think I'm pretty smart, but not smart enough to do that. I focus more on getting an idea if there's enough, leverage across the different functions to get to the, 2020 number. I understand, andy, you're expressed we will continue to work on that and might be sooner or later ready to give you a better phasing, but that's too early to say. Of course, the price increase will be implemented January next year.
And that is so I asked for understanding that my focus was not to get an understanding what is beautiful, and I'm very confident. On the DHL divisions, yes, we think that they are on the right track. That's the reason why we are reconfirming the guidance for this year and beyond. So we have no reason to, to do that. You know, the stem price, this is, you know, it's an interesting question.
And if you think about that, we always assume that the 3rd year of the stem price increase will be the most difficult one. And we said that already 4 weeks ago, What in hindsight, I probably missed, and this is linked to what I've said earlier, that we missed an opportunity to stabilize that. If we had started earlier or to invest more in the ongoing, we probably would get now more benefits. So we have not leveraged what we got at the beginning. To equalize more or less the impact by doing something at the beginning.
So in hindsight, you are always smarter. At that time, probably felt it's important that we demonstrate and as we really see movement of the results. And that's the reason why we might already earlier start reduce that. And if you are then on a slope and then the most difficult year comes, which is referred here. So it is to a certain extent, it is a consequence of the model, but of course, that should give us some insights going forward that we are not saying all the stem prices straight away and we continue to invest somehow even in the year where we might need that to demonstrate that this is a good year.
So it's It's a complex answer to a simple question. It's probably not just coincidence. I think we missed an opportunity and we should not listen now again. And And that's definitely, which is on my list.
Can I just ask one more just in
terms of the restructuring charge the civil servants? How many people was that roughly equates at least?
Annie, I have a very clear opinion. I don't want to raise concerns for a lot of people are knowing that they will stay around. And that's the reason why I always say, I'm committed to cost reduction but I don't want to give headcount firms because that ends up in newspapers and it sends the wrong signals, to people because The people will be very innovative, but if the press picks the number up and then the press writes this headcount and then people who are not even in the scope of that, gets concerned, and I don't want to have that because we have a lot of civil servants in the operations, and they should not worry, and they should not see, oh, that's not was valid for me as well, and that's the reason why I'm I'm pretty reluctant. And you never see that in my tenure now for more than 10 years. I never set any headcount number.
Because I think that is wrong because that confuses people and makes them nervous without any benefit for us. So we are very committed, and we will tell you later after the fact Please note before.
Okay. Thank you very much. Good. And we've got a few more callers the short of the questions and the more they allow for a short answer, the more callers we can take care of.
And the next caller is Matija Gergeli calling from Goldman Sachs.
Two quick questions for me. The first one is on no yield management in Parcels. Could you give us maybe a bit of thick color? What kind of say annual yield management results, should we should we expect, I don't know, 1, 2% per annum, or would you expect this initially to have a bigger, result? And the second question is around, say, excess liquidity, excess capital as we're debating it at the Capital Markets Day just a few weeks ago.
Now considering the lower guidance, would you still say that now you have, say, excess capital that you would say commit to return to shareholders? Yeah, that's those are the two questions.
Thank you.
Yeah, So, so is there Melanie has something to do as well? Melanie will take the second question and I will take the first question. So, you know, despite that I see opportunity, you know, on what is doable, I prefer not to give different type levels over time, what we intend to do, I want to have a clear communication sent to everybody and once in a place and what we do usually, we start with our customers first instead of sending that around because that confuses as well. Our And that's not good. So I asked for some understanding, as I said, we found opportunities in that area, but as the order is definitely not to announce in an analyst call any general price increase or whatsoever.
We have to work on that. Then we have prepared communication, then we do something and not the other way around. So I can't say more, but that's my logic about that. I can assure you, I think there is opportunity.
Yes, I think on the second question, so I mean, yes, we have a challenging situation in PeP, but that doesn't mean that we are changing our finance policy. And I think it says very clearly in our finance policy that once we accumulate excess liquidity, we will think about the right ways to share that also with our shareholders. Obviously, given the changed guidance, that is now going to be more challenging for the year 2018, but we still acknowledge that we have generated excess liquidity in 2016 2017. So how and what we do with this excess liquidity remains open, but it will be dictated by the unchanged finance policy.
Thank you, Matija. And I think two colors we still could take.
Okay. Then Next up, it's Robert Johnson. He's calling from BNP Paribas.
Good afternoon, everybody. A couple of questions on the numbers, if I may. The first question concerns the benefits that are expected to be derived from the million restructuring charge. You said in the presentation that the expected benefit is greater than 1,000,000 for 2020. Would it be fair to assume that the benefits will be greater than that in 2019 and then start to fade from 2021?
And if it's possible to give a total benefit, that would be extremely helpful as well. The second question concerns the 1000000 to 1000000 per year of recurring OpEx. You said that that will recur in 2019 2020. Is it possible to estimate by how much that will decline from 2021 onwards?
Will not generate a peak and then it slows down. The costs are gone and then they are gone and they will build up over time depending on when people really go in these restructuring measures, be it early retirement or other measures we will take. And we believe that these will be you know, measures which were lost forever because we will not rehire these people. The same is true for this is not something which we generate. I think what my intention of this investment now is that we establish an ongoing culture of continuous improvement and optimization.
And as I said already earlier, the whole service industry not today, but in other speeches and presentations, the whole industry is now getting through digitalization opportunities in new periods. If you look into what we are doing in many areas, we are still a very manual, you know, organization or service industry that will change. This $150,000,000 in every year, 2018, 1920,000,000 will set the base, but if they but this investment will continue to really learn and leverage what technology will bring to our party. And that will drive an continuous improvements of productivity. And this is probably the point where we have better started earlier, but we didn't.
So I can't change that. So what I can turn it out to say, okay, we earmarked money, we should go into continuous improvement of operations. The nice thing is now it's easier because technology has advanced certain things will not possibly be for a year even if you dreamed about that, but artificial intelligence, data analytics, all this stuff is moving so rapidly that you can capture if you don't have enough data analysts, you can think about data analysts. And if you don't have them, you can't make any changes, and that will change now with that money. And that is not peaking even in 2020.
I think it creates a base even for more improvements beyond.
Can I maybe just ask a follow-up question please? Is the early retirement being offered to only employees? You have a kind of maximum number of years before retirement? I don't know, 4 years or something like that, or is this available to anybody?
So by law, it is only applicable to civil servants aged fifty 5 plus. And we will, of course, define the criteria. And one criteria is obviously going to be that those people to be in positions where no refill is required because that is what makes the economics work.
Great. Thanks, Rob. That was crisp. And if we say that crisp, we've cut time for one last caller.
And that's up. We have David Carstens, who's calling from Jefferies.
Hi, good afternoon, everybody. Thanks for taking the question. I've got 2, please. First of all, on the expected slowdown in partial Germany volume, is that because you see the market becoming more competitive with Amazon Logistics ramping up? Or do you deliberately step on the brake to manage costs more effectively?
And then secondly, regarding, Parcel Europe, you're highlighting profitability of up to $100,000,000. What measures would you take to improve ability faster for Parcel Europe. It doesn't mean more, cooperation agreements with incumbent operators and less direct investments. Thank you very much.
So, on the first one, so this is we say it's a more a balance of growth and yield. So we will not we don't see any slowdown in the underlying growth, but we believe after so many years of market share gains. There is no need to further gain market share. It's focusing as well on profitable growth more in line with the market. And that's three objectives.
So the market is not slowing down and not because others are starting something. I think this year, continuation But if a market is tightening from the supply, you know, I think that's the chance where you should think about, you know, what is your deal? And I think that's that is what the oil industry has to think about more carefully. And I think that's the opportunity, not only for us, but for the whole industry. And so the second is We have some this is too early to say and that's the reason.
I think there is an opportunity to do 100,000,000 in e commerce in the past of Europe until 2020. And that's the reason why we write 0 to 100 I want to see, I don't want to see that we are cutting back on our expansion plans just to deliver a number reason why we say, if that's not doable to generate profits because we want to continue to grow, we come up with a 0. But if we continue to grow very nicely, we should not generate because we have countries who are already pretty profitable as we demonstrated or shortly already before. And that's the reason why I've said, this is a part of a journey. And let's see that.
And that's a positive development in comparison to what we said so far. But on the other side, so that you're not saying, oh, now they are putting something in which we said differently before, even if you're taking 0 and we still can make the 1.7. So we are not changing our expression, but you should not be surprised either that this business is making profits by 2020 different from what we have said in the past. And that is meant by that. And that is an ongoing discussion we will have in the next 2 years.
How what should we do? But I will not compromise on growth and opportunity just squeeze out profitability.
Okay, very clear. Thank you very much.
You're welcome. Perfect. Thanks Thanks, David. And basically, that concludes the Q And A session. I think we've got it taken care of all the requests out there.
And, yeah, so the next schedule of communication is then for our Q2 results for August 7th. That concludes today's session. And over to you, Frank, for closing remarks.
So, again, sorry for surprising. We've made the bad news, and the change in guidance, I hope that, we could demonstrate that We created more confidence than we had even 4 weeks ago that our long term plans are executable and not to operational and therefore realistic. And on the other side, that this needs some short earned help from restructuring expenses and reinvestment of OpEx, in this year and also then in a continuation, But if we do that, we will make our numbers. I'm very confident and I feel even more confident than 4 weeks ago because I have dig more into that and I spent a lot of time with the folks. I think we have a strong management team with the right ideas My drop is now to focus along the right stuff and started already, but this will help as well internally.
The message is now out. We can be very clear and want in talking to the organization that will help to get traction. And And that is also something which is, I have not mentioned, but this is beneficial to us. The organization needs to know what has to happen, and that's not very clear, and that's the reason why we went out as well. Because nothing is worse when the organization doesn't know what's going on.
And now the organization knows, and we will pull up our sleeves and we'll make that happen. Thank you very much, and see you soon. Thank you. Bye bye.
Thank you.