Capital expenditure lower than expected

The Group’s capital expenditure (capex) totalled €1,262 million at the end of 2010 (previous year: €1,171 million), down 10% on the originally budgeted figure of €1.4 billion. Funds were injected primarily into replacements and growing the business.

At the beginning of the year, we were initially cautious with our investments in light of the uncertain economic trend. As the year progressed, we shifted from a single focus on replacements to growth-orientated investments. Funds were used mainly to replace and expand assets as follows: €1,058 million were invested in property, plant and equipment and €204 million in intangible assets excluding goodwill. Investments in property, plant and equipment related mainly to advance payments and assets under development (€279 million), technical equipment and machinery (€265 million), transport equipment (€212 million), IT equipment (€97 million) and aircraft (€68 million).

Our initial focus on replacement investments led to investments being made primarily in Europe and the Americas, as shown in the graph on the right. In Europe, investments were centred on Germany and the UK.

MAIL invests in internet business

Capital expenditure in the MAIL division rose in the reporting year from €338 million (adjusted) to €445 million. These investments related in particular to technical equipment and machinery (€210 million), internally generated software (€96 million) and other operating and office equipment (€40 million). The domestic mail business invested primarily in replacing technical equipment and mail sorting machines. In addition, we developed the platform for the E-Postbrief product.

Investments in the domestic parcel business focused largely on new camera and scanning technology for the parcel centres which we used to automate more of our processes. We expanded our Packstation network and updated the necessary software. We also launched the MeinPaket.de online shop, thereby expanding our online shopping services.

With regard to the retail outlets, we restructured our network and improved the software in use.

EXPRESS investments remain low

In the EXPRESS division, capital expenditure totalled €286 million (previous year, adjusted: €370 million), representing a further decline of 23% compared with the previous year. Investments were driven primarily by regulatory aircraft maintenance and network optimisation. Investments in property, plant and equipment focused on aircraft (€68 million), advance payments and assets under development (€118 million), technical equipment and machinery (€23 million) and IT equipment (€20 million).

Investments in intangible assets related mainly to advance payments and intangible assets under development (€6 million) as well as software (€6 million).

In regional terms, we prioritised upgrading our terminals in Italy and the Netherlands and improving our Network Operation Services in Germany. In the Asia Pacific region, we invested mainly in India and China. In the Americas region, capex centred on aircraft conversions in the United States and on technical equipment and machinery in Mexico and Canada.

GLOBAL FORWARDING, FREIGHT modernises infrastructure

In the GLOBAL FORWARDING, FREIGHT division, €102 million was invested in the year under review (previous year, adjusted: €92 million). Of this figure, €75 million was attributable to the Global Forwarding business unit. As in the prior year, we updated our IT infrastructure and streamlined our processes, particularly in our global applications.

Funds of €27 million were invested in the Freight business unit, where they were used primarily for property, plant and equipment in the UK, including transport equipment.

SUPPLY CHAIN invests in new business

In the SUPPLY CHAIN division, capital expenditure increased by 10% to €215 million (previous year, adjusted: €195 million). Of this amount, €198 million related to the Supply Chain business, €15 million to Williams Lea and €2 million to central entities. Investments were stepped up in the second half of the year and related mainly to new business activities in the Americas and Asia Pacific regions. Roughly 65% of the funds went towards new business and 35% for replacements and renewals in 2010 as a whole. Capex in the Americas region was primarily attributable to new business in the Retail, Consumer and Automotive sectors. Replacement investments focused on customer-funded projects in the Retail and Energy sectors in the Americas region. In the UK, we continued to direct capital towards warehousing and transport solutions for new and existing customers, with major investment projects being carried out in the Life Sciences & Healthcare sector and in Airline Business Solutions. Capex in other parts of Europe was limited to new and existing business solutions as well as essential replacements and saw an overall year-on-year decline of 27%. In the Williams Lea business unit we invested in developing software and in modernising IT.

Rise in cross-divisional investments

Cross-divisional capital expenditure rose from €176 million in 2009 to €214 million in 2010. Most of these expenses related to the purchase of vehicles. Capital expenditure had been considerably reduced in this area in the previous year when vehicle operating life was extended and new vehicle orders suspended. Investments in IT equipment went down, primarily as a result of the previous year’s restructuring.