Group management

EBIT after asset charge sees significant increase

Since 2008, Deutsche Post DHL has used EBIT after asset charge (EAC) as a key performance indicator. EAC is calculated by subtracting a cost of capital component, or asset charge, from EBIT.

By including the cost of capital in our business decisions, we encourage all divisions to use resources efficiently and to organise our operating business to increase value sustainably whilst generating cash flow. In the reporting year, EAC served as a key performance indicator in addition to EBIT and was also used as a basis on which to determine management remuneration.

To calculate the asset charge, the net asset base is multiplied by the weighted average cost of capital (WACC). The asset charge calculation is performed each month so that we can also take fluctuations in the net asset base into account during the year.

All of our divisions use a standard calculation for the net asset base. The key components of operating assets are intangible assets, including goodwill, property, plant and equipment and net working capital. Provisions and operating liabilities are subtracted from operating assets.

The Group’s WACC is defined as the weighted average net cost of interest-bearing liabilities and equity, taking into account company-specific risk factors in a beta factor according to the Capital Asset Pricing Model.

We apply a standard WACC of 8.5% across the divisions and this also represents a minimum target for projects and investments within the Group. The weighted average cost of capital is generally adjusted to adhere to the current situation on the financial markets. However, the goal is not to match every short-term change but to reflect long-term trends. WACC is reviewed once annually. As in previous years, we did not change the WACC in order that our internal resource allocation should not be influenced by short-term fluctuations in capital market interest rates. A constant WACC also ensures that EAC is comparable with previous years.

EAC improved substantially in 2011, rising from €670 million to €1,229 million. The increase resulted primarily from the improvement in profitability of our DHL divisions, whereas the cost of capital went up moderately by 3.6%.

A.10 EBIT after asset charge (EAC)
€m
		2010 adjusted1		2011		+/– %
EBIT		1,835		2,436		32.8
Asset charge		–1,165		–1,207		–3.6
EAC		670		1,229		83.4

Our net asset base increased by €980 million to €14,356 million in the reporting year due, amongst other reasons, to the Group’s increasing investment activity. Advance payments for cargo aircraft as well as investments in new sorting systems and our vehicle fleet increased property, plant and equipment year-on-year by 5.9%. In addition, the utilisation of restructuring provisions increased our net asset base. The restructuring provisions had reduced our net asset base as operating liabilities in the prior year. The rise in intangible assets is attributable to currency effects, which raised goodwill, and to the acquisition of Tag Group.

Net working capital was on a par with the prior year despite the fact that revenues and freight volumes in the DHL divisions increased in the reporting year: the rise in trade receivables of 6.9% was more than offset by an increase in trade payables of 8.2%.

A.11 Net asset base (unconsolidated)
€m
		31 Dec. 2010 adjusted1		31 Dec. 2011		+/– %
Intangible assets including goodwill		11,852		12,200		2.9
Property, plant and equipment		6,125		6,488		5.9
Trade receivables		6,011		6,426		6.9
Other operating assets		3,146		3,264		3.8
Operating provisions		–3,620		–3,396		6.2
Trade payables		–5,672		–6,135		–8.2
Other operating liabilities		–4,466		–4,491		–0.6
Net asset base		13,376		14,356		7.3