Comment / Analysis: Rising staff costs may be a package too heavy to carry for DP-DHL

26/03/2018

Almost all the key 2017 financial figures released by DP-DHL this month moved in the right direction – group revenues rose nicely above inflation and earnings growth was even stronger, thanks to operating leverage, while free cash flow as well as debt metrics were impressive.

One number soared, however, and certain trends prompted concern, particularly for the employees of the DHL Global Forwarding (DGF) unit.

(DGF in this story refers to both freight and forwarding activities, which are reported separately).

Rising costs

It is ...

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Ross Delaney
March 26, 2018 at 9:47 pm
This is at the heart of the ill conceived bias in market financial analysis towards asset carrier businesses versus their forwarder competitors….

“Let’s look at the EBIT/employees ratio by unit in 2017 instead, which was: €8,363 for PeP; €20,112 for Express; €6,964 for Global Forwarding; and €3,723 for Supply Chain.

This shows why the freight forwarding unit is where the axe might fall, barring similar considerations for the supply chain business, which has capex requirements at about 4x versus DGF.”

So in essence: 4x capex should not require a similar or greater multiple to be applied to the expected revenue per employee of that high asset consumption dependent business model? Why not?

Back in the day, Burlington Northern coined the phrase “people not planes deliver” yet it seems financial analysts through this ZIRP era have been able to repeatedly give lazy capital intensive business models, those that rely in turn on lazy anti-trust regimes, a free pass.

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- Ale Pasetti
  March 27, 2018 at 9:38 am
  That is exactly the point, I think we agree Ross. Thanks much for your feedback.
  
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