Net assets and financial position remain sound
The following analysis of the Group’s net assets is based on the consolidated balance sheet, which can be found in the “Achievements” section.

As of the reporting date, total assets increased by 3.8% to €162,647 million (previous year: €156,701 million). The balance sheet structure changed only slightly.

Noncurrent assets grew by 18.1% to €14,536 million (previous year: €12,304 million). This reflected a sharp increase in intangible assets, which rose to €5,076 million (previous year: €1,787 million) due to the inclusion of goodwill for DHL as well as the reversal of negative goodwill for Postbank in the amount of €1,499 million. After deduction of the impairment loss charged on DHL’s goodwill, the carrying amount of DHL totaled €1,742 million. Previously, the negative goodwill at Postbank was netted against goodwill, so that the reversal of the negative goodwill resulted in an increase in intangible assets in the year under review. Property, plant and equipment also increased sharply, rising 8.2% to €9,085 million (previous year: €8,395 million) as a result of the consolidation of DHL.

In contrast, noncurrent financial assets fell to €375 million (previous year: €2,122 million). This was due to two factors: firstly, DHL was still recognized under investments in associates as of the end of 2001. Secondly, a loan granted to DHL that was recognized as of December 31, 2001 was subsequently eliminated during the course of the first-time consolidation.

Current assets increased slightly by 2.6% to €146,665 million (previous year: €142,906 million). Once again, receivables and other securities from financial services resulting from Postbank’s business activities constituted the largest single item by far; this item increased by 1.3% to €137,641 million (previous year: €135,904 million). Primarily as a result of the consolidation of DHL, inventories increased by 31.3% to €214 million (previous year: €163 million), receivables and other assets rose by 27.6% to €6,168 million (previous year: €4,834 million), and cash and cash equivalents including current financial instruments grew by 31.8% to €2,642 million (previous year: €2,005 million).

Deferred tax assets fell by 3.0% to €1,446 million (previous year: €1,491 million). In addition to other minor effects, this change reflects two important contrary developments: on the one hand, the reduction of deferred taxes from loss carryforwards at Deutsche Post AG and Postbank led to a €250 million decrease in deferred tax assets from tax loss carryforwards. On the other, deferred tax assets from temporary differences rose by €205 million.

Equity decreased by 4.8% to €5,095 million (previous year: €5,353 million) as if the balance sheet date. This decline is attributable to the following factors, which were recognized directly in equity: dividends in the amount of €412 million were distributed from the unappropriated surplus from fiscal year 2001. In addition, equity fell by €438 million as a result of the remeasurement of financial instruments in accordance with IAS 39 and was reduced by a further €97 million due to currency translation (for additional information, see the Statement of Changes in Equity in the “Achievements” section). In contrast, consolidated net profit of €659 million led to a corresponding increase in equity.

The capital ratio fell by 0.3 percentage points to 3.1% (previous year: 3.4%); for additional information, please see the table above. This figure is very low compared with other service providers due to Postbank’s business operations, which are represented by the FINANCIAL SERVICES Corporate Division. After adjustment for the effect of the banking business, the Group has a capital ratio of 19.1% (previous year: 24.3%) and thus a sound financing structure, as is evident from a glance at the key figures in the “Postbank at equity” scenario.

The Group’s ratio of equity to fixed assets fell to 35.1% (previous year: 43.5%); in the “Postbank at equity” scenario, this figure dropped to 28.7% (previous year: 33.5%).

The minority interest rose to €117 million (previous year: €75 million). The largest proportion of this amount – €83 million – is attributable to the Guipuzcoana group.

Provisions increased by 15.6% to €12,684 million. The first-time consolidation of the provisions from DHL USA and the creation of a restructuring provision for the STAR project were offset by the decrease in pension provisions that resulted from the transfer of property, plant and equipment to Deutsche Post AG’s Pension Trust. Changes to the collective wage agreement resulted in a reduction in pension provisions that was recognized in income. The changes to the collective wage agreement relate to a reduction in automatic increases to pension entitlements.

Liabilities primarily relate to liabilities from financial services. This contra account to receivables from financial services rose slightly from €131,532 million to €132,851 million as of the balance sheet date. On the whole, liabilities increased by 3.2% to €144,751 million (previous year: €140,302 million).

This was partly attributable to the first-time consolidation of liabilities at DHL, which caused a 12.6% increase in trade payables to €2,707 million (previous year: €2,404 million). In addition, the European Commission’s state aid ruling led to the recognition of a liability of €907 million in other liabilities; this item increased by 32.5% to €5,377 million (previous year: €4,058 million). Financial liabilities rose by 65.3% to €3,816 million (previous year: €2,308 million). This increase, which was primarily due to the consolidation of DHL, was offset by principal repayments to banks and other creditors. A breakdown of the financial liabilities by maturity is presented in item 40 of the Notes.

Net debt (financial liabilities minus securities and cash and cash equivalents) rose to €1,174 million (previous year: €303 million). As of the end of 2002, the Group’s net gearing totaled 18.7% (previous year: 5.4%). In the “Postbank at equity” scenario, net debt rose to €1,986 million (previous year: €1,750 million) while net gearing increased to 28.0% (previous year: 24.6%).

In order to actively manage the Group’s cash resources, we launched a bond issue in autumn 2002. The two tranches worth a total of €1.5 billion have maturities of five and ten years, respectively. In this way, we were able to take advantage of very attractive interest rates at the time of the issue and convert short-term liabilities into long-term debt.

Our current cash reserves and existing bank credit lines of around €3.9 billion (approximately 17% of which had been drawn down as of the balance sheet date) mean that we have sufficient funds to finance both the growth we are aiming for and our planned investments.

The key elements of the cash flow statement (Postbank at equity) have been summarized below in order to explain the financial position. The complete consolidated financial statements, including Postbank accounted for at equity, can be found in the “Achievements” section.

The Group’s liquidity position improved substantially in the year under review. Our cash and cash equivalents, the net of all cash inflows and outflows, increased by €1,233 million to €1,827 million (previous year: €594 million) as of December 31, 2002. For additional information, please see the table above.

The net profit before changes in working capital declined by €2,345 million to €683 million (previous year: €3,028 million) as of December 31, 2002. The primary reason for this drop is the disputed repayment of state aid in the amount of €907 million in accordance with the European Commission’s ruling (which we have appealed); this amount was recognized as an extraordinary expense and reduced the consolidated net profit accordingly. This effect is balanced out in operating cash flow (net cash from operations/Cash flow I), since the allegedly unjustified state aid was repaid at the beginning of 2003 and increased other liabilities in the year under review.

Within non-cash expenses and income, net income from the measurement of Postbank at equity totaling €1,640 million was offset by non-cash provisions for restructuring and staff costs for the STAR program in particular in the amount of €1,600 million. The net income from the measurement of Postbank at equity contains the reversal of negative goodwill for Postbank in the amount of €1,499 million.

In addition, net cash from operating activities/Cash flow II increased to €3,093 million (previous year: €2,593 million) as a result of higher interest and dividend income. The largest single item was the dividend paid by Postbank, which amounted to €137 million.

Net cash used in investing activities was impacted by the acquisition of a 100% interest in DHL in the year under review and, at €2,118 million, almost attained the prior-year level (€2,020 million). Investments in noncurrent assets totaled €2,785 million (previous year: €3,051 million) in the year under review. €1,588 million of this amount (previous year: €2,132 million) was attributable to investments in other noncurrent assets, while the acquisition of companies accounted for €1,197 million (previous year: €919 million). The acquisition costs were reduced by the cash and cash equivalents amounting to €193 million acquired in the course of the acquisitions. These investments were offset by income from the disposal of items of noncurrent assets, which fell to €667 million (previous year: €1,031 million).

At the reporting date, net cash from financing activities amounted to €258 million, as against net cash used in financing activities of €492 million in the previous year. This reflects our active management of cash and cash equivalents, which led to a substantial increase in redemption payments on financial liabilities to €2,184 million (previous year: €527 million). At the same time, we increased the dividend distribution to €412 million (previous year: €300 million). These effects were offset by new financial liabilities (resulting, in particular, from the €1,496 million bond issued by DP Finance B.V.), which increased to €2,854 million (previous year: €335 million).