Business development

Income development 

Transition to the adjusted statement of income

  • Special issues are eliminated in the adjusted statement of income. The transition to the adjusted statement is a two-step process. Firstly, standard reclassifications are carried out, then the figures are adjusted for individual special items.
  • The reclassifications essentially relate to two issues.
    • The first issue is the reclassification of net interest income components not related to net financial debt and pension provisions: predominantly the compounding and discounting effects of non-current provisions (excluding pension obligations) and non-current liabilities (excluding financial debt). The non-operational character of these components can also be seen in the fact that their influence on net interest income very much depends on the interest rates as of the balance sheet date.
    • The second significant reclassification relates to the amortization of intangible assets capitalized in the course of purchase price allocation (PPA) of acquisitions conducted during the assessment of long-term customer contracts. Existing transport contracts are an essential component of the purchase price valuation, in passenger transport in particular. In order to safeguard the operating assessment and to prevent these contracts from being treated differently from other contracts, these amortization components are eliminated from the operating profit. The sum reclassified in the year under review relates almost entirely to the acquisition of Arriva.
  • Adjustments for special items involve issues which are extraordinary based on the reasons for them and/or the amounts involved, and which would have a significant negative effect on operating development over time. Book profits and losses from transactions with subsidiaries/financial assets are adjusted regardless of their amounts. Individual items are adjusted if they are extraordinary in character, can be accounted for and assessed precisely and are significant in volume.

Operating profit figures

The following presentation of income development describes the changes in the key items on the statement of income, adjusted for special items. The effects of the changes in the scope of consolidation and exchange rate changes are presented in the following table and are not explained further in the following section.

In the year under review, exchange rate effects caused an overall immaterial increase in income and expenses. Effects resulting from changes in the scope of consolidation were also not significant.

The economic development remained challenging. Adjusted EBIT developed significantly weaker compared to the previous year, driven by the integrated rail system. Here, charges from additional expenses for measures to expand capacity (in particular personnel), to improve quality and for digitalization, as well as factor cost increases, were only partially offset by revenue increases. In a challenging competitive environment, DB Arriva developed slightly below the previous year’s level. The increase in operating profit at DB Schenker had a positive effect, mainly driven by development in land transport and ocean freight. The positive development of adjusted EBITDA was marked by the effect of the first-time application of IFRS 16.

Transition to the adjusted statement of income
(€ million)

2019

Reclassifications

Adjustment of special items

2019
adjusted

IFRS com-
pound-
ing/dis-
counting
Net
investment
income

PPA

amorti-
zation

Impending
losses
Restruc-
turing
Provision for disman-
tling obli-
gations

Other

 

Revenues

44,430

1

44,431

Inventory changes and other internally
produced and capitalized assets

3,166

3,166

Other operating income

3,030

–11

–11

3,008

Cost of materials

–‍22,262

3

0

–‍22,259

Personnel expenses

–‍18,152

118

23

–‍18,011

Other operating expenses

–‍5,157

146

1

71

40

–‍4,899

EBITDA/EBITDA adjusted

5,055

146

111

71

53

5,436

Depreciation

–‍3,671

62

6

4

0

–‍3,599

Operating income (EBIT) | EBIT adjusted

1,384

62

152

115

71

53

1,837

Net interest income | Operating interest balance

–‍655

33

2

–‍620

Operating income after interest

729

33

62

152

115

71

55

1,217

Result from investments accounted for using the equity method | Net investment income

–‍12

3

–‍9

Other financial result

–‍36

–‍33

–‍3

–‍72

PPA amortization customer contracts

–‍62

–‍62

Extraordinary result

–‍152

–‍115

–‍71

–‍55

–‍393

Proft before taxes on income

681

681

Excerpt from adjusted statement of income
(€ million)

2019

adjusted

2018
adjusted

Change

absolute

thereof due
to changes in
the scope of consolidation
thereof due to exchange
rate effects

thereof IFRS 16 effect

%

 

Revenues

44,431

44,024

+⁠407

+⁠77

+⁠124

–⁠48

+⁠0.9

  Inventory changes and other internally produced and capitalized assets

3,166

3,091

+⁠75

+⁠0

+⁠2.4

  Other operating income

3,008

2,862

+⁠146

+⁠1

+⁠2

+⁠5.1

  Cost of materials

–⁠22,259

–⁠22,254

–⁠5

–⁠23

–⁠64

  Personnel expenses

–⁠18,011

–⁠17,149

–⁠862

–⁠22

–⁠37

+⁠5.0

  Other operating expenses  

–⁠4,899

–⁠5,835

+⁠936

–⁠3

–⁠18

+⁠991

–⁠16.0

EBITDA adjusted

5,436

4,739

+⁠697

+⁠30

+⁠7

+⁠943

+⁠14.7

  Depreciation

–⁠3,599

–⁠2,628

–⁠971

–⁠22

–⁠4

–⁠897

+⁠36.9

EBIT adjusted

1,837

2,111

–⁠274

+⁠8

+⁠3

+⁠46

–⁠13.0

  Net operating interest

–⁠620

–⁠618

–⁠2

+⁠2

+⁠1

–⁠69

+⁠0.3

Operating income after interest

1,217

1,493

–⁠276

+⁠10

+⁠4

–⁠23

–⁠18.5

  Result from investments accounted for using the equity method |
Net investment income

–⁠9

12

–⁠21

–⁠0

  Other financial result

–⁠72

–⁠41

–⁠31

+⁠3

–⁠0

+⁠75.6

  PPA amortization customer contracts

–⁠62

–⁠59

–⁠3

–⁠0

+⁠5.1

  Extraordinary result

–⁠393

–⁠233

–⁠160

–⁠1

+⁠68.7

Profit before taxes on income

681

1,172

–⁠491

+⁠13

+⁠3

–⁠23

–⁠41.9

The economic development remained challenging. Adjusted EBIT developed significantly weaker compared to the previous year, driven by the integrated rail system. Here, charges from additional expenses for measures to expand capacity (in particular personnel), to improve quality and for digitalization, as well as factor cost increases, were only partially offset by revenue increases. In a challenging competitive environment, DB Arriva developed slightly below the previous year’s level. The increase in operating profit at DB Schenker had a positive effect, mainly driven by development in land transport and ocean freight. The positive development of adjusted EBITDA was marked by the effect of the first-time application of IFRS 16.

  • Revenue development was slightly positive.
  • Other operating income increased. In the integrated rail system, the effects of train-path price support in rail freight transport throughout the year had a positive effect (offsetting effects in revenues). At DB Arriva, the increase was mainly due to the utilization of provisions for impending losses.

There were noticeable additional charges on the expense side, especially in the case of personnel expenses:

  • The cost of materials was at the previous year’s level. In the integrated rail system, among others performance-driven lower energy expenses were largely offset by higher purchased transport services at DB Cargo. Higher expenses for infrastructure utilization in Great Britain at DB Arriva were offset by lower purchased transport services at
    DB Schenker as a result of volume declines and lower freight rates.
  • Personnel expenses increased markedly. In addition to tariff effects, especially in the integrated rail system, the higher number of employees also had an impact.
  • Other operating expenses declined significantly in the integrated rail system, at DB Arriva and at DB Schenker. This was mainly due to the elimination of leasing expenses as operating expenses through the first-time application of IFRS 16 (counteracting effects in depreciation).
  • Depreciation increased in particular as a result of the IFRS 16 effect. In addition, higher depreciation on vehicles as a result of capital expenditures had an impact, particularly in the integrated rail system.

The operating interest balance was roughly at the previous year’s level, meaning that the operating income after interest also decreased. Effects from higher interest for leasing as a result of the capitalization of lease agreements previously treated as operating leases (IFRS 16 effect) were mainly offset by lower interest expenses. This was mainly due to lower interest rates.

Net investment income developed significantly more weakly. This is mainly due to GHT Mobility GmbH, a company which began being included in the consolidated financial statements using the at-equity method in the year under
review.

The decline in other financial results was mainly caused by effects from hedging transactions.

The extraordinary charges increased significantly.

Extraordinary result (€ million)

2019

thereof affecting EBIT

2018

thereof affecting
EBIT

 

DB Long-Distance

5

5

DB Regional

0

0

–⁠0

–⁠0

DB Cargo

–⁠12

–⁠12

–⁠13

–⁠13

DB Netze Track

–⁠77

–⁠75

67

67

DB Netze Stations

3

3

7

7

DB Netze Energy

Other/consolidation
integrated rail system

–⁠109

–⁠109

–⁠82

–⁠82

Integrated rail system

–⁠195

–⁠193

–⁠16

–⁠16

DB Arriva

–⁠182

–⁠182

–⁠204

–⁠204

DB Schenker

–⁠2

–⁠2

–⁠7

–⁠7

Consolidation other

–⁠14

–⁠14

–⁠6

–⁠6

DB Group

–⁠393

–⁠391

–⁠233

–⁠233

In the year under review, the extraordinary result consisted of the following special items, among other things:

  • effects from impending losses (DB Arriva);
  • effects in the context of restructuring measures (essentially the Other division);
  • effects from adjustments to provisions for dismantling obligations (DB Netze Track); and
  • effects arising from the adjustment of pension provisions as a result of the compulsory cancellation of gender-specific inequalities in guaranteed minimum pensions in Great Britain (DB Arriva).

The composition of the extraordinary result in the previous year is presented in the 2018 Integrierten Bericht.

Excerpt from statement of income
(€ million)

2019

2018

Change

absolute

%

 

Profit before taxes on income

681

1,172

–⁠491

–⁠41.9

Taxes on income

–⁠1

–⁠630

+⁠629

–⁠99.8

     Actual taxes on income

–⁠137

–⁠192

+⁠55

–⁠28.6

     Deferred tax expenses (–)/
income (+)

136

–⁠438

+⁠574

–⁠131

Net profit for the year

680

542

+⁠138

+⁠25.5

     DB AG shareholders

662

528

+⁠134

+⁠25.4

     Hybrid capital investors

5

+⁠5

     Other shareholders
(non-controlling interests)

13

14

–⁠1

–⁠7.1

Earnings per share (€)    

     Undiluted

1.54

1.23

+⁠0.31

+⁠25.2

     Diluted

1.54

1.23

+⁠0.31

+⁠25.2

The significant decline in profit before taxes on income was compensated by the development of the income tax position. This was driven by the development of the deferred tax position at DB AG resulting from taking a longer planning horizon into account. At the same time, the actual income tax expense declined as a result of reduced income tax risks abroad. The net profit for the year (profit after taxes on income) thus increased significantly.

Earnings per share developed accordingly.

Operating profit development of the business units

EBIT adjusted by business units
(€ million)

2019

2018

Change

absolute

%

 

DB Long-Distance

485

417

+⁠68

+⁠16.3

DB Regional

408

492

–⁠84

–⁠17.1

DB Cargo

–⁠308

–⁠190

–⁠118

+⁠62.1

DB Netze Track

807

840

–⁠33

–⁠3.9

DB Netze Stations

210

221

–⁠11

–⁠5.0

DB Netze Energy

43

21

+⁠22

+⁠105

Other/consolidation
integrated rail system

–⁠622

–⁠493

–⁠129

+⁠26.2

Integrated rail system

1,023

1,308

–⁠285

–⁠21.8

DB Arriva

289

300

–⁠11

–⁠3.7

DB Schenker

538

503

+⁠35

+⁠7.0

Consolidation other

–⁠13

–⁠13

DB Group

1,837

2,111

–⁠274

–⁠13.0

The development of the adjusted operating profit figures for the business units was differentiated, but overall unsatisfactory. The business units of the integrated rail system significantly declined due to factor cost increases.

Additional expenses for capacity and quality improvement measures also had a negative impact. The countermeasures introduced dampened these effects slightly. The adjusted EBIT of DB Schenker increased mainly as a result of positive business development. In a challenging market environment, DB Arriva developed slightly below the previous year’s level.

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