ANNUAL REPORT 2006 THE POST DANMARK GROUP

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N M A R K G R O U P

Post Danmark A/S Tietgensgade 37 1566 Copenhagen V Tel. +45 33 75 44 75

www.postdanmark.dk

ANNUAL REPORT 2006

THE POST DANMARK GROUP

CUSTOMER SERVICE

Tel. +45 70 11 12 30 (Business) Tel. +45 80 20 70 30 (Private)

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CONTENTS

Preface

Company Presentation Highlights and Ratios The Year 2006 De Post – La Poste Expectations for 2007 Customers and Market Business Customers Private Customers Courier, Express, Parcels International Post Production and Processes Employees and Management Risks

Shareholder Information Financial Review Accounting Policies

Consolidated Financial Statements 2006 Parent’s Financial Statements 2006 Principal Companies in Post Danmark Organisation of Post Danmark Board of Directors and Executive Board Management’s Statement Auditors’ Reports 5 6 9 10 11 12 14 16 22 26 28 31 36 42 44 46 51 61 85 98 99 100 103 104

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’I regn og slud skal posten ud’ (‘Sleet or hail, we never fail’) is a slogan that we all know in Den-mark. Everybody deals with and has dealt with Post Danmark in their everyday lives ever since the Danish postal service was born in 1624 – the year when King Christian IV issued the socalled ‘Ordinance on Postmen’, established nine mail routes and appointed the country’s first postmaster. According to the directives, the postmaster was to be a sober and hard-working man, and his noblest responsibility was person-ally to look after the mail that went to and from the stock exchange in Copenhagen.

Many years and billions of letters later, Post Danmark’s staff is our most important asset. At the same time, Post Danmark plays a very important role in society. The company ensures that all citizens and enterprises in Denmark can entrust Post Danmark with the responsibility for on-time delivery of mail. Relations are created between people and information is shared. At Post Danmark we have several hundred years of experience in performing this primary task. However, it is not only postmen and women who contribute to the Group’s growth. Post Danmark is to a great extent a technologically based business which is highly dependent on knowledge staff.

We are very proud and happy about the results we have achieved. Fortunately, our employ-ees are also pleased with Post Danmark. We regularly measure staff satisfaction, which has shown positive results. But, we can, of course, become even better. A labour market under pressure has contributed to a higher staff turn-over in 2006, especially among delivery staff. However, we are constantly working to create the best possible frameworks and conditions that modern people feel comfortable in. This helps us retain our competent staff. The 2006 financial year was an eventful year. We acquired a substantial ownership interest in the Belgian postal service, carried out significant efficiency improvements and developed our ac-tivities further in many areas. The net profit for the year of DKK 892 million reflects good and targeted work and is highly satisfactory. Developments in the postal market have moved in line with recent years’ trend, with a falling volume of conventional letters as a result of the technological development. Despite this development, Post Danmark has managed to improve net profit for the year by focusing on, for example, new business areas and develop-ing existdevelop-ing ones. The market for postal services is undergoing constant development, and so

is Post Danmark. We are continuously aware of the growth opportunities through acquisi-tions, and continuous efforts are being made to develop new business areas and products. We have carried out strong profiling of our customer service and sales efforts. At the same time, our customer-oriented activities were improved in 2006, reflecting our efforts to streamline our internal processes. These activi-ties will continue.

2006 was a prosperous year for Post Danmark, and a year of major changes. Post Danmark is still strongly positioned to meet customer needs and requirements based on a broad platform of products. In the coming years, focus will remain on developing the existing business. However, we will also be forward-oriented, searching the market for potential business partners and acquisitions, which can help create growth and support our visions.

Enjoy the reading!

Fritz H. Schur Helge Israelsen

CHAIRMAN OF THE BOARD CHIEF EXECUTIVE OFFICER OF DIRECTORS

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Post Danmark is the country’s leading sup-plier of postal services to the Danish people and business community. The company has always played a central role in society and is an important part of the Danish society. What would our everyday life be like if we didn’t have postcodes, postmen and women, stamps and post offices, not to mention the personal com-munication between people? Post Danmark is not just a business – it is a Danish institution. Post Danmark strives to create the best possible environment for modern people – we are, of course, referring to its customers and employ-ees. For centuries, Post Danmark has built up a modern, competent organisation, the object of which is to provide postal services and to carry on business within distribution, communica-tions, transport and logistics. In recent years, its activities have been expanded to include facility service, scanning and eCommunication. The company also has an ownership interest in the Belgian postal service De Post – La Poste. Today, Post Danmark is a modern undertaking undergoing constant change.

The provision of postal services includes an obligation to maintain an efficient nationwide service within collection, transport, sorting and distribution of letters, periodicals and parcels up to 20 kilos.

In return for the universal service obligation, Post Danmark has the monopoly of distributing letters weighing up to 50 grams. This monop-oly, which is expected to be abolished in 2009, is accompanied by an obligation to maintain a high service level defined as a target where 95 per cent of ordinary letters are delivered on the following weekday.

In 2006, the European Commission presented a proposal for an amended directive concern-ing liberalisation of the postal services in the EU. In addition to the removal of the above-mentioned monopoly of distributing letters below 50 grams, the proposal also provides that requirements as to uniform tariffs can-not be established generally for letters. If the proposal, which has been submitted to the Member States for consultation, is adopted, it is expected to become effective in 2009.

Post Danmark is in favour of the planned liberalisation provided that the company is secured fair and efficient framework conditions and provided that all ‘significant’ countries are liberalised simultaneously. In this connection, it is important that a position is taken on the implementation of the directive in Denmark concurrently with the considerations taking place in the context of the EU.

In accordance with the object established by law, Post Danmark’s mission is to provide basic postal services to all customers in Denmark – senders and recipients alike. These postal services must be the best in Europe measured in terms of service level, quality and price combined.

Post Danmark’s vision is to become the most excellent postal company in Europe, i.e. · to produce results at level with the best · to provide Europe’s best postal customer

serv-ices to all senders and recipients in Denmark · to make a profit from the letter segment –

de-spite a considerable decline in volumes

COMPANY PRESENTATION

POST DANMARK LEASING A/S POST DANMARK A/S

BUDSTIKKEN TRANSPORT A/S

DATA SCANNING A/S

PAN NORDIC LOGISTICS AB

100 PER CENT

PARENT

CONSOLIDATED SUBSIDIARIES

ASSOCIATES AND JOINT VENTURES

100 PER CENT 100 PER CENT 50 PER CENT 33 1/3 PER CENT TRANSPORTGRUPPEN A/S *) 51 PER CENT

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· to successfully develop and provide new cus-tomer services to senders and recipients · to gain market shares in competing markets · to cooperate with a major international

opera-tor

· to develop the most skilled and committed postal workforce in Europe.

The framework for achieving the objectives is good. A unique network of parcel and let-ter sorting centres, intelligent registration of changes of addresses, state-of-the-art solutions in production, etc., ensure a high level of reli-ability of delivery (service level), as a result of which Post Danmark is ranked among the best postal operators in Europe, for the benefit of the customers.

To ensure efficient and targeted operations, Post Danmark’s organisation is divided into eight business units and a number of staff and support functions.

Four customer-oriented business units are re-sponsible for sales to their respective customer segments while four production-oriented units

operate as subsuppliers of production, distribu-tion, IT and service. This division is based on a desire to ensure transparency in the contribu-tions made by the various activities to Post Danmark’s total economic value added. The eight business units are therefore measured by their economic performance.

The impact of electronic substitution is expected to continue in the domestic letter market, and the entry of new competitors will intensify the competitive situation. However, Post Danmark expects overall to retain a solid market position. The total market for newspapers, magazines and periodicals has changed significantly in recent years, driven by the abolition of the state subsidy for most weeklies and monthlies which has changed publishers’ preferences. As a result, most weeklies and monthlies have been transferred to magazine mail. The size of the market for the remaining newspapers, magazines and periodicals is expected to grow in 2007 thanks to the increase in the number of free newspapers.

Conditions are also changing in the newspaper market. The passing of a new law on subsidised distribution of daily papers (lov om tilskud til distribution af dagblade) implies that from 1 January 2007 the subsidy will be paid directly to publishers instead of Post Danmark.

An increase is expected in the domestic parcel market and for light goods. The market for outgoing international parcels is also expected to grow. At the same time, market share should improve.

In a forward-oriented approach, Post Danmark will search the market for potential business partners and acquisitions, which can help create growth and underpin its visions. Over several hundred years, Post Danmark has developed a unique know-how within postal services, which we expect to be able to introduce into adjoining markets. INCOME 2006 BY BUSINESS UNIT INTERNATIONAL POST COURIER, EXPRESS, PARCELS PRIVATE CUSTOMERS BUSINESS CUSTOMERS

NUMBER OF STAFF MEMBERS

OTHER PRIVATE CUSTOMERS (POST OFFICES) LETTER PRODUCTION AND TRANSPORT DISTRIBUTION (POSTMEN AND WOMEN)

REVENUE 2006 BY PRODUCT LETTERS, MONOPOLY OTHER NEWSPAPERS, MAGAZINES, PERIODICALS AND UNADDRESSED MAIL PARCELS LETTERS, COMPETITION

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HIGHLIGHTS AND RATIOS

AMOUNTS IN DKKM POST DANMARK GROUP

2006 2005 2004 2003 2002 2006 EURO INCOME STATEMENT 11,227 10,605 10,799 68 43 34 11,295 10,648 10,833 (9,492) (9,103) (9,427) 1,803 1,545 1,406 (597) (586) (525) 1,206 959 881 0 (261) (260) 1,206 698 621 0 (160) (466) 1,206 538 155 (60) (72) (103) 1,146 466 52 (357) (169) 44 789 297 96 4,839 4,245 4,220 2,483 2,436 2,437 7,322 6,681 6,657 2,519 2,080 1,872 - 314 542 1,726 1,777 1,559 3,077 2,510 2,684 7,322 6,681 6,657 1,402 1,415 837 (999) (939) (691) (154) (261) (1,350) 249 215 (1,204) 11 7 6 36 15 5 34 31 28 26 32 175 11.96 5.96 3.64 21,838 21,847 23,203 11 10 10 470 317 315 The financial statements are prepared in accordance with the international financial reporting standards, IFRS. The accounting policies are described on pages 51-59.

The financial statements are not directly comparable. For the years 2006, 2005 and 2004, they are prepared in accordance with the IFRS standards. For the years 2003/2002, they are prepared in accordance with the provisions of the Danish Financial Statements Act.

DKK has been translated into Euro at Danmarks Nationalbank’s quotation rate of 745.60 at 31 December 2006.

*) The extraordinary dividend of DKK 451 million paid in 2005 is not included in the figures.

1,563 9 1,572 (1,350) 222 (79) 143 0 143 0 143 16 159 (39) 120 727 304 1,031 366 -270 395 1,031 164 (154) (17) (7) 9 34 36 56 3.59 21,511 12 74 11,393 69 11,462 (9,778) 1,684 (560) 1,124 0 1,124 0 1,124 (91) 1,033 (295) 738 4,910 2,115 7,025 2,471 -1,700 2,854 7,025 1,304 (696) (1,088) (480) 10 30 35 53 22.00 21,539 11 471 11,648 70 11,718 (10,065) 1,653 (588) 1,065 0 1,065 0 1,065 122 1,187 (295) 892 5,424 2,263 7,687 2,731 -2,010 2,946 7,687 1,226 (1,154) (127) (55) 9 34 36 56 26.75 21,511 12 552 Revenue

Other operating income Total income

Operating expenses

Profit before depreciation, amort. and impairment losses (EBITDA) Dep., amort. and impairment losses, excl. amort. of goodwill Profit after dep. and amort., but before amort. of goodwill (EBITA) Amortisation of goodwill

Operating profit before non-recurring items Non-recurring items

Operating profit (EBIT)

Financials, incl. profits/(losses) of associates and joint ventures Profit before tax

Tax on profit for the year Net profit for the year

BALANCE SHEET Non-current assets Current assets Total assets Equity Provisions Non-current liabilities Current liabilities Total equity and liabilities

CASH FLOWS Operating activities Investing activities Financing activities Change in cash RATIOS

Operating profit margin, per cent Return on equity, per cent Solvency ratio, per cent

Dividend as a percentage of profit before tax *) Dividend per share, DKK/Euro *)

Number of full-time employees

ECONOMIC VALUE ADDED

Economic value added, per cent Economic value added

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In 2006, the Post Danmark Group achieved a profit after tax of DKK 892 million against DKK 738 million in 2005. Consolidated results were at the level stated in the Interim Report for the Third Quarter of 2006 and the best ever in the history of the company. Consolidated results were generated through maintenance of the earnings level of domestic operations combined with a positive result of the activities in the Bel-gian postal service, De Post – La Poste, in which Post Danmark acquired an ownership interest of 25 per cent in 2006.

The increase in revenue for the year was in particular the result of growth in domestic and international parcels, but revenue also improved for letters and magazine mail as well as for newspapers, magazines, periodicals and unad-dressed mail. As in the previous years, volumes dropped slightly for letters, mainly caused by the technological substitution to electronic mail. In the public sector, this development was driven by ‘Projekt Digital Forvaltning’ (Project eGovernment), which increasingly transfers the written communication exchanged between the public authorities to digital form.

The growth in expenses was moderate and almost in line with the increase in revenue. Staff costs rose only slightly, while other operating expenses showed a somewhat more substantial rise.

The lower operating profit was furthermore due to higher amortisation and depreciation charges resulting from the relatively high investment level in recent years.

Consolidated results were affected positively by the purchase of the ownership interest of 25 per cent in the Belgian postal service, De Post – La Poste. The acquisition was made in

Group S.A.), which is owned by Post Danmark and CVC Capital Partners in equal shares. The Belgian State is still the majority shareholder of the company. In 2006, De Post – La Poste comprehensively modernised its production facilities, and Post Danmark has supported this modernisation process through expatriation of experts in key areas.

The profit from Post Danmark’s investment in De Post – La Poste is recognised under profits or losses of associates and joint ventures.

The economic value added (EVA) in Post Danmark rose from DKK 471 million in 2005 to DKK 552 million in 2006, driven mainly by the positive results of the investment in De Post – La Poste.

Of the net profit for the year it is recommended that DKK 669 million be paid as dividend to the shareholders and that DKK 223 million be transferred to equity. The proposed dividend of DKK 26.75 per share is in accordance with Post Danmark’s dividend policy.

In 2006, Post Danmark had positive cash flows from operations which after deduction of cash requirements for investing activities totalled DKK 72 million. Financing activities, including ordinary dividend paid of DKK 550 million as well as a capital contribution to associates and joint ventures of DKK 535 million net, affected cash flows negatively. Consequently, cash was reduced by DKK 55 million, amounting to DKK 201 million at year-end 2006.

In 2006, Post Danmark improved its high level of on-time delivery rates for letters compared with 2005. For 2006, the on-time delivery rate was 94.1 per cent against 93.9 per cent in 2005. The on-time delivery rate for

non-prior-the rest of non-prior-the year. The on-time delivery rate was considerably above the minimum require-ment of 93 per cent as specified in the present concession and again close to the quality target of 95 per cent.

In 2006, Post Danmark continued to expand its activities through company investments. The most important activity was the acquisition of De Post – La Poste. In addition, Post Danmark was involved in the formation of Morgendistri-bution Danmark A/S as a result of the open-ing of an entirely new market for household distribution of free newspapers etc. early in the morning. However, this activity was disposed of in February 2007 as it was concluded that the restrictions the competition authorities put into their approval of the cooperation would, among other things, eliminate the strategic prospects of the cooperation. At year-end 2006, negotiations were conducted concerning the acquisition of a stake in the transport company Transportgruppen A/S and, in January 2007, 51 per cent of Transportgruppen A/S was acquired. Post Danmark has built up a source of finance for, for example, being able to make company investments. As part thereof, Post Danmark list-ed a bond loan on the Swlist-edish stock exchange in Stockholm in May 2006. The listing gives Post Danmark the right to issue bonds for up to one billion Swedish kroner with a maturity of up to 15 years. During the year, bonds were issued with a nominal value equal to DKK 388 million (SEK 200 million and EUR 30 million).

In 2006, Post Danmark implemented a share-based incentive programme for the Executive Board and managerial staff. The programme, which comprised 0.5 per cent of the share capital, involved partly the sale of shares at market price and partly the granting of options

THE YEAR 2006

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DE POST – LA POSTE

With effect from early January 2006, Post Danmark acquired together with CVC Capital Partners 50 per cent less one share of the share capital of the Belgian postal service, De Post – La Poste.

Prior to the acquisition of the shareholding in De Post – La Poste, Post Danmark, the Belgian State and CVC Capital Partners thoroughly discussed and adjusted a five-year development plan for the company. The aim of the plan is to carry out a major modernisation and develop-ment of the business into a first-rate postal service provider.

In 2006, Post Danmark and De Post – La Poste cooperated on modernising product offerings and production facilities. Post Danmark’s main contribution was its expertise in the areas of production planning (letter sorting centres) and development of the markets for parcels and unaddressed mail. As part of this contribution, Post Danmark has a minor team of expatri-ate staff working temporarily on assignments in Belgium. In addition, significant financial progress was made already during the first year after the acquisition, reflecting competent management of De Post – La Poste.

De Post – La Poste is the national postal service provider in Belgium. The company provides all kinds of postal solutions to the 4.5 million households and approx. 1 million businesses in

Belgium. The company’s activities are divided into three main business areas:

· Postal products · Branch network · Postal solutions. POSTAL PRODUCTS

Postal products are De Post – La Poste’s largest business area, comprising domestic collection, sorting and distribution of letters, small packets (weighing up to 5 kilos), magazines/newspa-pers and printed advertising mail. De Post – La Poste’s international business, which comprises both postal products and parcels, is organi-sationally connected with the business area postal products.

Like Post Danmark, De Post – La Poste has experienced pressure in the market for physical letters as a result of the electronic develop-ment. However, the company improved its revenue by 7 per cent in 2006 through growth in other products. The company’s management has prepared a detailed plan for the continued expansion, and Post Danmark is confident that this plan will be implemented with expectations of growth in revenue.

BRANCH NETWORK

The branch network operates as a sales chan-nel for both postal products and financial services. The branch network distributes bank and insurance services for Banque de La Poste,

which is a bank owned jointly with the insur-ance and banking business Fortis. The branch network also provides a number of services such as payment handling on behalf of the Belgian State. The approx. 1,300 branches are marketing a wide range of services, which are continuously adjusted to match demand. De Post – La Poste has carried out experiments on developing new types of branches placed with business partners. The introduction of Post Points like Post Danmark’s post shops is expected to enhance both customer satisfac-tion and profitability. In 2007, a large number of branches operated by the company will be converted into Post Points.

POSTAL SOLUTIONS

Postal solutions include the parent’s business-oriented activities and a number of subsidiaries providing services within courier transport, unaddressed mail, facility service and electronic communications.

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TOTAL INCOME is in 2007 expected to be on a par with the year before. The ongoing develop-ment of electronic communications continues to put pressure on the market for physical letters. In addition, the letters market is subject to intensified competition. The fall in letters volume is expected to continue, while growth is expected in the other main products, especially parcels.

TOTAL EXPENSES, inclusive of amortisation and depreciation charges, are expected to rise slight-ly compared with 2006 as a result of generalslight-ly higher wages, salaries and prices. In addition, amortisation and depreciation charges should be slightly higher than in 2006 as a result of investments made.

OPERATING PROFIT is expected overall to show a fall.

THE RESULT OF NET FINANCIALS INCLUDING ASSOCIATES AND JOINT VENTURES is expected to rise, due mainly to the investment in De Post – La Poste.

PROFIT BEFORE TAX is expected overall to be somewhat lower than in 2006.

Expectations for 2007 are summarised in the table below.

EXPECTATIONS FOR 2007

EXPECTATIONS FOR 2007

DKKBN EXPECTED 2007 FINANCIAL STATEMENTS 2006 FINANCIAL STATEMENTS 2005

Income 11.7-11.8 11.7 11.5

Expenses, incl. depreciation and amortisation 10.8 -10.9 10.6 10.4

Operating profit (EBIT) 0.9 -1.0 1.1 1.1

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2002 2003 2004 2005 2006

CUSTOMERS AND MARKET

Post Danmark offers its customers a number of products based on the basic postal service provided, thereby meeting many customers’ demand for transport of messages and goods. The main product is the carriage of letters and other forms of written, paper-based communications, which account for about 79 per cent of total revenue. In the past five years, the volume of letters has gone down, and the composition of the product portfolio has been changed towards an increase in non-individualised mail (direct mail and maga-zine mail).

In addition to letters, Post Danmark offers trans-port of parcels and express mail. Post Danmark operates a branch network, which also provides

other services as a supplement. In recent years, Post Danmark has offered new types of services such as internal mail handling (Facility Services) and electronic communications solu-tions, all originating from Post Danmark’s core area – letters. During the year, Post Danmark launched new services such as sending letters via the Internet, SMS messages about delivery of parcels and a pilot test of self-service stations at post offices.

Post Danmark has the monopoly of distribut-ing letters weighdistribut-ing up to 50 grams. In 2006, approx. 34 per cent of Post Danmark’s revenue was comprised by this monopoly. Thus, most of the revenue was generated in free competition.

Post Danmark is an important supplier and busi-ness partner for commerce and industry. Post Danmark’s customers cover the entire spectrum of businesses in Denmark, from large well-established groups to small newly well-established entrepreneurs. A very substantial part of Post Danmark’s revenue is derived from Denmark’s largest businesses and public institutions, which are also important business partners in connec-tion with Post Danmark’s efforts to optimise and further develop its product portfolio. Even though the basic service is the same, the needs of the various groups of customers vary greatly. Customer responsibility is therefore divided into four customer-oriented business units. 2002 2003 2004 2005 2006 45 40 35 30 25 20 15 10 5 0 2,000 1,750 1,500 1,250 1,000 750 500 250 0 PARCELS MILLION ITEMS

BUSINESS UNIT ACCOUNTS COURIER, UNALLOCATED

AMOUNTS IN DKKM BUSINESS CUSTOMERS PRIVATE CUSTOMERS EXPRESS, PARCELS INTERNATIONAL POST AND ELIMINATION POST DANMARK TOTAL

2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005

Total income 6,631 6,537 2,149 2,166 1,310 1,222 1,529 1,449 99 88 11,718 11,462 Expenses, incl.

UNADDRESSED MAIL AND LOCAL WEEKLIES

MILLION ITEMS

LETTERS, MAGAZINE MAIL, NEWSPAPERS, MAGAZINES AND PERIODICALS, MILLION ITEMS

2002 2003 2004 2005 2006 1,750 1,500 1,250 1,000 750 500 250 0

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In addition, there are four internal business units.

For internal management purposes, follow-up is carried out in relation to the eight business units, based on the accounts of each business unit. The results of the business unit accounts are consolidated in the segment financial state-ments of the four customer-oriented business units. In addition, there are a number of activi-ties that cannot be allocated to the customer-oriented segments. These activities mainly concern support and staff functions. The objec-tive of preparing segment financial statements is to show the profitability of Post Danmark’s oriented activities. The four customer-oriented business units’ draws on resources in production-oriented business units are settled by means of transfer pricing.

The segment financial statements are based on a model, which is updated regularly. Com-parative figures for 2005 have been restated accordingly.

BUSINESS CUSTOMERS

The Business Customers business unit is respon-sible for domestic products, except courier, ex-press and parcel solutions, from Post Danmark’s large and medium-sized business customers. This group of customers is characterised by expecting more individualised solutions which require knowledge of the customer’s business and needs. To ensure that large customers gain

common access to all products and services provided by Post Danmark, Business Customers is responsible for all sales efforts aimed at large and medium-sized business customers in all product areas.

PRIVATE CUSTOMERS

The Private Customers business unit is respon-sible for domestic products from private and small business customers. This group of custom-ers is mainly offered standard solutions, which are primarily provided by the branch network for whose operations Private Customers is responsible.

COURIER, EXPRESS, PARCELS

The Courier, Express, Parcels business unit is responsible for domestic courier, express and parcel solutions and light goods for large and medium-sized business customers as well as for international courier solutions. In addition, Courier, Express, Parcels handles the operations of the parcel centres, which are responsible for sorting parcels.

INTERNATIONAL POST

The International Post business unit is responsi-ble for international products and cooperation with foreign business partners within all product areas. International Post is responsible for the operation of Post Danmark’s international mail centre located at the Copenhagen Airport. The centre is responsible for incoming and outgoing international mail. 2002 2003 2004 2005 2006 60 50 40 30 20 10 0

INCOMING AND OUTGOING PAYMENTS AT POST OFFICES, MILLION ITEMS

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BUSINESS CUSTOMERS

The Business Customers business unit is responsible for domestic letters, newspapers, magazines and periodicals, unaddressed mail, facility services and electronic communications solutions. Business Customers also operates as Post Danmark’s common sales organisation for Courier, Express, Parcels and outgoing interna-tional mail in relation to major and medium-sized business customers. The sales organisation is working systematically to obtain fresh orders from existing customers and to procure new customers offering a great revenue potential. The total number of customer calls made by sales staff every month is just under 1,500, and the impact of the sales efforts is monitored us-ing a number of Key Performance Indicators.

In 2006, income from Business Customers was DKK 6,631 million (DKK 6,537 million in 2005), or 57 per cent of Post Danmark’s total income. The number of people employed by the business unit was 237 (translated into FTE), which is unchanged from 2005.

The segment financial statements of Business Customers show a negative development in the segment’s operating profit despite higher income. The higher income was driven mainly by growing revenue from newspapers, magazines and periodicals as well as unaddressed mail and to a smaller extent from magazine mail. Com-pared with 2005, the growth in expenses was relatively higher as a result of increasing volumes of newspapers, magazines and periodicals as

well as unaddressed mail and magazine mail, which led to a corresponding rise in expenses. The increasing volume of unaddressed mail furthermore involved higher expenses in relation to multi-packing by Distribution Service of unad-dressed mail.

LETTERS

Business post is Post Danmark’s main product, comprising four main types of letters: mail by series, classical mail, distribution mail and pre-paid reply items, with the first two letter types accounting for most of the revenue.

Post Danmark has the monopoly of collecting, transporting and distributing letters weighing up to 50 grams. This limit is expected to disappear

REVENUE 2006

BY PRODUCT AREA

eCOMMUNICATION

BUSINESS UNIT ACCOUNTS

AMOUNTS IN DKKM 2006 2005 Total income 6,631 6,537 Expenses, incl. depreciation and amortisation (5,447) (5,164) Operating profit/(loss) (EBIT) 1,184 1,373 Assets 3,172 3,184 Liabilities 1,412 1,497 The accounting figures are reproduced from the internal business unit accounts described on page 14.

FACILITY SERVICES NEWSPAPERS, MAGAZINES AND PERIODICALS MEDIA POST BUSINESS POST INCOME 2006 BY BUSINESS UNIT BUSINESS CUSTOMERS

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within a foreseeable number of years as the European Commission has proposed that the EU countries should abolish the monopoly by 1 January 2009 at the latest.

Letters are expected to contribute a very sig-nificant amount to the company’s revenue and earnings for many years to come even though the number of letters continues to decline. The growing use of electronic communications in the form of, for example, e-mail and home banking has greatly affected the volume of letters in recent years. Electronic substitution, including the public sector’s ‘digitalisation project’, has also contributed to the decline.

A special category of letters conveys a marketing message targeted at the recipient, thereby gain-ing higher attention value and greater meas-urability than other advertising media. Direct Marketing (DM) competes primarily with other targeted media such as e-mail and secondarily with mass marketing media such as TV, radio and cinema commercials, newspapers, and billboards. In cooperation with its customers, Post Danmark is striving to make DM even more attractive by continuously developing, differenti-ating and adapting the physical letter to the

cus-tomers’ specific needs based on the strengths of the letter compared with other media.

In early 2006, www.sendbreve.dk was launched. This service makes it possible to develop a DM distribution online and subsequently auto-matically print, pack and distribute the physical letters. In the year under review, Post Danmark also launched DialogPortalen, providing DM customers with a flexible and user-friendly campaign management tool, which can help customers plan, design, implement and follow up on their DM activities.

In 2006, Post Danmark also joined a broad advisory services partnership (IVÆKST) compris-ing a number of the country’s most competent advisers of small and medium-sized enterprises. Post Danmark’s role is to give the partnership’s customers advice on, among other things, sale and marketing.

NEWSPAPERS, MAGAZINES AND PERIODICALS

Conditions are rapidly changing in the newspa-per market, reflecting, among other things, the introduction of new household-distributed free newspapers. The passing of a new law on

subsi-dised distribution of daily papers (lov om tilskud til distribution af dagblade) also contributes to changing market conditions because from 1 January 2007 the subsidy will be paid directly to publishers instead of Post Danmark. Post Dan-mark’s share of the market for the distribution of newspapers is relatively modest because Post Danmark has no early morning distribution. Due to the new competitive situation, Post Danmark expects this market share to become subject to additional pressure in 2007, with a resulting slightly declining market share.

The abolition of the state subsidy for the distri-bution of weeklies and monthlies in 2004 and 2005 has led to quite substantial price increases for the publishers. This is due to the fact that these papers – in addition to being subsidised – for Post Danmark involved a substantial loss, which was lawfully financed by the letter prod-uct. The removal of the subsidy also removed the possibility of cross-subsidising the products. Instead of the weekly and monthly newspaper products, Post Danmark has introduced maga-zine mail, which provides customers with more options than the previous paper product, and a distribution service covering all households and business enterprises in Denmark. At the same

BUSINESS POST

MAIL BY SERIES is mail produced in series for many recipients. Mail by series comprises statements of account, financial information and other individual messages which typically are not signed.

CLASSICAL MAIL is mail that is not mass-produced. This mail is normally individual messages, private letters and ordinary business post, typically signed.

DISTRIBUTION MAIL is mail containing products, specimens, etc. Distri-bution mail generally weighs more than 100 grams.

PREPAID REPLY ITEMS comprise all types of mail that can be categorised as ‘Postage paid by recipient’. This type is characterised by senders receiving feedback in writing from their customers and by recipients paying for the postage.

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time, a competitive price is ensured through more efficient production. The efficiency im-provement is the result partly of an adaptation of posting and distribution periods to optimise the utilisation of the production and distribution facilities and partly of enhanced automation of production.

UNADDRESSED MAIL AND LOCAL WEEKLIES

The market for unaddressed mail (household-distributed printed advertising material) is grow-ing, driven by growth experienced by the retail trade. Unaddressed mail is especially competing with other mass marketing media – including advertising in dailies, local weeklies and periodi-cals. Despite the growing volume of advertising material in the letter box, unaddressed mail is a popular medium amongst consumers. Only ap-prox. 12 per cent of Denmark’s households have declined ads, a rate whitch is slightly higher than in 2005. Measurements show that no less than 89 per cent of all recipients read their ads, and 93 per cent of these respond to the bargains in fliers.

One of Post Danmark’s major customers, the COOP retail chains, has signed a contract with

one of Post Danmark’s competitors concerning the distribution in 2007 and 2008 of unad-dressed mail for the retail chains operated by COOP. As a direct result of this, Post Danmark’s annual volume of this segment will fall by ap-prox. 400 million items.

Post Danmark offers three distribution periods every week. This gives the customer a greater choice of when the ad is to be delivered to the recipient. Furthermore, Post Danmark offers, as the only distributor in Denmark, distribution to second homes as well as offices and shops. Unaddressed mail is packed mechanically for distribution in the first and the last distribution period of the week. In 2007, the mechanical multipacking option will be extended to include mail distributed mid week.

The market for local weeklies is relatively stable and Post Danmark expects to be able to maintain its position, which was strengthened in 2006.

FACILITY SERVICE

Post Danmark offers customised solutions within three main fields:

· Internal services within office support · Company logistics including special logistics

and transport solutions · Document scanning.

Facility Service covers services such as the deliv-ery of mail as well as sorting, internal distribu-tion, collection and subsequent processing of the individual business customer’s internal and external mail. A newer and rapidly growing element of the overall Facility Services concept is the scanning of the contents of letters and documents and electronic delivery to business customers.

Facility Service is one of Post Danmark’s growth areas. Value-adding customer solutions are be-ing developed in close cooperation among the producing units and a specialised sales organisa-tion in Business Customers.

Post Danmark is constantly developing its service offerings, e.g. the distribution of patient test samples by Budstikken’s bicycle messen-gers from doctors to a large hospital. Another example of a new Facility Service solution is logistics where free newspapers are placed in distribution boxes. The service, which is offered

OTHER PRODUCT AREAS

UNADDRESSED MAIL is fliers and advertising material, etc.

DIRECT MAIL is targeted mail with a specific marketing message and characterised by close attention by recipients and a high level of ability to measure response. Direct Mail competes primarily with other tar-geted media such as e-mail, response media and secondarily with mass marketing media such as TV, radio and cinema commercials, advertise-ments in newspapers, magazines and periodicals, and billboards.

NEWSPAPERS, MAGAZINES AND PERIODICALS are dailies, weeklies and monthlies, magazine mail and local weeklies.

FACILITY SERVICE covers services such as the delivery and collection of mail as well as the sorting, distribution, collection and processing of the individual business customer’s internal and external mail. A new element of the total Facility Services concept is the scanning of the

con-eCOMMUNICATION comprises the electronic post office (ePosthuset) and services from the associate e-Boks A/S. ePosthuset is an integral part of Post Danmark’s website www.postdanmark.dk. ePosthuset pro-vides, for example, self-service facilities for the choice between receipt of letters electronically or physically, online notice of change of address, purchases of stamps and tickets and other postal services such as the calculation of postage rates, postcode searches as well as Track & Trace for parcels. eCommunication offers business customers a total solution for handling electronic and physical communications. The business customer can supply the total data basis for the mail to eCommunica-tion, which will distribute the letters electronically to recipients based on their registrations with ePosthuset, e.g. a wish to receive the letter in e-Box or by e-mail. The rest of the letters are as hitherto sent as physical letters.

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to all free newspapers, ensures collection of the free newspapers at printers and transport to, for example, selected post offices at which the free newspapers are placed in distribution boxes. In response to the previously mentioned declin-ing volume of physical letters, Post Danmark has moved into new areas, and is now a significant actor in the market for digitalisation of docu-ments. Post Danmark’s subsidiary, Data Scanning A/S, has been certified by the Danish state as a “Read-in bureau” and Post Danmark is now the largest supplier of scanned invoices to public authorities. The general digitalisation of both the private and the public sectors continues its strong growth. The conversion of paper files into electronic files in particular is undergoing rapid growth.

One example is the Danish Court Administra-tion’s new electronic title registration system, which is to be put into use in 2008. Before that time, approx. 70 million pages concerning about 2.2 million properties are to be scanned and digitalised. In early 2007, Data Scanning A/S commenced cooperation with three other undertakings on the scanning of approx. 50 mil-lion of these pages.

The interest in receiving letters, invoices, etc. in electronic form is generally great amongst large recipients of letters. Post Danmark’s scanning solutions convert paper-based documents into electronic documents adapted to the customers’ IT systems.

This growing interest in the scanning of docu-ments has caused revenue of Data Scanning A/S to rise by 26 per cent from 2005 to 2006. eCOMMUNICATION

With the eCommunication business area, which is cooperating with e-Boks, Post Danmark is well established in the market for electronic process-ing, distribution and storage of mail (primarily mail by series such as invoices, statements of account and pay slips).

eCommunication offers business customers a

can supply the total data basis for the mail to eCommunication, which will distribute the letters electronically to recipients based on their registrations with ePosthuset, e.g. a wish to receive the letter in e-Box or by e-mail. The rest of the letters are sent as physical letters. In 2006, eCommunication achieved very high growth rates by developing both the coopera-tion with existing customers and by focusing on new segments. By way of example, supplemen-tary value-adding solutions have been devel-oped for a public agency and the tele segment. eCommunication has also experienced a large increase in the entry of pension companies and has set up in business in the market for electronic pay slips.

Post Danmark supplies, by the eCommunica-tion solueCommunica-tion and the registraeCommunica-tion with e-Boks, a number of other services which together provide the sending business with a total solution for electronic and paper-based distribution to cus-tomers, employees, etc.

e-Boks has more than one million users, repre-senting an almost 0.3 million increase in 2006. This significant growth was also reflected in revenue rising by just over 80 per cent compared with 2005. For the first time, e-Boks therefore achieved a profit, which was just over DKK 4 million, against a loss of DKK (10) million reported in 2005.

Post Danmark owns the company e-Boks A/S together with PBS A/S and KMD A/S. CUSTOMER SATISFACTION AND LOYALTY Loyalty and satisfaction among Post Danmark’s business customers have been falling slightly in 2005 and 2006. The Business Customers busi-ness unit has therefore prepared specific action plans in significant areas, including development of sales staff’s product competencies, based on the level of customer satisfaction with the design of the individual products.

Systematic measurements of the attitudes of a representative section of customers to various

statements on Post Danmark are reflected in, among other things, the key figures customer satisfaction and customer loyalty.

The results for 2006 show a customer satis-faction index for business customers of 61 compared with 64 in 2005. Business customers’ loyalty fell from index 64 in 2005 to index 61 in 2006.

Please note that the figures for 2006 relate to the first half-year as no figures are available yet for the full year.

2002 2003 2004 2005 2006 *) 100 90 80 70 60 50 40 30 20 10 0

CUSTOMER SATISFACTION INDEX

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The Private Customers business unit is re-sponsible for servicing Post Danmark’s private customers and small business customers. Private Customers is also responsible for post office network operations and for the production and sale of stamps and philatelic products.

In 2006, Private Customers reported income of DKK 2,149 million (DKK 2,166 million in 2005), or 18 per cent of Post Danmark’s total income. The number of people employed by the busi-ness unit in 2006 was 1,258 (translated into FTE) against 1,395 in 2005.

Private Customers reported lower earnings compared with 2005. Compared with 2005, revenue from the sale of branch products

showed a fall, which was simultaneously coun-terbalanced by growing revenue from postal parcels. The growth in revenue from postal parcels was attributable to increasing volumes despite lower average prices. Overall, revenue was on a par with 2005. The increasing volume of postal parcels led to a corresponding rise in expenses compared with 2005.

The maintenance of a nationwide network of branches is an important element of Post Danmark’s concession. The nationwide network consists partly of 184 post offices owned by Post Danmark, all of which are full-service outlets, and partly of 605 post shops operated by other retailers.

The branches’ main products are stamp sales, receipt and delivery of mail products such as parcels and registered letters as well as sales of various letter items, stationery and office sup-plies. Stamps are being sold by post offices and post shops in addition to a number of stamp outlets and increasingly through the electronic post office, ePosthuset, on Post Danmark’s website. The branches also receive and deliver parcels. Other important activities are payment handling service – primarily giro forms in co-operation with Danske Bank – and ticket sales, etc. on behalf of BILLETnet.

Revenue from stamped letters in 2006 was at the 2005 level. The number of stamped letters is expected to drop, but, in 2006, this trend was

PRIVATE CUSTOMERS

PHILATELY AND OTHER BRANCH PRODUCTS PAYMENT HANDLING

PARCEL MAIL OF PRIVATE CUSTOMERS

SMALL AND MEDIUM-SIZED BUSINESS CUSTOMERS STAMPS FOR FRANKING

REVENUE 2006

BY PRODUCT AREA

INCOME 2006

BY BUSINESS UNIT

PRIVATE CUSTOMERS

BUSINESS UNIT ACCOUNTS

AMOUNTS IN DKKM 2006 2005 Total income 2,149 2,166 Expenses, incl. depreciation and amortisation (2,052) (1,998) Operating profit/(loss) (EBIT) 97 168 Assets 1,248 1,250 Liabilities 654 671 The accounting figures are reproduced from the internal business unit accounts described on page 14.

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offset by general price increases so that revenue remained unchanged.

In 2006, the number of giro inpayment cards dropped by 15 per cent compared with 2005 – slightly more than in the preceding years. The downward trend mainly reflects electronic pay-ment service and home banking. This trend is expected to continue in 2007.

The need to adjust costs increases as the branch network’s revenue from payment handling service and stamp sales drops. This adjustment takes place partly by replacing post offices with post shops and partly by reducing the total number of service outlets.

The changes are made within the framework defined by the concession, based on a dialogue with local stakeholders. In addition, the size of the individual post offices and post shops is adjusted to match needs, and the efficiency of operations is increased on an ongoing basis. Also the range of other products and services at post offices are undergoing continuous adjust-ment. In 2006, Post Danmark focused on mak-ing it even more attractive to carry on a post shop by providing management and staff with, among other things, information and training. This effort will continue in 2007. Furthermore, the IT platforms of most of the country’s post offices and post shops were replaced by new equipment and software during the year.

In September 2006, Post Danmark initiated a pilot test of two new self-service facilities (PostSelv and Pakkepostkassen). Customer sur-veys have shown that self-service is in demand among customers, and provisional indications from the pilot tests seem to suggest that young customers in particular (customers of the future) have welcomed PostSelv.

Pakkepostkassen covers two purposes – partly the opportunity to post parcels “bought” through PostSelv and partly general self-serv-ice posting of parcels at post offices and post shops.

In 2006, efforts were also made to increase traffic at the country’s post offices. For example,

POSTSELV ENABLES CUSTOMERS TO:

· Measure and weigh letters and parcels

· Send letters as Standard, Large or Maxi Letters, or Registered

· Buy parcel or address labels for parcels (both domestic and international) · Buy self-adhesive postage labels in any desired value

· Inform recipient (e-mail or SMS) that a parcel is underway

· Be informed (e-mail or SMS) when a parcel has been delivered to the recipient · Use flexible delivery

· Track letters and parcels via their consignment number · Pay by various types of cards and get a receipt for purchases

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focus is placed on small business customers by improving the competencies of the customer centres in servicing this group of customers and by distributing the magazine ‘Post og Pakker’. In addition, work procedures are standardised. In 2005, the focus was primarily placed on small business customers, who already had a contract with Post Danmark. In 2006, however, the focus was extended to include also small business customers having no contract with Post Danmark.

Two new recipient services were introduced in February 2006. The new services include an offer of delivery of mail at the address before 10am and the opportunity to rent a post office box. As a supplementary service, a post office

box agreement can be extended to include early collection of, for example, registered letters and parcels. Nine months after the introduction of guaranteed delivery of letters before 10am eve-ry day, about 2,700 customers have bought a guarantee and approx. 21,000 customers have rented a post office box in one of approx. 400 post office box systems installed all over the country. In 2007, various forms of marketing are expected to be implemented with a view to enhancing further both private and business customers’ knowledge of the services. CUSTOMER SATISFACTION AND LOYALTY The customer satisfaction index for 2006 was 69 against 71 in 2005. The index for private cus-tomers’ loyalty was 71 in 2006 (2005: index 73).

Please note that the figures for 2006 relate to the first half-year as no figures are available yet for the full year.

In 2006, 86 per cent of customers at post of-fices operated by Post Danmark were attended to within five minutes and 98 per cent within ten minutes. Both figures are unchanged from 2005. 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 *) 800 700 600 500 400 300 200 100 0 100 90 80 70 60 50 40 30 20 10 0 SATISFACTION LOYALTY

CUSTOMER SATISFACTION INDEX

PRIVATE CUSTOMERS

COMPANY-OPERATED POST OFFICES

POST SHOPS

DEVELOPMENT OF COMPANY-OPERATED POST OFFICES AND POST SHOPS

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COURIER, EXPRESS, PARCELS

The Courier, Express, Parcels business unit is responsible for courier shipments as well as domestic parcels and groupage from customers having a business agreement. Courier, Express, Parcels is also responsible for sorting at the parcel centres.

In 2006, Courier, Express, Parcels reported income of DKK 1,310 million (DKK 1,222 million in 2005), or 11 per cent of Post Dan-mark’s total income. The number of people employed by the business unit was 616 (translated into FTE) compared with 619 in 2005.

Courier, Express, Parcels reported growth in operating profit. Revenue rose for parcels and

light goods. Compared with 2005, expenses showed a minor increase.

Domestic parcels account for by far the greater part of the business unit’s revenue. In terms of sale, the parcels are supported by Post Dan-mark’s ability to offer supplementary services like courier shipments, groupage and value added services. The Danish parcels market is character-ised by strong competition due to the presence of all important international parcel distribu-tors. The option to combine several types of shipments and to have special services provided is greatly appreciated by many customers, who increasingly choose to enter into agreements on purchases of a customised set of services. In 2006, therefore, Post Danmark conducted

ne-gotiations concerning the acquisition of 51 per cent of the shares in one of the country’s lead-ing distributors of groupage and pallet goods, Transportgruppen A/S. The aim was, in coopera-tion with the other shareholders, to strengthen their common position and competitive power in the logistics market. Transportgruppen offers a variety of cargo and warehousing services that complement Post Danmark’s logistics solutions. The agreement on the acquisition of shares was made on 4 January 2007.

In 2006, Post Danmark also entered into a cooperation agreement with Maersk Logistics. The cooperation agreement makes it possible to combine a logistics solution and a distribution solution into one overall process providing

cus-COURIER AND EXPRESS PARCELS

PARCELS, LIGHT GOODS, ETC.

BUSINESS UNIT ACCOUNTS

AMOUNTS IN DKKM 2006 2005 Total income 1,310 1,222 Expenses, incl. depreciation and amortisation (1,419) (1,412) Operating profit/(loss) (EBIT) (109) (190) Assets 893 899 Liabilities 363 390 The accounting figures are reproduced from the internal business unit accounts described on page 14.

REVENUE 2006 BY PRODUCT AREA INCOME 2006 BY BUSINESS UNIT COURIER, EXPRESS, PARCELS

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tomers with one of the strongest supply chains in the country. The cooperation is aimed at enterprises buying and making goods in China or other overseas countries for distribution in Denmark. Maersk Logistics is responsible for, among other things, the handling and transport of the goods until they arrive in Denmark, after which distribution to the destination will be handled by Post Danmark.

In the BtC market, Post Danmark launched a new service, the SMS notification service, in January 2006. The service was developed together with a mail order customer as another means of ensuring that the parcel is delivered to the recipient at the first attempt. In this way, the recipient needs not go to the post office and the sender will experience fewer cancellations of orders. The SMS notification service has been favourably received by the market.

The combination of ability to supply the cus-tomer with a coherent service and traditional strengths like high reliability and speed of deliv-ery and the most finely meshed distribution net-work in the country makes Post Danmark expect that it will be able to maintain its leading posi-tion in the Danish parcels market. In early 2007, Post Danmark will offer senders the opportunity to choose where parcels are to be picked up. Also the return service will be improved. Budstikken Transport A/S is Post Danmark’s subsidiary within national courier and express

shipments, providing as the only courier service provider nationwide distribution through its own network. This offers the company signifi-cant advantages in terms of capacity utilisation, product development and quality. In 2006, Budstikken continued to improve its revenue. In 2006, Budstikken introduced a new foreign courier concept, and in that connection a new terminal at Rødovre was put into operation. In recent years, Budstikken has consolidated the former franchise departments and strengthened operations through, among other things, ex-pansion of its IT platform. The development of Budstikken’s IT platform has resulted in a grow-ing number of transport orders via the Internet, thereby facilitating administrative work for both Budstikken and customers. The strength that Budstikken has achieved through its nationwide network and strong IT platform provides the ba-sis for development of the business by offering to handle types of shipments that are heavier than the conventional courier products. CUSTOMER SATISFACTION AND LOYALTY High customer satisfaction is vital to Post Dan-mark’s competitiveness in the parcels market where Post Danmark is especially competing on quality and customised solutions. Post Dan-mark has maintained a high level of satisfac-tion among parcel customers, which in 2006 resulted in a customer satisfaction index of 73 against 74 in 2005.

Please note that the figure for 2006 relates to the first half-year as no figure is available yet for the full year.

TYPES OF PARCELS

BTB PARCELS are parcels sent from one business to another. The parcels may weigh up to 50 kilos. BtB parcels are not comprised by Post Dan-mark’s universal service obligation.

BTC PARCELS are parcels sent by a business to a private individual, e.g. e-commerce and mail order parcels. These parcels may weigh up to 20 kilos, or 50 kilos by special agreement. BtC parcels weighing less than 20 kilos are comprised by Post Danmark’s universal service obligation.

COURIER AND EXPRESS PARCELS are mainly domestic express parcels distributed on the same day, and cross-border parcels. The product is provided by Post Danmark’s subsidiary Budstikken Transport A/S. Courier and express parcels are not comprised by Post Danmark’s universal service obligation.

LIGHT GOODS are groupage sent from one business to another and may weigh up to 1,000 kilos per unit. Light goods are not comprised by Post Danmark’s universal service obligation.

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International Post is responsible for Post Danmark’s international letters and parcels as well as the operation of the international mail centre. International Post also negotiates and administers Post Danmark’s international agree-ments with other postal service providers, etc. In 2006, International Post reported income of DKK 1,529 million (DKK 1,449 million in 2005), or 13 per cent of Post Danmark’s total income. The number of people employed by the busi-ness unit was 330 (translated into FTE) against 333 in 2005.

International Post showed a profit on a par with 2005. Income went up, mostly driven by grow-ing revenue from outbound consignment letters

and partly by growing revenue from magazine mail and inbound letters. Expenses rose cor-respondingly, primarily as a result of higher expenses in relation to international settlements for letters.

International letters are definitely the largest area of the International Post business unit. Post Danmark retains its strong position in the market for international letters, outgoing as well as incoming. Like the market for domestic letters, this market is under pressure from elec-tronic communications. The volume of letters from Denmark to international destinations has shown a declining trend in recent years and is expected to be stagnant in the coming years.

By focusing on price, Post Danmark’s competi-tors have tried to increase their market shares to gain a foothold in Denmark. Nevertheless, Post Danmark has succeeded in retaining its strong position in the market by providing high quality, an attractive range of products and by targeting its sales efforts.

Post Danmark’s letter quality remains one of the best in the European Union as far as international letters are concerned. 96.7 per cent of all letters sent from Denmark to other countries arrive on time and 96.1 per cent of all letters sent to Denmark from other countries arrive on time. External quality measurements show that letters sent by Post Danmark to international destinations reach

INTERNATIONAL POST

INTERNATIONAL PARCELS

INTERNATIONAL LETTERS OTHER PRODUCTS

BUSINESS UNIT ACCOUNTS

AMOUNTS IN DKKM 2006 2005 Total income 1,529 1,449 Expenses, incl. depreciation and amortisation (1,287) (1,192) Operating profit/(loss) (EBIT) 242 257 Assets 1,018 1,041 Liabilities 641 640 The accounting figures are reproduced from the internal business unit accounts described on page 14.

REVENUE 2006

BY PRODUCT AREA

INCOME 2006

BY BUSINESS UNIT

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their destinations much faster than letters sent by its competitors.

Post Danmark cooperates with other national postal service providers on developing the inter-national letter quality.

Post Danmark’s international parcel activities are handled by Pan Nordic Logistics, which is jointly owned with Posten Norge. Posten Finland and Posten Sverige operate as business partners. Pan Nordic Logistics’ product concept is tar-geted at Nordic business enterprises and their international parcel distribution needs. This means, for example, that business customers can choose between a number of services.

‘CarryOn Business’ is the professional solution for sending parcels to other businesses in most of the world. ‘CarryOn Business’ comprises the 60 countries that account for more than 90 per cent of Danish exports.

In 2006, Pan Nordic Logistics recorded growth in both revenue and earnings.

INTERNATIONAL PRODUCTS

INTERNATIONAL LETTERS are letters, magazines and periodicals sent to and from other countries.

INTERNATIONAL PARCELS are parcels sent to and from other countries. International parcels are handled by Pan Nordic Logistics AB, which is owned by Post Danmark and Posten Norge in equal shares.

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PRODUCTION AND PROCESSES

In recent years, Post Danmark has reduced the number of domestic letter sorting centres from seven to four whilst the number of parcel sorting centres is down to two. The restructur-ing of production has resulted in the sortrestructur-ing of letters and parcels being done at separate centres. However, some of the areas of the letter sorting centres will continue to operate as distribution centres for the reloading of parcels and groupage before transportation either to distribution centres or directly to the customer. Both letter and parcel production use modern technology reducing the manual handling of mail items to a minimum. Thus, most standard letters are sorted mechanically in the order of distribution. Most of the large letters are

also sorted mechanically, though only for the individual postman or woman. 90 per cent of parcels are also sorted mechanically. The recipient is in most cases read mechanically and matched with Post Danmark’s address database, which contains updated address data on all Danish individuals and business enterprises. This enables the sorting plants to perform rapid and efficient redirection of letters and parcels sent to an address for which the recipient has given notice of change of address, temporary or permanent.

LETTER PRODUCTION

In recent years, Post Danmark’s letter produc-tion has undergone a process of change to increase the level of automation and

opti-mise the use of its machines. In 2006, focus continued to be placed on productivity, the sequence sorting percentage and the delivery route sorting percentage. Letters are put into one of the country’s nearly 10,000 letter boxes at one of nearly 800 branches or posted, by special agreement, by the sender directly at one of the letter sorting centres. Certain customers have entered into an agreement, according to which Post Danmark is to collect letters at the customer.

In 2006, the letter sorting centres handled 1,150 million letters, or 3.8 million letters a day. Mechanical sorting and sequence sorting of standard letters in the order of distribution is

100 99 98 97 96 95 94 93 92 91 0 2002 2003 2004 2005 2006 NON-PRIORITY PRIORITY LETTER QUALITY PER CENT

QUALITY OF DOMESTIC LETTERS

A quality level of 95 per cent is Post Danmark’s target in 2006 for letters, both priority letters and non-priority letters. This means that 95 per cent of priority letters must reach the final recipient the day after posting. In 2006, the quality level was 94.1 per cent for priority letters. In 2005, it was 93.9 per cent. As regards non-priority letters, 98.0 per cent (2005: 98.3 per cent) were delivered within the specified time-limit in 2006.

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now so efficient that just under 80 per cent of the standard letters are delivered to the post-man or wopost-man in the order of distribution. Large letters, which account for just over one fifth of the letter volume, are also sorted mechanically. In 2006, the sorting plants were capable of sorting just over 65 per cent of large letters. Sorting is done by eight OCR-C4 machines – divided equally among the four letter sorting centres. The addresses are read by optical means in the same way as standard letters are, after which the letters are sorted for the individual postman or woman, who will then carry out the final sorting of letters in the order of distribution.

The implementation of Lean production, which is a simplified, streamlined and standardised process, continues. In 2006, all letter sorting centres continued this work with focus on continuous improvements through the use of the Kaizen method. Kaizen contributes to devel-oping the competencies of participants while at the same time making production more efficient. The concept has been introduced in all letter sorting centres and transport depart-ments. The concept has also been introduced in other parts of the Post Danmark organisation. Post Danmark’s price policy, which is based on the cost of handling the various products, has led to a growing portion of the letter volume now being suitable for automated sorting

because customers can now see a financial advantage in choosing a letter format which can be handled by machines. The ongoing dialogue with customers on better addressing methods and better use of standardised formats continued in 2006.

Unaddressed mail is increasingly being packed mechanically at a subsupplier who also puts the mail into a cover for the individual house-hold. The cover, which is based on an address database, ensures that each household receives the right mail without manual sorting by the postman or woman being required. The cover contains advertisements, consumer tips, com-petitions and editorial articles telling odd stories from all over the country and providing

infor-THE LETTER’S ROUTE

COLLECTION PRIMARY SORTING SORTING FOR OFFICES OF DELIVERY PREPARATION DISTRIBUTION

08:00-23:00 16:00-23:30 23:30-06:00 05:00-07:30 07:30-13:00 *)

LETTER BOX AND BRANCH

AUTOMATIC CULLING OCR MACHINERY

(PRIMARY SORTING OF LARGE AND SMALL LETTERS)

VIDEO CODING (ON + OFFLINE)

TABLE SORTING POST OFFICE BOXES LETTER SORTING

CENTRE

AT THE CUSTOMER MANUAL CULLING SEQUENCE SORTING MACHINERY (SECONDARY SORTING)

ADDRESS DATABASE SPECIAL DELIVERY TO CUSTOMERS

PACKING OF MAIL PRIVATE AND BUSINESS OCR MACHINERY (FINAL SORTING) SEQUENCE SORTING MACHINERY (SYSTEMATISATION) *) 14:30 IN URBAN ZONE

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mation about events of current interest. The covers are sent in bundles and on pallets to the individual distribution centre. In 2006, 72 per cent of the total number of approx.1.7 billion unaddressed mail items was packed mechani-cally. In 2007, this share will grow, reflecting the introduction of mechanical packing of mail for distribution in the middle of the week. PARCEL PRODUCTION

Parcels are sorted at two parcel sorting centres, one in Jutland and one on Zealand. In addition to the two parcel sorting centres, four distribu-tion centres are used in Jutland and on Funen for the handling of parcels and groupage, including sorting of parcels which cannot be mechanically sorted.

Large customers can enter into an agreement, according to which Post Danmark collects the parcels at the customer while other customers have to post their parcels in a branch. Parcel sorting is done at either of Post Danmark’s two parcel sorting centres, which together handle approx. 40 million parcels a year – or approx. 160,000 parcels a day. The two-centre structure requires that the customers sort the parcels by destination in either eastern or western Denmark.

Post Danmark’s parcel sorting centres use advanced technology and have a high degree of automation which enables each of them to sort 12-15,000 parcels per hour. Parcels which can-not be mechanically sorted are sorted manually

at either of the parcel sorting centres or at one of the four hubs.

At the parcel sorting centres, approx. 90 per cent of parcels are handled mechanically by parcel sorting plants. For the handling of the rest of the parcels lifting equipment has been installed which provides both a better working environment and a more gentle handling of heavy parcels. Production is planned according to the Lean production principles. The parcel sorting plants sort approx. 62 per cent of the parcels electronically. A growing portion of parcels is being sorted on the basis of data sup-plied by the customer on an electronic file. In 2006, Post Danmark worked on improving the quality of the IT data received from the

custom-THE PARCEL’S ROUTE

COLLECTION PRIMARY SORTING SORTING FOR OFFICES OF DELIVERY INWARD SORTING DISTRIBUTION

08:00-19:00 15:00-23:00 15:00-03:30 22:00-05:00 07:00-13:00 *)

*) 21:00 FOR PRIVATE CUSTOMERS BRANCH SORTING PARCEL SORTING CENTRE AT THE CUSTOMER SORTING SPECIAL DELIVERY TO BUSINESS CUSTOMERS

SORTING DELIVERY TO PRIVATE CUSTOMERS

DELIVERY TO BUSINESS CUSTOMERS PICK-UP IN BRANCH

Figure

TABLE SORTING POST OFFICE BOXESLETTER SORTING

TABLE SORTING

POST OFFICE BOXESLETTER SORTING p.32

References

Related subjects :