2017 Integrated Report – Departure into a new era

Income development remains positive

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 result. 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 performance 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 exhibit very positive development

The following presentation 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.

Exchange rate effects in the year under review reduced both income and expenses on the whole. Effects resulting from changes to the scope of consolidation were not significant.

Positive income development significantly improved adjusted EBIT. It should also be borne in mind that the negative effects of restrictions in rail operations totaling about € 140 million put a damper on development in the year under review.

  • Revenue development was clearly positive.
  • Other operating income rose for a number of reasons, among them the reimbursement of the nuclear fuel tax, higher income from compensation payments and the reversal of provisions at DB Schenker, and the start of operation of new services by DB Arriva in the previous year.
  • The cost of materials increased significantly in operating terms. This was essentially a result of a higher volume of purchased transport services at DB Schenker in the wake of increased demand and higher freight rates. The cost of energy increased owing to higher prices and larger volumes.

Transition to the adjusted statement
of income (€ million)

2017

Reclassifications

Adjustment for special items

2017
adjusted

IFRS com-

pounding/
discounting

Net
investment
income

PPA
amorti-

­zation

Restruc-
turing

Super-
structure
impairments

Revaluation
of legacy
remediation/real estate

Other

Revenues

42,693

11

42,704

Inventory changes and other
internally produced and capitalized assets

2,900

2,900

Other operating income

2,954

–127

–25

2,802

Cost of materials

– 21,457

0

16

– 21,441

Personnel expenses

– 16,665

306

–4

– 16,363

Other operating expenses

– 5,890

26

180

12

– 5,672

EBITDA/EBITDA adjusted

4,535

205

180

10

4,930

Depreciation

– 2,847

73

19

125

–120

–28

– 2,778

Operating profit (EBIT) | EBIT adjusted

1,688

73

224

125

60

–18

2,152

Net interest income | Net operating interest

– 704

19

3

– 682

Operating income after interest

984

19

73

224

125

60

–15

1,470

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

14

–0

14

Other financial result

– 30

–19

0

– 49

PPA amortization customer contracts

–73

– 73

Extraordinary result

–224

–125

–60

15

– 394

Profit before taxes on income

968

968

Excerpt from adjusted statement of income (€ million)

2017

adjusted

2016
adjusted

Change

absolute

thereof due
to changes in
the scope of consolidation

thereof due to exchange
rate effects

%

Revenues

42,704

40,576

+ 2,128

+54

–415

+ 5.2

Inventory changes and other internally produced and capitalized assets

2,900

2,741

+ 159

–1

–2

+ 5.8

Other operating income

2,802

2,650

+ 152

+2

–14

+ 5.7

Cost of materials 

– 21,441

– 19,858

– 1,583

–36

+191

+ 8.0

Personnel expenses

– 16,363

– 15,669

– 694

–9

+135

+ 4.4

Other operating expenses 

– 5,672

– 5,643

– 29

–9

+72

+ 0.5

EBITDA adjusted

4,930

4,797

+ 133

+1

–33

+ 2.8

Depreciation

– 2,778

– 2,851

+ 73

–4

+11

– 2.6

EBIT adjusted

2,152

1,946

+ 206

–3

–22

+ 10.6

Net operating interest

– 682

– 721

+ 39

+1

+4

– 5.4

Operating income after interest

1,470

1,225

+ 245

–2

–18

+ 20.0

Net investment income

14

34

– 20

+0

– 58.8

Other financial result

– 49

– 65

+ 16

–0

+2

– 24.6

PPA amortization customer contracts

– 73

– 91

+ 18

+2

– 19.8

Extraordinary result

– 394

– 397

+ 3

–1

– 0.8

Profit before taxes on income 

968

706

+ 262

–2

–15

+ 37.1

  • Personnel expenses also increased significantly. Aside from collective wage increases, the higher number of employees also had an impact – particularly at DB
    S
    chen­­ker and DB Netze Track, and as a result of the start of operations and acquisitions at DB Arriva.
  • There was a slight increase in other operating expense. This trend was driven by higher rental expenses, at DB Schenker first and foremost.

Overall income climbed more significantly than expenses. There was a significant increase in adjusted EBITDA.

  • Depreciation declined slightly owing to lower net capital expenditures and lower extraordinary depreciation at DB Netze Track. Lower depreciation on vehicles also had an impact, at DB Long-Distance first and foremost.

The development of the adjusted profit figures of the business units was varied. Performance at the DB Long-Distance, DB Netze Track and DB Schenker business units was very positive in particular. Owing to additional charges in the maintenance and personnel divisions and to allocations to the provision for pending losses, the development at DB Regional had the opposite effect. Income development was also weaker at DB Cargo, DB Netze Energy and in the Other division.

EBIT adjusted by
business units
(€ million)

2017

2016

Change

absolute

%

DB Long-Distance

381

173

+ 208

+ 120

DB Regional

508

636

– 128

– 20.1

DB Arriva

301

280

+ 21

+ 7.5

DB Cargo

– 90

– 81

– 9

+ 11.1

DB Schenker

477

410

+ 67

+ 16.3

DB Netze Track

687

561

+ 126

+ 22.5

DB Netze Stations

233

221

+ 12

+ 5.4

DB Netze Energy

72

126

– 54

– 42.9

Other/consolidation

– 417

– 380

– 37

+ 9.7

DB Group

2,152

1,946

+ 206

+ 10.6

The development of the operating result after interest was significantly positive. In addition to the positive development in EBIT, net operating interest also improved in connection with the reimbursement of the nuclear fuel tax and lower interest rates on refinancing operations.

The decline in net investment income was essentially driven by London Overground (the business has been transferred to Arriva Rail London, which is fully consolidated) and Barraqueiro at DB Arriva.

The development of the other financial result was primarily attributable to the compounding of provisions. This was offset by the effects of hedging transactions.

Extraordinary charges remained at the previous year’s level, not substantially affecting the development of the result before income taxes, which also significantly improved.

Extraordinary charges at the previous yearʼs level

Extraordinary result (€ million)

2017

thereof
affecting
EBIT

2016

thereof
affecting
EBIT

DB Long-Distance

DB Regional

21

21

2

2

DB Arriva

5

5

– 7

–7

DB Cargo

– 5

–5

– 48

–48

DB Schenker

– 105

–105

– 4

–4

DB Netze Track

– 10

–7

– 4

–1

DB Netze Stations

– 10

–10

– 1

–1

DB Netze Energy

– 15

–15

– 244

–244

Other/consolidation

– 275

–275

– 91

–91

DB Group

– 394

–391

– 397

–394

There was no substantial change in the extraordinary result, which was composed inter alia of the following special items:

  • Expenses relating to restructuring measures at DB Re­­gio­­nal, DB Cargo, DB Schenker and Other.
  • Effects of impairments relating to the superstructure (decommissioning overhead line systems on disused routes) at DB Netze Track.
  • Expenses relating to the increase in the provision for legacy remediation (Other division) and income from the recovery in value and reductions in provisions for real estate owing to an altered portfolio strategy (DB Netze Track).

The extraordinary result in the previous year was composed inter alia of the following special items:

  • Expenses in connection with the accrual of provisions relating to our stake in Neckar-Westheim joint venture power plant, prompted by the findings of the commission reviewing the financing of Germany’s nuclear phase-­­out at DB Netze Energy.
  • Expenses relating to restructuring measures at DB Re­gional, DB Cargo, DB Schenker and the Other division.

Improved net profit for the year

Excerpt from statement
of income
(€ million)

2017

2016

Change

absolute

%

Profit before taxes on income

968

706

+ 262

+ 37.1

Taxes on income

– 203

10

– 213

     Actual taxes on income

– 180

– 157

– 23

+ 14.6

     Deferred tax expenses

– 23

167

– 190

Net profit for the year

765

716

+ 49

+ 6.8

     DB AG shareholders

745

695

+ 50

+ 7.2

     Other shareholders
(non-controlling interests)

20

21

– 1

– 4.8

Earnings per share (€)

     Undiluted

1.73

1.62

+ 0.11

+ 6.8

     Diluted

1.73

1.62

+ 0.11

+ 6.8

The marked improvement in the profit before taxes was weakened by the development of the income tax position. The dominant factor here was the marked decline in the development of the deferred tax position at DB AG due to weaker fiscal profit expectations of DB Group. The increase in net profit for the year (profit after taxes) was thus less significant.

Earnings per share developed accordingly.