DFDS AND BREXITEMLO

OLE FAERGE, VP LEGALOCTOBER 26, 2018

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Agenda

Who are we? What do we do? How does Brexit impact us?

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DFDS is one of the largest shipping and logistics operators in Europe

DFDS Group

▪ Founded in 1866

▪ Activities in 20 European countries

▪ 7,700 employees

Shipping Freight PassengerLogistics

▪ Door-door transport

▪ Contract logistics

▪ 5,600 trailers

▪ 3,500 containers

▪ Quay to quay

▪ Industry solutions

▪ Port terminals

▪ 45 vessels

▪ Mini-cruise and RoPax

▪ 5.3 million passengers

▪ Four mini-cruise ships

85% 15%Note: Numbers refer to share of total DFDS group revenue

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We operate ships, terminals and trailers…

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…across a large European shipping and logistics network

Revenue 2017

6,4bn DKK

2,2bn DKK

5,2bn DKK

13,8bn DKK

Shipping Freight

Passenger

Logistics

DFDS Total

Note: Revenue shares calculated excl. U.N. Ro-Ro

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DFDS is highly exposed to Brexit

Intra-UKLogistics:▪ 900

Continent-UKLogistics:▪ 1,200Shipping Freight:▪ 3,000Passenger:▪ 1,200

Scandinavia-UKLogistics:▪ 600Shipping Freight:▪ 1,200

Revenue split on trade lane and business, 2017 mDKK Summary of exposed revenue

Shipping Freight

Total UK related revenue 2017, mDKK: 4,200

Share of Shipping Freight revenue: 65%

Passenger

Total UK related revenue 2017, mDKK: 1,200

Share of Passenger revenue: 53%

Logistics

Total UK related revenue 2017, mDKK: 2,700

Share of Logistics revenue: 54%

Note: Revenue shares calculated excl. U.N. Ro-RoSource: DFDS

DFDS, Total

Total UK related revenue 2017, mDKK: 8,100

Share of total DFDS revenue: 59%

Shipping Freight

Passenger

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Phase 1: Brexit vote creating uncertainty & resulting in depreciation of the GBP

Depreciating exchange rates post-Brexit vote…

11,0

8,5

8,0

9,0

10,0

9,5

10,5

20

15

Jan

GBP/DKK

Oct

Oct

Au

g

Ap

r

Jul

20

16

Jan

Ap

r

Ap

r

Jul

Oct

20

17

Jan

Jul

20

18

Jan

Ap

r

-20%

Pre-Brexit vote

Brexit vote

…impacting DFDS’ topline

Translation loss of revenue due to depreciation of the GBP 2016 vs 2017

600m DKK

Source: Danmarks Statistik; DFDS

Post-Brexit vote

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Pre-Brexit vote

Brexit vote

Phase 2: UK is paying a price and trading patterns are changing

-4%

-2%

0%

2%

4%

6%

8%

10%

2016Q1

Q2 Q3 Q4 2017Q1

Q2 Q3 Q4 2018Q1

Exports Imports

UK-EU trade in goods - y/y Q-growth in volume indices (ex. Oil)

Brexit vote

Source: OECD and UK Office for National Statistics

0,6%

0,0%

0,1%

0,2%

0,4%

0,3%

0,5%

0,7%

0,8%

0,9%

1,0%

1,1

1,2

Q3 Q4 2018 Q1

2016 Q1

GDP growth, Q-o-Q

2015 Q1

Q2Q2 Q3 Q4 Q4 2017 Q1

Q2 Q3 Q2

GDP growth is falling behind… … with shift in trade patterns

Germany United Kingdom

Post-Brexit vote

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Phase 3: Lack of drivers from Eastern Europe is an increasing problem for hauliers

-6%

-4%

-2%

0%

4%

2%

6%

8%

10%

2017 Q1

Volume growth, same quarter LY

Q32016 Q1

Q2 Q3 Q4Q4 Q2 2018 Q1

Q2 Q3

Movement from accompanied to unaccompanied traffic

Volume growth on accompanied and unaccompanied traffics

Source: Port of Dover and DFDS

Port of Dover

Rotterdam-Felixstowe

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We are planning for two scenarios in the next phase…

80% likelihood20% likelihood

Hard BrexitMarch 19, 2019

Transition periodDecember 31, 2020 (end)

• Transition period to allow UK to get everything in place and allow businesses and others to prepare for the new post-Brexit rules between the UK and the EU begin (31 Dec, 2020)

• Free movement will continue during the transition

“UK could stay in EU customs union for years after Brexit transition”- https://www.politico.eu quoting senior U.K. and EU officials

• UK departs the EU at 11pm UK time

• UK gives up full access to the single market and full access of the custom union along with the EU

• Likely fall back on World Trade Organisation (WTO) rules for trade with its former EU partners.

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…and are preparing for the worst !Summary of focus areas

27 October 2018

Physical Operations

DocumentationIT

Enhancements

OpportunitiesPeople Watching Carefully

▪ Terminal activities▪ The Channel

▪ Authorised Economic Operator Status

▪ Customs Clearance

▪ Process Stress Test▪ Systems Analysis

▪ Upgrade customs expertise▪ Assist customers to prepare

▪ Driver Permits▪ Island of Ireland

▪ Commercial Customs clearance activity

▪ Additional warehousing

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What are we doing.....no deal preparation

Port approvals and congestion mitigation

Physical Operations

TSF Temporary Storage Facilities to allow third country transit through terminals

Customs Warehousing

BIP Facilities

Cargo Capacity

Warehousing Facilities

Warehousing facilities to allow cargo to be held and split down prior to customs clearance

Border Inspection Point facilities not present at all ports which could lead to restrictions on shipping routes for certain goods

Assess capacity requirements to look for possible enhancements and expand footprints

Additional facilities to hold additional stock pre and post clearance

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Challenges in Dover/Calais under investigations

BU Channel “readiness” Port requirement post Brexit

Dunkerque DFDS is already working on a secure carpark project which could be used for advance check-in and/or triage

Will be a challenge – joint solution to be developed between involved parties

Might be a challenge – solution to be developed

Dover Calais

Additional parking space

Dock exit barriers

Stopping facilities

Sheds for exceptional exams

Calais

Dover

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What are we doing.....no deal preparation

Customs formalities likely to be cumbersome and time consuming. Lack of knowledge within the industry leading to limited resources for documentation processes

Documentation

AEO Authorised Economic Operator application in progress to facilitate simplified customs processes. Reduce financial guarantee requirements

Customs Clearance

Customs clearance teams being enhanced / set up across the divisions

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Impact of obtaining AEO accreditation

▪ From a fiscal perspective - Being recognised by Customs authorities:

▪ Less audits and reduced risk of penalties

▪ More cooperation

▪ From an organisational point of view

▪ A more structured approach to documentation.

▪ From a commercial and competitive point of view:

▪ DFDS can put itself forward as a recognised Customs expert to sell customs brokerage products

▪ Many of our major competitors already have AEO status in many EU countries (DSV, Maersk)

▪ Less financial guarantees required.

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What are we doing.....no deal preparation

Systems requirements vary from country to country which means enhancements become complex

IT Enhancements

Full Process Stress Test

Test assumed processes to assess weakness and required enhancements

Map Requirements

Map requirements in relevant geographies to be prepared for customs system and integration

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What are we doing.....no deal preparation

Employee and consumer knowledge and readiness will be needed

People

Customs Formalities

Prepare for challenge of industry-wide limited knowledge of customs requirements, including safety and security declarations, animal and plant health

Customer Preparation

Address possible lack of preparation of industrial customers and smaller trailer operators. Less of an issue for larger customers who will be more prepared

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What are we doing.....no deal preparation

The future is uncertain but we have heavy focus and watching carefully in key areas

Watching Carefully

Drivers Permits Possible requirements of permits for UK hauliers to carry out operations into the EU and vice versa; reducing no of foreign drivers already reducing through reduced purchasing power at home given GBP depreciation against EUR

Island of Ireland

How will transport companies operate in Ireland / Northern Ireland after Brexit?

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ITS NOT ALL BAD NEWS................

Opportunities to enhance our service offering to customers

Opportunities

Customs Clearance

Offer customs documentation facilities to customers

Customs Warehousing

Warehousing Facilities

Duty Free

Offer customs warehousing facilities for industrial customers to enable call off facilities and deferred clearance

Warehousing facilities to hold additional stock

Duty free could increase passenger spend.

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