Presentation of DSV – global transport and logistics · Yusen Logistics (JP) Rhenus (D E) A...

Presentation of DSV – global transport and logistics

Virksomhedsdagen, 4 June 2015

Jens H. Lund, CFO

2 | Virksomhedsdagen 2015

Agenda

1

2

3

4

DSV and the competitive landscape

Q&A

Going forward – industry challenges and opportunities

Highlights Q1 2015


Three divisions• Air & Sea – global network

• Road – complete network in Europe

• Solutions – contract logistics

Asset light business model• Transport services outsourced

Own operations in more than 70 countries• … and an international network of agents

23,000 employees worldwide

Listed on NASDAQ Copenhagen• No majority shareholder

• 100% free float of shares

General facts about DSV– global supplier of transport and logistics services

DSV countries


2008

A global network created through M&A

197610 independenthauliers establishDSV

1989DSV acquires severaldanish competitors

Breakdown of EBIT by divisionAir & SeaRoadSolutions

1997DSV acquiresSamson Transportand becomes DSVSamson Transport

2000

2005-2006

DSV acquires DFDSDan Transport Groupand quadroble thesize of the company

2012-2015

100% DSV acquiresJ. H. Bachmann andFrans Maas

DSV acquires ABXLOGISTICS

DSV strenghtens theglobal networkthrough a number ofsmaller acquisitionsalong with solidorganic growth

797 DKKmRevenue

100%

33 DKKmEBIT

2,694 DKKmRevenue

98 DKKmEBIT

19,478 DKKmRevenue

854 DKKmEBIT

31,972 DKKmRevenue

1,504 DKKmEBIT

37,435 DKKmRevenue

2,554 DKKmEBIT

48,582 DKKmRevenue

2,624 DKKmEBIT

29%

68%

3%

38%

59%

3%

45%

44%

11%58%

32%

10%

Breakdown of EBIT by geographyEMEARest of world


The DSV business model– adding value through services

We are brokers in the transport and logistics market

• No ships owned• No airplanes owned• Very few trucks owned

FROMSHIPPER

TOCONSIGNEE

FREIGHT FORWARDING TRANSPORTATION (SUBCONTRACTED) LOGISTICS & DISTRIBUTION

VALUE ADDED SERVICES• Shipment booking• Pickup• Customs clearance• Cargo consolidation• Documentation and Insurance

VALUE ADDED SERVICES• Warehousing• Picking/Packing• Distribution• Supply chain management• Order planning


37.523.4

19.012.0

8.77.9

7.37.1

6.65.95.85.85.75.5

4.64.34.24.24.14.1

DHL Logistics (DE)Kuehne + Nagel (CH)

DB Schenker (DE)C. H. Robinson (US)

(DK)CEVA Logistics (NL)

Panalpina (CH)Dachser (DE)

Expeditors (US)SNCF Geodis (FR)

J. B. Hunt (US)UPS (US)

Sinotrans (CN)Gefco (FR)

Toll (AU)Bolloré (FR)

Agility Logistics (KW)Uti Worldwide (US)

Yusen Logistics (JP)Rhenus (DE)

A fragmented industry– global top 20 freight forwarders based on 2014 revenue (billion USD)

Source Journal of Commerce, 15 April 2015, Transport Intelligence

• The market is fragmented and DSV’smarket share is ~2%

• It is estimated that the top 20 companiescontrol ~40-45% of the total freightforwarding market

• The market is fragmented and DSV’smarket share is ~2%

• It is estimated that the top 20 companiescontrol ~40-45% of the total freightforwarding market

1

2345678910

111213

1415161718

1920


Competition comes in many forms– both global and local competitors


• 4.8% organic growth in gross profit driven by solid above

market growth in transport volumes

• 8.5% organic growth in EBIT

• The Air & Sea Division delivered another strong quarter

• The Road Division moved forward and achieved 8.4% organic

growth in EBIT

• The Solutions Divisions saw a decline in EBIT for the period

• Focus on expanding the network

• New share buyback programme of DKK 500 million

• We maintain the financial outlook for 2015

Highlights Q1 2015

Gross profit (DKKm)

EBIT (DKKm)

2,465

2,682

Q1 2014 FX Organic Q1 2015

3.7%

4.8%

546

641

Q1 2014 FX Organic Q1 2015

8.5%

8.2%


Financial performance in Q1 2015– a good start to the year!

* EBIT before special items in % of gross profit

Q12015

Organicgrowth

Q12015

Organicgrowth

Q12015

Organicgrowth

Q12015

Organicgrowth

Turnover 12,601 5.6% 5,421 0.0% 6,122 2.4% 1,440 8.1%

Gross Profit 2,682 4.8% 1,226 6.6% 1,132 4.9% 330 -0.3%

EBIT before special items 641 8.5% 388 11.2% 220 8.4% 36 -25.0%

Conversion ratio* 23.9% 31.6% 19.4% 10.9%

Profit margin 5.1% 7.2% 3.6% 2.5%

DSV Market DSV Market DSV Market

Volume growthAir 7.6% 3-4% 5.0% 1-2% 5.0% 1-2%

Sea 4.1% 2-3%


89

145

54 60

175

213

79

91

149133

Regional development Q1 2015– EBIT (DKKm)

Americas

+63%

Nordic countries

Southern Europe

Other Europe+ EMEA

-11%

+15%

APAC

Q1 2015

Q1 2014

+11%

+22%


Air Sea

Road Solutions

Market share gains in a competitive market– DSV freight volumes versus market

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

Q12013

Q2 Q3 Q4 Q12014

Q2 Q3 Q4 Q12015

DSV Market (Europe)

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

Q12013

Q2 Q3 Q4 Q12014

Q2 Q3 Q4 Q12015

DSV Market (Europe)

-4.0%

0.0%

4.0%

8.0%

12.0%

16.0%

Q12013

Q2 Q3 Q4 Q12014

Q2 Q3 Q4 Q12015

DSV Market

-4.0%

0.0%

4.0%

8.0%

12.0%

16.0%

Q12013

Q2 Q3 Q4 Q12014

Q2 Q3 Q4 Q12015

DSV Market


Outlook for 2015

Gross profit

EBIT before special items

Net financial expenses

Effective tax rate

Adjusted free cash flow excl. M&A

2014 actual 2015 outlook Growth %

Air (global market)

Sea (global market)

Road (European market)

The financial outlook for 2015 is based on the followingassumptions for transport volume growth (%)

Solutions (European market)

10,297 10,500-10,900 1-6%

2,624 2,700-2,900 3-11%

306 300

26% 25%

1,472 2,000

3-5% 3-5%

3-5% 3-5%

1-2% 1-2%

1-2% 1-2%

We havea target of

gainingmarket sharein all Divisions


Growth drivers for DSV– and the freight forwarding industry in general

• Emerging markets will drive continued growth

• “New” import markets – China, India, Brazil etc.

• European recovery

• 3PL’s can deliver a more sophisticated service than oceanand airline carriers – full supply chain management

• Global network – one stop logistics provider

• Better IT-systems and service offering

• Favorable prices by virtue of stronger buying power

Shippers likely to increaseuse of 3PL services

3PL’s can take marketshare from asset owners

Global 3PL’s able to takemarket share from smaller

players

World trade is stillexpected to grow

• Shippers wish to cut costs for logistics and inventory

• Logistics is not a core competence of the shippers

• New outsourcing areas – e.g. hospitals


Dealing with industry challenges– DSV’s approach to selected industry trends

”Back sourcing”

Key challenges

Competition

Bargaining power

E-commerce

• Some production is likely to move back from China to North America andEurope

• But modern supply chains rely on parts/pieces from all over the world• New markets and business opportunities arise

• Lower economic growth is likely to increase competition• The most efficient players in the industry will be the winners• We actively pursue consolidation opportunities

• Despite alliances competition remain severe among our subcontractors• Freight forwarders must add value to supply chains – otherwise we become

an unnecessary intermediary

• Supply chains are changing – especially the last mile• Freight forwarders must have e-commerce in the product portfolio• We maintain the asset light approach – and work with parcel distributors

Our take on the challenges


*EBIT before special items

30%30%

7%7%

Financialtargets 2018

783 861 854

1,123

1,504

1,882 1,936

1,703

2,202

2,4262,540 2,552 2,624

4.4% 4.9% 4.7% 4.9% 4.7% 5.4% 5.2% 4.7% 5.2% 5.6% 5.7% 5.6% 5.4%

19.2%22.1% 22.1% 24.1% 21.8%

24.4% 23.7%19.1%

23.6% 24.7% 25.3% 25.5% 25.5%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

EBIT* (DKKm) EBIT margin EBIT/GP

So far so good..


Wrap up – the equity story

The world’s 5th largest freightforwarder

A fragmented and competitiveindustry with room for market share

gains and consolidation

Asset light business model supportscost flexibility and margin stability

Strong financial profile and provencash flow generation ability – also in

economic downturns

Our focused CSR efforts are widelyrecognized among best in industry

A well established group with anexperienced management team and

a proven track record

DSV

Thanks for the attention – any questions?


Appendix


DSV A/S

Geographic exposure by revenue (2014)

DSV Air & Sea

DSV Road DSV Solutions

27%

16%40%

8%9% Nordics*

SouthernEurope**

Other EMEA

Americas

APAC

14%

18%

28%

19%

21%Nordics*

SouthernEurope**

Other EMEA

Americas

APAC

42%

12%

46%

Nordics*

SouthernEurope**

Other EMEA

19%

20%58%

3% Nordics*

SouthernEurope**

Other EMEA

APAC/Americas

*Nordics include: Denmark, Sweden, Norway and Finland** Southern Europe include: France, Spain, Portugal, Italy and Greece


DSV Air & Sea exposure– volume full-year 2014

Air freight by export region Sea freight by trade lane

39%

11%10%

7%

6%

26% Asia-Europe (WB)

Europe-Asia (EB)

Trans Atlantic (WB)

Trans Pacific (EB)

Intra Europe

Other

24%

11%

6%24%

8%

28%

Market**

**Source: Container Trades Statistics

51%

31%

18%

EMEA

Asia-Pacific

Americas

43%

41%

17%

Market*

*Source: International Air Transport Association


0

500

1,000

1,500

2,000

2,500

3,000

3,500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Financial performance– CAGR incl. M&A

Revenue (DKKm) EBITDA (DKKm)

EBIT* (DKKm) Margins (%)CAGR: 11.5%

CAGR: 7.1%

0

10,000

20,000

30,000

40,000

50,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

0

500

1,000

1,500

2,000

2,500

3,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

CAGR: 10.4%

CAGR: 6.1%

CAGR: 11.9%

CAGR: 9.0%

*EBIT before special items

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

EBIT margin Conversion ratio


DSV A/S

Financial performance per division– selected KPI’s

DSV Air & Sea

DSV Road DSV Solutions

0%

5%

10%

15%

20%

25%

30%

35%

40%

0200400600800

1,0001,2001,4001,6001,800

2009 2010 2011 2012 2013 2014

EBIT Conversion ratio (Rhs) Profit margin (Rhs)

0%

5%

10%

15%

20%

25%

0

200

400

600

800

1,000

2009 2010 2011 2012 2013 2014


0%

5%

10%

15%

20%

0

200

400

2009 2010 2011 2012 2013 2014


0%

5%

10%

15%

20%

25%

30%

0

500

1,000

1,500

2,000

2,500

3,000

2009 2010 2011 2012 2013 2014



Cash flow and ROIC

* Cash Conversion Ratio: (Free cash flow adjusted for net financial items, tax and acquisition/divestment of subsidiaries )/EBIT before special items

Operating cash flow (DKKm) Cash conversion ratio* (%)

Invested capital (DKKm) ROIC (%)

0

500

1,000

1,500

2,000

2,500

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Average: 99%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

0%

20%

40%

60%

80%

100%

120%

140%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014


Long-term financial targets remain unchanged

We expect to reach the targets within 5 yearscounting from 2013

• Minimum 3% annual growth in gross profit isneeded to reach the targets

• Air & Sea is on track

• Targets for Road and Solutions are ambitious,and 2014 did not bring the expected progress

• Net working capital to revenue level isexpected around 1%

• Normalised CAPEX is expected in the level of0.5 – 0.75% of revenue

• Effective tax rate of 25% is expected

Targets Actual 2014Actualchange

2013-2014DSV – total % % %-pointProfit margin 7% 5.4% -0.2%Conversion ratio 30% 25.5% 0.0%ROIC (pre tax) 25% 21.8% 0.7%

Air & SeaProfit margin 7-8% 7.0% 0.1%Conversion ratio 35% 33.7% 1.3%ROIC (pre tax) 25% 22.6% 1.2%

RoadProfit margin 5% 3.5% -0.6%Conversion ratio 25% 19.4% -2.5%ROIC (pre tax) 25% 25.0% -0.1%

SolutionsProfit margin 7% 4.8% 0.1%Conversion ratio 25% 19.6% 1.4%ROIC (pre tax) 20% 18.3% 3.2%

Profit margin = EBIT as % of revenueConversion ratio = EBIT as % of gross profitEBIT before special items


Capital structure and capital allocation

Financial gearing (NIBD/EBITDA)Target for financial gearing (Net interest-bearing debt/EBITDA)

• Target: around 2.0 x EBITDA before special items

• Gearing ratio may exceed this level in periods with M&A activity

• Funding: approx. 50% bank debt and 50% corporate bonds

Capital allocation – priority for use of free cash flow1. Repayment of debt if financial gearing ratio is above target

2. Value creating acquisitions or further development of the existing

business

3. Allocation to shareholders via share buyback and dividend

Allocation to shareholders (DKKm)

397

2,505

1,302

7001,183

252

52

105

190

235

270

283

2010 2011 2012 2013 2014 Q1 2015

Share buyback Dividends

2.2x 2.2x 2.1x 1.9x 1.9x 1.9x

2010 2011 2012 2013 2014 Q1 2015


Market growth – the ”multiplier” has faded since 2008

• The big wave of outsourcing of production to the Far East and general growth ininternational trade have been driving growth in the period 1990-2008 above GlobalGDP growth

Source: Morgan Stanley Research – January 2015

MultipliersCAGR (%) 1980-2008 2000-2008 2008 2009 2010 2011 2012 2013 2014e 2015e 2016eGlobal real GDP 2.3% 3.6% 2.8% -0.6% 5.0% 3.9% 3.1% 3.0% 3.2% 3.5% 3.9%

Global trade 4.5% 4.5% 2.2% -11.4% 14.1% 6.3% 3.0% 2.8% 4.6% 5.3% 5.7%multiplier ^ (x) 1.9x 1.2x 0.8x 19.8x 2.8x 1.6x 1.0x 0.9x 1.4x 1.5x 1.5x

Container volumes* 9% 10% 4% -11% 14% 8.3% 3.3% 4.7% 4.5% 4.8% 5.7%multiplier ^ (x) 3.9x 2.8x 1.5x 18.9x 2.8x 2.1x 1.1x 1.6x 1.4x 1.4x 1.5x

Air freight volumes* 4.9% 3.7% -3.3% -0.7% 19.1% 2.3% -1.0% 1.2% 3.5% 4.0% 4.0%multiplier ^ (x) 2.1x 1.0x -1.2x 1.3x 3.8x 0.6x -0.3x 0.4x 1.1x 1.1x 1.0x

Euro Area GDP ** 0.9% 0.7% 0.5% -4.1% 1.7% 1.6% -0.7% -0.5% 0.8% 1.0% 1.7%European road freight * 3.6% 2.9% -1.7% -10.1% 3.8% -1.1% -3.0% -7.1% 2.0% 2.0% 2.0%

multiplier (x) 4.2x 3.9x -3.7x 2.5x 2.2x -0.7x 4.4x 15.4x 2.5x 2.0x 1.2x

^over global GDP, *containers in TEU, Air freight in tonnes, road in tonne-km** Euro Area GDP for the period 1980-2008 refers to the 1992-2008 periodSource: Company data, IMF, Drewry, IATA, ICAO, Eurostat, Morgan Stanley Research


Air (IATA, global freight volume) Sea (CTS, container volume)

German road tax (kilometres)

Market growth indicators (Year-on-Year)

4.6%

3.1%

1.9%

2.5%2.1%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Q12014

Q2 Q3 Q4 Q12015

4.4%

3.4%

5.4%4.8%

5.3%

3.6% 3.4% 3.4%

4.1%

4.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Q12014

Q2 Q3 Q4 Q12015

FTK AFTK

4.5%

6.3%

4.2%

1.0% 0.8%

5.8%

8.1%

5.7%

3.6%

-1.3%-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Q12014

Q2 Q3 Q4 Q12015

Global Europe, import

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