finansanalytikerforeningens virksomhedsdag 7. juni 2012 · 3 | finansanalytikerforeningens...

Finansanalytikerforeningens Virksomhedsdag 7. juni 2012

Jens H. Lund, CFO

2 | Finansanalytikerforeningens Virksomhedsdag 7. juni 2012

Agenda

• Introduction to DSV

• High level SWOT analysis

• Cash flow highlights

• Net working capital

• Investing activities

• Capital structure

• Funding

• Operational leasing

• Q & A


DSV - Introduction

Global supplier of transportand logistics services

Three divisions Air & Sea – global network Road – complete network in Europe Solutions – contract logistics in Europe

Asset light business model Transport services outsourced

Own operations in more than 60 countries and an international network of agents

21,000 employees worldwide

Listed on NASDAQ OMX Copenhagen among the 10 most traded shares in Copenhagen current market cap ~ EUR 3.0bn ~ 60% foreign shareholders 100% free float of shares

DSV countries

55%34%

11%

EBITA by Division (2011)

Air & Sea

Road

Solutions


DSV Group - geographical footprint (% of group total 2011)

DSV countries

Europe North/EastRevenue 67%EBITA 61%

Southern Europe*Revenue 18%EBITA 11% Asia/Pacific

Revenue 8%EBITA 15%

AmericasRevenue 7%EBITA 13%

*) Southern Europe: France, Spain, Portugal, Italy, Greece


4.9

5.1

5.4

5.5

5.7

6.1

6.2

6.3

7.3

8.2

8.7

9.6

19.9

22.1

37.8

15. UTI (US)

14. Gefco (FR)

13. Toll (AU)

12. Dachser (DE)

11. Sinotrans (CN)

10. UPS (US)

9. Expeditors(US)

8. SNCF Geodis (FR)

7. Panalpina (CF)

6. DSV (DK)

5. C.H. Robinson (US)

4. Ceva Logistics (NL)

3. DB Schenker (DE)

2. Kuehne + Nagel (CF)

1. DHL Logistics (DE)

Top 15 Global freight forwarders (3 PLS)Based on 2011 revenue – Billion USD

Source: Journal of Commerce, 27 April 2012

In Road DSV ranks as number 3 in Europe

In Air & Sea DSV is in top 10 globally

The market is fragmented and DSV’s market share is ~ 2% both in Air & Sea and Road

It is estimated that the top 15 companies control 35-40% of the total freight forwarding market

In Road DSV ranks as number 3 in Europe

In Air & Sea DSV is in top 10 globally

The market is fragmented and DSV’s market share is ~ 2% both in Air & Sea and Road

It is estimated that the top 15 companies control 35-40% of the total freight forwarding market


DSV Group - 20 years of evolution(Revenue, billion DKK)

In 1992 DSV had 365 employees – in 2011 headcount was 21,678rent Value/Base Value)^(1/number of years)]-1

0.9 0.9 0.9 1.1 1.2 1.43.0 3.6 4.4

17.9 17.9 17.8 18.1

23.0

32.034.9

37.4 36.1

42.6 43.7

0

5

10

15

20

25

30

35

40

45

50

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11


1.7 1.92.3

3.4

4.5

5.86.1

3.9

6.2

7.8

6.77.0

7.57.8

8.2

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12

Earnings per shareDiluted adjusted earnings per share, DKK (12 months rolling)

Quarterly development

+22.5%CARG 18.4%


Strengths and opportunities

D

Asset Light and resilient

business model

Strong market position and

margins among best in

the industry

High Growth Industry

High cash conversion

Active capital allocation

Strong M&A track record

High exposure to Europe and low

exposure to emerging markets

High focus on profitability and

margins can put a damper on growth

Lack of scale in Air & Sea division

Cyclical industry and uncertain

global and European macro

Financial gearing is appreciated by many

investors - but too agressive for some

- Weaknesses and threats

Risk of pressure from asset owners (when capacity is

tight)

Risks related to price, integration and execution for

future M&A


Cash flow – highlights 2009 - 2011

Million DKK 2009 2010 2011

Profit before tax 460 1,660 1,995

Cash flow from operating activities - before changes in NWC 717 1,671 2,047

Changes in net working capital 985 (8) (184)

Cash flow from Operating activities 1,702 1,663 1,863

Cash flow from investing activities, excl. M&A (445) (97) 31

Adjusted free Cash flow 1,257 1,566 1,894

Net working capital in % of Revenue 0.4% 0.2% 0.0%

Cash conversion ratio 121% 103% 113%


0%

20%

40%

60%

80%

100%

120%

2006 2007 2008 2009 2010 2011

Cash conversion ratio

Cash Conversion Ratio

Cash Conversion RatioFree Cash flow adjusted for net financial items, tax, special items and acquisition/divestment of subsidiaries

EBITA

Asset light business model and low net working capital is reflected in cash conversion ratio

2008 was impacted by high NWC in ABX Logistics – this was normalised in 2009


Net working capital (NWC)

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

0

200

400

600

800

1000

1200

07 08 09 10 11

NW

C in

% o

f re

ven

ue

Mil

lio

n D

KK

NWC NWC / revenue

High focus on NWC throughout the organisation Credit policy Monitoring of and targets for debtor / creditor days Weekly liquidity reporting Internal board meetings, etc.

NWC around or below 1% of revenue is considered very satisfactory Different approach to NWC and credit management in acquired companies (ABX 2008) Large geographical differences Growth in Air & Sea and growth with large customers could cause increase in NWC Supply chain financing can be an attractive option

Managing NWC is like mowing the lawn .......


Cash flow from investing activities

The ‘Asset-light strategy’ implies limited investments in assets in the form of trucks and facilities. And no investments in ships or aeroplanes!

Investments and disposals (excl. goodwill) should be seen as a net amount. Disposal or sale and lease back transactions, in particular in connection with M&A, are part of the asset light strategy

DSV has historically under-invested depreciations

7.1 X 7.2 X7.8 X

8.8 X

7.2 X7.8 X

5.9 X 5.8 X

7.2 X

7.9 X

0 X

1 X

2 X

3 X

4 X

5 X

6 X

7 X

8 X

9 X

-100

0

100

200

300

400

500

600

700

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Rev

enue

/ non c

urr

ent

asse

ts(e

x. G

W)

DK

Km

Revenue/Assets (ex. GW)

Depreciation ex. customer relations

Depreciation and amortisation (average)

Net CAPEX (ex. goodwill/acquisitions)

Net. CAPEX (average)


Capital structure

Overall target for the capital structure

Manage cost of capital and secure financial flexibility to meet the strategic goals

Financial gearing

Current target range for financial gearing (NIBD/EBITDA) is 2.0-2.5 x

Target range is evaluated on a continuing basis

Larger acquisitions can cause breach of target ranges for shorter periods

Share buy-backs and dividend

Share buy-backs will be used to maintain the gearing ratio within the target range

Dividend policy: increase dividend per share 25% per year – but from a low starting point

2006 *) 2007 2008 **) 2009 2010 2011 2012

Financial gearing - historical 2,5x 2.4x 3,6x 3.1x 2.2x 2.2x 2.2x (Q1)Target range 1.5-2.5x 2.0-3.0x 2.0-3.5x 1.5-2.5x 1.5-2.5x 2.0-2.5x 2.0-2.5x

*) Adjusted for the acquisition of Frans Maas

**) Adjusted for the acquisition of ABX LOGISTICS


Funding

Currently all long term credit facilities are based on bank funding

”Syndicate” of banks - loan documentation is based on pari passu principle

Average duration of debt approx. 4 years

Interest rate swaps are used to hedge interest rate risks

Lessons learned in 2008 Consider equity financing in case of larger acquisitions – and be careful with bridge financing

Focus on average duration of the debt – ensure sufficient time to react to changes

Focus on the financial strenght of the banks

2009 2010 2011

Total facilities (million DKK) 5,770 6,076 6,958

Average duration, years 4.0 4.4 3.9

Not drawn (million DKK) 372 1,282 1,273

Net financial expenses (million DKK) 555 537 431

Average interest rate on long term loans 6.5% 5.6% 4.2%


Operational leasing is preferred to ensure flexibility – even under potential new IFRS regulation.

DKK million 2010 2011Operating lease obligations relating to land and buildings fall due:0-1 year 791 8831-5 years 2,105 2,170> 5 years 1,133 1,341

Total 4,029 4,394

Operating lease obligations relating to operating equipment fall 0-1 year 332 3371-5 years 320 370> 5 years 1 1

Total 653 708

The following is recognised in the income statement:Operating leases related to property 1,024 994Operating leases related to operating equipment 507 514

Total 1,531 1,508

Operational leasing

Extract from note 26 in 2012 annual report


Estimated effect on EBITDA, NIBD and financial gearing if operational gearing is recognised:

DKK million 2010 2011

Reported EBITDA 2,721 2,975 Operational leasing costs in P&L reversed 1,531 1,508

Adjusted EBITDA 4,252 4,483

Net interest bearing debt (NIBD) 5,872 6,585 Leasing obligations 4,682 5,102

Adjusted NIBD 10,554 11,687

Reported financial gearing 2.2 2.2 Adjusted financial gearing 2.5 2.6

Estimated effect if operational leasing is recognised in balance sheet

Potential changes to IFRS will not have impact on DSV´s cooperation with the banks. The loan agreements allow for changes for reason of consistency.


The use of a ”standard” multible can easily overstate leasing obligations:

Operating leases related to operating equipment 507 514

Total 1,531 1,508

Calculated leasing obligation, based on "leasing costs x 7"Property 7,168 6,958Equipment 3,549 3,598

Total 10,717 10,556

Actual obligationProperty 4,029 4,394Equipment 653 708

Total 4,682 5,102

Overstatement Property 3,139 2,564Equipment 2,896 2,890

Total 6,035 5,454

Operational leasing – be aware when estimating leasing liability


Q&A

Appendix


Long term financial targets

DSV Air & Sea Road Solutions

Transport volume

EBITA margin 7% 7 - 8% 5% 7%

Gross profit conversion ratio 30% 35% 25% 25%

ROIC (pre tax) 25% 25% 25% 20%

Growth above market

Current Status - 2011 DSV Air & Sea Road Solutions

Volume growth ÷

EBITA margin 5.6% 7.2% 3.7% 5.6%

Conversion ratio 24.7% 33.1% 19.5% 18.7%

ROIC (pre tax) 19.7% 20.9% 21.5% 14.4%


Asset Light – a resilient business model

783861 854

1.123

1.504

1.882 1.936

1.703

2.202

2.426

4,4% 4,9% 4,7% 4,9% 4,7% 5,4% 5,2% 4,7% 5,2% 5,6%

19,2%22,1% 22,1%

24,1%21,8%

24,4% 23,7%19,1%

23,6% 24,7%

2,2%

12,2%

22,2%

32,2%

42,2%

52,2%

62,2%

72,2%

82,2%

0

500

1000

1500

2000

2500

3000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

EBITA (mDKK) EBITA margin Gross Profit conversion ratio


Outlook 2012

DKK million Actual 2011 Outlook 2012 Growth %

Gross profit 9,819 10,000 - 10,500 2 - 7%

Operating profit before special items 2,426 2,500 - 2,700 3 - 11%

Special items 0 250

Net financial expenses 431 300

Effective tax rate 27.4% 27.0%

Adjusted free cash flow 1,894 1,600 - 1,800

Market growth - transport volume Actual 2011 Expected 2012

Air - 1 % 0 %

Sea 5 - 6 % 4 - 5 %

Road 2 - 3 % 1 - 2 %

Solutions 2 - 3 % 1 - 2 %

It is the target to gain market share on all markets where DSV

operates

The development in global and European economy in 2012 is uncertain – and this also creates

uncertainty when it comes to transport volume.

The above outlook is based on the following assumptions for market growth in 2012.


Disclaimer

This document contains forward-looking statements which involve risks and uncertainties. These statements may be identified by such words as 'may', 'plans', 'expects', 'believes' and similar expressions, or by their context. These statements are made on the basis of current knowledge and assumptions. Various factors could cause actual future results, performance or events to differ materially from those described in these statements. No obligation to update any forward-looking statements is assumed. Potential risks and uncertainties include such factors as general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures and regulatory developments.

The information contained in this document has not been independently verified and no representation or warranty, express or implied, is made to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein. The information in this presentation is subject to change without notice, it may be incomplete or condensed, and it may not contain all material information concerning the DSV Group. DSV A/S nor its respective affiliates shall have any liability whatsoever for any loss whatsoever arising from any use of this document, or otherwise arising in connection with this document.

finansanalytikerforeningens virksomhedsdag 7. juni 2012 · 3 | finansanalytikerforeningens...

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