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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
3 | Virksomhedsdagen 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
4 | Virksomhedsdagen 2015
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
5 | Virksomhedsdagen 2015
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
6 | Virksomhedsdagen 2015
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
7 | Virksomhedsdagen 2015
Competition comes in many forms– both global and local competitors
8 | Virksomhedsdagen 2015
• 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%
9 | Virksomhedsdagen 2015
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%
10 | Virksomhedsdagen 2015
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%
11 | Virksomhedsdagen 2015
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
12 | Virksomhedsdagen 2015
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
13 | Virksomhedsdagen 2015
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
14 | Virksomhedsdagen 2015
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
15 | Virksomhedsdagen 2015
*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..
16 | Virksomhedsdagen 2015
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?
18 | Virksomhedsdagen 2015
Appendix
19 | Virksomhedsdagen 2015
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
20 | Virksomhedsdagen 2015
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
21 | Virksomhedsdagen 2015
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
22 | Virksomhedsdagen 2015
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
EBIT Conversion ratio (Rhs) Profit margin (Rhs)
0%
5%
10%
15%
20%
0
200
400
2009 2010 2011 2012 2013 2014
EBIT Conversion ratio (Rhs) Profit margin (Rhs)
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
EBIT Conversion ratio (Rhs) Profit margin (Rhs)
23 | Virksomhedsdagen 2015
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
24 | Virksomhedsdagen 2015
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
25 | Virksomhedsdagen 2015
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
26 | Virksomhedsdagen 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
27 | Virksomhedsdagen 2015
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