Slide 1: Ferry Routes & Logistics: DFDS Group Overview
FERRY ROUTES & LOGISTICS DFDS Group Overview September 2018
Slide 2: What We Do
WHAT WE DO . 2 2
Slide 3: We move freight and passengers on 23 ferry routes
We move freight and passengers on 23 ferry routes in Europe and Turkey 3
Slide 4: It's all about the routes and their location
It’s all about the routes – and their location 4
Slide 5: Routes are part of Europe's and Turkey's infrastructure
Routes are part of Europe’s and Turkey’s infrastructure And part of business supply chains 5
Slide 6: We mainly move fast moving freight
We mainly move fast moving freight for delivery same day, next day or day after (A,B,C) 85% of carried volumes are trailers 6
Slide 7: Our key freight customers are forwarders and hauliers
Our key freight customers are forwarders and hauliers Manufacturers of heavy goods are also important customers 7
Slide 8: On routes we move freight and passengers together
On 9 routes we move freight and passengers together 8
Slide 9: People travelling by car are our key customers
People travelling by car are our key customers as is cruise passengers Both for holiday and transport purposes 9
Slide 10: We also provide transport and logistics solutions
We also provide transport and logistics solutions to a wide range of businesses 10
Slide 11: Freight, logistics & pax – northern Europe & Mediterranean
Freight, logistics & pax – northern Europe & Mediterranean Freight routes Logistics solutions Passenger routes ▪ Trailers, unaccompanied ▪ Door-door full & ▪ Overnight Key & accompanied part loads services ▪ Day ▪ Industry solutions ▪ Contract logistics ▪ Transport/holiday ▪ Port terminals ▪ Cruise
Slide 12: Roll on, roll off
Roll on, roll off • Ro-ro/ro-pax shipping: roll on, roll off of freight units and passenger cars • Routes carry both unaccompanied and accompanied trailers • Other types of cargo, e.g. heavy industrial goods and containers, are placed on carrying equipment (mafis) and tugged on to the ship 12 12
Slide 13: Ferry types
FERRY TYPES Day ferry (ro-pax), Channel Freight ferry (ro-ro) Cruise ferry Combined freight and passenger ferry (ro-pax)
Slide 14: Structure & Performance
STRUCTURE & PERFORMANCE . 14 14
Slide 15: DFDS structure, ownership and earnings split
DFDS structure, ownership and earnings split DFDS Group DKK bn Revenue 2017-18 Q2 LTM per division People & Ships Finance 16 14 12 Shipping Division Logistics Division 10 10.2 Shipping Division 8 Logistics Division • 23 ferry routes - freight • Door-door transport 6 Eliminations and other and passen
Slide 16: DFDS key figures – impact from UNRR acquisition in 2018
DFDS key figures – impact from UNRR acquisition in 2018 DKK bn Revenue Inv cap, DKK bn Invested capital & ROIC before special items ROIC, % 15 18 20 16 18 12 14 16 14 12 9 12 10 10 6 8 8 6 6 3 4 4 2 2 0 0 0 2014 2015 2016 2017 2018 Q2 LTM 2014 2015 2016 2017 2018 Q2 LTM Shipping Division Logistics D
Slide 17: Shipping
SHIPPING Q2 LTM 2018: Shipping Division Business units & ROIC, Q2 LTM 2018 Revenue North Sea Baltic Sea Channel Mediterranean North Sea Baltic Channel Mediterranean Passenger Passenger EBIT Sea 16% 31% 20% 2% 20% 0% 20% 40% 60% 80% 100% . 17 17
Slide 18: Logistics
LOGISTICS Q2 LTM 2018 Logistics Division Business units & ROIC, Q2 LTM 2018 Revenue Nordic Continent UK & Ireland EBIT Nordic Continent UK & Ireland 24% 14% 7% 0% 50% 100% . 18 18
Slide 19: Brexit
BREXIT . 19 19
Slide 20: Some slowdown in UK-EU trade growth in 2018
Some slowdown in UK-EU trade growth in 2018 • EU growth scenario continues EU-UK trade of goods – volume growth to mitigate uncertainty related 10% to Brexit 8% • Lift in UK export growth to EU post Brexit vote leveling off 6% but still above pre-Brexit level 4% Brexit vote • Volume growth divergenc
Slide 21: DFDS is planning for two scenarios
DFDS is planning for two scenarios Hard Brexit Transition period Brexit March 19, 2019 December 31, 2020 • UK departs the EU at 11pm UK time • Transition period to allow UK to get most in place and allow businesses • UK gives up full access to the single and others to prepare for the new market and
Slide 22: Actions to mitigate possible Brexit impacts
Actions to mitigate possible Brexit impacts • Key risk is development of UK GDP Possible hard Brexit impacts growth as trading volumes are linked to GDP • Cumbersome customs process • Congestion in ports • Reduction in trade volumes • UK supply chains closely integrated with • Increase in unaccompan
Slide 23: Mediterranean
MEDITER RANEAN . 23 23
Slide 24: Mediterranean expansion through acquisition of U.N. Ro-Ro
Mediterranean expansion through acquisition of U.N. Ro-Ro • Leading freight ferry company with 34% market share of ferry & road market and 60% market share of ferry market • High growth region • Similar unaccompanied ferry business model and fleet create opportunities for synergies • Increased flexi
Slide 25: U.N. Ro-Ro routes and ports
(1) U.N. Ro-Ro owns 60% of Port of Trieste’s operator (Samer Seaports Company), owns the company that has the concession agreement (2) Pendik port is fully owned 25 Source: U.N. Ro-Ro
Slide 26: U.N. Ro-Ro overview
U.N. Ro-Ro overview Business overview Key figures • Established 1994, #1 freight ferry operator in Vessels 12 (total capacity of 45.4km lanemeters) Turkey in terms of market share, number and capacity of vessels Ports Owns Pendik and Trieste Port(1), operates in Ambarli, Toulon, Mersin and Bari • 5
Slide 27: Ferry expected to continue to gain market share vs road
Ferry expected to continue to gain market share vs road Export freight from Turkey to Europe • Truck investment needs for forwarders and hauliers reduced by using Units '000 unaccompanied ferry solution 300 59% • Ferry also competitive vs driving through 250 57% Balkan region: 55% 200 • Transit time
Slide 28: EU is important and balanced trade partner with Turkey
EU is important and balanced trade partner with Turkey Turkey’s top trade partners (2017) Turkish trade market share 9.3% 40 5.0% 30 (US$bn) 20 0.6% 10 0 Romania France China Russia UAE Iran Iraq Germany US UK India Poland Spain Japan Italy Belgium Israel Switzerland Netherlands South Korea Source:
Slide 29: Turkey - inflation and exchange rate development of TRY
Turkey - inflation and exchange rate development of TRY • TRY-depreciation is linked to high TRY/DKK inflation rates in Turkey: 2.55 2016 2017 2018 • 2016: 8% 2.35 • 2017: 11% • 2018 ytd: 16% 2.15 1.95 • Turkey’s real GDP was up 7% in Q1 1.75 • FY GDP forecast at around 4% before -15% TRY dropped in
Slide 30: Impact of TRY depreciation on DFDS finance items
Turkey – impact of TRY depreciation on DFDS finance items • Finance items impacted by ‘one-off’ currency TRY/DKK loss on debtors 1.45 1.40 • Mediterranean’s prices are set in EUR to 1.35 protect revenue development 1.30 • Invoicing in TRY implies, however, currency risk 1.25 in 60 day payment period
Slide 31: Turkish trade historically resilient in face of TRY depreciation
Turkish trade historically resilient in face of TRY depreciation Turkey trading, indexed import/export ro-ro volumes, and exchange rate TRY/EUR 6.00 300 Crisis 4 Depreciation sparked by conflict with USA 5.17 5.00 240 250 Crisis 2 Crisis 1 Global financial crisis Banking led crisis EUR/TRY depreciat
Slide 32: Import ro-ro volumes exceed export volumes
Import ro-ro volumes exceed export volumes EUR:TL vs. Export-Import Volume Specific to Ro-Ro 6,000,000 6.00 5.17 5,000,000 5.00 4.12 4,000,000 4.00 3.34 3,000,000 3.02 3.00 2.91 2.53 2.33 2.31 2.16 2,000,000 1.99 2.00 1.90 1.77 1.80 1.78 1.69 1.67 1.43 1.10 1,000,000 1.00 0.58 0 0.00 2000 2001 2002
Slide 33: Impact of TRY depreciation on trading
Turkey – impact of TRY depreciation on trading • Export volumes increased 17% Jan-May 2018 while import volumes were up 3% Turkey-Europe cargo split 0% 5% 10% 15% 20% 25% 30% 35% • Currency depreciation is impacting import Parts volumes – once TRY is stabilised imports are expected to resume but lik
Slide 34: Key Focus Areas 2018
KEY FOCUS AREAS 2018 . 34
Slide 35: Key growth and efficiency events shaping 2018 & beyond
Key growth and efficiency events shaping 2018 & beyond Growth from • Special Cargo: operator of flatbed trailers in Europe, acquisitions consolidated 3 January 2018 • U.N. Ro-Ro: freight ferry routes connecting Europe and Turkey, completed 7 June 2018 • Integration expected to be completed in 2018 •
Slide 36: as AER ae ‘ ae
as AER ae ‘ ae
Slide 37: Appendices
APPENDICES . 36 37
Slide 38: North Sea
North Sea • Only freight ferry routes (ro-ro) • High share of industrial customers Sweden-UK/Continent • Forwarders main customer group UK-Continent North Sea Invested DKK m Revenue EBIT capital ROIC, % Q2 LTM 2018 3,776 683 4,046 16.4 Q2 LTM 2017 3,546 576 4,222 13.4 Lane metres, '000 ∆ vs LY Pax,
Slide 39: Baltic Sea
Baltic Sea • Freight ferry (ro-ro) and combined freight and passenger ferry routes (ro-pax) • Forwarders main freight customer group • Russia to a large degree ‘closed for business’ by sanctions Baltic Sea Invested DKK m Revenue EBIT capital ROIC, % Q2 LTM 2018 1,478 376 1,195 31.4 Q2 LTM 2017 1,432
Slide 40: Channel
Channel • Combined freight and passenger ferry routes (ro-pax) • Forwarders main freight customer group • Seasonal passenger market, Q3 high season Channel Invested DKK m Revenue EBIT capital ROIC, % Q2 LTM 2018 2,755 382 1,930 19.7 2017* 2,683 353 1,956 18.0 Lane metres, '000 ∆ vs LY Pax, '000 ∆ vs
Slide 41: Mediterranean
Mediterranean Mediterranean Invested • Freight ferry routes connecting Europe and DKK m Revenue EBIT capital ROIC, % Q2 LTM 2018 251 34 1,539 2.2 Turkey (UNRR acquired 7 June 2018) 2017* 103 9 99 9.3 • Turkish forwarders and hauliers main Lane metres, '000 ∆ vs LY Pax, '000 ∆ vs LY customer group Q2
Slide 42: Passenger
Passenger • Cruise ferry routes, overnight crossings • Seasonal passenger market, Q3 high season • Increasing share of overseas passengers • Also carries freight Passenger Invested DKK m Revenue EBIT capital ROIC, % Q2 LTM 2018 1,707 132 638 20.2 Q2 LTM 2017 1,694 246 610 39.5 Lane metres, '000 ∆ vs
Slide 43: Key northern European ferry companies
KEY NORTHERN EUROPEAN FERRY COMPANIES • Logistics office/warehouse ― Container/sideport route 42 43
Slide 44: It's all about the route
IT’S ALL ABOUT THE ROUTE . 43 44
Slide 45: Ferry route capacity dynamics
FERRY ROUTE CAPACITY DYNAMICS - stepwise addition of ferries on a route leverages capacity significantly Minimum required No. of ships Capacity impact Route no. of ships for on route today of entry* entry Dover-Calais 8 3 38% Gothenburg-Immingham 3 2 67% Fredericia- Copenhagen- 1 1 100% Klaipeda ddd
Slide 46: Freight ferry capacity (ro-ro) – total down, large ships growing
Freight ferry capacity (ro-ro) – total down, large ships growing Global freight ferry (ro-ro) capacity per ship size, lane • Freight ferry (ro-ro) capacity expected to LM '000 metres decrease 2% in 2017 driven by smaller 1,000 CAGR: -2.4% ships 800 600 2501-4000+ • CAGR of -2.4% in global LM capacit
Slide 47: Ferry capacity (ro-pax) – stable, large ships growing
Ferry capacity (ro-pax) – stable, large ships growing Global ro-pax capacity per ship size, lane metres • Ferry (ro-pax) capacity expected to LM '000 remain flat in 2017 as increase in 600 CAGR: -0.2% capacity of large ships is balanced by 500 CAGR: +4.6% decrease for smaller ships 400 2501-4000+ 30
Slide 48: Orders for own routes set to maintain stable ferry market
Orders for own routes set to maintain stable ferry market • Trend towards larger ships set to Shipping Division: Fleet overview 2016 continue as ferry operators order ships Average age of for own route networks Ro-pax Passenger Ownership owned Total ships Ro-ro ships ships ships share, % ships, yrs
Slide 49: Logistics Division: Growing share of contract logistics
Logistics Division: Growing share of contract logistics Activity Nordic Continent UK & Ireland Door-door full & part • Scandinavia- • Continent- • Northern Ireland-UK loads (trailers, UK/Baltics/Continent Scandinavia/ • Ireland/UK-Spain containers & rail) UK/Ireland • UK domestic Contract logistics
Slide 50: Logistics Division is a key customer of the route network
Logistics Division is a key customer of the route network • Top 3 customer NORDIC of Shipping Division UK & IRELAND • 8% of total shipping volumes • 10-20% volume target on individual Logistics routes CONTINENT Division Invested DKK m Revenue EBIT capital ROIC, % Nordic Q2 LTM 2018 1,984 87 362 23.8
Slide 51: How We Run DFDS
HOW WE RUN DFDS . 50 51
Slide 52: 3 key strategic demands and supporting initiatives
3 key strategic demands and supporting initiatives 1. Top line focus 2. Increase 3. Acquisitions efficiency and and investments reduce cost base for future growth Continuous improvement projects M&A IT systems development Fleet strategy Digital DFDS WAY 2.0 52
Slide 53: Continuous improvement projects to increase efficiency
Continuous improvement projects to increase efficiency • Pricing & yield: improve revenue growth through enhanced capacity utilisation on both freight and passenger routes • Starlight: improve on board experience and performance of the two cruise ferry routes • Carpe Momentum: completion of project
Slide 54: 3 key strategic demands
3 key strategic demands 3. Acquisitions 1. Top line focus 2. Increase and investments efficiency and for future reduce cost base growth Continuous improvement projects M&A IT systems development Fleet strategy Digital DFDS WAY 2.0 54
Slide 55: Our digital vision
Our digital vision A best-in-industry digital customer experience generating tangible business benefits for customers and DFDS Support businesses to gain deep insights into customers’ needs to catalyse business change for sustained relevance 55
Slide 56: Digital capabilities, new business models & technologies
Digital capabilities, new business models & technologies • New digital and IT operating model launched in 2017 • Time-to-market and scalability being improved through architectural changes • Unified digital customer experience platform to launch in Q2 2018 • User-experience, innovation and smart dat
Slide 57: Creating value from operational and strategic synergies
Creating value from operational and strategic synergies • Focus on both transformational and Revenue bolt-on acquisitions 2017, Routes Regions Major activity DKK bn Across Northern Europe, Mediterranean DFDS 14 27 9 (incl. sideport/container) • Ferry routes: Stena Line 10 23 6 Across Northern Europe
Slide 58: How We Perform
HOW WE PERFORM . 57 58
Slide 59: ROIC Drive – activity by activity performance benchmark
ROIC Drive – activity by activity performance benchmark • Around 90 profit-generating activities covered by programme • Simple ROIC scorecard makes programme accessible for activity Activities performing managers above 10% • 3-year high-level rolling business plans, review meetings with top manageme
Slide 60: Steady ROIC improvement
Steady ROIC improvement DFDS Group: Return on invested capital (LTM) % • Major challenges resolved: 20 19.0 • Gothenburg-Immingham 18.1 19.3 17.8 18 • Russian market sanctions 18.1 17.4 17.6 16.9 • Channel turnaround 16 16.4 15.3 • Closure of 3 routes end 2014 14 13.7 • Successful transition to new
Slide 61: Capital distribution
Capital distribution Capital distribution overview • Total distribution to shareholders was DKK m 2015 2016 2017 DKK 1.7bn in 2017 equal to 9.2% yield on Actual Actual Actual equity market value Dividend per share, DKK 5.40 6.00 10.00 • The NIBD/EBITDA multiple was 0.9 at the end Dividend, Mar 218 1
Slide 62: Cash generation and CAPEX
Cash generation and CAPEX • Cash conversion of 99% in 2017 Cash flow and investments DKK bn • Cash flow boosted by Light Capital project started in 2013 to reduce working capital 3.0 • Limited tax payments due to European 2.5 tonnage tax regime 2.0 • Investments expected to stay below operating cash
Slide 63: Acquisitions Fuel Growth: DFDS Group Q2 2018
ACQUISITIONS FUEL GROWTH DFDS GROUP Q2 2018 16 August 2018
Slide 64: Acquisitions fuel growth and earnings in Q2
Acquistions fuel growth and earnings in Q2 • UNRR consolidated from 7 June Q2 EBITDA before special items with revenue of DKK 141m and DKK m EBITDA of DKK 50m 2018 802 • DFDS Group revenue up 6% and EBITDA up 9% to DKK 802m 2017 739 • EBITDA outlook for full-year 2018 2016 699 unchanged at DKK 3.0-3
Slide 65: A bit more headwind than tailwind in Q2
A bit more headwind than tailwind in Q2 • Bunker price up 47% in Q2 mitigated Oil price development, 2017-18 by 8% lower USD 700 650 • Lag of 1-2 months in recovery of 600 bunker price increase impacted Q2 negatively, also in Logistics 550 500 • Total EBITDA impact of DKK -40m USD 450 • SEK down 6%
Slide 66: Q2 2018 numbers: Impact from UNRR acquisition
Q2 2018 numbers: Impact from UNRR acquisition Change Change • 6% revenue growth driven by UNRR and DKK m Q2 18 Q2 17 vs LY % continued growth in freight volumes. Revenue REVENUE 3,894 3,688 206 6% up 4% on a like-for-like basis EBITDA BEFORE SI 802 739 63 9% margin, % 20.6 20.0 0.6 n.a. • EBITDA up
Slide 67: Mediterranean and Passenger key Q2 EBIT drivers
Mediterranean and Passenger key Q2 EBIT drivers • North Sea +8m: Continued volume growth, offset from lag in bunker cost recovery Q2 2018 DFDS Group EBIT development vs LY DKK m 540 • Channel +1m: Positive route contribution offset by extra ferry maintenance costs and lag in bunker cost recovery 530
Slide 68: Channel sailings reduced in Q2, DFDS level with 2017
Channel sailings reduced in Q2, DFDS level with 2017 Channel sailings 2017-2018 • In Q2 2018, the total number 1,800 3,500 of sailings was 1.7% below 2017 1,600 3,000 1,400 • P&O had 3.7% fewer sailings due to a laid-up ferry that 2,500 1,200 was grounded in Dec 2017 and subsequent dockings of 1,000
Slide 69: Channel volumes: Freight down, pax up
Channel volumes: Freight down, pax up Channel freight volume growth YOY, 2017-2018 • Freight market volumes were down 1.2% 10% 8% in Q2 2018 and down 1.6% for H1 6% 4% • The YOY growth per rolling full-year was 2% -1.0% after June 0% -2% • Negative impact from lower ferry capacity -4% -6% -8% • DFDS
Slide 70: DFDS further increased market share in Q2
DFDS further increased market share in Q2 Channel freight market shares, 2017-2018 • DFDS’ freight market share was 29.4% in 43% Q2 2018 up from 28.1 in 2017 41% 39% • P&O’s freight market share was 30.4% in Q2 37% 2018 down from 33.0% in 2017. Decrease 35% equals a 9% volume reduction 33% 31% 29% 2
Slide 71: Capital structure in line with target leverage
Capital structure in line with target leverage • NIBD/EBITDA at 2.9 end of Q2 and 2.4 on pro NIBD/EBITDA forma basis 3.5 • Share issue with proceeds of DKK 1.0bn 3.0 completed in June 2018 2.9 2.5 • Interest-bearing debt increased to DKK 9.5bn 2.4 Times 2.0 • Board will in February 2019 review capit
Slide 72: EBITDA outlook 2018 unchanged at DKK 3.0-3.2bn
EBITDA outlook 2018 unchanged at DKK 3.0-3.2bn • European real GDP growth above 2% expected in 2018 OUTLOOK 2018 • Some slowdown in UK market but • Revenue growth of around 10% demand for ferry and logistics services is robust • EBITDA range of DKK 3,000-3,200m • Development of digital and IT • Ship
Slide 73: Priorities 2018
Priorities 2018 • Integration of U.N. Ro-Ro • Realise our next steps in digital strategy • Customer satisfaction – grow the topline • Continue push for efficiency improvements • Improve performance of Passenger business unit • Preparing for deployment beginning 2019 of two freight new buildings (ro-
Slide 74: Q&A
Q&A . 74
Slide 75: Diverse customer base: forwarders, manufacturers & passengers
Diverse customer base: forwarders, manufacturers & passengers Passengers 21% Forwarders 36% Port terminal customers 3% PAX SOLUTIONS External charterers 3% Manufacturers (shipping) 5% TRAILER SHIPPING Manufacturers (transport & logistics) 32% Percent of total revenue per customer segment 75 75
Slide 76: DFDS' freight business model integrates routes and logistics
DFDS’ freight business model integrates routes and logistics • DFDS’ logistics activities Manufacturers have a narrow scope of full/part load solutions Heavy Other Consumer industrial goods industrial goods goods • Own logistics provides access to market intelligence and ability to DFDS Freight forw
Slide 77: DFDS fleet overview and key figures 2017
DFDS fleet overview and key figures 2017 Average age Passenger Container and Ownership of owned Total ships Ro-ro ships Ro-pax ships ships sideport ships share, % ships, yrs DFDS Group 64 22 18 4 20 - - Shipping Division 40 22 14 4 - - - North Sea 18 18 - - - 72 13 Baltic Sea1 9 2 7 - - 67 16 Channe