Dfds A/s · OMXCOP:DFDS
Dfds A/s — Non-Deal Roadshow (October 2018)
78 slides from Dfds A/s's roadshow presentation, October 2018
Slide 1: Ferry Routes & Logistics: DFDS Group Overview
FERRY ROUTES & LOGISTICS DFDS Group Overview October 2018
Slide 2: What We Do
WHAT WE DO . 2 2
Slide 3: We move freight and passengers on ferry routes in Europe and Turkey
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: It's All About the Route
IT’S ALL ABOUT THE ROUTE . 14 14
Slide 15: 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 16: Structure & Performance
STRUCTURE & PERFORMANCE . 16 16
Slide 17: 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 18: DFDS key figures
DFDS key figures 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 Division DKK bn EBITDA & margin before s
Slide 19: Shipping Division
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% . 19 19
Slide 20: Logistics Division
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% . 20 20
Slide 21: Brexit
BREXIT . 21 21
Slide 22: Slowdown in UK-EU trade growth in 2018
Slowdown in UK-EU trade growth in 2018 • Euro area growth has to EU-UK trade of goods - volume development some extent mitigated 12% uncertainty related to 10% Brexit 8% • Lift in UK export growth to 6% EU post Brexit vote 4% Brexit vote leveling off but still above 2% pre-Brexit level 0% • Volume g
Slide 23: DFDS is planning for two scenarios
DFDS is planning for two scenarios Hard Brexit Transition period Brexit March 29, 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 24: Brexit – challenge and opportunity
Brexit – challenge and opportunity • Key risk is development of UK GDP Possible hard Brexit impacts growth that is driver of trading volumes • Time-consuming customs process • Congestion in ports • UK supply chains closely integrated with • Reduction in trade volumes Continental Europe • Increase in
Slide 25: Mediterranean
MEDITER RANEAN . 25 25
Slide 26: 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 27: U.N. Ro-Ro structure
(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 27 Source: U.N. Ro-Ro
Slide 28: Ownership of two key ports and access to five others
Ownership of two key ports and access to five others Pendik Port (Turkey) Port of Trieste (Italy) West East Istanbul Istanbul Ambarlı Pendik Main industrial zones DFDS port Other ports 60% ownership of Samer Seaports Other ports in route network Ambarlı (Turkey) Toulon (France) Mersin (Turkey) Bari
Slide 29: 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 30: Mediterranean's geographical reach
Mediterranean’s geographical reach Mediterranean’s Target and Secondary Markets Finland Norway Sweden Latvia Denmark Ireland U.K. Germany Poland Netherlands Belgium Luxembourg Czech Republic Slovakia France Austria Switzerland Slovenia Trieste (1) Portugal Toulon Ambarlı Italy Spain Pendik (2) Bari
Slide 31: Why customers choose ferry solution vs road transport
Why customers choose ferry solution vs road transport Ro-Ro Land Key Customer Shifting from Land to Ro-Ro Value Add to Customers Lower Capital Intermodal model reduces investment requirement for trucking Expenses companies (allows for fewer trucks and more trailers in fleet) ✓ ✓ Asset base optimiz
Slide 32: Documented cost advantage of Ro-Ro vs Land
Documented cost advantage of Ro-Ro vs Land Operational Expense Reductions Capital Expenditure Reductions Overview of Cost Dynamics Land • Ro-Ro service is more cost efficient Cost of c. €125K for 1 truck • Increasing use of semi-trailers has made Ro-Ro even more cost x and 1 trailer set; €375K for c
Slide 33: 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 34: DFDS compares favorably to competitors
DFDS compares favorably to competitors ✓ Number of Vessels 12 6(1) 4 Average Age of Fleet ✓ 10.8 N/A(1) 17.3 Weekly Sailings ✓ 29(2) 13 6 Total LM Capacity ✓ 45,356 / 47,096(3) 21,772 13,708 Average LM ✓ 3,780 / 3,925(3) 3,629 3,427 Competition with Own ✓ Fully insourced, therefore viewed Fully neut
Slide 35: 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 China France UAE Russia Iran Iraq US UK India Poland Spain Japan Germany Italy Belgium Israel South Korea Switzerland Netherlands Source:
Slide 36: Turkey - inflation and exchange rate development of TRY
Turkey - inflation and exchange rate development of TRY • TRY-depreciation is linked to high inflation rates in Turkey: TRY/DKK • 2016: 8% 2.55 • 2017: 11% 2016 2017 2018 • 2018 ytd: >20% 2.35 2.15 • Turkey’s real GDP was up 7% in Q1 1.95 • OECD: real GDP growth forecast of 1.75 0.5% for 2019 1.55 -
Slide 37: Turkey – impact of TRY depreciation on finance items
Turkey – impact of TRY depreciation on finance items • Financial performance impacted by ‘one- TRY/DKK off’ currency loss on debtors recorded in 1.45 Finance items 1.40 1.35 • Mediterranean’s prices are set in EUR to protect revenue development 1.30 1.25 • Invoicing in TRY implies, however, 1.20 Jul
Slide 38: 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 39: 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 40: Turkey – 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 41: TRY depreciation decreases imports & boosts export volumes
TRY depreciation decreases imports & boosts export volumes Growth in truck market (target market countries), same period last year* Growth in DFDS Mediterranean* imports and exports, same period last year 11% 20% 12% 9% 15.4% 10% 15% 1H18 7% 8% 1H18 10% +4,0% 5% 5% 7% 8% 7% +4.6% 4% 3% 6% 5% 3% 3% 3
Slide 42: Investments planned to drive Mediterranean's growth
Investments planned to drive Mediterranean’s growth 2 vessel lengthenings in 2018 to increase capacity Scrubber investments to comply with 2020 IMO legislation Expansion of current terminals to accommodate growing volumes Fleet renewal to increase efficiency and capacity 42
Slide 43: Integration organised in workstreams
Integration organised in 18 workstreams SteerCo Integration officers (overall responsible for the integration) Integration Management Office ++ Communication (IMO) Commercial workstreams Platform workstreams Support workstreams 0 Confidential 5 11 Organizational Setup IT Strategy Finance & Tax 1 6 1
Slide 44: Key Focus Areas 2018
KEY FOCUS AREAS 2018 . 44
Slide 45: 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 46: Appendices
APPENDICES . 45 46
Slide 47: 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 48: 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 49: 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 50: 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 51: 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 52: Key northern European ferry companies
KEY NORTHERN EUROPEAN FERRY COMPANIES • Logistics office/warehouse ― Container/sideport route 51 52
Slide 53: 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 54: 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 55: 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 56: 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 57: Key logistics sectors for DFDS
Key logistics sectors for DFDS Forestry & metals Cold chain Automotive (also Turkey) High-value 57
Slide 58: 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 59: How We Run DFDS
HOW WE RUN DFDS . 58 59
Slide 60: 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 60
Slide 61: 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 62: 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 62
Slide 63: 5 tech trends most relevant for DFDS
5 tech trends most relevant for DFDS Key tech focus areas Connect through information… (ranked by urgency) DFDS Customers Real time IoT tracking at every step of the Fully connected supply chain network with real logistics chain time coordination by all parties 1 IoT DFDS … for continuous learning a
Slide 64: Further investment in 3 key digital areas
Further investment in 3 key digital areas Key observations… Business critical 1. Digital go-to-market: Some customers are served through a manual and analogue process with several pain points Create flawless and efficient digital offering 2. Digitize the core: Many internal processes are manual with
Slide 65: Digital go-to-market: 80% of business from 400 customers
Digital go-to-market: 80% of business comes from 400 customers and 60% of small customers treated manually DFDS Shipping and Logistics customer statistics, 2017 Description Revenue split Analogue EDI Digital 216 3rd Party Logistics Freight Forwarders 27% 42% 31% provider and hauliers 4,354 187 Large
Slide 66: Digitizing the core: Software, Hardware & networks and Analytics
Digitizing the core consists of three overall elements: Software, Hardware & networks and Analytics Focus next Hardware & Software Analytics networks • Composable architecture • Sensors/IoT on physical • Capturing data in large • Cloud assets (e.g., vessels, volumes • Datacenters terminals, port equ
Slide 67: Ambition to create a DFDS solution improving customer experience
Ambition to create a DFDS solution improving customer experience drives 5 significant value levers Instant Instant Online Online Self- Online Proactive Exceptions Quoting Onboarding sales service payment handling & new solutions proposals Requires fully automated Requires proper payment platform use
Slide 68: Example, autonomous trucks
Example, autonomous trucks: Research indicates 10-30% of all trucks will be autonomous by 2030 Adoption rate % 100 80-100% Trucks sold 80 Trucks on the road 60 40-60% 50-80% 40 20-40% 30-50% 20 10-30% 0% 0 2020 2030 2040 2050 Time 68 Note: trucks after 2030 matched with car adoption rate Source: Vic
Slide 69: Example, autonomous ships
Example, autonomous ships: Commercialization ongoing – however material impact not expected until after 2030 2020 2025 2030 2035 Remotely operated Remotely controlled Remotely controlled Autonomous local vessels ships commercialized unmanned ocean- unmanned (Costal / short-sea) going ships ocean-goi
Slide 70: Leverage route network & logistics through M&A
Leverage route network & logistics through M&A Acquisition type Description Examples Expand core route Expand ferry network in existing markets and and logistics expand to new European markets network Acquire forwarders synergetic with shipping Core in Europe (e.g. to secure cargo control for routes
Slide 71: 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 72: How We Perform
HOW WE PERFORM . 72 72
Slide 73: 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 74: 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 75: 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 76: 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 77: 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 78: 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