Dfds A/s · OMXCOP:DFDS
Dfds A/s — Goldman Sachs European Industrials Conference, London, 27 November 2018
80 slides from Dfds A/s's conference presentation, November 2018
Slide 1: Ferry Routes & Logistics: DFDS Group Overview
FERRY ROUTES & LOGISTICS DFDS Group Overview November 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 Serving industrial clusters Combined trade and travel 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 Q3 LTM per division People & Ships Finance 18 16 14 Shipping Division Logistics Division 12 10.7 Shipping Division 10 8 Logistics Division • 23 ferry routes - freight • Door-door transport 6 Eliminations and other and pas
Slide 18: DFDS key figures
DFDS key figures DKK bn Revenue DKK bn EBITDA & margin before special items Margin, % 16 3.0 20 14 18 2.5 12 16 2.0 10 14 8 1.5 12 6 1.0 10 4 0.5 8 2 0 0.0 6 2014 2015 2016 2017 2018 Q3 LTM 2014 2015 2016 2017 2018 Q3 LTM Shipping Division Logistics Division Invested capital & ROIC before special it
Slide 19: Shipping
SHIPPING Q3 LTM 2018: Shipping Division Business units & ROIC, Q3 LTM 2018 Revenue North Sea Baltic Sea Channel North Sea Baltic Channel Mediterranean Passenger Mediterranean Sea EBIT Passenger 16% 31% 20% 3% 18% 0% 20% 40% 60% 80% 100% . 19 19
Slide 20: Logistics
LOGISTICS Q3 LTM 2018 Logistics Division Business units & ROIC, Q3 LTM 2018 Revenue Nordic Continent Nordic Continent UK & Ireland UK & Ireland EBIT 23% 13% 8% 0% 50% 100% . 20 20
Slide 21: Brexit
BREXIT . 21 21
Slide 22: Slowdown in UK-EU trade in Q3 2018
Slowdown in UK-EU trade in Q3 2018 • Political volatility and EU-UK trade of goods – volume growth y/y hard Brexit scenario focus 12% over the summer has 10% increased uncertainty… 8% • …and put activity in 6% general on hold as well as 4% Brexit vote reduced trading 2% • Businesses are waiting for
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: Preparations focus on assets, processes and expertise
Preparations focus on: assets, processes and expertise Assets Processes Expertise New assets to enable New processes to Building expertise to new services and grow business and address customs mitigate congestion ensure efficient challenges and volume loss operations 25
Slide 26: New assets for new services, mitigate congestion/volume loss
New assets for new services, mitigate congestion/volume loss Objective Asset-related activity Activity description Additional facilities to hold additional stock pre and Enable new services Warehousing facilities post clearance and mitigate congestion Warehousing facilities to allow cargo to be held
Slide 27: New processes to grow business and efficient operations
New processes to grow business and efficient operations Objective Process-related activity Activity description Customs clearance Offer customs documentation services to customers Grow business Duty free on PAX and RO-PAX routes to increase on- Duty free board sales Test assumed IT processes to asse
Slide 28: Building expertise to address customs challenges
Building expertise to address customs challenges Objective Expertise-related Activity description activity Customs clearance teams being set up, trained and Customs team upsized across the divisions Build internal Dedicated groups of local BUs formed to solved Working groups customs expertise common
Slide 29: Contingency plan triggered if hard Brexit confirmed
Contingency plan triggered if hard Brexit confirmed • Create short-term capacity in terminals to reduce traffic e.g. by renting extra space • Postpone docking of vessels from Q1 to Q2 to cater for pre-Brexit trade spike (already decided) Assets • Focus on sales by supporting customers in navigating
Slide 30: Mediterranean
MEDITER RANEAN . 25 30
Slide 31: 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 32: U.N. Ro-Ro port ownership
(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 32 Source: U.N. Ro-Ro
Slide 33: 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 34: 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 35: 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 36: 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 37: 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 38: 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 39: 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 40: 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 41: Mediterranean – impact of TRY depreciation on finance items
Mediterranean – impact of TRY depreciation on finance items • TRY-depreciation is linked to high TRY/DKK inflation rates in Turkey: 1.45 • 2016: 8% • 2017: 11% 1.40 • 2018: Oct ~ 25% 1.35 1.30 • Turkey’s real GDP growth estimated to Q3: -24% Oct: +13% become negative in H2 after growth of 1.25 7% an
Slide 42: 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 43: 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 44: 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 45: Robust Mediterranean volume development
Robust Mediterranean volume development Mediterranean (ex. Marseille-Tunis) • YTD* volumes: LM '000 +3.0% 340 • Q3 volumes: -0.8% 320 • Volumes consistently 300 above 2017 until July 280 • TRY depreciation and extended holiday 260 lowered volumes in August 240 220 • Rebound to above 2017 in Septembe
Slide 46: Export growth above import growth set to continue
Export growth above import growth set to continue • YTD exports: +5.9% Total routes, YTD LM '000 170 • YTD imports: +0.1% 160 • Q3 exports: +2.4% 150 • Q3 imports: -4.0% • Strong rebound in 140 exports in September 130 • Imports expected to show resilience driven 120 by high share of semi- manufactu
Slide 47: 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 47
Slide 48: 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 49: Key Focus Areas 2018
KEY FOCUS AREAS 2018 . 49
Slide 50: 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 51: Appendices
APPENDICES . 45 51
Slide 52: 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, % Q3 LTM 2018 3,776 654 3,969 15.9 2017 3,699 670 4,164 15.8 Lane metres, '000 ∆ vs LY Pax, '000 ∆
Slide 53: 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, % Q3 LTM 2018 1,500 372 1,179 31.5 2017 1,465 379 1,
Slide 54: 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, % Q3 LTM 2018 2,776 378 1,892 20.0 2017 2,683 353 1,956 18.0 Lane metres, '000 ∆ vs LY Pax, '000 ∆ vs
Slide 55: Mediterranean
Mediterranean • Freight ferry routes connecting Europe and Mediterranean DKK m Revenue EBIT Invested capital ROIC, % Turkey (UNRR acquired 7 June 2018) Q3 LTM 2018 672 101 2,961 3.4 • Turkish forwarders and hauliers main 2017 103 9 99 9.3 customer group Lane metres, '000 ∆ vs LY Pax, '000 ∆ vs LY •
Slide 56: 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, % Q3 LTM 2018 1,725 112 626 17.5 2017 1,674 183 678 26.6 Lane metres, '000 ∆ vs LY Pax
Slide 57: Key Northern European ferry companies
KEY NORTHERN EUROPEAN FERRY COMPANIES • Logistics office/warehouse ― Container/sideport route 51 57
Slide 58: 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 59: 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 60: 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 61: 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 62: 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% Logistics Division Invested volume target DKK m Revenue EBIT capital ROIC, % on individual Nordic Q3 LTM 2018 1,937 89 350 23.2 routes CONTINENT
Slide 63: 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 64: Guidance above DKK 3bn reaffirmed
GUIDANCE ABOVE DKK 3BN REAFFIRMED DFDS GROUP Q3 2018 13 November 2018
Slide 65: Acquisitions drive Q3 improvement as Brexit slows growth
Acquistions drive Q3 improvement as Brexit slows growth • DFDS Group revenue up 12% and EBITDA Q3 EBITDA before special items up 7% to DKK 1,045m in Q3 DKK m • EU-Turkey market stabilised, except 2018 1,045 Mersin region 2017 976 • Slowdown in UK trading in Q3. Uncertainty linked to Brexit outcome i
Slide 66: Currently some headwind but sound platform
Currently some headwind but sound platform • Brexit concerns slowed market growth in northern Europe in Q3 • As a result, freight volumes on DFDS routes to and from UK were lowered • Businesses and consumers require clarity on Brexit for growth to continue • New Mediterranean route network linking E
Slide 67: Q3 2018 EBIT flat as depreciations increase
Q3 2018 EBIT flat as depreciations increase Change Change • 12% revenue growth driven mainly by DKK m Q3 18 Q3 17 vs LY % UNRR REVENUE 4,383 3,922 461 12% EBITDA BEFORE SI 1,045 976 69 7% • EBITDA up 7% to DKK 1,045m driven by margin, % 23.8 24.9 -1.0 n.a. UNRR as Northern European freight P/L assoc
Slide 68: UK-linked business units impacted by Brexit concerns
UK-linked business units impacted by Brexit concerns • North Sea -28m: 1.9% lower volumes driven by Brexit slowdown and dip in automotive Q3 2018 DFDS Group EBIT development vs LY volumes. Negative SEK impact DKK m • Baltic Sea -4m: Higher pax contribution 770 partly offset lower freight earnings -1
Slide 69: Increased cash flow drives deleveraging
Increased cash flow drives deleveraging DKK m Q3 2017 Q3 2018 ∆ ∆% • Operating cash flow increased 9% EBITDA 976 1,045 69 7% Working capital & adjustments -112 -85 26 -24% • Free cash flow increased 10%, Taxes -3 -18 -14 n.a. including investments of DKK 234m Operating cash flow 861 942 81 9% mainly
Slide 70: Channel volumes: Freight down, pax up
Channel volumes: Freight down, pax up Channel freight volume growth YOY, 2017-2018 • Freight market volumes were down 1.1% 10% in Q3 2018 and YTD down 1.5% 8% 6% • The YOY growth per rolling full-year was 4% 2% -1.3% after September 0% -2% • DFDS’ volumes were down 1.9% in Q3 and -4% -6% YTD up 1.4%
Slide 71: DFDS freight and car market share on level with 2017
DFDS freight and car market share on level with 2017 Channel freight market shares, 2017-2018 45% • DFDS’ freight market share was 43% 29.4% in Q3 2018 slightly down from 41% 29.7 in 2017 39% 37% • P&O’s freight market share was 30.6% 35% in Q3 2018 down from 31.9% in 2017. 33% 31% Decrease equals a
Slide 72: EBITDA outlook 2018 narrowed to DKK 3.0-3.1bn
EBITDA outlook 2018 narrowed to DKK 3.0-3.1bn • European real GDP growth slowed in Q3, now expected just below 2% OUTLOOK 2018 in 2018 • Revenue growth of around 10% • Slowdown in UK market lowered • EBITDA range of DKK 3,000-3,100m freight demand in Q3 (2017: DKK 2,702m) • Shipping Division: DKK 2,
Slide 73: Current priorities
Current priorities • Preparing for Brexit transition • Customer satisfaction – grow the topline • Continue push for efficiency improvements • Improve performance of Passenger business unit • Integration of U.N. Ro-Ro • Realise our next steps in digital strategy • Deployment of two freight new buildi
Slide 74: How We Perform
HOW WE PERFORM . 72 74
Slide 75: 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 76: Significant ROIC improvement
Significant ROIC improvement • Major challenges resolved: DFDS Group: Return on invested capital (LTM) % • Gothenburg-Immingham 20 19.0 19.3 • Russian market sanctions 18.1 17.8 18 • Channel turnaround 17.6 18.1 17.4 16.9 • Closure of 3 routes end 2014 16 16.4 • Successful transition to new 15.3 Acq
Slide 77: Capital distribution
Capital distribution • Total distribution to shareholders was Capital distribution overview DKK 1.7bn in 2017 equal to 9.2% yield on DKK m 2015 2016 2017 equity market value Actual Actual Actual • The NIBD/EBITDA multiple was 0.9 at the end Dividend per share, DKK 5.40 6.00 10.00 of 2017, on level w
Slide 78: Increased cash flow drives deleveraging
Increased cash flow drives deleveraging DKK m Q3 2017 Q3 2018 ∆ ∆% • Operating cash flow increased 9% EBITDA 976 1,045 69 7% Working capital & adjustments -112 -85 26 -24% • Free cash flow increased 10%, including Taxes -3 -18 -14 n.a. investments of DKK 234m mainly Operating cash flow 861 942 81 9%
Slide 79: Cash generation and CAPEX
Cash generation and CAPEX • Cash conversion of 101% for LTM Q3 2018 Cash flow and investments • Cash flow boosted by Light Capital project DKK bn 5.0 started in 2013 to reduce working capital 4.5 In 2018, DKK 3.6bn of total investments of • Limited tax payments due to European 4.0 DKK 4.6bn are acqu
Slide 80: 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
DFDS — Goldman Sachs European Industrials Conference, London, 27 November 2018 on 6ix