DFDS Group

Thank you very much and welcome to this call. I am joined by our new CFO, Karen Bosen, and Søren Bornholt, head of our IR. Q2 turned out to be a more challenging quarter than expected. And as you know, we consequently revised the earnings outlook for 2024 I'm pleased to report that we still expect to deliver an adjusted free cash flow in 2024 of 1.5 billion Danish kroner. We're dealing with two sets of challenges. One is market headwinds linked to the overall European macro picture and transport market dynamics. The second challenge is our own performance. For some of our activities, performance is also impacted by market dynamics but we have underperformed in certain areas, particularly our Nordic coal chain unit. If I look beyond Q2, DFDS's strategic positioning is strong. We are positioned to tap into growth from nearshoring. Our ability to engage with large transport and logistics buyers is stronger than ever before. We see a UK where the leadership wants to improve trade relations with the EU. We see a Turkey well on its way to reduce inflation with a good potential for the economy to bounce back in 2025. But let's dive into Q2 and talk more about our performance and the challenges. If we move to page three, a recap of our moving together towards 2030 strategy. It's unlock network value, it's the green transition, and it's our financial ambitions. And just reminding you of our financial ambitions, it's an annual adjusted free cash flow of 1.5 billion. It's a ROIC in 2027 of around 10%, and it's a leverage reducing to 2.5 times by 2026. Moving to page four to then see where we are in relation to those ambitions. First, ROIC Q2 last 12 months, we are at 6%, quite a distance away from our ambition. Ferry is at 8%. We're not delivering above the ambition, but the Baltics and Channel are currently impacted by overcapacity. Logistics at 4%. We'll come back to this, but our second half year focuses on earnings turnaround. Not much to say about CapEx. We have reduced the outlook to 150 million due to timing and other decisions. The adjusted free cash flow of Q2 was 0.7 billion, and we do still expect to deliver the 1.5 billion for the year. In terms of leverage, leverage reduced 0.1 compared to Q1, but with the ECOL acquisitions, we'll see a slight increase, expectedly, Q3 or Q4. Moving to page five and the headline of our report, Navigating Challenging Markets. We delivered organic growth of 3% despite these challenging markets. Our financial performance, though, was below expectations. And ferry was impacted by volume and rate pressure in addition to adverse cost dynamics. Logistics was impacted by margin pressure, shift in customer flows, and one underperforming business unit looking to second half of the year the european growth rebound expectations have have softened our focus is on continued protection of ferry market positions as as various expected to face continued market headwinds for logistics Key second half priorities are price, warehouse volumes, and turnaround of Nordic cold chain. Our cash flow outlook is maintained, as mentioned, and the top priority remains to deliver on financial ambition of one and a half billion of annual adjusted free cash flow. strong Q2 cash flow was delivered and with reduced CapEx in the second half of the year, our cash flow outlook is on track. In the strategic perspective of this unlocked value of expanded network, Our organic growth ambition continues to be supported by strong customer pipelines. The acquisition of eco-logistics network, the expected end of Q3, will strengthen our Mediterranean business setup. And the sale of our Oslo route was driven by our transport network focus, where we believed better owners could bring the Oslo route forward. Moving to page six, I will hand over to Karen for some words on our reduced EBIT.

Thank you Torben and good morning everyone. So zooming in on our EBIT, first and foremost, as mentioned by Torben, we do have a healthy revenue growth, 9% overall, and adjusted for acquisitions and the ETS, which is also a new element in our revenue this year. We see a 3% organic growth, which is still solid for the quarter. However, our EBIT is reduced 28% due to various factors that we will come back to later in the presentation, but overall, You see a reduction compared to the same quarter last year in ferry of $133 million and $60 million in logistics, which then takes us to the EBIT of $519 for the quarter. If we move on to income statement, which is the next slide, I will quickly go through the numbers, but not in too much detail, as we will come back to them, and you can obviously read for yourself. Overall, our revenue growth, as mentioned, is 9%, In summary, and in line with what we gave of guidance updated on 22nd of July, we do see still a revenue growth in line with our guidance and expectations for the year as well. However, our EBITDA this quarter decreased 10% compared to same quarter last year. And then when you at the same time have an increase in depreciation of 11 million, an increase of 11% and an increase in our amortization as well, then obviously you end with a significantly lower EBIT of the 28% negative. In addition to that and below the EBIT, we also have increased finance costs driven by higher interest rates for the unhedged part and slightly higher leasing debt. So a few words more on the revenue, although I have said quite a bit already. mainly driven overall by the acquisitions. A little bit of half of the growth of the 9% is coming from the acquisitions that we made over the past 12 months. And then of the real growth, we see 4% in logistics, which is true organic growth coming from various regions, some up, some down, but a net growth of 4% organically. And then we also see an increase in passengers, mainly driven by our channel routes, The ferry freight growth here you see in revenue is predominantly the ETS that comes in through the top line and then gets passed on to our customers. And with that, I will hand back to Torben.

Thank you. On page nine, our freight ferry EBTA is down 8%, as mentioned, or $60 million. excluding 54 million decrease in oil spread hedging income compared to last year. The organic decrease is driven by rate pressures and adverse cost development. The passenger EBITDA is up 25 million due to higher volumes in spending in channel, offsetting negative state of Gibraltar contribution due to the seasonality of this new business. Depreciation increase of 49 million which is due to higher cost of stockings, the sale and lease back impact of the three mega ROROs implemented last year and the Strait of Gibraltar acquisition. More details on logistics on page 10 with an organic EBITDA decrease of 56 million driven by 20% of the revenue with margin pressure, shift in trade flows, and Nordic cold chain underperformance. For the remaining part of our business, the 80%, we saw a flat development with general margin pressure, but offset by improved performance in mainly Sweden, contract logistics, our special cargo unit, and our UK cold chain. We gained EBITDA from acquisitions of 9 million, And depreciation increased by 21, of which 8 came from acquisitions. Moving to page 11, cash flows and capital. Our operating cash flow is up 32% to $1.3 billion, driven by a strong working capital performance. Operating capex is, as expected, $300 million. and an adjusted free cash flow for the quarter of 0.7 billion. Last 12 months, we had 2.3. However, this is positively impacted by the sale-leaseback of the three freight ferries. Leverage, as mentioned, is lowered to 3.1 times net interest-bearing debt to EBITDA. With that, moving to green on page 13, we see continued progress On both our green and social targets, our ferry emission intensity reduced 3% for our own fleet, 2% across route network when including charter vessels. Our first deployment of battery ferries on the channel still expected by 2029. We are awaiting response from EU funding for ammonia vessels for green corridors. And the rollout of e-trucks continues with now 150 e-trucks in operation, including now also Germany. And we have added and continue to add mega charging facilities, this time in Rotterdam, to service our trucks. In terms of female representation, we increase this three percentage point in management positions still of course far below our targets but they move in the right directions in terms of safety we rolled out a safety program for all our land-based employees and we continue to see positive results from this moving to page 15 Not so much new, but 600 million of capital distribution for the year. Dividend already paid, share buyback of 431, of which 270 million is completed by the end of last week. Page 16, outlook 2024. It's a more challenging year than previously expected. We now see a growth rebound in Q4. We see a continued rate pressure on our freight routes, ferry routes. On the other hand, we probably have seen on the road transport a buttoning out of the the haul is over capacity and therefore we also see an improvement of our margins during the second half. On the passenger side, the markets are all stable, somewhat softer demand in the Baltics, but no real concerns anywhere. On page 17, As mentioned a couple of times, our cash flow outlook is unchanged, although the EBIT range is lowered. We continue to keep the strong top line performance driven by acquisitions, as mentioned by Karen, but also by solid organic growth. The EBIT outlook range is lowered. We did that already mid-July. to now 1.7 to 2.1 billion, whereas before it was 2 to 2.4 billion. CapEx is also reduced, and as mentioned, the adjusted free cash flow continues to remain 1.5 billion. Priorities for second half for DFDS is, of course, to protect and to deliver. continued organic growth focus, continued focus on protecting our key ferry market positions, add enterprise accounts, and fill the warehouses where we have empty space. Logistics turnaround, price focus, cost focus, and a reversal of the fortunes of Nordic cold chain. will continue to deliver on our short- and long-term targets on the green transition. We have a lot of focus on Strait of Gibraltar and the continued success of the integration, and also, of course, the performance, which we can sensibly measure after the high season, so after Q3. Eco-logistics is moving closer in terms of regulatory approval for the acquisition And we are ready to start the integration once the approvals have been received. With that, we turn over for Q&A.