DFDS Group

Thank you and good morning and welcome to DFJS' Q4 and full year 2024 conference call. I'm as usual joined by Karen Boosen, our CFO, and Søren Bonnhold, our Head of Investor Relations. This morning we released our 2024 numbers. As you know, we already released the headline EBIT numbers for 2024 and the 2025 outlook, and they are both unchanged since January. going into 2025 our story is quite simply that our strategy is to unlock value from our network and to do that we have three specific focus areas that we aim to resolve in 2025 in 2024 we succeeded with organic growth and we are getting good customer feedback on the capabilities of our network we have a strong foundation to further unlock value The three areas that we focus on in 2025 are not new. It's the competitive situation for the Mediterranean ferry network, it's the turnaround of the acquired Turkish transport company, and it's the logistics boost projects that we initiated in 2024. I'll talk more about these three areas shortly, but let us first turn to our Q4 and full-year performance If you turn to page 3, there is a quick recap of our strategy launched at the end of 23, moving together towards 2030, with the five pillars for unlocking value, protect and grow, profit, standardize, digitize, moving to green, and be a great place to work. We have clear targets that we need to achieve on the green transition that that we are on track to deliver. And then we have a cash flow focus. We want to leverage long term between two and three. Right now we are of course above that. We are focusing on deleveraging to get into this range. We have communicated that we are looking at non-core assets and we have indeed disposed of the Oslo Copenhagen route in 2024. and we have various working capital initiatives to also maintain the cash flow focus. Turning to page four, the network was expanded in 24 but saw a financial challenging year. If we look at the strength and the expansion, then we achieved the organic growth that we had communicated The acquisition of Strait of Gibraltar delivered the business plan that we based the acquisition on in 2004. With the ECOL acquisition, we have now created a structure that resembles what we have on the North Sea, where we have a very successful door-to-door complementing the ferry routes. We won a 20-year concession agreement agreement with the Jersey Islands and looked very much forward to starting that service the 28th of March. And we completed the sale of the Oslo route, as mentioned. But it was a financially challenging year. Results obviously fell short of expectations. We experienced both macro and market headwinds. And we also had underperforming units in the network. We saw a competitor entry in our Mediterranean market and we acquired a company that we knew required a turnaround and were producing losses from day one. So 2025 will be a transition to recovery to more acceptable earnings levels. We unfortunately have had to say that the leveraged ambitions, the adjusted free cash flow ambitions, ROIC ambitions that we had set up for 26 and 27, we have to not have those at the moment until we see that this transition works out as planned, and then we'll come back and evaluate more long-term goals. We have three specific focus areas that I already mentioned and we'll come back to in more detail in the following pages. But first, if you move to page six, I will hand over to Karen for more details on the numbers.

Thank you Torben and good morning everyone. First a few words on Q4 and then some words on the full year. Overall for Q4, we continue to see the revenue growth that we have seen throughout the year. We see 5% revenue growth in Q4. If we do net of acquisitions, that is still a negative, unfortunately, growth of 2%. But with the equal acquisition and straight or triple tie, if you compare to Q3 last year, we have still a positive growth. We also see growth in our passenger revenue, in particular from the channel. and also some good organic growth within the logistics divisions from the UK. That is all in Q4. However, our EBIT for Q4 is far from reflecting that growth. On the contrary, it's a very, very depressed EBIT we see in Q4, particularly when you compare to the previous years. This is driven very much by our situation in the Mediterranean, by the competitive situation. but also because we had a significant one-off gain in 2023, which relates to the sale and leaseback of three ferries in 2023. The logistic EBIT is significantly depressed in Q4, and without the addition of ECOL, it would not have been as depressed. But Equal contributes with quite a significant amount, which is 62 million, as you can calculate from the numbers on the slides. The rest of logistics, we have a relatively robust business in the UK. But however, our Nordic and continent logistic business continues to be affected by the challenges in automotive, the Brexit phase three, and overall, the very low growth in Europe. So overall, an EBIT of the quarter of $2 million. Turning to page 8, just highlighting a few things. Obviously, we've already taken the bridge to the $2 million in EBIT. Our financing costs are up $57 million. which is quite significant. That includes a one-off gain from our sale and lease back last year, which was $33 million. So the real like-for-like difference is only $24 million, which is increased interest costs mainly and some increased leasing payments or interest on leasing. Moving to the full year. For the year, we see overall a good growth, overall 9% growth. Now we are on page 10. And overall, we see a full growth of 9%, including acquisitions, and then a 2% revenue growth if we only include the organic part. We see some good growth, in particular, from our passenger part of our business, which is driven by the general business Overall, we also see a good growth organically from our logistic business for the full year of 3%, just above. And then the addition of the acquisitions, which is mainly by Strait of Gibraltar, but also by ECOL, and then a few other additions. But the vast majority is Strait of Gibraltar and ECOL. EBIT for the year, as already communicated back in January, is 1.506, and this is on page 11. Our ferry EBIT is down significantly again compared to 2023, both driven by the one-off gain, but also driven by the situation in the Mediterranean, some cost pressure in particular in our North Sea area, and then also a better impact of our bunker bath spread in 2023 compared to 2024. Logistic overall. This includes a negative impact from the acquired equal entity, which is included in the last one and a half months of the year, as we just touched upon in the Q4, but then also generally down in Nordic and continent driven by the same factors as I just mentioned, the market headwinds, cold chain challenges, automotive sector depressed, and so forth. So I'm not going to comment specifically on page 12, the full-year income statement, but it is included for reference. There is just mentioning the reversal of the impairment related to the sale of the Oslo route, and that was as it hailed for sale, and the gain was $33 million. We reversed that in our impairment, just making that clear. Turning to page 13, cash flow and capital for the year. Overall, a slightly lower operating cash flow from our business and then capex of 1.45 in line with our guidance and expectations and we then ultimately deliver an adjusted free cash flow of 1 billion. That's also communicated back in January. This is below the guidance provided that was the last latest guidance given was 1.2, so slightly lower. Finally, our financial leverage at the end of the year see an increase, and this is an increase that comes from the additional debt taken in relation to the acquisitions made over the course of the year, in particular in the end of the year. And the combined increased debt and the fact that the entity acquired, ECOL, is at the moment not generating profits but has negative EBITDA, means that our leverage ratio, net EBITDA, net interest-bearing debt to EBITDA increases to 3.9 at the end of Q4. If we exclude the leasing debt, it's 3.7. With that, I will turn back to Torben.

Thank you very much. On page 15, we talk about the ESG traction We reduced our ferry emission intensity from our own fleet by 1.7% when adjusting for acquisition, so keeping a like-for-like basis. We see that the pace of transitioning to low-emission ferries is challenged. Fuel availability, fuel costs is holding us back. but it is not impacting our 2030 goals of 45% intensity reduction. E-trucks, now 131. We install solar panels. Different port terminal equipment is beginning to become electric, also driving our electrification. We have increased the ratio of... women in management positions by one percentage point, and the focus on safety and now very much increased focus on the land-based activities are starting to show results with lower incidents, but still work to be done. Turning to page 17 and coming back a little bit to to the network and the priorities. If we look at 2025, the majority of the network is expected to uphold performance or improve. North Sea, we've seen stable commercial performance from the North Sea in the past and also expected in 2025. Some cost pressures have taken down the result in 24. We expect to be able to eliminate the negative impacts in 25. Channel 24 was a turnaround year where the competitive situation has eased. Capacity has been taken out. and we saw improved earnings that we expect to continue to see in 2025. Baltic Sea has been in a tough place since the war in Ukraine by Russia started, but we did see a bottling out, and actually in Q4, despite the The VAT Q4 results, Baltic Sea was actually showing improvement, an improvement that we expect to continue to see in 2025. Strait of Gibraltar, even excluding the Tarifa route, is expected to deliver the business plan that we based the acquisition on. They are off to a very strong 25, both volumes and rate-wise. On the logistics side, we've seen a very robust UK and Ireland business unit. Parts of the Nordic and continent units are challenged, as we've talked about during 24, and I'll come into some details on that in a moment. And then, of course, we have won the New Jersey contract that we will soon commence operating. But turning to page 18, After having talked about the strength and the positive developments, there are three focus areas to resolve. It's adapting the Mediterranean network, it's the Turkey and Europe South turnaround, so the previous ECOL activities, and then it's showing successful results from our logistics boost projects. On page 19, we start with the Mediterranean environment. Overcapacity was created when a new competitor started operating mid-September. We focused initially on defending our market shares, and we did that successfully. Now we turn to rebalancing of the market through reducing capacity making sure that we get the right rates for our services so that we in all likelihood push some market share to the new competition, but on the other hand secure good utilization of our own capacity and better rates. Moving to page 20 and the Turkey and Europe south turnaround, it is on track. It was a tough situation that we stepped into, but we knew that. And strategically, in a two to three years timeframe, it makes sense for DFDS. The progress so far is in line with our breakeven ambitions for the end of 2025. This week we announced a redundancy round of 125 Istanbul office employees. We start to see some positive commercial traction from combining with our existing network when selling to customers We have started right-sizing the capacity of the previous ECOL business by reducing trailers, reducing trucks, and also creating more flexibility through subcontracting a significant part of the haulage capacity. We are looking at how the 10 European offices that we have taken over from ECOL is best optimized in our existing European network and have some good developments there as well. Over the next couple of months more information will be released from this turnaround project. Turning to page 21, the logistics boost projects. It is not a secret that logistics, Nordics and continents have been under earnings pressure. There's been a lot of focus on addressing this. It's been complicated by a continued macro downturn even and market slowdown that had been stronger than we had expected and a rebalancing of supply and demand have dragged out. But there is full focus and detailed plans for these eight projects. If you look at the table, you see those in blue are from the Nordics, and those in black are from the continent business unit. And it is cold chain and automotive that are particularly hard hit. Some impact, of course, also from the general market slowdown and the geopolitical situation where the Brexit phase three is hurting our fresh meat, our ability to move fresh meat in a cost-effective way between UK and the continent. which is further now impacted by the food and mouth disease breakout in Germany that have led UK to cut off import from Europe for 90 days. We'll not go into the details. We can take some of those in the questions if you have more details that you would like. Moving to page 23 for our outlook 2025, We only expect very modest tailwind from the markets, so muted growth assumed to remain in the European area due to the macro uncertainty that has not been reduced the last month with the new administration in the US, obviously. We continue to see market growth in the Mediterranean and North Africa areas, but of course our freight ferry business in the Mediterranean will not benefit from this due to the competition and the actions that I mentioned before that we are going to take or are taking. Road transport markets in Europe are assumed to remain highly competitive with some overcapacity which reduce our ability to pass on cost increases. On the passenger side, markets are all stable. Channel still has some backlog from COVID that we expect to generate growth in 2025. To turn it to 2024, the EBIT outlook is, as communicated, impacted by These focus areas that I just talked through, we expect revenue growth of 5%, a significant part coming from the full year impact from the ECOL acquisition, but also organic growth. The outlook for EBIT is around $1 billion and is reflecting growth. the negative impact from Mediterranean and Turkey and Europe's south turnarounds. Operating capex, 1.6 billion entirely maintenance capex in the ferry division and replacement of equipment on the logistic side. Adjusted free cash flow around 1 billion accomplished also through some working capital improvement, whereas I in the introduction mentioned a lot of focus is placed right now. On page 25, a quick summary of our key priorities for 25, protect and grow our network strength, organic growth focus, resolving the three focus areas that I went through. strong cost focus, strong cash flow focus, and the continuation of our green transition and diversity so that we deliver on the communicated targets. With this, we will turn over to the operator for handling Q&A. Yes.