DSV A/S

Hi everyone and welcome to the DSV trading update for Q1 2024. Today's call is being recorded. For the first part of this call, all participants will be in a listen-only mode. Afterwards, there will be a question and answer session. To ask a question, please press 5 star on your telephone keypad. I would like to introduce Group CEO Jens Lund and Group CFO Michael Ebbe. Speakers, please begin.

Thank you very much and welcome to our investor call for Q1. We would like to welcome all our investors, analysts and DSV employees that are probably also listening in to the call. The call will be an hour and I would also like to ask the analyst to have two questions per person. If we move to slide number two, we can see the agenda. And to the right, you can also see the statement on forward looking statements. Please have a look at that, taking care that you have taken this message on board. If we move to slide number three, we will now go through some of the highlights for Q1. And I think it's very important for us to state that in a normalizing market we have actually delivered very solid results and we have delivered progress in all the business areas that we operate in and we are following our internal budgets. Of course, we have grown now in Q1 and this has consumed some cash flow, which is also visible in the numbers. But we see this as a positive sign of us driving the business forward. This has an impact on our share buyback, which is 1 billion for the next quarter. It's important for us to state that we reiterate our EBIT guidance between 15 and 17 billion DKK. In the quarter, we've also completed the leadership transition. We have an experienced DSV team in place. It's basically internal succession so it's a solid foundation and it's basically still the good old DSV DNA that you know that is run in the company taking care that we deliver on our operational and commercial strategy. On the next slide we have the overview of the RNC division. I think it's a very strong result also comparing to our peers. Actually we delivered very solid GP progression in 23 and we've continued that journey into 24 as well. taking care of course that the market is normalizing now. The Red Sea has had limited impacts on our results and we don't expect any significant impacts going forward as well. I think we've achieved significant shipment growth and I think most notably also related to our DSV and M&A DNA. We've also seen that we've managed to increase productivity quite a bit compared to last year. If we move to the next slide, we can have a look at the air freight market. We've gained share. in our addressable market. The market is competitive, in particular out of Asia these days. And it's a bit volatile when it comes to the Transpac and the trade to Europe out of Asia. I think one thing that is very important to note here is a very strong sequential performance that we have vis-à-vis Q4. And I also think that the focus that we have on our network business and the productivity improvements, they are visible in the numbers below. There's another thing that I would like to draw your attention to is that what we focus on is the generation of gross profit. So, of course, we want to grow faster than the market. and then of course also at the best yields that we can obtain. And I think that you can see what we've delivered on the yields here is something that is very solid. If we move to the next slide, we then have the ocean freight as well. I think also here we've definitely taken market share and I think the lanes where we've had the most progression is the Transpac lane, but also the Asia to Europe trade lane. probably a little bit also related to that the destocking has stopped and the market is sort of normalizing a little bit. As I just talked about the Red Sea situation, it's not had a significant impact on us, but I know it's had a very significant impact on some of our customers. So we've had to spend a lot of resources together with our customers taking care of this disruption so that we keep their supply chains flowing and their businesses running. I think also here I would like to point out that the sequential growth is also very very solid and on the strategic side I think that the focus we have on our LCL network and basically the service and the quality that it brings to our customers is also paying off. We see that we have increased shipment counts and it's something that is very well received with our customers. If we move to our next slide, we have the road division. In road, in particular in Europe, prices are under pressure. This means that in order to grow the company, we need to produce more shipments. This is also the case here. And we've managed basically to produce a GDP on level with last year and EBIT that is slightly below. So it also means that even if we have inflationary pressure on our cost, then basically we've managed to increase the productivity. There's a little extra information on the roadside and it is that we've had implementation of a customer contract where we've had some difficulties. It's impacted the quarter with 30 million DKK. so if it hadn't been the case we would actually have delivered growth in this quarter and we're very proud about the performance despite that we've had this little issue if we move to solutions It's in reality the same. In solutions, we've also seen a situation where the rates are a little bit under pressure, but we produce more volume because we have increased our footprint, our network. So we're really driving the company forward. Then, as you know, when you make expansions in solutions, you get sort of what we call big boxes. And it takes a little while to fill them up. So this is actually the reason why our depreciations are a little bit higher on the right of use as it's here. So we're a little bit below on EBIT. But we have a strong pipeline, so we are confident that we will be able to basically utilize the capacity that we have. We are now more than 9 million square meters on solutions, and I don't know if some of you can remember, but it's only a couple of years ago that we were 7.5 million. So we've definitely continued to develop this division as well. Then the next slide, slide nine, is the leadership update. We've made the transition and I don't necessarily want to go into all the bullets, just say that we've made changes to the executive management, the divisions and our commercial team as well. What is important to get across is that it's an experienced management team. And we are safeguarding our DSV DNA. The team, they are accountable. It's a culture that we have in the company of accountability. And also in relation to potential M&A that might come up, the team is really solid. So that was a little bit on the leadership change. It will be the only time that we will talk about it because it's of course a concern that we had to address. But it's business as usual and everybody's basically executing on the strategy. Then the next thing is basically on slide 10. It's a little bit about our commercial approach, the way we approach the market. If we take our customers, we basically have our largest customers in this segment. It sort of accounts to up to 50% of the GDP that we produce. We've reinforced this approach that we have on these customers so that we become more customer centric and can handle the strategic debates that are relevant on such customers. And then on the remaining part, there's sort of a little bit more than 55% of our volume. It's the SME segment. This is our classic stronghold and we continue to develop this as well. Here we are of course focusing on what is relevant for the different segments of this customer portfolio. and also digitizing our services so that we can address these customers in the most efficient and professional way that works best for them. And as you can see from the numbers, both the organization but also this commercial approach, it's already starting to show results and it's very satisfying to see this. The next slide we have, the next update is actually on Neom. So on Neom, I have a few key messages for you. One is that we are mobilized. So we have done all the things we need to do in order to be able to produce our services in Neom. And the team that has been used to that is basically free to do other tasks now. Then Currently there's no change to the business plan. It's the same it's been all the time. I know that some of you have seen information in the media about changes. But you have to get used to in a big infrastructure project like this that there are constantly changes and we will update you when we have to update our business plan. This is very important and we have to get used to that. Either this track in NEOM has been changed or another track. There are multiple tracks there in this project and so far We mobilize, so that's de-risked and our business plan is intact. This is basically the key takeaways on this slide. And I think that was it from my side, so I will pass over to our CFO, Michael Eber, who will be happy to take you through the numbers.

Thank you, Jens. Yes, on page 12, I think Jens has already been through the operational performance, so I will only address a few highlights on this slide here. As Jens mentioned, we have had growth. Despite of that, our revenue and impact are impacted by the normalization, which means that we have a lower revenue and GDP compared to last year, same quarter. It is more normalized, as Jens also said, also seasonality wise. We have been able to reduce our cost base due to our strong cost management as we have always been part of the DSV DNA. And that's despite the inflationary pressure that is on all of us actually. Our interest rate costs has increased and that's due to our increased financial leases and then also increase in the interest rates. That's the key messages on that slide. So I will jump to the next slide on slide 13. I think it's Jens, you all already addressed it that our Q1 cash flow is traditionally low. in our normal world and with the normal seasonality. And that's also what we have seen this quarter. And we've had the exact opposite impact than we had last year, same quarter. And that's impacting the net working capital, where we've seen the increase in activity, especially in the second half of Q1. So that is the reason for this development. Then a few comments to our network and capital. We have, as we've also written in the announcement, we have tied up some capital in our property projects, which is part of our growth strategy and has always been that. It's an integrated part of our business. We expect that we will be able to reduce that with the two billion before the year end. So I think that's the key messages on that side. And then, of course, the ratios are impacted by the lower earnings. Going to page 14, the allocation to shareholders. Based on our positive cash flow in Q1, we've decided to launch a new share buyback of 1 billion DKK starting today and running until we announced the next quarterly results in July. That means that we will have allocated 4.2, which is announced. When you look at this table, it's important that is what is announced. 4.2 billion, of which 3.1 is actually already returned to the shareholders in Q1. It's also important for me to stress that there is no change in our capital allocation policy. It stays true to what has always been. So that is just a dynamic approach that we've talked about before when we assess that quarter on quarter. Going to the last slide from my side is the outlook and Jens has already mentioned that we have maintained our guide look based on the strong Q1. So I think that's basically the key message on this slide. I think that was very quickly through the numbers Jens and you will take the word.