Global Transport and Logistics 2011 Annual Report Global Transport and Logistics DSV is a global supplier of transport and logistics services. Contents The Group has more than 21,000 employees worldwide and subsidiaries in more than 60 countries. DSV Air & Sea specialises in the handling of air and sea freight to destinations all over the world. The Division plans and executes shipments in a quick, efficient, safe and environmentally friendly manner and combines the means of transportation when most appropriate. The Division has 6,000 employees and subsidiaries in more than 60 coun- tries. MANAGEMENT’S COMMENTARY DSV Road offers transportation of full, part and groupage Global Transport and Logistics 2 loads all over Europe in a quick, efficient, flexible and envi- ronmentally friendly manner and provides good connections DSV delivers results! 4 to the rest of the world. The Division has 10,000 employ- Financial highlights 7 ees and subsidiaries in 32 countries in Europe. Strategy and financial targets 8 DSV Solutions specialises in logistics services across the Financial review 10 entire supply chain from design through freight manage- ment, customs clearance, warehousing and distribution DSV Air & Sea 16 to information management and e-business support. DSV Road 20 The Division has 5,000 employees and subsidiaries in DSV Solutions 24 16 European countries. Shareholder information 28 Corporate governance 31 Risk management 34 Corporate social responsibility 36 The Executive Board and the Board of Directors 38 Statement by the Executive Board REVENUE – BY REGION and the Board of Directors 40 Independent auditors’ report 41 ■ Nordic countries – 29% ■ Southern Europe – 18% CONSOLIDATED FINANCIAL STATEMENTS ■ Other Europe – 38% Income statement 44 ■ North America – 7% ■ Asia – 8% Statement of comprehensive income 44 Balance sheet 45 Cash flow statement 46 Statement of changes in equity 47 Notes 49 EBITA – by REGION Group structure 80 ANNUAL REPORT OF PARENT ■ Nordic countries – 26% ■ Southern Europe – 11% CD containing 2011 Annual Report of Parent 83 ■ Other Europe – 35% ■ North America – 13% ■ Asia – 15% 2 DSV 2011 ANNUAL REPORT – MANAGEMENT’S COMMENTARY – C ONTENTS Revenue* DKKM AIR & Sea Road Solutions 43,710 41% 48% 11% EBITA* DKKM 2,426 55% 34% 11% Employees** NUMBER OF 21,678 29% 46% 25% * External revenue and EBITA after elimination of internal transactions ** Including Group functions ■ Countries in which DSV has its own companies DSV 2011 ANNUAL REPORT – MANAGEMENT’S COMMENTARY – C ONTENTS 3 DSV delivers results! Continued growth in all Divisions and a solid position among the world’s leading transport and logistics providers. DSV remains on track and delivers results in line with the outlook. It is a great pleasure to state that DSV has managed to deliver results in line with the outlook despite the fact that the year of 2011 was characterised by financial and politi- cal instability, which lead to an unstable global market. Once again, the asset light business model of DSV has proven its worth, enabling us to achieve the set goals and use external circumstances to our advantage to the largest extent pos- sible. On track 2011 began where 2010 left off: With clear, blue skies and widespread optimism in the wake of the financial crisis of 2008 and 2009. However, this atmosphere changed over summer as the political challenges of the European debt crisis contributed to a slowdown in the last six months of the year. Nevertheless, we can state that the overall develop ment of DSV is moving in the right direction: Continued growth in revenue, gross profit and EBITA, as well as productivity accelerating in 2011. This generated a strong cash flow which enabled the Group to carry out a historic share buy-back of DKK 2.5 billion in 2011, corresponding to more than 10% of the issued share capital, and at the same time double the divi- Jens Bjørn Andersen dend payments to our shareholders. Going forward, DSV CEO aims to increase dividends, continue the active capital DSV A/S allocation policy and maintain the capital structure target of a debt to EBITDA ratio of 2.0-2.5. Focus on the customer Small and medium-sized customers constitute the key seg- our customers. At the same time, these services free time ment of DSV, and we constantly focus on strengthening and human resources to perfect our skills in other areas our competencies within this segment while perfecting our that are key to continued growth. services for large, global customers. DSV focuses on specialising within all industries and It is our mission to add value for our customers and offer sectors of the Group. DSV has dedicated employees for competitive advantages through innovative products and specific tasks; often with a professional background in the services. New services, such as cargo insurance with DSV relevant industry. Know-how and expertise within the in- Insurance and the continued focus on offering e-services dividual segments are key to good business relationships. across borders and divisions, contribute to strengthening Today we offer a competitive product very different from the market position of DSV. Through constant focus on the product that we offered 10 years ago, and we endea- development and expansion of e-services and, above all, vour to constantly improve our business to always meet smarter distribution, DSV is committed to adding value for and exceed our customers’ requirements. 4 DSV 2011 ANNUAL REPORT – MANAGEMENT’S COMMENTARY – DSV DELiVERS results! This generated a strong cash flow which enabled the Group to carry out a historic share buy-back of DKK 2.5 billion in 2011... DSV Air & Sea tain high earnings in 2011. Moreover, the Division makes Delivering 55% of the consolidated EBITA, the Air & Sea constant efforts to further specialise its services, success- Division maintains its position as the best earner of the fully developing and offering new and sought-after pro- Group. Large freight rate fluctuations, especially in the sea ducts. Altogether, DSV Solutions achieved good results, and freight market, required major efforts by the organisation, the Division plays an increasingly important role relative to and we have reason to be pleased with the entire Division. the other business areas in step with the increasing demand The market as a whole was characterised by declining air for fully integrated supply-chain services that cover ser- freight volumes, and we are therefore pleased to note that vices from all three Divisions. DSV has managed to increase air freight volumes, surpass- ing the market growth rate. As for sea freight, the growth Employees in shipments recorded by DSV was slightly below market DSV invests many resources in a wide range of initiatives growth. to develop our vital resource - our employees. As a service It is a key goal of the Division to continue the profitable provider, DSV is highly dependent on the commitment and growth and maintain the high profit per shipment, both the skills, knowledge and ambitions of the individual em- within sea and air freight, rather than growing aggressively ployee. We therefore emphasise the importance of offering and risk jeopardising the profit per shipment. The Division is our employees good career opportunities and retraining in well equipped to take part in global market growth. Never- order to satisfy the ambitions of the individual and ensure theless, strengthening our network in the Asian and South potential candidates for internal recruitment in DSV. American growth markets through acquisitions is of high priority for the coming period. Corporate Social Responsibility The CSR activities of the Group were further formalised DSV Road and structured in 2011. The efforts to implement CSR poli- DSV Road recorded impressive performance, particularly cies in DSV contribute to reducing a number of financial and in the Northern and Eastern European markets, where the commercial risks, and we regard this work as an important Division holds a strong position. These markets saw a more means to turn these risks into opportunities. positive development than Southern Europe. The Division In 2011, DSV set a number of corporate CSR targets, still has good development potential with large variations including specific targets for the carbon emissions of the in productivity between the countries, and DSV Road has Group. The efforts are aimed primarily at the Company’s launched several interesting initiatives during the year subcontractors, which carry out the majority of the physi- which, in combination with continued optimisation of the cal transport operations of DSV. However, we also make existing business, are to create the basis for improvements. targeted efforts to reduce the energy consumed for light- The Division has managed to increase freight volumes ing, heating, air conditioning and ventilation systems in above the market growth. The Division has considerable the Group’s buildings. This aspect of social responsibility is strength and has built one of the most comprehensive shared by the entire organisation and is of high importance transport networks in Europe, attracting many new cus- to us and to our customers. tomers. Continued consolidation DSV Solutions The transport market is still characterised by a large num- With great stability and progress, DSV Solutions maintains ber of players, each having a relatively small market share. its position as a leading European logistics provider in key DSV expects the consolidation in the industry to continue, geographical areas. In a fiercely competitive market, the and we intend to take part in the process. DSV aims to Division has managed to attract new customers and main- continue to grow, organically and through acquisitions, in all DSV 2011 ANNUAL REPORT – MANAGEMENT’S COMMENTARY – DSV DELiVERS results! 5 Divisions and markets. Acquisitions will primarily relate to Outlook the Air & Sea Division and will mainly focus on the growth There is no doubt that the outlook for the global economy, markets in Asia and South America.