Change the color of the angle, choose between the four colors FERRY ROUTES & LOGISTICS DFDS Group Overview
in the top menu
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October 2018 WHAT WE DO
.
2 We move freight and passengers on 23 ferry routes in Europe and Turkey
3 It’s all about the routes – and their location
4 Routes are part of Europe’s and Turkey’s infrastructure
And part of business supply chains
5 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 Our key freight customers are forwarders and hauliers
Manufacturers of heavy goods are also important customers
7 On 9 routes we move freight and passengers together
8 People travelling by car are our key customers as is cruise passengers
Both for holiday and transport purposes
9 We also provide transport and logistics solutions to a wide range of businesses
10 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 ferry
Freight
Share of Group 45% 20% revenue
80% freight 20% pax
11 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 Change the color of the angle, choose between the four colors FERRY TYPES
Day ferry (ro-pax), Channel in the top menu
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Freight ferry (ro-ro) Cruise ferry Combined freight and passenger ferry (ro-pax) IT’S ALL ABOUT THE ROUTE
.
14 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 ddddd * Assuming entered ships are identical to incumbent ships and same no. of departures per ship
Freight Infrastructure
Ferry route Port Port terminal Bridge terminal • Logistics office/warehouseRoad Road ― Container/sideportRail route Rail Tunnel
15 STRUCTURE & PERFORMANCE
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16 DFDS structure, ownership and earnings split
DFDS Group
DKK bn Revenue 2017-18 Q2 LTM per division People & Ships Finance 16 14 12 Shipping Division Logistics Division 10 10.2 Shipping Division 8 Logistics Division 6 • 23 ferry routes - freight • Door-door transport Eliminations and other and passengers • Contract logistics 4 5.3 • 45 ferries • 5,600 trailers and 2 • 7 port terminals 3,500 containers 0 • 2 sideport ships and -2
VSA/SCA* EBITDA 2017-18 Q2 LTM per division DKK bn DFDS facts Shareholder structure 3.5 3.0 2.5 • • Lauritzen: 42% Founded in 1866 2.0 Shipping Division 25.0% margin Logistics Division • Activities in 20 • Free float: 56% 1.5 2.6 Non-allocated items European countries and • Nasdaq Copenhagen 1.0 Turkey • Foreign ownership 0.5 5.9% margin • 8,000 employees share: ~30% 0.0 0.3 -0.5
17 *Vessel sharing agreements/slot charter agreements on container ships DFDS key figures
DKK bn Revenue Inv cap, DKK bn Invested capital & ROIC before special items ROIC, %
15 18 20
16 18 12 14 16 14 12 9 12 10 10 6 8 8 6 6 3 4 4 2 2 0 0 0 2014 2015 2016 2017 2018 Q2 LTM 2014 2015 2016 2017 2018 Q2 LTM
Shipping Division Logistics Division
EBITDA & margin before special items Operating cash flow & NIBD/EBITDA DKK bn Margin, % NIBD/EBITDA DKK bn 3.0 20 3.5 3.0
18 2.5 3.0 2.5
16 2.0 2.5 2.0 14 2.0 1.5 1.5 12 1.5 1.0 10 1.0 1.0 0.5 8 0.5 0.5
0.0 6 18 0.0 0.0 2014 2015 2016 2017 2018 Q2 LTM 2014 2015 2016 2017 2018 Q2 LTM SHIPPING
Q2 LTM 2018: Shipping Division
Business units & ROIC, Q2 LTM 2018 Revenue North Sea Baltic Sea Channel Mediterranean North Sea Baltic Channel Mediterranean Passenger Passenger Sea EBIT
16% 31% 20% 2% 20% 0% 20% 40% 60% 80% 100%
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19 LOGISTICS
Q2 LTM 2018 Logistics Division
Business units & ROIC, Q2 LTM 2018 Revenue Nordic Continent UK & Ireland Nordic Continent UK & Ireland EBIT
24% 14% 7% 0% 50% 100%
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20 BREXIT
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21 Slowdown in UK-EU trade growth in 2018
• Euro area growth has to EU-UK trade of goods - volume development some extent mitigated 12%
uncertainty related to 10% Brexit 8%
• Lift in UK export growth to 6%
EU post Brexit vote 4% leveling off but still above Brexit vote pre-Brexit level 2% 0%
• Volume growth -2% divergence between -4% North Sea and Channel is -6% continuing in 2018 due in Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 July Aug part to shortage of drivers 2016 2017 2018
UK (EU) Exports UK (EU) Imports
22 22 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 full access of the custom post-Brexit rules between the UK union with the EU and the EU (31 Dec, 2020)
• Likely fall back on World Trade • Free movement will continue during Organisation (WTO) rules for trade the transition with its former EU partners
“UK could stay in EU customs union for years after Brexit transition” - https://www.politico.eu quoting senior U.K. and EU officials
23 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 unaccompanied trailer volumes
DFDS actions • Import customers are considering to increase stocks in UK ahead of March • Brexit steering group established 2019 in case of hard Brexit, vice versa for • Cost recovery, pass-through agreements • Register as Authorised Economic Operator UK exporters • Increasing staff with customs clearance expertise • Less impact expected on un-accompanied • Offer customs clearance services trailers vs accompanied trailers • Upgrading IT customs systems • Expanding port terminals in Vlaardingen, Felixstowe and Immingham to offer • Upside from new services – export warehousing/storage/standage declarations, customs clearance, • Dover/Calais options under review warehousing/storage/standage and duty- • Offer duty-free sales free
24 24 MEDITER RANEAN
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25 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 flexibility of fleet deployment in route network as well as synergies in vessel investments
• Profitable company with expected EBITDA of around EUR 97m in 2018
26 (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 27 Source: U.N. Ro-Ro 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 (Italy) Patras (Greece) Ambarli-Trieste Pendik-Toulon Mersin-Trieste Pendik-Bari Pendik-Patras
Owned by AkçanSA Publicly owned port operated by Owned by Mersin Publicly owned port Publicly owned port CCIV International Ports Long-term exclusive contract 3rd party terminal with no DFDS has private exclusive lease until May 2026 3rd party terminal with no 3rd party terminal with no exclusive contract area for its entire operations exclusive contract exclusive contract
28 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 Owns Pendik and Trieste Port(1), operates in capacity of vessels Ports Ambarli, Toulon, Mersin and Bari
• 5 routes between Turkey and France/Italy with Fleet age 11 years a fleet of 12 modern Ro-Ro vessels Market share 34% between Turkey and EU • U.N. Ro-Ro’s operation is based on an intermodal setup, combining land, sea and P&L (€m) 2014A 2015A 2016A 2017A railways for trucks Total Revenues 195,1 192,8 185,2 224,7 EBITDA 72,9 84,4 81,2 94,3 • The Company caters to the international Margin 37% 44% 44% 42% transport companies, importers and exporters EBIT 31,2 46,2 47,0 66,6 in Turkey Margin 16% 24% 25% 30%
▪ In 2013 the largest customer (EKOL Logistics) started own ro-ro Business is EUR denominated, minimising service and switched all its captive cargo to own ships exposure to the volatility in Turkish Lira ▪ Slight underperformance in 2016 due to two engine break-downs
29 (1) Owns company that has the concession agreement for Trieste port Source: U.N. Ro-Ro Corporate Presentation, Company data and press releases Mediterranean’s geographical reach
Mediterranean’s Target and Secondary Markets Finland
Norway
Sweden
Latvia Denmark Ireland
U.K.
Germany Netherlands Poland
Belgium Luxembourg Czech Republic Slovakia France Austria Switzerland Slovenia Trieste (1)
Portugal Ambarlı Toulon Italy Spain Bari Pendik (2) Turkey Greece
Patras Mersin
Target Market Secondary Market Port of Trieste Operated by U.N. Ro-Ro Other Ports in U.N. Ro-Ro Network
Note: (1) Long term concession with freeport status. U.N. Ro-Ro owns 60% of Port of Trieste’s operator (Samer Seaports Company). (2) c. 74k sqm owned and c. 26k sqm leased from the state 30 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 optimization
Cost-competitive pricing vs. land delivers savings to trucking Lower Operating companies (lower driving time, fuel costs, driver and other Expenses ✓ expenses) ✓ Price competitive Fewer Mitigates the issue of limited available truck drivers in Turkey and Drivers Required Europe ✓
No Unaffected by continued road congestion and unreliability of road ✓ Safe and secure Congestion Issues transportation ✓
Circumvents the strict EU visa requirements to Turkish truck No Visa (1) Requirements drivers and driving restrictions ✓ ✓ Consistently reliable
No Need for Road Avoids the issue of limited EU transit permits to Turkish trucks; no Permits increase in the last five years(2) ✓
✓ Highly flexible Environmentally Lower fuel consumption and reduced CO2 emissions than road Friendly transportation ✓
Cost benefits Operational benefits
Note: (1) Ro-Ro reduces visa requirements as time spent at sea or on rail within the Schengen area does not count as working days for the driver for visa purposes. (2) Transportation ministries from respective countries agree on number of permits to be distributed to trucking companies when needed. The number of permits is fixed and limited. 31 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 competitive 3 trucks and trailers
• Ro-Ro operators can act to maintain this cost advantage through pricing decisions/expanding intermodal services
Ro-Ro
DFDS Cost Savings by Destination (1 Trieste Toulon Cost of c. €175K for 1 truck ✓ and three trailers Barcelona 20% 31% Less than half the cost Paris & Lyon 9% 10% ✓ compared to land route
Milan 10% - (2)
Munich 5% - (2)
Manchester 6% 4%
Brussels 4% - (2) Switching truck fleet configuration to Ro-Ro model creates ✓ significant customer stickiness
Note: (1) The price components considered include bunker costs, vessel tickets, highway charges, bridge tolls, average land distances, driver costs, depreciation and maintenance costs; as of December 2017. (2) Choice of Ro-Ro mode of transportation with Toulon route would not be commercially viable on these routes
32 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 and costs • Border crossings and customs 53% formalities 150 • Security issues 51% • Permit and visa issues 100 • Limited investment in road 49% 50 infrastructure 47% • Congestion
- 45% • Ferry’s market share increased from 49% 2013 2014 2015 2016 2017 in 2013 to 55% in 2017 Road Ferry Ferry market share
Source: Economist Intelligence Unit (EIU) 2018 33 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 neutral Mostly neutral Customers as Ekol Logistics ✓ Diversified customer volume over Majority of cargo from Ekol Customer Concentration Limited and regional customer base multiple routes Logistics and its subcontractors
✓ Majority of long-standing Historical Customer Business model built on one solid Limited regional customer base customers also founders and Relationship logistics contract with long term relationships previous shareholders ✓ Neutral operator working with Competing with rail operators No intermodal presence; Intermodal Connections multiple rail operators through Ekol Logistics co-operates with U.N. Ro-Ro
Announced Plans for 1 ✓ No scrubber installation No scrubber installation January 2020 IMO Announced scrubber installations announcements Decision announcements
Source: Ship broker estimates from BRS GROUP, as of YE 2017, Weekly sailings figures from Alternative’s and Ulusoy’s websites and other publicly available information 34 Note: (1) Ekol is not a owner part of its fleet is on a charter basis (2) Includes 2 export-only trips on the Pendik - Bari route (3) Pending lengthening of 2 vessels in 2018 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
20 0.6% (US$bn) 10
0
US UK
Iran Iraq
Italy
UAE
India
Israel
Spain
China
Japan
Russia
France
Poland
Belgium
Romania
Germany
Switzerland
Netherlands South Korea South
Source: Macro Advisory Partners 2018 Exports Imports 35 Turkey - inflation and exchange rate development of TRY
• TRY-depreciation is linked to high inflation rates in Turkey: TRY/DKK • 2016: 8% 2.55 • 2017: 11% 2016 2017 2018 • 2018 ytd: >20% 2.35
2.15 • Turkey’s real GDP was up 7% in Q1
1.95 • OECD: real GDP growth forecast of 1.75 0.5% for 2019 -15% 1.55 -18% 1.35
1.15 -36%
0.95
0.75
01/2016 02/2016 03/2016 04/2016 05/2016 06/2016 07/2016 08/2016 09/2016 10/2016 11/2016 12/2016 01/2017 02/2017 03/2017 04/2017 05/2017 06/2017 07/2017 08/2017 09/2017 10/2017 11/2017 12/2017 01/2018 02/2018 03/2018 04/2018 05/2018 06/2018 07/2018 08/2018 09/2018 10/2018
36 Turkey – impact of TRY depreciation on finance items
• Financial performance impacted by ‘one- TRY/DKK off’ currency loss on debtors recorded in 1.45
Finance items 1.40
1.35 • Mediterranean’s prices are set in EUR to protect revenue development 1.30
1.25 Jul -7% Aug -25% Sep +13% • Invoicing in TRY implies, however, 1.20 currency risk in 60 day payment period 1.15 for debtors 1.10
• TRY exposure on debtors of around 1.05
DKK 300m 1.00
0.95 • ‘One-off’ currency loss in Finance items of around DKK 70m incurred in Q3 by 0.90 24% TRY depreciation
37 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 201 starting in Nov 2000 EUR/TRY depreciated 4.12 4.00 7% in 2008 and 13% 200 5.7% drop in GDP in in 2009 181 173 170 2001 168 184 161 161 153 EUR/TRY depreciated 150 152 151 3.34 3.00 162 150 91% in 2001 137 156 156 133 152 3.02 129 146 2.91
108 111 128 123 2.53 100 120 98 115 117 2.33 2.31 111 113 2.00 110 2.16 100 100 1.99 95 1.90 1.77 1.80 1.78 Crisis 3 1.69 1.67 Political unrest 2013-14 75 1.43 1.00 EUR/TRY depreciated 50 1.10 9% in 2013 and 15% in 2014 0.58
0.00 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
38 38 TRY/EUR Exports (in tonnes rebased to 100) Imports (in tonnes rebased to 100) 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 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Exports (in tonnes) Imports (in tonnes) EUR:TL
39 Source: Drewry Shipping Consultants LTD 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 likely at a lower level Auto industry until domestic demand recovers Textiles • Export volume growth expected to mitigate impact from imbalance/reduced import volumes Materials
Machines • Also mitigation from import of semi- manufactured goods used as parts in Turkish Food manufacturing plants – such imports comprise more than 50% of import volumes carried on Furniture, construction materials DFDS routes Empty • With the current visibility, EBITDA outlook unchanged based on the ‘early’ consolidation of Exports Imports UNRR as of 7 June Materials: Industrial, chemical, plastic, metal, glass, paper 40 TRY depreciation decreases imports & boosts export volumes
Growth in truck market (target market countries), same period last year* Growth in DFDS Mediterranean* imports and exports, same period last year
11% 20% 12% 9% 15.4% 15% 10% 7% 1H18 1H18 +4,0% 8% 10% 7% 8% 7% 5% 5% +4.6% 3% 6% 4% 3% 3% 5% 4% 3% 4% 1% 0% 3% 2% 2% 0% 2% -5% -2% -2% 0% 2% -7.8% -2% -10% -8% -13% 0% 1H18 -4% -6% YTD -15% -0,2% +0,1% -15% -6% -20% -7% -8% Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Export Import Export Import Source: Customs authorities Source: BU Med ▪ Currency depreciation is impacting import ▪ DFDS Mediterranean is impacted in a similar volumes – once TRY is stabilized imports are way to the truck market in general expected to resume at a lower level ▪ Due to depreciation of the TRY we are seeing ▪ Export volume growth expected to mitigate low import growth rates, and increased exports impact from imbalance/reduced import volumes ▪ Drewry estimates 2018 for cargo exports 10% growth, imports -2.5% ▪ Also mitigation from significant import of semi-manufactured goods used for manufacturing of finished goods in Turkey and then re-exported 41 * Excluding Marseille–Tunis 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
42 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 12 Sales & Customers Digital Strategy Business Partnering
2 7 13 Business Development Port Agencies & Terminals Legal
3 8 14 Branding Strategy Technical & Marine Standards Insurance 4 9 15 Logistics Strategy Investment planning & Funding Procurement 10 16 HR, crewing, training, cultural Intermodal awareness & Integration
17 Transaction focus Funding, valuation, BP model 18 Transaction focus Legal closing
43 KEY FOCUS AREAS 2018
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44 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
• Financial flexibility maintained to pursue further opportunities
Growth from ferry new • 6 freight ferries (ro-ro), from early 2019 building orders • 2 combined freight and passenger ferries (ro-pax), from 2021 • 1 Channel ferry, 10-year bareboat charter, from 2021
Operational efficiency • Italian logistics activities restructured • Boost projects for challenged logistics activities • Corporate functions restructured • Rosyth-Zeebrugge route closed • Starlight: On board customer service and revenue project Digital • Ongoing investment in digital customer solutions • Realise long-term digital strategy
45 APPENDICES
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4546 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, % Q2 LTM 2018 3,776 683 4,046 16.4 Q2 LTM 2017 3,546 576 4,222 13.4 Lane metres, '000 ∆ vs LY Pax, '000 ∆ vs LY Q2 LTM 2018 13,359 6.7% n.a. n.a. Q2 LTM 2017 12,517
4647 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, % Q2 LTM 2018 1,478 376 1,195 31.4 Q2 LTM 2017 1,432 371 1,275 29.0 Lane metres, '000 ∆ vs LY Pax, '000 ∆ vs LY Q2 LTM 2018 4,567 3.5% 209 -1.4% Q2 LTM 2017 4,414 212
4748 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, % Q2 LTM 2018 2,755 382 1,930 19.7 2017* 2,683 353 1,956 18.0 Lane metres, '000 ∆ vs LY Pax, '000 ∆ vs LY Q2 LTM 2018 19,987 1.0% 3,865 1.6% 2017* 19,796 3,803
*Q2 LTM 2017 n.a. available due to change in BU structure
4849 Mediterranean Mediterranean Invested • Freight ferry routes connecting Europe and DKK m Revenue EBIT capital ROIC, % Turkey (UNRR acquired 7 June 2018) Q2 LTM 2018 251 34 1,539 2.2 2017* 103 9 99 9.3 • Turkish forwarders and hauliers main Lane metres, '000 ∆ vs LY Pax, '000 ∆ vs LY customer group Q2 LTM 2018 522 127.9% n.a. n.a. • Freight ferry route between France and 2017* 229 n.a. Tunisia *Q2 LTM 2017 n.a. available due to change in BU structure
4950 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, % Q2 LTM 2018 1,707 132 638 20.2 Q2 LTM 2017 1,694 246 610 39.5 Lane metres, '000 ∆ vs LY Pax, '000 ∆ vs LY Q2 LTM 2018 582 -5.5% 1,361 2.8% Q2 LTM 2017 616 1,323
5051 KEY NORTHERN EUROPEAN FERRY COMPANIES
• Logistics office/warehouse ― Container/sideport route
5152 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: +5.1% CAGR of -2.4% in global LM capacity 500-2500 since 2009 due to: 400 • Consolidation of volumes around hubs 200 CAGR: -6.9% • Increased utilization on large ships • Large ships with lower unit costs replace 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 smaller ships • Ongoing scrapping of older and smaller Global no. of freight ferries (ro-ro) per ship size ships No. of ships 500 CAGR: -5.1% • Number of ships likewise declining as is 400 CAGR: +4.6% availability of ferries for potential 300 2501-4000+ ‘speculative’ entrants 200 500-2500
100 CAGR: -7.6%
• Order book consists primarily of orders 0 from Cobelfret and DFDS 2009 2010 2011 2012 2013 2014 2015 2016 2017
53 53 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+ 300 • CAGR of -0.8% in global LM capacity 1000-2500 200 CAGR: -1.8% since 2009 due to: 100 • Same drivers as for freight ferries… 0 • …mitigated by a positive impact from ro- 2009 2015 2016 2017 pax ferries with large freight capacity replacing traditional ferries aimed at Global no. of ferries (ro-pax) per ship size passenger market No. of ships 300 CAGR: -0.8%
250 • Decline in number of ships exceeds CAGR: +4.8% 200 capacity decline due to growth of large 150 2501-4000+ 1000-2500 ships 100 CAGR: -1.9%
50 • Order book consists primarily of orders 0 from Stena Line 2009 2015 2016 2017
54 54 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 • New build prices at low point Shipping Division 41 23 14 4 - - North Sea 19 19 - - 68 12 Baltic Sea1 9 2 7 - 67 15 • DFDS requirements for 2018-2022 for Channel 6 - 6 - 67 14 Passenger 4 - - 4 100 27 ongoing renewal, efficiency and capacity France & Med1 3 2 1 - 33 20 growth to accommodate demand: 1 Includes VSAs (vessel sharing agreements) and SCAs (slot charter agreements) • North Sea/Mediterranean: 6 ro-ros • Baltic Sea: 2 ro-paxes Dry-cargo1 newbuilding price index Index • Channel: 1 day ferry ro-pax 225 • Passenger: decision on 4 ships for either 200 further life extension or purchase and rebuild of secondhand ships (new builds a 175
possibility beyond 2022) 150
125 • Financing of freight ferries and ro-paxes 100 can be ownership or BB-charter '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
55 55 Source: Clarksons Platou 1 Dry cargo includes containerships, multi purpose vessels, ro-ro and pure car carriers 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 • Automotive, • Automotive, Germany- • Temperature Gothenburg UK, Belgium controlled, Scotland, England • Retail, Northern Ireland Paper shipping logistics • Norway-Continent/UK
56 Key logistics sectors for DFDS
Forestry & metals
Cold chain Automotive (also Turkey) High-value
57 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% volume target on individual Logistics routes Division Invested CONTINENT DKK m Revenue EBIT capital ROIC, % Nordic Q2 LTM 2018 1,984 87 362 23.8 Q2 LTM 2017 1,699 51 325 15.7 Continent Q2 LTM 2018 2,287 79 417 14.4 Q2 LTM 2017 1,964 49 342 10.6 UK & Ireland Q2 LTM 2018 1,208 34 387 7.3 Q2 LTM 2017 1,495 60 420 12.4
5758
LTM as per Q3 2014 HOW WE RUN DFDS
.
5859 3 key strategic demands and supporting initiatives
1. Top line focus 2. Increase 3. Acquisitions efficiency and and investments reduce cost base for future growth
Continuous improvement projects M&A
IT systems development Fleet strategy
Digital
DFDS WAY 2.0
60 Continuous improvement projects to increase efficiency
• Pricing & yield: improve revenue growth through enhanced capacity utilisation on both freight and passenger routes
• Starlight: improve on board experience and performance of the two cruise ferry routes
• Carpe Momentum: completion of project to improve on board sales and spend per passenger on Channel routes
• Italy profit improvement project, Logistics - COMPLETED
61 3 key strategic demands
3. Acquisitions 1. Top line focus 2. Increase and investments efficiency and for future reduce cost base growth
Continuous improvement projects M&A
IT systems development Fleet strategy
Digital
DFDS WAY 2.0
62 5 tech trends most relevant for DFDS
Key tech focus areas (ranked by urgency) DFDS Connect through information… Customers Real time IoT tracking at every step of the Fully connected supply chain network with real logistics chain time coordination by all parties 1 IoT
DFDS … for continuous learning and development… Customers Ongoing optimization of network (capacity, Connected optimization of timing reliability timing) to customer demands across supply chain players for end-consumer 2 AI / Machine learning (i.e. just in time shipments and delivery) Ongoing reduction of ops time (e.g. terminals)
DFDS ... with offerings safely transacted digitally … Customers Physical docs and payments made digital Transaction information seamlessly transferred digitally throughout chain 3 Blockchain
DFDS … and operations done by autonomous assets… Customers Autonomous vessels and terminals Autonomous cars and trucks (self-driven vehicles) 4 Autonomous
DFDS … powered by Energy 2.0 Customers A fleet of electrified, charging assets, with no Minimal energy cost/km for all transportation bunker consumption methods 5 Energy 2.0
Energy provider to e.g. customers No / minimal CO2 omissions
63 Further investment in 3 key digital areas
Key observations… Business critical 1. Digital go-to-market: Some customers are served through a manual and analogue process with several pain points Create flawless and efficient digital offering
2. Digitize the core: Many internal processes are manual with potential Digitize the core processes for efficiency boost for efficiencies
3. Innovation & partnerships: Many future trends, some with potential high impact for DFDS – focused approach and engagement Innovate and partner to exploit emerging trends
64 Digital go-to-market: 80% of business comes from 400 customers and 60% of small customers treated manually
DFDS Shipping and Logistics customer statistics, 2017 Description Revenue split Analogue EDI Digital
216 3rd Party Logistics 27% 42% 31% Freight Forwarders provider and hauliers 4,354
187 Larger cargo owners Industrial shippers producing or handling 64% 23% 13% raw material and goods 4,623
11,260 Small customers with 60% 25% 15% Small DFDS Customers revenue below ~4mDKK 2,680
# Customers Revenue, mDKK Long tail of 11,000 customers to be serviced more efficiently to release 65 resources for growth Digitizing the core consists of three overall elements: Software, Hardware & networks and Analytics
Focus next
Hardware & Software Analytics networks
• Composable architecture • Sensors/IoT on physical • Capturing data in large • Cloud assets (e.g., vessels, volumes • Datacenters terminals, port equipment) • Using data analytics in • Delivery process • Connectivity everywhere real time • Nearshoring to ensure data delivery • Building AI solutions (e.g., at sea, in terminals)
66 Ambition to create a DFDS solution improving customer experience drives 5 significant value levers
Instant Instant Online Online Self- Online Proactive Exceptions Quoting Onboarding sales service payment handling & new solutions proposals
Requires fully automated Requires proper payment platform user identity Requires defined management Requires comprehensive products & prices Requires Requires defined and structured data agreements to be product catalogue collection non-route or - (incl. bundles) market specific
Serve customers Improve Limit risk from Attract new customers Increase share of wallet efficiently customer retention new platforms
67 Example, autonomous trucks: Research indicates 10-30% of all trucks will be autonomous by 2030
Adoption rate %
100 80-100% Trucks sold 80
Trucks on the road 60 40-60% 50-80%
40 20-40% 30-50% 20 10-30% 0% 0 2020 2030 2040 2050 Time
68 Note: trucks after 2030 matched with car adoption rate Source: Victoria Transport Institute & International Transport Forum Example, autonomous ships: Commercialization ongoing – however material impact not expected until after 2030
2020 2025 2030 2035
Remotely operated Remotely controlled Remotely controlled Autonomous local vessels ships commercialized unmanned ocean- unmanned (Costal / short-sea) going ships ocean-going ships
Yara is already doing this by building 'Birkeland' the However, a clear business case on autonomous world’s first fully electric and autonomous container ships still needs to be developed according to ship with zero emissions Rolls-Royce:
Technologies to make ships remote and • 2018 Birkeland will autonomous exist – task is to find optimum way initially operate as a to combine them reliably and cost effectively manned vessel Effects on safety and security of autonomously • 2019 Moving to remote or remotely controlled ships not yet extensively Yara operation studied
• 2020 Expected to be performing fully So far, little research on which rules and autonomous operations regulations need to be changed and how
69 Source: Waterborne, Yara company site, Rolls Royce: "Autonomous ships the next step" Leverage route network & logistics through M&A
Acquisition type Description Examples Expand core route Expand ferry network in existing markets and and logistics expand to new European markets network Acquire forwarders synergetic with shipping Core in Europe (e.g. to secure cargo control for routes)
Grow supply chain Acquire new competencies and capabilities to Alphatrans solutions in expand product portfolio selected areas Niche logistics operators Target businesses with ferry synergies
Build efficient digital offering and Acquire / partner for new digital competencies innovate Digital start- to leap-frog and to mitigate risk of disruption for customers up/Partnership
70 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 • Expand European network P&O Ferries 8 8 3 UK-Continent • Overlapping operations Tallink 7 6 1 Baltic Sea North • Tonnage flexibility Cobelfret 4 7 4 Benelux-UK, Sweden-Belgium • Leverage operating model Color Line 4 4 1 Norway-DK/Germany Viking Line 4 3 1 Baltic Sea North Finnlines 4 8 7 Finland-Continent/UK, Baltic Sea South Scandlines 4 2 1 Denmark-Germany • Transport & logistics: Brittany Ferries 3 7 3 UK-France/Spain • Expand and connect European network ICG 2 4 1 Ireland-UK/Continent • Increased value-added services Transfennica n.a. 3 6 Finland-Continent/UK • Leverage operating model Eckerö 2 3 1 Baltic Sea North Seatruck n.a. 3 1 Ireland-UK TT-Line 1 2 1 Sweden-Germany/Poland Polferries n.a. 2 1 Poland-Sweden • Transactions 2016-18: Unity Line n.a. 2 1 Poland-Sweden • Hanko-Paldiski route • Shetland Transport • Italcargo • Alphatrans • U.N. Ro-Ro 71 71 HOW WE PERFORM
.
72 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 management 10% ROIC Activities performing around 10% • Internal performance ranking and benchmarking
• Threshold rate of 10% for Activities performing investments, including acquisitions below 10%
Key focus areas for ROIC meetings, business plans, benchmarking and structural solutions 73 73 Steady ROIC improvement
DFDS Group: Return on invested capital (LTM) • Major challenges resolved: % 20 19.0 • 19.3 Gothenburg-Immingham 18.1 17.8 18 • Russian market sanctions 18.1 17.4 17.6 16.9 • Channel turnaround 16 16.4 15.3 • Closure of 3 routes end 2014 14 13.7 • Successful transition to new Sulphur rules 12 12.6
10 10.3 • Continuous improvement 9.0 projects, > 3 every year 8 8.0 7.9 7.1 6 5.8 • ROIC Drive programme 5.8 4 4.5 4.7 4.5 4.4 • Tailwind from moderate pick- 2 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 up in EU growth since 2014 12 13 13 13 13 14 14 14 14 15 15 15 15 16 16 16 16 17 17 17 17 18 18
74 74 Capital distribution
Capital distribution overview • Total distribution to shareholders was DKK m 2015 2016 2017 DKK 1.7bn in 2017 equal to 9.2% yield on Actual Actual Actual equity market value Dividend per share, DKK 5.40 6.00 10.00 • The NIBD/EBITDA multiple was 0.9 at the end Dividend, Mar 218 175 168 of 2017, on level with 2016 Dividend, Aug 108 174 387 Total dividend* 326 349 555 2018 Buyback, auction - 400 478 • Dividend of DKK 4.00 paid in March Buybacks, other 401 514 628 Total share buybacks 401 914 1,106 • Planned dividend in August suspended Total distribution 727 1,263 1,661 • Share buyback launched in February Dividends exclude treasury shares cancelled
• Board will reassess capital structure in February 2019 and hence capital distribution
75 Capital structure in line with target leverage
• NIBD/EBITDA at 2.9 end of Q2 and 2.4 on pro NIBD/EBITDA forma basis 3.5 • Share issue with proceeds of DKK 1.0bn 3.0 completed in June 2018 2.9 2.5 • Interest-bearing debt increased to DKK 9.5bn 2.4 2.0 • Board will in February 2019 review capital Times 1.5 structure and distribution
1.0 0.9 0.9 0.5
0.0 2016 2017 LTM Q2 2018 LTM Q2 2018 pro forma basis
76 Cash generation and CAPEX
• Cash conversion of 99% in 2017 Cash flow and investments • Cash flow boosted by Light Capital project DKK bn started in 2013 to reduce working capital 3.0
• Limited tax payments due to European 2.5 tonnage tax regime 2.0 • Investments expected to stay below operating cash flow for next cycle of asset investments 1.5
• Planned major CAPEX: 1.0 • 2018, outlook of DKK 5.0bn: • DKK 500m: dockings/ship 0.5 upgrades/lengthenings • DKK 150m: port terminals 0.0 • DKK 500m: new buildings 2013 2014 2015 2016 2017 • DKK 150m: logistics equipment • DKK 100m: IT-systems and other Operating cash flow after tax (FCFF) Investments • DKK 3.6bn: U.N. Ro-Ro equity value • 2019: delivery of 4 freight new buildings • 2020: delivery of 2 freight new buildings • 2021: delivery of 2 ro-pax new buildings 77 77 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 Channel 6 - 6 - - 100 15 Passenger 4 - - 4 - 100 28 France & Mediterranean1 3 2 1 - - 33 17
Logistics Division1 20 - - - 20 - -
Nordic1 6 - - - 6 33 19 Continent1 14 - - - 14 0 -
Chartered out ships 3 - 3 - - 100 23 Laid-up ships 1 - 1 - - 0 -
1 Includes VSAs (vessel sharing agreements) and SCAs (slot charter agreements)
78 78