DSV A/S

Jens Bjorn Andersen – Chief Executive Officer Jens Lund – Chief Financial Officer

Lars Topholm – Carnegie Casper Blom – ABG Damian Brewer – Royal Bank of Canada Robert Joynson – BNP Paribas Mark McVicar – Barclays Neil Glynn – Credit Suisse Joergen Bruaset – Nordea Markets Lars Heindorff – SEB Peter Testa – One Investments Aymeric Poulain – Kepler Stewart Todd – Lloyds

Thank you very much. After this fine introduction, I would also like to extend a warm welcome to everybody on behalf of Jens Lund and myself.

We look forward to the next approximately one hour taking you through the 2016 Annual Report of DSV. And after reading the disclaimer on Page Number 2, I do suggest that we flip to Page Number 3 which is the agenda for this morning.

I will start off the presentation with giving some highlights about 2016 and then, later on, moving on as point number 2, giving a brief update on the integration between UTi and DSV. We always also spend some time going through the three divisions, which is point number 3, after which Jens Lund will take over with a financial review, the outlook for 2017 we have given this morning, and Jens will finish off with also a slide about the financial targets of DSV.

So I suggest that we go straight to Page Number 4. We are super happy today in DSV; we feel we have published a very strong set of numbers which fully lived up to our own expectations.

We are tracking the plans that we have set out, and it’s very satisfactory to see that what we set out to achieve is also what we have achieved in 2016. So it gives us great pleasure to say that 2016 has been, by far, the best year in DSV, at least a year with the by far highest EBIT result, and also a year of a very, we would say, successful integration of the biggest acquisition we have ever done in the history of DSV when we bought UTi with closing January 22, 2016.

As you know, we did see a brief dilution of our numbers, initially due to the fact that UTi was loss making, but now we clearly start to see the positive impacts coming in. The gross profit of our Company increased a healthy 41% to just a number just below DKK16 billion.

And, maybe more importantly, we also saw a healthy improvement or increase in the EBIT before special items, which increased in 2016 14% to DKK3,475 million. Last, but not least, the financial gearing ratio is now just below 2 times.

We actually decided to go from one digit to two digits as we were very happy to see that the ratio went below 2 times; it is now a 1.95 times, which is important for us. When it comes to the earnings, you can see we have put an additional graph on the bottom of the slide on Page Number 4, so you can now see both the Q4 development and also the full-year development.

And when we look at this, to the far right, it may be interesting to see that there is a very strong earnings momentum in our Company for the full year. As I said, the EBIT has gone up 14%, but in Q4 we did see a healthy increase of 24%.

So of the DKK500 million increase in EBIT of the year, organic and M&A almost DKK200 million came in Q4, and this is clearly in line with what we also expected. So we are tracking the plans very, very closely and things are as we had expected.

So Page Number 5; it might be the last time that we have this integration update as a part of the main slide deck, it will probably move over to the appendix. We are becoming more and more one company now.

We don’t talk about UTi versus DSV, we are all DSV now. But, of course, we feel that it is appropriate just to give you an integration update in relation to the release of the 2016 numbers.

On the commercial side, it’s good to see that we have been able to successfully protect the core volumes that we acquired from UTi. The customers are, more and more, feeling at home also in DSV and we are very happy about this.

It’s also good to see that we have managed to rebrand all activities now. As I said just before, we are really one company now and we all act as one DSV.

And it has been a great privilege to see the enthusiasm also from all the good employees from UTi really embracing the DSV corporate culture, and also the branding, so that has been a very positive journey. What this means is, of course, that we feel we are well positioned to build up a pipeline and to go back and to take market share, which is something which, logically enough, maybe didn’t happen to a large degree in 2016.

But we have a clear ambition to get back on the market share, gaining track, you can say, in 2017 and organically grow at a faster pace than the market, which is something we have been able to demonstrate many, many quarters in a row before we bought UTi. When it comes to the cost synergies, our target of DKK1.5 billion annually is maintained and we are also following the plans that we have set out to execute.

The planned office mergers and migration to the DSV air and sea platform is actually completed. I think we have merged more than 200 offices, and we have lifted approximately 5,000 users out of the old UTi air and sea platform.

And the system it still exists, so to say, but not a single new shipment is made or handled in the old UTi, which is something which gives us great comfort. The integration of some of the administrative functions is progressing as planned; we still have a little way to go, but it’s also going the way we had set out.

So I know a lot of you have great interest in the cost synergy number, but we also remind you that we have always seen a further opportunity to improve the productivity after the final integration, and this is the famous small square at the far right to the upper-hand graph. It goes without saying that we will continue to trim the organization and to hunt for improved productivity also after the integration is over.

This is something at least we have seen every time we have bought companies also in the past. When it comes to the restructuring costs it’s also unchanged.

There was a little bit of confusion with the wording we used; some of you, by mistake, thought that we needed an additional DKK500 million in restructuring costs. That is not the case, let me make that very clear.

The total estimate for achieving the cost synergies is still DKK1.5 billion, and you can see we set out to spend DKK1 billion in 2016; it actually came out at DKK1.002 billion, so very close to that. And we still expect to spend an additional DKK500 million in 2017, taking us to the number of DKK1.5 billion.

So the integration is progressing the way we had planned, and we will now go to page number 6 which talks about the full year and Q4 in our air and sea division. We did see healthy growth in the EBIT in Q4 of almost 16%.

And as we have seen in the previous quarters, the volume growth was mainly driven by UTi. There is no doubt about the fact that we have not managed to grow as much organically as we have done in the past.

This was not unexpected; this is clearly in line with what we have seen in previous acquisitions also. In the year of the integration, sometimes the volumes they lag a little bit behind, but, as you can see, we have still a sizeable growth.

There’s been a lot of debate about the market developments and there’s been a lot of speculation about what impact would that have had on the margins. You can see we also saw a temporary small, I would say, margin squeeze, in Q4, mainly due to very high demand in airfreight, but also due to a sharp increase in freight rates in seafreight.

When we talk about this, you have to look at the graph we have at the top right-hand corner, where you can see the developments, and I will just come back to that in just a second. What we also took in Q4 was a negative one-off in connection with the decommissioning of the UTi air and sea system, which is called OneView, and our GP and EBIT was consequently negatively impacted.

Some of you have been asking about this, this morning, and we can say that the negative impact in Q4 is approximately DKK40 million to DKK50 million, which is not uncommon when you decommission a system. It was not perfect, to put it this way, the first couple of months after we took over and some of the profits we saw in Q2 and Q3 were just slightly overstated and we have corrected this in Q4.

So when you take that into consideration, when you look at the margins that we have for airfreight and seafreight, the underlying development is the 2% squeeze on airfreight and only a 1% margin squeeze on seafreight, so we do believe that we are in good shape. You can also see that the total volumes for 2016 came to a little over 1.3 million TEUs handled by DSV, which is significantly up compared to 2015.

And we also handled close to 575,000 tonnes in airfreight, which is also a sharp increase of almost 85% compared to last year. Last, but not least, it is extremely good to see the numbers for market growth; I cannot believe or I cannot remember the last time we saw market growth rates of 7% to 8% in airfreight, and also an okay market growth in seafreight of between 3% and 4%, or 4% to 5% for the quarter.

So good activity in the quarter and it’s going to be exciting to see if we can just see a similar development continuing into 2017. On page number 7, we talk about our road division.

Once again, I must say a fantastic result for the road division, surpassing DKK1 billion EBIT before special items for the first time in the history of the division, of course helped by a good development in the activities that we got from UTi in both the U.S. and South Africa.

They have really contributed in a good manner, and a good way, but also the old, so to say, classic DSV road countries in Europe, they have actually performed really, really good in the year. So we are optimistic about the division.

It seems like there are certain signs of a pickup in activity levels in Europe. Some of the German road tax numbers, they look quite encouraging, and also some of the other numbers coming out of certain major European countries, they look pretty good.

So it’s not a bad place to be, for the time being. So strong set of numbers from road, which we are very happy about.

Solutions, last but not least, before I hand over to Jens Lund, very strong set of numbers in Q4. I know it surprised some of you, and it surprised us a little bit but not that much.

The revenue growth was mainly driven by UTi, but we have to remember also the strong results that we saw in Q4 in DSV is also on a back of a very weak Q4 2015. So the comparison is actually not easy, but it is a little bit easier at least than what we have seen earlier.

We did see some tailwind from seasonality, especially in some of the new business we have gotten in from UTi is traditionally very strong at the end of the year. We saw an impact of that.

It’s also good to be able to say that runoffs don’t only always go against us. We saw that in air and sea but actually in solution it was positive.

We saw positive runoff from previous quarters of between DKK20 million and DKK30 million so that has been good for us. And last, but not least, we also transferred, as we talked about earlier, some business from air and sea into solutions which also helped us in a positive way.

So all in all, a good set of numbers for the solutions division. And overall, I can say we are very happy with the developments of all the three divisions.

I think I said that after Q3, and I’d like to reiterate that again, we do see a clear green light for all of the three divisions that we have in DSV. So with these words, I would like to hand the microphone over now to Jens Lund who will take us through the financial review.

Okay, thank you very much, Jens Bjorn, and we will quickly run through the numbers. I think it’s clear, if we look at Page 9 and look at the net revenue, that in the first quarters we had lower revenues due to lower freight rates.

Now it seems that the freight rates have increased quite a lot and we can see that the revenue is growing quite a lot. But what is important is, of course, gross profit and here we see that we’ve grown the gross profit with 41.3% in the quarter.

This is as expected and we’re very satisfied with this. On the cost side, we can see that the conversion ratio is on the way back to historical levels.

Of course, it’s been diluted a little bit by the previous quarters because we acquired UTi and, as we’ve spoken about earlier, we’ve lost some of the high conversion ratio due to the losses we have seen in UTi. But when we harvest the synergies, we go back to the levels that we used to have and this is basically what we see in the numbers here as well.

When it comes to special items we have spent DKK1.002 billion so very close to the guidance that we gave. It’s a coincidence but, nevertheless, we still have DKK500 million outstanding that we need to spend next year before we have completed the integration.

When we talk about financial items, we guided DKK300 million before we started the quarter and this is basically where we are. There’s a one-off FX gain of DKK115 million.

We’ve touched upon that before so we are also in line on financial items. When it comes to tax, the tax rate is a little bit higher than we’ve normally seen.

This is due to certain impacts of the integration. Normally, we would expect a tax level of 25%.

And one of the most important things on this slide is also if you look at the earnings per share, I think it’s something that we can be very pleased with, that the earnings per share have actually, calculated on a fully diluted basis, increased even in a year where we complete the acquisition of UTi. So it certainly proves that the synergies that we can extrapolate will be a very good driver for future earnings growth as well.

If we move to Slide Number 10, the cash flow, this is always interesting. Free cash flow somewhat lower than last year.

This is, of course, due to integration cost, but also due to net working capital not being where we wanted to be. This is normal when we transfer volumes from one platform onto another.

And we also need to improve the collection of, in particular, the volume that we have acquired; we are working on that as we speak. On top of this, we do have some volume as well as sitting as assets held for sale, so this is also something that we have to bear in mind when we look at the cash flow and the cash flow guidance.

But all in all, I would say that we are very satisfied with the development of cash flow bringing the leverage below two times. As you know, we would like to go into our target range; this is between 1 and 1.5 times EBITDA.

There’s still a bit of repayment to do on the debt, but we will soon reach our target range. When it comes to the return on the invested capital, needless to say that it’s been impacted by the acquisition of UTi and it’s somewhat lower.

But given the budget, and also the further optimization of our balance sheet, we do expect to come back to the historical levels within a year or so. So then we move to Slide Number 11, outlook for 2017.

We have guided between DKK4.2 billion and DKK4.5 billion in operational result. This is also, of course, in line with the guidance we gave on the synergies and it’s a growth of between 21% and 29%.

The financial items, I think I will just make a small remark here on that, because some of you have already noticed that it’s strange that it’s unchanged, but there’s a few things you have to take into consideration. One of them is that we do expect a little bit higher interest cost on our pensions.

Then we have a small buffer for FX fluctuations in there as well. So under normal circumstances, it could have been DKK30 million lower than what we have here.

But this is included in our guidance, because we do see that we trade more with emerging markets and there are more fluctuations on the currency side than we have been used to, so this impacts our financial guidance. On the tax rate, we will have a more stable situation and we expect a tax rate of 25%.

And when it comes to the cash flow, we have guided a healthy DKK3.5 billion in free cash flow. I think if you make the calculation on the back of the envelope, you will say that’s quite a strong cash conversion.

But this is, of course, because have to recover something from the working capital and also to release some of these assets held for sale. If you adjust for that, I think that the DKK3.5 billion is a good target for us and we expect to be able to live up to this.

A few other comments; basically some of the assumptions there listed below that we do expect a normal growth situation. This is the foundation of our budget.

And as mentioned earlier on, we still need to spend another DKK500 million. This is expected to be a cash-out in restructuring cost, so you can also use this information when you do your modeling.

We will now move to Slide number 12, financial targets. What we have written in the material that we have submitted to the market today is that in 2018 we expect to go back to the historical conversion rate, so the 2015 level.

And here are the financial targets that we have to achieve at 2020. Also in line with what Jens Bjorn said, we have to get further productivity improvements.

As you can see, it’s our normal financial targets; nothing has changed, so we just reiterate them. I’ll not go through them one by one because they are unchanged.

I think that was it on the financial review, outlook and the targets for 2020. With that, I think we can open the conference for questions and Jens Bjorn and I will be happy to take your questions.

Thank you.

Yes, congrats on the results. There’s three brief questions on my side.

Just to be absolutely sure on the one-offs in air and sea, the DKK40 million to DKK50 million, was it all booked as gross profit? Then question number two; when you mentioned you have seen some yield pressure in air and sea in Q4, you also appear quite firm that this is temporary.

So I wonder if you can put some words on why this is temporary and maybe distinct between ocean freight and airfreight. Then a third question that is to your guidance because, Jens, you just mentioned it assumed around 3% global GDP growth and assumed transportation volumes would grow largely in line with that.

But Jens Bjorn explained the Q4 growth was significantly higher. So my question is, if current momentum continues, would that represent an upside to your guidance, or would that more decide whether you end in the high end or the low end of your range?

Thank you.

That was some good and interesting questions. Maybe I’ll take the first one first, air and sea.

The correction was all hitting GP, that is correctly understood. It was simply a change – it was slightly overstated profits, so it all affected the GP line.

When it comes to the yield in air and sea, of course when you ask us to say what will the yields be in 2017, as you know it’s impossible to say. We have seen a very, very strong finish in 2016 when it comes to volume.

We did see some high tech launches, which really also inflated the airfreight volumes tremendously. We did see the collapse of Hanjin, which also impacted the seafreight market very much.

It seems like it has stabilized now and, of course, we carefully talked about if we could say that this was temporary. We did see it as temporary.

We do believe that the yield situations will be stabilized now for us and, of course, there would be continued volatility as we have seen in the last many years. But the squeeze that we saw, in DSV at least, with the characteristics that we have in our current portfolio, we see that that is temporary.

Maybe, Jens, would you take the last of the three questions?

If we take the guidance, it’s correct, Lars that we have used a normal volumes into our guidance. Of course, how we perform depends on the market, that’s one thing in our guidance, but also the momentum that we need to build up in our sales again.

We need to have the external focus instead of having the internal focus that we have seen in 2016. So it’s a combination of both the market and the other thing that we have to deliver on.

It’s hard to say how high in the guidance we will reach, but we will see that as we go along.

Okay. Thank you very much.

Thank you and thanks for taking my question. First question relates to the synergies and the DKK600 million guided in 2017.

Can you talk a little bit about how certain you are of those synergies? Is it basically things that are already set and now just has to feed through to the P&L, or what’s the uncertainty in those synergies for 2017?

And maybe also a little bit about the timing of those synergies, whether they’ll be front or back end loaded. Secondly, after you acquired UTi you talked about a potential client loss of around 5% in air and sea.

If you could give any sort of update on what you’ve seen there, if that is possible to measure? And then finally, a bit of household here, if you could give some insight into your CapEx expectations for 2017.

Thank you.

I can talk briefly on the synergies. When we have to achieve synergies in 2017, you need to execute or to pave the way for those synergies, before they need to hit the P&L.

So that means that, with a few exceptions, we have executed on the synergies in 2016, and now we just need to see it hitting the P&L in 2017. So that’s why we are fairly confident that we will achieve the synergies.

And also, as a consequence, it is logic to anticipate that actually the synergies will be front end loaded, so we will see a higher impact in Q1 and Q2 when it comes to the synergies. It is simply issues or activities that has already taken place in 2016, that we will, hopefully, see feeding into the P&L here, at the beginning of this year.

I don’t know, Jens…

No, that’s correct, about the synergies. And you talked about the customer loss, I think the volume development that you are seeing in Q4, and the way we’ve managed to hold onto the customers, it is fairly unchanged from what we have said before; it can be up to 5%.

We’re a little bit uncertain to what the actual volumes of UTi were, because of the lag of the data and information quality in UTi. So I think we stick to that.

I think we are actually very pleased. And if you look at the synergies we guide, we haven’t upgraded them, so it also means that we need to know the headcount that we had planned for these volumes.

I just think that it also underpins it. When we come to the CapEx situation, I think we get a situation where you under-invest your depreciation and amortization a little bit, like we have seen before.

This is a normal situation that we have seen also in the past and this is also what you can expect, going forward.

That is very clear. Thanks a lot and congrats on yet another strong quarter.

Thank you.

Hello, good morning. Thank you for taking the question.

I’ve just got two or three questions as well, please. First of all, coming back to the working capital, could you tell us some idea of what sort of progress you’re targeting on the billing days, not just on air and sea, but also if you give us a little bit more details of, in particular, the solutions business, where the doubling of revenue has seen a significant expansion in the working capital requirements?

And just give us a feel how much of that, now you’ve got almost a full year of UTi under your belt, is structural rather than something that can be addressed, i.e., the DKK80 million going to DKK816 million working capital in solutions. Secondly, with UTi bringing a lot of more India into the business, could you expand a little bit more on what you see the opportunities there are, as well as the challenges and how you’re planning to leverage those?

And then very finally, within the Annual Report, I know it’s on about page 67, you’ve got about DKK1.4 billion of cash that’s restricted or trapped in countries. When you think about the point to trigger the next round of share buybacks, which feels like it could come as soon as the second half of this year, how do you think about that DKK1.4 billion?

Is it addressable, or is it something that you would have to take into account when considering, if you like, the effective net debt to EBITDA? Thank you.

Good, Damian. I will give Jens just a few minutes to flick through to page 67 in the annual accounts, and then I will maybe take the question of India.

We are very excited about India. We have been in India for 10 years before we bought UTi, and we have developed – until the acquisition of UTi, we did develop fairly well, but it never really took off.

I remember I visited India at the five-year anniversary, five years ago, and I’ve also been travelling to India in 2016. And after the acquisition of UTi, and I must say we have a significantly different Company now, I cannot remember exactly, but I know Samia, our country manager for air and sea, will kill almost if I don’t mention that they are very close to being a top 10 country, EBIT-wise now, at least between 10 and 15, and I know that they have a clear ambition of improving that.

You know we have rankings for all countries and it is every country manager’s ambition to move up in these rankings. So India has become much more important to us.

We also do a fair share of contract logistics, or solutions activities with some very large global blue chip companies, which is also something which can increase a lot. There’s a lot of potential in India and I know, size-wise, it’s a very large country, but we also have to remember it’s still not China, from a volume perspective.

But for us it’s new, and it’s very, very interesting for us.

Good, then we’ll talk a little bit about working capital. And as you rightfully said, solutions is, of course, we’ve seen quite a dramatic increase.

They have one particular activity in there, which absorbs a lot of working capital. We managed, at the end of last year, to make an arrangement with a particular customer to change that way we do this business.

This one item represents $50 million, so it’s quite a large proportion of that business. On top of this, it’s probably one of the areas where we have moved their volumes in air and sea onto our production platform.

And we need to get the solutions volume onto our platform as well, in certain areas. So here, there’s still some improvements to be made as well, so it’s not unrealistic that we will have at least able to halve or do a little bit more on the working capital in solutions.

We will have to see if we can achieve all this in 2017, but we have a good plan for this. When it comes to the other areas, it’s clear that also here we see some pressure on the working capital from our last customers.

But we see that, on billing days, as you rightfully mentioned, there’s still some ground to cover. We’ve got UTi colleagues onto our platform, but they are not as fast in billing and collecting, as we are.

So here, we also have a project that is actually running right now where we increase the focus on this. This is done in close collaboration with the air and sea division where we have some ground to cover.

Then we talked about our leverage, we are at 1.95 times. And if you look at the cash flow and its split normally throughout the year, I guess your back of the envelope calculation that you made, that says we have to do a buyback in the second part of the year, I think this will most likely be correct.

We will assume a normal capital allocation policy, and repayments to the shareholders as soon as we find it adequate. And also that we are within the range that we have guided, because it’s important for us to make the statement that we are now back to normal, and that also on the financial side, that it’s business as usual after the acquisition of UTi.

So we will follow this closely, and in the second half, I can’t make a promise, but it looks promising, I think I can say that.

Okay, thank you. And just to be clear, when we’re thinking about the net debt/EBITDA, and particularly net debt offset by the gross cash, when you look internally at the triggers for a share buyback, does that DKK1.4 billion of restricted cash get counted towards net debt, or do you think of that separately?

No, we don’t, we look at it as interest bearing debt. As we move ahead with the restructuring, there is some trapped cash in there, but we’ve already made some steps and we will be able to release some of that also when we go into 2017.

So it’s not restricted in sort of a long-term way, but it’s something. UTi had a very complex structure with ownership on the British Virgin Islands, and it’s quite a challenge to untangle that.

But we have a plan that we execute on, and we take it step by step. And here, in 2017, we will be able dissolve that, so the cash can flow freely within our Group, which is normal for DSV anyway.

Okay, thank you. That’s very clear.

Thank you very much, Jens and Jens.

Good morning, everybody. I have three questions, if I may, focused on the air and sea division?

First of all, just on volume growth, you said that organic volume growth wasn’t as strong during 2016 as it has been in the past. Could you maybe just provide some color on what you estimate organic volume growth was in 2016 for both the air and the sea businesses?

And also on the extent to which you would expect organic volume growth accelerates in 2017 now with the UTi integration is at a more advanced stage? That’s the first question.

Second question is just on unit profitability. The gross profit per container was down by about 6% in dollars in Q4 versus Q3; given that container freight rates have been strong during Q1 so far as well, should we expect that margin pressure to continue into Q1?

And then final question just on procurement synergies; could you comment on the extent to which you were able to derive procurement synergies from the container shipping lines and the airlines during 2016, and whether that could accelerate in 2017? Thank you.

Yes, I will try to answer these questions. As much as we would like to, we are not able to say exactly what the organic development has been at DSV.

The quality of the data that we have received from UTi they are simply not strong enough. We have debated that, both externally and internally, for the whole 2016.

We look so much forward to, within one or two quarters, be able to track exactly what is happening with the numbers on a year-on-year basis. So it’s simply not been possible for us to say what the organic developments have been.

What we can say, though, is that we have a very, very clear outspoken ambition to, I don’t want to use the word accelerate, but we want to grow faster than the market in 2017 when it comes to all the three divisions that we have. We have done that, prior to acquiring UTi, for a number of quarters in a row, and it is a clear logic, to my mind, that a large freight forwarder like DSV should take markets, and we should grow at a faster pace than the market.

If that is not happening during 2017, we will be very disappointed. When it comes to the unit profitability, we have touched upon it a little bit earlier during this conference call.

It is correct that we did see a squeeze in the margins in Q4, and it is not our opinion, at this present moment in time, that this will continue in Q1. This is not what we see so far.

Again, this year has also started very, very strong, as you have probably seen from different statistics. It could also have been impacted a little bit with the Chinese New Year, so we have to be careful not to put too much emphasis on this.

But we do believe that the margins that we have, if you take maybe the full-year 2016 as basis, that would be a pretty relevant number to use. Last on the procurement, it’s also logic that I would be very, very disappointed if we don’t see a procurement benefits from the added volume that we have now.

We have 85% more airfreight, as you can see that we had a year ago, and also more than 50% more containers. I know for sure, I have been in meetings with our suppliers myself, so I know they do kind of treat us nicer now than they did earlier.

And, of course, we do expect to see that reflected in the procurement rates or the rates that we get from the suppliers. The problem is a little bit, as you know, that we sometimes use this in the competitive landscape.

This new strong buying power that we have is also something that we will use to either retain existing customers which could go out on tenders, or to be successful in tenders for new customers. So sometimes, the clear effect cannot be seen in the P&L because we use it as a competitive weapon to gain market share.

But we will, for sure, procure airfreight and seafreight more efficiently in 2017, and we already did it also in 2016.

Good to hear. Thank you.

Thanks.

Good morning. Two quick questions from me.

First of all, could you give us a little bit of color around the type of initiatives that will drive the extra profitability from 2019 onwards, after the main plan has been executed? And the second question is just back on the free cash flow.

If we’re assuming that you sell all of the DKK800 million of assets held for sale, is the rest of the difference between where you were in 2016 and where you want to be in 2017, adjusting for higher profits and things, effectively working capital or is there anything else in there? There’s no swing in tax paid or anything like that?

Okay.

There were two questions for Jens Lund, Mark, so he will…

I’ll take it. If we take the assets held for sale, there might be some new at the end of the year.

So it’s not necessarily that you get them all in. You have to, what can I say – when we do the consolidation, sometimes we will buy a piece of land or be in the middle of construction or whatever, so it’s like an asset held for sale, and some consolidation work to be done here when we’ve bought UTi.

So we will bring that number somewhat down and I think all these assets will be gone, but there might be a few new ones there. So that’s basically the situation on the assets held for sale.

This is the reason why that the – otherwise you would get an even stronger cash flow, if you understand what I’m saying. So that’s the explanation on that.

And if we look at what is going to drive the synergies afterwards, basically what we’ve always experienced is that our normal business development and process optimization, if we want to put it like this, once we get it integrated, once we get everything stabilized, then we have road maps for continuous improvement. Then we see that, with the extra volume that we got, we are able simply to get the productivity higher because we can take even more advantage of some of the processes that we run, or the IT tools that support our processes.

So this is basically what we expect to see, so further leverage on our infrastructure and, of course, best practice throughout the Group because there are certain areas where we can improve more than other areas. So this is basically normal grinding, if you want to put it like this.

Okay, that’s great. Thank you guys, very much.

Good morning everybody. If I could ask two questions, please?

The first one with respect to clearly a lot has been done in terms of integrating UTi, so I’m just interested in terms of can you provide some color as to how much less senior management time may need to be spent on that integration process in 2017, relative to 2016, with a view to spending their time on improving the commercial performance, as you touch on? And then the second question, clearly there are some strategies from both suppliers and customers trying to disintermediate freight forwarders; however big a theme that becomes eventually, we’ll obviously see.

But just interested in terms of how you consider your own vulnerability relative to the long tail of smaller competitors that you compete with and are trying to gain share from.

Two very good questions. Why don’t we start off with the last question first?

It’s correct that the – I guess the word of the year in 2016 was disruption; we are being met with that also. Can we be disrupted?

What’s going to happen? We are of the opinion that also our industry will change.

We are on a digital journey ourselves. Digitalization plays a far, far more important role in DSV now than it did before.

We actually do, maybe we are not good enough at branding what we actually do, like others, but we are actually highly digital in the way that we communicate with our customers, with our vendors internally, and we have, to a very high degree, always – already digitalized our Company. Of course, we can still continue that journey and it’s something that has a high focus.

This is also expensive sometimes. We need to invest significant amounts of money in IT, like we have done in the last many years.

And this is something that we, as you say, see as a clear advantage, not only for us but for other of the larger players in the industry. This is something, when it comes to building specific customer unique solutions, that some of the small competitors, they simply cannot do for financial reasons.

So that should actually be a clear advantage for the bigger guys in the industry. And I also believe that we have – all the big guys as a whole over the last five years have communicated that we have taken market share, meaning that we have to take that from the smaller ones.

It’s correct also, as you mention, that we’ve spent a lot of time in the management of the Company on integrating the acquisition of UTi. It was a no brainer.

We spent $1.3 billion so, of course, I guess all our shareholders would expect that it had our full attention. And I can tell you, I have never in my life been traveling as much as I did in 2016 and I think the same goes for you, Jens.

It’s been a true pleasure and we have learned a lot and it’s been important for us also to go out and meet also both the old and the new employees of DSV. We will continue to do this but, of course, we will slightly or we will, as time goes by, we will change our priorities more to growth-related initiatives, where we will maybe not sit and look so much at the old integration plans, but more about participating in customer meetings where new business is on the agenda.

So as I said at the beginning of the presentation, the integration is almost over and the communication that you will hear from us about integration will also slowly fade away as we are becoming one company.

That’s great. Thanks for the color, Jens.

Thank you very much and thank you for taking my questions. Just looking a bit more ahead, you’re still in integration mode but we have been talking about future M&A.

If you look at the market developments, particularly in the U.S. versus the EU, would you give any color if you see any markets or activities which is more interesting in terms of future M&A?

And also just a household question; when we look at the guidance, to my knowledge you haven’t provided any breakdown on division. Should we expect a similar breakdown as in 2016, or should we expect a different run rate than historically seen, given the recent strong performance in solutions?

Thank you.

Maybe I will just touch upon the M&A and then, Jens, you can go through the guidance. We’ve said that we will keep our eyes strictly on the ball right now, meaning the finalizing the integration of UTi, making sure that we will also see the effects of what we did in 2016 in the numbers.

We have a saying in DSV, from PowerPoint to P&L, which is very important. It looks all nice in PowerPoint but we have to make sure that we will also see the effects in the P&L.

We will spend a lot of time on that during 2017. Then it is correct what you say, we are still in a very fragmented industry.

Our market share is still insignificant, even though we are one of the biggest transport and logistics companies in the world now. So if UTi turns out to be a successful and value-creating acquisition, which we do believe it will be, then I guess it will even further underscore that we are correct in the strategy that we have in DSV that we want to take part in the consolidation.

And, as time passes by, I guess the organization will be more ready also for new M&A. It’s still a little bit too early but, as 2017 progresses, I guess we can say we will be open.

We will slowly start to get the M&A machine up and running again, and maybe not executing on anything significant but at least see what is out there and do some initial deliberations internally. I think M&A has traditionally created a lot of value for shareholders in DSV and, if UTi will do the same, I think it will mean that we will also be ready to consider new acquisitions which I cannot say should be – we are open to most things, let me put it that way.

We don’t have a favorite division or geography. It would be based on the opportunities that will present themselves.

Thank you.

Okay, and then we talked a little bit about the divisions and the guidance and how we should see things, going forward. I think you’re aware that we have made extra good result in solutions here in Q4 that’s not the normal run rate.

I would probably estimate a run rate in solutions with something with a 4 and a couple of zeros, and perhaps this could be a good indication. And then I think you can spread your guidance on the other two divisions then; we normally don’t guide on divisions but here, of course, if it’s a little bit unclear we can help a little bit.

Thank you very much.

Good morning, gentlemen. Two questions from my side.

Firstly, regarding the road division; we’ve been talking about this before and, Jens Bjorn, you were also fairly upbeat about volume developments when you talked about the division in your presentation. But despite that, we can see that gross margin continued to decline.

I just want to hear your gut feeling about that, whether this is something structural or whether you actually believe this volume is picking up, that you can also start to reverse that gross margin trend, going forward. That’s the first one.

The second one is back to the cash flow statement. We’ve been talking a lot about that, but I wonder if you could give us a bit more clarity, first, regarding how much of the DKK800 million you expect to offload on the balance sheet this year, i.e., what is the underlying, I would say, normal CapEx.

And then secondly, what is the assumption regarding net working capital which is built into this free cash flow guidance? Is it back to the 1% to 1.5% which is your target?

Thank you, Lars. Thank you for some good questions.

Let me start off by talking a little bit about roads, the old classic division that started DSV in 1976. It’s correct that there’s been a lot of up and down and volatility also on the gross margin.

And I know this is, of course, also now impacted by the acquisition of UTi, but it is also very much affected by an increased share that we have seen in domestic distribution, that has diluted the margins a little bit. So we do believe that – we can see, in our own internal statistics, that the underlying margin is actually quite stable.

I think it will be easier now to compare sequentially in the coming quarters, and we hope that we will be able also to demonstrate that the margin will not deteriorate any further. It’s correct that I was quite upbeat about road.

Road has been through some difficult years also, and it is still a very, very competitive, very tough market. But we start to see that some of the power, you can say, that we have also transpires into the P&L.

You can see that we have grown our volumes 5% where the market only grew 2% to 3%. Some of the previous troublesome areas that we have had, they start to improve.

The southern part of Europe for instance; Germany is really powering ahead, which is probably the most important country from a road perspective. So Sweden, Denmark also we shouldn’t forget them.

So it’s nice and we will really have operational leverage opportunities in the road division. If we start to see okay growth, we will be able to increase the productivity, so the cost base will grow significantly slower than the top line if we should get into that scenario.

But again still uncertainty, geopolitical unrest, elections in many European countries, so let’s be clear that we are not painting a too rosy picture here.

Okay, and when we talk about the cash flow, I think you could view the cash flow situation in another way. You could say if you take our guidance, and if you take the middle of the range, and if you then you put special items in and all the other things that you will find, tax rate, interest costs and stuff like that, you will come to a certain cash generation.

Then on top of this, in order to reach our guided range, you have to produce a certain number in cash flow. This could be a number, let’s say, of DKK800 million all in all, or something like this, and that will then come from the items you have mentioned last.

But we don’t guide specifically on what will come from the working capital, or what will come from the net effect of assets held for sale. So this we won’t give any more color on, but I think it’s fairly specific what we need to do.

And at the end of the day, with the working capital we have to get it down to the 1% to 1.5% level that we have guided.

And maybe a follow-up on that then; how long do you think it will take before you get to that 1% to 1.5%?

We will cover some of the ground here in 2017, but if you look at the ABX acquisition, it also took a while before we managed to get the working capital. So it will probably be into 2018 before we have finalized all this work we are doing there.

Okay. All right, thank you, guys.

Thank you for taking the question. I’m interested in what you can do about improving the commercial performance at UTi; so how important is the roll-off and fixed term contracts, and are those done now at year end?

Where are you on repricing the base to improve the gross profit per unit? And maybe just generally on business momentum, to shift that and maybe recover the lost volume maybe with the fixed contracts leaving?

And then also on the synergies, you talked about the front loading of the synergies into 2017, your employee count is also quite a few hundred below where we thought it would be at year end. Can you comment as to whether you think that that might also mean that you end up pulling in the 2018 synergies into 2017?

Thank you.

I think we have now realigned the commercial organizations to the DSV principles. Of course, we have some inherited contracts from UTi, also especially in solutions that ran over many years, which is not necessarily bad.

As you remember, the solutions activities that we took over from UTi, they were actually profitable. So it’s more on the air and sea, they have all been aligned to DSV, we give short contracts now.

And we have also been, and this is probably also why we have seen a slight lack of growth in Q4, we have been more selective on some of the opportunities. We have tried to protect our profitability, and that has always been the most important part for DSV.

So we will have to see. I think we are already now, we do very, very clearly believe that we have a much better product, a much better network to sell to our customers now.

We are much better equipped to go out with confidence now and sell a product. 2016 has been a difficult year, a lot of integration; some of our customers have been hesitant to give us new business.

They had like existing customers, a little bit of wait and see approach, let’s wait and see how this integration goes; we are not giving you more volume right now. I think that is slowly changing now; the quality KPIs are back to where they were prior to the acquisition.

We have restructured the sales organization with a very strong Chief Commercial Officer for each of the three divisions. And I think, actually, we are in a good spot to go out and hunt market share now.

And basically, all we’re asking ourselves, or we are demanding from ourselves, is to get back to what we did before we bought UTi, and that was growing the volume at a faster pace than the market.

Okay. So you think the gross profit performance per unit at UTi business is now basically in line from 2017 onwards with the DSV business, and that the business momentum won’t be affected by repricing?

It will not be affected by repricing, but I think we have been diluted a little bit by some of the volume that we got in from UTi. We did have a clear superior GP per unit before we bought UTi.

But if you assume the full-year yields 2016 as maybe the level, going forward, then that’s probably the best current guidance we can give at this moment in time, which is slightly lower than what we had before.

Okay. And then on the synergies, please.

On the synergies I think we will have to stick to the plan that we have prepared and sent to the market initially. I think what you have to bear in mind is that infrastructure, if we have to do IT projects, or if we have to move into joint facilities, it takes some time to do; even if we have good people that can work fast, it’s not possible to do it overnight.

On top of that, there are some legal and some union stuff as well that needs to work out for us. So also these things they do – we have taken all the easy things we could do and now we’re working on some of the harder topics.

It’s not that we can’t figure out how to do it, it just takes a little bit longer.

Right. Okay.

Thank you for the answers.

Yes, good morning. The first question is just a bit of clarification on this gross profit per tonne, and gross profit per TEU, in the fourth quarter.

So you say there’s a 2% impact year-on-year from the FX, there is also a 3% impact from the restatement, and then there’s a dilutive effect from the consolidation of UTi. What is exactly the dilutive effect, just to quantify the like-for-like gross profit per tonne, or gross profit per TEU, trend?

On that as well, I’d be curious to know, given the surge in volume we saw in the market in the fourth quarter, if there was any particular industry that led that volume surge? Or if it was a broad-based development?

And last, but not least, in the Annual Report you refer to the arrival of new entrants from the digital space in the market, and I understand Amazon is planning to launch an application for Truckload business in America in the summer. And I was curious to see if you saw an impact on UTi if it was a threat to the market, or a new opportunity for you as well.

If we look at the GP per TEU, I think the market, or the impact that we saw in the margins squeeze is probably 1% to 2% in our number. So it’s not something dramatic and we do expect that it’s a temporary phenomena.

As we talked about hi-tech where we have seen a lot of volume moving in the fourth quarter. So I think that’s on the GP per TEU.

If we look at the market in general, and Amazon moving into the market, there’s a lot of competitors in freight forwarding and we have not, so far, seen any direct impact on the UTi business. It will be interesting to follow how they develop their business, but you have to bear in mind that it’s not necessarily a service that is targeted at customers that we serve.

It’s probably more to the smaller clients they’re looking at right now, as far as I’ve understood.

Perfect. Thank you.

Yes. Good afternoon and good morning gentlemen.

Many thanks for taking my question. The first one on air and sea.

You highlighted the sharp increase in freight rates in Q4; what sort of follow-through has there been in Q1? There were certain factors behind the hike in rates in Q4, but how much follow through for Q1?

And my second question is on UTi. Do you see any negative impact?

Are there concerns about the change of President in the U.S.? Mr.

Trump has upset a lot of people in the U.S. regarding the trade agreements; do you see any negative impact for UTi there?

Let’s start with the new President of the U.S. It doesn’t necessarily change anything in particular for UTi.

If something will change, it’s going to be for the whole of DSV. We are relatively relaxed about it.

Of course, we are very pro free-trade agreements and I don’t necessarily believe that is the case for Donald Trump. But we think, from a practical point of view, in the supply chains of the world are extremely sophisticated now and it will not be possible to change that significantly.

It can have a small impact is something which is not necessarily too concerning for us. When it comes to the rate going into the new year, of course the Chinese New Year has played a big role.

There was a big surge that kept a hand under the rates up to Chinese New Year. Now it’s going to be interesting to see what happens with the rates, but I guess we will get into an environment which is more normalized in 2017.

But it’s pure speculation; we don’t know exactly what’s going to happen. But one thing we can say for sure is that they will be volatile; that is extremely likely.

Okay. Thank you.

Then, I would like to conclude this conference call by thanking everybody who listened in. Thank you for all of you who came up with your intelligent and good questions.

Maybe just take one moment also to extend a great thank you to all the hard working, fantastic, wonderful, employees of DSV; you’ve done a fantastic, tremendous job in 2016. We are proud of you.

We are sure that this will continue also in 2017. Thank you for that.

We will, as we normally say, go back, work hard now and we will be back with the Q1 numbers before you know it. So on that note, we would conclude this webcast by saying thank you very much.