DSV A/S

Thank you very much. And welcome, everybody to the full year 2021 results here from Hedehusene, Denmark, we have as normal prepared a small presentation folio that we will go through and we will finalize the session with the normal Q&As.

We will ask you to have a look at page number 2 and read the forward looking statements first. And after you have done that maybe go through the agenda for this afternoon on page number 3.

We will split the presentation between Michael Ebbe and myself. I will take the first part.

And then Michael will take the remaining parts. And then we are, as you heard also, joined by anyone Jens Lund, who I'm sure is more than willing to also assist if you have any questions later on.

So we will all answer questions, all the three of us. So let's go straight into it, to page #4, the highlights of what we can only say is truly remarkable, unbelievable year.

Fantastic results like we had not even dreamed about achieving when the year started, 2021. Amongst others, we had four upgrades to the earnings during the year.

And we ended up much, much stronger than what we had hoped to believe. A year characterized also by a great degree of volatility and disruptions on the markets, which I'm sure you're all 100% aware of, still also having to deal throughout the year with the COVID pandemic did not make things easier.

Despite all this, we have achieved a record breaking result that everybody from DSV, who was listening in, can be extremely proud and happy about. It is truly amazing.

We're very happy about that. On top of the topics I mentioned before we also managed to acquire Agility GIL during the year, slightly earlier acquisition that may be what we had expected.

But sometimes when the opportunity is there, you have to grasp the opportunity. We did that.

And we're very, very happy with the integration. I'll come back to that.

The integration is progressing really well. This morning, we have given 2 guidances; for the future one, of course for 2022.

Where we now have an EBIT guidance of between DKK 18 billion and DKK 20 billion. And we have also updated our long term financial targets.

We're very happy to sign off a little bit on the on the strategy of DSV of value creation. After all, what you do get as a shareholder is some sort of development in the earnings per share, we are very happy to be able to announce that we have shown development of 20%, annually CAGR for the last 10 years.

And if you go back even to 20 years, the performance is not significantly lower than that. So this is fine.

You can read the numbers yourself. I'm sure you've done it already this morning, strong end to the year, Q4 being strong.

And also, we managed to exceed the guidance we had given to the stock market with an annual EBIT result of DKK 16.2 billion which is up 70% year on year. So yes, good results.

Page 5, the Agility integration. We do expect the integration to be completed during Q3, when we do get to the end of Q2 most will be done.

We still guide for a full year impact of DKK 3 billion like we have said in the past. Everything is running as it should so far.

We're happy to be able to announce that 39 of 63 GIL countries have now been onboard to the DSV Air & Sea platform. And that represents approximately 75% of the GIL revenue.

So no surprises. Seems like our new colleagues are enjoying the new company, we are at least enjoying their company, inside DSV.

And as we have said, with previous transactions, we do feel that we are much stronger and better company now than we were as 2 individual companies. So let's go into the divisions starting off with the powerhouse of Air & Sea who have also this quarter or the past quarter in Q4 shown remarkable development.

We've seen significant EBIT growth driven by strong gross profit, we will talk about that a little bit later on the yields, but also the division have exercised what they normally do, a continued strong cost discipline. So that has been great.

We have also seen throughout the whole year, the full year impact of the Panalpina acquisition, but also GIL in Q4. I think it's fair to say that the results, the standalone results of GIL surprised us, they were strong.

They had also enjoyed a good year, like what we saw in DSV. So we're very pleased about that.

You can see it yourself. We have surpassed 100% growth in the quarter in EBIT and about 83% for the full year; ending up with an EBIT result for the full year of DKK 12.7 billion.

You can also see, I did read some newspaper articles that our EBIT margin was a little bit under pressure, I felt that quite hilarious to be honest to read, everybody should be 100% aware that this is a mathematical consequence of the very, very steep increase in revenue that we have seen. So of course, EBIT margins could get diluted a little bit.

But in this environment having above 8% in last quarter, I think that's pretty strong, you can also see the conversion ratio which has plateaued a little bit above 50%. Good.

A little bit on the 2 markets, air freight and consequently sea freight, you can see the developments on the volumes and the yields on page #7, the gross profit yield have been positively impacted by the market situation. We are pleased about the development on the market also.

We do estimate that our organic growth in Q4 has been more or less in line with the market, which is good, when the yields are developing as positively as they have been. Very, very pleased here with the charter network, the legacy Panalpina charter network that we have in air; we have developed that even further and it represents now 12% of total volume.

So it is something but we are still cautious not getting into a situation where we do have capacity that we cannot fill. It's very difficult to say exactly how long the current market conditions will continue but we do expect for airfreight that they are likely to last well into 2022, maybe even for the duration of the whole year.

Yes, you can see also the market estimate. It's still pretty good numbers the market has grown between 10% and 15%.

Mainly also driven by the disruption we have seen in sea freight moving certain volume from sea to air. Page #8 is sea freight.

Almost the same development, yields up also to new record levels, markets volumes less favorable than what we have seen in air freight. We do actually believe that the market was negative in Q4 in terms of volumes between 0 and minus 3%.

But we actually managed to grow ahead of that, which is good to see. Also here, it is not unlikely to estimate that the current market conditions with great disruptions will continue for a great part of this year.

So check the box with Air & Sea, once again, fantastic performance. We respect the performance of the division very, very much.

Road, also on page #9, new all time highs, also new records for the division; above DKK 500 million in the quarter which is 20%, up year-on-year; 30% up for the full year. So Road is closing in on DKK 2 billion, the DKK 2 billion mark EBIT, it's not that long ago, they were on DKK 1 billion.

So that's very, very, very good. Also, there will be challenges and interesting things happening on the Road market this year.

Market is characterized by high activity levels, but also tight capacity driven by -- partly at least, by the EU Mobility Package, which will lead to some sort of increase in the pricing, which we are in the process or we have already passed on to the transport buyers. But very, very strong results.

It's fantastic to see also good stable development on the conversion ratio. And also EBIT margin above 5% with a high turnover is very satisfactory for us to see.

So congratulations also to everybody from Road. The last division, before I hand over to Michael, is the Solutions contract logistics, they are now breathing the Road guys in the neck, as we say in Danish, so they're coming from behind with a very strong performance in Q4, significant EBIT growth, good development on gross profit and also the division have managed to keep the costs under control.

We do continue to see a lot of demand for the services that we offer in contract logistics or in Solutions. And we see a high utilization of capacity.

And there are still lots to do in Solutions. There has been a lot of automation projects, which we have only initiated.

There is a lot of consolidation both of the physical infrastructure and the digital infrastructure. So we expect to see benefits from that.

Like we saw in particularly Air & Sea, we have also seen a very good operations from GIL in contract logistics. I would not say they have surprised us, but it is probably a little bit better than what we expected, the operational results.

So we are super happy about that. And I think the margins also here like with the 2 other divisions they can be compared to most in the industry.

So we are pleased about that. So I guess, Michael, with that said, over to you.

Thank you very much Jens Bjorn. Then a couple of highlights from the P&L on Slide 11.

It's clear that by the acquisitions of the GIL, we see an impact in the P&L on almost the entire P&L, which is reflected in Q4, we can see the revenue growth is driven by the higher activity and also the higher freight rates and it also have an impact on the net working capital, which I will come back to in a couple of minutes. The strong growth is also reflected in our absolute GP numbers.

So that's nice to see that as well. Also resulting in conversion ratio, which is at a record high level, also leading to the fact that we will readjust those a little bit.

I think as Jens Bjorn mentioned it previously and we will also come back to it in a couple of slides as well. And another thing which can be seen on this one that is that our number of FTEs has increased.

This is of course due to the fact that we acquired the GIL, we also have a couple of minor other acquisitions, and then also the increase in our capacity. So that's the reasons for this.

If you look at the tax rate, it's 24.5%, for the full year 2021. It's also impacted by the acquisition.

And we will expect to lower that later on. And then Jens Bjorn mentioned the earnings per share.

And you can see here, the growth in earnings per share is significantly 92% from full year 2021. So that's also good to see.

If you take the next page, #12, we have some highlights from our cash flow statements. And one thing that is easy to see that is the group growth in our net working capital, we have tied up quite some funds in net working capital.

And that is due to the fact that again, the very, very high freight rates, addition of GIL in Q4, and especially within the Air & Sea division, where you can see the growth in revenue is 127% almost. So that is, as of course impacting the net working capital.

We still do believe that we have it under control, we have not seen any increases in our overdues. And we do, of course, follow tightly up on that one.

And also to make sure that that the business they issue the invoices as soon as we can, and we -- we would like to have the net working capital to amounting to roughly 3% of our full year revenue. Then the cash flow from the investing activities is impacted by a cash position that were in GIL.

So that's why it's a positive one here. If you look at the net interest bearing debt, we have this year or in 2021, we have issued some corporate bonds amounting to in total EUR 1.6 billion with a duration of 10 to 15 years.

And that of course leading to the fact that our interest bearing debt has increased on all of these 3 issuance is well less than 1% in interest rates. So the -- so that's our financing is in good shape there.

Our gearing ratio is for end of 2021 is 1.4. So that is well below our range.

A little bit about the cash flow. If we turn to page #13.

We have a status of our share buyback and the dividend. We have today launched a new share buyback program of DKK 2.5 billion starting today and running until we will announce the Q1 in April 26 in 2022.

We've closed the latest one share buyback earlier this year. So we've bought 13.3 million shares bought back in 2021.

We have 6.6 million of treasury shares. And we do plan to reduce the share capital with 6 million shares at the AGM.

With this new share buyback of DKK 2.5 billion that will correspond to an allocation to our shareholders of a little bit more than DKK 4 billion for the first quarter here in 2022. Of course, the share buyback is announced and also an increase in the dividend that are the ones that are impacting this one.

If we go to slide #14, I think as Bjorn already talked upon the fact that we have issued a guidance with a range from DKK 18 billion to DKK 20 billion. It's a -- we have of course made some assumptions behind this number, with a global economic growth round 4%.

And like Jens Bjorn also mentioned, we do expect that in the first part of the year, the market situation will be more or less as it is right now and then we will see a gradual improvement, which will most likely start in the second half of the year. We will also additional EBIT impact from the GIL, we have already now included GIL in Q4 and we will add on in the next year as well.

Special items, the integration cost is only related to the GIL integration, which is DKK 1 billion expected in 2022. And then, of course, we also expect the currency rates to remain at the current level.

And it's clear, if you note, the range of the guidance is a little bit bigger than what we normally see. The numbers are also bigger than what we normally see.

And hence, the range is also a little bit bigger giving the uncertainty that we look into here in 2022. If we go to the next page, page 15, the financial targets.

Now that we have acquired GIL, and we've started to integrate it, and like Jens Bjorn mentioned, that we are well on the way for that. We have also reconsidered part of the 2026 financial targets.

So we're taking the opportunity to adjust them a little bit, it's only in the Air & Sea division, we will adjust it, but the Air & Sea division is such a big part of the total so it will also have an impact on the DSV group as a whole. We have seen in the last couple of quarters, conversion ratios well above in the 50s for Air & Sea.

So, by having a new target of above 50% in the Air & Sea division that is going to reflect that we do not see this margin to continue forever for the next at least for the next 5 years. So we expect a normalization, meaning that we would like to have a target of above 50%.

And the Road and Solutions, we will keep them as they were. And that means for the entire DSV group as a whole, the new target will be above 45%.

This is also assuming an annual growth of around 3%. And also that we continue our strategy.

And so we expect to gain market shares. And we, of course, also work on the efficiency projects that we have in each of the divisions.

And then the net CapEx will be expected to be 0.50, 0.75 of the revenue and as mentioned the net working capital full year revenue roughly 3%. That's also what we expect.

And then we will stay within our gearing ratio below 2%. We -- well below 2%.

That was it for the 2026 adjustment. And please be aware that we add another year.

So it is 2026 that is the new financial targets. Then the last slide on this one that is the financial calendar for 2022.

We have -- we decided that we will have the Capital Markets Day and that is in the end of May. And so please be aware of that.

And more information will of course come. I think that was it from my side, Jens Bjorn.

Yes, that was it.

And three from me, please, first on your 2026 targets. So we can see you've upgraded your Air & Sea conversion target by 2.5%, and the group target by 5%.

That I'm correcting to just an increase in the weight of Air & Sea in the overall mix. And I think GIL only gets us partway there.

So can you please talk us a bit through the moving pieces around volumes, yields and so on that bridge that gap? Secondly, maybe drilling into the Air & Sea target specifically, can you maybe talk about what it is that you've learned or discovered in the last 12 months that enables the increase in the target from 47.5% to more than 50%?

And then third and finally, as we're getting stuck into RFQs and RFPs how are you finding the tone of the market versus prior years? Specifically, is the expansion of shipping lines more and more into forwarding or end to end logistics territory impacting win rates or pricing or anything else?

Thoughts on that would be very much appreciated.

Thanks for the questions. I will at least take the last one first because I think it's pretty easy for us.

We think the tone is more or less the same as it has been. We have great faith in our own abilities to grow and to attract new customers.

The product is strong. The company is better than ever before, our pricing power is better, our digital capabilities are better, the network is better.

So we're happy about our own capabilities and our own kind of opportunities to also grow and generate value for shareholders going forward. So, we have agreed a long time ago not to comment too much on anybody else, but to focus on our own company.

We try to run that to our best ability. And then there are a lot of other strategies amongst different operators.

And I think that's perfectly fine as well. So I don't think a lot as such has happened, the market is still very, very fragmented.

We're one of the largest asset light logistics companies in the world. And our market share is still below 5%.

So there's still a lot of volume also to be gained from us. Michael, you have anything to -- maybe you can elaborate a little bit on some of the moving parts on the long term financial targets?

Yes, yes, I can do that. Yes, you're right, there are two parts of it.

One being the Air & Sea division being a bigger part of the total. Hence, you can say the impact will be bigger for the conversion ratio targets.

And other assumptions that we have tailored in to this that is of course that we would like to have some ambitious targets. And they are made under the assumption that the market will gradually come back to a more normal situation also in terms of yields.

However, we do not expect that the yields will go back to pre pandemic level. So that's the part that is tailored into these 26 targets.

Three if I may. Could you help us with some color on the GP per unit for the first quarter and second quarter versus what you've achieved in Q4 in Air & Sea?

Secondly, a hypothetical question, if you double your volumes in Air & Sea how should we think about your conversion ratio there? Is there a lot upside versus the 50% that you flag in your return targets.

And the last one, we have quite a lot of incremental capital coming to Air & Sea and logistics, either by ocean carriers or digital forwarders. Now, in the same time, you mentioned your GP per unit you don’t think is going to come back to pre COVID levels in 5, 6 years.

I mean, what gives you confidence there isn't a risk on your value added products, which is a good part of your GP since you have more competition there, you have stronger competitors than in the past. Any comments that could help us there, please.

Maybe Jens you can say a few words on the last point or any of the others, of course.

No, but if you look at the GP per unit, obviously, it's clear that if we look at the development this year, we've had an increase over the quarters. And I think what we're seeing right now is that this continues into 2022.

And of course, we've probably also guided a little bit that it's going to taper a little bit off at the end of the year. Then I think you had the question about, you know, if we double our volume, what will happen to our conversion rates?

So I think you know, if you look at our financial targets, not at least for the Air & Sea division, every time we have basically increased our volume, we have managed to increase our conversion rates slightly. Of course, it gets harder and harder the higher the conversion rates that we have.

But every time as I said, we have made transactions that are significant it has certainly increased our conversion ratio. And I don't see any dynamics why this should not change because it is in reality, when you run a platform business, you will have economies of scale.

And that's also the case here. And then I think you also alluded to the fact that there's competition in our market and I think that that's certainly something that we see that there's a lot of investment going into this sector.

There has been for years, and now it's from the carrier side or perhaps even on from the digital players, I think they've been there for years. I'm not saying that we don't need any of the digital players in a tender that might be the case, but it's not that old.

They're not that significant. From the carrier side we haven't seen too much yet, but they might want to throw some money after it.

And then we have to deal with that. We've dealt with competitors that are subsidized from the state, or from, you know, postal offices, etc.

Or there's been many types of competition. What we have to focus on is our own strategy, our own value proposition.

And then, if we continue to develop our productivity, once we have solid roadmaps forward then I think we will be able to continue the journey that we've been on. I think as Bjorn alluded to it, for the last 20 years our EPS has grown approximately 17.5% per year.

So I guess the plans we're having they are not too shabby.

So the high end of the guidance implies just over DKK 2 billion of organic EBIT growth. Can you talk a little bit about kind of what sort of yields in Air & Sea are embedded in this assumption?

And then also, on the Solutions side, that was a very strong performance, as you said, in the fourth quarter, can we take the fourth quarter EBIT and kind of, is it fair to annualize that or is there something else that we should keep in mind for Solutions' EBIT? And can you just give a little bit more color on the current market conditions in air and ocean?

And have you seen any slowdown in demand in your bookings or anything?

Thank you very much for the questions. I know Michael is a little bit disappointed that it was only on the question #3, or the third question he got where we had to elaborate on the 2022 targets.

I know he will be very happy to go through that in a second with some of the assumptions, he's prepared that thoroughly. But I could just say a few words on the current market conditions, this call is about 2021.

So as probably as you probably would appreciate limited amounts of things that we can say about 2022. But I guess it's fair to say that there is very strong performance we saw in Q4 has actually continued has carried on into to this year, there's no change whatsoever in the current market conditions.

The big question is, of course, that we all ask ourselves, how long will it last, but for the time being and it's not even inflated or influenced, as such, as we can see by Chinese New Year, anything like that, but a very, very solid start to this year. I guess that's what I can say about that.

So maybe, Michael, a little bit on some of the assumptions on the guidance for this year.

I think it was, you asked specifically for the yields. The assumptions for our 2022 guidance, that is that our average yields was the increase slightly above 2021 range.

And that goes actually for both Air & Sea as well. It's also given the fact that the first half of this year, the average yield was a little bit lower.

And then if we -- like we mentioned before expect that the current market conditions, they continue well into 2022, then the average yield will be slightly above 2021. And that goes both for the air product and also for the sea product.

Do not have to sustain the very high levels we saw in Q4. And then I think there was the last one on Solutions; basically the seasonality.

It's normal that the Q1 for Solutions is probably always a little bit slower than the remaining part of the year. And then you probably also have a little bit more in the holiday season in the summer time, where you have a little bit slowdown.

So Q3, Q4 always good quarters for Solutions. We would like to be able to multiply the last Q4 with 4, but I don't think I would put it into my spreadsheet right now.

But it's definitely a solid result. And with the pace they're running, they're probably going outpace our Road division this year.

And here, we also have to say one thing, we actually did get a solid piece of business to include from the GIL transaction, we see a very strong performance. And I think it's worthwhile mentioning that as well, that -- it really good activities we took over, well run, well managed, well structured, and really glad about this part of the acquisition as well.

Actually, I have 3 questions. So firstly, on the Road, actually, the Road conversion ratio going from 26% to 30%.

And how much of this is actually driven by the successful rollout of Roadway Forward projects. And then the second one is actually around the production activities in China.

So last year, basically, we didn't have any like normal Chinese year related seasonality. The productions activities were like normal, even after the Chinese New Year.

And what are you actually currently seeing in China post the Chinese New Year? And the third one, in Q4, you actually reported like around DKK 159 million in the co-adjustment in the corporate line, which is like DKK 100 million step up if you compare to Q4 of 2020.

What is actually driving that step up, and how should we think about going into '22?

Yes. But that's brilliant questions.

I think it's actually more or less one for each of us. I'll start with the middle one.

China as a Chinese New Year is just barely over. So it's too early for us to have any views on this.

There's been some sort of a pause, certain places, factories being shut down due to also the Olympics. So it's been not super high activities, but it's actually been more or less as we had expected before Chinese New Year a couple of months ago, there was the speculation that when we reached Chinese New Year, that was the event which would help to ease off the congestion in sea is not going to happen.

It's not -- it's nowhere near enough to rectify the problems that we are seeing or the challenges that the industry is seeing in terms of sea freight. So still stable developments, of course, very volatile, very unpredictable also with the zero tolerance policy on COVID.

We need to be able to also expect this year that things -- they can change from one week to the other. But we are still very optimistic and happy about the volume projections for the full year.

Then Jens I know road way forward is close to your heart. So maybe you can elaborate a little bit on that?

Yes. But it's correct that further digitization of the Road production and the Road volumes should drive these efficiencies that drive conversion rate up.

And of course, here, there are several initiatives, of course, taking place, but the most predominant one, of course, is the prominent one is the Roadway Forward project. So that certainly plays an important role for the development of the Road division.

So far, so good. We are still on track with the plans that we have for that.

And we will do our utmost to make sure that we deliver on time so that we get the benefits. In reality, if we create the same type of platform for Road as we have done for air and ocean we should be able to see that we could add volume in a similar way.

That's at least the whole idea behind it, and they're running behind with many years now on the Air & Sea division, but there should be something also in stock on the Road side for later on.

Yes. And then I can take the last one, see if I can do it short, not to get too broad here.

It is correct that we have a negative EBIT for the group/elimination in Q4. And that is only to the fact that we acquired GIL.

And when we do acquire companies, they have their own way of allocating overhead from central functions. So we need -- and we cannot change them in the middle of the year due to transport pricing, regulation and so forth.

So the huge amount that you referred to here in Q4 that is due to the GIL integration. Going forward, we expect, you can say, in the range of maybe DKK 30 million to DKK 40 million negative per quarter.

That's what we aim for in 2022.

And as usual, congratulations on delivering a great set of numbers. My first question, guys, if you could talk a little bit more on the EU Mobility Package to be fair I don't think that there's been a lot of focus on this regulation and how it could potentially impact your industry.

So I think, Jens, you mentioned that you've started pricing up just on some trade lanes. Can you add a little bit on how much are we seeing here?

And how much of this have you been implementing so far? And what are your customers' reactions to this?

And also how are your suppliers implementing these things here. Then moving on to Air & Sea, I noted that in your presentation, you didn't add the "Assuming the demand holds up," in the air part, but you did that in the sea part.

Is this something I should read more into? I think that previously, you've talked about you expected air rates to hold up more than sea rates on the back of that.

And then just finally on the M&A side. Is it sometimes when you're out there scouting for new potential targets that you meet the -- some of the carriers out there at some of these deals?

Thanks very much, Michael. When it comes to M&A, I say normally that the last, I don't know, 10 years all the companies we wanted to buy with one exception, we have bought.

I cannot remember even once, where we have competed with anybody actually and not coming out successfully. So for the time being, it's very simple to say, it's not the case.

On the EU Mobility, it did -- it was implemented 9 days ago, so still very, very early days. We think it's not very rational.

Some of the reasons behind is probably okay. It's also okay because it's a common regulation for everybody in Europe.

So I guess, fair enough. It just does -- some of the single elements just does not make sense for us, for instance, that a truck needs to return to its home base every 8 weeks, if it's full or empty, from an environmental point of view does not make sense.

There's a lot of costs associated with this as always with us. It's not a responsibility that we can take.

It must be the shipper, the transport user buyer that needs to pick up this tab, unfortunately. We are having discussions with customers.

You asked about the reactions from customers. I guess it's no surprise that customers are not too happy about this, but it's my understanding also that it is that there is some sort of kind of understanding about it, it's clear, and it's easy to explain that it is something which is coming from the outside and not just something that we have come up with as an industry.

So we do expect that it would be cost neutral for us and we will pass on the additional costs. It could be -- depending on the trade lanes, it could be significant increases we're talking about in certain cases, double-digit percentage increases for some customers.

I am not sure I understood.

What about your sub suppliers, yes?

They are asking for more money. It's still, as I said, it happened 9 days ago.

So we will probably pay more to the suppliers, to the haulage companies because their costs have gone up. And as a broker, we will not pick up that bill ourselves.

We have to pass that on to our customers. But we will pay more this year.

That's very likely.

But just as a follow-up, am I right in assuming that someone is fined out there because they don't follow the rules. That won't be you that will be the hauler.

We don't take ownership. We are not -- that's not a responsibility that we carry, you're right.

It's the hauler, it's the asset owner that needs to follow the regulations. Michael, on the Air & Sea part?

Yes. I think, Michael, you mentioned whether there was -- whether we expected an increase in the demand.

We do -- in our guidance for 2022, we do expect volume growth both in the air and that's slightly less in sea. And bear in mind that this is a full year-on-year comparison when we do these, you can say, assumptions because we -- during the integration, the volume growth will maybe be slightly less.

And when we are done with the integration, we have bigger opportunities to gain more growth.

A few questions from me, please. First of all, on the guidance with respect to congestion and tight capacity, you said a gradual improvement could start during the second half of the year.

I was just wondering on that. Is that what you actually expect, i.e., do you have specific reasons to believe that will happen?

Or is it more a case of flagging that scenario as a possibility in order to be prudent? So that's the first question.

Second question on sea freight. On its conference call earlier this morning, your neighbor in Copenhagen said that it expects the capacity that it can make available to forwarders to be lower going forward as -- going forward, sorry, -- is that the message for the large forwarders, such as DSV receiving?

Or is it maybe just smaller forwarders that are being impacted. And then the final question on Road.

You received a lot of questions on your expectations for container shipping rates and air freight rates, but fewer questions on your expectations for European trucking rates. So I was just wondering what you are expecting in that respect this year.

We expect -- I'll take some of these questions, Robert, for us to be able to be held accountable for exactly when this situation changes in Air & Sea and air respectively sea? And what does it mean?

It changes basically every month. You can see that our yields have also changed quarter-over-quarter it's very, very difficult to say.

When we base our opinion about this, it's based on all kinds of intelligence that we get from the outside also from analysts, yes, basically like yourself and others who track this very much, from customers that we speak to, from asset owners. So with that knowledge, we just say that we have factored in some sort of deterioration in our yields because of an improvement or whatever you want to call it, on the markets in the second half of this year.

And of course, when we give the guidance today, there's a lot of different elements in that as a bottom-up budget, there's different assumptions that we put in for volumes and for yields, some can go one way, some can go the other way. And then when all that is said and done, we've come up with this guidance we have, I don't think it's super, super conservative or prudent, but it's realistic.

When it comes to capacity from the shipping lines, we're not going to comment on individual asset owners, but we are in a good position where we do get the capacity from shipping lines that we need. We don't have to reject any bookings from our customers.

So it's good to be big also in this respect. When it comes to Road, it's much easier to define.

You know this I don't have to tell you, but it's much more easier to define what are the rates in Air & Sea. The official statistics, we don't really see that in Road.

So what we are tracking very much is the GP margin, of course, also being diluted a little bit if rates or if prices go up a lot, but we still think that we have a stable, what you say, a GP margin. And these traditionally, historically, it has been possible for us to pass on any what you say, influence from the outside due to regulations or increase in currency or increase in bunker and fuel prices.

These are the agreements that we have with customers that when it goes one way, the customers benefit from it and when it goes the other way, they pay for it. We expect that also to be the case in 2022.

If I could also ask 3 questions, please. The first one is just thinking about market share and your volume performance.

I think it's fair to say it's been a little bit disappointing to you over the course of the last couple of years. And I think back to when you did the Panalpina deal, you never really got a chance to leverage that expanded scale.

So now with GIL on board, I'd like to understand, do you expect market share gains to ramp through 2022? Or is that far more likely to look beyond 2022 at this point?

Then a second question, you've obviously got 3 divisions as you report them. Is it possible to give us some kind of feel for what proportion of your customers use either 2 or 3 of those divisions?

And is that actually growing as you can offer more services in an efficient manner to customers perhaps struggling with congestion? And then the third question, I noticed within your report, your employee turnover ratio, adjusted for synergies, has been the highest we've seen over recent history.

Is that prompting some inflationary pressure within the business? Are you seeing more competition for talent across broader markets?

Good. Thanks very much.

I'll start with the first question. We have actually not -- I hate to correct you a little bit, but we have actually not disappointed ourselves when it comes to market share, it's been more or less like we have said.

Unfortunately, and we hate to say this because it sounds like the worst excuse, but it is a fundamental fact that when we do acquisitions, we are not in a position to show organic market growth. That we will have some dilution.

We are upfront about that. We've said it when we bought UTi, Panalpina and also now with Agility GIL.

And I guess this is also what you are alluding to. There will be some duplicate clients.

There will be some customers who temporarily get a small dip in service levels, who will leave us. So unfortunately, the staff on acquisition is not the time where you will show organic growth.

You're right, actually, in saying that we have been looking forward to showing organic growth rates. But then we bought Agility and it's not like it was a welcoming event.

Because we were actually on our way to show some fairly good numbers. I think they actually stack up okay now.

We do expect that we will see organic growth at the end of this year, we need to be able to demonstrate that to the market. But also, please remember, I guess, if you evaluate DSV on a 10- or 15-year time period, we might not be the company with the most outperformance in terms of volume growth.

But in terms of absolute EBIT, we probably have nothing to hide on that. So it's a discussion we have every single day in the company -- and we have this discussion, is it growth for the sake of growth or is it profitable growth?

And what margin can you accept for new customers coming in? You should -- it's important, but it is, I guess, the main KPI you should measure us on is the growth in absolute GP and absolute EBITDA, I'm not even going to comment on volume count, how you count it.

At least we have seen with the companies we have acquired. Believe it or not, you should believe you would think that a container is a container and a ton of air freight is a ton of airfreight.

But that's not always the case. So there can also be different ways of accounting for this.

Yes, Michael, Jens, do you have anything on these 2 other questions about the 3 divisions or…

I can take the cross sales and the other stuff. If you look at cross sales, it's -- I mean if you look at our customer mix, I would think that in a company like ours or what can we say, top 200 customers, they would probably be the ones that are relevant for some cross sales.

They would perhaps account for 30% of our sort of total sales. And out of them, of course, we will also have smaller customers that where you have used the various divisions, but that would be more for distribution capabilities, you would use Road as a subcontractor.

And then we would have really a large proportion because, of course, there's a lot of interaction. But where we do big chunks of business for large accounts, I would say this would be our top 200 customers.

And on these top 200, I would say that probably half of them would be working with multiple divisions. But having said that, there's a large, what can I say, on a sort of explored opportunity to get more share of wallet with the customers.

That might be all what can I say, lack of ability to get access to that volume, but there are also many customers that don't want to allocate business to us. And then I think if you look at the employee turnover, I think that was another thing that you alluded to.

I think you're quite right that there's a lot of demand for staff these days. Of course, that does drive salaries up in certain areas.

But I can then also say to you that we've never had as many employees in our shared service centers that we have now, right now. And they are, of course, located in areas where we can get access to staff or capacity, and they also then have, what can I say, somewhat lower salary than the people that they replace.

So we try to steer this in a balanced way so that we actually then can outsource to some of these areas, where we can get access to staff or capacity however you want to label it. But of course, there are cost pressures in certain markets, no doubt about it.

So that's also very positive when we look at getting GIL in because there's economies of scale as well, and then we can then simply increase the efficiency. So overall, we think we can have this development of 3% to 4% in our cost base as the sum of what can I say, estimations that we are talking about.

And I think that we've shown in the past that we've managed to steer through similar situations, and we expect to do the same this year.

I have 2, please. The guidance talks about a sort of a gradual improvement in the freight environment in the second half.

I guess just be interested in why you think it's -- it will probably be gradual, is it possible for a sharper normalization at some point? Or does this kind of unwind quite slowly over a period of time?

And the second question is on the Roadway Forward platform, just have a bit of an update on the process there? Is it still sort of something like 2 years away from being completed?

And what's the level of confidence in that platform? Is it just a question of it takes time to roll out?

Or is there still some uncertainty over exactly what level of benefit you'll get from that system once it's implemented?

I think if we take the improvement, let's say, on the air or the ocean freight market, if we just start with that. This is not something that it will be like turn off switch or whatever and then everything is normal tomorrow.

I think there's a lot of congestion, a lot of constraints all over and they will -- if we take the airfreight, hopefully, COVID will ease off, and we will see more belly capacity coming in. As you know, in 2020, 80% of the total volumes were produced in freighters, I think we are somewhat down perhaps down to 60% or 70%, I don't have the exact number right now.

But historically, more than 50% were actually in belly capacity. So of course, this swing has to come and it comes slowly.

And if we look at the ocean freight, there's a lot of ports, a lot of congestion, a lot of problems that we have there. We have seen that they got more equipment in on the container side, but I think they're still waiting to get new vessels in, and I think that's going to be something that will happen slowly.

Unless we get dramatic inflation that none of us sort of really anticipate, I guess, right now that it's going to be a disruptive factor. So we expect a gradual improvement.

We don't see sort of anything big change. If you look at the Roadway Forward, I think we've now had a POC real live in 3 countries.

It works well. We will now go live with the fourth country, which will add significant volume to the platform.

This is Poland. We are live in Estonia, Latvia and Lithuania now we will go to Poland that will really tell us something about how the system it behaves when we get significant volume on it.

There's nothing that tells us that it shouldn't behave as we expect, but scalability for those that run IT programs, projects, business development, it's always something that you have to have a lot of respect for. So we have that.

And then there will be one more POC this year, and that's going to be Germany. And once we have done that, it's basically a rollout project.

And we will then have a platform that can scale in the Road division just like we have in air and ocean then it will take some time to roll it out. And then as we roll it out, of course, we can automate our processes to a much larger extent than we have today.

And this means that we can process more transactions per person per day. And that would then translate into something you call a conversion ratio, where a larger proportion of the GP will then ultimately become EBIT.

And we are on the plan that we've explained to you before, there's no delay but no, what can I say, increase in pace either. It's a question of grinding our way through that.

And as you say, it's going to take some years before we reach the final deadline. The POCs will end this year, hopefully, then we will have learned and develop what we need to develop in order to have our platform in place.

This is then, as far as I'm aware, quite unique because I'm not aware of any competitors that would have a modern IT platform, where you can steer, what can I say, the network and the master data on a European scale anywhere. So this is certainly something that we look very much forward to complete.

If I can ask one follow-up. If you're looking at M&A that got a lot of road in it, is the success of this Roadway Forward platform quite important for when you're kind of thinking about what price you would pay for the M&A or whether you'd want to buy a road acquisition.

Having this platform will be quite important for that?

Yes. But the business case that you make would always somehow will be dependent on what you can -- how your own performance is because otherwise, there's no value.

The value comes from that to buy a business that has a weaker performance. And when we then integrate this business, we normally like to say that we could then increase the performance of the acquired entity up to the level of our own.

So of course, if we can't drive our own productivity and profitability up, then we cannot create the same value and therefore, we can pay less. I mean, that's sort of ingredients does go into this.

So of course, we would want to pay less, even if we are very profitable. That's clear because then our own shareholder will get the vast majority of the benefit.

But we've paid quite handsome multiples on some of the transactions we've done and still managed to make our own shareholders quite happy. So it is a question of how much muscle do you have at the end of the day?

Just to make it clear, the -- it's not like Roadway Forward needs to be finally implemented in all countries around the globe before we can acquire companies with road competencies.

Just firstly, I wanted to ask we read a lot about the transfer tech emerging technologies. Can you just kind of give us your high-level view of what are the most impactful and which you see the most having kind of increasing applications to your business?

And then secondly, in terms of your comment on the medium-term conversion ratio and the expectation that GP yields kind of settled at higher levels versus history. Can you talk a little bit about how much kind of mix effects are kind of driving that expectations rather than the view that the sort of spot rates never go back to pre-pandemic levels?

And then finally, the market seems to be a little bit worried about sort of U.S. retail demand more recently.

Can you just talk about sort of the other verticals you have exposure to? And should we see a bit of a more sustained slowdown in U.S.

retail sales are the other verticals able to keep kind of the system well in demand?

It's very, very hard to predict exactly what the developments are going to be like in the verticals. What we are happy about in DSV is that we are exposed to every industry in the world, apart from maybe new [pure] material and whatever.

We are in all verticals. We even transport live animals from different zoos around the world just to go to one extreme.

So the beauty has always been for us if one vertical falls a little bit behind, it's being picked up by another. We think there's a lot of slack or there's a lot of potential coming in, in some industries that are suffering right now, partly due to the lack of semiconductors.

If you think about automotive volumes are not what they used to be or what they were expected to be. It's not unlikely that we could see a development in a positive direction if the supply of chips improved.

So overall, we believe that volumes will be healthy for DSV. But as Michael said, in low single-digit numbers for 2022.

I don't know if anybody else has any remarks to the 2 other questions on…

I can take the first one, Michael, you can take the one on the conversion ratio. But the first one, of course, tech and what is happening in tech.

I think you should look at that --this, there's, what can I say, a digital track that we're talking about. So when you move cargo, there's a digital flow.

And here, you find that many tech companies have come out with technologies that are basically what you would call API native. So they would have, what can I say, a certain way of organizing their infrastructure so that they are strong on data and also that it's very easy to integrate to.

The problem is master data in general, it might be that they are good on data, but their customers are not necessarily good on data. So whether they like it or not, then they are exposed to the fact like we are as forwarders in general that we have to work on the data quality with our vendors.

And that then goes back to the classical forwarder where as the classical forwarder, we will have capabilities that allows us to enhance the low-quality data that we receive, and we can do a lot of other things. We own infrastructure.

We have customer relations. We have carrier relations.

We have a hundred of other attributes that we have developed over years and years which the new digital forwarder don't have. And I think that's the problem for many of these new digital forwarders that they don't have the classic capabilities.

So they need the productivity on enhancement of data and then they need also the scalability of their organization. They think they can run a business on the third floor out of an office somewhere in the middle of a big city.

But you can't do that. So I think that's sort of really the issues that they have.

So we have to monitor them closely. I won't mention anyone specifically, but some of them seem to have more traction than others.

And -- but we also see that many of them in order to get traction they develop attributes that make them look quite similar to ours or basically the classic forwarders. So we are very focused on the things that they can do.

We try to make ourselves, what can I say, API not native because we can't be that, but we try to get API enabled across the board so that in reality, we can deliver the same on data and on integration as these type of companies they can. And now, Michael, on the conversion rate, you can take that.

Starting to be an expert in conversion ratio. I think for the -- if you look at our guidance for 2022 and then you look for the long-term financial targets, then what we have built in, obviously, we do see a strong connection about the yields and then the volume growth.

So what we have done, the way that we see it is that next year, the yields will be a little bit higher. And then when things normalize second half of 2022, the new yields might be a little bit lower for the next couple of years '23 and '24, and then we can work on the strategic road mapping that Jens heads up together with the divisions to improve our efficiency as well as we can gain more volume in.

And hence, that's why we believe that the conversion ratio target for Air & Sea is -- it has to be above 50%.

All right. And just to follow up on that kind of mix of volume or activity.

I mean, I think previously, we talked about that you're interested to utilize this kind of legacy Panalpina network with the dedicated traders more actively. I mean that comes at a structurally higher yields than the daily capacity.

I'm just trying to understand if you can give me a high-level kind of mix changes. If not, I will leave at that.

That's easy. Panalpina produced less than 10% of their volumes in the freighter.

I think we are now at 10% to 15% of our volumes in the freighter network. So it's not big swings we are talking about.

But depending on how the market situation develops, we might be able to produce a little bit higher percentage of our volumes there. And yes, it's a higher-quality product.

It's a network we control ourselves. It has fixed lead times, and it's not dependent on a third party.

And we have access to the tarmac, we are on the gateways, et cetera. So obviously, it's a higher-quality product.

And then it will give us a little bit better price for the services that we win.

But it's also a total other number of volume, right, from the 10% to 15% for the combined versus the below 10% in Panalpina.

Just one question remaining on my side on shareholder returns. On your payout ratio, you've chosen something towards the low end of your range despite record profit levels and gearing below target.

Also the so far announced share buybacks seem to be lower year-on-year. Can you please elaborate on your thinking around this?

And also whether one can read something into this like keeping your powder dry?

Our powder is always dry, it's never been wet [indiscernible]. I don't think you should read too much into this.

I can promise ex any M&A, small or medium or whatever is going to happen this year we will -- when the year is over, we will have paid back the lion's share of the net profit of the company to shareholders. This is set in stone and granite in DSV.

We trust this capital allocation policy very much. As you probably know, we favor buybacks over dividends.

It's a little bit of special month or quarter where we have the dividend. And then let's see how the year goes.

We are very adamant and that the shareholder lies best in the progress of the -- or the money lies best in the progress of the shareholders. And we will do that.

We will not delever the company. Then you can say that the capital allocation policy is leverage below 2.

Does that mean 1.999? Maybe not, but it's going to be somewhere between 1.5 and 2, we are very adamant about that.

Michael?

Yes, one additional comment, you're absolutely right, [indiscernible] is that we will stick to this policy and stuff like that. One other thing that you need to bear in mind with this, with the share buyback, first of all, Q1 is not normally our strongest quarter in terms of cash flow.

And then also bear in mind that the period that we run the share program with is relatively short compared to the subsequent quarters.

Thank you very much, ladies and gentlemen, and everybody else who has listened in. We appreciate the interest in DSV.

For those of you from DSV listening in, thank you very much for your fantastic results. It's just unbelievable what you have done.

We go into 2022 with confidence. We have high targets, of course, we know that we have to deliver on those.

We have plans to do it. And I think the company is in better shape than before also at least from that perspective, we are ready.

So thanks. We will get back to you in the coming weeks, and we have sessions with some of you.

If you have anybody who wants to get in touch with us, you know how to get hold of us. And then we'll get back to you when we have the Q1 numbers ready at the end of April.

And then we look forward also to hosting the Capital Markets Day, which is some years ago that we have posted. So with that, on behalf of everybody here at DSV and Jens Lund, and Michael and myself, thanks very much, and have a good day.