Annual Report (ESEF) • Feb 2, 2023
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Download Source FileUntitled Annual Report 2022 Keeping supply chains flowing in a world of change DSV A/S Hovedgaden 630 2640 Hedehusene Denmark CVR no. 58 23 35 28 1 January – 31 December 2022 DSV is one of the world’s leading freight forwarders. We help companies connect with the world and ensure smooth and ecient storage and transport of their goods. By air, sea and road. We keep supply chains flowing – from shipper to customer doorstep – and help to deliver sustainable growth. By giving our customers the logistics services they require. By running a profitable operation that delivers return on investment for our shareholders. And by giving our people an inspiring place to work and equal oppor tunities to develop their talent. Combining the latest technologies and the talent of our strong global workforce, we make supply chains leaner and greener. That is how we will help to shape a sustainable future. Welcome to our Annual Report 2022. Delivering sustainable growth DSV A/S Hovedgaden 630, 2640 Hedehusene, Denmark Tel. +45 43 20 30 40, CVR no. 58 23 35 28 Annual Report for the year ending 31 December 2022 (46th financial year). Published 2 February 2023. Contents Management’s commentary Introduction Letter from our CEO.......................................... 4 Highlights 2022 ............................................. 6 Five-year overview........................................... 8 Strategy and financial targets Our strategy: Growth. Eciency. Sustainability. ................. 9 Sustainable logistics for a fast-changing world.................. 11 Our business model ......................................... 13 Our industry and market trends............................... 14 A responsive approach ....................................... 16 Outlook for 2023 and 2026 financial targets................... 17 Capital structure and allocation ............................... 18 Financial and non-financial performance Financial review ............................................ 19 ESG performance ...........................................23 Air & Sea ................................................... 24 Road ...................................................... 27 Solutions ................................................... 29 Corporate governance and shareholder information Risk management ........................................... 31 Corporate governance ....................................... 37 Board of Directors........................................... 40 Shareholder information ..................................... 41 Other information Quarterly financial highlights.................................. 43 Financial statements Consolidated financial statements Income statement........................................... 45 Statement of comprehensive income .......................... 45 Cash flow statement ........................................ 46 Balance sheet............................................... 47 Statement of changes in equity ............................... 48 Notes to the consolidated financial statements ................. 49 Definition of key figures and ratios ............................ 83 Group company overview .................................... 84 Statements Management’s statement .................................... 91 Independent Auditor’s reports ................................ 92 Parent Company financial statements Parent Company financial statements.......................... 95 3 DSV Annual Report 2022 Contents Keeping supply chains flowing in a world of change In extraordinary market conditions with continued supply chain disruptions, our teams delivered a strong set of results in 2022. It was also a year when we finalised the integration of Agility's Global Integrated Logistics business (GIL) and we continued to drive the sustainability agenda. In addition, we had to adjust to an increasingly volatile macroeconomic and geopolitical environment. Letter from our CEO We integrated Agility GIL within a year – our fastest integration to date. Strong financial performance 2022 was a good year for DSV. I am proud of the results we have achieved for the year and we also made good progress on our long- term strategic ambitions. Our gross profit for the year amounted to DKK 52.1 billion (+33.3%), and operating profit before special items was DKK 25.2 billion (+48.0%). Our adjusted free cash flow for 2022 amounted to DKK 22.8 billion (+163.4%) and ROIC improved by 550bp to 25.1%. Read more about our Group results on pages 19-22. The significant supply chain disruptions increased the value of our services and had a positive impact on our financial performance for 2022. As the freight markets gradually normalise and the general economic slowdown continues, we expect a significant decline in earnings for 2023. This development is reflected in our outlook. Navigating macroeconomy and geopolitics COVID-19 had a lasting eect on our industry and global supply chains. Over the past two years, we have managed to adapt to the challenges it created, mitigate disruptions and oer our customers robust logistics solutions. Although today the world seems to have moved on from COVID-19, the pandemic made a significant impact on 2022 and still casts its shadows across our industry. Market volatility persists. At the start of 2022, capacity was tight, freight rates reached unprecedented highs, and then plummeted. In the second half of 2022, we have been in a period of economic slowdown and declining transport volumes across most markets. Several factors caused the current slump – normalisation of consumer behaviour aer the pandemic, the ongoing energy crunch and inflationary levels not seen in decades, to name a few. Not all geographies and indus- tries have been aected the same – the Middle East region and the healthcare and energy industries are examples of more resilient areas. The volatile macroeconomic environment in 2022 was further fuelled by Russia’s invasion of Ukraine. In response, we divested or closed down our operations in Russia and Belarus. In response to Ukraine’s humanitarian crisis, we have donated transport and logistics services, food and supplies, and in some instances, our sta have opened their homes to take in families fleeing the war. Navigating market volatility and tough challenges is not new to DSV. Our cost discipline, focus on keeping net working capital under control, strong capital structure and scalable asset-light business model are all designed with this purpose in mind. A stronger company We integrated GIL within a year – our fastest integration to date. To bring together two large and complex organisations across multiple countries and divisions is a considerable undertaking, and we are very happy with the outcome. Lessons learnt from previous integrations, cultural synergies between our two companies and the close collaboration all contributed to a successful integration. We are a dierent company today compared to only a few years ago. Our journey of successful acquisitions and integrations has transformed us into a top three player in our industry. We have added new highly skilled colleagues to our teams, and by joining forces, we have a more comprehensive service oering, greater scale and a stronger global net- work. On top of this, we have worked to develop our digital production platforms and create more transparent supply chains. That means we are now even better placed to support growing customer needs. Our organisation and market position are already strong, but M&A remains an important part of our strategy, and we will continue to monitor the market in search of value creation opportunities. Committing to net-zero by 2050 In 2022, we raised our ambitions and took additional steps to create a more sustainable business. On the environment, we recalculated our 2019 CO 2 emission baseline to reflect our larger size aer the GIL inte- gration. We implemented an internal CO 2 fee to support new sustainability initiatives and innovation with funding. But most importantly, we committed to net-zero emissions across our operations by 2050. To achieve our sustainability ambitions, we also changed our organisation in 2022 and established a new Operational Sustainability Team headed by our COO. Its purpose is to connect our operational teams directly to our sustainability tar- gets. This will more concretely embed sustainability into our operations and help us drive innovation and implement environmental and climate initiatives. We are determined to reach our long- and mid-term targets, but we know we are at the start of a long and complex net-zero journey. We cannot get there alone; we must collaborate closely with our customers, suppliers and other stakeholders across the industry. And ultimately, we depend on continued technological development in our industry. Success built by our people I have always believed that DSV is a people business, and I will never grow tired of celebrating our employees' hard work and contributions. They are central to our current and long-term success. Operating in the volatile and challenging environment of recent years has rein- forced the importance of our people and their outstanding eorts in supporting our customers – making our success during this period even more remarkable. A huge thanks to all of them for their amazing work and team spirit. Whatever market challenges persist in 2023 and beyond, we are optimistic about the future and are committed to keeping supply chains flowing in this world of change. Jens Bjørn Andersen Group CEO, DSV A/S 5 DSV Annual Report 2022 Introduction Highlights Group results +.% growth in Gross profit DKK , million Air & Sea % of total Road % of total Solutions % of total +.% growth in EBIT before special items DKK , million Air & Sea % of total Road % of total Solutions % of total EBIT before special items EBIT before special items was up 48.0% for 2022, in line with our latest outlook for the year. Growth com- pared to 2021 was driven by strong performance across all business areas and geographical regions and by the addition of Agility Global Integrated Logistics (GIL), which was fully integrated during the year. .% .% Adjusted free cash flow The earnings growth was converted to cash, and the adjusted free cash flow was also impacted by improved net working capital. In line with our capital allocation policy, we allocated DKK 21,633 million to sharehold- ers in 2022 through share buyback and dividend. ROIC before tax The increase in ROIC (pre-tax) was driven by the strong earnings growth, while invested capital stayed stable in 2022. Earnings and ROIC for 2022 were boosted by the extraordinary market conditions. We maintain our 2026 target of a minimum ROIC of 20%. , , , - , , , Actual Actual Actual Actual Actual Actual Outlook Growth including M&A and in constant currencies. 6 DSV Annual Report 2022 Introduction Solutions Solutions achieved 35.3% growth in gross profit and 47.4% growth in EBIT in 2022. This was driven by the inclusion of GIL, primarily in the Middle East, and strong organic growth across all regions. EBIT before special items: DKK 2,701 million +.% Road The increase in EBIT before special items was driven by 11.0% growth in gross profit. In a market impact- ed by new regulation, geopolitical events and by significant cost in- flation, all regions performed well and contributed to the growth. EBIT before special items: DKK 2,040 million +.% Air & Sea The division achieved 38.5% increase in gross profit and 53.0% growth in EBIT for the year. This was driven by the successful integration of GIL and by earnings growth across all regions. The results were positively impacted by the extraordinary market conditions, which led to higher gross profit per shipment, espe- cially in the first half of the year. Towards the end of 2022, freight markets declined, and the division increased its focus on productivity and cost management. EBIT before special items: DKK 20,658 million +.% Global footprint AMERICAS Gross profit: DKK 13,274 million %of total EBIT before special items: DKK 7,111 million %of total EMEA Gross profit: DKK 27,501 million %of total APAC Gross profit: DKK 11,374 million %of total EBIT before special items: DKK 10,952 million %of total EBIT before special items: DKK 7,141 million %of total CO emissions As an asset-light company, we know lowering our Scope 3 emissions re- quires collaboration with our partners. And to do so, we have developed DSV Green Logistics. Green Logistics provides a set of solutions ranging from CO 2 reporting, strategic supply chain optimisation, emission compensation, and sustain- able fuel oerings designed to reduce the carbon footprint of our Scope 3 supply chain. (' tonnes) Scope 3: , Scope 1: Scope 2: 7 DSV Annual Report 2022 Introduction Five-year overview Ratios 2022 2021 2020 2019 2018 Financial ratios (%) Gross margin 22.1 20.6 24.6 25.1 22.1 Operating margin 10.7 8.9 8.2 7.0 6.9 Conversion ratio 48.3 43.1 33.4 28.0 31.2 Eective tax rate 23.9 24.5 24.3 25.8 23.3 ROIC before tax 25.1 19.6 14.3 13.4 26.7 Return on equity 24.1 18.4 8.8 11.6 27.2 Solvency ratio 45.0 45.9 49.2 50.7 37.5 Gearing ratio 1.0 1.4 1.3 1.8 0.9 Share ratios Earnings per share of DKK 1 77.3 49.3 18.7 18.7 22.0 Diluted adjusted earnings per share of DKK 1 81.4 50.9 26.5 22.1 22.1 Number of shares issued (‘000) 219,000 240,000 230,000 235,000 188,000 Share price at year-end (DKK) 1,096.5 1,527.5 1,020.0 767.8 429.2 Proposed dividend per share (DKK) 6.50 5.50 4.00 2.50 2.25 Financials 2022 2021 2020 2019 2018 Results (DKKm) Revenue 235,665 182,306 115,932 94,701 79,053 Gross profit 52,149 37,615 28,534 23,754 17,489 Operating profit before amortisation and depreciation (EBITDA) before special items 30,275 20,417 13,559 10,292 6,212 Operating profit (EBIT) before special items 25,204 16,223 9,520 6,654 5,450 Special items, costs 1,117 478 2,164 800 - Net financial expenses 866 841 1,729 858 249 Profit for the year 17,671 11,254 4,258 3,706 3,988 Adjusted earnings 18,765 11,847 6,146 4,456 4,093 Cash flow (DKKm) Operating activities 26,846 12,202 10,276 6,879 4,301 Investing activities (966) 420 (556) 1,371 (444) Free cash flow 25,880 12,622 9,720 8,250 3,857 Adjusted free cash flow 22,810 8,659 8,746 3,678 3,916 Share buyback 20,313 17,841 5,031 4,888 4,161 Dividends distributed 1,320 920 588 423 380 Cash flow for the year 1,635 3,942 2,721 766 (143) Financial position (DKKm) DSV A/S shareholders’ share of equity 71,519 74,103 47,385 49,430 14,561 Non-controlling interests 222 175 (88) (111) (29) Balance sheet total 159,045 161,395 96,250 97,557 38,812 Net working capital 5,116 8,031 2,701 3,125 1,767 Net interest-bearing debt (NIBD) 29,870 29,245 18,189 18,355 5,831 Invested capital 99,540 101,231 64,285 68,595 20,381 Gross investment in property, plant and equipment 1,514 1,180 1,121 1,000 720 * The implementation of IFRS 16 Leases as of 1 January 2019 had a material impact on the financial statements and key ratios for 2019 onwards. Comparative figures for 2018 have not been restated. ** Comparative figures have been restated, as our method for calculation and data transparency has improved. For a definition of financial key figures and ratios, please refer to page 83. For definition of ESG data, please refer to Sustainability Report. ESG data 2022 2021 2020 2019 2018 CO 2 e (g/tonne-km) - Air transport 694.4 707.4 704.0 718.2 728.0 CO 2 e (g/tonne-km) - Sea transport 6.6 6.5 6.2 6.4 7.0 CO 2 e (g/tonne-km) - Road transport 97.5 98.7 92.8 93.2 96.5 Lost Time Injury Frequency Rate 2.8 4.5 6.7 5.0 4.6 Lost workdays due to lost time injury 52.0 61.0 78.8 97.5 98.0 Gender diversity (%) (female/male) 39/61 38/62 38/62 39/61 38/62 Employee turnover ratio (adjusted for synergies) 22.1 21.9 20.5 21.1 20.1 Employees (FTE) 76,283 77,958 56,621 61,216 47,394 8 DSV Annual Report 2022 Introduction People Customers Operational excellence Sustainable growth Our strategy is anchored in our corporate purpose of keeping supply chains flowing in a world of change. The four focus areas for delivering our strategy remain consistent: sustainable growth, our customers, our people and operational excellence. With this focus we aim to create long- term value for our stakeholders and make DSV fitter for the future. Helping our customers grow sustainably By combining a broad range of logistics service oerings, competitive pricing and a strong geographic footprint, DSV continues to enhance the customer experience we deliver. We are able to leverage our scale and global reach, providing capacity and consistent service levels across our network. Across the three divisions, our end-to-end logistics services and digital integrations enable customers to achieve visibility and control of supply chains, which is essential when operating in today’s complex market conditions. Throughout our operations, we seek to support customers' growth while remaining mindful of the environmental impact of our services and provid- ing options for reduction of emissions through our Green Logistics services. Following the successful integration of Agility's Global Integrated Logistics business (GIL), we have in 2022 reinforced our focus on initiatives to support organic growth. We have also raised our ambitions for sustainability and reconfirmed our M&A strategy. Our strategy: Growth. Eciency. Sustainability. In 2022, we completed the integration of more than 35,000 customers from GIL, adding to our foothold among both the large, global customers as well as small and mid-sized customers. Our industry-specific solutions in automotive, industrial, chemicals, retail and fashion, healthcare, tech- nology and energy help customers in those sectors succeed, and we will continue to strengthen our expertise, not least in the fast-growing healthcare and e-commerce sectors. We proactively manage customer relations through our Global Customer Success Programme. In 2022, we received feedback from more than 13,000 customers, and in line with our internal targets, we responded to the evaluations within 48 hours. Our organic growth target remains unchanged: we aim to take market share across our three divisions and the markets we operate in. Supporting our people to develop their talent Our employees are the heart of our business and responsible for the long- term success of our company. DSV employs more than 75,000 people worldwide – from oce workers to warehouse operatives. Regardless of function or position, we respect our employees' rights. Keeping supply chains flowing in a world of change For nearly five decades, we have moved millions of ship- ments across oceans and continents. Knowing how to do that in the most streamlined way is how we have earned the trust of our customers and partners. And it is how we will continue to deliver global transport and logistic services that can help businesses and societies prosper. Our purpose: Focus areas in our strategy 9 DSV Annual Report 2022 Strategy and financial targets We work to create a safe, healthy and nurturing workplace where every- one has the chance to grow and develop their talent. To enable our employees to do their best, we give them the right digital tools, training and conditions. In recent years, the pandemic showed the im portance of the skills and knowledge of our experienced teams, and the continued development of our industry will increase the need for further skills. As for any company, hiring and keeping talented employees is critical for us. To attract, motivate and retain the best of them, we provide career- a dvancing opportunities through our DSV Academy and our talent management programme. DSV operates globally and employs +150 dierent nationalities. In com- bination with an inclusive and responsive culture, diversity – also related to gender and other factors – makes our workplaces more dynamic and ultimately leads to better business decisions. In 2022, we continued our focus on diversity and inclusion across our organisation, supported by mandatory e-learning programmes. Operational excellence, every day Local empowerment and global scale We maintain a flat, locally empowered organisation, firmly anchored in local markets. This has always been a core strength in DSV, and we continue to believe in local ownership and decisions based on sound business acumen, supported by solid data. As a global company, we aim to benefit from our scale where we can. We work together as one global network, and we have centralised selected activities – e.g. in our International Shared Service Centres and group functions such as our Global Commercial Organisation, Group Property, Group Insurance and Group Procurement. Transparency, productivity and scalability Through our focus on transparency, productivity and scalability, we support more ecient global trade flows for our customers. And more ecient workflows for DSV. We support transparency by measuring productivity and financial perfor- mance, ensuring that our managers have good insights to inform their decision making. High data quality across systems, activity-based costing and a strong financial organisation are key elements in this. We boost productivity by defining and standardising our service catalogues across geographies and divisions. Standardised service catalogues enable digitalisation, automation and ecient workflows across the organisation. By streamlining our services across the organisation, we can deliver a high and consistent service level – this is exactly what our customers are looking for. To support our growth strategy, our physical and digital infrastructure must be able to scale. Working according to the principle of one main system per business area, we run a consolidated, standardised and scalable IT platform and, where available, we use standard o-the-shelf IT systems with high focus on data quality and security. Developing our infrastructure Based on our knowledge of the logistics markets, technological trends and our ongoing dialogue with customers, we plan development of our IT infra- structure as well as the long-term planning of warehouses (and warehouse automation), terminals and oces. We prepare strategic roadmaps for each business area, closely managed and prioritised by our Group Executive Committee. All planning of our infra- structure and innovation is based on enterprise solutions which can be applied across our network. Continued focus on M&A DSV has had a remarkable journey in recent years. The acquisitions and successful integrations of UTi Worldwide, Panalpina Welttransport and Agility's Global Integrated Logistics business have transformed us into a top three global player in our industry. Our worldwide organisation is now big- ger than ever; our geographical footprint is more diverse; and the services we oer to our customers are more advanced. We continue to focus on balancing stable, above-market organic growth with an active acquisition strategy. Measured by revenue and profit mar- gins, we are one of the industry’s largest and most profitable players. This gives us a strong market position and forms the foundation of our ambition to continuously grow our business. Within the fragmented transport and logistics industry, we believe there is room for further consolidation, and we will continue to monitor the market for relevant, value-creating opportunities. Fitter for the future Our ambitions for the coming years revolve around three themes: growth, eciency and sustainability. At a practical level, that means continuing our focus on M&A, strengthening our market position through organic growth, enhancing our logistics and digital capabilities, continuing our work on the sustainability agenda and exploring new opportunities in response to changing market dynamics. As we engage in all of these activities, our mindset will always be to try to do more with less, accelerating our operational excellence initiatives and digital transformation to constantly find more ecient solutions to support our customers. Key strategic projects for each of our divisions are described in the divisional reviews on pages 24-30. 10 DSV Annual Report 2022 Strategy and financial targets Sustainability strategy anchored at the top Our sustainability strategy and eorts are driven from the highest manage- ment levels in our company. In close collaboration with the Executive Board, the Board of Directors sets the direction, reviews the performance and further develops our Sustainability targets and strategy. We are guided by our commitment to promote and fulfil the United Nations’ Sustainable Development Goals (SDGs). Our strategy and targets are based on our analysis of materiality, risks and opportunities and our dialogue with our major stakeholders. Our sustainability strategy is centred around our sustainability priorities with- in environment, social and governance. These priorities and our associated material topics are highlighted in the adjacent figure. DSV’s approach to sustainability has evolved systematically over recent years. As the world’s third-largest transport and logistics provider, we take an active role in the sustainability agenda in our industry, and today, this is fully integrated in our corporate strategy and business operations. Sustainable logistics for a fast- changing world Our sustainability priorities Environment Reducing our impact. We recognise the urgent need to protect the planet. We play our part by reducing our environmental impact. And we want to lead our industry in tackling climate change and decarbonising transport and logistics. Governance Doing business with integrity. We do business compliantly and honestly and pay taxes where we generate our profits. We handle data ethically with the right safeguards around data privacy. Running a responsible supply chain. We make sure all suppliers match our standards, environmental and social criteria, and understand our sustainability goals. Social Caring for our employees. We strive to be a safe and inclusive place to work. We work hard to attract and keep talent by giving em- ployees responsibility and growth opportunities. We want to promote diver sity, protect rights and improve our employees well-being. Engaging with communities. We work with local communities across the globe. We respond to local needs, challenges and emergencies everywhere we do business. • Diversity and inclusion • Human capital development • Health and safety • Labour rights & working conditions • Human rights • Community engagement • Climate change • Waste management and recycling • Business integrity • Responsible supply chain • Tax transparency • Data ethics and cybersecurity 11 DSV Annual Report 2022 Strategy and financial targets Raising our environmental ambitions We – and the whole industry – need to do more to protect the environ- ment. To hold ourselves accountable to that goal, we have now commit- ted to reaching net-zero carbon emissions across our operations by 2050. To make sure this follows a common, robust and science-based definition, we follow the recognized SBTi Net-Zero Standard. We continue to work towards our 2030 emission reduction targets, and this year, we increased our target ambition for the 1.5°C global warming scenario for scope 1 and 2, in line with the latest climate science. We also recalculated our 2019 CO 2 emission baseline for all scopes, to reflect our larger business size aer the integration of Agility's Global Integrated Logistics business (GIL). Our biggest challenge to reach net-zero is technological; in our industry today there are still no carbon neutral solutions available at scale. Another challenge is that the majority of emissions in our supply chain are not in our full control. As an asset-light freight forwarder we do not own or control the trans- port equipment and we have limited direct influence on investments in new technologies. Still, we take responsibility for our scope 3 emissions and engage with our customers, suppliers and other partners in finding new and more sustainable transport solutions to be able to optimise sup- ply chains and oer our customers lower-emission transport alternatives. Our approach to managing the risk and opportunities from climate change is an embedded part of our risk management framework, as described on page 36. Driving innovation in logistics Delivering our targets will require a huge eort across our industry. We have strengthened our governance and initiated various organisational changes in DSV to anchor our ESG strategies in our business operations and help drive innovation and implementation of our environmental and climate initiatives. Solar panels on rooops, partnerships with suppliers on sustainable fuel and pilots with electric trucks are examples of the inno- vation initiatives we worked on in 2022 to investigate the possibilities within these technologies. In 2023, we are introducing an internal carbon fee – the fee will be levied on our activities, based on their CO 2 emissions. The funds generated will be invested back into our innovation initiatives. At the end of 2021, we implemented our Green Logistics services to help customers reduce emissions from their supply chains. We continue to promote and develop these services, and we expect growing demand in the coming years, as many of our customers have set their own, ambitious climate targets. Partnerships and stakeholder engagement No one, DSV included, can tackle planet-wide environmental challenges alone. Collaboration and partnerships are key to finding and implementing eective and long-lasting solutions to our most pressing sustainability challenges. We engage regularly with employees, customers, suppliers and investors on our sustainability strategy – and use their input and ideas to enhance our plans. During 2022 we evaluated more options for expanding existing partnerships and working with innovative new companies. These are part- nerships that can help us develop more sustainable energy sources, scale sustainable fuel technologies and run alternative trucking technology pilots. Integrity and transparency As one of the world’s largest freight forwarding companies, our global network spans geographical and cultural borders across the globe, engag- ing with customers, suppliers, business partners and public authorities in more than 80 dierent countries. We are committed to conducting our activities with integrity and engag- ing with our stakeholders in an open and transparent manner. We strive to ensure that we apply and maintain uniform high ethical standards across our global organisation as defined by our Code of Conduct. To safeguard this focus, we run global awareness campaigns and recurring training programmes for all employees. As a freight forwarder we are aware of our position in the global logistics value chain in which our services are, to a large degree, performed by third-party suppliers. How our suppliers act reflects back on us as a com- pany and on our industry as a whole. Our Supplier Code of Conduct out- lines our ethical business standards, which we require our suppliers to follow. And our new centralised third-party risk management vetting platform and ongoing annual supplier audits are other measures to safe- guard compliance with our standards. Our social responsibility Freight forwarding is a people business, and ensuring that our employees thrive in an inspiring working environment is a central part of our HR strategy. We believe that a diverse and inclusive working environment consisting of people from across dierent nationalities, cultures, genders and ages generates better work dynamics and provides a stronger basis for engaging with our customer base. Being mindful of employee safety is also high on our agenda which we manage through several health and safety initiatives as well as addressing labour and human rights. We apply this mindset everywhere we operate globally, and when we integrate companies – like GIL in 2021/22 – we make sure this culture and these standards are implemented across the organisation. In 2022, we performed our first global people survey – this has provided us with valuable information to further enhance these values and culture, making DSV an even more attractive place to work. Across the globe, we continue to engage in and support the communities we are part of. In 2022, the war in Ukraine only confirmed how quickly things can change and how important it is that we are ready to respond as a company with both financial and logistics support. 12 DSV Annual Report 2022 Strategy and financial targets Our business model End-to-end logistics Through our global network, we provide a wide range of end-to- end supply chain solutions. We track our environmental impact systematically with a view to making our operations as carbon, energy and resource ecient as possible. The majority of our CO 2 emissions come from subcontracted transport (scope 3). Subcontracted transport Scope 1 + 2 + 3 Warehousing — Picking/packing — Cross-dock terminal — Deconsolidation Labelling, configuration, testing — Distribution — Documentation & customs clearance E-commerce fulfilment — Carbon emission reports — Supply chain optimisation — 4PL Shipment booking — Pick-up — Warehouse — Documentation & customs clearance Cargo consolidation — Purchase order management Cross-dock terminal — Insurance Scope 1 + 2 + 3 Scope 3 From shipper To consignee Freight forwarding services Logistics and distribution We ship freight by land, sea and air – and provide contract logistics too. Our business model is flexible and asset light, which helps us to keep supply chains flowing eciently, from shipper to consignee. A light model for the right reasons Our business model allows us to quickly scale activities to match changes in market demand or modes of transport. It also helps us choose the best partners for any ser- vice, based on reliability, available capacity, sustainability factors, transit time and price. Although we are a global business, we are always close to local markets. Working with container carriers, airlines, road hauliers and railway operators, we move goods to wherever they are needed. And being one of the largest buyers globally means we – and our customers – benefit from keen pricing and strong, long-standing relation- ships with carriers. We oer a unique combination of a highly skilled workforce with extensive industry know-how, advanced IT systems, modern warehouses and terminals, strong carrier relationships and a global network across more than 80 countries. Adding value to complex supply chains As well as transport, our customers buy a full range of freight forwarding, logistics and distribution services from us. And we constantly develop new services to keep ahead of what customers need. Our workflows are highly digitalised, and our systems tightly integrated with cus- tomers and suppliers. To cut the environmental impact of our business, we work closely with customers and suppliers to track and minimise emissions across our entire supply chain – from shipper to final destination. CO 2 CO 2 CO 2 Green logistics services CO 2 reporting — Green supply chain design & optimisation — Sustainable fuel oerings — Carbon osetting 13 DSV Annual Report 2022 Strategy and financial targets 5% 5% 4% 3% 3% 20%60% A fragmented competitive landscape We are one of the top three global freight forwarders, with a market share of roughly 4%. Together, the top 20 forwarders have an estimated global market share of 30-40%. The rest of the market consists of a long tail of smaller regional and local freight forwarders. The mix of industry fragmentation and service standardisation creates a competitive pricing landscape. But because of our scale, global network, strong IT systems and logistics competences, big freight forwarders like DSV are in a good position to consolidate the market and gain market share. Our acquisition track record is a strong ex ample of this, and we expect the consolidation trend to prevail in the coming years. New competition emerging In recent years, new competitors have entered the industry. One category is the digital forwarders, who typically oer a simple, standardised range of services, mainly focused on online price quoting and booking. Digital forwarders have a high level of digital capabilities but a lower level of logistics capabilities, such as operational expertise, global networks, scale, warehouses and carrier relationships. Furthermore, a few of the large ocean carriers now aim to provide door- to-door transport services, air and overland transport in addition to ocean transport. Our industry and market trends By understanding market trends in our own industry – and in others that aect us – we can take advantage of opportunities and act quickly to reduce risks. This has created scenarios where these carriers are both suppliers and competitors to freight forwarders. So far, the new players have not gained material market shares. Based on our strong logistics capabilities and our clear roadmap to further enhance our digital capabilities, we are confident that DSV will remain highly competitive. GDP sets the pace for market growth In recent years, global trade growth has been on level with GDP growth, and we believe this correlation will continue in the long term – with dierent growth rates between regions. As a result of the slowdown in the global economy and a post-COVID shi in consumer spending away from goods and towards services, global trade volumes have contracted during 2022 and have developed worse than the general economy. This development will also impact our markets going into 2023. Our asset-light model enables us to quickly adjust our capacity to such changes in demand. Our industry has changed dramatically in recent years. New trends and market dynamics are aecting transport and logistics globally and locally. We must understand these dynamics so we can act quickly to capitalise on opportunities and mitigate threats. In the following chart we have listed important ongoing trends aecting DSV. Market share Top five global freight forwarders and market share based on 2021 revenue. Source: Armstrong & Associates and DSV estimates. ■ Kuehne + Nagel ■ DHL Logistics ■ DSV+GIL Top five Others ■ DB Schenker ■ C.H. Robinson ■ Top 6-20 ■ Others, estimated 14 DSV Annual Report 2022 Strategy and financial targets Trends Their impact Our response A need for reliable global supply chains Even before the COVID-19 pandemic, companies sought more reliable and transparent supply chains. That need has only grown, and companies are contingency planning and adjusting their setup to protect against future risks. Many companies are diversifying outsourced production between China and other East Asian countries. With dual sourcing and with more countries involved, dependencies are reduced, but complexity goes up. Companies are also considering reshoring of production. It is happening for certain products, but so far with limited impact on global trade. For some companies, storing extra buer inventory closer to the end market can be another way to make supply chains more robust. We help our customers optimise their supply chains – suggesting eciency improvements to increase reliability, cut costs or reduce the environmental impact. By providing supply chain visibility through our digital services, we can support planning and monitoring all the way from purchase order to final delivery. Dual sourcing and more complex supply chains may increase the demand for our services – e.g., purchase order management, cargo consolidation, customs clearance and warehousing. Geopolitical instability and protectionism Geopolitical instability causes tension and unrest. Global trade flows and economies are impacted by factors like protectionism, trade wars and political and military conflicts. Across the globe, we continue to see new examples of conflicts, protectionism, changes to taris and embargoes. In 2022, the war in Ukraine had both direct and indirect impact on the supply chains of many companies and on transport markets due to the closure of Russian air space and Ukrainian truck drivers leaving the European market. In recent years, the UK Brexit and the “trade war” between China and the US have also had a significant impact on supply chains and our operations. When such changes occur, we and our customers must react quickly to keep supply chains flowing – and to avoid violating any regulation. We oer a strong operational and compliance setup to help customers prepare for and adapt to market changes. Ultimately, we expect the benefits of global supply chains to win out over protectionism, and we believe globalisation is here to stay. There will be examples of more local production, and with our flexible business model we can adapt to such changes in trade flows. Greener supply chains The demand for greener supply chain solutions is growing – driven by increasing environmental regulations and consumer pressure. The transport and logistics industry is a major contributor to carbon emissions, and the sector as a whole must make a bigger eort to develop more environmentally sustainable business practices and reduce emissions from its activities. Having a clear sustainability strategy and service oering is increasingly becoming a “license to operate” for transport and logistics companies. In 2022, we continued our eorts to support greener supply chains for our customers through our Green Logistics oerings. This market is still at an early stage, and we expect that the demand for these services will increase in the coming years. We continue to develop our services, and in 2022, we changed our organisation and created new operational and commercial sustainability teams to support this. The rise of e-commerce Consumer behaviour is becoming increasingly digital, sending fulfilment centre and last-mile delivery activities skyward. COVID-19 lockdowns accelerated the shi in consumers’ buying behaviour towards more online shopping. During 2022, e-commerce slowed a little, in line with the economic slowdown. But we still expect high structural growth in this area in the coming years, both for local and cross-border transactions. We continue to see growth potential for DSV in the e-commerce market, and we are continuously devel- oping our services. This includes the roll-out of our automated e-fulfilment factories and customised solutions for large customers. Digitalisation and automation Technology has transformed our industry over the past decades. This development will continue and will impact the way we operate and interact with customers and other stakeholders. Across supply chains, the demand for visibility and productivity – oen in tight labour markets – drives technological development. Customer and vendor interactions are gradually changing from manual and classic EDI based to more modern API connections. And to drive productivity and support the fast-growing e-commerce segment, warehouses are increasingly being fitted with automated storage & retrieval systems. We aim to combine our strong logistics competences with advanced digital solutions. We work with strategic roadmaps to develop our digital and physical infrastructure, and we implement scalable tech- nology across our organisation. Read more about our approach to technology in the following chapter. 15 DSV Annual Report 2022 Strategy and financial targets Our business operations rely on strong systems and technology. Last year, our scalable, digital platforms handled almost 270 million jobs, shipments and order lines. This platform not only supports ecient workflows; it also ensures a fast and smooth integration of M&As and supports our growth strategy. Hybrid computing and AI To fulfil our strategy and react quickly to our dynamic markets, we have a strong, scalable IT infrastructure. We take a hybrid computing approach blending on-premises and cloud-based infrastructure across operational systems, customer integrations and engagement services. On top of our Advanced Integration Platform that we implemented in 2021, we are now applying artificial intelligence (AI) to improve our oper- ational eciency in various ways. In 2022, we implemented systems for improving data quality of vendor data and for automated scanning of cus- toms declaration forms. Our modular approach to developing AI solutions allows us to quickly reuse models and data across the business to roll out even more solutions and respond to customer needs in a quick fashion. Delivering supply chain visibility Digitalisation is changing the way we interact with customers and vendors through every phase of a shipment. From quote, purchase order, booking, shipment tracking and status alerts to final billing and KPI reports. Our digital tools provide supply chain visibility to DSV customers – and make it easy to do business with us. Our digital freight forwarding platform, myDSV, is part of our critical IT infrastructure, not only managing bookings but also tracking, claims and reporting. In 2022, bookings on myDSV were up by more than 30%. A responsive approach At DSV, we continuously monitor the latest trends and adopt new technologies that benefit our business and our customers. Besides myDSV, we provide direct customer integrations for large customers. Increasingly, we are seeing EDI connections replaced by more advanced API integrations. Automated, ecient warehousing Automating and optimising warehouse processes improve customers’ experiences and enable us to utilise warehouse space more eciently. The structural growth in e-commerce transactions means that the demand for ecient warehouse solutions is growing too. The journey towards more automated warehouses continued in 2022. Our automated goods-to-person storage and retrieval program, DSV Fulfilment Factory, was launched in 2021, and during 2022, it has been rolled out to even more sites and customers. In addition, we are increasing the adoption of a wider range of warehouse automation technologies, including auto- mated guided vehicles and airborne autonomous drones for cycle count. Digital cargo twins In more and more warehouses and terminals, we now scan the size and weight of every incoming parcel and distribute this data across our IT systems as a ”digital cargo twin”. This gives us a precise view of the utilisation and performance of our warehouses and other assets, allowing us to optimise performance. In addition, the scanning of parcels ensures that customers are invoiced accurately based on the actual size and weight of their shipments. Staying abreast of the latest trends Our DSV Innovation Hub drives our global innovation eorts, monitoring trends and technologies and prioritising which to explore. Working with internal and external stakeholders, this team tests ideas, establishes fi- nancial business cases and implements projects across our global network. DSV technology trend radar Power- to-X Adopting Testing Tracking/ Assessing Computer Vision Micro mobility Quantum computing Smart Robots Autonomous vehicles Electrical trucks Wearables Autonomous drones for delivery Artificial intelligence Digital cargo twins Hybrid computing platform Warehouse Automation 16 DSV Annual Report 2022 Strategy and financial targets We have based our guidance on the assumption of declines in air and sea freight volumes of 2-5% for the full year 2023. As transport markets continue to normalise, we expect that our gross profit yields in Air & Sea will decline compared to the average level in 2022. For Road and Solutions, we expect that markets will be flat or decline by low single digits in 2023. Across all divisions our aim of taking market share remains intact. We will monitor activity closely across our organisation and adjust our capacity and cost base accordingly. The outlook for 2023 assumes that the currency exchange rates, especially the US dollar against DKK, will remain at the current level. The geopolitical and macroeconomic environment remains uncertain, and unforeseen changes may therefore impact our financial results. Assumptions for 2023 financial outlook Aer an extraordinary 2022, we expect a decline in our earn- ings and margins for 2023 as freight markets find a new nor- mal level aer the pandemic. The World Bank projects global GDP growth in the level of 2-3% in 2023 – with lowest growth rates in the advanced economies. Normally, we expect transport volumes to grow in line with the economy, but in the second half of 2022, we saw volumes declining more than GDP due to reduction of inventory levels and normalisation of consumer behaviour aer COVID-19. We expect this negative development in freight volumes to continue in the first part of 2023, but we expect a recovery in the second half of the year. Outlook for and financial targets 2026 financial targets While we expect decline in conversion ratio and ROIC in 2023 compared to the extraordinary levels in 2022 – mainly for Air & Sea – our 2026 targets are unchanged. The targets are based on the assumption of stable global eco- nomic development during the period 2024-26, with average annual global GDP growth of at least 3% and transport market growth in line with GDP. All the way towards 2026 we will continue our focus on achiev- ing organic growth ahead of the market, and we see opportuni- ties to improve productivity across the Group. Our IT systems, infrastructure and back-oce functions are scalable, providing opportunities to leverage operations in all three divisions. The targets are based on organic growth and do not include the potential impact from large acquisitions in the period. The strategic objectives of the Group are translated into the following targets: Outlook (DKKm) 2022 actual Outlook 2023 Operating profit (EBIT) before special items 25,204 16,000- 18,000 Eective tax rate 23.9% 24.0% For 2023, we expect EBIT before special items of DKK 16,000-18,000 million. We maintain our 2026 financial targets and aim for a 45% conversion ratio for the Group. 2026 targets (%) 2022 actual 2026 targets DSV Group Conversion ratio 48.3 >45.0 ROIC (before tax) 25.1 >20.0 Divisional targets for conversion ratio Air & Sea 59.7 >50.0 Road 25.8 >30.0 Solutions 29.0 >30.0 Forward-looking statements This Annual Report in- cludes forward-looking statements on various matters, such as expect- ed earnings and future strategies and expansion plans. Such statements are uncertain and involve various risks, because many factors, some of which are beyond our control, may result in actual developments diering considerably from the expectations set out in the 2022 Annual Report. Such factors include, but are not limited to, general economic and business conditions, exchange rate and interest rate fluctuations, the demand for our services, compe- tition in the transport sector, operational prob- lems in one or more of DSV’s sub sidiaries and uncertainty in connec- tion with the acquisition and divestment of enterprises. 17 DSV Annual Report 2022 Strategy and financial targets As a Group, we have a track record of successful company inte- grations – the most recent chapter in this story being the acquisi- tion of Agility's Global Integrated Logistics business (GIL) in 2021. We have been able to create increasing return on invested capital (ROIC) over time. However, large acquisitions have initially diluted ROIC before tax. Capital structure Group Management continuously monitors whether the capital structure is in line with the targets, and excess capital is distribut- ed to shareholders through share buybacks and dividends. Adjustments to the capital structure are usually announced in connection with the release of quarterly financial reports and are made primarily through share buybacks. Dividend policy DSV aims to ensure an annual dividend pay-out ratio of approx- imately 10-15% of our net profit. Proposed dividend for 2022 amounts to DKK 6.50 per share (2021: 5.50 per share). The proposed dividend for 2022 is equivalent to 8.1% of net profit. The lower dividend payout- ratio for 2022 reflects the extraordinary result for 2022 and expected normalisation of earnings in 2023. Capital structure The aim of DSV’s target capital structure is to ensure: • sucient financial flexibility to meet our strategic objec- tives; and • a robust financial structure to maximise the return for our shareholders. Our target financial gearing ratio is below 2.0 x EBITDA before special items. The ratio may exceed this level following signi- ficant acquisitions. Capital allocation policy Our free cash flow allocation prioritisation remains unchanged: 1. We pay net interest-bearing debt in periods when the financial gearing ratio is above target range. 2. We make value-adding investments in the form of acqui- sitions or development of the existing business. 3. Our distribution to the shareholders takes place through share buybacks and dividends. Value-adding investments DSV pursues an active acquisition strategy. Our acquisitions have created substantial value for shareholders over the years and have also contributed to consolidating an otherwise frag- mented industry. Capital structure and allo cation ROIC before tax (%) 120,000 100,000 80,000 60,000 40,000 20,000 0 20222018 2019 2020 2021 ROIC before tax incl. goodwill and customer relationships ■ Goodwill and customer relationships ■ Invested capital excl. goodwill and customer relationships ■ 30 25 20 15 10 5 0 Distribution of capital (DKKm) Dividends ■ Share buyback ■ 25,000 20,000 15,000 10,000 5,000 0 20222018 , Total , 2019 , Total , 2020 , Total , 2021 , Total , , Total , , 18 DSV Annual Report 2022 Strategy and financial targets Michael Ebbe CFO Financial review Income statement (DKKm) 2022 2021 Growth Revenue 235,665 182,306 24.3% Direct costs 183,516 144,691 Gross profit 52,149 37,615 33.3% Gross margin 22.1% 20.6% Other external expenses 5,559 4,173 Sta costs 16,315 13,025 Operating profit before amortisation and depreciation (EBITDA) before special items 30,275 20,417 Amortisation and depreciation 5,071 4,194 Operating profit (EBIT) before special items 25,204 16,223 48.0% Conversion ratio 48.3% 43.1% Special items, costs 1,117 478 Net financial expenses 866 841 Profit before tax 23,221 14,904 Tax on profit for the year 5,550 3,650 Profit for the year 17,671 11,254 The Group delivered strong results for 2022, achieving 33% growth in gross profit. EBIT before special items was DKK 25,204 million – up 48% and in line with the expected level of DKK 24,500-25,500 million. Strong performance in an extraordinary year 2022 was an eventful year with volatile freight markets, heightened geopolitical unrest, historically high inflation rates and a macroeconomic slowdown. The market for air and sea shied from congestion, lack of capacity and record-high freight rates in the first half of the year to declining volumes and rapidly falling rates in the second half. The markets for road and contract logistics were less volatile – but certainly also impacted by the changes in the world around us. For DSV, it was also an integration year. We completed the integration of Agility's Global Integrated Logistics business (GIL) less than one year aer the closing of the transaction – a new record for us. Across all business areas, we achieved growth in earnings in 2022 – with the strongest performance in Air & Sea and Solu- tions. In the extraordinary market conditions, we delivered 48% growth in EBIT before special items. And very importantly, we converted the earnings to cash. Adjusted free cash flow was up by 163.4% compared to 2021, and in line with our capital allo- cation policy, we allocated DKK 21,633 million to shareholders through share buyback and dividend. Earnings per share (diluted and adjusted) was up 59.9% in 2022, * Growth including M&A and in constant currencies. 100 80 60 40 20 0 60,000 50,000 40,000 30,000 20,000 10,000 0 (DKKm) (DKKm) (DKK) % % 50 40 30 20 10 0 28,000 24,000 20,000 16,000 12,000 8,000 4,000 0 2021 2021 2021 2020 2020 2020 2019 2019 2019 2018 2018 2018 2022 2022 2022 20 16 12 8 4 0 Operating margin EBIT driven primarily by growth in earnings and to a less degree a reduction in the number of issued shares. The performance of each of our divisions is further described in the reviews on pages 24-30. Integration of Agility's Global Integrated Logistics business The acquisition of GIL was closed in August 2021, at which date we included GIL in our consolidated financial statements. Consequently, the business combination was only partly included in the comparable P&L figures for 2021. We finalised the integration during Q3 2022, and in line with previous announcements, we estimate that GIL will contribute at least DKK 3 billion annually to combined EBIT before special items. The integration triggered costs of DKK 1.1 billion in 2022, which are recognised in the income statement under special items. Ukraine and Russia As previously announced, we have divested or closed down all DSV sub- sidiaries in Russia and Belarus. We made this decision shortly aer Russia’s invasion of Ukraine, and the exit had no material impact on the financial results of the Group. We also make sure that we comply with international sanctions against Russia and Belarus at all times, and we have stopped organising transports to, from and through the two countries, except for pharmaceutical shipments and humanitarian aid. Our Ukrainian operations were temporarily suspended when the invasion started in February 2022. During the year, we have resumed activities in the country to the extent possible. Results Revenue Revenue was up 24.3% in 2022. The Air & Sea division grew revenue by 26.1%, driven by the inclusion of GIL and higher freight rates in the first half of the year. In the second half of 2022, the economic slowdown resulted in lower demand for freight services. In combination with less congestion this led to falling freight rates and lower revenue for the division. (DKKm) 2022 2021 Growth Air & Sea 174,431 131,901 26.1% Road 41,507 35,416 16.4% Solutions 24,409 18,734 26.2% Non-allocated items and eliminations (4,682) (3,745) n.a. Total revenue 235,665 182,306 24.3% * Growth including M&A and in constant currencies. The Road and Solutions divisions also achieved strong revenue growth for the year. This was driven by higher average rates/fuel prices and higher ac- tivity (market share gains). GIL business contributed to the growth in both divisions, especially in Solutions, due to its strong footprint in the Middle East and APAC. The economic slowdown also aected Road and Solutions in the second half of 2022; however, less than the Air & Sea division. Gross profit Gross profit was up 33.3% in 2022. Growth in Air & Sea was mainly driven by the addition of GIL and higher gross profit yields due to the extra- ordinary market conditions with port congestion, high freight rates and general cost inflation. In the second half of the year, the division was aected by a gradual drop in yields as congestion started to ease. (DKKm) 2022 2021 Growth Air & Sea 34,624 23,769 38.5% Road 7,911 7,095 11.0% Solutions 9,318 6,653 35.3% Non-allocated items and eliminations 296 98 n.a. Total gross profit 52,149 37,615 33.3% * Growth including M&A and in constant currencies. Gross profit (DKKm) EBIT before special items (DKKm) Diluted adjusted earnings per share of DKK 1 Conversion ratio Gross profit 20 DSV Annual Report 2022 Financial and non-financial performance Gross profit growth in Road and Solutions was driven by the addition of GIL business and higher activity levels. Solutions in particular achieved high growth as we added new warehouse capacity. Gross margin for the Group was 22.1%, compared to 20.6% last year. This increase was driven by the Air & Sea division with high gross profit yields and a change in its product mix. The Solutions division also achieved a higher gross margin, due to increased warehouse utilisation and more ecient workflows. All regions achieved growth in gross profit in 2022, strongest in APAC and Americas. Furthermore, the Middle East was significantly strengthened by the addition of GIL’s network in this region. EBIT before special items For the Group, EBIT before special items increased by 48.0%. This was driven by gross profit growth across all divisions and geographical regions and by the addition of GIL. (DKKm) 2022 2021 Growth Air & Sea 20,658 12,768 53.0% Road 2,040 1,857 9.2% Solutions 2,701 1,775 47.4% Non-allocated items and eliminations (195) (177) n.a. Total EBIT before special items 25,204 16,223 48.0% * Growth including M&A and in constant currencies. The 2022 conversion ratio was 48.3%, compared to 43.1% last year. Our Air & Sea and Solutions divisions improved their ratios and Road was on par with 2021, even though inflation put high pressure on the cost base in the second half of the year. In extraordinary market circumstances – and while managing the GIL integration – our teams continued to opti- mise workflows and systems and leverage our network. As logistics mar- kets gradually normalise, we expect a lower conversion ratio in 2023. Total sta costs (excluding hourly workers) were DKK 16,315 million in 2022 (2021: DKK 13,025 million). The cost rise was from the inclusion of GIL as well as organic increases in activity, cost inflation and the impact of exchange rate fluctuations. Other external expenses totalled DKK 5,559 million in 2022 (2021: DKK 4,173 million). They were aected by the same factors as sta costs. Depreciations totalled DKK 5,071 million in 2022 (2021: DKK 4,194 million). This rise was due to the inclusion of GIL and the addition of several warehouses in our Solutions division. Special items totalled DKK 1,117 million in 2022 (2021: DKK 478 mil- lion), relating to the now finalised GIL integration. The total GIL integration cost came to DKK 1.6 billion. Net financial expenses totalled DKK 866 million in 2022 (2021: DKK 841 million). The increase was partly due to the inclusion of GIL and an increase in our leasing debt compared to 2021 due to our warehouse expansions in 2022. Gain on currency translation was DKK 276 million in 2022, compared to a DKK 53 million loss in 2021. Currency translations were mainly related to intercompany loans and had no cash impact. The integration of GIL led to a temporary increase in intra-group currency exposure. (DKKm) 2022 2021 Interest on lease liabilities 727 495 Other interest cost, net 396 276 Interest on pensions 19 17 Currency translation, net (276) 53 Net financial expenses 866 841 The eective tax rate was 23.9% in 2022, compared to 24.5% in 2021. This was in line with our expectations. The inclusion of GIL and the growth of the Air & Sea division have increased the Group’s presence in countries with a relatively higher corporate tax rate. Diluted adjusted earnings per share Diluted adjusted earnings per share went up by 59.9% to DKK 81.4 in 2022 (2021: DKK 50.9). This was driven by the significant increase in adjusted earnings and also a reduction in shares outstanding, as treasury shares from share buybacks were cancelled during the year. Cash flow statement Cash flow from operating activities in 2022 rose by 120.0% to DKK 26,846 million. Cash flow from operating activities was positively aected by higher EBITDA before special items and an improvement in net working capital, but oset by higher tax payments for the period. On 31 December 2022, our net working capital (NWC) was DKK 5,116 million, compared to DKK 8,031 million in 2021. The main reason was lower NWC for the Air & Sea division, where lower freight rates and lower activity in the last months of 2022 reduced funds tied up in NWC. Process optimi- sations, especially in the GIL business, also contributed to lower NWC. (DKKm) 2022 2021 Cash flow from operating activities 26,846 12,202 Cash flow from investing activities (966) 420 Free cash flow 25,880 12,622 Cash flow from financing activities (24,245) (8,680) Cash flow for the period 1,635 3,942 Free cash flow 25,880 12,622 Net acquisition of subsidiaries and activities - (1,631) Special items 664 828 Repayment of lease liabilities (3,734) (3,160) Adjusted free cash flow 22,810 8,659 21 DSV Annual Report 2022 Financial and non-financial performance Relative to full-year revenue, funds tied up in NWC at year- end decreased to 2.2%, from 3.5% in 2021. Cash flow from investing activities was an outflow of DKK 966 million in 2022, in line with our expectations. The cash inflow of DKK 420 million in 2021 was due to including the positive cash position of GIL. Adjusted free cash flow (adjusted for acquisitions, special items and IFRS 16) was DKK 22,810 million, compared to DKK 8,659 million last year. The adjusted free cash flow was mainly driven by the significant positive increase in cash flow from operating activities. Cash flow from financing activities was negative by DKK 24,245 million in 2022 (2021: negative DKK 8,680 million). This dierence was mainly due to higher proceeds from bor- rowings last year. In 2021, we issued three new corporate bonds versus only one in 2022. In line with our capital allocation policy, we allocated DKK 21,633 million to shareholders via share buybacks and divi- dend in 2022. At year end, the financial gearing ratio was 1.0x EBITDA (2021: 1.4x). Capital structure On 31 December 2022, DSV shareholders’ share of equity was DKK 71,519 million (2021: DKK 74,103 million). This decrease was mainly driven by allocations to shareholders, partly oset by profit for the period. The share capital was nominally DKK 219 million by the end of 2022 (2021: 240 million). The share capital is divided into 219 million shares of DKK 1 each. Each share has one vote. The share capital was reduced on 20 April 2022 through the cancellation of 6 million treasury shares and on 22 December 2022 through the cancellation of 15 million treasury shares. The solvency ratio excluding non-controlling interests was 45.0% on 31 December 2022, compared to 45.9% on 31 December 2021. Net interest-bearing debt (including IFRS 16 lease liabilities) was DKK 29,870 million by the end of 2022 – close to the level of last year (2021: DKK 29,245 million). In 2022, we issued one new corporate eight-year bond of EUR 600 million. The weighted average duration of corporate bonds, committed loans and credit facilities was 8.3 years on 31 December 2022, compared to 9.6 years on 31 De cember 2021. Invested capital and ROIC The invested capital including goodwill and customer relation- ships amounted to DKK 99,540 million on 31 December 2022 (2021: DKK 101,231 million). The decrease was mainly due to lower net working capital, partly oset by higher currency exchange rates. Driven by strong growth in earnings, return on invested capital (including goodwill and customer relationships) was 25.1% for 2022 (2021: 19.6%). Excluding goodwill and customer rela- tionships, return on invested capital was 105.1% for 2022 (2021: 77.9%). Reporting on corporate social responsibility Reporting on corporate social responsibility cf. section 99a of the Danish Financial Statements Act We have reported separately on corporate social responsibility in our Sustainability Report 2022, in accordance with section 99a of the Danish Financial Statements Act. Reporting on management gender composition cf. section 99b of the Danish Financial Statements Act We have reported separately on management gender composition in our Sustainability Report 2022, in accordance with section 99b of the Danish Financial Statements Act. Reporting on diversity cf. section 107d of the Danish Financial Statements Act We have reported separately on diversity in our Sustainability Report 2022, in accordance with section 107d of the Danish Financial Statements Act. For more information on developments within each ESG area, please refer to our Sustainability Report at: https://www.dsv.com/en/sustainability-reports Sustainability Report 2022 Accelerating our ambitions towards a more sustainable future 22 DSV Annual Report 2022 Financial and non-financial performance Performance on CO 2 emissions In 2022, we raised our ambitions and committed to reaching net-zero carbon emissions across our operations by 2050, and we revised our 2030 emission reduction targets for scope 1 and 2. According to our revised targets, we will reduce our scope 1 and 2 emissions by 50% by 2030 and our scope 3 emissions by 30%. Our total CO 2 emissions in 2022 increased by 4% compared to 2021. The increase was primarily due to the full-year eect from GIL, but this was oset by declining volumes within air and sea due to the economic slowdown in the second half of 2022. The growth in scope 1 and 2 emissions was also impacted by the growth in our Solutions division and an increase in our own truck fleet. Compared to the 2019 baseline – now including GIL – our total emissions declined by 22%. The main reason for this was an overall decline in freight volumes in the period. As volume growth is expected to return in the coming years, we need to achieve lower carbon intensity per transport. Carbon intensity has generally improved over the years as transport equipment becomes more ecient enabling better utilisation of capacity. For sea freight, carbon intensity saw a negative development in 2021 and 2022, mainly due to less slow-steaming in a period with port congestion and tight capacity – we expect this situation to reverse in the coming years as more capacity is added. With our CO 2 baseline in place, we are now working on a roadmap with initiatives which over time can contribute to reducing our emissions across all business areas. This includes the continued development of our Green Logistics oerings, the use of sustainable fuels, pilots with electric trucks, own production of energy and continued focus on optimising our own buildings. A business powered by people We successfully integrated GIL in 2022. Across the organisation we were able to retain the key GIL employees, which was very positive. In a tight labour market we also achieved a relatively stable development for existing DSV employees, and as a result, our employee turnover adjusted for synergies was 22.1%. This was on level with last year and we estimate that this is on level with our industry. Promoting health and safety capabilities across the organisation is a key priority for us in order to keep employees safe. It is reflected in our lost time injury frequency rate, which this year dropped to 2.8 compared to 4.5 in 2021. Conducting our business activities responsibly and applying strong ethical standards is high on our agenda. This includes ensuring that we comply with the latest human rights regulations, and in 2022 we developed a new and improved Human Rights programme which will be fully rolled out in 2023. Towards the end of 2022, we carried out a global engagement survey across our organisation. The survey achieved a high response rate and provided valuable feedback and insight on how we can make DSV an even better place to work. The results of the survey are currently being reviewed, and we look forward to addressing these findings over the coming year. Working with integrity The DSV Code of Conduct forms our ethical foundation and guides our principles, behaviour and culture. We conduct mandatory internal e-learning modules every year, and in 2022, we achieved a 100% completion rate among the employees assigned this year. As freight forwarders, we depend on our suppliers who perform the trans- port services. This year, we have implemented a new global third-party risk management system, enabling us to improve our risk assessments, approval and monitoring capabilities. In combination with new automated distribution and sign-o capabilities of our Supplier Code of Conduct, these solutions will help enforce our standards across our entire supply chain. We will continue developing the new platform in 2023, improving our supplier screening and evaluation capabilities. In 2022, we committed to an ambitious 2050 net-zero target, and we restated our 2019 baseline for CO 2 emissions to now include GIL. We also completed our first global employee engagement survey and updated our human rights assessment programme. ESG performance 2021 2019 Baseline2022 Total Co 2 emissions ('000 tonnes) 15,930 15,373 20,526 Scope 1+2 441 254 409 Scope 3 15,489 15,119 20,117 Carbon intensity - Co 2 e (g/tonne-km) Air transport 694.4 707.4 739.5 Sea transport 6.6 6.5 6.3 Road transport 97.5 98.7 98.1 23 DSV Annual Report 2022 Financial and non-financial performance Condensed income statement and key figures (DKKm) 2021 Growth2022 Revenue 174,431 131,901 26.1% Direct costs 139,807 108,132 Gross profit 34,624 23,769 38.5% Other external expenses 4,244 3,366 Sta costs 8,471 6,598 Operating profit before amortisation and depreciation (EBITDA) before special items 21,909 13,805 Amortisation and depreciation 1,251 1,037 Operating profit (EBIT) before special items 20,658 12,768 53.0% Gross margin (%) 19.8 18.0 Conversion ratio (%) 59.7 53.7 Operating margin (%) 11.8 9.7 Number of full-time employees at year end 23,032 24,675 Total invested capital 68,813 73,256 Net working capital 5,849 10,675 ROIC before tax (%) 29.1 21.9 For 2022, the division reported a 38.5% increase in gross profit and 53.0% increase in EBIT before special items. This growth was driven by the inclusion of GIL, high gross profit yields in extraordinary freight markets and a continued focus on operational excellence. Air & Sea * Growth including M&A and in constant currencies. Market situation Navigating volatile markets was a major theme in 2022. Dur- ing the year, there was a significant change in the dynamics of the global freight markets. At the start of the year, supply chains were still heavily impacted by congestion and COVID- 19 lockdowns. This resulted in lack of capacity, high freight rates and low schedule reliability. During the second half of the year, demand for transport servic- es declined as a result of the general macroeconomic slowdown, de-stocking in the retail sector and a gradual normalisation aer COVID-19 lockdowns as consumption shied away from mate- rial goods and towards services. Congestion across supply chains gradually eased and capacity started to recover, leading to a more balanced market situation by the end of the year. Air The global air freight market saw gradually declining demand during 2022, especially for export from Asia to Europe and to North America. Demand for air freight was also impacted by improving schedule reliability and lower rates in the sea freight market, which made sea freight a more competitive alternative. The available air freight capacity gradually increased as belly- space capacity in passenger planes returned. As a result, air freight rates declined, mainly in the second half of 2022. This year, we achieved air freight volume growth of 3% (in- cluding M&A impact). Adjusted for the acquisition of GIL, the division’s 2022 volumes were down by approximately 7%, compared to an estimated general market decline of 8-10%. Sea In the global sea freight market, port congestion was still an issue on the US East Coast and in Northern Europe in the first part of 2022, but available capacity gradually increased as congestion eased during the year. In combination with weaker The Air & Sea division operates a global network specialising in transportation of cargo by air and sea. The division oers both conventional freight for- warding services and tailored project cargo solutions. Gross profit DKK 34,624 million +.% +.% Operating profit DKK 20,658 million % EMEA % APAC % AMERICAS Geographic segmentation based on gross profit demand – especially on the Asia-Europe and Trans-Pacific routes – this led to rapidly declining spot rates from the historical high rate levels we saw at the end of 2021. In 2022, we achieved sea freight volume growth of 7% (including M&A impact). Adjusted for the acquisition of GIL, the division’s 2022 volumes were down by approximately 7%, which we estimate to be in line with the general market. The volume development compared to the market for both air and sea was impacted by our relatively high exposure to the Asia-Europe trade lane, which was among the weakest performing in 2022. Furthermore, our abili- ty to outgrow the market is normally limited during an integration year. Strategic and operational highlights We successfully completed the integration of GIL in 2022, less than a year aer the acquisition – thanks to the strong eorts from our teams worldwide. The inclusion of GIL has strengthened our Air & Sea network across most geographies, especially in the Middle East and APAC. With the integration of GIL, we also gained new competences, e.g., within the energy and the chemicals sectors. With the GIL integration behind us and general demand declining, our focus has shied to adjusting our capacity and workforce and managing the impact of cost inflation on our business. This was a theme in the last part of 2022 and will continue to be high priority for us in 2023. In 2022, we continued to develop systems and service oerings to cus- tomers. Our workflows are already close to paperless, but we see poten- tial to use and further improve our systems, focusing on areas like digital customer integrations and booking data quality. This will help us provide better and faster supply chain visibility to customers – and increase our own productivity. Our air charter network provides tailor-made solutions to customers on specific routes. In 2022, we added new lanes to the network, e.g., from Singapore to Los Angeles. We operate the network with a clear fo- cus on flexibility so we can scale capacity up and down as demand chang- es. LCL (less than container load) in ocean freight is another business area where we increased our focus in 2022. We have gained a strong position within LCL in recent years, and we see good growth opportu- nities in this market. We saw increasing interest from customers for our Green Logistics services in 2022, especially around carbon footprint transparency and supply chain optimisation. The market for sustainable fuel is still relatively immature with volatile pricing and limited availability. We expect this will improve in the coming years, and it is highest priority for us to make sure that our customers have the option to choose lower-emission transports. Results DSV Air & Sea revenue was DKK 174,431 million in 2022 (2021: DKK 131,901 million), a growth of 26.1%. This revenue growth was driven by the addition of GIL business and high- er freight rates for both air and sea compared to 2021. Geographically, all regions contributed to the growth in revenue. Gross profit came to DKK 34,624 million for 2022 (2021: DKK 23,769 million), a growth of 38.5%. The increase was driven by the addition of GIL and high yields per unit for both air and sea freight compared to the same period last year. The extraordinary market conditions over the past years have had a positive impact on gross profit per TEU (sea freight) and per tonne (air freight). Our skilled forwarders, scale benefits and strong carrier relation- ships have enabled us to navigate the complex markets and oer trans- port solutions for our customers despite the challenges. With weaker demand, less congestion and lower freight rates, our gross profit yields started to decline in the second half of 2022. The division’s gross margin was 19.8% for 2022 (2021: 18.0%). The in- crease was mainly due to the extraordinary markets as well as a change in product mix compared to 2021 – with growth within higher- margin activities like LCL and decline in lower-margin project business. This year, EBIT before special items was DKK 20,658 million (2021: DKK 12,768 million) – an increase of 53.0%. The significant growth was driven by the inclusion of GIL, the general gross profit rise and our continued focus on productivity, achieving synergies and managing costs (operational excel- lence). All regions contributed to the EBIT growth in 2022. The conversion ratio came to 59.7%, compared to 53.7% last year. The con- version ratio was positively aected by extraordinary high gross profit yields. As yields normalise, we expect conversion ratio to decline. The improvement in 2022 was also driven by the GIL integration and the achieved synergies. Air freight (DKKm) 2022 2021 Revenue 90,591 70,846 Direct costs 71,988 57,795 Gross profit 18,603 13,051 Gross margin (%) 20.5 18.4 Volume (tonnes) 1,557,972 1,510,833 Gross profit per unit (DKK) 11,941 8,638 Sea freight (DKKm) Revenue 83,840 61,055 Direct costs 67,819 50,337 Gross profit 16,021 10,718 Gross margin (%) 19.1 17.6 Volume (TEUs) 2,665,147 2,493,951 Gross profit per unit (DKK) 6,011 4,298 25 DSV Annual Report 2022 Financial and non-financial performance 21 18 15 12 9 6 3 0 Gross profit Conversion ratio Operating margin EBIT (DKKm) (DKKm) (DKKm) 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 25,000 20,000 15,000 10,000 5,000 0 %% 2021 2021 20212020 2020 2020 2019 2019 2019 2018 2018 2018 60 50 40 30 20 10 0 2022 2022 2022 Net working capital (NWC) was DKK 5,849 million at the end of the year, compared to DKK 10,675 million at year-end 2021. This was due to a combination of lower freight volumes and lower freight rates in the last part of 2022, but also process improvements, especially in the GIL related business. In 2022, return on invested capital was 29.1%, compared to 21.9% in 2021. The increase was driven by the strong earnings growth. Focus areas for 2023 Aer completing three large integrations in recent years, we have achieved a strong market position. We have the network, skilled people and digital tools to provide market-leading global services to our custom- ers, and our clear target is to gain market share. Today, some companies are taking a critical look at their supply chains. We see this as an oppor- tunity, and we are ready to help them with production relocation, dual sourcing strategies, lowering emissions and by creating more supply chain visibility/predictability. In 2022, we had good momentum within sectors like energy, healthcare and semiconductors, and we will continue to focus on these sectors. Furthermore, we will continue to develop our LCL network, express services and our air charter network as well as adapting to future changes in demand. Supply chain disruptions and volatility will still be an issue in some parts of the market in 2023, but the so markets we saw in the second half of 2022 are likely to continue in the first part of 2023. Due to the transport market slowdown and increasing competition, we expect a decline in gross profit yields compared to the 2022 level, and we will do our best to navigate the markets, adjust capacity and protect our margins. Revenue Gross profit EBIT before special items 26 DSV Annual Report 2022 Financial and non-financial performance For 2022, the Road division achieved 11.0% growth in gross profit and a 9.2% increase in EBIT before special items. The increase in earnings was mainly driven by organic growth. The division deliv- ered strong operational performance in a market aected by tight capacity and cost inflation. The Road division is among the market leaders in Europe and furthermore has operations in North America, South Africa and in the Middle East. The division operates more than 23,000 trucks and oers full load, part load and groupage services through a net- work of more than 250 terminals. Gross profit DKK 7,911 million +.% +.% % % Operating profit DKK 2,040 million EMEA AMERICAS Road Condensed income statement and key figures (DKKm) 2021 Growth2022 Revenue 41,507 35,416 16.4% Direct costs 33,596 28,321 Gross profit 7,911 7,095 11.0% Other external expenses 1,425 1,122 Sta costs 3,543 3,149 Operating profit before amortisation and depreciation (EBITDA) before special items 2,943 2,824 Amortisation and depreciation 903 967 Operating profit (EBIT) before special items 2,040 1,857 9.2% Gross margin (%) 19.1 20.0 Conversion ratio (%) 25.8 26.2 Operating margin (%) 4.9 5.2 Number of full-time employees at year end 16,701 16,888 Total invested capital 10,690 9,624 Net working capital (586) (2,133) ROIC before tax (%) 20.1 20.0 * Growth including M&A and in constant currencies. Market situation We estimate that our main road freight market in Europe grew by around 1-3 % in 2022 – in line with European GDP. With the general economic slowdown in the second half of the year, the road freight market slowed down and market volumes dropped below 2021 levels in the last quarter of the year. The road market was characterised by tight capacity and lack of truck drivers during most of 2022. The EU Mobility Package came into eect at the beginning of the year, and the new regu- lation eectively reduced available capacity. On top of this, the market was impacted by higher fuel costs and general cost infla- tion, which also contributed to increasing freight rates and costs. In a challenging market, we estimate that our Road business grew its share across most markets as a consequence of our strong network and market position. Strategic and operational highlights The war in Ukraine, EU’s Mobility Package and other market challenges were top of mind in 2022. Following the outbreak of the war, many Ukrainian truck drivers le Western Europe and returned to their home country. This added to the already tight situation with structural lack of truck drivers. Our eective procurement setup and network meant that, in most cases, we were able to provide necessary capacity for our customers. We believe that this was an important factor be- hind our market share gains in 2022. We also made progress on our Road Way Forward programme. We implemented improvements across our European groupage network, including enhanced planning, better equipment utilisa- tion – and most importantly, more departures and higher and more consistent customer service levels. Our new transport management system is live in the Baltic countries, but we made less progress than expected in 2022. We have now changed our approach and reduced vendor dependency, and we are confident that we will achieve further progress in 2023. Geographic segmentation based on gross profit 10 8 6 4 2 0 Gross profit Conversion ratio Operating margin EBIT (DKKm) (DKKm) (DKKm) 48,000 40,000 32,000 24,000 16,000 8,000 0 10,000 8,000 6,000 4,000 2,000 0 2,500 2,000 1,500 1,000 500 0 % % 2021 2021 2021 2020 2020 2020 2019 2019 2019 2018 2018 2018 40 35 30 25 20 15 10 5 0 2022 2022 2022 The GIL acquisition had a limited impact on the Road division, but it did add road activities in the Middle East, which continued to perform well in 2022. We have continued our work to help customers optimise their supply chains and reduce their carbon footprints. This includes promoting our Green Logistics services, where we are seeing good interest – especially in North- ern Europe and among large customers. Longer term, we are involved in strategic partnerships with truck manufacturers, and we are testing dier- ent technologies and equipment. This includes electric trailers, which have the potential to reduce CO 2 emissions from transport by up to 40%. Results DSV Road revenue was DKK 41,507 million in 2022 (2021: DKK 35,416 million) – a growth of 16.4%. This was driven mainly by higher freight rates and higher fuel surcharges. For international transports and busi- ness-to-business shipments, we achieved growth year-on-year. Busi- ness-to-consumer shipments were down, mainly due to lower activity for customers within e-commerce and construction/do-it-yourself and simi- lar sectors. In a market with record-high rate increases and cost inflation, the division has tracked developments closely and has generally been able to adjust prices and provide capacity to our customers. The division has more than 85% of its revenue in Europe and saw good performance across most countries in this region – especially in our German operations. Our still relatively small operation in North America achieved the highest organic growth rate in 2022, and adding GIL’s road activities also contributed to growth. Gross profit was DKK 7,911 million in 2022 (2021: DKK 7,095 million), an annual increase of 11.0%. The division’s gross margin was 19.1% for 2022, compared to 20.0% for 2021. Capacity shortages, higher fuel prices and general cost inflation – partly due to the EU Mobility Package – led to higher direct freight cost for the division. The pass-through element of cost inflation had a negative impact on the gross margin. EBIT before special items was DKK 2,040 million in 2022, compared to DKK 1,857 million in 2021. This 9.2% increase was driven by the gross profit growth and solid performance across all regions, except for South Africa which was loss-making in 2022. The conversion ratio came to 25.8% for 2022, compared to 26.2% for the same period last year. In an environ- ment with high inflationary pressure on the cost base, the division has maintained focus on productivity and cost management. Net working capital (NWC) was negative DKK 586 million at the end of the year, against negative DKK 2,133 million at year-end 2021. This development was mainly a result of pre-payments related to property projects included in NWC at the end of 2021. Return on invested capital was 20.1% in 2022 and was on level with last year. Focus areas in 2023 We expect a competitive market in 2023, with activity levels still impact- ed by the economic slowdown. During the year, we will monitor activity levels closely and adjust capacity when needed. Our target of gaining market shares across geographies remains unchanged. Across our network, we will continue to develop our services and systems, supporting our customers’ need for supply chain visibility. We take more than 90% of customer bookings digitally, and we aim to enhance data quality in these bookings to improve customer service quality and our own productivity. We will also continue to promote and develop our Green Logistics services, and we expect an increasing demand for these services. We continue to see North America as an attractive market with strong potential for DSV Road, both organically and through M&A. The Road Way Forward project continues in 2023. This includes rolling out our transport management system in more countries and continuing devel- opment of our European groupage services – aiming for greater geographi- cal network coverage and improved performance on first/last mile distribu- tion. Based on the network improvements we have already made, we ex- pect growth in international groupage shipments in 2023. Revenue Gross profit EBIT before special items 28 DSV Annual Report 2022 Financial and non-financial performance The Solutions division achieved a 35.3% increase in gross profit and a 47.4% increase in EBIT before special items. The strong performance was driven by organic growth and the addition of GIL activities. Condensed income statement and key figures (DKKm) 2021 Growth2022 Revenue 24,409 18,734 26.2% Direct costs 15,091 12,081 Gross profit 9,318 6,653 35.3% Other external expenses 1,759 1,338 Sta costs 2,254 1,664 Operating profit before amortisation and depreciation (EBITDA) before special items 5,305 3,651 Amortisation and depreciation 2,604 1,876 Operating profit (EBIT) before special items 2,701 1,775 47.4% Gross margin (%) 38.2 35.5 Conversion ratio (%) 29.0 26.7 Operating margin (%) 11.1 9.5 Number of full-time employees at year end 32,077 31,866 Total invested capital 23,364 20,182 Net working capital 1,624 1,061 ROIC before tax (%) 12.4 11.3 Solutions * Growth including M&A and in constant currencies. Market situation The contract logistics market grew by an estimated 3-4% in 2022 compared to the previous year. The market had strong momentum for the first part of the year, but growth deceler- ated towards the end of the year. For many companies, espe- cially in the retail sector, inventory levels increased during the year, but in- and outbound transactions in warehouses de- clined compared to the high activity level in 2021. Throughout the year, warehouse capacity stayed in high demand across most markets. As a result, warehouse utilisation has been high, and the market was impacted by lack of labour, increasing energy prices, general cost inflation and higher interest rates. We estimate that Solutions took market share in all its major markets during the year. This was driven by a strong service oering, addition of new warehouse capacity and high utilisa- tion of existing capacity. Strategic and operational highlights In 2022, we completed the GIL integration. The contract logistics operations in the Middle East and South-East Asia added activities across several industries, including pharma/ healthcare, and were a strong contributor to the growth. We continued executing our long-term strategy for developing multi-client warehouse campuses based on strategic roadmaps for each region, and in 2022 we added more than 800,000 m of warehouse facilities – of which approximately 300,000 m was a net addition to the existing capacity. The campuses are partly replacing existing facilities but are also adding new capac- ity and are a key organic growth driver for the division. The new warehouses can be equipped and automated to match the needs of customers in dierent industries – and can accommodate changes in customer needs around seasonality and growth. Having several customers in the same location The Solutions division oers ware- housing and logistics services globally and controls more than 500 logistics facilities. The service portfolio includes freight management, customs clear- ance, order management and e-com- merce solutions. Gross profit DKK 9,318 million +.% +.% % % % Operating profit DKK 2,701 million EMEA APAC AMERICAS Geographic segmentation based on gross profit 14 12 10 8 6 4 2 0 Gross profit Conversion ratio Operating margin EBIT (DKKm) (DKKm) (DKKm) 28,000 24,000 20,000 16,000 12,000 8,000 4,000 0 10,000 8,000 6,000 4,000 2,000 0 3,000 2,500 2,000 1,500 1,000 500 0 % % 2021 2021 2021 2020 2020 2020 2019 2019 2019 2018 2018 2018 30 25 20 15 10 5 0 2022 2022 2022 delivers significant scale benefits, including improved utilisation of space and equipment, warehouse automation and better sta planning. This is clearly reflected in the division’s higher profit margins in recent years. Across both new and existing warehouses, we continue to focus on sus- tainability, launching several initiatives to reduce the environmental im- pact of our operations. Our new warehouses are certified in line with leading standards, such as BREEAM, and we increase the utilisation of rooop areas for solar panels. Our ongoing consolidation eorts also include the IT infrastructure. More than 70% of all sites operate on the division’s global Warehouse Manage- ment System, enabling standardisation of services and workflows while reducing the cost per transaction (order line). In 2021, we launched DSV Fulfilment Factory. This solution enables us to oer warehouse automation to all sizes of companies with multiple distribution channels, both B2B and B2C. We continued rolling it out in 2022 and now have 8 of 16 planned sites in operation. Results Solutions revenue was DKK 24,409 million in 2022 (2021: DKK 18,734 million), an annual growth of 26.2%. Growth was strongest in the first part of the year and was driven both by the inclusion of GIL and by organic growth across all regions. Gross profit was DKK 9,318 million in 2022 (2021: DKK 6,653 million) – an annual increase of 35.3%. The division achieved a gross margin of 38.2%, compared to 35.5% last year. Higher activity, high warehouse utilisation and more ecient workflows in the new campuses were the main drivers behind this development. EBIT before special items was DKK 2,701 million (2021: DKK 1,775 million). This increase of 47.4% was driven by organic growth across all regions and the successful integration of GIL. The conversion ratio was 29.0%, compared to 26.7% last year. This improvement was driven by growth in gross profit, and it was achieved despite general cost inflation aecting the cost base – especially in the second half of the year. Net working capital (NWC) was DKK 1,624 million at the of the year, compared to DKK 1,061 million last year. The increase was mainly due to higher activity levels and property projects in progress. Return on invested capital came to 12.4%, compared to 11.3% last year. The growth in earnings was partly oset by an increase in average invest- ed capital compared to 2021, mainly due to increases in warehouse leas- ing commitments. Focus areas in 2023 The current economic slowdown is also impacting the contract logistics market. We are closely monitoring developments and maintain high focus on continu- ously adjusting capacity and managing our cost base to match demand levels. Despite the temporary economic slowdown, we still expect the market to be characterised by strong demand for modern, ecient and automated warehouses in the right locations. We will continue to develop multi-client, automated warehouses with a high focus on sustainability and energy eciency. We aim to strengthen our foot- print across existing countries and focus particularly on growing our presence in Americas and APAC. Bolt-on acquisitions may be relevant for us, especially to gain specific industry competences or a foothold in a specific market. We maintain our target of gaining market share – our improved pharma sector oering and strengthened e-commerce products are examples of commercial initiatives we expect will support growth in 2023. Several industries are focusing on creating more robust supply chains. This may lead to relocating production for our customers, more regional production and assembly, higher inventory levels and more stock points or distribution centres closer to the end consumer. We will work closely with our customers and pursue the opportunities this will provide. Revenue Gross profit EBIT before special items 30 DSV Annual Report 2022 Financial and non-financial performance Ongoing key risk reassessment Tracking Risk governance structure As a global freight forwarder, we are exposed to a variety of risks that are inherent to our operations. Managing these risks is an integrated part of our management activities. Our risk management framework is based on structured risk identification, analysis and reporting processes, all of which provide the basis for ongoing risk assessments and subsequent initiation of relevant mitigating actions. Risk management MitigationReportingRecordingAnalysis and assessment Identification Dynamic risk adaption Identified risks are analysed to determine cause, impact and likelihood of the risk occurring. Risks are identified using the Group’s risk reporting tools. Identified risks are recorded and prioritised. Risk owners are allo cated to identified key risks. Risks are reported to the Board of Directors, the Audit Committee, the Execu- tive Board and other stakeholders in the organisation. Risks are monitored and preventive measures implemented in cooperation with the aected business units. When necessary, mitiga- tion actions are initiated imme- diately aer risk identification. Our flat organisational structure allows for fast escalation and timely re- sponse to issues that may have a material impact on the Group’s earnings and financial and strategic targets. The Board of Directors is responsible for the Group’s risk management strategy and the overall framework for identifying and mitigating risks. The Audit Committee supervises compliance with the established framework. The Executive Board is responsible for the day-to-day risk management processes as well as the continuous development of the Group’s risk management activities. Risk management Our risk management process is structured into two parallel tracks: 1. Operational risk management – which includes continuous handling of various identified risks resulting from our normal day-to-day operations; 2. Strategic risk management – which addresses key risks and other mid- to long-term strategic risks. Operational risk management Every week, the operational risks that arise as part of the daily business operations are registered and processed across the organisation, followed by initiation of mitigating actions. The risks and risk management procedures initiated are reported on a weekly basis to the Executive Board as well as to senior management across the Group. Our weekly operational risk reporting forms the basis for the Executive Board’s day-to-day risk management activities and serves as input for the regular reporting to the Board of Directors and the Audit Committee. The weekly report is also distributed to lower management levels across the organisation to create awareness and support knowledge sharing on risks and other matters of importance to the Group. Strategic risk management The operational risk management process is followed up annually by high-level strategic risk assessments. They focus on identifying and map - ping the key risks facing the Group. These assessments are based on input from the operational risk manage- ment process and extensive risk surveys involving a number of key em- ployees across functions, departments and regions. 31 DSV Annual Report 2022 Corporate governance and shareholder information 1 3 Likelihood of occurrence DKK 750 million Estimated annual EBIT impact in case of occurence Almost certain Moderate LikelyUnlikelyRare 5 8 6 2 7 4 Key risk map 1 IT Security System breakdowns and cyberattacks 2 Macroeconomy Recession and changes to global supply chains 3 Employees Retention and attraction 4 Compliance Increasing regulatory complexity 5 M&A Acquisitions and integration 6 Technology Disruption and technological adaption 7 Com mercial Failure to execute on organic growth strategy 8 Climate risk The short-term impact from climate change The key risks identified are addressed by the Executive Board and as- signed to risk owners within the Group to make sure that relevant pre- ventive measures are implemented. In line with the established frame- work, the key risks are reported to and addressed by the Audit Commit- tee and the Board of Directors. Key risk assessment 2022 The latest assessment of the Group’s internal and external strategic risks was carried out in Q4 2022. The analysis confirmed the eight overall key risk areas – also identified in previous years – which may have a significant impact on the Group’s earnings, financial position and ability to achieve other strategic objec - tives, should they materialise. The results of the risk analysis are presented in the adjacent risk map and described in greater detail in the following pages. The risks are not listed in a specific order. The indicated likelihood of occurrence and annual EBIT impact are based on our best estimates, taking mitigation strategies into consideration. As such, it should be noted that the quantifications applied in the risk map carries some degree of uncertainty. Financial risks Our daily operations involve various financial risks. However, these are not considered key risks. Our financial risks are monitored by our Group Finance departments to ensure a high level of management attention on the eectiveness of our hedging strategies. Please refer to Chapter 4 of the notes for additional information on our financial risks. 32 DSV Annual Report 2022 Corporate governance and shareholder information IT security – System breakdowns and cyberattacks Risk description Mitigation strategies Risk assessment IT systems, networks and related processes are crucial to our day-to-day operations – from the delivery of our core logistics services to our analytic capabilities and reporting to the financial markets. This makes us vulnerable to system breakdowns, cyberattacks and failed IT implementations. A breakdown or an attempt to cause damage to DSV, our customers, sup- pliers or partners through unauthorised access, destruction, corruption or manipulation of data or systems could pose a significant risk to the Group. Consolidation, centralisation and standardisation of our systems and processes are cornerstones of our IT strategy and security setup. When integrating acquired companies, we migrate these to our IT platform as quickly as possible. The Group is focused on IT security and awareness, and we conduct regular audits and continu- ous analyses of current controls and regular security updates. Migration to cloud-based solu- tions, continuous cyber awareness training across the organisation, multi-factor authentication, anti-virus and patch management and disaster recovery training are among the measures implemented to mitigate the potential impact of this risk. Our global IT organisation oversees IT risks and is responsible for ensuring infrastructure pre- paredness. The Executive Board and the Audit Committee actively monitor cyber risks and the eectiveness of our key IT controls through reporting and regular meetings with the IT and compliance teams. In 2022, we have experienced stable performance from our IT and security plat- forms – both in terms of operational performance and in terms of mitigating cyber- attacks, phishing attempts and other IT security risks. The geopolitical situation and increasing digitalisation of our industry and workplaces have accelerated the risk of targeted cyberattacks. This trend is likely to continue, and our strategy for IT security is already based on this. To mitigate the increased risk, we maintain a high security level, and we have – among other initiatives – expanded the IT security training of employees. During 2022, the Agility's Global Integrated Logistics business (GIL) operational systems were successfully migrated to the DSV platform, reducing last year’s height- ened exposure level. Everything considered, the IT risk of the Group remains on par with last year, with a slight increase in risk of occurrence. Macroeconomy – Recession and changes to global supply chains Risk description Mitigation strategies Risk assessment An economic recession triggered by, e.g., geopolitical conflicts, rising infla- tion and interest rates, distortion of the financial markets or a pandemic will have an impact on our activity levels and, consequently, on our finan- cial results. Similarly, protectionist measures enacted by the major world economic powers can also have a negative impact on global trade. Some restrictions may be counterbalanced by increasing domestic activities and, as a result, sale of other logistics services. Finally, changing industry and consumer patterns which lead to lower glob- al trade volumes or shortened logistic chains (e.g., because of increasing environmental awareness or industries bringing production closer to home to mitigate supply chain exposures) is also something we monitor closely, although we have yet to see a material impact of this on our business. To diversify our geographical exposure, we have for several years focused on organic and acquisitive growth outside Europe, which has historically been our main market. The acquisitions of UTi, Panalpina and GIL have significantly strengthened our network in Americas, APAC and MENA. Our asset-light approach implies that the majority of our terminals, warehouses and operational equipment are leased on short- to medium-term contracts, with the average duration closely monitored to accommodate capacity requirements. This allows us to quickly adapt to any po- tential slowdown in individual markets. Certain global supply chains are gradually changing, and we continuously adapt our network and service oerings. This way, when production is established in new markets and dual sourcing strategies are applied, we are ready to support our customers. During 2022, the global economy and trade volumes have slowed down. Going into 2023, we are facing lower demand for transport services. This slowdown is already in- cluded in our financial guidance for the year – but, obviously, there is uncertainty related to the development both in terms of timing and severity. We maintain our long-term assumption of 2-3% annual growth in global economy and transport volumes growing in line with this. Navigating economic downturns and the resulting fluctuations in demand is not new to DSV. Our cost discipline, focus on keeping net working capital under control, strong capital structure and scalable asset-light business model are all designed with this very purpose in mind. As a consequence of the economic slowdown, our macroeconomic risk has increased from last year. 33 DSV Annual Report 2022 Corporate governance and shareholder information Employees – Retention and attraction Risk description Mitigation strategies Risk assessment Our employees are our most important asset and vital to ensuring that we succeed when it comes to executing on our strategies and meeting our financial targets. As freight forwarding is a people-reliant service oering, we depend on highly qualified management teams and employees with technical and operational qualifications, customer and market insights at all organisa- tional levels. Failure to attract new talent or to retain existing, experienced key employ- ees can potentially have long-term consequences for the operational, strategic and financial development of our company. We strive to make our company an attractive place to work by oering a supportive and inspiring working environment for all employees. This includes ensuring that our oce and warehouse premises are modern and safe places to work as well as encouraging a safe and healthy working environment. We have established a performance culture centred around the empowerment of the individual, which allows our employees to take responsibilities, make decisions and influence their everyday work life. We also oer clear career-advancing opportunities to talented employees. We implement this strategy through several initiatives driven by both local management teams and our Group HR department. Examples include initiatives to promote our diversity and inclusion policy, DSV Academy, talent development programmes and retention bonus programmes for key employees. During 2022, it remained a challenge to recruit new candidates for certain open positions and in some cases to retain existing colleagues. Skilled employees and managers will most likely continue to be in high demand, but as the global economy slows down, we expect parts of the labour markets to ease. Compared to previous years, we were able to retain a stable turnover ratio for our employees, despite the challenging market in 2022. The integration of GIL now completed, we see that we have managed to retain key sta throughout the GIL organisation, as we intended. Despite the positive notes, it is our assessment that the challenges involved in recruiting and retaining sta for key positions have intensified. This implies that the employee risk has slightly increased. Compliance – Increasing regulatory complexity Risk description Mitigation strategies Risk assessment At all levels of our organisation and in all the regions and countries we do business, we are committed to honest and ethical business practices and complying with all relevant international and local regulations. As a result of our global operations, we are subject to extensive national and international regulatory requirements. In particular, regulations relating to tax, customs, VAT, data privacy and competition law continue to in- crease in scope and complexity. Trade embargoes impacting international transports is another area currently increasing in magnitude. Cases of non-compliance may carry a long-term impact on our public reputation, which may in turn have a negative impact on our relationships with customers and other stakeholders. Additionally, cases of non-compliance may lead to significant fines, claims, etc., for the Group, members of our Management or our employees. 'We do not deal in compliance' is a mantra which is well-known throughout the DSV organisa- tion. This fundamental principle has been defined to safeguard the company and its employees, but also because we believe it is the right way to run a business. Our internal procedures, systems and employee training programmes are designed to ensure awareness of this core principle and to ensure proper understanding and compliance with relevant legislation and our Code of Conduct. Our compliance framework is integrated into our business processes, containing clear guidelines on how to identify compliance-related issues and how to act accordingly. In addition, communi- cating and creating awareness of relevant issues is high on our agenda and activated through regular news updates, global newsletters, webcasts and internal conferences. Significant compliance-related risks are monitored and managed at Group level in close cooperation with our local business units. Following the trend from previous years, regulatory requirements continue to expand in number and complexity. The fact that our operational activities span more than 80 countries and jurisdictions adds to this complexity. To ensure adherence, we keep a close track of changes in the regulations governing international taxation, transfer pricing as well as goods and country restrictions – the latter currently emphasised by the international sanctions imposed as a result of the Russian-Ukrainian war. The integration of the GIL business into our compliance framework was completed in 2022, significantly reducing the risk of non-conformance with existing DSV compliance processes. Although the GIL integration has been successfully completed, regulatory complexity remains high. In addition to this, the current geopolitical situation also poses chal- lenges. This leads us to conclude that the overall compliance risk exposure has increased slightly. 34 DSV Annual Report 2022 Corporate governance and shareholder information M&A – Acquisitions and integration failure Risk description Mitigation strategies Risk assessment Growth through strategic acquisitions is fundamental to our corporate strategy and has been for many years. Acquisitions always involve the risk of unsuccessful integration of the acquired company, which could result in cost synergies, strategic advan- tages or economies of scale being delayed or not fully realised. Deciding on and carrying out the wrong acquisition may also be costly and take up valuable resources that could have been spent on other potential acquisition candidates. We have a history of successful integration of acquired companies and realisation of expected synergies. This rests on several factors. First of all, we stress the importance that any potential acquiree matches our business model Our IT, reporting and operational systems are designed to be scalable and to accommodate eective integration of acquired companies. Large integrations are headed by an integration board, and the activities are organised into work streams (operational, commercial, financial, IT, legal, tax, etc.). The integration of operational ac- tivities is anchored with and led by local management teams, based on guidance from Group Man- agement. Local ownership ensures that acquired activities are integrated, with due consideration of local legislation, market conditions and cultures. A little over a year aer the takeover date, the integration of GIL was finalised in 2022. The integration of operations, IT and back-oce functions across close to 60 countries was carried out according to our plans and in line with our financial business case. M&A remains an important part of our strategy; this can lead to both large and small acquisitions and integrations in the coming years. We continue to apply our strong governance structure around M&A, but the financial risk related to each transaction will depend on the size and type of the acquired company. Due to the completed integration of GIL, the M&A risk has decreased compared to last year. Technology – Disruption and technological adoption Risk description Mitigation strategies Risk assessment As with most industries, freight forwarding undergoes continuous techno- logical developments, while also being exposed to gradual changes in the competitive landscape, driven by both existing players and new entrants to the market. Currently, we see digitalisation and automation of processes (quoting, booking, tracking, reporting and billing) and the increasing focus on sus- tainability as the most significant developments impacting the freight forwarding industry in the coming years. These developments provide an opportunity to optimise workflows and increase productivity, while also providing higher levels of service and product oerings to our customers. Failure to keep up with, adapt to and utilise these new technological op- portunities – as well as tackle the competitive challenges they bring – will lead to gradual loss of market share and earnings. Central to our mitigation strategy is the monitoring of the logistics market, our customers’ needs and emerging technologies that could impact and improve our operations or services. Strategic planning, innovation and continued development of our digital and physical infrastruc- ture are anchored with our COO. Based on strategic roadmaps for each business area, we focus on developing our service catalogues, systems and operational procedures to ensure that we have a strong and competitive product oering that meets customer needs. The aim of our strategy is to ensure that we can continue to benefit from our logistics exper- tise, scale and global network as a classic freight forwarder, while increasing our digital com- petences and utilising the benefits of technology. We believe that we are well positioned in our industry within these areas, and that our current development and strategic plans will ensure that we will remain so in the coming years. In 2022, we have continued to invest in and develop our IT platforms across our service oerings. The COO function was established in 2021 and has been further strengthened during 2022. Consequently, we assess that our technology risk has remained largely unchanged from last year. For additional descriptions of our current technology focus areas, please see ‘A responsive approach to technology and digitalisation’ on page 16. 35 DSV Annual Report 2022 Corporate governance and shareholder information Commercial – Failure to execute on organic growth strategy Risk description Mitigation strategies Risk assessment With the acquisitions of UTi in 2016, Panalpina in 2019 and GIL in 2021, DSV has grown significantly over few years, more than tripling our revenue and the number of employees of the Group. Our network and market position have been strengthened, but growth also carries challenges. While we integrate acquired companies and grow as a business, we must make sure to maintain a strong commercial focus and stimulate collaboration across the organisation. Most important of all, we must retain our focus on customer needs, know how to adapt to market changes and develop our services to ensure that our value proposition is clear. If we fail to deliver in these areas, our ability to execute on our organic growth strategy will be impaired, and this will influence our long-term financial results. Managing our commercial risk is anchored with the Executive Board and the Group Executive Committee. In this forum, strategic initiatives are aligned and our commercial threats and op- portunities are explored. For each of our business areas, we define the overall strategy and purpose, our value proposition and which customer segments we target. Through regular business reviews with divisions and our operational companies in each country, Executive Management ensures that each division and country is aligned with the Group’s strat- egy and policies. These reviews include financial performance, market situation, organisation, local strategic initiatives, etc. During 2022, we estimate that DSV has taken market share across most of the markets we operate in. For the coming years, we maintain our target of achieving organic growth above the market. A number of strategic projects are in place to support our organic growth ambitions. In 2022, we implemented a more systematic approach to managing and prioritising these projects. The initiatives are anchored with our COO and include enhancing our digital capabilities, deepening our vertical expertise, improving our green logistics services and strengthening the cooperation across divisions. We go into 2023 with a stronger network and market position than ever. Still, we assess that the current macroeconomic slowdown will limit our short-term growth potential and intensify the competition across our industry. Based on this, we esti- mate that the potential impact from commercial risk for 2023 has increased slightly. Climate – The long-term impact from climate change Risk description Mitigation strategies Risk assessment The long-term negative eects of climate change (as forecasted by the UN IPCC and others) have the potential of significantly impacting our industry. As such, it is a risk that we monitor closely. Associated risks may manifest themselves as physical disruptions of our logistic sites and operations or other forms of disruption in the global sup- ply chains, triggered by an increase in the number of extreme weather events. Increasing climate regulations, taxations and customer requirements may also impact the financial results of our company – for example as a result of higher fuel costs or tax on emissions – to the extent that we are not able to transfer the associated costs to our customers. Finally, increasing consumer climate awareness may also lead to changes in global supply and demand patterns, resulting in supply chains moving clos- er to home markets. This could have a dampening eect on the long-term growth potential on the more profitable intercontinental transport lanes. Oversight and management of climate-related risks is anchored with the Board of Directors. To support the Board of Directors in this role, we have established a Sustainability Board, headed up by the Group CEO. The Sustainability Board takes the lead when it comes to identifying, assessing and reporting on the development in climate-related risk. To address the longer-term risk from climate change, we have committed to the Science Based Targets initiative. We aim to achieve our CO 2 emission reduction targets through a number of initiatives, such as making lower-emission transport alternatives available to our customers and investing in modern and energy-ecient infrastructure. As part of our mitigation strategy, we include the potential impact from climate changes when we plan our physical infrastructure. For example, new warehouses and logistic centres are de- signed to withstand more extreme weather conditions; and when deciding on placement, loca- tions with lower risk of flooding is also taken into consideration. Furthermore, our asset-light business model allows us to adapt to changes in the market, as we have not invested in specific transport equipment. For additional details and results on our 2022 TCFD climate risk assessment, please see the DSV Sustainability Report 2022: https://www.dsv.com/en/sustainability-reports Climate change and sustainability continue to move up on our agenda. In 2022, we have – among other initiatives – increased our ambitions and introduced a net-zero target for carbon emissions. And to support innovation and ensure that our sustaina- bility ambitions are embedded in our operations, we established an Operational Sustainability team, headed up by our COO. We continue to develop our climate risk assessment framework based on guidelines set by the Task Force on Climate-related Financial Disclosures (TCFD). As reflected in the risk map, it is our current assessment that the overall climate risk to our company is unchanged from last year, with a potential low-to-moderate im- pact on our business, should unmitigated risks materialise. Making projections on the long-term eects of climate change on our business in- volves a high degree of uncertainty, hence our assessment may change in the future. 36 DSV Annual Report 2022 Corporate governance and shareholder information Annual General Meeting Board of Directors Executive Board Division Management Air & SeaRoad Solutions Organisation Board Committees Group functions Management structure The Board of Directors outlines and supervises the overall vision, strategy and objectives of the Group’s business activities. The Executive Board is responsible for the execution of these and for the day-to-day management of the Group. It also provides input and supports the work done by the Board of Directors. Divisional Management is responsible for managing the operational activi- ties of the divisions, supported by centralised Group functions. The Board of Directors Board composition The Board of Directors must comprise five to nine members in accordance with the Articles of Association and currently numbers eight. Directors are elected for a term of one year, and new Directors are elected in accordance with the applicable rules of the Danish Companies Act. At the ordinary General Meeting in March 2022, Annette Sadolin resigned from her position aer serving more than 12 years on the Board. Benedikte Leroy joined in her place, bringing substantial management experience from the tech industry as well as extensive expertise in the fields of legal com- pliance, ESG and business ethics. Corporate governance All members of the Board of Directors are considered independent in ac- cordance with the Danish Recommendation on Corporate Governance with the exception of Birgit W. Nørgaard, who has served more than 12 years on the Board. Birgit is not up for re-election at the Annual General Meeting in 2023. Board competencies The Board is composed so as to ensure that the competencies of its mem- bers are diverse and business relevant, so it can perform its duties as in- tended. Overboarding is also taken into consideration when determining the Board’s composition. The current competencies required of Board members are: knowledge of the transport sector, international commercial experience as well as ex perience in strategy, M&A, risk management, IT, human resources and accounting. See page 40 for a description of the individual members’ com petencies and experience. Board self-evaluation Once a year, the Board of Directors self-evaluates its composition, compe- tencies and performance during the year. Diversity, overboarding, internal management cooperation, succession planning and strategic focus areas for the coming year are some of the topics evaluated. The Board of Directors and the Executive Board form the governing body of DSV, the ultimate authority resting with the shareholders at the General Meeting. The allocation of tasks and responsibilities between the two boards is defined by the Rules of Procedure. 37 DSV Annual Report 2022 Corporate governance and shareholder information The Chairman of the Board is responsible for initiating and running the evaluation process, which includes a mix of questionnaires and interviews. When completed, the outcome is presented to – and discussed by – the Board. At least every third year, external advisors are brought in to help conduct the annual self-evaluation. The last time was in 2021. Using external advi- sors helps give an independent perspective on the performance and com- positions of the Board of Directors. The Board can then use their input to support the self-evaluation the following years. The 2022 self-evaluation addressed a number of topics – including Board members’ mix of competencies and insight in areas like digitisation and ESG regulation. The summary report had no reservations on these topics and validated the appropriateness of the current Board composition. Board committees The Board of Directors is assisted by an audit, nomination and remunera- tion committee. Each is responsible for carrying out various preparatory tasks around the Board’s key areas of responsibility. The committees also assist the Board by preparing and assessing all man- agerial and strategic proposals presented to the Board, to ensure a solid and informed basis for decision-making. The rules of procedure for the committees are available at: https://www.dsv.com/en/board-committees Board meetings In 2022, the Board of Directors held nine ordinary and no extraordinary meetings. The agenda for each is defined in accordance with the annual cycle of the Board to make sure the strategic and operational policy framework of the Group is always up to date and in accordance with the emphasis defined by the Board. Besides the work laid down in the annual cycle, this year the Board mainly focused on M&A and growth strategies, various integration topics around the acquisition of Agility's Global Integrated Logistics business (GIL), cy- bersecurity and the continuous development of our digital freight for- warding platforms. Meeting attendance 2022 Board of Directors Audit Committee Nomination Committee Remune ration Committee Thomas Plenborg 9/9 3/3 2/2 2/2 Jørgen Møller 9/9 - 2/2 2/2 Birgit W. Nørgaard 9/9 - 2/2 - Marie-Louise Aamund 9/9 3/3 - - Beat Walti 9/9 - - 2/2 Niels Smedegaard 9/9 3/3 - - Tarek Sultan Al-Essa 9/9 - - - Benedikte Leroy (elected March 2022) 7/7 2/2 - - Annette Sadolin (resigned March 2022) 2/2 1/1 - - 38 DSV Annual Report 2022 Corporate governance and shareholder information ME = Member The Board also addressed various strategic considerations and business adaptations in light of the European energy crisis, emergence of a global economic downturn and other macroeconomic impacts brought on by the war in Ukraine. Remuneration of the Board of Directors and Executive Board Remuneration policy Remuneration of the Board of Directors and Executive Board is carried out in accordance with DSV’s Remuneration Policy as adopted by the Annual General Meeting. The purpose of the Remuneration Policy is threefold: to make sure DSV can attract and retain qualified members of the Board of Directors and Executive Board; to align the interests of the Executive Board with those of our investors and other societal stakeholders; and ultimately to create incentive for generating long-term value for shareholders and executing on goals set by the Board of Directors (for example around sustainability or other strategic business initiatives). The latest DSV Remuneration Policy is available at: https://www.dsv.com/en/remuneration-policy Remuneration report We report on the remuneration of members of the Board of Directors and Executive Board separately in the DSV Remuneration Report. The report is prepared in accordance with section 139b of the Danish Companies Act and the Danish Recommendations on Corporate Govern- ance and is available at: https://www.dsv.com/en/remuneration-reports Report on Corporate Governance cf. section 107b of the Danish Financial Statements Act In managing DSV, the Board of Directors applies the latest Recommenda- tions on Corporate Governance issued by the Danish Committee on Corporate Governance. The Board uses the Recommendations for guidance when setting up man- agement structures, tasks and procedures and checks against them to make sure we are acting in accordance with the principal intentions of the Recommendations. The Board regularly assesses its procedures based on the Recommendations. DSV fully abided by the Recommendations in 2022. We report on our adherence to the Recommendations – including internal controls and risk management systems applied as basis for the financial reporting process – in the Statutory Report on Corporate Governance available at https://www.dsv.com/en/governance-reports Reporting on Data Ethics policies cf. section 99d of the Danish Financial Statements Act We report separately on our policies and approach to Data Ethics in accordance with section 99d of the Danish Financial Statements Act. The reporting is available in our Statutory Report on Data Ethics, at: https://www.dsv.com/en/data-ethics Jens Bjørn Andersen Oce CEO Member since 2008 Born 1966 Jens H. Lund Oce COO and Vice CEO Member since 2002 Born 1969 Michael Ebbe Oce CFO Member since 2021 Born 1970 Board positions ME EET Group Holdings ApS Executive Board 39 DSV Annual Report 2022 Corporate governance and shareholder information Jørgen Møller Oce Deputy Chairman Member since 2015 Up for re-election Yes Independent Yes Born 1950 Committee Audit Committee - Nomination Committee Member Remuneration Committee Member Skills and experience • General international management experience • Extensive experience in shipping and logistics (industry expert) • CEO of DSV Air & Sea Holding A/S 2002-2015 Beat Walti Oce Member Member since 2019 Up for re-election Yes Independent Yes Born 1968 Committee Audit Committee - Nomination Committee - Remuneration Committee Member Skills and experience • Professional board and general management experience • Dr. jur. and legal experience serving as an attorney-at-law • Acquisition and divestment of enterprises Other Board positions CM Ernst Göhner Foundation ME Siegfried Holding AG CM Zurzach Care AG ME Wenger Vieli AG DC Rahn AG ME EGS Beteiligungen Ltd Benedikte Leroy Oce Member Member since 2022 Up for re-election Yes Independent Yes Born 1970 Committee Audit Committee Chairman Nomination Committee - Remuneration Committee - Skills and experience • International board and general management experience • Extensive experience in technology from international leadership roles in Dell, Symantec, GE and Apple • Legal compliance, ethics and extensive insight in environ- mental, social and governance regulation (ESG expert) • Acquisition and divestment of enterprises Birgit W. Nørgaard Oce Member Member since 2010 Up for re-election No Independent No Born 1958 Committee Audit Committee - Nomination Committee Member Remuneration Committee - Skills and experience • General international management experience • Strategy and financial management • Acquisition and divestment of enterprises Other Board positions CM NO Invest A/S and two related subsidiaries DC NNE A/S DC The Danish Council for ICT DC Dansk Vækstkapital I ME Dansk Vækstkapital II ME NCC AB ME ABP Associated British Ports ME WSP Global Inc. ME RGS Nordic A/S ME Consolis Group SAS Niels Smedegaard Oce Member Member since 2020 Up for re-election Yes Independent Yes Born 1962 Tarek Sultan Al-Essa Oce Member Member since 2021 Up for re-election Yes Independent Yes Born 1964 Committee Audit Committee Member Nomination Committee - Remuneration Committee - Skills and experience • General international management experience • Extensive experience in shipping, logistics and the airline industry (industry expert) • Acquisition and divestment of enterprises Other Board positions CM ISS A/S CM Molslinjen Group ApS and two related subsidiaries CM Abacus Medicine A/S Committee Audit Committee - Nomination Committee - Remuneration Committee - Skills and experience • General international management experience • Extensive experience in shipping and logistics • Acquisition and divestment of enterprises • Extensive insight in environmental, social and governance regulation (ESG expert) Other Board positions DC Agility Public Warehousing Company K.S.C.P. ME National Real Estate Company K.P.S.C. Thomas Plenborg Oce Chairman Member since 2011 Up for re-election Yes Independent Yes Born 1967 Committee Audit Committee Member Nomination Committee Chairman Remuneration Committee Chairman Skills and experience • Management experience from directorships and honorary oces • Strategy and financial management • Professor of accounting and auditing at Copenhagen Business School Other Board positions CM ECIT AS ME Menzies Aviation Marie-Louise Aamund Oce Member Member since 2019 Up for re-election Yes Independent Yes Born 1969 Committee Audit Committee Member Nomination Committee - Remuneration Committee - Skills and experience • General international management experience • International tech leadership experience from Microso, IBM and Google • Cybersecurity, digital transformation and sustainability • Acquisition and divestment of enterprises Other Board positions CM Thinkproject GmbH ME KIRKBI A/S ME The Lego Foundation ME WS Audiology A/S CM = Chairman DC = Deputy Chairman ME = Member * = Listed company CM Bikubenfonden CM Falck A/S ME UK P&I ME TT Club Board of Directors 40 DSV Annual Report 2022 Corporate governance and shareholder information DSV share price (DKK) ■ DSV ■ C25 rebased 31-12-2018 31/12 201931/12 2018 31/12 2020 31/12 2021 31/12 2022 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Share price performance in 2022 At year-end, the closing price for DSV shares on Nasdaq Copenhagen was DKK 1,096.5 – down 28.2% since year- end 2021. During the same period, the Danish C25 Index decreased by 13.5%. The average daily trading volume of DSV shares on Nasdaq Copenhagen was 383,288 shares in 2022 (0.2% of shares issued). At year-end, DSV’s market capitalisation (excluding treasury shares) was DKK 238 billion against DKK 358 billion at the end of 2021. Ownership There is no complete record of all shareholders. Based on the available information as of 31 December 2022, DSV had 92,179 registered shareholders. The registered shares totalled 211 million, corresponding to 96.2% of the share capital. The 25 largest shareholders owned 60.9% of the free-floating share capital. DSV has no majority shareholders. Shareholders owning more than 5% of the share capital in DSV A/S according to latest shareholding notifications are: • Ernst Göhner Stiung, Switzerland (9.7%) • Agility Public Warehousing Company K.S.C.P, Kuwait (8.0%) • BlackRock, Inc., USA (7.8%) • Capital Group Companies, Inc., USA (5.1%) Shareholder information Share buyback and treasury shares In 2022, DSV acquired 18.6 million treasury shares at a total purchase price of DKK 20,313 million (average purchase price DKK 1,092.8 per share). During 2022, 21 million treasury shares were cancelled in connection with reduction of the registered share capital. On 31 December 2022, DSV held 2.1 million shares as treasury shares, corresponding to 1.0% of the share capital. On 1 February 2023, our portfolio of treasury shares amounted to 3.1 million shares. Throughout 2022, we have engaged in five share buy - back programmes. The purpose of these was to accommo- date the exercise of share options under incentive schemes and to adjust the capital structure in accordance with the financial targets. The shares were acquired under the authorisation of the Annual General Meeting. One programme was carried out outside the Safe Harbour principles, while the remaining programmes were executed under the Safe Harbour principles. Dividends The Board of Directors proposes an ordinary dividend of DKK 6.5 per share for 2022 (2021: DKK 5.5). Shares issued (‘000) 2018 2019 2020 2021 2022 Number of shares issued 188,000 235,000 230,000 240,000 219,000 Average number of shares issued during the past 12 months 182,092 198,273 227,246 227,501 235,438 Average diluted number of shares during the past 12 months 185,287 201,405 231,576 232,639 230,467 41 DSV Annual Report 2022 Corporate governance and shareholder information Capital allocation policy Our capital allocation principles are described on page 18. Authorities granted to the Board of Directors The following authorities have been granted to the Board of Directors: • to increase DSV’s share capital by issuing up to 48 million shares with or without pre-emptive rights for existing shareholders. This authority remains valid until 8 September 2026; and • to acquire up to 21.9 million own shares, of which 3.1 million were utilised as per 1 February 2023. This authority remains valid until 22 November 2027. Communication with shareholders We wish to provide the basis for fair and ecient pricing of the DSV share by practising open and proactive communication. To keep investors and other stakeholders up to date with the latest devel- opments, our Executive Management host conference calls following the release of financial results. Throughout the year, Executive Management and Investor Relations stay in close contact with existing and potential investors as well as market analysts, engaging with them through road- shows and conferences hosted by various brokers. We observe a four-week silent period prior to the publication of annual and interim reports. DSV is covered by more than 20 equity analysts. For more information about analyst coverage, please visit investor.dsv.com DSV share data Number of shares of DKK 1 on 31 Dec. 2022 219,000,000 Share classes 1 Restrictions on transferability and voting rights None Listed Nasdaq Copenhagen Trading symbol DSV ISIN code DK0060079531 Company announcements In 2022, we published 71 company announcements (Nos. 936-1006). The most important of these are listed in the chart below: 09 Feb. No. 941 Annual Report 2021 11 Mar. No. 949 EUR 600 Million EUROBOND issue 17 Mar. No. 951 Annual General Meeting 20 Apr. No. 956 Reduction of Share Capital in DSV A/S 27 Apr. No. 957 Interim Financial Report Q1 2022 26 Jul. No. 972 Interim Financial Report H1 2022 03 Aug. No. 975 Major shareholder announcement 21 Oct. No. 988 Major shareholder announcement 25 Oct. No. 991 Interim Financial Report – Q3 22 Nov. No. 998 Extraordinary General Meeting 22 Dec. No. 1005 Reduction of Share Capital in DSV A/S Financial calendar The financial calendar for 2023 is as follows: Annual General Meeting 16 March Q1 2023 Report 27 April H1 2023 Report 25 July Q3 2023 Report 24 October Denmark % Kuwait % UK % Switzerland % USA % % Others The geographical distribution of our shareholders 42 DSV Annual Report 2022 Corporate governance and shareholder information 2022 2021 Q1 Q2 Q3 Q4 Full year Q1 Q2 Q3 Q4 Full year Income statement (DKKm) Revenue 61,125 62,749 60,560 51,231 235,665 33,616 37,831 49,557 61,302 182,306 Gross profit 12,877 14,078 13,538 11,656 52,149 7,785 8,333 9,823 11,674 37,615 Operating profit (EBIT) before special items 6,496 7,453 6,506 4,749 25,204 3,067 3,571 4,472 5,113 16,223 Operating margin (%) 10.6 11.9 10.7 9.3 10.7 9.1 9.4 9.0 8.3 8.9 Conversion ratio (%) 50.4 52.9 48.1 40.7 48.3 39.4 42.9 45.5 43.8 43.1 ROIC before tax (%) (trailing 12 months) 23.1 27.2 24.7 25.1 25.1 16.4 17.8 16.6 19.6 19.6 Invested capital (YTD) 103,986 105,596 106,713 99,540 99,540 66,420 67,690 100,316 101,231 101,231 Segment information (DKKm) Air & Sea Revenue 45,887 47,282 45,339 35,923 174,431 22,924 25,948 36,861 46,168 131,901 Gross profit 8,637 9,575 9,135 7,277 34,624 4,788 5,142 6,314 7,525 23,769 Operating profit (EBIT) before special items 5,224 6,163 5,455 3,816 20,658 2,393 2,843 3,521 4,011 12,768 Operating margin (%) 11.4 13.0 12.0 10.6 11.8 10.4 11.0 9.6 8.7 9.7 Conversion ratio (%) 60.5 64.4 59.7 52.4 59.7 50.0 55.3 55.8 53.3 53.7 Road Revenue 10,188 10,835 10,406 10,078 41,507 8,056 8,663 8,783 9,914 35,416 Gross profit 1,938 2,074 1,989 1,910 7,911 1,657 1,768 1,745 1,925 7,095 Operating profit (EBIT) before special items 498 566 525 451 2,040 403 476 465 513 1,857 Operating margin (%) 4.9 5.2 5.0 4.5 4.9 5.0 5.5 5.3 5.2 5.2 Conversion ratio (%) 25.7 27.3 26.4 23.6 25.8 24.3 26.9 26.6 26.6 26.2 Solutions Revenue 6,162 6,182 5,841 6,224 24,409 3,609 3,997 4,739 6,389 18,734 Gross profit 2,322 2,324 2,325 2,347 9,318 1,348 1,377 1,717 2,211 6,653 Operating profit (EBIT) before special items 789 753 613 546 2,701 263 278 486 748 1,775 Operating margin (%) 12.8 12.2 10.5 8.8 11.1 7.3 7.0 10.3 11.7 9.5 Conversion ratio (%) 34.0 32.4 26.4 23.3 29.0 19.5 20.2 28.3 33.8 26.7 Please refer to page 83 for a definition of key figures and financial ratios. * Reference is made to note 2.1 Segment information for a reconciliation of revenue, gross profit and operating profit before special items. Quarterly financial highlights 43 DSV Annual Report 2022 Other information Consolidated financial statements 2022 Income statement .................................... 45 Statement of comprehensive income ................... 45 Cash flow statement .................................. 46 Balance sheet ........................................ 47 Statement of changes in equity ........................ 48 Notes to the consolidated financial statements ........... 49 Income statement Statement of comprehensive income (DKKm) Note 2022 2021 Revenue 2.2 235,665 182,306 Direct costs 2.3 183,516 144,691 Gross profit 52,149 37,615 Other external expenses 2.4 5,559 4,173 Staff costs 2.5 16,315 13,025 Operating profit before amortisation and depreciation (EBITDA) before special items 30,275 20,417 Amortisation and depreciation 2.6 5,071 4,194 Operating profit (EBIT) before special items 25,204 16,223 Special items, costs 2.7 1,117 478 Financial income 2.8 606 206 Financial expenses 2.8 1,472 1,047 Profit before tax 23,221 14,904 Tax on profit for the year 5.1 5,550 3,650 Profit for the year 17,671 11,254 Profit for the year attributable to: Shareholders of DSV A/S 17,568 11,205 Non-controlling interests 103 49 Earnings per share: 4.6 Earnings per share of DKK 1 77.3 49.3 Diluted earnings per share of DKK 1 76.2 48.2 (DKKm) Note 2022 2021 Profit for the year 17,671 11,254 Items that may be reclassified to the income statement when certain conditions are met: Net foreign exchange differences recognised in OCI 1,260 2,472 Fair value adjustments of hedging instruments 9 (21) Fair value adjustments of hedging instruments transferred to financial expenses 9 6 Tax on items reclassified to the income statement 5.1 (2) 3 Items that will not be reclassified to the income statement: Actuarial gains/(losses) 3.7 (395) 555 Tax on items that will not be reclassified 5.1 54 (119) Other comprehensive income, net of tax 935 2,896 Total comprehensive income 18,606 14,150 Total comprehensive income attributable to: Shareholders of DSV A/S 18,500 14,109 Non-controlling interests 106 41 Total 18,606 14,150 45 DSV Annual Report 2022 Consolidated financial statements 2022 Cash flow statement (DKKm) Note 2022 2021 Operating profit before amortisation and depreciation (EBITDA) before special items 30,275 20,417 Adjustments: Share-based payments 6.2 202 160 Change in provisions 520 105 Change in working capital 2,840 (4,604) Special items 2.7 (664) (828) Interest received 2.8 323 153 Interest paid, lease liabilities 3.6 (727) (495) Interest paid, other 2.8 (745) (443) Income tax paid 5.1 (5,178) (2,263) Cash flow from operating activities 26,846 12,202 Purchase of intangible assets 3.2 (280) (303) Purchase of property, plant and equipment 3.3 (1,514) (1,180) Disposal of property, plant and equipment 824 420 Acquisition of subsidiaries and activities 6.1 - 1,631 Change in other financial assets 4 (148) Cash flow from investing activities (966) 420 Free cash flow 25,880 12,622 Proceeds from borrowings 4.3 4,393 12,834 Repayment of borrowings 4.3 (3,719) (489) Repayment of lease liabilities 4.3 (3,734) (3,160) Other financial liabilities incurred (161) 118 (DKKm) Note 2022 2021 Transactions with shareholders: Dividends distributed to shareholders of DSV A/S 4.2 (1,320) (920) Purchase of treasury shares 4.1 (20,313) (17,841) Sale of treasury shares 4.1 618 784 Other transactions with shareholders (9) (6) Cash flow from financing activities (24,245) (8,680) Cash flow for the year 1,635 3,942 Cash and cash equivalents 1 January 8,299 4,060 Cash flow for the year 1,635 3,942 Currency translation 226 297 Cash and cash equivalents 31 December 10,160 8,299 The cash flow statement cannot be directly derived from the balance sheet and income statement. Statement of adjusted free cash flow (DKKm) Note 2022 2021 Free cash flow 25,880 12,622 Net acquisition of subsidiaries and activities (reversed) 6.1 - (1,631) Special items (reversed) 2.7 664 828 Repayment of lease liabilities 4.3 (3,734) (3,160) Adjusted free cash flow 22,810 8,659 46 DSV Annual Report 2022 Consolidated financial statements 2022 Balance sheet Assets (DKKm) Note 2022 2021 Intangible assets 3.2 77,674 76,661 Right-of-use assets 3.6 14,694 13,709 Property, plant and equipment 3.3 6,284 6,262 Other receivables 2,461 2,395 Deferred tax assets 5.2 3,494 3,544 Total non-current assets 104,607 102,571 Trade receivables 4.4 32,387 36,369 Contract assets 3.4 5,785 9,797 Inventories 3.5 1,889 284 Other receivables 4,179 4,009 Cash and cash equivalents 10,160 8,299 Assets held for sale 38 66 Total current assets 54,438 58,824 Total assets 159,045 161,395 Equity and liabilities (DKKm) Note 2022 2021 Share capital 4.1 219 240 Reserves 4.1 919 (356) Retained earnings 70,381 74,219 DSV A/S shareholders’ share of equity 71,519 74,103 Non-controlling interests 222 175 Total equity 71,741 74,278 Lease liabilities 3.6 13,190 11,848 Borrowings 4.3 21,398 16,993 Pensions and other post-employment benefit plans 3.7 1,183 908 Provisions 3.8 4,260 3,508 Deferred tax liabilities 5.2 504 447 Total non-current liabilities 40,535 33,704 Lease liabilities 3.6 3,577 3,440 Borrowings 4.3 814 4,472 Trade payables 4.4 14,992 17,040 Accrued cost of services 3.4 12,085 13,289 Provisions 3.8 2,407 1,841 Other payables 9,640 10,257 Tax payables 3,254 3,074 Total current liabilities 46,769 53,413 Total liabilities 87,304 87,117 Total equity and liabilities 159,045 161,395 47 DSV Annual Report 2022 Consolidated financial statements 2022 Statement of changes in equity 2022 2021 Attributable to shareholders of DSV A/S Attributable to shareholders of DSV A/S (DKKm) Share capital Reserves Retained earnings Tota l Non- con trolling interests Total equity Share capital Reserves Retained earnings Tota l Non- con trolling interests Total equity Equity at 1 January 240 (356) 74,219 74,103 175 74,278 230 (2,836) 49,991 47,385 (88) 47,297 Profit for the year - - 17,568 17,568 103 17,671 - - 11,205 11,205 49 11,254 Other comprehensive income, net of tax - 1,271 (339) 932 3 935 - 2,482 422 2,904 (8) 2,896 Total comprehensive income for the year - 1,271 17,229 18,500 106 18,606 - 2,482 11,627 14,109 41 14,150 Transactions with shareholders and non-controlling interests: Share-based payments - - 202 202 - 202 - - 160 160 - 160 Tax on share-based payments - - (322) (322) - (322) - - 791 791 - 791 Dividends distributed - - (1,320) (1,320) (58) (1,378) - - (920) (920) (7) (927) Purchase of treasury shares - (19) (20,294) (20,313) - (20,313) - (13) (17,828) (17,841) - (17,841) Sale of treasury shares - 2 616 618 - 618 - 2 782 784 - 784 Capital increase - - - - - - 16 - 24,479 24,495 - 24,495 Capital reduction (21) 21 - - (1) (1) (6) 6 - - - - Transfer of treasury shares as business combination consideration - - - - - - - 3 5,073 5,076 - 5,076 Addition/disposal of non-controlling interests - - - - - - - - - - 273 273 Dividends on treasury shares - - 43 43 - 43 - - 28 28 - 28 Other adjustments - - 8 8 - 8 - - 36 36 (44) (8) Total equity transactions (21) 4 (21,067) (21,084) (59) (21,143) 10 (2) 12,601 12,609 222 12,831 Equity at 31 December 219 919 70,381 71,519 222 71,741 240 (356) 74,219 74,103 175 74,278 * For a specification of reserves, please see note 4.1. 48 DSV Annual Report 2022 Consolidated financial statements 2022 Notes to the consolidated financial statements Contents Chapter 1 Basis of preparation Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50 Basis of measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Changes in accounting policies . . . . . . . . . . . . . . . . . . . . . . . 50 Management judgements and estimates . . . . . . . . . . . . . . . . . 50 Basis of consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 New accounting regulations. . . . . . . . . . . . . . . . . . . . . . . . . 51 Chapter 2 Profit for the year 2.1 Segment information . . . . . . . . . . . . . . . . . . . . . . . . . 52 2.2 Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 2.3 Direct costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 2.4 Other external expenses . . . . . . . . . . . . . . . . . . . . . . . 55 2.5 Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 2.6 Amortisation and depreciation. . . . . . . . . . . . . . . . . . . . 55 2.7 Special items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 2.8 Financial income and expenses . . . . . . . . . . . . . . . . . . . 56 Chapter 3 Operating assets and liabilities 3.1 Impairment testing . . . . . . . . . . . . . . . . . . . . . . . . . . 57 3.2 Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 3.3 Property, plant and equipment . . . . . . . . . . . . . . . . . . . 60 3.4 Contract assets and accrued cost of services . . . . . . . . . . . 61 3.5 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 3.6 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 3.7 Pension and other post-employment benefit plans . . . . . . . . 63 3.8 Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Chapter 4 Capital structure and finances 4.1 Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 4.2 Capital structure and capital allocation . . . . . . . . . . . . . . . 67 4.3 Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 4.4 Financial risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 4.5 Derivative financial instruments. . . . . . . . . . . . . . . . . . . 72 4.6 Earnings per share. . . . . . . . . . . . . . . . . . . . . . . . . . . 73 4.7 Financial instruments – fair value hierarchy . . . . . . . . . . . . 73 Chapter 5 Tax 5.1 Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 5.2 Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Chapter 6 Other notes 6.1 Acquisition and disposal of entities . . . . . . . . . . . . . . . . . 77 6.2 Share option schemes . . . . . . . . . . . . . . . . . . . . . . . . 79 6.3 Remuneration of the Executive Board and the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . 81 6.4 Fees to auditors appointed at the Annual General Meeting . . . . . . . . . . . . . . . . . . . . . . . 81 6.5 Related-party transactions . . . . . . . . . . . . . . . . . . . . . 81 6.6 Contingent liabilities and security for debt. . . . . . . . . . . . .82 49 DSV Annual Report 2022 Consolidated financial statements 2022 Chapter 1 Basis of preparation The 2022 Annual Report of DSV A/S has been prepared on a going concern basis in accordance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and additional disclosure requirements for listed companies in the Danish Financial Statements Act. IFRS standards have been applied to the extent these have been adopted by the European Union. The consolidated financial statements are presented in Danish kroner (DKK) and rounded to the nearest million. Introduction The Annual Report of DSV A/S comprises the consolidated financial state- ments of DSV A/S and its subsidiaries. The Board of Directors and Executive Board considered and approved the 2022 Annual Report of DSV A/S on 2 February 2023. The Annual Report will be submitted to the shareholders of DSV A/S for approval at the Annual General Meeting on 16 March 2023. Basis of measurement The Annual Report has been prepared under the historical cost convention with the exception of derivative financial instruments and acquisition opening balances, which are measured at fair value. Non-current assets held for sale are measured at the lower of their carrying amount and fair value less costs to sell. The accounting policies described in the notes have been applied consistently for the financial year and for the com- parative figures. Changes in accounting policies All amendments to the International Financial Reporting Standards (IFRS) effective for the financial year 2022 have been implemented as basis for preparing the consolidated financial statements and notes to the statements. None of the implementations have had any material impact on the state- ments or notes presented. Management judgements and estimates In preparing the consolidated financial statements, Management makes various accounting judgements and estimates that affect the reported amounts and disclosures in the financial statements and notes to the statements. These are based on professional experience, historical data and other factors available to Management. By nature, a degree of uncertainty is involved when carrying out these judgements and estimates, hence actual results may deviate from the assessments made at the reporting date. Judgements and estimates are continuously evaluated, and the effects of any changes are recognised in the relevant period. The primary financial statements items for which significant accounting judgements and estimates are applied are listed below: • Contract assets and accrued cost of services (note 3.4) • Provisions (note 3.8) • Acquisition and disposal of entities (note 6.1) • Tax (note 5.1 and note 5.2) Additional description of management judgements and estimates made are provided in the relevant notes. Basis of consolidation The consolidated financial statements include the Parent Company (DSV A/S) and all subsidiaries over which DSV A/S exercises control. Entities in which the Group directly or indirectly controls at least 20%, but not more than 50%, of the voting power are accounted for as associates and meas- ured using the equity method. Investments with negative net asset values are recognised at DKK 0. The consolidated financial statements are prepared based on uniform accounting policies in all Group entities. Consolidation of Group entities is performed after elimination of all intra-group transactions, balances, in- come and expenses. 50 DSV Annual Report 2022 Consolidated financial statements 2022 Group composition The Group holds interests in 473 entities and was composed as follows at 31 December 2022: Entities (Number) Region EMEA Americas APAC Total Subsidiaries 302 55 108 465 Associates 5 1 2 8 Foreign currency Functional currency A functional currency is determined for each Group entity. The functional currency is the currency used in the primary financial environment in which the individual Group entity operates. Foreign currency translation On initial recognition, foreign currency transactions are translated into the functional currency at the exchange rate at the transaction dates. Foreign currency translation differences between the exchange rates at the trans- action date and the date of payment are recognised in the income state- ment under financials. Monetary items denominated in a foreign currency are translated at the exchange rate at the reporting date. The difference between the exchange rates at the reporting date and the transaction date or the exchange rate used in the latest annual report is recognised in the income statement under financials. Foreign currency translation differences arising on the translation of non-monetary items, such as investments in associates, are recognised directly in other comprehensive income. Recognition in the consolidated financial statements When preparing the consolidated financial statements, the income state- ments of entities with a functional currency other than DKK are translated at the average exchange rate for the period, and balance sheet items are translated at the closing rate at the end of the reporting period. Foreign exchange differences arising on translation of the equity of for- eign entities and on translation of receivables considered part of net in- vestment are recognised directly in other comprehensive income. Foreign exchange differences arising on the translation of income state- ments from the average exchange rate for the period to the exchange rate at the reporting date are also recognised in other comprehensive income. Adjustments are presented under a separate translation reserve in equity. Presentation Cash flow statement The cash flow statement is prepared using the indirect method based on operating profit before amortisation, depreciation and special items. The cash flow statement cannot be derived directly from the balance sheet and income statement. Materiality in financial reporting In preparing the Annual Report, Management seeks to improve the infor- mation value of the consolidated financial statements, the notes to the statements and other measures disclosed by presenting the information in a way that supports the understanding of the Group’s performance in the reporting period. This objective is achieved by presenting fair transactional aggregation levels on items and other financial information, emphasising information that is considered of material importance to the user and making relevant rather than generic descriptions throughout the Annual Report. All disclosures are made in compliance with the International Financial Reporting Standards, the Danish Financial Statements Act and other relevant regulations, ensuring a true and fair view throughout the Annual Report. Presentation of items and subtotals The presentation of items and subtotals is based on separate classification of material groups of similar items. In the income statement, income and expense items are classified based on the ‘nature of expense’ method in accordance with IAS 1. Furthermore, the use of special items is applied to improve the transparency and understanding of the Group’s financial statements by separating the core performance of the Group from ex- ceptional items. For a definition and reconciliation of Group results before and after special items, refer to note 2.7 Special items. New accounting regulations The IASB has issued a number of new standards and amendments not yet in effect or adopted by the EU and therefore not relevant for the prepara- tion of the 2022 consolidated financial statements. DSV expects to imple- ment the standards and amendments when they take effect. None of the new standards issued are currently expected to have signifi- cant impact on the Group’s financial statements when implemented. 51 DSV Annual Report 2022 Consolidated financial statements 2022 Chapter 2 Profit for the year This chapter includes disclosures on components of consolidated profit for the year. The consolidated profit is based on the combined results of our three operating segments – Air & Sea, Road and Solutions – as described in the following. Reference is also made to the comments on the financial performance of the Group and the divisions in Management’s commentary. Accounting policies Operating segments are defined by the operational and management structure of DSV, which is derived from the types of services we deliver and our geographical presence on the world market. As such, our operat- ing segments reflect our divisional and Group reporting used for manage- ment decision-making. Operating segments Our business operations are carried out by three divisions, forming the basis of our segment reporting. Air & Sea The Air & Sea division provides air and sea freight services across the globe. This includes a projects department, handling out of gauge cargo and special transportation projects. Road The Road division provides road freight services across Europe, Middle East, North America and South Africa. Solutions The Solutions division offers contract logistics services, incl. warehousing and inventory management, across the globe. Measurement of earnings by segment Our business segments are measured and reported down to operating profit before special items. Segment results are accounted for in the same way as in the consolidated financial statements. Segment income/expenses and assets/liabilities comprise the items directly attributable to the individual segment as well as the items that may be allocated to the individual segment on a reliable basis. Income and expenses relating to Group functions, investing activities, etc., are managed at Group level. These items are not included in the statement of segment information, but are presented under ‘non- allocated items and eliminations’. Financial position of business segments Assets and liabilities are included in the segmental reporting to the extent they are used for the operation of the segment. Assets and liabilities that cannot be attributed to any of the three seg- ments on a reliable basis are presented under ‘non-allocated items and eliminations’. Geographical information DSV operates in most parts of the world and has activities in more than 80 countries, which are divided into the following geographical regions: • EMEA: Europe, Middle East and Africa • Americas: North and South America • APAC: Asia, Australia and the Pacific Revenue and non-current assets are allocated to the geographical areas according to the country in which the individual consolidated entity is based. Refer to note 2.2 for regional segmentation of revenue. The cor- porate headquarter of DSV is located in Denmark, which is included in the EMEA segment. Our business is based on transactions in our global net- work rather than in individual countries or regions. Intersegment transactions are made on an arm’s length basis. Major customers DSV is not reliant on any major customers. No single customer exceeds 5% of combined Group revenue. 2.1 Segment information 52 DSV Annual Report 2022 Consolidated financial statements 2022 2.1 Segment information – continued Segment information – divisions (DKKm) Air & Sea Road Solutions Non-allocated items and eliminations Tot a l 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Condensed income statement Revenue 172,868 130,899 38,746 33,077 23,826 17,989 225 341 235,665 182,306 Intercompany revenue 1,563 1,002 2,761 2,339 583 745 (4,907) (4,086) - - Divisional revenue 174,431 131,901 41,507 35,416 24,409 18,734 (4,682) (3,745) 235,665 182,306 Direct costs 139,807 108,132 33,596 28,321 15,091 12,081 (4,978) (3,843) 183,516 144,691 Gross profit 34,624 23,769 7,911 7,095 9,318 6,653 296 98 52,149 37,615 Other external expenses 4,244 3,366 1,425 1,122 1,759 1,338 (1,869) (1,653) 5,559 4,173 Staff costs 8,471 6,598 3,543 3,149 2,254 1,664 2,047 1,614 16,315 13,025 Operating profit before amortisation, depreciation and special items 21,909 13,805 2,943 2,824 5,305 3,651 118 137 30,275 20,417 Amortisation and depreciation 1,251 1,037 903 967 2,604 1,876 313 314 5,071 4,194 Operating profit (EBIT) before special items 20,658 12,768 2,040 1,857 2,701 1,775 (195) (177) 25,204 16,223 Condensed balance sheet Total gross investments 1,797 17,262 501 1,958 4,338 4,118 165 7,864 6,801 31,202 Total assets 93,821 96,879 24,437 24,135 29,347 26,245 11,440 14,136 159,045 161,395 Total liabilities 67,546 79,824 17,547 18,883 23,357 20,310 (21,146) (31,900) 87,304 87,117 Geographical information – major countries (DKKm) Revenue Non-current assets 2022 2021 2022 2021 USA 52,826 36,532 2,431 1,715 Germany 17,684 15,061 1,526 1,523 Denmark 17,071 17,452 4,159 4,774 United Kingdom 9,761 7,807 896 813 Sweden 8,360 6,172 890 896 Other 129,963 99,282 14,325 13,397 Total 235,665 182,306 24,227 23,118 Geographical information – regions (DKKm) Non-current assets 2022 2021 EMEA 18,179 18,154 Americas 3,593 2,542 APAC 2,455 2,422 Total 24,227 23,118 ** Non-current assets less tax assets, customer relationships and goodwill. * Reference is made to the income statement for a reconciliation from operating profit (EBIT) before special items to profit for the year. 53 DSV Annual Report 2022 Consolidated financial statements 2022 2.2 Revenue Accounting policies Revenue comprises freight forwarding services, contract logistics and other related services delivered in the finan cial year. Revenue from services delivered is recognised in accordance with the over-time recognition principle following the satisfaction of various mile- stones as the performance obligation is fulfilled towards the customer. Our main services comprise air, sea, road and solutions services as de- scribed in the following. Air services Air services comprise air freight logistics facilitating transportation of goods across the globe. Air services are reported within the Air & Sea re- porting segment. Air services are characterised by short delivery times, as most air transports are completed within a few days. Sea services Sea services comprise sea freight logistics facilitating transportation of goods across the globe. Sea services are reported within the Air & Sea re- porting segment. Sea services are characterised by longer delivery times, averaging one month depending on destination. Road services Road services comprise road freight logistics facilitating transportation of goods by road networks mainly in Europe, Middle East, the US and South Africa. Road services are reported within the Road reporting segment. Road services are characterised by short delivery times, as most road transports are completed within a few days. Solutions services Solutions services comprise contract logistics, incl. warehousing and in- ventory management, across the globe. Solutions services are reported within the Solutions re porting segment. Solutions services are character- ised by very short delivery times, happening almost instanta neously as agreed actions under the customer contract are carried out. General recognition principles Revenue from services delivered are recognised based on the price speci- fied in the contract with the customer. Revenue is measured excluding VAT and other tax collected on behalf of third parties, and any discounts are offset against the revenue. Incremental costs of obtaining a contract with a customer are not recognised as an asset but as an expense when incurred due to the short delivery times. Trade receivables from services delivered are invoiced to the customer and are not adjusted for any financing components, as credit terms are short – typically between 14 and 60 days – and the financing component therefore insignificant. Where services delivered have yet to be invoiced and invoices on services received from hauliers have still to be received, contract assets and accrued cost of services are recognised at the re- porting date. Revenue allocated to remaining performance obligations are not disclosed following the practical expedient of IFRS 15. Revenue also comprises income from sale of property projects in the form of sale of land and buildings acquired, constructed and held for sale in the ordinary course of business. Revenue from property projects is recognised at a point in time in the reporting segment to which it relates when control of and legal title to the property have been transferred to the customer. Revenue is recognised based on the price specified in the contract with the customer, and the consideration is due upon transfer of the legal title. Delivery times on prop- erty projects are typically 8-18 months. If the property is leased back after completion, the right-of-use asset arising from the leaseback is recognised at the proportion of the previous carrying amount of the asset that relates to the right of use retained by DSV. As such, any gain or loss recognised only corresponds to rights transferred to the buyer. Sale of services and geographical segmentation specify as follows: Services and geogra phical segmentation (DKKm) EMEA Americas APAC Tot a l 2022 2021 2022 2021 2022 2021 2022 2021 Air services 30,258 24,867 28,083 19,624 32,250 26,355 90,591 70,846 Sea services 41,386 32,053 28,494 18,317 13,960 10,685 83,840 61,055 Road services 37,453 32,452 4,054 2,964 - - 41,507 35,416 Solutions services 16,537 12,914 4,382 3,639 3,490 2,181 24,409 18,734 Total 125,634 102,286 65,013 44,544 49,700 39,221 240,347 186,051 Non-allocated items and eliminations (4,682) (3,745) Total revenue 235,665 182,306 54 DSV Annual Report 2022 Consolidated financial statements 2022 2.2 Revenue 2.3 Direct costs Sale of services includes revenue from freight forwarding services, con- tract logistics, sale of property projects and other related services. Sale of property projects recognised at a point in time constitutes less than 1% of total revenue (2021: less than 2%). Other operating income includes rental income from terminal and building leases, gains from disposal of non- current assets and income from insurance contracts. Accounting policies Direct costs comprise costs paid to generate the revenue for the year. Direct costs include settlement of accounts with haulage contractors, ship- ping companies, airlines, etc. Direct costs also include staff costs relating to hourly workers used for fulfilling orders and other direct costs of operation, such as rental of logistics facilities and costs of property projects. Revenue is specified as follows: Revenue (DKKm) 2022 2021 Sale of services 234,669 181,707 Other operating income 996 599 Total revenue 235,665 182,306 Direct costs (DKKm) 2022 2021 Cost of carriers 169,068 133,631 Staff costs, hourly workers 7,647 6,280 Other costs of operation 6,801 4,780 Direct costs 183,516 144,691 2.6 Amortisation and depreciation 2.5 Staff costs Accounting policies Other external expenses include expenses relating to marketing, IT, other rent, training and education, office premises, travelling, communications as well as other selling costs and administrative expenses, less costs transferred to direct costs. Accounting policies Staff costs include wages and salaries, pension costs, social security costs and other staff costs for salaried employees, but exclude staff costs for hourly workers, which are recognised as direct costs. Staff costs are recognised in the financial year in which the employee renders the related service. Costs related to long-term employee benefits, e.g. share-based payments, are recognised in the periods in which they are earned. Reference is made to note 3.7 for detailed information on pension plans, note 6.3 for information on remuneration of the Executive Board and the Board of Directors and note 6.2 for detailed information on the Group’s share option schemes. Accounting policies Amortisation and depreciation for the year are recognised based on the amor tisation and depreciation profiles of the underlying assets (refer to notes 3.2, 3.3 and 3.6). Other external expenses (DKKm) 2022 2021 Other external expenses 12,360 8,953 Transferred to direct costs (6,801) (4,780) Total other external expenses 5,559 4,173 Staff costs (DKKm) 2022 2021 Salaries and wages, etc. 20,111 16,250 Defined contribution pension plans 745 567 Defined benefit pension plans 84 74 Other social security costs 2,820 2,254 Share-based payments 202 160 Total staff costs 23,962 19,305 Recognised in the income statement items: Hourly workers – recognised as direct costs 7,647 6,280 Salaried employees – recognised as staff costs 16,315 13,025 Total 23,962 19,305 Weighted average number of full-time employees 76,583 67,016 Number of full-time employees at year-end 76,283 77,958 Amortisation and depre ci ation (DKKm) 2022 2021 Customer relationships 254 212 Software 185 218 Buildings 341 231 Other plant and operating equipment 530 388 ROU assets – Land and buildings 3,549 2,757 ROU assets – Other plant and operating equipment 212 388 Total amortisation and depreciation 5,071 4,194 2.4 Other external expenses 55 DSV Annual Report 2022 Consolidated financial statements 2022 2.8 Financial income and expenses Accounting policies Special items are used in connection with the presentation of profit or loss for the year to distinguish consolidated operating profit from exceptional items, which by their nature are not related to the Group’s ordinary opera- tions or investment in future activities. Special items comprise: • Restructuring costs, impairment costs, etc., relating to fundamental structural, procedural and managerial reorganisations as well as any related gains or losses on disposals; • Transaction and restructuring costs relating to the acqui sition and divestment of enterprises. Special items reconcile to the income statement items as specified in the table below: Accounting policies Financial income and expenses include interest, share of associates’ profit/ loss, foreign currency gains and losses, bank charges as well as amortisation of financial assets and liabilities, including finance lease obligations. Further- more, realised and unrealised gains and losses on derivative financial instru- ments that cannot be classified as hedging contracts are included. Interest income includes interest on financial assets of DKK 323 million (2021: DKK 202 million). Interest expenses include interest on financial liabilities measured at amortised cost of DKK 1,453 million (2021: DKK 977 million). 2022 2021 Special items Bridge (DKKm) Reported income statement Special items Adjusted income statement Reported income statement Special items Adjusted income statement Revenue 235,665 - 235,665 182,306 23 182,329 Direct costs 183,516 19 183,535 144,691 12 144,703 Gross profit 52,149 (19) 52,130 37,615 11 37,626 Other external expenses 5,559 237 5,796 4,173 184 4,357 Staff costs 16,315 653 16,968 13,025 277 13,302 Operating profit before amortisation and depreciation 30,275 (909) 29,366 20,417 (450) 19,967 Amortisation and depreciation 5,071 213 5,284 4,194 29 4,223 Operating profit 25,204 (1,122) 24,082 16,223 (479) 15,744 Special items, costs 1,117 (1,117) - 478 (478) - Financial income 606 - 606 206 - 206 Financial expenses 1,472 (5) 1,467 1,047 (1) 1,046 Profit before tax 23,221 - 23,221 14,904 - 14,904 Management judgements and estimates In the classification of special items, judgement is applied in ensuring that only exceptional items not associated with the ordinary operations of the Group are included. Special items (DKKm) 2022 2021 Restructuring and integration costs 1,117 392 Transaction costs relating to acquisitions - 86 Special items, costs 1,117 478 Financial income (DKKm) 2022 2021 Interest income 323 202 Share of associates’ profit, net of tax 7 4 Currency translation recognised in the income statement 276 - Total financial income 606 206 Financial expenses (DKKm) 2022 2021 Interest expenses on lease liabilities 727 495 Interest expenses on borrowings 236 159 Interest expenses, bank 397 249 Financial expenses on pension obligations, refer to note 3.7 19 17 Currency translation recognised in the income statement - 53 Other financial expenses 93 74 Total financial expenses 1,472 1,047 2.7 Special items 56 DSV Annual Report 2022 Consolidated financial statements 2022 Chapter 3 Operating assets and liabilities This chapter includes notes disclosures on the Group’s invested capital that forms the basis of our business activities. Invested capital repre- sents the Group’s property, plant and equip- ment, intangible assets and net working capital in the form of operating assets and liabilities. Invested capital is structured based on our asset-light business model, including our focus on minimising funds tied up in working capital to optimise the generation of available free cash flow. Invested capital also com prises significant intangible assets mainly relating to acquired goodwill from business combinations carried out over the years. Accounting policies Goodwill The carrying amount of goodwill is tested for impairment at least annually together with other non-current assets of the Group. Impairment testing is performed for the lowest cash-generating unit to which consolidated goodwill is allocated, as defined by our divisional management and operational structure. The cash-generating units there- by follow our divisional structure: Air & Sea, Road and Solutions. Goodwill is written down to its recoverable amount through the income statement if lower than the carrying amount. The recoverable amount is determined as the present value of the discounted future net cash flow from the cash-generating unit to which the goodwill relates. In calculating the present value, discount rates are applied reflecting the risk-free interest rate with the addition of risks relating to the individual cash-generating units, such as geographical and financial exposure. Other non-current intangible assets, property, plant and equipment The carrying amount of other non-current assets is tested for impairment at least once a year in connection with the impairment test of goodwill. If the tests show evidence of impairment, the asset is written down to the recoverable amount through the income statement. The recoverable amount is the higher of the fair value of the asset less the expected costs to sell and its value in use. The value in use is calculated as the present value of expected future cash flows from the asset or the division of which the asset forms part. Management judgements and estimates For goodwill impairment testing, a number of estimates are made on the development in revenues, gross profits, operating margins, future capital expenditures, discount rates and growth expectations in the terminal peri- od. These are based on an assessment of current and future developments in the three cash-generating units and on historical data and assumptions of future expected market developments, including expected long-term average market growth rates. Material value drivers affecting the future net cash flows of the three cash-generating units are: Air & Sea The Air & Sea division operates globally, so developments in the global economy and world trade therefore have a material impact on the divi- sion’s future net cash flow. Developments in gross profit per shipment, cost management initiatives and development in internal productivity (number of shipments per employee) also affect the division’s cash flow. Road The Road division mainly operates on the EMEA and US markets, which means that the division’s future net cash flow is affected by the growth rate in these regions. Developments in gross profit per shipment, including truck and terminal utilisation rates, cost management initiatives and devel- opment in internal productivity (number of shipments per employee) also affect the division’s cash flow. Solutions The Solutions division operates globally, so developments in the global economy and world trade therefore have a material impact on the divi- sion’s future net cash flow. Developments in warehouse lease costs and costs of related services, utilisation of warehouse facilities, cost manage- ment initiatives and development in internal productivity (number of order lines per employee) also affect the division’s cash flows. 3.1 Impairment testing 57 DSV Annual Report 2022 Consolidated financial statements 2022 Goodwill impairment test at 31 December 2022 (DKKm) 2022 2021 Air & Sea Road Solutions Air & Sea Road Solutions Carrying amount of goodwill 58,877 7,964 9,452 57,893 7,901 9,269 Budget period Annual revenue growth 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% Operating margin 9.1% 5.6% 11.0% 9.1% 5.6% 11.0% Terminal period Growth 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% Pre-tax discount rate 11.0% 9.7% 11.1% 7.2% 6.0% 7.3% Sensitivity analysis Growth in budget period – allowed decline (percentage points) 23.1% 28.2% 9.0% 28.3% 40.0% 18.4% Discount rate – allowed increase (percentage points) 9.9% 11.0% 2.5% 8.7% 13.2% 4.1% The expected future net cash flow is based on budgets and business plans approved by Management for the year 2023 and projections for subsequent years up to and including 2026. From 2026 onwards, DSV expects the growth rate to remain in line with the expected long-term average growth rate for the industry. 3.1 Impairment testing — continued Impairment test Goodwill was tested for impairment at 31 December 2022. The tests did not result in any impairment of carrying amounts. The assumptions used, including a sensitivity analysis, are stated in the following paragraph. The pre-tax discount rate is calculated in accordance with IAS 36. The sensitivity analysis assesses the impact of changes in cash flows and discount rates on the impairment test results. The an alysis concluded that even negative changes, which are unlikely to occur, will not result in im- pairment of goodwill in any of the three cash-generating units. Sensitivity analysis The sensitivity analysis shows the lowest possible growth rate or highest possible discount rate in percentage points by which the assumptions used can change before goodwill becomes impaired. Other non-current intangible assets, property, plant and equipment Other non-current assets were also tested for impairment indications to- gether with goodwill at 31 December 2022. No indication of impairment was identified in connection with these tests. 58 DSV Annual Report 2022 Consolidated financial statements 2022 Goodwill Only goodwill arising from business combinations is recognised in the finan- cial statements. Goodwill is measured as the difference between the total of the fair value of the consideration transferred, the value of non-controlling interests and any equity investments previously held in the acquiree, com- pared to the fair value of identifiable net assets on the date of acquisition. Goodwill is not amortised, but is tested for impairment at least annually. 3.2 Intangible assets Customer relationships On initial recognition, customer relationships identified from business com- binations are recognised in the balance sheet at fair value. Subsequently, customer relationships are measured at cost less accumulated amortisation and impairment losses. Customer relationships are amortised over a period of eight years using the diminishing balance method. Software and software in progress Software bought or developed for internal use is measured at the lower of cost less accumulated amortisation and impairment losses and the recover- able amount. Cost comprises payments for the software and other directly attributable expenses of preparing the software for its intended use. After commissioning, software is amortised on a straight-line basis over its expected useful life. The amortisation period is 1-8 years. 2022 2021 Intangible assets (DKKm) Goodwill Customer relationships Software Software in progress Tota l Goodwill Customer relationships Software Software in progress Tota l Cost at 1 January 75,063 2,565 1,212 280 79,120 47,476 2,032 1,265 206 50,979 Additions from business combinations/previous period adjustments 370 - - - 370 25,333 569 1 13 25,916 Additions - - 42 238 280 - - 56 247 303 Disposals - (27) (250) (2) (279) - (56) (246) (43) (345) Reclassifications - - 174 (174) - - - 143 (143) - Currency translation 860 36 2 - 898 2,254 20 (7) - 2,267 Total cost at 31 December 76,293 2,574 1,180 342 80,389 75,063 2,565 1,212 280 79,120 Total amortisation and impairment at 1 January - 1,719 740 - 2,459 - 1,551 763 - 2,314 Amortisation and impairments for the year - 254 185 - 439 - 212 218 - 430 Disposals - (27) (191) - (218) - (56) (241) - (297) Reclassification - - - - - - - 7 - 7 Currency translation - 35 - - 35 - 12 (7) - 5 Total amortisation and impairment at 31 December - 1,981 734 - 2,715 - 1,719 740 - 2,459 Carrying amount at 31 December 76,293 593 446 342 77,674 75,063 846 472 280 76,661 59 DSV Annual Report 2022 Consolidated financial statements 2022 Accounting policies Land and buildings and other plant and operating equipment are measured at cost less accumulated depreciation and impairment losses. The cost comprises the acquisition price and other expenses directly attributa- ble to preparing the asset for its intended use. The present value of estimated expenses for dismantling and disposing of the asset as well as restoration expenses are added to the cost if such expenses are recognised as a provision. Material borrowing costs directly attributable to the construction of the indi- vidual asset are also added to cost. 3.3 Property, plant and equipment If the individual components of an asset have different useful lives, each component will be depreciated separately. The cost of self-constructed assets comprises direct and indirect costs for materials, components, subcontractors, wages and salaries. Costs for self-constructed assets are recognised as property, plant and equipment in progress on an ongoing basis until the assets are ready for use. Subsequent costs, such as partial replacement of property, plant and equip- ment, are included in the carrying amount of the asset in question when it is probable that such costs will result in future economic benefits. The carrying amount of the replaced parts is disposed from the balance sheet and recognised in the income statement. 2022 2021 Property, plant and equipment (DKKm) Land and buildings Other plant and operating equipment Property, plant and equipment in progress Total Land and buildings Other plant and operating equipment Property, plant and equipment in progress Total Cost at 1 January 4,907 3,838 282 9,027 2,355 2,649 473 5,477 Additions from business combinations/previous period adjustments (408) - - (408) 2,229 295 30 2,554 Additions 393 963 158 1,514 241 762 177 1,180 Disposals (533) (402) - (935) (146) (348) (33) (527) Transferred to assets held for sale - - - - 2 - (2) - Reclassification 19 22 (26) 15 64 356 (375) 45 Currency translation 83 4 - 87 162 124 12 298 Total cost at 31 December 4,461 4,425 414 9,300 4,907 3,838 282 9,027 Total depreciation and impairment at 1 January 1,111 1,654 - 2,765 967 1,496 - 2,463 Depreciation for the year 341 530 - 871 231 388 - 619 Disposals (226) (402) - (628) (87) (289) - (376) Reclassification (21) 21 - - 24 31 - 55 Currency translation 7 1 - 8 (24) 28 - 4 Total depreciation and impairment at 31 December 1,212 1,804 - 3,016 1,111 1,654 - 2,765 Carrying amount at 31 December 3,249 2,621 414 6,284 3,796 2,184 282 6,262 60 DSV Annual Report 2022 Consolidated financial statements 2022 Depreciation is carried out on a straight-line basis over the expected useful lives of the assets. The expected useful lives of the overall asset categories are as follows: • Terminals and administration buildings: 50-60 years • Other buildings and building elements: 10-30 years • Technical plant and machinery: 6-10 years • Other plant and operating equipment: 3-8 years • Land is not depreciated The basis of depreciation takes into account the residual value of assets and is reduced by any impairment losses. The residual value is calculated on the date of acquisition and reassessed once a year. Depreciation will be halted if the residual value exceeds the carrying amount of the asset. Assets are transferred to assets held for sale if it is highly probable that their carrying amount will be recovered primarily through sale rather than through continuing use. Management judgements and estimates Judgement is applied in determining the depreciation period and future residual value of the assets recognised and is generally based on historical experience. Reassessment is done annually to ascertain that the deprecia- tion basis applied is still representative and reflects the expected life and future residual value of the assets. Accounting policies Contract assets and accrued costs of services include accrued revenue and accrued costs from freight forwarding services, contract logistics and other related services in progress at 31 December 2022. Contract assets are recognised when a sales transaction fulfils the criteria for revenue recognition, but the final invoice has yet to be issued to the customer for the services delivered. Refer to note 4.4 for disclosure of credit risk as trade receivables carry substantially the same characteristics as contract assets. Accrued costs of services are estimated and recognised when supplier in- voices relating to recognised revenue for the reporting period have yet to be received. Management judgements and estimates In the preparation of the consolidated financial statements, significant estimates are applied in assessing services in progress, including accrual of income and pertaining direct costs. These estimates are based on experi- ence and continuous follow-up on services in progress relative to sub- sequent invoicing. Accounting policies Inventories are measured at the lower of cost and net realisable value. The cost of inventories comprises all costs of purchase, processing and other costs incurred in bringing the inventories to their present condition. Write- downs of inventories to net realisable value are recognised as direct costs in the income statement. Accounting policies Whether a contract contains a lease is assessed at contract inception. For identified leases, a right-of-use asset (ROU) and corresponding lease liability are recognised on the lease commencement date. Upon initial recognition, the right-of-use asset is measured at cost corre- sponding to the lease liability recognised, adjusted for any lease prepayments or directly related costs, including dismantling and restoration costs. The lease liability is measured at the present value of lease payments of the leasing period discounted using the interest rate implicit in the lease contract. In cas- es where the implicit interest rate cannot be determined, an appropriate in- cremental DSV borrowing rate is used. In determining the lease period exten- sion, options are only included if it is reasonably certain they will be utilised. At subsequent measurement, the right-of-use asset is measured less accu- mulated depreciation and impairment losses and adjusted for any remeas- urements of the lease liability. Depreciation is carried out following the straight-line method over the lease term or the useful life of the right-of- use asset, whichever is shortest. 3.3 Property, plant and equipment — continued 3.4 Contract assets and accrued cost of services 3.5 Inventories 3.6 Leases Inventories (DKKm) 20212022 Stocks 93 119 Property projects under construction 1,796 165 Total 1,889 284 Inventories consists of land and buildings under construction held for the purpose of sale in the ordinary course of business (property projects) and stocks. In total, DKK 1,231 million relating to property projects was recog- nised as an expense in 2022 (2021: DKK 1,562 million). 61 DSV Annual Report 2022 Consolidated financial statements 2022 The lease liability is measured at amortised cost using the effective interest method and adjusted for any remeasurements or modifications made to the contract. Right-of-use assets and lease liabilities are not recognised for low value lease assets or leases with a lease term of 12 months or less. These are recognised as an expense on a straight-line basis over the term of the lease. Any service elements separable from the lease contract are also accounted for following the same principle. Extension options are only included in the lease term if extension of the lease is reasonably certain. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor. Management judgements and estimates In accounting for lease contracts, various judgements are applied in deter- mining right-of-use assets and lease liabilities. Judgements include assess- ment of lease periods, utilisation of extension options and applicable dis- count rates. Leases Right-of-use assets classified as land and buildings mainly relate to leases of warehouses, terminals and office buildings, whereas assets recognised as other plant and operating equipment mainly relate to leases of trailers, trucks, company cars, forklifts, IT hardware and other office equipment. Land and building leases normally have a lease term of up to ten years, whereas leases of other plant and operating equipment normally have a lease term of up to five years. Land and buildings may include extension options with the intention of se- curing flexibility in the lease – however, any leasing period beyond the nor- mal ten years expected at the initiation of the lease will normally be reflect- ed in the contractual lease term agreed. Analysis of lease liabilities showing the remaining contractual maturities is provided in the following table: The profit or loss and cash flow impact of leases recognised for the year are specified below: 2022 2021 Right-of-use assets (DKKm) Land and buildings Other plant and operating equipment Total Land and buildings Other plant and operating equipment Total Carrying amount at 1 January 13,121 588 13,709 10,146 965 11,111 Additions from business combinations - - - 2,367 8 2,375 Additions 4,970 75 5,045 3,488 227 3,715 Disposals (252) (40) (292) (336) (224) (560) Depreciation for the year (3,549) (212) (3,761) (2,757) (388) (3,145) Currency translation (5) (2) (7) 213 - 213 Carrying amount at 31 December 14,285 409 14,694 13,121 588 13,709 Contractual maturity of lease liabilities (DKKm) 20212022 0-1 year 4,302 3,692 1-5 years 11,059 9,835 > 5 years 5,917 4,803 Total undiscounted lease liabilities at 31 December 21,278 18,330 Current/non-current classification (discounted) Current 3,577 3,440 Non-current 13,190 11,848 Lease effects recognised in profit or loss and cash flow (DKKm) 20212022 Profit or loss Interest expenses on lease liabilities 727 495 Expenses relating to short-term leases 563 457 Expenses relating to leases of low-value assets 635 308 Expenses relating to variable lease payments not included in the measurement of lease liabilities 97 103 Gains from sale and leaseback transactions 109 56 Income from subleasing of right-of-use assets 14 - Cash flow Total cash outflow for leases 4,461 3,655 3.6 Leases — continued 62 DSV Annual Report 2022 Consolidated financial statements 2022 Accounting policies Pension obligations relating to defined contribution plans, under which the Group pays regular pension contributions to independent pension funds, are recognised in the income statement for the period in which they are earned. Contributions payable are recognised in the balance sheet under other current liabilities. In regards to defined benefit plans, an actuarial valuation of the present value of future benefits payable under the plan is made once a year. The present value is calculated based on various assumptions, including the future development in wage/salary levels, interest rates, inflation and mortality. The present value is only calculated for benefits to which the employees have become entitled during their employment with the Group. The actuarial calculation of the present value less the fair value of assets under the plan is recognised in the balance sheet under pensions and other post-employment benefit plans. Pen- sion costs for the year are recognised in the income statement based on actuarial estimates and the financial outlook at the beginning of the year. Differences between the calculated development in pension plan assets and liabilities and the realised values are recognised in other comprehensive income as actuarial gains or losses. Changes in benefits payable for employees’ past services to the company result in an adjustment of the actuarial calculation of the present value, which is classified as past service costs. Past service costs are charged to the income statement immediately if the employees have already earned the right to the adjusted benefits. Otherwise, they will be recognised in the income statement over the period in which the employees earn the right to the adjusted benefits. Management judgements and estimates In determining pension obligations, management makes use of valuations from external and independent actuaries as basis for the estimates ap- plied. The actuarial assumptions used in the valuations vary from country to country owing to national, economic and social conditions. 3.7 Pensions and other post-employment benefit plans Pension obligations Of these obligations, DKK 856 million relates to unfunded pension obliga- tions (2021: DKK 1,032 million) and DKK 327 million relates to partly funded obligations (2021: DKK 124 million). The latter is primarily due to the Swiss plans being overfunded. Total pension costs for the year In 2022, net costs of DKK 848 million relating to the Group’s pension plans were recognised in the income statement (2021: DKK 658 million) and specify as follows: Pension obligations (DKKm) 2022 2021 Present value of defined benefit plans 4,112 5,693 Fair value of pension plan assets 2,929 4,785 Pension obligations, net 1,183 908 Pension cost 2022 (DKKm) Defined contribution plans Defined benefit plans Tota l Staff costs 745 84 829 Financial expenses - 19 19 Total costs recognised 745 103 848 Pension cost 2021 (DKKm) Defined contribution plans Defined benefit plans Tota l Staff costs 567 74 641 Financial expenses - 17 17 Total costs recognised 567 91 658 Defined benefit pension obligations Development in the present value of defined benefit pension obligations is specified as follows: The expected average duration of the obligations is 14 years. Defined benefit pension obligations (DKKm) 20212022 Obligations at 1 January 5,693 4,218 Current service cost 135 100 Past service cost from plan amendments, curtailments and gains/losses on settlements 9 (26) Calculated interest on obligations 75 56 Actuarial gains/losses arising from changes in financial assumptions (1,283) (186) Actuarial gains/losses arising from changes in demographic assumptions (23) (63) Actuarial gains/losses arising from experience adjustments 39 (8) Payments from the plan (521) (1,211) Additions from business combinations - 2,667 Currency translation (12) 146 Obligations at 31 December 4,112 5,693 Expected maturity of pension obligations (DKKm) 20212022 0-1 year 501 206 1-5 years 933 747 > 5 years 2,678 4,740 Total obligations recognised 4,112 5,693 63 DSV Annual Report 2022 Consolidated financial statements 2022 3.7 Pensions and other post-employment benefit plans — continued Pension plan assets Development in the fair value of pension plan assets is specified as follows: Actuarial loss included in statement of comprehensive income amounts to DKK 395 million. DSV expects to contribute DKK 61 million to defined benefit plan assets in 2023 (2022: DKK 55 million). The pension plan assets are composed as follows: Sensitivity analysis The following table illustrates the change in the gross obligation relating to defined benefit plans from a change in the key actuarial assumptions. The analysis is based on reasonably probable changes, provided that the other parameters remain unchanged. Significant pension plans The most significant defined benefit plans of the Group relate to Europe, with Germany, Sweden and the UK being the largest. No other countries have individual defined benefit plans of significance. The plan in Sweden is a final pay scheme, which covers all salaried employees born in or before 1978 and is based on a collective labour agreement. Salaried employees born in or after 1979 are covered by a defined con tribution plan. The plan in Germany covers both salaried and hourly workers. Under this plan, employees earn a fixed amount for each year in service. The plan has been closed for new employees since 1994. Pension plan assets (DKKm) 2022 2021 Pension plan assets at 1 January 4,785 2,999 Calculated interest on plan assets 56 29 Return on plan assets excluding calculated interest (1,288) 298 Contributions to the plan 163 121 Payments from the plan (411) (1,168) Additions from business combinations - 2,312 Asset ceiling (374) - Currency translation (2) 194 Pension plan assets at 31 December 2,929 4,785 Composition of pension plan assets (%) 20212022 Shares 47% 52% Bonds 44% 37% Insurance contracts 9% 11% Total 100% 100% Sensitivity analysis (DKKm) 20212022 Defined benefit pension obligation 4,112 5,693 Discount rate Increase of 0.5 percentage point 3,888 5,293 Decrease of 0.5 percentage point 4,346 6,126 Future wage/salary increase Increase of 0.5 percentage point 4,148 5,744 Decrease of 0.5 percentage point 4,071 5,595 Inflation Increase of 0.5 percentage point 4,223 5,900 Decrease of 0.5 percentage point 3,987 5,479 Life expectancy Life expectancy increase of 1 year 4,218 5,810 Life expectancy decrease of 1 year 3,986 5,507 We continuously work to change our defined benefit plans in DSV into defined contribution plans for the benefit of the Group and the employees. Applied key assumptions for the most significant pension plans are as follows: Key assumptions 2022 Discount rate Future wage/salary increase Future rate of inflation Sweden 3.9% 2.6% 2.1% Germany 4.1% 3.0% 2.4% Other 0.7-7.3% 0-10.0% 0-3.5% Weighted average 4.2% 3.0% 1.8% Mortality prognosis table Sweden DUS21 (w-c) Germany RT Heubeck 2018 G Key assumptions 2021 Discount rate Future wage/salary increase Future rate of inflation Sweden 1.5% 2.0% 1.5% Germany 1.0% 2.0% 1.5% Other 0.3-6.1% 0-10.0% 0-2.1% Weighted average 1.5% 2.8% 1.2% Mortality prognosis table Sweden DUS14 (w-c) Germany RT Heubeck 2018 G 64 DSV Annual Report 2022 Consolidated financial statements 2022 Accounting policies Provisions are recognised when, due to an event occurring on or before the reporting date, the Group has a legal or constructive obligation and it is probable that the Group will have to give up future economic benefits to meet the obligation. Provisions are measured on the basis of Management’s best estimate of the anticipated expenditure for settle ment of the relevant obligation and are discounted if deemed material. Management judgements and estimates Management continually assesses provisions, including contingencies and the likely outcome of pending and potential legal proceedings. The out- come of such proceedings depends on future events, which are, by na- ture, uncertain. When considering provisions involving significant estimates, opinions and estimates by external legal experts as well as existing case law are applied in assessing the probable outcome of material legal proceedings, etc. Provisions Provisions have not been discounted, as the effect thereof is immaterial. Provisions are expected to be settled within two years in all material respects. Restructuring costs Restructuring costs relate mainly to the integration of acquirees and the restructuring plans previously announced, which consist mainly of termina- tion benefits and costs under terminated leases. 3.8 Provisions Disputes and legal actions Provisions for disputes and legal actions relate mainly to probable lia bilities taken over at the acquisition of enterprises. Other provisions Other provisions include indemnification liabilities totalling DKK 1,843 million relating to various company- and value added taxes (2021: DKK 1,818 million). Furthermore, other provisions mainly relates to restoration obligations in connection with property leases and onerous contracts. Provisions — 2022 (DKKm) Restruc turing costs Disputes and legal actions Other provisions Tota l Provisions at 1 January 673 940 3,736 5,349 Additions for the year 978 301 2,202 3,481 Additions from business combinations 4 4 69 77 Used for the year (655) (227) (1,223) (2,105) Reversal of provisions made in previous years (36) (56) (53) (145) Currency translation 2 13 (5) 10 Provisions at 31 December 966 975 4,726 6,667 Current/non-current classification: Non-current liabilities 445 325 3,490 4,260 Current liabilities 521 650 1,236 2,407 Provisions at 31 December 966 975 4,726 6,667 65 DSV Annual Report 2022 Consolidated financial statements 2022 Chapter 4 Capital structure and finances This chapter includes disclosures on the financial basis and exposures of the Group’s activities derived by our capital structure and net working capital. The capital structure is linked to our long-term financial target of a gearing ratio below 2.0 x EBITDA before special items and the principles for capital allocation. In order of priority, the free cash flow is used to reduce the Group’s net interest- bearing debt in periods when the gearing ratio exceeds the target, for investments and business combina- tions, and for share buybacks or distribution to the Company’s shareholders. Accounting policies Share capital At year end, the share capital of DSV A/S amounted to 219 million shares with a nominal value of DKK 1 each. 4.1 Equity Shares consist of only one share class and include no special rights, pref- erences or restrictions. All shares are fully paid up. Reserves specification – 2022 (DKKm) Treasury share reserve Hedging reserve Translation reserve Total reserves Reserves at 1 January (6) (9) (341) (356) Other comprehensive income, net of tax - 14 1,257 1,271 Transactions with shareholders: Purchase of treasury shares (19) - - (19) Sale of treasury shares 2 - - 2 Capital reduction 21 - - 21 Reserves at 31 December (2) 5 916 919 Reserves specification – 2021 (DKKm) Treasury share reserve Hedging reserve Translation reserve Total reserves Reserves at 1 January (4) (11) (2,821) (2,836) Other comprehensive income, net of tax - 2 2,480 2,482 Transactions with shareholders: Purchase of treasury shares (13) - - (13) Sale of treasury shares 2 - - 2 Capital reduction 6 - - 6 Transfer of treasury shares as business combination consideration 3 - - 3 Reserves at 31 December (6) (9) (341) (356) 66 DSV Annual Report 2022 Consolidated financial statements 2022 Reserves Reserves as presented in the statement of changes in equity comprise treasury share reserve, hedging reserve and translation reserve, as speci- fied on the previous page. Treasury share reserve The reserve comprises the nominal value of treasury shares. The difference between the market price paid and the nominal value plus dividends on treasury shares is recognised directly as retained earnings in equity. Treasury shares are bought to meet obligations under the Company’s incen- tive schemes and to adapt the capital structure. The reserve is a distributable reserve. Capital structure The capital structure of DSV is intended to maintain financial stability, opti- mise cost of capital and to ensure financial readiness allowing to act on business opportunities as they present themselves. The gearing ratio was 1.0 at 31 December 2022 (2021: 1.4). The target gearing ratio is below 2.0 x EBITDA, but may exceed this level following significant acquisitions. Capital allocation The Group aims to spend its free cash flow in the following order of priority: 1. Repayment of net interest-bearing debt in periods when the financial gearing ratio is above target; 2. Value-adding investments in the form of acquisitions or development of the existing business; 3. Distribution to the Company’s shareholders by means of share buybacks and dividends. Net interest-bearing debt The Group increased its net interest-bearing debt in 2022 by DKK 625 million (2021: increased by DKK 11,056 million). Net interest-bearing debt can be specified as follows: 4.1 Equity — continued 4.2 Capital structure and capital allocation Hedging reserve The reserve comprises the fair value of hedging instruments qualifying for hedge accounting. Hedge accounting ceases when the hedging instrument matures or if a hedge is no longer effective. Translation reserve The reserve comprises foreign currency translation arising on the transla- tion of net investments and related hedging in entities with a functional currency other than DKK. The reserve is dissolved upon disposal of entities. 2022 2021 Treasury shares Market value (DKKm) % of share capital at 31 December Nominal value (DKKm) Market value (DKKm) % of share capital at 31 December Nominal value (DKKm) Portfolio, beginning of year 8,921 2.4% 5.8 3,972 1.7% 3.9 New shares issued - - - 24,495 6.7% 16.0 Cancellation of treasury shares (24,474) (9.6%) (21.0) (5,863) (2.5%) (6.0) Portfolio, adjusted for amount of shares (15,553) (6.9%) (15.2) 22,604 5.8% 13.9 Purchased during the year 20,313 8.5% 18.6 17,841 5.5% 13.3 Consideration for acquisition - - - (29,571) (8.0%) (19.3) Sold during the year (1,601) (0.6%) (1.3) (784) (0.9%) (2.1) Value adjustment (820) - - (1,169) - - Portfolio, end of year 2,339 1.0% 2.1 8,921 2.4% 5.8 Net interest-bearing debt (DKKm) 2022 2021 Lease liabilities 16,767 15,288 Interest-bearing borrowings 22,206 21,472 Pensions and other post-employment benefit plans 1,183 908 Other receivables (126) (124) Cash and cash equivalents (10,160) (8,299) Net interest-bearing debt 29,870 29,245 67 DSV Annual Report 2022 Consolidated financial statements 2022 Distribution to the Company’s shareholders In 2022, the Group spent DKK 20,313 million on purchase of treasury shares and DKK 1,320 million on dividends distributed (2021: DKK 17,841 million and DKK 920 million, respectively). It is proposed to distribute a dividend of DKK 6.50 per share for 2022 (2021: DKK 5.50). Cash and capital restrictions Cash and cash equivalents comprise cash on hand and short-term liquid assets that are readily convertible to cash. Of total cash and cash equiva- lents, DKK 1,777 million (2021: DKK 839 million) are subject to restric- tions implying that the cash may not be readily available for general use or distribution by the Group. Major types of cash and capital restrictions: Cash and capital restrictions (DKKm) 20212022 Exchange control restrictions 1,498 654 Insurance collaterals 273 178 Other collaterals 6 7 Total 1,777 839 Exchange control restrictions Exchange control restrictions comprise cash balances in countries where various forms of foreign exchange controls or other legal restrictions apply. While the cash balances are available for the daily operations of the local entities, the balances cannot be immediately repatriated to the ultimate parent company. Insurance collaterals Insurance collaterals constitute security for outstanding insurance con- tracts sold to customers by DSV Insurance. The amount is regulated and measured in accordance with laws and regulations issued by the Danish Financial Supervisory Authority. Accounting policies The financial liabilities of the Group are divided into four financing cate- gories: overdraft and credit facilities, issued bonds, lease liabilities and other financial liabilities. Overdraft and credit facilities obtained through the issuance of bonds are initially recognised at fair value net of transaction expenses. Subsequently, the financial liability is measured at amortised cost, correspond- ing to the capitalised value using the effective interest method, so that the difference between the proceeds and the nominal value is recognised in the income statement over the term of the loan. Lease liabilities are described in further detail in note 3.6. 4.2 Capital structure and capital allocation — continued 4.3 Financial liabilities Financial liabilities (DKKm) 20212022 Non-current liabilities 34,588 28,841 Current liabilities 4,391 7,912 Total 38,979 36,753 Other liabilities are measured at amortised cost, which, in all essentials, corresponds to the net realisable value. Financing activities 2021 (DKKm) Overdraft and credit facilities 1,089 563 139 105 - 1,896 Issued bonds 7,730 11,782 - 48 (3) 19,557 Lease liabilities 12,278 (3,160) 2,539 246 3,385 15,288 Total liabilities from financing activities 21,097 9,185 2,678 399 3,382 36,741 Other non-current liabilities 62 12 Total financial liabilities 21,159 36,753 Non-cash change Financing activities 2022 (DKKm) Beginning of year Cash flow Additions from business combinations Currency effects Other End of year Overdraft and credit facilities 1,896 (1,159) - 92 - 829 Issued bonds 19,557 1,833 - 53 (66) 21,377 Lease liabilities 15,288 (3,734) - (33) 5,246 16,767 Total liabilities from financing activities 36,741 (3,060) - 112 5,180 38,973 Other non-current liabilities 12 6 Total financial liabilities 36,753 38,979 * Other includes additions and remeasurement of financial liabilities. 68 DSV Annual Report 2022 Consolidated financial statements 2022 Liquidity risk The cash readiness of the Group is ensured through short and long-term credit facilities from the main banks of the Group and through the issuance of bonds. The purpose of issuing bond loans is to diversify the Group’s long-term debt, making the Group less dependent on bank loans. The Group’s bank and bond loans are subject to standard clauses, accord- ing to which the Group’s debt must be repaid in case of a change of con- trol. The long-term credit facilities with banks are furthermore subject to one covenant. The covenant relates to the gearing ratio of the Group and is reported on every quarter. The covenant has not been breached in 2022. The total duration of the Group’s long-term loan commitments and the amounts drawn on its credit lines at 31 December 2022 are shown in the accompanying table. Furthermore, a maturity analysis has been provided based on contractual cash flows, including estimated interest payments. The amounts have not been discounted and as such do not reconcile directly to the balance sheet. Foreign currency risk Due to its global activities, the Group is exposed to exchange rate fluctu- ations to a certain extent. DSV seeks to eliminate foreign currency risks by hedging currency exposures centrally via the Group’s Treasury depart- ment. The risk exposure is managed on a net basis, primarily by using foreign exchange forward contracts. The Group’s foreign subsidiaries are not affected where trading income and costs are denominated in the local functional currency. This applies to a large part of the Group’s subsidiaries. Furthermore, a large proportion of the income and expenses of the Group are denominated in EUR, and the total foreign currency risk is therefore limited. 4.4 Financial risks Commitments and amounts drawn on long-term credit facilities at 31 December 2022: The Group’s financial liabilities fall due as follows: Loan facilities Principal amount (EURm) Principal amount (DKKm) Fixed/floating interest rate Expiry of commitments Duration (years) Undrawn Bond loan - ISIN XS2387735470 500 3,718 Fixed 17-09-2036 13.7 - Bond loan - ISIN XS2360881549 600 4,462 Fixed 05-07-2033 10.5 - Bond loan - ISIN XS2308616841 500 3,718 Fixed 03-03-2031 8.2 - Bond loan - ISIN XS2458285355 600 4,462 Fixed 16-03-2030 7.2 - Bond loan - ISIN 212542679 500 3,718 Fixed 26-02-2027 4.2 - Bond loan - ISIN 0030403993 200 1,487 Fixed 20-09-2024 1.7 - Revolving credit facility I 200 1,487 Floating 03-10-2027 4.8 1,487 Revolving credit facility II 75 558 Floating 31-12-2024 2.0 558 Revolving credit facility III 125 930 Floating 28-02-2024 1.2 930 Revolving credit facility IV 150 1,115 Floating 31-01-2024 1.1 1,115 Revolving credit facility V 100 744 Floating 31-01-2024 1.1 744 Revolving credit facility VI 100 744 Floating 15-01-2026 3.0 744 Overdraft facility I 100 744 Floating 28-02-2025 2.2 744 Overdraft facility II 50 372 Floating 31-01-2024 1.1 372 Total and weighted duration 3,800 28,259 8.3 6,694 Financial liabilities – maturity 2022 (DKKm) Carrying amount Total cash flow, inclu ding interest 0-1 year 1-5 years > 5 years Overdraft and credit facilities 829 859 859 - - Issued bonds 21,377 23,062 186 5,852 17,024 Lease liabilities 16,767 21,278 4,302 11,059 5,917 Trade payables 14,992 14,992 14,992 - - Currency derivatives 93 93 93 - - Total 54,058 60,284 20,432 16,911 22,941 Financial liabilities – maturity 2021 (DKKm) Carrying amount Total cash flow, inclu ding interest 0-1 year 1-5 years > 5 years Overdraft and credit facilities 1,896 1,932 1,932 - - Issued bonds 19,557 20,923 2,741 1,952 16,230 Lease liabilities 15,288 18,330 3,692 9,835 4,803 Trade payables 17,040 17,040 17,040 - - Currency derivatives 33 33 33 - - Interest rate derivatives 7 (9) (9) - - Total 53,821 58,249 25,429 11,787 21,033 69 DSV Annual Report 2022 Consolidated financial statements 2022 The Group is also exposed to foreign currency risks, partly on the transla- tion of debt denominated in foreign currency other than the functional currency and partly on the translation of net investments in enterprises with a functional currency other than DKK. The former risk affects profit before tax. On recognition of net investments in foreign subsidiaries, the Group is exposed to a translation risk when the profit or loss and equity of foreign subsidiaries are translated into DKK at the reporting date based on the average rates of exchange and the closing rates. The need to hedge the Parent’s net investments in subsidiaries is assessed on a regular basis. It is Group policy to reduce net investments in Group subsidiaries on an ongoing basis by distributing the subsidiaries’ profits as dividends. The Group hedges booked external net currency positions and currencies with large expected short-term operational cash flows for up to six months. At year-end 2022, 71% of expected six-month cash flows in USD were hedged. As hedge accounting is only applied to a limited extent and we do not hedge currency exposure related to intra-group balances with no under- lying cash flow impact, significant changes in currency rates, especially EUR/DKK, USD/DKK, CNY/DKK and CHF/DKK, will result in more fluctua- tions in reported financial items. Unhedged intra- group balances at 31 December are outlined in the main currency exposures table to the right. In general, the Group does not hedge EUR positions, as it expects that the official Danish fixed exchange-rate policy against the EUR will continue. The sensitivity analysis of EUR/DKK exposure shows the effect of a 2% (2021: 5%) change in average exchange rates for the year on profit/loss (EBIT) and the effect of a 2% (2021: 5%) change in year-end closing rates on other comprehensive income. The sensitivity analysis of other significant currency exposures shows the effect of a 5% change in average exchange rates for the year on profit/loss (EBIT) and the effect of a 5% change in year-end closing rates on other comprehensive income. The calculation method applied in the sensitivity analysis is unchanged compared to previous years. 4.4 Financial risks — continued Loan and credit facilities (DKKm) 2022 2021 Carrying amount Fixed/floating interest rate Expiry Carrying amount Fixed/floating interest rate Expiry Bond loans 21,377 Fixed 2024-2036 19,557 Fixed/floating 2022-2036 Credit facilities - - - 818 Fixed 2022 Overdraft facility 829 Floating 2023 1,078 Floating 2022 Loans and credit facilities at 31 December 22,206 21,453 Current/non-current classification: Non-current liabilities 21,392 16,981 Current liabilities 814 4,472 Unhedged intra-group balances Currency exposures – sensitivity analysis Main currency exposures (DKKm) 2022 2021 2022 2021 Net position Impact on profit/loss Net position Impact on profit/loss Impact on profit/loss Impact on OCI Impact on profit/loss Impact on OCI EUR/DKK (26,927) (539) (12,154) (608) 103 130 191 238 USD/DKK (7,076) (354) (188) (9) 275 552 145 293 CNY/DKK (2,558) (128) (3,143) (157) 134 74 84 54 CHF/DKK (1,798) (90) (1,771) (89) 18 24 14 38 PLN/DKK (873) (44) (543) (27) 28 38 22 24 SGD/DKK (845) (42) 102 n.a. 18 16 n.a. n.a. SEK/DKK (551) (28) (240) n.a. 42 33 n.a. n.a. Total n.a. (1,225) n.a. (890) 618 867 456 647 70 DSV Annual Report 2022 Consolidated financial statements 2022 Interest rate risk At 31 December 2022, 96% (2021: 92%) of Group borrowings were secured either through fixed-rate loans or other hedge transactions. The duration of hedges relating to net borrowings of the Group was 182 months (2021: 151 months). The weighted average interest rate on the Group’s loans, credit facilities and interest rate hedging was 1.0% at the end of 2022 (2021: 1.2%). A 1 percentage point increase in interest rates would not have a signifi- cant impact on the income statement (2021: increase DKK 57 million) and other comprehensive income (2021: increase DKK 5 million), based on average net interest-bearing debt for 2022. The calculation method applied in the sensitivity analysis is unchanged compared to pre vious years. Credit risk The Group’s credit risk mainly relates to trade receivables. The Group is not dependent on particular customer segments or any spe- cific customers, and all customers are subjected to individual credit as- sessments and credit limits in accordance with the Group’s Credit Policy. As a result, the credit risk of the Group is generally considered insignificant. The Group mainly hedges credit risks through the use of credit insurance. For a limited number of customers, the Group uses non-recourse fac- toring. At 31 December 2022, non-recourse factoring amounted to DKK 2,288 million (2021: 1,696 million). DSV is exposed to counterparty credit risk when entering into derivative financial instruments. In order to reduce this risk, DSV only enters into derivative financial instruments with the existing banks of the Group whose credit ratings from Standard & Poor’s are long-term A or higher. 4.4 Financial risks — continued As a general rule, the Group only makes short-term deposits with banks rated short-term A-2 or higher by Standard & Poor’s and/or P-2 or high- er by Moody’s. Impairment of trade receivables Impairment of trade receivables is assessed on an ongoing basis and in- surance policies are taken out for the majority of these. At 31 December 2022, credit insurance amounted to DKK 26,628 mil- lion, corresponding to 82% of total trade receivables (2021: DKK 25,295 million or 70%). Loss allowances for impaired trade receivables are provided for following an expected credit loss model. The model includes uninsured trade receiv- ables and also factors in any own risk on insured receivables. Expected credit loss at 31 December 2022 is presented in the following table: Expected credit loss 2022 (DKKm) Carrying amount Expected loss rate (%) Loss allowance Current 25,745 0.3% 76 Overdue 1-30 days 4,319 2.2% 94 Overdue 31-60 days 1,331 7.1% 95 Overdue 61-90 days 615 15.0% 92 Overdue 91-120 days 368 26.9% 99 Overdue >121 days 882 47.3% 417 Total 33,260 873 Current receivables are considered to have high credit worthiness with a low risk of loss. The loss allowance provision for the year is specified below: Loss allowance provision (DKKm) 20212022 Provision at 1 January 757 423 Additions from business combinations - 351 Additions for the year 713 337 Losses recognised (155) (79) Reversal of provisions from previous years (443) (277) Currency translation 1 2 Provision at 31 December 873 757 Impairment losses on trade receivables for 2022 amounted to DKK 155 million, corresponding to 0.07% of consolidated revenue (2021: DKK 79 million, or 0.04%). Expected credit loss 2021 (DKKm) Carrying amount Expected loss rate (%) Loss allowance Current 31,079 0.4% 117 Overdue 1-30 days 3,834 1.6% 62 Overdue 31-60 days 970 5.8% 56 Overdue 61-90 days 413 13.3% 55 Overdue 91-120 days 167 24.4% 41 Overdue >121 days 663 64.2% 426 Total 37,126 757 71 DSV Annual Report 2022 Consolidated financial statements 2022 Accounting policies Derivative financial instruments are recognised on the trade date and are measured at fair value. Positive and negative fair values are included in oth- er current re ceivables or other current payables in the balance sheet. Posi- tive and negative fair values are only offset if the Group has a right and an intention to settle several financial instruments net (by means of settle- ment of differences). Fair value is determined based on generally accepted valuation methods using available observable market data. When entering into contracts for financial instruments, an assessment is made of whether the instrument qualifies for hedge accounting, including whether the instrument hedges recognised assets and liabilities or net in- vestments in foreign entities. The effectiveness of recognised financial in- struments is assessed on a monthly basis, and any in effectiveness is recog- nised in the income statement. Fair value changes which are classified as and fulfil the criteria for recogni- tion as a fair value hedge are recognised in the income statement together with changes in the value of the part of the asset or liability that has been hedged. Fair value changes in the part of the derivative which is classified as and qualifies for recognition as a future cash flow hedge and which effectively hedges against changes in the value of the hedged item are recognised in other comprehensive income as a separate hedging reserve. When the underlying hedged item is realised, any gain or loss on the hedg- ing transaction is transferred from equity and recognised together with the hedged item. Fair value changes that do not meet the criteria for treatment as hedging instruments are recognised on an ongoing basis in the income statement under financial items. 4.5 Derivative financial instruments Foreign currency risk hedging The Group mainly uses foreign exchange forward contracts to hedge for- eign currency risks. The main currency hedged is USD. The foreign ex- change forward contracts are used as fair value hedges of currency expo- sures relating to external balance sheet assets and liabilities as well as expected short-term operational cash flows. A loss on hedging instruments of DKK 184 million was recognised in the income statement for 2022 (2021: a loss of DKK 84 million). In the same period, a gain of DKK 460 million was recognised relating to assets and liabilities (2021: a loss of DKK 28 million). The net gain in 2022 primarily relates to unhedged intercompany positions. Interest rate risk hedging The Group has obtained long-term loans mainly on a fixed rate basis, which means that the Group is less exposed to interest rate fluctuations. The Group mainly uses interest rate swaps to hedge future cash flows relating to interest rate risks. Thereby, floating-rate loans are converted to fixed-rate financing. At the balance sheet date, the Group no longer had any interest rate swaps. The weighted average effective interest rate of existing interest rate instruments used as hedges of long-term loans was therefore 0.0% at the reporting date (2021: 0.8%). External hedging instruments (DKKm) 2022 2021 Currency instruments Interest rate instruments Tota l Currency instruments Interest rate instruments Tota l Contractual value 5,589 - 5,589 11,801 744 12,545 Maturity (year) 2023 - 2022 2022 Fair value 93 - 93 (33) (7) (40) Of which recognised in income statement 97 - 97 (34) - (34) Of which recognised in OCI (4) - (4) 1 (7) (6) 72 DSV Annual Report 2022 Consolidated financial statements 2022 4.6 Earnings per share 4.7 Financial instruments — fair value hierarchy Earnings per share (DKKm) 2022 2021 Profit for the year 17,671 11,254 Non-controlling interests’ share of consolidated profit for the year 103 49 DSV A/S shareholders’ share of profit for the year 17,568 11,205 Amortisation of customer relationships 254 212 Share-based payment 202 160 Special items, costs 1,117 478 Related tax effect (376) (208) Adjusted profit for the year 18,765 11,847 (‘000 shares) Total average number of shares 235,438 231,732 Average number of treasury shares (8,121) (4,231) Average number of shares in circulation 227,317 227,501 Average dilutive effect of outstanding share options under incentive schemes 3,150 5,138 Diluted average number of shares in circulation 230,467 232,639 Earnings per share of DKK 1 77.3 49.3 Diluted earnings per share of DKK 1 76.2 48.2 Adjusted earnings per share of DKK 1 82.5 52.1 Diluted adjusted earnings per share of DKK 1 81.4 50.9 Diluted average number of shares Diluted earnings per share and diluted adjusted earnings per share have been calculated excluding out-of-the money share options. The number of out-of- the money share options was 0 in 2022 (2021: 0). Fair value hierarchy by category DSV has no financial instruments measured at fair value based on level 1 input (quoted active market prices) or level 3 input (non-observable market data). All financial instruments are measured based on level 2 input (input other than quoted prices that are observable either directly or indirectly). Derivative financial instruments The fair value of currency and interest rate derivatives is determined based on generally accepted valuation methods using available obser vable market data. Calculated fair values are verified against comparable external market quotes on a monthly basis. 2022 2021 Financial instruments by category (DKKm) Carrying amount Fair Value Carrying amount Fair value Financial assets: Currency derivatives 93 93 - - Trade receivables 32,387 32,387 36,369 36,369 Other receivables 6,640 6,640 6,404 6,404 Cash and cash equivalents 10,160 10,160 8,299 8,299 Financial assets measured at amortised cost 49,187 49,187 51,072 51,072 Financial liabilities: Interest rate derivatives - - 7 7 Currency derivatives - - 33 33 Issued bonds measured at amortised cost 21,377 16,615 19,557 19,557 Overdraft and credit facilities 829 829 1,896 1,896 Trade payables 14,992 14,992 17,040 17,040 Financial liabilities measured at amortised cost 37,198 32,436 38,493 38,493 Financial liabilities measured at amortised cost In 2021, the carrying value of financial liabilities measured at amortised cost was not considered to differ significantly from fair value. Due to changes in the macroeconomic environment, the carrying value of fi- nancial liabilities measured at amortised cost is no longer considered to rep- resent the fair value. The 2022 fair value of issued bonds measured at amor- tised cost is within level 1 of the fair value hierarchy. Trade receivables, trade payables and other receivables Receivables and payables pertaining to operating activities and with short churn ratios are considered to have a carrying value equal to fair value. 73 DSV Annual Report 2022 Consolidated financial statements 2022 Chapter 5 Tax In 2022, we contributed with direct and indirect taxes such as corporate taxes, VAT, GST, duties, etc., in more than 80 countries. Our corporate tax payments amounted to DKK 5,178 million. We believe in contributing to the societies and communities we do business in. One of the ways we do that is through our global tax payments. In all tax matters, we act in a fair, compliant and responsible way. Accounting policies Current tax payables and receivables are recognised in the balance sheet as tax calculated on the taxable income for the year adjusted for tax on taxable income for previous years and for prepaid tax. Tax for the year comprises current and deferred tax on profit or loss for the year, interest expenses related to pending tax disputes and adjust- ments to previous years, including adjustments due to tax rulings. Tax for the year is recognised in the income statement, unless the tax expense relates directly to items included in other comprehensive income or equity. 5.1 Income tax Tax for the year (DKKm) 20212022 Tax for the year is disaggregated as follows: Tax on profit for the year 5,550 3,650 Tax on other changes in equity 322 (791) Tax on other comprehensive income (52) 116 Total tax for the year 5,820 2,975 Tax on profit for the year is calculated as follows: Current tax 5,704 3,830 Deferred tax (302) (220) Tax adjustment relating to previous years 148 40 Total tax on profit for the year 5,550 3,650 Tax on other comprehensive income specifies as follows: Fair value adjustment of hedging instruments (2) 3 Actuarial gains/(losses) 54 (119) Total tax on other comprehensive income 52 (116) Tax rate (%) 20212022 Tax rate specifies as follows: Calculated tax on profit for the year before tax 22.0% 22.0% Adjustment of calculated tax in foreign group enterprises relative to 22.0% 2.5% 2.4% Change in deferred tax based on change in income tax rate 0.0% (0.1%) Tax effect of: Non-deductible expenses/non-taxable income 0.5% 0.7% Non-deductible losses/non-taxable gains on shares (0.1%) 0.0% Tax adjustment relating to previous years 0.6% 0.3% Tax asset valuation adjustments, net (2.3%) (1.2%) Other taxes and adjustments 0.7% 0.4% Effective tax rate 23.9% 24.5% 74 DSV Annual Report 2022 Consolidated financial statements 2022 Accounting policies Deferred tax is recognised based on temporary differences between the carrying amount and the tax value of assets and liabilities. No recognition is made of deferred tax on temporary differences relating to amortisation or depreciation of goodwill, properties and other items if disallowed for tax purposes, except at the acquisition of enterprises, if such temporary differ- ences arose on the date of acquisition without affecting the results or the taxable income. In cases where it is possible to calculate the tax value ac- cording to different taxation rules, deferred tax is measured on the basis of the planned use of the asset or the settlement of the liability. Deferred tax assets, including the tax base of tax loss carryforwards, are recognised as other non-current assets at the expected value of their utili- sation, either by elimination in tax on future earnings or by offsetting de- ferred tax liabilities within the same legal tax entity and jurisdiction. Deferred tax assets and tax liabilities are offset if the enterprise has a legally enforceable right to set off current tax liabilities and tax assets or intends either to settle current tax liabilities and tax assets on a net basis or to realise the assets and liabilities simultaneously. Deferred tax is adjusted for elimination of unrealised intra-group gains and losses. Deferred tax is measured on the basis of the tax rules and tax rates of the relevant countries that will be effective under current legislation at the reporting date on which the deferred tax is expected to materialise as current tax. 5.2 Deferred tax Management judgements and estimates Management applies significant estimates when recognising and measuring deferred tax assets and uncertain tax positions. Deferred tax assets, including the tax base of tax loss carryforwards, are recognised if it is assessed that there will be sufficient future taxable in- come against which the temporary differences and unutilised tax losses can be utilised. This assessment is based on budgets and business plans for the following years, including planned business initiatives. Deferred tax assets are tested annually and are only recognised if it is probable that future taxa- ble profit will allow the deferred tax asset to be recovered. Uncertain tax positions include ongoing disputes with tax authorities and have been provided for in accordance with the accounting policies. Man- agement believes that the provisions made are adequate. The actual obliga- tions may deviate as they depend on the result of litigations and settlements with the relevant tax authorities. Deferred tax recognised in the balance sheet (DKKm) 20212022 Deferred tax at 1 January 3,097 2,293 Deferred tax for the year 302 220 Tax adjustment relating to previous years (74) (337) Tax on changes in equity (430) 675 Additions from business combinations 79 456 Currency translation 36 (47) Other adjustments (20) (163) Deferred tax at 31 December 2,990 3,097 Deferred tax not recog nised in the balance sheet (DKKm) 20212022 Temporary differences 29 (58) Tax loss carryforwards 853 1,220 Total tax assets not recognised 882 1,162 Of not recognised tax loss carryforwards, DKK 574 million (2021: DKK 795 million) may be carried forward indefinitely. 75 DSV Annual Report 2022 Consolidated financial statements 2022 5.2 Deferred tax — continued Deferred tax allocation 2022 (DKKm) Intangible assets PPE, ROU assets, lease liabilities Provisions Other liabilities Tax base of tax loss carry- forwards Tota l Deferred tax at 1 January (290) (166) 889 1,758 906 3,097 Recognised in profit/loss 277 170 111 (298) (32) 228 Recognised in equity - - 52 (482) - (430) Additions from business combinations - 90 (95) - 84 79 Other adjustments - - (2) 13 (31) (20) Currency translation 2 18 (2) 3 15 36 Deferred tax at 31 December (11) 112 953 994 942 2,990 Balance sheet classification: Deferred tax assets 162 273 1,034 1,074 951 3,494 Deferred tax liabilities (173) (161) (81) (80) (9) (504) Deferred tax allocation 2021 (DKKm) Intangible assets PPE and ROU assets Provisions Other liabilities Tax base of tax loss carry- forwards Tota l Deferred tax at 1 January (253) (252) 1,225 702 871 2,293 Recognised in profit/loss (42) 204 (418) 311 (172) (117) Recognised in equity - - (116) 791 - 675 Additions from business combinations 6 (135) 210 (21) 396 456 Other adjustments - - 1 (2) (162) (163) Currency translation (1) 17 (13) (23) (27) (47) Deferred tax at 31 December (290) (166) 889 1,758 906 3,097 Balance sheet classification: Deferred tax assets (275) 590 701 1,620 908 3,544 Deferred tax liabilities (15) (756) 188 138 (2) (447) The deferred tax assets and liabilities recognised are allocated to the following items: 76 DSV Annual Report 2022 Consolidated financial statements 2022 Chapter 6 Other notes This chapter includes disclosures on other statutory information not directly related to the operating activities of the Group. The chapter describes the acquisition and disposal of entities during the year, contingent liabilities and security for debt as well as trans- actions with Group Management, auditors and other related parties. Accounting policies When accounting for business combinations, the acquisition method is applied in accordance with IFRS 3. Acquirees are recognised in the consolidated financial statements from the date of acquisition. The date of acquisition is the date on which DSV obtains control of the company. Entities disposed of are recognised in the consolidated financial statements until the date of disposal. The date of disposal is the date on which DSV surrenders control of the company. The consideration transferred as payment for the acquiree consists of the fair value of assets transferred, liabilities incurred to former owners of the acquiree and equity instruments issued. Contingent considerations de- pendent on future events or the performance of contractual obligations are also recognised at fair value and form part of the total consideration transferred. Fair value changes in contingent considerations are recog- nised in the income statement until final settlement. Identifiable assets, liabilities and contingent liabilities of the acquiree are measured at fair value at the date of acquisition by applying relevant val- uation methods. Identifiable intangible assets are recognised if they are separable or arise from a contractual right. Deferred tax is recognised for identifiable tax benefits existing at the date of acquisition and from the perspective of the new combined Group in compliance with local tax legislation. The excess of the total consideration transferred, value of non-controlling interests and the fair value of any equity investments previously held in the acquiree over the total identifiable net assets measured at fair value are recognised as goodwill. If measurement of the identifiable net assets is uncertain at the date of acquisition, initial recognition is done based on provisional amounts. Measurement period adjustments to the provisional amounts may be done for up to 12 months following the date of acquisition. 6.1 Acquisition and disposal of entities The effects of cross-period measurement period adjustments are recog- nised in equity at the beginning of the financial year, and comparative figures are restated. After the end of the measurement period, goodwill is no longer adjusted. Transaction costs inherent from the acquisition are recognised in the in- come statement when incurred. Goodwill and fair value adjustments arising from the acquisition of an ac- quiree whose functional currency differs from the presentation currency of the Group are translated into the functional currency of the foreign entity using the exchange rate ruling at the date of acquisition. Other than cross-period measurement period adjustments, comparative figures are not adjusted when acquiring or disposing of entities. Management judgements and estimates In applying the acquisition method of accounting, estimates are an inte- gral part of assessing fair values of several identifiable assets acquired and liabilities assumed, as observable market prices are typically not available. Valuation techniques where estimates are applied typically relate to de- termining the present value of future uncertain cash flows or assessing other events in which the outcome is uncertain at the date of acquisition. More significant estimates are typically applied in accounting for property, plant and equipment, customer relationships, trade receivables, deferred tax, debt and contingent liabilities. As a result of the uncertainties inherent in fair value estimation, measurement period adjustments may be applied. 77 DSV Annual Report 2022 Consolidated financial statements 2022 Acquisitions and disposals On 16 August 2021, DSV acquired the Global Integrated Logistics divi- sion (GIL) of Agility Public Warehousing Company K.S.C.P. No material enterprises, non-controlling interests or activities were acquired or di- vested in 2022. About Agility's Global Integrated Logistics business The GIL business was a leading global transport and logistics provider with a strong footprint in emerging markets. The business offered a mix of integrated logistics services, including air, ocean and road freight forward- ing services, contract logistics and specialised logistics capabilities. GIL operated a flexible, customer-centric and sustainability-driven business with a global workforce of approximately 17,000 employees and service provision across 100+ countries around the world (incl. agents). GIL em- powered businesses of all sizes, from small businesses to large multination- als, through sector-specific expertise and digital tools and technology to enhance supply chain efficiency. Consideration transferred The consideration transferred for GIL was made in DSV equity instru- ments by offering 19,304,348 DSV shares in total at a fair value of DKK 29,493 million based on the acquisition date share closing price of DKK 1,531 on Nasdaq Copenhagen, offset by a cash consideration transferred from Agility to DSV of approximately DKK 61 million. Adjusted for the fair value of cash and cash equivalents acquired of DKK 1,759 million, the total net consideration amounted to DKK 27,734 million. Fair value of acquired net assets and recognised goodwill In 2022, DKK 370 million was recognised as measurement period adjust- ments to the acquisitional opening balance. The measurement period adjustments primarily relate to the valuation of properties. For further details, refer to note 6.1 in the DSV Annual Report 2021. Net assets and goodwill recognised (DKKm) Fair value at date of acquisition Customer relationships 569 Other intangible assets 13 Right-of-use assets 2,375 Property, plant and equipment 2,146 Trade receivables 5,438 Contract assets 1,448 Inventories 34 Deferred tax assets 720 Other receivables 2,365 Cash and cash equivalents 1,759 Total assets 16,867 Lease liabilities 2,331 Borrowings 138 Provisions 2,800 Pensions and similar obligations 349 Trade payables 2,499 Accrued cost of services 1,864 Deferred tax liabilities 159 Tax payables 605 Other payables 1,935 Total liabilities 12,680 NCI share of acquired net assets 264 Acquired net assets 3,923 Fair value of total consideration transferred 29,493 Goodwill arising from the acquisition 25,570 The fair value of other receivables recognised includes indemnification assets totalling DKK 1,818 million relating to various corporate tax and value added taxes. Indemnification assets have not been excluded from the consideration transferred or opening balance recognition. Had the indemnification assets been excluded, the consideration trans- ferred and net assets recognised would have amounted to DKK 27,675 million and DKK 2,105 million respectively, whereas acquisitional goodwill would have remained unchanged. The fair value of identified net assets and goodwill recognised from the acquisition is comprised of the following items: 6.1 Acquisition and disposal of entities — continued 78 DSV Annual Report 2022 Consolidated financial statements 2022 Accounting policies DSV's share option schemes are equity-settled, measured at the grant date and recognised in the income statement as staff costs over the vesting period. The offsetting item is recognised directly in equity. The value of employee services received during the vesting period in ex- change for share options granted corresponds to the fair value of the share options at the date of granting. The fair value of the options granted is determined based on the Black & Scholes valuation model. The assumptions used in the valuation takes into account the terms and conditions applicable to the options granted and Management’s expectations of the various parameters on which the valua- tion model is based. Upon initial recognition, an estimate is made of the number of share options that the employees are expected to earn. The estimated number of share options is adjusted subsequently to reflect the actual number of share op- tions earned. The estimated volatility is based on historical data over the preceding three years adjusted for any unusual circumstances during the period. The valu- ation of the share options granted in 2022 and 2021 is based on the fol- lowing assumptions: 6.2 Share option schemes Assumptions 2022 2021 Share price 1,485.0 1,325.0 Volatility 18.0% 18.0% Risk-free interest rate 1.2% (0.1%) Expected dividends 0.8% 0.8% Expected remaining life (years) 3.5 3.5 Current share option schemes Scheme Options granted Exercise period Exercise price Number of employees Market value at date of granting (DKKm) 2018 2,733,500 28.03.2021 - 28.03.2023 477.5 1,600 118.2 2019 2,735,000 29.03.2022 - 27.03.2024 545.0 1,624 141.7 2020 3,080,750 31.03.2023 - 31.03.2025 560.0 2,000 155.5 2021 2,438,300 01.04.2024 - 31.03.2026 1,325.0 2,202 205.3 2022 2,640,900 01.04.2025 - 31.03.2027 1,485.0 2,524 279.8 Share option schemes at 31 December 2022 Scheme Executive Board Key employees Tot a l Average exercise price per option 2018 190,000 687,000 877,000 477.5 2019 190,000 1,836,500 2,026,500 545.0 2020 202,000 2,708,500 2,910,500 560.0 2021 168,750 2,193,800 2,362,550 1,325.0 2022 198,250 2,387,000 2,585,250 1,485.0 Outstanding at 31 December 2022 949,000 9,812,800 10,761,800 940.6 Open for exercise at 31 December 2022 380,000 2,523,500 2,903,500 524.6 Life (years) 2.2 2.6 2.6 n.a. Market value (DKKm) 350.5 3,134.4 3,484.9 n.a. * Share options granted in 2018 and 2019 are currently exercisable. 79 DSV Annual Report 2022 Consolidated financial statements 2022 Share option schemes DSV has launched incentive share-based payment schemes with the purpose of motivating and retaining key employees across the organisa- tion. Share options are awarded at all levels in the organisation, e.g. from team leads, specialists, branch managers, country managers, up to Executive Management. Retention is motivated by requiring continued service for a period cover- ing the vesting period as a minimum. The schemes are also intended to align the interests of employees and shareholders. All active schemes entail a three-year vesting period and a two-year ex- ercise period. In case of a change of control, all outstanding share options will vest. Exercise prices are set based on the quoted market prices lead- ing up to the date of granting. The share options can be exercised by cash purchase of shares only. The obligation relating to the schemes is partly covered by the Company’s treasury shares. Share options are granted pursuant to the procedures laid down in the Group’s Remuneration Policy applicable in the relevant year. A total of 2,988 employees held share options at 31 December 2022 (2021: 2,625 employees). Total costs recognised in 2022 for services received but not recognised as an asset amounted to DKK 202 million (2021: DKK 160 million). The average share price for options exercised in the financial year was DKK 1,093.4 per share at the date of exercise (2021: DKK 1,324.5 per share). 6.2 Share option schemes — continued Outstanding share options Executive Board Key employees Tota l Average exercise price per option Outstanding at 1 January 2021 760,000 8,646,129 9,406,129 507.2 Granted 156,750 2,281,550 2,438,300 1,325.0 Transferred * 36,000 (36,000) - - Exercised (190,000) (1,953,556) (2,143,556) 427.9 Options waived/expired - (123,475) (123,475) 684.7 Outstanding at 31 December 2021 762,750 8,814,648 9,577,398 730.9 Outstanding at 1 January 2022 762,750 8,814,648 9,577,398 730.9 Granted 198,250 2,442,650 2,640,900 1,485.0 Exercised (12,000) (1,279,573) (1,291,573) 479.1 Options waived/expired - (164,925) (164,925) 1,091.6 Outstanding at 31 December 2022 949,000 9,812,800 10,761,800 940.6 * A member of the Executive Board has previously received share options in the Director’s former capacity as a key employee. 80 DSV Annual Report 2022 Consolidated financial statements 2022 Executive Board The members of the Executive Board are subject to a notice period of up to 24 months. Remuneration of the members of the Executive Board and the Board of Directors complies with the principles of the Company’s Re- muneration Policy and is described in detail in the Remuneration Report. The aggregate remuneration to the members of the Executive Board for 2022 was DKK 54.8 million (2021: DKK 41.5 million). The remuneration to the Executive Board is specified: Executive Board remuneration (DKKm) 20212022 Fixed salary 36.1 27.6 Pension 2.9 2.2 Share-based payment 15.8 11.7 Total 54.8 41.5 * Michael Ebbe became a member of the Executive Board on 26 October 2021. Board of Directors The aggregate remuneration to the Board of Directors of DSV A/S for 2022 was DKK 6.9 million (2021: DKK 7.0 million). Non-audit services provided by PwC Denmark amounted to DKK 5 million in 2022 relating to advisory services in relation to legal disputes, assur- ance and advisory in relation to ESG, various tax advisory services and other advisory services. Non-audit services provided by PwC Denmark did not exceed 70% of the audit fees in accordance with EU audit legislation. 6.3 Remuneration of the Executive Board and the Board of Directors 6.4 Fees to auditors appointed at the Annual General Meeting Audit fees and services (DKKm) 20212022 Statutory audit fees 45 42 Other assurance services 3 4 Tax and VAT advisory services 1 2 Other services 5 4 Total fees to auditors appointed at the Annual General Meeting 54 52 Statutory audit fees 6 13 Tax and VAT advisory services 2 21 Other services - 12 Total fees, other 8 46 Total fees 62 98 DSV has no related parties with control of the Group and no related par- ties with significant influence other than key management personnel – mainly in the form of the Board of Directors and the Executive Board. Related-party transactions Board of Directors and Executive Board No transactions with the Board of Directors and Executive Board were made in 2022 other than ordinary remuneration, as described in notes 6.2 and 6.3. Associated companies DSV holds ownership interests in 8 associates (2021: 12 associates). The Group’s share of associates’ profit for the year amounted to DKK 7 million (2021: DKK 4 million). The carrying amount of the investment was DKK 50 million at 31 Decem- ber 2022 (2021: DKK 63 million). The Group had the following transac- tions with associates: 6.5 Related-party transactions Associated companies transactions (DKKm) 20212022 Sale of services 128 163 Purchase of services 14 18 The Group had the following balances with associates at 31 December: Associated companies balances (DKKm) 20212022 Receivables 19 26 Payables - 1 81 DSV Annual Report 2022 Consolidated financial statements 2022 Contingent liabilities Accounting policies Contingent liabilities comprise possible obligations which have not yet been confirmed, are uncertain or cannot be measured reliably, but which, if realised, may result in a drain on the Group’s resources. Obligations are recognised in the financial statements only to the extent that the criteria for recognising a provision are met. Management judgements and estimates Management applies judgements in assessing the existence of contingent liabilities on an ongoing basis and in this regard considers if the criteria for recognising a provision are met. These judgements may involve advice from external experts, legal advisors, etc. Contingent liabilities As an international transport service provider, the Group is regularly in- volved in tax and VAT disputes, legal proceedings or inquiries from compe- tition authorities. Management believes that the cases currently identified will have no material impact on the financial position of the Group. A detailed disclosure of individual contingent liabilities is considered im- practicable and is therefore not included in the notes to the financial statements. Security for debt Bank guarantees As part of its ordinary operations, DSV has provided bank guarantees to authorities, suppliers, etc. The counterparties may claim appropriation of collateral if DSV fails to pay any amount due. 6.6 Contingent liabilities and security for debt Pledges At 31 December 2022, property, plant and equipment and other financial assets with a carrying value of DKK 30.9 million were pledged as security (2021: DKK 140.9 million). The carrying amount of debt secured by pledges amounted to DKK 0 million (2021: DKK 64 million). Contracts DSV has concluded IT service contracts. Costs related to these contracts are recognised as the services are provided. 82 DSV Annual Report 2022 Consolidated financial statements 2022 Definition of key figures and ratios Key figures and ratios are disclosed in accordance with ‘Recommendations & Ratios’ published by the Danish Finance Society, except for financial ratios marked with (), as these are either derived or not included in the Recommendations. Earnings per share and diluted earnings per share are disclosed in accordance with IAS 33. Environmental, social and govern- mental key figures and ratios are defined in the DSV Sustainability Report 2022 to which reference is made. Net interest- = bearing debt Net working = capital Invested capital = Adjusted earnings = Net financial = expenses Special items = Adjusted free = cash flow Gross margin = Operating margin = Conversion ratio = Effective tax rate = Return on invested = capital before tax Return on equity = Solvency ratio = Gearing ratio = Earnings per share = Diluted earnings = per share Diluted adjusted = earnings per share Number of shares = Average number = of shares Average number = of shares diluted Interest-bearing debt less interest-bearing assets and cash and cash equivalents Receivables and other current operating assets less trade payables and other payables and other current operating liabilities NWC + property, plant and equipment, ROU assets, intangible assets including goodwill and customer rela- tionships less long-term provisions The DSV A/S shareholders’ share of profit for the re- porting period adjusted for amortisation and impairment of goodwill and customer relationships, costs related to share-based payments and special items. The tax effect of the adjustments has been taken into account Financial income less financial expenses Exceptional items of income or expense which by nature are not related to the Group's ordinary operation or investments in future activities. See note 2.7 for addi- tional details on items included Free cash flow adjusted for net acquisition of subsidiar- ies and activities, lease liability repayments, special items and normalisation of working capital in subsidiar- ies and activities acquired Gross profit * 100 Revenue Operating profit (EBIT) before special items * 100 Revenue Operating profit (EBIT) before special items * 100 Gross profit Tax on profit for the year * 100 Profit before tax Operating profit (EBIT) before special items * 100 Average invested capital Profit attributable to the shareholders of DSV A/S * 100 Average equity excluding non-controlling interests Equity excluding non-controlling interests * 100 Total assets Net interest-bearing debt Operating profit before amortisation, depreciation (EBITDA) before special items Profit attributable to the shareholders of DSV A/S Average number of shares Profit attributable to the shareholders of DSV A/S Average number of shares diluted Adjusted earnings Average number of shares diluted Total number of shares outstanding excluding treasury shares at the reporting date Average number of shares outstanding during the reporting period Average number of shares outstanding during the reporting period including share options, but excluding out-of-the-money options measured relative to the average share price for the period Key figures Financial ratios Share ratios 83 DSV Annual Report 2022 Consolidated financial statements 2022 Air & Sea Road Solutions GroupActivity: Company Country Ownership share Activity Europe (continued) Company Country Ownership share Activity Europe (continued) Group company overview The overview below is a list of companies in the DSV Group at 31 December 2022 showing the companies by segment and not by legal structure. Company Country Ownership share Activity Parent DSV A/S Denmark Subsidiaries Europe DSV Air & Sea GmbH Austria 100.00% GIL Austria GmbH in Liquidation Austria 100.00% DSV Road GmbH Austria 100.00% DSV Air & Sea NV Belgium 100.00% Panalpina World Transport N.V. Belgium 100.00% AD Handling NV Belgium 100.00% ABX Worldwide Holdings NV/SA Belgium 100.00% DSV Road Holding NV Belgium 100.00% DSV Air & Sea Belgium NV Belgium 100.00% DSV Solutions N.V. Belgium 100.00% DSV Logistics N.V. Belgium 100.00% DSV Road N.V. Belgium 100.00% MCI Brokers N.V. Belgium 99.90% DSV Air & Sea EOOD Bulgaria 100.00% DSV Road EOOD Bulgaria 100.00% DSV Hrvatska d.o.o. Croatia 100.00% Panalpina Business Services (Prague), s.r.o. Czech Republic 100.00% DSV Air & Sea s.r.o. Czech Republic 100.00% Panalpina Czech S.R.O. Czech Republic 100.00% GIL Czech Republic s.r.o. Czech Republic 100.00% DSV Air & Sea Czech Republic s.r.o. Czech Republic 100.00% DSV Solutions s.r.o. Czech Republic 100.00% DSV Road a.s. Czech Republic 100.00% DSV Insurance A/S Denmark 100.00% DSV Group Services A/S Denmark 100.00% DSV Shop Hub A/S Denmark 100.00% DSV FS A/S Denmark 100.00% Anpartselskabet af 25. januar 2017 Denmark 100.00% DSV Real Estate Ringsted A/S Denmark 100.00% DSV Air & Sea Holding A/S Denmark 100.00% DSV Air & Sea A/S Denmark 100.00% DSV Ocean Transport A/S Denmark 100.00% PC KH ApS Denmark 100.00% DSV Air & Sea Denmark ApS Denmark 100.00% Agility A/S Denmark 100.00% DSV Solutions Holding A/S Denmark 100.00% DSV Solutions A/S Denmark 100.00% DSV Real Estate Duisburg A/S Denmark 100.00% DSV Road Holding A/S Denmark 100.00% DSV Road A/S Denmark 100.00% DSV Real Estate Horsens A/S Denmark 100.00% DSV Real Estate Hedeland 5 A/S Denmark 100.00% DSV Road Services A/S Denmark 100.00% DSV Estonia AS Estonia 100.00% DSV Air & Sea Oy Finland 100.00% DSV Solutions Oy Finland 100.00% DSV Road Oy Finland 100.00% DSV Air & Sea SAS France 100.00% DSV International Air & Sea France France 100.00% DSV Solutions SAS France 100.00% DSV Road Holding S.A. France 100.00% DSV Road SAS France 100.00% ING REEIF WATTRELOS France 100.00% DSV Group Services GmbH Germany 100.00% DSV Air & Sea Germany GmbH Germany 100.00% DSV Air & Sea Deutschland GmbH Germany 100.00% DSV Real Estate Duisburg A/S - German Branch Germany 100.00% DSV Solutions Group GmbH Germany 100.00% DSV Solutions GmbH Germany 100.00% DSV Stuttgart GmbH & Co. KG Germany 100.00% DSV Stuttgart Verwaltung GmbH Germany 100.00% Administration & Accounting Service GmbH Germany 100.00% DSV Road GmbH Germany 100.00% DSV HELLAS S.A. Greece 100.00% 84 DSV Annual Report 2022 Consolidated financial statements 2022 Company Country Ownership share Activity Europe (continued) Company Country Ownership share Activity Europe (continued) Company Country Ownership share Activity Europe (continued) UTi Networks Limited Guernsey 100.00% DSV Air & Sea Hungary Kft. Hungary 100.00% DSV Solutions Hungary Kft. Hungary 100.00% DSV Hungaria Kft. Hungary 100.00% DSV Air & Sea Limited Ireland 100.00% Panalpina World Transport (Ireland) Ltd. Ireland 100.00% DSV GIL Ireland Limited Ireland 100.00% LEP Shannon Ltd. Ireland 100.00% DSV Air & Sea (Ireland) Limited Ireland 100.00% DSV Solutions Ltd. Ireland 100.00% UTI Inventory Management Solu- tions Limited Ireland 100.00% DSV Road Limited Ireland 100.00% DSV S.p.A. Italy 100.00% UTi Italy SrL Italy 100.00% Panalpina Trasporti Mondiali S.p.A. Italy 100.00% DSV Real Estate S.p.A. Italy 89.75% DSV Air & Sea Italy S.r.l. Italy 100.00% DSV Solutions S.R.L. Italy 100.00% DSV Real Estate Novara S.r.l. Italy 66.00% DSV Real Estate Modena S.r.l. Italy 100.00% DSV Road S.R.L. Italy 100.00% DSV Real Estate Verona S.r.l. Italy 100.00% UTi Kazakhstan LLP Kazakhstan 100.00% GIL Kazakhstan LLP Kazakhstan 100.00% DSV Latvia SIA Latvia 100.00% DSV Lithuania UAB Lithuania 100.00% DSV Air & Sea S.A. Luxembourg 100.00% XB Luxembourg Holdings 1 SA Luxembourg 100.00% DSV Air Services Luxembourg 100.00% DSV Lead Logistics B.V. Netherlands 100.00% Agility Logistics International BV Netherlands 100.00% GeoLogistics European Holdings B.V. Netherlands 100.00% Telmidas AMS B.V. Netherlands 100.00% TransOceanic Holdings BV Netherlands 100.00% DSV Finance B.V. Netherlands 100.00% African Investments BV Netherlands 100.00% UTi (Netherlands) Holdings BV Netherlands 100.00% DSV Air & Sea Nederland B.V. Netherlands 100.00% DSV Shared Services B.V. Netherlands 100.00% DSV Solutions Holding B.V. Netherlands 100.00% DSV Solutions Nederland B.V. Netherlands 100.00% IMS Holdings BV Netherlands 100.00% DSV Multi-Channel Fulfilment B.V. Netherlands 100.00% DSV Solutions (Moerdijk) B.V. Netherlands 100.00% DSV Real Estate Dallas Holding B.V. Netherlands 100.00% DSV Real Estate Venlo 5 B.V. Netherlands 100.00% DSV Real Estate Maastricht B.V. Netherlands 100.00% DSV Real Estate Moerdijk B.V. Netherlands 100.00% DSV Moerdijk Project B.V. Netherlands 100.00% DSV Road Holding N.V. Netherlands 100.00% DSV Road B.V. Netherlands 100.00% DSV ROAD DOOEL Skopje North Macedonia 100.00% DSV Air & Sea AS Norway 100.00% Panalpina AS Norway 100.00% GIL Norway AS Norway 100.00% DSV Solutions AS Norway 100.00% DSV Road AS Norway 100.00% DSV International Shared Services Sp. z o.o. Poland 100.00% DSV Real Estate Warsaw Sp. z o.o. Poland 100.00% DSV Real Estate Warsaw II Sp. z o.o. Poland 100.00% DSV Air & Sea Sp. z o.o. Poland 100.00% Panalpina Polska Sp. z o.o. Poland 100.00% GIL POLAND Sp. z o.o. Poland 100.00% DSV Air & Sea Poland Sp. z o.o. Poland 100.00% DSV Services Sp. z o.o. Poland 100.00% DSV Road Sp. z o.o. Poland 100.00% DSV Solutions Sp. z o.o. Poland 100.00% DSV Group Services Unipessoal, Lda Portugal 100.00% DSV Air & Sea Portugal, LDA Portugal 100.00% DSV Solutions, Lda. Portugal 100.00% DSV SGPS, Lda. Portugal 100.00% DSV Transitarios, Lda. Portugal 100.00% DSV Air & Sea SRL Romania 100.00% GIL AIR&SEA S.R.L. Romania 100.00% DSV Solutions S.R.L. Romania 100.00% DSV Road S.R.L. Romania 100.00% DSV Road d.o.o. Serbia 100.00% DSV Solutions Slovakia s. r. o. Slovakia 100.00% DSV Air & Sea Slovakia s.r.o. Slovakia 100.00% DSV Real Estate Bratislava s.r.o. Slovakia 100.00% DSV Slovakia, s.r.o. Slovakia 100.00% DSV Transport d.o.o. Slovenia 100.00% Tacisa Transitaria S.L. Spain 100.00% DSV Air & Sea International, S.L.U. Spain 100.00% DSV Solutions Spain S.A.U. Spain 100.00% 85 DSV Annual Report 2022 Consolidated financial statements 2022 Company Country Ownership share Activity Europe (continued) Company Country Ownership share Activity North America Company Country Ownership share Activity Europe (continued) Servicios Logisticos Integrados SLI, S.A. Spain 100.00% DSV Road Spain S.A.U. Spain 100.00% DSV Holding Spain S.L. Spain 100.00% DSV Air & Sea, S.A.U. Spain 100.00% DSV Air & Sea AB Sweden 100.00% DSV Air & Sea Nordic AB Sweden 100.00% Agility AB Sweden 100.00% DSV Solutions AB Sweden 100.00% DSV Real Estate Landskrona 2 AB Sweden 100.00% DSV Real Estate Helsingborg AB Sweden 100.00% DSV Group AB Sweden 100.00% DSV Road AB Sweden 100.00% Göinge Frakt EK Sweden 100.00% DSV Road Property Holding AB Sweden 100.00% GIL Switzerland 4 AG Switzerland 100.00% Panalpina Welttransport Holding AG Switzerland 100.00% DSV Corporate Services AG Switzerland 100.00% Panalpina International AG Switzerland 100.00% Panalpina Global Employment Services AG Switzerland 100.00% Panalpina Air & Ocean AG in liquidation Switzerland 100.00% DSV Air & Sea AG Switzerland 100.00% GIL Switzerland 1 AG Switzerland 100.00% GIL Switzerland 2 AG Switzerland 100.00% GIL Switzerland 3 AG Switzerland 100.00% DSV Logistics S.A. Switzerland 100.00% DSV Air & Sea A.S. Türkiye 100.00% DSV International Hava ve Deniz Taşimaciliği Ltd.Şirketi Türkiye 100.00% DSV Road & Solutions A.S. Türkiye 100.00% Panalpina World Transport Ltd. Ukraine 100.00% DSV Logistics LLC Ukraine 100.00% Agility Logistics LLC Ukraine 100.00% DSV GIL Holding Limited United Kingdom 100.00% DSV Air & Sea Limited United Kingdom 100.00% UTi (UK) Holdings Ltd. United Kingdom 100.00% UTi Worldwide (UK) Ltd. United Kingdom 100.00% Panalpina World Transport Ltd. United Kingdom 100.00% DSV GIL UK Limited United Kingdom 100.00% DSV GIL Fairs & Events Limited United Kingdom 100.00% DSV GIL Pension Trustees Limited United Kingdom 100.00% DSV Air & Sea 2018 (UK) Limited United Kingdom 100.00% DSV Lead Logistics Limited United Kingdom 100.00% DSV GIL Solutions Limited United Kingdom 100.00% DSV GIL Management Limited United Kingdom 100.00% DSV Peterborough Real Estate Limited United Kingdom 100.00% DSV Real Estate Thrapston Limited United Kingdom 100.00% DSV Road Holding Ltd. United Kingdom 100.00% DSV Commercials Ltd. United Kingdom 100.00% DSV Road Ltd. United Kingdom 100.00% Global Options Worldwide Express (Ltd) United Kingdom 100.00% DSV Pension Trustees Ltd. United Kingdom 100.00% DSV Solutions Ltd. United Kingdom 100.00% DFDS Transport Ltd. United Kingdom 100.00% DSV Real Estate Tamworth Ltd. United Kingdom 100.00% GeoLogistics Holdings (Bermuda) Limited Bermuda 100.00% DSV Air & Sea Inc. Canada 100.00% DSV Solutions Inc. Canada 100.00% DSV Road, Inc. Canada 100.00% DSV Air & Sea, S.A. de C.V. Mexico 100.00% DSV International Shared Services S.A. de C.V. Mexico 100.00% TransOceanic Shipping Co. S. de RL de C.V. Mexico 100.00% DSV Solutions S.A. de C.V. Mexico 100.00% DSV Road, S.A. de C.V. Mexico 100.00% DSV 4PL Inc. United States 100.00% DSV Air & Sea Holding Inc. United States 100.00% DSV Air & Sea Inc. United States 100.00% Agility Fairs and Events Logistics LLC United States 100.00% DSV Air & Sea International Holding Inc. United States 100.00% DSV Solutions, LLC United States 100.00% DSV Inventory Management Solutions Inc. United States 100.00% DSV Real Estate Dallas Inc. United States 100.00% Market Industries LLC United States 100.00% Sammons Transportation, Inc. United States 100.00% DSV Road, Inc. United States 100.00% South America UTi Logistics Argentina S.A. Argentina 100.00% DSV Air & Sea S.A. Argentina 100.00% DSV Solutions Brasil Serviços de Logística Ltda. Brazil 100.00% 86 DSV Annual Report 2022 Consolidated financial statements 2022 Company Country Ownership share Activity Company Country Ownership share Activity Asia (continued) Company Country Ownership share Activity South America (continued) DSV Air & Sea Brasil Ltda. Brazil 100.00% UTi Worldwide Inc. Brit. Virgin Islands 100.00% UTi Logistics (Proprietary) Limited Brit. Virgin Islands 100.00% Thomas International Freight Auditors Limited Brit. Virgin Islands 100.00% UTi Kazakhstan Investments Ltd Brit. Virgin Islands 100.00% Agility (Asia/Pacific) Limited Brit. Virgin Islands 100.00% PWC Global Logistics Holdings Ltd Brit. Virgin Islands 100.00% DSV Air & Sea (Latin America) Holding S.A. Chile 100.00% DSV Air & Sea S.A. Chile 100.00% Panalpina Chile Transportes Mundiales Ltda. Chile 100.00% Agility Logistics Corp. Holding SpA Chile 100.00% Agility Logistics Chile SA Chile 100.00% DSV Air & Sea S.A.S. Colombia 100.00% Agility Logistics Colombia S.A.S. Colombia 100.00% AGENCIA DE ADUANAS DSV S.A.S. NIVEL 1 Colombia 100.00% DSV Solutions S.A.S. Colombia 100.00% DSV Air & Sea S.A. Costa Rica 100.00% GIL 1 (Curaçao) N.V. Curacao 100.00% DSV AIR & SEA DOMINICANA, S.R.L. Dominican Republic 100.00% DSV-AIR&SEA S.A. Ecuador 100.00% DSV Air & Sea, S.A. de C.V. El Salvador 100.00% DSV Air & Sea PA Inc. Panama 100.00% Panalpina SEM, S.A. Panama 100.00% Panalpina S.A. Panama 100.00% Almacenadora Mercantil S.A. Panama 100.00% South America (continued) DSV Air & Sea S.A. Peru 100.00% Agility Logistics Peru S.A. Peru 100.00% DSV Air & Sea (PR) Inc. Puerto Rico 100.00% Arabella Shipping Ltd Saint Vincent And The Grenadines 100.00% DSV Air & Sea Uruguay - Servicios Logisticos SA Uruguay 100.00% Panalpina Uruguay Transportes Mundiales S.A. Uruguay 100.00% Panalpina Zona Franca S.A. Uruguay 100.00% Asia DSV Air & Sea Ltd. Bangladesh 100.00% Agility Ltd. Bangladesh 100.00% UTI Pership (Pvt) Limited - Bangladesh Branch (BDT) Bangladesh 100.00% DSV Air & Sea (Cambodia) Co., Ltd. Cambodia 100.00% Prime Cargo (Cambodia) Co., Ltd. Cambodia 100.00% GIL Integration 1 (Cambodia) Co., Ltd. Cambodia 100.00% DSV Air & Sea Co., Ltd. Cambodia 100.00% UTi Worldwide Co. Ltd. - Cambodia Branch (USD) Cambodia 100.00% DSV Air & Sea Co., Ltd. China 100.00% DSV Air & Sea Co., Ltd. (South East China) China 100.00% DSV Air & Sea Co., Ltd. (China) China 100.00% Baisui United Logistics (Shanghai) Co. Ltd. China 100.00% Agility Logistics (Shanghai) Limited China 100.00% DSV Logistics Co., Ltd. China 100.00% Panalpina World Transport (PRC) Ltd. China 100.00% Zhejiang DSV supply chain management CO.,LTD China 100.00% DSV Air & Sea Ltd. Hong Kong 100.00% Pantainer (H.K.) Ltd. Hong Kong 100.00% Prime Cargo (H.K.) Ltd. Hong Kong 100.00% Agility Logistics Limited Hong Kong 100.00% GIL Integration Hong Kong 1 Limited Hong Kong 100.00% ECT Transport Limited Hong Kong 100.00% DSV Solutions Limited Hong Kong 100.00% DSV Air & Sea (HK) Ltd. Hong Kong 100.00% Panalpina World Transport Ltd. Hong Kong 100.00% Panalpina China Ltd. Hong Kong 100.00% GIL Shared Services Private Limited India 100.00% DSV Air & Sea Pvt. Ltd. India 100.00% DSV Air & Sea International Private Limited India 100.00% DSV Coload & Clearance Pvt. Ltd. India 100.00% DSV Solutions Private Limited India 100.00% PT. DSV Transport Indonesia Indonesia 100.00% PT GIL Solusi Indonesia Indonesia 100.00% PT DSV Solutions Indonesia Indonesia 100.00% PT Synergy Indonesia Indonesia 100.00% PT Sarana Prima Optima Indonesia 100.00% DSV Air & Sea Japan GK Japan 100.00% DSV Air & Sea Co., Ltd. Japan 100.00% DSV Solutions Co., Ltd. Japan 100.00% DSV Air & Sea Ltd. Korea 100.00% DSV Solutions Ltd. Korea 100.00% DSV Air & Sea International Ltd. Korea 100.00% 87 DSV Annual Report 2022 Consolidated financial statements 2022 Company Country Ownership share Activity Asia (continued) Company Country Ownership share Activity Asia (continued) Company Country Ownership share Activity Asia (continued) DSV Air and Sea Limited Macao 100.00% DSV Air & Sea Sdn. Bhd. Malaysia 100.00% Panalpina Customs Services (M) SDN BHD Malaysia 100.00% Litvest Corporation Sdn Bhd Malaysia 100.00% DSV Solutions (DC) Sdn. Bhd. Malaysia 100.00% GOCT Logistics Sdn Bhd Malaysia 100.00% DSV Shared Services Asia Sdn Bhd Malaysia 100.00% Logik Pengurusan Sdn Bhd Malaysia 100.00% DSV Logistics Sdn. Bhd. Malaysia 100.00% DSV SOLUTIONS SDN. BHD. Malaysia 100.00% Panalpina Transport (Malaysia) Sdn. Bhd. Malaysia 100.00% DSV Inventory Management Solutions Sdn. Bhd. Malaysia 100.00% DSV Air & Sea (Myanmar) Limited Myanmar 100.00% DSV Air and Sea Pakistan (SMC- Private) Limited Pakistan 100.00% DSV SOLUTIONS (PRIVATE) LIMITED Pakistan 100.00% DSV Air & Sea Limited Papua New Guinea 100.00% Panalpina Global Business Services (GBS) - Philippines Philippines 100.00% DSV International Shared Services Inc. Philippines 100.00% DSV Air & Sea Inc. Philippines 100.00% GIL Holding Co Inc. Philippines 100.00% GIL Logistics Holding Inc. Philippines 100.00% GIL International Logistics Inc. Philippines 100.00% DSV Logistics Solutions Philippines, Inc. Philippines 100.00% DSV SHARED SERVICES MANILA (ROHQ) Philippines 100.00% Panalpina World Transport (Philippines) Inc. Philippines 100.00% DSV Global Solutions Inc. Philippines 100.00% GIL Logistics Distribution Inc. Philippines 100.00% Agility Logistics Holdings Pte Ltd Singapore 100.00% Agility Logistics Holdings (S) Pte. Ltd. Singapore 100.00% DSV Singapore Real Estate Holding Pte. Ltd. Singapore 100.00% DSV Air & Sea Pte. Ltd. Singapore 100.00% Agility International Logistics Pte. Ltd. Singapore 100.00% Agility Fairs & Events Logistics Pte. Ltd. Singapore 100.00% China Baisui Logistics Pte Ltd Singapore 100.00% ABX LOGISTICS Singapore PTE LTD Singapore 100.00% DSV Solutions Pte Ltd. Singapore 100.00% DSV Air & Sea Singapore Pte. Ltd. Singapore 100.00% DSV Inventory Management Solutions Pte. Ltd Singapore 100.00% UTi Pership (Pvt) Limited Sri Lanka 51.00% DSV Pership (Private) Limited Sri Lanka 40.00% DSV Air & Sea Co., Ltd. Taiwan 100.00% UTi Holding Co., Ltd. Taiwan 100.00% DSV Air & Sea (Taiwan) Ltd. Taiwan 100.00% DSV Solutions Co., Ltd. Taiwan 100.00% Panalpina Asia-Pacific Services (Thailand) Ltd. Thailand 100.00% Supreme Eliga Co. Ltd. Thailand 100.00% Agility Co. Ltd. Thailand 100.00% DSV Solutions Ltd. Thailand 100.00% DSV Holding (Thailand) Co., Ltd. Thailand 100.00% Panalpina World Transport (Thailand) Ltd. Thailand 100.00% DSV Air & Sea Ltd. Thailand 100.00% Panalpina World Transport (Vietnam) Co. Ltd. Vietnam 99.00% DSV Solutions Co., Ltd Vietnam 100.00% Agility Logistics Vietnam Company Ltd. Vietnam 100.00% Agility Ltd Vietnam 71.00% DSV Air & Sea Vietnam Limited Vietnam 100.00% Inventory Management Solutions Vietnam Limited Vietnam 100.00% Middle East Agility Logistics Limited Afghanistan 100.00% Panalpina Central Asia EC - Azerbaijan Branch Azerbaijan 100.00% DSV W.L.L. Bahrain 100.00% Panalpina Central Asia EC Bahrain 100.00% DSV Solutions B.S.C Closed Bahrain 100.00% Panalpina Georgia LLC Georgia 100.00% Al-Alb Co. for General Transportation (PLLC) Iraq 100.00% Agility Kurdistan Company for Administration of Warehouses and Facilitate Storage Process Limited Iraq 67.50% The Warehousing Company for Shipping, Discharging and Custom Clearance LLC Iraq 100.00% DSV Air & Sea Ltd. Israel 100.00% DSV Marine Insurance Agency Ltd. Israel 100.00% Hermes Exhibition & Projects Limited Israel 100.00% DSV - E-COMMERCE LTD. Israel 100.00% DSV Solutions Ltd Israel 100.00% 88 DSV Annual Report 2022 Consolidated financial statements 2022 Company Country Ownership share Activity Middle East (continued) Company Country Ownership share Activity Oceania Company Country Ownership share Activity Middle East (continued) U.T.I.-Inventory Management Solutions Limited partnership Israel 100.00% UTI IMS Ltd. Israel 100.00% DSV Air & Sea Jordan Jordan 100.00% Public warehousing Company -Jordan PSC Jordan 100.00% Public Warehousing Company for Storage and Distribution Services Jordan 100.00% Public warehousing Company -Jordan PSC - Aqaba Branch Jordan 100.00% DSV Holding for Company Business Management W.L.L Kuwait 100.00% Global Logistics for General Trading and Contracting Co. WLL Kuwait 100.00% DSV Air & Sea Co. W.L.L. Kuwait 49.00% DSV A&S for Shipping and Transport W.L.L Kuwait 100.00% Muroona Logistics Solution Co. for General Trading of Equipments, Supplier for Construction and Real Estate WLL Kuwait 100.00% DSV Solutions for Warehousing and Third Party Inventory S.P.C Kuwait 100.00% GIL Logistics Cargo Transport W.L.L Kuwait 100.00% Agility Freight Forwarding (Lebanon) SARL Lebanon 100.00% PWC Trading and contracting Lebanon SAL (Holding) Lebanon 100.00% PWC Lebanon (Holding) SAL Lebanon 100.00% PWC investments (Lebanon) SARL Lebanon 100.00% DSV Air and Sea LLC Oman 70.00% Global Logistics (Oman) LLC Oman 50.00% Panalpina Qatar WLL Qatar 49.00% DSV Panalpina Marine Shipping W.L.L. Qatar 100.00% Panalpina World Transport (Saudi Arabia) Ltd. Saudi Arabia 100.00% DSV Solutions for Logistics Services Company Saudi Arabia 100.00% GIL INTERNATIONAL HOLDINGS I LIMITED United Arab Emirates 100.00% GIL INTERNATIONAL HOLDINGS II LIMITED United Arab Emirates 100.00% GIL INTERNATIONAL HOLDINGS III LIMITED United Arab Emirates 100.00% DSV Air & Sea (LLC) United Arab Emirates 100.00% DSV Solutions DWC-LLC United Arab Emirates 100.00% Panalpina Jebel Ali Ltd. United Arab Emirates 100.00% DSV Gulf Customs Broker LLC United Arab Emirates 49.00% DSV Air and Sea DWC-LLC United Arab Emirates 100.00% DSV Air and Sea Middle East DWC-LLC United Arab Emirates 100.00% DSV Solutions PJSC United Arab Emirates 49.00% DSV Solutions L.L.C. United Arab Emirates 100.00% DSV Solutions MENA FZE United Arab Emirates 100.00% DSV Road and Transport L.L.C United Arab Emirates 99.00% DSV Solutions - FZE United Arab Emirates 100.00% DSV Air & Sea Pty. Ltd. Australia 100.00% DSV Solutions Pty. Ltd. Australia 100.00% A.C.N. 116 779 876 PTY LTD Australia 100.00% A.C.N. 004 265 721 PTY LTD Australia 100.00% A.C.N. 007 430 935 PTY LTD Australia 100.00% A.C.N. 078 189 296 PTY LTD Australia 100.00% A.C.N. 082 751 460 PTY LTD Australia 100.00% A.C.N. 144 885 156 PTY LTD Australia 100.00% DSV Air & Sea Limited New Zealand 100.00% Africa Agility Maghreb Sarl Algeria 49.00% Agility Logistics SARL Algeria 100.00% Frans Maas Algerie S.a.r.l. Algeria 100.00% Panalpina Transportes Mundiais Navegãçao e Trânsitos S.A.R.L. Angola 49.00% Global Integrated Logistics Lda Angola 100.00% DSV Air & Sea (PTY) Limited Botswana 100.00% Panalpina Transports Mondiaux Cameroun S.A.R.L. Cameroon 90.00% DSV-UTI Egypt Ltd. Egypt 100.00% Panalpina World Transport Egypt LLC Egypt 100.00% GIL Egypt Limited Liability Company Egypt 100.00% DSV Solutions S.A.E. Egypt 100.00% Global Options Worldwide Express Investments (Pty) Ltd Eswatini 100.00% Panalpina Transports Mondiaux Gabon S.A. Gabon 89.78% DSV Air & Sea Limited Kenya 100.00% Panalpina Kenya Ltd. Kenya 100.00% 89 DSV Annual Report 2022 Consolidated financial statements 2022 Company Country Ownership share Activity Africa (continued) Company Country Ownership share Activity Africa (continued) DSV Air & Sea Limited Malawi 100.00% GIL Africa Holdings Ltd Mauritius 100.00% Panalpina Morocco S.A.R.L. Morocco 100.00% Global Integrated Logistics Company SARL AU Morocco 100.00% DSV Transport Int'l S.A Morocco 100.00% DSV Air & Sea Limitada Mozambique 100.00% GIL Mozambique, LDA Mozambique 100.00% Globeflight Worldwide Express (Pty) Ltd Namibia 100.00% DSV Freight International Limited Nigeria 100.00% DSV Air and Sea (Proprietary) Limited South Africa 100.00% DSV South Africa (Pty) Ltd. South Africa 75.00% DSV Shared Services (Pty) Ltd. South Africa 100.00% UTi Logistics (Proprietary) Limited - SC OCS Division South Africa 100.00% DSV AFRICA HOLDING (Pty) Ltd. South Africa 100.00% DSV Skyservices (Pty) Ltd South Africa 100.00% Scorpion Share Block (Pty) Ltd. South Africa 100.00% Marine Link (Pty) Ltd. South Africa 100.00% DSV Real Estate Johannesburg (Pty) Ltd. South Africa 100.00% Firefly Investments 337 Properties Proprietary Limited South Africa 100.00% Linkit lnvestments (Pty) Ltd. South Africa 80.00% GIL South Africa 1 (Pty) Ltd South Africa 100.00% DSV Healthcare (Pty) Ltd. South Africa 100.00% DSV Solutions (Pty) Ltd. South Africa 100.00% DSV Assembly Services (Pty) Ltd. South Africa 65.30% DSV Mounties (Pty) Ltd. South Africa 100.00% DSV Road (Pty) Ltd. South Africa 100.00% Globeflight Worldwide Express (SA) Pty Ltd South Africa 100.00% Mercury Couriers (Pty) Ltd South Africa 100.00% DSV Air & Sea Limited Tanzania 100.00% DSV Air & Sea Limited Uganda 100.00% Agility Logistics Limited Uganda 100.00% Swift Freight International (Zambia) Ltd. Zambia 100.00% DSV Air & Sea Limited Zambia 100.00% DSV Air & Sea (Private) Limited Zimbabwe 100.00% Associates Trans-Link Cambodia Ltd Cambodia 49.00% GT Stevedores Oy Finland 25.50% KM Logistik GmbH Germany 35.00% IDS Logistik GmbH Germany 28.00% Tristar Transport (Private) Limited Pakistan 50.00% ATS Air Transport Service AG Switzerland 48.00% Polymer Logistics Investments LLC United Arab Emirates 36.50% Key Logistics, Inc. United States 49.00% 90 DSV Annual Report 2022 Consolidated financial statements 2022 Statement by the Board of Directors and the Executive Board The Board of Directors and Executive Board have today considered and adopted the Annual Report of DSV A/S for the financial year 1 January to 31 December 2022. The Annual Report has been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standard Board (IASB) and in accordance with IFRS as adopted by the EU and further requirements in the Danish Financial Statements Act. In our opinion, the Consolidated Financial Statements and the Parent Company Financial Statements give a true and fair view of the financial position of the Group and the Parent Company at 31 December 2022 and of the results of the Group and Parent Company operations and cash flows for the financial year 2022. Hedehusene, 2 February 2023 Executive Board: Jens Bjørn Andersen CEO Michael Ebbe CFO Jens H. Lund COO and Vice CEO Board of Directors: Thomas Plenborg Chairman Beat Walti Jørgen Møller Deputy Chairman Niels Smedegaard Birgit W. Nørgaard Tarek Sultan Al-Essa Marie-Louise Aamund Benedikte Leroy In our opinion, the annual report of DSV A/S for the financial year 1 January to 31 December 2022 with the file name DSV-2022-12-31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. In our opinion, Management’s commentary includes a true and fair account of the development in the operations and financial circumstances of the Group and the Parent Company, of the results for the year and of the financial position of the Group and the Parent Company as well as a de- scription of the most significant risks and elements of uncertainty facing the Group and the Parent Company. We recommend that the Annual Report be adopted at the Annual General Meeting. 91 DSV Annual Report 2022 Statements To the shareholders of DSV A/S Report on the audit of the Financial Statements Our opinion In our opinion, the Consolidated Financial Statements and the Parent Company Financial Statements give a true and fair view of the Group’s and the Parent Company’s financial position at 31 December 2022 and of the results of the Group’s and the Parent Company’s operations and cash flows for the financial year 1 January to 31 December 2022 in accord- ance with International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board (‘IASB’) and in accordance with IFRS as adopted by the EU and further requirements in the Danish Financial Statements Act. Our opinion is consistent with our Auditor’s Long-form Report to the Audit Committee and the Board of Directors. What we have audited The Consolidated Financial Statements and Parent Company Financial Statements of DSV A/S for the financial year 1 January to 31 December 2022 comprise income statement and statement of comprehensive income, cash flow statement, balance sheet, statement of changes in equity and notes, including summary of significant accounting policies for the Group as well as for the Parent Company. Collectively referred to as the “Financial Statements”. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the Auditor’s responsibilities for the audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical require- ments applicable in Denmark. We have also fulfilled our other ethical re- sponsibilities in accordance with these requirements and the IESBA Code. To the best of our knowledge and belief, prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No 537/2014 were not provided. Appointment We were first appointed auditors of DSV A/S on 9 March 2017 for the financial year 2017. We have been reappointed annually by shareholder resolution for a total period of uninterrupted engagement of six years including the financial year 2022. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements for 2022. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Revenue recognition, contract assets and accrued cost of services The Group’s revenue consists primarily of services, i.e. transportation of goods between destinations, which by nature is rendered over a period of time. We focused on this area, because at year-end, material contract assets and accrued cost of services exist which involve significant accounting estimates and which are complex by nature, i.e. accrual of income (con- tract assets) and related costs (accrued cost of services), including meth- ods and data applied and assumptions made by Management. The process of accruing for services rendered around the balance sheet date is, there- fore, complex and dependent on relevant IT controls in certain operational IT systems. Moreover in the Air & Sea division, an inherent risk exists regarding estimates for recognising revenue in the right period at year end due to the services being rendered over a lengthier period of time. In addition, we focused on this area because of the significance of re- venue and as revenue comprises a substantial number of transactions, including with different characteristics depending on which business segment the revenue relates to. Reference is made to notes 2.2 and 3.4 in the Consolidated Financial Statements. How our audit addressed the key audit matter Our audit procedures included considering the appropriateness of the accounting policies for revenue recognition applied by Management and assessing compliance with applicable financial reporting standards. We updated our understanding of relevant controls, including Group controlling procedures and IT controls, concerning the timing of revenue recognition, contract assets and accrued cost of services, and evaluated whether these were designed in line with the Group’s accounting policies and were operating effectively. For revenue, contract assets and accrued cost of services, we examined reports concerning services in progress and challenged the assumptions made by Management in this regard. Moreover, we selected a sample of transactions during the year and at year-end, and traced these to underlying evidence to determine whether revenue and the related costs are recognised in the right period. Independent Auditor’s reports 92 DSV Annual Report 2022 Statements In addition, we applied data analysis in our testing of revenue transactions in order to identify and assess transactions outside the ordinary trans action flow. Deferred tax assets and income tax positions The Group operates in many territories and is, consequently, subject to local laws and cross-border transfer pricing legislation, which complicates the Group’s tax matters, and which gives rise to provisions for income tax positions. The Group also carries significant deferred tax assets that consist primarily of tax on provisions made at the balance sheet date and tax loss carryforwards. The utilisation of tax assets is, inherently, uncertain, as they are dependent on the financial development of business activities in certain countries. We focused on this area because the valuation of deferred tax assets and provisions for income tax positions are subject to significant Management estimates, including Management’s applied model, data and assumptions. Reference is made to note 5.2 to the Consolidated Financial Statement. How our audit addressed the key audit matter Our audit procedures included considering the appropriateness of the accounting policies and valuation models within the tax accounting area and assessing compliance with applicable financial reporting standards. We also assessed Management’s process for identifying and assessing complex income tax transactions as well as deferred tax assets that might not be recoverable. We tested provisions made for income tax positions. As part of this, we reviewed correspondence with tax authorities and discussed methods and data applied as well as assumptions made by Management. In doing so, we used our internal corporate tax specialists. Moreover, we tested Management’s assessment of the recoverability of the carrying value of deferred tax assets arising from temporary differ- ences and tax loss carryforwards on the basis of internal forecasts of fu- ture taxable income, and evaluated the assumptions made by Manage- ment in this connection. Statement on Management’s Commentary Management is responsible for Management’s Commentary Our opinion on the Financial Statements does not cover Management’s Com- mentary, and we do not express any form of assurance conclusion thereon. In connection with our audit of the Financial Statements, our responsi- bility is to read Management’s Commentary and, in doing so, consider whether Management’s Commentary is materially inconsistent with the Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Moreover, we considered whether Management’s Commentary includes the disclosures required by the Danish Financial Statements Act. Based on the work we have performed, in our view, Management’s Com- mentary is in accordance with the Consolidated Financial Statements and the Parent Company Financial Statements and has been prepared in accord- ance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement in Management’s Commentary. Management’s responsibilities for the Financial Statements Management is responsible for the preparation of consolidated financial statements and parent company financial statements that give a true and fair view in accordance with International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board (‘IASB’) and in accord- ance with IFRS as adopted by the EU and further requirements in the Danish Financial Statements Act, and for such internal control as Management deter- mines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the Financial Statements, Management is responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management ei- ther intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that in- cludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements. As part of an audit in accordance with ISAs and the additional require- ments applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, for- gery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circum- stances, but not for the purpose of expressing an opinion on the ef- fectiveness of the Group’s and the Parent Company’s internal control. • Evaluate the appropriateness of accounting policies used and the rea- sonableness of accounting estimates and related disclosures made by Management. • Conclude on the appropriateness of Management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions 93 DSV Annual Report 2022 Statements that may cast significant doubt on the Group’s and the Parent Compa- ny’s ability to continue as a going concern. If we conclude that a mate- rial uncertainty exists, we are required to draw attention in our audi- tor’s report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclu- sions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group or the Parent Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the Finan- cial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that gives a true and fair view. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the Consolidated Financial Statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and, where ap- plicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matters. As part of our audit of the Financial Statements we performed procedures to express an opinion on whether the annual report of DSV A/S for the financial year 1 January to 31 December 2022 with the filename DSV- 2022-12-31-en.zip is prepared, in all material respects, in compliance with the Commission Delegated Regulation (EU) 2019/815 on the Euro- pean Single Electronic Format (ESEF Regulation) which includes require- ments related to the preparation of the annual report in XHTML format and iXBRL tagging of the Consolidated Financial Statements including notes. Management is responsible for preparing an annual report that complies with the ESEF Regulation. This responsibility includes: • The preparing of the annual report in XHTML format; • The selection and application of appropriate iXBRL tags, including ex- tensions to the ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for all financial information required to be tagged using judgement where necessary; • Ensuring consistency between iXBRL tagged data and the Consolidat- ed Financial Statements presented in human-readable format; and • For such internal control as Management determines necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation. Our responsibility is to obtain reasonable assurance on whether the annual report is prepared, in all material respects, in compliance with the ESEF Regulation based on the evidence we have obtained, and to issue a report that includes our opinion. The nature, timing and extent of procedures selected depend on the auditor’s judgement, including the assessment of the risks of material departures from the requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include: • Testing whether the annual report is prepared in XHTML format; • Obtaining an understanding of the company’s iXBRL tagging process and of internal control over the tagging process; • Evaluating the completeness of the iXBRL tagging of the Consolidated Financial Statements including notes; • Evaluating the appropriateness of the company’s use of iXBRL ele- ments selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified; • Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and • Reconciling the iXBRL tagged data with the audited Consolidated Financial Statements including notes. In our opinion, the annual report of DSV A/S for the financial year 1 January to 31 December 2022 with the file name DSV-2022-12-31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. Hellerup, 2 February 2023 PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab CVR no 3377 1231 Lars Baungaard State Authorised Public Accountant mne23331 Kim Tromholt State Authorised Public Accountant mne33251 Report on compliance with the ESEF Regulation 94 DSV Annual Report 2022 Statements Parent Company financial statements 2022 Contents Financial statements Income statement ...............................................96 Statement of comprehensive income ..............................96 Cash flow statement ............................................97 Balance sheet ...................................................98 Statement of changes in equity ...................................99 Notes Basis of preparation 1. Accounting policies ........................................ 100 2. Changes in accounting policies .............................. 100 3. Management judgements and estimates ..................... 100 4. New accounting regulations ................................ 100 Income statement 5. Revenue ................................................. 100 6. Fees to auditors appointed at the Annual General Meeting ..... 100 7. Sta costs ................................................ 100 8. Special items ............................................. 100 9. Financial income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 10. Financial expenses ......................................... 101 11. Income tax ............................................... 101 Balance sheet 12. Intangible assets .......................................... 101 13. Other plant and operating equipment ........................ 102 14. Current receivables from Group entities and other receivables .. 102 15. Equity reserves ........................................... 102 16. Financial liabilities ......................................... 103 17. Payables to Group entities and other payables ................. 103 18. Deferred tax .............................................. 103 Supplementary information 19. Share option schemes ..................................... 104 20. Investments in Group entities ............................... 104 21. Derivative financial instruments ............................. 105 22. Financial risks ............................................. 105 23. Contingent liabilities and security for debt .................... 106 24. Related-party transactions ................................. 106 95 DSV Annual Report 2022 Parent Company financial statements 2022 Income statement Statement of comprehensive income (DKKm) Note 2022 2021 Revenue 5 3,077 2,417 Gross profit 3,077 2,417 Other external expenses 6 1,533 1,138 Sta costs 7 1,411 1,095 Operating profit before amortisation and depreciation (EBITDA) before special items 133 184 Amortisation and depreciation 255 268 Operating profit (EBIT) before special items (122) (84) Special items, costs 8 84 251 Financial income 9 5,006 6,543 Financial expenses 10 594 212 Profit before tax 4,206 5,996 Tax on profit for the year 11 349 137 Profit for the year 3,857 5,859 Proposed distribution of profit: Proposed dividend per share is DKK 6.50 (2021: DKK 5.50 per share) 1,424 1,320 Transferred to equity reserves 2,433 4,539 Total distribution 3,857 5,859 (DKKm) 2022 2021 Profit for the year 3,857 5,859 Items that may be reclassified to the income statement when certain conditions are met: Fair value adjustments of hedging instruments transferred to financial expenses 1 14 Tax on items reclassified to the income statement - (8) Other comprehensive income, net of tax 1 6 Total comprehensive income 3,858 5,865 96 DSV Annual Report 2022 Parent Company financial statements 2022 Cash flow statement (DKKm) Note 2022 2021 Operating profit before amortisation and depreciation (EBITDA) before special items 133 184 Adjustments: Share-based payments 19 36 - Change in working capital 55 (583) Special items - (185) Dividend received 9 2,930 5,746 Interest received 9 227 797 Interest paid, other 10 (161) (212) Income tax paid 71 (477) Cash flow from operating activities 3,291 5,270 Purchase of intangible assets 12 (236) (230) Purchase of other plant and operating equipment 13 (204) (146) Acquisition of subsidiaries and activities 6,212 2,153 Cash flow from investing activities 5,772 1,777 Free cash flow 9,063 7,047 (DKKm) Note 2022 2021 Proceeds from borrowings 4,462 11,898 Repayment of borrowings (1,500) - Change in long-term receivables and borrowings, net 7,116 (828) Transactions with shareholders: Dividends distributed (1,320) (920) Dividends on treasury shares 43 28 Purchase of treasury shares (20,313) (17,841) Sale of treasury shares 1,426 2,150 Cash flow from financing activities (10,086) (5,513) Cash flow for the year (1,023) 1,534 Cash and cash equivalents 1 January 7,696 6,160 Cash flow for the year (1,023) 1,534 Currency translation - 2 Cash and cash equivalents at 31 December 6,673 7,696 The cash flow statement cannot be directly derived from the balance sheet and income statement. 97 DSV Annual Report 2022 Parent Company financial statements 2022 Assets (DKKm) Note 2022 2021 Intangible assets 12 710 657 Other plant and operating equipment 13 306 216 Investments in Group entities 20 47,874 54,087 Receivables from Group entities and other receivables 24,449 24,062 Deferred tax assets 18 - 20 Total non-current assets 73,339 79,042 Receivables from Group entities and other recievables 14 18,999 18,463 Tax receivables - 216 Cash and cash equivalents 6,673 7,696 Total current assets 25,672 26,375 Total assets 99,011 105,417 Equity and liabilities (DKKm) Note 2022 2021 Share capital 219 240 Reserves 15 545 488 Retained earnings 40,385 56,704 Total equity 41,149 57,432 Borrowings 16 21,388 27,176 Provisions 74 - Deferred tax liabilities 18 16 - Total non-current liabilities 21,478 27,176 Borrowings 16 206 1,714 Provisions 145 - Tax payables 168 - Payables to Group entities and other payables 17 35,865 19,095 Total current liabilities 36,384 20,809 Total liabilities 57,862 47,985 Total equity and liabilities 99,011 105,417 Balance sheet 98 DSV Annual Report 2022 Parent Company financial statements 2022 Statement of changes in equity 2022 2021 (DKKm) Share capital Reserves Retained earnings Total equity Share capital Reserves Retained earnings Total equity Equity at 1 January 240 488 56,704 57,432 230 425 37,920 38,575 Profit for the year - 52 3,805 3,857 - 59 5,800 5,859 Other comprehensive income, net of tax - 1 - 1 - 6 - 6 Total comprehensive income for the year - 53 3,805 3,858 - 65 5,800 5,865 Transactions with shareholders: Share-based payments - - 36 36 - - - - Dividends distributed - - (1,320) (1,320) - - (920) (920) Purchase of treasury shares - (19) (20,295) (20,313) - (13) (17,828) (17,841) Sale of treasury shares - 2 1,425 1,426 - 2 2,166 2,168 Capital increase - - - - 16 - 24,479 24,495 Capital reduction (21) 21 - - (6) 6 - - Transfer of treasury shares as business combination consideration - - - - - 3 5,073 5,076 Dividends on treasury shares - - 43 43 - - 28 28 Other adjustments - - (13) (13) - - (14) (14) Total transactions with shareholders (21) 4 (20,124) (20,141) 10 (2) 12,984 12,992 Equity at 31 December 219 545 40,385 41,149 240 488 56,704 57,432 * For a specification of reserves, please refer to note 15. 99 DSV Annual Report 2022 Parent Company financial statements 2022 Basis of preparation 1. Accounting policies As the Parent Company of the DSV Group, the financial statements of DSV A/S are separate financial statements disclosed as required by the Danish Financial Statements Act. The separate financial statements have been prepared in accordance with International Financial Reporting Stand- ards (IFRS) as issued by the International Accounting Standards Board (IASB) and additional disclosure requirements in the Danish Financial Statements Act for listed companies. IFRS standards have been applied to the extent these have been adopted by the European Union. The account- ing policies of the Parent Company are identical with the accounting poli- cies for the consolidated financial statements, except for the following: Dividends from investments in subsidiaries Dividends from investments in subsidiaries are recognised as income in the Parent Company’s income statement under financial income in the financial year in which the dividends are declared. Investments in subsidiaries in the Parent Company’s financial statements Investments in subsidiaries are measured at cost. If there is any indica- tion of impairment, investments are tested for impairment as described in the accounting policies applied by the Group. If the cost exceeds the recoverable amount, the investment is written down to this lower value. Currency translation Foreign currency adjustments of balances considered part of the to- tal net investment in enterprises which have a functional currency other than Danish kroner (DKK) are recognised in the income state- ment of the Parent Company under financials. Development cost reserve In accordance with the Danish Financial Statements Act the reserve for development costs comprises capitalized development costs ad- justed for deferred tax. 2. Changes in accounting policies All amendments to the International Financial Reporting Standards (IFRS) eective for the financial year 2022 have been implemented as basis for preparing the Parent Company financial statements and notes to the statements. None of the implementations have had any material impact on the statements or notes presented. 3. Management judgements and estimates In preparing the Parent Company financial statements, Management makes various accounting judgements that aect the reported amounts and disclo- sures in the statements and in the notes to the financial statements. These are based on professional judgement, historical data and other factors availa- ble to Management. By nature, a degree of uncertainty is involved when car- rying out these judgements and estimates, hence actual results may deviate from the assessments made at the reporting date. Judgements and estimates are continuously evaluated, and the eect of any changes is recognised in the relevant period. The primary financial statements items for which significant accounting judgements and estimates are applied are listed below: Investments in subsidiaries Management assesses annually whether there is an indication of impair- ment of investments in subsidiaries. If so, the investments will be tested for impairment in the same way as Group goodwill, involving various esti- mates on future cash flows, growth, discount rates, etc. On 31 December 2022, no impairment indicators were identified. 4. New accounting regulations The IASB has issued a number of new standards and amendments not yet in ef- fect or adopted by the EU and therefore not relevant for the preparation of the 2022 Parent Company financial statements. These standards and amendments are expected to be implemented when they take eect. None of the new standards or amendments issued are currently expected to have any signi ficant impact on the Parent Company financial statements when implemented. Income statement 5. Revenue (DKKm) 2022 2021 Intra-group charges 3,077 2,417 Total revenue 3,077 2,417 (DKKm) 2022 2021 Statutory audit 7 9 Other assurance services 1 2 Tax and VAT advisory services 1 1 Other services 1 4 Total fees 10 16 7. Sta costs For information on remuneration of the Executive Board and the Board of Directors, refer to notes 6.2 and 6.3 to the consolidated financial statements. (DKKm) 2022 2021 Remuneration of the Board of Directors 7 7 Salaries etc. 390 332 Intra-group salary charges etc. 971 721 Defined contribution pension plans 43 35 Total sta costs 1,411 1,095 Average number of full-time employees 607 507 8. Special items (DKKm) 2022 2021 Restructuring and integration costs 84 165 Transaction costs relating to acquisition of GIL - 86 Total special items, costs 84 251 6. Fees to auditors appointed at the Annual General Meeting * The intra-group salary charges relate to an average of 1,803 FTEs in 2022 (2021: 1,364). 100 DSV Annual Report 2022 Parent Company financial statements 2022 11. Income tax Tax for the year is disaggregated as follows: Balance sheet 12. Intangible assets Tax on profit for the year specifies as follows: Tax rate specifies as follows: Interest income includes interest on financial assets of DKK 227 million (2021: DKK 154 million). 10. Financial expenses Interest expenses include interest on financial liabilities measured at amortised cost of DKK 161 million (2021: DKK 145 million). (DKKm) 2022 2021 Interest income 227 154 Interest income from Group entities 831 406 Currency translation, net 1,018 237 Dividends from subsidiaries 2,930 5,746 Total financial income 5,006 6,543 (DKKm) 2022 2021 Interest expenses 161 145 Interest expenses to Group entities 433 67 Total financial expenses 594 212 (DKKm) 2022 2021 Tax on profit for the year 349 137 Tax on other comprehensive income - 8 Total tax for the year 349 145 (DKKm) 2022 2021 Current tax 326 187 Deferred tax 24 (78) Tax adjustment relating to previous years (1) 28 Total tax on profit for the year 349 137 (DKKm) 2022 2021 Calculated tax on profit for the year before tax 22.0% 22.0% Tax eect of: Non-deductible expenses/non-taxable income (13.7%) (20.2%) Tax adjustment relating to previous years 0.0% 0.5% Eective tax rate 8.3% 2.3% 2022 2021 (DKKm) Soware Soware in progress Tot a l Soware Soware in progress Tot a l Cost at 1 January 908 266 1,174 1,004 166 1,170 Additions - 236 236 - 230 230 Disposals (141) - (141) (226) - (226) Reclassifications 174 (174) - 130 (130) - Total cost at 31 December 941 328 1,269 908 266 1,174 Total amortisation and im pairment at 1 January 517 - 517 554 - 554 Amortisation and impairment for the year 151 - 151 140 - 140 Disposals (109) - (109) (177) - (177) Total amortisation and im pairment at 31 December 559 - 559 517 - 517 Carrying amount at 31 December 382 328 710 391 266 657 9. Financial income 101 DSV Annual Report 2022 Parent Company financial statements 2022 13. Other plant and operating equipment 15. Equity reserves Equity reserves are specified below: For a description of equity reserves, please refer to note 4.1 to the consolidated financial statements. 14. Current receivables from Group entities and other receivables (DKKm) 2022 2021 Cost at 1 January 460 350 Additions 204 146 Disposals (140) (36) Total cost at 31 December 524 460 Total depreciation and impairment at 1 January 244 204 Depreciation for the year 104 76 Disposals (130) (36) Total depreciation and impairment at 31 December 218 244 Carrying amount at 31 December 306 216 (DKKm) 2022 2021 Receivables from Group entities 18,764 18,138 Other receivables 235 325 Total 18,999 18,463 2022 (DKKm) Treasury share reserve Hedging reserve Development cost reserve Total reserves Reserves at 1 January (6) (4) 498 488 Profit for the year - - 52 52 Other comprehensive income, net of tax - 1 - 1 Transactions with shareholders: Purchase of treasury shares (19) - - (19) Sale of treasury shares 2 - - 2 Capital reduction 21 - - 21 Reserves at 31 December (2) (3) 550 545 2021 (DKKm) Treasury share reserve Hedging reserve Development cost reserve Total reserves Reserves at 1 January (4) (10) 439 425 Profit for the year - - 59 59 Other comprehensive income, net of tax - 6 - 6 Transactions with shareholders: Purchase of treasury shares (13) - - (13) Sale of treasury shares 2 - - 2 Capital reduction 6 - - 6 Transfer of treasury shares as business combination consideration 3 - - 3 Reserves at 31 December (6) (4) 498 488 102 DSV Annual Report 2022 Parent Company financial statements 2022 16. Financial liabilities 17. Payables to Group entities and other payables 18. Deferred tax Borrowings are subject to standard trade covenants. All financial ratio covenants were observed during the year. The weighted average interest rate was 0.9% (2021: 0.7%). (DKKm) 2022 2021 Overdra and credit facilities 16,408 22,036 Issued bonds 5,186 6,681 Other financial liabilities - 173 Total financial liabilities 21,594 28,890 Financial liabilities as recognised in the balance sheet: Non-current liabilities 21,388 27,176 Current liabilities 206 1,714 Financial liabilities at 31 December 21,594 28,890 Carrying amount (DKKm) Expiry Fixed/floating 2022 2021 Bond loans 2024-2027 Fixed 5,186 6,681 Overdra and credit facilities 2023-2036 Fixed 16,408 22,036 Loans and credit facilities at 31 December 21,594 28,717 2022 2021 Non-cash change Non-cash change Financing activities (DKKm) Beginning of year Cash flow Acqui- sition Other End of year Beginning of year Cash flow Acqui- sition Other End of year Overdra and credit facilities 22,036 (5,628) - - 16,408 4,045 17,807 - 184 22,036 Issued bonds 6,681 (1,500) - 5 5,186 6,674 7 - - 6,681 Lease liabilities - - - - - 1 (1) - - - Total liabilities from financing activities 28,717 (7,128) - 5 21,594 10,720 17,813 - 184 28,717 Other non-current liabilities 173 - 90 173 Total financial liabilities 28,890 21,594 10,810 28,890 (DKKm) 2022 2021 Payables to Group entities 34,901 18,364 Other payables 964 731 Total 35,865 19,095 (DKKm) 2022 2021 Deferred tax at 1 January 20 (29) Deferred tax for the year (24) 78 Tax adjustments relating to previous years 1 (38) Tax on changes in equity (13) 9 Deferred tax at 31 December (16) 20 Deferred tax as recognised in the balance sheet: Deferred tax liabilities 16 - Deferred tax assets - 20 Deferred tax, net (16) 20 Specification of deferred tax: Intangible assets (84) (86) Current assets (11) (3) Other liabilities 79 109 Deferred tax at 31 December (16) 20 Overdra and credit facilities: 103 DSV Annual Report 2022 Parent Company financial statements 2022 Supplementary information 19. Share option schemes DSV A/S has issued share options to key employees and members of the Executive Board of the Company. Refer to note 6.2 to the consolidated financial statements for a list of current incentive share option schemes and a description of the assumptions used for the valuation of the share options granted in 2022. Total costs recognised in 2022 for services re- ceived but not recognised as an asset amounted to DKK 36 million (2021: DKK 27 million). The average share price for options exercised in the financial year was DKK 1,097.7 per share at the date of exercise. 20. Investments in Group entities DSV A/S owns the following subsidiaries, all of which are included in the consolidated financial statements: Owner ship 2022 Owner ship 2021 Registered oce Share capital (DKKm) DSV Road Holding A/S 100% 100% Hedehusene, Denmark 100 DSV Air & Sea Holding A/S 100% 100% Hedehusene, Denmark 50 DSV Solutions Holding A/S 100% 100% Hedehusene, Denmark 100 DSV Insurance A/S 100% 100% Hedehusene, Denmark 25 DSV Group Services A/S 100% 100% Hedehusene, Denmark 5 DSV FS A/S 100% 100% Hedehusene, Denmark 0.5 Panalpina Welttransport (Holding) AG 100% 100% Basel, Switzerland 18 Agility Logistics International B.V. 100% 100% Rozenburg, Netherlands 2,632 DSV Finance B.V. 100% 100% Venlo, Netherlands 0 GIL International Holdings I Ltd. 100% 100% Abu Dhabi, UAE 3,108 Share option schemes at 31 December 2022 Scheme Exercise period Executive Board Key employees Total Average exercise price per option 2018 28.03.2021 - 28.03.2023 190,000 58,000 248,000 477.5 2019 29.03.2022 - 27.03.2024 190,000 154,000 344,000 545.0 2020 31.03.2023 - 31.03.2025 202,000 283,250 485,250 560.0 2021 01.04.2024 - 31.03.2026 168,750 239,925 408,675 1,325.0 2022 01.04.2025 - 31.03.2027 198,250 263,675 461,925 1,485.0 Outstanding at 31 December 2022 949,000 998,850 1,947,850 926.7 Open for exercise at 31 December 2022 380,000 212,000 592,000 516.7 Life (years) 2 3 3 n.a. Market value (DKKm) 350 299 650 n.a. * Share options granted in 2018 and 2019 are currently exercisable. Outstanding share options Executive Board Key employees Total Average exercise price per option Outstanding at 1 January 2021 760,000 926,129 1,686,129 501.3 Granted 156,750 263,850 420,600 1,325.0 Transferred ** 36,000 (36,000) - - Exercised (190,000) (222,056) (412,056) 401.7 Options waived/expired - (11,775) (11,775) 703.3 Outstanding at 31 December 2021 762,750 920,148 1,682,898 972.4 Outstanding at 1 January 2022 762,750 920,148 1,682,898 972.4 Granted 198,250 274,075 472,325 1,485.0 Exercised (12,000) (164,573) (176,573) 514.1 Options waived/expired - (30,800) (30,800) 1,112.0 Outstanding at 31 December 2022 949,000 998,850 1,947,850 926.7 ** A member of the Executive Board has previously received share options in the Director’s former capacity as DSV key employee. 104 DSV Annual Report 2022 Parent Company financial statements 2022 21. Derivative financial instruments DSV A/S has obtained long-term loans mainly on a fixed rate basis, imply- ing that DSV A/S is less exposed to interest rate fluctuations. DSV A/S mainly uses interest rate swaps to hedge future cash flows relat- ing to interest rate risks. Thereby, floating-rate loans are converted to fixed-rate financing. At the balance sheet date, DSV A/S no longer have any interest rate swaps. The weighted average eective interest rate for existing interest rate instruments used as hedges of long-term loans was therefore 0% at the reporting date (2021: 0.8%). For 2022 a gain on hedging instruments of DKK 208 million was recog- nised in the income statement (2021: loss of DKK 51 million). In the same period, a gain of DKK 810 million was recognised relating to assets and liabilities (2021: loss of DKK 5 million). For more information on foreign currency and interest rate risk hedging, refer to notes 4.4 and 4.5 to the consolidated financial statements. 22. Financial risks Financial risks of the Parent Company are handled within the risk manage- ment processes and framework of the Group. Please refer to note 4.4 to the consolidated financial statements. The liabilities of DSV A/S fall due as listed in the adjacent table. The analysis of expected maturity is based on contractual cash flows, including estimated interest payments. No amounts have been discount- ed, for which reason they cannot necessarily be reconciled to the related items of the balance sheet. 2022 Hedging instruments (DKKm) Contractual value Maturity Fair value Of which recog- nised in income statement Of which recognised in OCI Currency instruments 16,736 2023-2025 82 86 (4) Total 16,736 82 86 (4) 2021 (DKKm) Contractual value Maturity Fair value Of which recog- nised in income statement Of which recognised in OCI Currency instruments 26,137 2022 (26) (27) 1 Interest rate instruments 744 2022 (7) - (7) Total 26,881 (33) (27) (6) 2022 2021 Loan and credit facilities (DKKm) 0-1 year 1-5 years > 5 years Total cash flows, incl. interest 0-1 year 1-5 years > 5 years Total cash flows, incl. interest Loans, credit facilities and issued bonds 186 5,852 17,024 23,062 11,805 1,952 16,230 29,987 Other payables 964 - - 964 736 - - 736 Payables to Group entities 34,901 - - 34,901 18,359 - - 18,359 Currency derivatives 80 2 - 82 26 - - 26 Interest rate derivatives - - - - 3 6 - 9 Total 36,131 5,854 17,024 59,009 30,929 1,958 16,230 49,117 105 DSV Annual Report 2022 Parent Company financial statements 2022 22. Financial risks – continued Financial instruments by category DSV has no financial instruments measured at fair value based on level 1 input (quoted active market prices) or level 3 input (non-observable market data). All financial instruments are measured based on level 2 input (input other than quoted prices that are observable either directly or indirectly). Derivative financial instruments The fair value of currency derivatives is determined based on generally accepted valuation methods using available observable market data. Calculated fair values are verified against comparable external market quotes on a monthly basis. 2022 2021 Carrying amount (DKKm) Carrying amount Fair value Carrying amount Fair value Financial assets: Currency derivatives 97 97 13 13 Current receivables from Group entities and other receivables 18,998 18,998 18,463 18,463 Non-current receivables from Group entities and other receivables 24,448 24,448 24,062 24,062 Cash and cash equivalents 6,673 6,673 7,696 7,696 Financial assets measured at amortised cost 50,119 50,119 50,221 50,221 Financial liabilities: Interest rate derivatives - - 9 9 Currency derivatives 15 15 39 39 Issued bonds measured at amortised cost 5,186 4,649 6,681 6,681 Loans and credit facilities 16,408 16,408 22,036 22,036 Payables to Group entities and other payables 35,865 35,865 19,095 19,095 Financial liabilities measured at amortised cost 57,459 56,922 47,812 47,812 Financial liabilities measured at amortised cost In 2021, the carrying value of financial liabilities measured at amortised cost was not considered to dier significantly from fair value. Due to changes in the macroeconomic environment, the carrying value of financial liabilities measured at amortised cost is no longer considered to represent the fair value. The 2022 fair value of issued bonds measured at amortised cost is within level 1 of the fair value hierarchy. Receivables from Group entities and other receivables and payables to Group entities and other payables. Receivables and payables pertaining to operating activities and with short churn ratios are considered to have a carrying value equal to fair value. 23. Contingent liabilities and security for debt Contingent liabilities DSV A/S and the other Danish Group entities are registered jointly for VAT purposes and are jointly and severally liable for the VAT liabilities. DSV A/S is assessed jointly for Danish tax purposes with the other do- mestic Group entities. DSV A/S is the administration company of the joint taxation arrangement and is under an unlimited and joint liability regime for all Danish tax payments and withholding taxes on dividends, interest and royalties from the jointly taxed entities. Income tax and withholding tax payables under the joint taxation arrangement amounted to DKK 168 million (2021: payable of DKK 506 million), which is included in the financial statements of DSV A/S. Parent Company guarantees DSV A/S has provided guarantees for subsidiaries’ outstanding balances with banks and liabilities to leasing companies, suppliers and public authorities, etc. in the amount of DKK 12,424 million (2021: DKK 11,005 million). Moreover, DSV A/S has issued several declarations of intent relating to outstanding balances between subsidiaries and third parties. 24. Related-party transactions DSV A/S has no related parties with control of the Group and no related parties with significant influence other than key management personnel – mainly in the form of the Board of Directors and Executive Board. Related-party transactions Board of Directors and Executive Board No transactions with the Board of Directors and Executive Board were made in the 2022 financial year other than ordinary remuneration, as described in notes 6.2 and 6.3 to the consolidated financial statements. Intra-group transactions No intra-group transactions were made in 2022 other than as stated in the income statement and notes. 106 DSV Annual Report 2022 Parent Company financial statements 2022 DSV A/S Hovedgaden 630 2640 Hedehusene Denmark Tel. +45 43 20 30 40 www.dsv.com CVR no. 58 23 35 28 Annual Report for the year ending 31 December 2022 (46th financial year). Published 2 February 2023. 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