Annual Report • Feb 7, 2019
Annual Report
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7 February 2019
"We delivered a strong set of results for 2018. Q4 2018 was in line with our expectations and we can report an EBIT of DKK 5,450 million for 2018, a 15% growth on 2017. We are on track to meet our 2020 financial targets and 2018 demonstrates our dedication to delivering quality services to our customers and growing organically. In line with our strategy, we are actively pursuing M&A opportunities and we believe that the right transactions can create value for all stakeholders," says Jens Bjørn Andersen, CEO.
| Full-year | Full-year | |||
|---|---|---|---|---|
| (DKKm) | Q4 2018 | Q4 2017 | 2018 | 2017 |
| Revenue | 20,945 | 19,019 | 79,053 | 74,901 |
| Gross profit | 4,447 | 4,054 | 17,489 | 16,605 |
| Operating profit before special items | 1,338 | 1,196 | 5,450 | 4,878 |
| Operating margin | 6.4% | 6.3% | 6.9% | 6.5% |
| Conversion ratio | 30.1% | 29.5% | 31.2% | 29.4% |
| Adjusted earnings | 4,093 | 3,484 | ||
| Adjusted free cash flow | 3,916 | 4,835 | ||
| Diluted adjusted earnings per share of DKK 1 | 22.1 | 18.40 | ||
| Proposed dividend per share (DKK) | 2.25 | 2.00 | ||
| Operating profit before special items | ||||
| Air & Sea | 897 | 789 | 3,693 | 3,225 |
| Road | 239 | 231 | 1,147 | 1,201 |
| Solutions | 223 | 185 | 709 | 494 |
For Q4 2018, revenue increased by 10.6%, adjusted for exchange rate fluctuations, and amounted to DKK 20,945 million (Q4 2017: DKK 19,019 million).
Freight volume growth for the quarter was 5% for air freight, 4% for sea freight and 2% for road transport.
For Q4 2018, gross profit came to DKK 4,447 million (Q4 2017: DKK 4,054 million). In constant currencies, the growth in gross profit came to 9.9% for the Group. The Air & Sea division achieved growth of 10.4% and the Road division 4.6%, both driven by higher transport volumes and improved profit per shipment compared to Q4 2017. The Solutions division also saw a higher activity level and achieved growth in gross profit of 15.6% for the quarter.
Operating profit before special items was up by 11.9% (in constant currencies) to DKK 1,338 million for Q4 2018 (Q4 2017: DKK 1,196 million). The growth was mainly driven by the Air & Sea and Solutions divisions.
Full-year adjusted free cash flow came to DKK 3,916 million for 2018. The cash flow was impacted by an extraordinary contribution to pension plans of DKK 250 million in Q4 2018 and was otherwise in line with expectations.
DSV A/S, Hovedgaden 630, 2640 Hedehusene, Denmark, tel. +45 43 20 30 40, CVR No. 58233528, www.dsv.com. Global Transport and Logistics
The Board of Directors proposes ordinary dividends of DKK 2.25 per share for 2018 (2017: DKK 2.00 per share).
DSV will host an investor teleconference on 7 February 2019 at 11.00 a.m. CET. Please refer to investor.dsv.com for details.
Flemming Ole Nielsen, tel. +45 43 20 33 92, [email protected] Nicolas Thomsen, tel. +45 43 20 31 93, [email protected]
Media Tina Hindsbo, tel. +45 43 20 36 63, [email protected]
Yours sincerely, DSV A/S
We provide and manage supply chain solutions for thousands of companies every day – from the small family-run business to the large global corporation. Our reach is global, yet our presence is local and close to our customers. 47,394 employees in more than 75 countries work passionately to deliver great customer experiences and high quality services.
Hovedgaden 630 2640 Hedehusene Denmark
Tel. +45 43 20 30 40 E-mail: [email protected] CVR-No 58 23 35 28
Annual Report for the year ended 31 December 2018 - 42nd financial year
Published 7 February 2019
| Five-year overview 3 | |
|---|---|
| Letter from CEO 4 | |
| Highlights 2018 6 |
| Vision and strategy 8 | |
|---|---|
| Industry and markets 9 | |
| Outlook and financial targets 12 | |
| Capital structure and allocation 13 | |
| Financial review 14 | |
|---|---|
| Air & Sea 18 | |
| Road 22 | |
| Solutions 25 |
| and shareholder information | |
|---|---|
| Risk management 28 | |
| Corporate governance 34 | |
| Board of Directors and Executive Board 37 | |
| Shareholder information 38 | |
| Responsibility in DSV 40 | |
| Quaterly financial highlights 42 | |
|---|---|
| -- | ---------------------------------- |
| Statements 2018 43 |
|
|---|---|
| Income statement 44 Cash flow statement 45 Balance sheet 46 Statement of changes in equity 47 Notes to the consolidated financial statements 48 |
|
| Definition of financial highlights 81 Group company overview 82 |
| Management's statement | 88 |
|---|---|
| Independent auditors' report | 89 |
| 2018 | 2017 | 2016 | 2015 | 2014 | Ratios |
|---|---|---|---|---|---|
| 79,053 | 74,901 | 67,747 | 50,869 | 48,582 | |
| 17,489 | 16,605 | 15,838 | 11,201 | 10,297 | |
| 6,212 | 5,664 | 4,250 | 3,575 | 3,145 | |
| 5,450 | 4,878 | 3,475 | 3,050 | 2,624 | |
| - | 525 | 1,002 | 58 | 304 | |
| 249 | 556 | 184 | 303 | 306 | |
| 3,988 | 3,012 | 1,678 | 2,058 | 1,491 | |
| 4,093 | 3,484 | 2,506 | 2,211 | 1,835 | |
| Share ratios | |||||
| 4,301 | 4,664 | 1,273 | 3,160 | 1,919 | |
| (444) | (325) | (4,953) | (431) | (461) | |
| 3,857 | 4,339 | (3,680) | 2,729 | 1,458 | |
| 3,916 | 4,835 | 1,838 | 2,837 | 1,472 | |
| (4,000) | (4,715) | 396 | 1,855 | (1,569) | |
| (4,161) | (1,559) | - | |||
| (380) | (342) | (327) | (283) | (270) | |
| (143) | (376) | (3,284) | 4,584 | (111) | |
| 14,561 | 14,835 | 13,416 | 11,809 | 6,052 | |
| (29) | (26) | (38) | 32 | 29 | |
| 38,812 | 38,388 | 40,367 | 27,725 | 23,680 | |
| 1,767 | 1,410 | 1,809 | 22 | 305 | |
| 5,831 | 5,575 | 8,299 | (546) | 5,859 | |
| 20,381 | 20,391 | 21,336 | 10,977 | 11,797 | |
| 720 | 620 | 728 | 660 | 651 | |
| (1,419) (1,183) |
| 2018 | 2017 | 2016 | 2015 | 2014 | |
|---|---|---|---|---|---|
| Financial ratios (%) | |||||
| Gross margin | 22.1 | 22.2 | 23.4 | 22.0 | 21.2 |
| Operating margin | 6.9 | 6.5 | 5.1 | 6.0 | 5.4 |
| Conversion ratio | 31.2 | 29.4 | 21.9 | 27.2 | 25.5 |
| Effective tax rate | 23.3 | 20.7 | 26.7 | 23.5 | 26.0 |
| ROIC before tax | 26.7 | 23.4 | 21.5 | 26.8 | 21.8 |
| Return on equity (ROE) | 27.2 | 21.1 | 13.2 | 23.0 | 24.3 |
| Solvency ratio | 37.5 | 38.6 | 33.2 | 42.6 | 25.6 |
| Gearing ratio | 0.9 | 1.0 | 2.0 | (0.2) | 1.9 |
| Share ratios | |||||
| Earnings per share of DKK 1 | 22.0 | 16.0 | 9.0 | 12.1 | 8.6 |
| Diluted earnings per share of DKK 1 | 21.6 | 15.8 | 8.9 | 12.0 | 8.6 |
| Diluted adjusted earnings per share of DKK 1 | 22.1 | 18.4 | 13.4 | 12.9 | 10.5 |
| Number of shares issued ('000) | 188,000 | 190,000 | 190,000 | 192,500 | 177,000 |
| Number of treasury shares ('000) | 9,985 | 5,917 | 4,509 | 8,606 | 7,156 |
| Share price at year-end (DKK) | 429.2 | 488.6 | 314.2 | 271.7 | 188.2 |
| Proposed dividend per share (DKK) | 2.25 | 2.00 | 1.80 | 1.70 | 1.60 |
| Non-Financials | 2018 | 2017 | 2016 | 2015 | 2014 |
|---|---|---|---|---|---|
| Number of full-time employees at year-end | 47,394 | 45,636 | 44,779 | 22,783 | 22,874 |
| Rate of occupational accidents (per million working hours) |
4.6 | 4.2 | 4.6 | 5.9 | 5.9 |
| CO2e (g/ton-km) – Sea transport | 6.1 | 6.3 | 6.9 | 6.6 | 7.9 |
| CO2e (g/ton-km) – Air transport | 588.5 | 607.0 | 601.9 | 622.0 | 666.9 |
| CO2e (g/ton-km) – Road transport | 71.5 | 72.3 | 73.9 | 72.0 | 70.9 |
2018 was yet another record year for DSV. We performed according to our own expectations and achieved strong organic growth across all business areas.
For the Group, we achieved revenue of DKK 79,053 million (+8.1%), gross profit of DKK 17,489 million (+7.9%) and operating profit before special items of DKK 5,450 million (+14.5%).
Adjusted free cash flow came to DKK 3,916 million, and in line with our capital allocation policy we have distributed DKK 4,541 million to shareholders in 2018 via share buyback and dividend.
In 2018, we received a BBB+ credit rating from S&P. This is a testament to DSV's financial strength.
During 2018, several geopolitical issues caused uncertainty in the logistics markets – most notably the implementation of trade tariffs between the US and China and the ongoing Brexit negotiations.
The direct impact on our activities and financial results in 2018 was limited. We are working closely with our customers to make sure that we will be prepared – as best we can – for the different Brexit and "trade war" scenarios. We hope that the contending parties will reach good, sustainable agreements.
In DSV, we are great believers in free trade and globalisation, and our base assumption is that global trade will grow in line with GDP in the coming years. In any case, we are flexible and will adapt to changing market conditions if necessary.
In 2018, we continued to benefit commercially from the strong market position and scale benefits we gained through the successful integration of UTi.
While M&A remains an important part of our strategy, we are also a disciplined and patient buyer. We pursue M&A opportunities when we see a strong business case and value for DSV's shareholders. But M&A is not a must – we already have a strong platform for organic growth and a clear target of outgrowing the underlying market.
In 2018, we delivered on this target and took market share across all business areas. We constantly focus on our customer relationships, looking for ways to improve our value proposition.
Our financial performance is proof of high productivity and a strong performance culture. For our customers this translates into high quality services.
Digitalisation and new technology remain hot topics in our industry, and the freight forwarder has been declared an endangered species for decades.
In 2018, DSV performed better than ever and our strategy has stood the test of time; the asset-light business model combined with focus on growth, operational excellence and people is a winning recipe. For this reason, we hold on to our vision and strategy.
We will continue to develop our IT infrastructure and our digital services, and we
Jens Bjørn Andersen CEO
strongly believe that we will benefit from further digitalisation and new technology. In 2018, our staff increased by 3.9%. In spite of our continued efforts to rationalise through digital workflows, IT systems and automation, we still need the right people to support our growth.
Further steps towards ensuring a talent pipeline and structured people development were taken in 2018 with the expansion of DSV Academy and implementation of a global talent management programme.
The plan for 2019 is further growth – both organic and inorganic. We assume that the transport markets will grow around 3% and expect that we can take market share.
We will continue to look for suitable M&A candidates to accelerate growth, but we will also keep a strong focus on delivering high-quality services to customers so we can grow with them.
In line with outlook for 2018, operating profit before special items came to DKK 5,450 million for 2018. Concurrently, the conversion ratio driven by improved productivity came to 31.2% for 2018 against 29.4% for 2017.
For 2018, adjusted free cash flow (excluding the Impact from M&A and special items) decreased to DKK 3,916 million impacted positively by higher EBITDA before special items and absence of integration costs, but negatively by higher working capital and extraordinary contributions to pension plans.
| 2018 Actual | 3,916 |
|---|---|
| 2018 Outlook |
The return on invested capital came to 26.7% in 2018, up from 23.4% in 2017. The increase was mainly a result of improved earnings. Invested capital amounted to DKK 20,381 million.
2018 Actual
26.7%
7 DSV Annual Report 2018 Introduction
AMERICAS North and South America
Gross profit: DKK 3,309 million
+12.5%
EBIT before special items: DKK 1,404 million +18.9%
EMEA Europe, Middle East and Africa
Gross profit: DKK 11,794 million +5.8%
EBIT before special items: DKK 2,996 million +9.9%
APAC Asia, Australia and the Pacific
Gross profit: DKK 2,386 million
+13.1%
EBIT before special items: DKK 1,050 million
+22.9%
Driven by a strong focus on sales and increasing productivity, DSV Air & Sea achieved 10.1% growth in gross profit in 2018 – and 18.2% growth in EBIT before special items. DSV performed well in the market, securing an 8.4% growth in air freight volumes and 3.8% growth in sea freight volumes.
EBIT before special items: DKK 3,693 million
Focus on better pricing and turn-around of low margin activities led to DSV Road achieving growth in gross profit of 2.0% (adjusted growth 4.5%) in 2018 – whereas EBIT before special items decreased 3.2% (adjusted growth 8.2%). The adjustment relates to the property transaction of approximately DKK 125 million in Q1 2017. DSV Road gained market share across our network, which led to volume growth of 3% in 2018.
EBIT before special items: DKK 1,147 million
In 2018, DSV Solutions' markets, contract logistics markets and omnichannel, continued the upward movement carried on from 2017. This led the division to achieve a 13.2% growth in gross profit – and a growth of 44.1% in EBIT before special items. 2018 was also impacted positively from long-term focus on consolidation of infrastructure and improved customer integration.
DSV is one among many players in a large, fragmented and competitive freight forwarding market. Our vision is simple, yet ambitious:
"We want to be a leading global supplier, fulfilling customers' needs for transport and logistics services, targeting extensive growth and to be among the most profitable in our industry".
With a few modifications of the wording, our vision has been the same for years. Global supply chains and technology change and this impacts the way we work, but the fundamentals of freight forwarding do not change overnight.
We aim to offer our customers global and competitive transport and logistics services of a consistent high quality – and to support their entire supply chain.
We have a strong foothold among small and mid-sized customers, and we will continue to focus on this segment. In recent years, we have also achieved growth with large, multinational customers and we are increasingly offering industry-specific solutions, e.g. within automotive and pharma logistics.
We continually work with customers to find optimal solutions to their logistics challenges – and we systematically and proactively
manage relations through our global customer success programme.
ABOVE MARKET GROWTH DSV actively pursues profitable growth – organically and via M&A.
Measured by revenue and profit margins, we are among the largest and most profitable players in the industry. This gives us a strong market position and a foundation for continuously growing our business above market level in all markets where we operate.
DSV has a track record of company integrations – and having successfully completed the integration of UTi Worldwide, we are ready for new M&A opportunities. Our main acquisition targets are large, global freight forwarders, preferably with high exposure to the air and sea market.
Freight forwarding is a service industry characterised by high volumes and relatively low profit per shipment/unit. This means that high productivity – operational excellence – is essential to profitability above market level.
We constantly strive to do things better than yesterday and to optimise quality, delivery times and prices to the benefit of our customers.
Based on the principle of one main system per business area, we operate a consolidated, standardised and scalable IT landscape.
We work systematically to ensure high data quality and security. When available, we prefer standard, off-the-shelf IT systems.
We measure productivity and financial performance methodically across the organisation to ensure that management has the best possible basis for decision making.
Our international and regional shared service centres continue to develop and grow as administrative competency hubs, servicing our global organisation.
While we focus intensely on IT and business process optimisation, our people are at the heart of our operations. We strive to ensure that they have the best tools, training and conditions to perform their best.
We continue to develop and optimise our operational and administrative systems to support our skilled and entrepreneurial freight forwarders in working smarter.
This ultimately translates to high quality service and supply chain visibility for our customers and value creation for DSV shareholders.
Recruitment and retainment of talent remain key to DSV's success. We offer clear career advancing opportunities to talented employees. Global HR initiatives, e.g. DSV Academy, e-learning, talent management and global mobility, are all in place to attract, motivate and retain the very best people.
As an international freight forwarder we operate in the transport and logistics market, supporting our customers' entire supply chain – all the way from shipper to consignee.
As a part of this service, we organise the transportation of goods through our subcontractors (hauliers, container carriers and airlines). This makes us asset-light and able to scale activities to growth and demand in the market.
The key resources of a freight forwarding company are skilled people with logistics knowhow, efficient IT systems, global networks of offices and warehouses, as well as buying power and strong relations with transport companies/carriers.
Our global network covers more than 75 countries and consists of approximately 500 warehouses and cross-dock terminals and 600 office locations. In countries where we do not have our own network, we work with agents.
In addition to organising transports, we offer our customers a full range of services necessary for processing goods in different parts of the supply chain. These value-added services include purchase order management, cargo consolidation, insurance, customs clearance, pick-and-pack, etc.
Value-added services are a vital part of modern supply chains and they require a high level of industry knowhow. It is secure and convenient for our customers to procure these services from us, and allows us to monitor the entire supply chain and provide supply chain visibility services (e.g. exception management, track and trace, proof of delivery) as well as suggest initiatives for optimisation.
Value-added services represent the majority of DSV's gross profit.
DSV is among the top five global freight forwarders with an estimated 2% market share. Together, the top 5 players have a market share of approximately 15% of the global freight forwarding market, and the top 20 players approximately 30% of the market.
Because the freight forwarding market is fragmented it is highly competitive, making price one of the main competitive factors.
In recent years, several of the large freight forwarding players have systematically gained market share.
People — IT systems — Global network with local presence — Standardised global workflow Carrier relations — Industry knowhow
Alerts —Exception management — Track and Trace — Proof of delivery — KPI reporting
This is a trend we expect will continue, and DSV is committed to taking an active part in the industry consolidation by growing both organically and via M&A.
The global economy sets the pace for the transport and logistics market, and in recent years growth in global trade has been on par with global GDP-growth. This is also DSV's expectation for market growth in the coming years.
The growth varies regionally, and several global trends impact global trade flows – most significantly, the gradual change to consumption-driven economy, which is taking place in several developing countries. This means that classic export markets, mainly in Asia, are becoming more balanced as import grows.
During 2018, we saw introduction of trade tariffs and a general increase in protectionist measures with the US and China as the main campaigners.
Transports between China and US represent approximately 10% of DSV's air and sea volumes and, so far, we have seen a limited impact from the tariffs on our volumes.
Following the implementation of the first tariffs during 2018, some companies have been able to find alternative suppliers in alternative countries and there have been
2014
2015 2016 2017 2018
Morgan Stanley Research
Source:
Global real GDP Global trade
5
(%)
4
3
2
1
0
examples of inventory build-up ahead of the tariffs. However, large scale changes to established supply chains will take years.
UK's planned exit from the EU is another example of a change to international trade conditions. The UK represents approximately 5% of DSV's activities, and 2018 saw preparations for various Brexit scenarios, e.g. by adding extra capacity to handle customs clearance formalities.
New or increasing customs formalities will add complexity to supply chains and can lead to higher demand for value-added services.
We do not believe that the current geopolitical trends are "the end of globalisation" as we know it. Global supply chains are complex and production is highly specialised in different regions. This is likely to drive growth in global trade, also in the coming years.
Over time we may see increased regionalisation, where certain products are manufactured close to the end market. In this case, the need for transportation and logistics will partly shift focus from international to regional and domestic.
With our diversified geographical and business mix, we are well-positioned to pick up on regional and segmental growth to compensate for any declines in other areas.
Geopolitical dynamics aside, to survive and prosper in the future DSV must continue to be on top of emerging and prevalent trends to meet customer demand – for better, real-time trackable and sustainable logistics.
The global manufacturing industry is characterised by complex supply chains due to components being manufactured in different parts of the world.
Supply chains are increasingly becoming demand chains where customer demand dictates purchase orders and flow of goods. Consequently, companies are keeping stocks low to minimise inventory and risk.
This is driving demand for efficient logistics solutions where real-time tracking, alerts and punctual delivery are crucial elements.
Against the same background, e-commerce and omni-channel logistics (allowing consumers multiple options of shopping and delivery) continued to grow in 2018.
DSV's role in e-commerce is to deliver solutions for e-fulfilment: receiving orders, picking and packing and handling returns in our warehouses. In most markets, we partner with specialised parcel distributers and let them handle last mile distribution to private consumers.
Sustainability continued to be on the agenda of DSV and our customers in 2018. The focus of the transport and logistics industry is on reducing impact on the environment and the maturing of greener transportation technologies.
When start-ups, established carriers and online retailers develop smart digital customer interfaces and start offering traditional freight forwarding services we are potentially faced with new competition. However, DSV believes that the established freight forwarders with years of experience, large freight volumes and pre-existing global networks are in a strong position to hold on to and expand their market position.
DSV's Innovation Lab was established to ensure that we systematically monitor and prioritise relevant trends and technologies. Several technologies are already in use, while others are tested or merely monitored.
In the following, some of the most important trends impacting DSV are described.
Digitalisation impacts our interactions with customers and subcontractors in several ways and covers all the steps in the supply chain; from quote, purchase order, booking, shipment tracking and status alerts to the final billing and KPI reporting.
The rollout and continued development of our digital freight platform, myDSV, continued in 2018. We have made significant progress and DSV Road in Europe has successfully moved all online digital bookings to myDSV.com.
Mobile apps for scanning of shipment status (DSV Driver App, Last Mile Delivery App) were implemented in Road and Air & Sea.
Our Quote tool for road freight has been implemented over the last two years and provides an efficient and standardised process for quotes to customers.
Further development of digital interactions progressed in 2018 with work being done on eDC (purchase order management) as well as EDI and API integrations with customers.
For the past couple of years, predictive analytics has been at work in DSV to help predict customer departure. The technology is implemented as part of our Customer Success Programme and provides our account managers with a "warning" (with 85% accuracy) that a customer is dissatisfied or considering leaving.
The DSV Robotics Centre of Excellence is the hub of Robotic Process Automation (RPA) used to handle repetitive, data intensive and rules-based business processes in DSV. The use of RPA helps achieve cost reductions, quality improvements and shorter transaction times. By the end of 2018, there were more than 100 software robots "employed" in DSV.
Warehouse processes can be automated and streamlined in several ways. We have implemented voice-picking software in selected warehouses and seen a positive impact on productivity.
Automated guided vehicles and goods to man picking systems are other examples
of technologies we have implemented with success in selected warehouses.
Due to the high volumes in e-commerce, the potential benefits from warehouse automation are often highest for e-commerce customers.
Driverless trucks, 3D printing and blockchain are examples of technologies that have received significant attention in recent years. However, in our view, they are still a few years away from having a significant impact on our industry.
For now we monitor these and other technologies, and if we at some point see a good business case within a reasonable time frame, we will be ready to act.
This outlook assumes stable developments in the markets in which we operate.
The OECD and IMF project global economic growth around 3% in 2019, with lower growth rates in Europe and USA and higher growth in emerging economies, mainly
We expect growth rates in the transport markets to be in line with underlying economic growth and that DSV will be able to gain market share in all the markets,
Our expectations are based on the assumption that currency exchange rates, especially the USD, against the DKK will remain at the
current level (6 February 2019).
For 2019, we expect an operating profit before special items of DKK 5,900-6,300 million. Adjusted free cash flow is expected at the level of DKK 4,300 million.
The operating profit before special items is estimated to be positively impacted by DKK 300-350 million by the change of accounting policies following the implementing of IFRS 16. Adjusted free cash flow is not impacted by IFRS 16.
Adjusted for IFRS 16 impact the expected organic growth in operating profit before special items is 2-9%.
IFRS 16 will cause an estimated increase in financial expenses of DKK 350 - 370 million. This means that net financial expenses for 2019 are expected in the level of DKK 620-650 million.
| OUTLOOK FOR 2019 (DKKm) | Actual 2018 | IFRS 16 impact | Outlook 2019 |
|---|---|---|---|
| Operating profit before special items | 5,450 | + 300 - 350 | 5,900 - 6,300 |
| Adjusted free cash flow | 3,916 | - | 4,300 |
| Effective tax rate | 23.3% | - | 23% |
in Asia.
in which we operate.
The 2020 financial targets are adjusted for the impact of the changed accounting policies following the implementing IFRS 16, but are otherwise unchanged from last year and are expected to be achieved by 2020.
The targets are based on the assumption of stable global economic developments during the period, with global annual GDP growth of approx. 3% (with regional differences) and freight market growth in line with GDP growth.
The main drivers for reaching the targets are above-market volume growth in all divisions.
With growth in transport volumes and continuous focus on operational excellence, we see opportunities to improve productivity in all divisions.
The IFRS 16 accounting standard for leases will be applied from 1 January 2019 onwards. The standard will have a material impact on DSV's financial statements, as off-balance operating leases will be capitalized.
The estimated impact is described in note 1 (page 51).
| Previous 2020 | Revised 2020 | ||
|---|---|---|---|
| 2020 TARGETS | Target | IFRS 16 impact | Targets |
| DSV – total | |||
| Operating margin | 7.5% | 0.0% - +0.5% | > 7.5% |
| Conversion ratio | 32.5% | -1.5% - -2.5% | > 30.0% |
| ROIC (before tax) | > 25.0% | -7.0% - -8.0% | > 20.0% |
| Air & Sea | |||
| Operating margin | 10.0% | 0.0% - +0.5% | 10% |
| Conversion ratio | 42.5% | 0.0% - +0.5% | 42.5% |
| Road | |||
| Operating margin | 5.0% | 0.0% - +0.5% | 5.0% |
| Conversion ratio | 25.0% | -1.0% - -2.0% | 22.5% |
| Solutions | |||
| Operating margin | 6.0% | +1.0% - +2.0% | 7% |
| Conversion ratio | 25.0% | -2.5% - -3.5% | 22.5% |
Our capital structure is designed to ensure:
After the implementeation of IFRS 16 our targeted financial gearing ratio is below 2.0xEBITDA (previously 1.0-1.5x). The ratio may exceed this range following significant acquisitions.
Our free cash flow allocation strategy is unchanged from previous years:
DSV actively participates in the consolidation of a fragmented industry and has over the years created substantial shareholder value through M&A.
DSV has a track record of successful company integrations – and having successfully completed the integration of UTi Worldwide, DSV is ready for new M&A opportunities, provided a solid business case can be established.
As shown below DSV have been able to create an increasing return on invested capital over time. The value creation comes from joining our platforms and scale effects (stronger buying power, cross-selling from enhanced network and clientele, operational efficiencies in terms of freight capacity).
This value is distributed to shareholders through share buybacks and dividends. Group Management continuously monitors whether the realised and expected capital structure meets the targets set. Any adjustments to the capital structure are determined in connection with the release of quarterly financial reports and are made primarily through share buybacks.
DSV aims to ensure that the dividend per share develops in line with the earnings per share. Proposed dividends for 2018 amount to DKK 2.25 per share, equivalent to an increase of 12.5% on 2017.
This annual report includes forward-looking statements on various matters, such as expected earnings and future strategies and expansion plans.
Such statements are uncertain and involve various risks, because many factors, some of which are beyond DSV's control, may result in actual developments differing considerably from the expectations set out in the 2018 Annual Report.
Such factors include, but are not limited to, general economic and business conditions, exchange rate and interest rate fluctuations, the demand for DSV's services, competition in the transport sector, operational problems in one or more of DSV's subsidiaries and uncertainty in connection with the acquisition and divestment of enterprises.
The group achieved 7.9% growth in gross profit, driven by above-market growth in all divisions. Operating profit grew 14.5%, and the conversion ratio came to 31.2% and is closing in on the current 2020 target of 32.5%.
Adjusted free cash flow came to DKK 3,916 and we have distributed DKK 4,541 to shareholders via share buyback and dividend, in line with our the capital allocation policy.
Diluted adjusted earnings per share grew a solid 20.1% in 2018.
Revenue totalled DKK 79,053 million for 2018 (2017: DKK 74,901 million). Adjusted for exchange rate fluctuations (constant currencies), growth for the period was 8.1%.
The Air & Sea division achieved revenue growth of 8.5%, Road 3.8% and Solutions 18.3% (constant currencies). The global transport and logistics markets saw a volume growth of approx. 3% in 2018, which is estimated to be in line with growth in global economy. Market growth was slightly lower in the second half of 2018 as the general economy slowed down.
DSV's growth in revenue was driven by higher activity levels in all three divisions as well as market share gains, in particular within air
freight and in Solutions. Furthermore, average freigth rates were higher in 2018.
Revenue – primarily in Air & Sea – was negatively impacted by a DKK 1,786 million currency translation effect in 2018. This was mainly due to USD.
Gross profit totalled DKK 17,489 million for 2018 (2017: DKK 16,605 million), corresponding to an increase of 7.9% (constant currencies).
The growth was driven by higher activity level and higher average gross profit per shipment.
The Air & Sea division achieved growth in gross profit of 10.1%, Road achieved 2.0% and Solutions 13.2% (constant currencies). The gross margin was 22.1% for 2018, which was on level with 2017.
Regionally, the highest growth rates were achieved in the APAC region with 13.1% and in the Americas with 12.5%. In EMEA, growth in gross profit was 5.8% (constant currencies).
Gross profit – primarily in Air & Sea – was negatively impacted by a DKK 404 million currency translation effect in 2018.
(EBIT) totalled DKK 5,450 million for 2018 (2017: DKK 4,878 million), up 14.5% (constant currencies).
| (DKKm) | 2018 | 2017 |
|---|---|---|
| Revenue | 79,053 | 74,901 |
| Direct costs | 61,564 | 58,296 |
| Gross profit | 17,489 | 16,605 |
| Other external expenses | 3,036 | 3,110 |
| Staff costs | 8,241 | 7,831 |
| EBITDA before special items | 6,212 | 5,664 |
| Amortisation and depreciation | 762 | 786 |
| EBIT before special items | 5,450 | 4,878 |
| FULL-YEAR GROWTH | 2017 full-year |
Currency translation adjustments |
Growth incl. Acquisitions |
2018 full-year |
|---|---|---|---|---|
| Revenue | ||||
| Growth | -2.6% | 8.1% | 5.5% | |
| DKKm | 74,901 | (1,786) | 5,938 | 79,053 |
| Gross profit | ||||
| Growth | -2.6% | 7,9% | 5.3% | |
| DKKm | 16,605 | (404) | 1,288 | 17,489 |
| EBIT before special items | ||||
| Growth | -2.8% | 14.5% | 11.7% | |
| DKKm | 4,878 | (116) | 688 | 5,450 |
The Air & Sea division reported EBIT before special items of DKK 3,693 million (2017: DKK 3,225 million).
The Road division reported EBIT before special items of DKK 1,147 million (2017: DKK 1,201 million).
The Solutions division reported EBIT before special items of DKK 709 million (2017: DKK 494 million).
Regionally, the Americas recorded EBIT growth of 18.9%, APAC grew 22.9% and EMEA 9.9% (constant currencies).
The negative currency translation impact of DKK 116 million was primarily related to Air & Sea.
Total staff costs (excluding hourly workers) came to DKK 8,241 million for 2018 (2017: DKK 7,831 million). The development was impacted by inflationary adjustments of salaries, and despite a general improvement in productivity the higher activity level led to a slight increase in headcount in certain areas. The increase was partly offset by currency translation adjustments.
Other external expenses totalled DKK 3,036 million for 2018 (2017: DKK 3,110 million).
The conversion ratio was 31.2% for 2018 against 29.4% for 2017.
The improvement is attributable to improved productivity, especially in Air & Sea and Solutions, driven by a consolidated infrastructure and improved efficiency. Furthermore, the remaining synergies from the UTi integration were realised in 2018.
The operating margin was 6.9% for 2018 against 6.5% for 2017 and was impacted by the same factors as the conversion ratio.
There were no special items in 2018 (2017: DKK 525 million).
Gross profit can be broken down by the following geographical areas:
Net financial expenses totalled DKK 249 million for 2018 (2017: DKK 556 million).
Excluding the impact from exchange rate adjustments, net financial expenses were at the same level as last year, amounting to DKK 309 million in 2018 (2017: DKK 296 million).
The average interest rate payable on DSV's long-term loans, credit facilities and interest rate hedging was 2.2% in 2018 (2.2% in 2017).
Net exchange rate adjustments came to a net gain of DKK 60 million in 2018 (2017: a net loss of DKK 260 million). The exchange rate adjustments mainly related to intragroup loans and had no cash flow impact.
Tax on profit for the year totalled DKK 1,213 million for 2018 (2017: DKK 785 million). The effective tax rate was 23.3% versus 20.7% in 2017.
The effective tax rate for 2018 was at the expected level. For 2017, the effective tax rate was lower than normal, impacted by restructuring of UTi activities.
Profit for the year totalled DKK 3,988 million for 2018 against DKK 3,012 million for 2017. The growth was driven by higher operating profit, lower net financial expenses – and the absence of integration costs (special items) in 2018.
Diluted, adjusted earnings per share increased by 20.1% to DKK 22.1 for 2018 driven by the higher earnings.
Cash flow from operating activities was DKK 4,301 million for 2018 versus DKK 4,664 million for 2017. Cash flow was impacted by higher EBITDA before special items and absence of integration costs, but negatively impacted by higher net working capital.
In Q4 2018, extraordinary contributions to pension plans had a negative impact of aproximately DKK 250 million on cash flow.
Net working capital (NWC) came to DKK 1,767 million on 31 December 2018 (2017: DKK 1,410 million).
Relative to full-year revenue, funds tied up in NWC increased to 2.2% on 31 December 2018 versus 1.9% at year-end 2017.
Increased Air & Sea activities have led to higher NWC for the Group, compared to historical levels.
Cash flow from investing activities was a cash outflow of DKK 444 million in 2018 (2017: DKK 325 million).
Free cash flow came to DKK 3,857 million for 2018 against DKK 4,339 million for 2017.
Adjusted free cash flow (excluding the impact from M&A and special items) amounted to DKK 3,916 million in 2018 versus DKK 4,835 million in 2017.
In accordance with DSV's capital allocation policy, the free cash flows for 2018 were distributed to shareholders as the financial gearing ratio has been within the target range throughout the year.
| DILUTED ADJUSTED EARNINGS PER SHARE (DKKm) |
2018 | 2017 |
|---|---|---|
| Profit for the year | 3,988 | 3,012 |
| Non-controlling interests' share of consolidated profit for the year | (12) | 31 |
| DSV A/S shareholders' share of profit for the year | 4,000 | 2,981 |
| Amortisation of customer relationships | 28 | 41 |
| Share-based payments | 93 | 68 |
| Special items, net | - | 525 |
| Related tax effect | (28) | (131) |
| Adjusted profit for the year | 4,093 | 3,484 |
| Diluted average number of shares in circulation ('000) | 185,287 | 189,112 |
| Diluted adjusted earnings per share of DKK 1 | 22.1 | 18.4 |
| CASH FLOW STATEMENT (DKKm) |
2018 | 2017 |
|---|---|---|
| Cash flow from operating activities | 4,301 | 4,664 |
| Cash flow from investing activities | (444) | (325) |
| Free cash flow | 3,857 | 4,339 |
| Cash flow from financing activities | (4,000) | (4,715) |
| Cash flow for the period | (143) | (376) |
| Adjusted free cash flow | 3,916 | 4,835 |
DSV shareholders' equity share came to DKK 14,561 million on 31 December 2018 (2017: DKK 14,835 million). The solvency ratio was 37.5% at the end of 2018 (2017: 38.6%).
Movements in equity mainly relate to net profit for the year, purchase and sale of treasury shares, distribution of dividends, and currency translation adjustments for foreign enterprises.
Net interest-bearing debt amounted to DKK 5,831 million on 31 December 2018 against DKK 5,575 million on 31 December 2017.
The financial gearing ratio (net interestbearing debt to EBITDA before special items) was 0.9 at year-end 2018 (2017: 1.0).
On 31 December 2018, the total duration of DSV's bond, loan and credit facilities was 3.2 years (2017: 3.2 years).
Credit rating: In September 2018, S&P Global Ratings assigned a BBB+ long-term issuer credit rating to DSV A/S with a stable outlook.
Invested capital amounted to DKK 20,381 million on 31 December 2018 (2017: DKK 20,391).
Return on invested capital (ROIC before tax) was 26.7% in 2018 versus 23.4% in 2017. The increase was mainly driven by higher operating profit (EBIT before special items).
In Company Announcement no. 734 from 16 January 2019, we informed that we had made a private proposal to acquire Panalpina Welttransport Holding AG. Please refer to note 5.8 page 80 for further details.
| 2018 | 2017 |
|---|---|
| 14,835 | 13,416 |
| 4,000 | 2,981 |
| (380) | (342) |
| (4,161) | (1,559) |
| 372 | 303 |
| (144) | (429) |
| 39 | 465 |
| 14,561 | 14,835 |
| 2018 | 2017 |
| 2,895 | 2,027 |
| 3,972 | 4,713 |
| 192 | 217 |
| 79 | 29 |
| 7,138 | 6,986 |
| 149 | 63 |
| 1,158 | 1,348 |
| 1,307 | 1,411 |
| 5,831 | 5,575 |
21,000 18,000 15,000 12,000 9,000 6,000 3,000 0
Invested capital incl. goodwill and customer relationships ■ ROIC incl. goodwill and customer relationships
NET INTEREST-BEARING DEBT AND GEARING RATIO
NIBD (DKKm) ■ Gearing ratio
Driven by our strong focus on sales and increasing productivity, DSV Air & Sea achieved 10.1% growth in gross profit and 18.2% items in 2018.
After a strong start to 2018, growth in the air freight market dropped to a level of 4% for the year. Compared to the growth level of 8-9% in 2017, when the air freight market experienced the strongest volume growth in nine years, we consider the market growth in 2018 to be on a more normal level, closer to the growth rate in the underlying economy.
(Growth% is presented in constant currencies)
DSV performed well in this market, securing an increase in air freight tonnes of 8%. As was the case for the market, our growth rates were highest in the first half of 2018 and throughout the year we achieved the highest growth in exports from Europe and North America.
The sea freight market grew 3%, in line with the underlying economy.
DSV achieved sea freight volume growth of 4%, which was slightly above market level. DSV's performance was impacted by the fact that our largest trade lane, Asia-Europe with approx. one third of total volume, saw a modest market growth during 2018. On the positive side, Europe-North America developed strongly.
The implementation of trade tariffs between the US and China has had limited impact on DSV's performance in 2018. The trade lane represents approx. 10% of our total volume.
| GROWTH IN FREIGHT VOLUMES 2018 |
DSV | Market |
|---|---|---|
| Sea freight – TEUs | 4% | 3% |
| Air freight – tonnes | 8% | 4% |
Market growth rates are based on DSV estimates
Revenue totalled DKK 36,972 million for 2018 (2017: DKK 35,204 million). In constant currencies, growth for the year was 8.5%.
The increase in revenue was mainly driven by growth in both air and sea freight volumes.
Furthermore, the average freight rates – mainly for sea freight – were higher in 2018 than in 2017.
Revenue was negatively impacted by a DKK 1,126 million currency translation effect in 2018.
Gross profit totalled DKK 9,193 million for 2018 (2017: DKK 8,624 million). In constant currencies, growth for the year was 10.1%.
The increase in gross profit was driven by higher freight volumes. The development in gross profit per shipment was satisfactory in 2018 and improved for both air and sea.
The division's gross margin was 24.9% for 2018 against 24.5% for 2017.
EBIT before special items totalled DKK 3,693 million for 2018 (2017: DKK 3,225 million). In constant currencies, growth for the year was 18.2%.
The earnings growth in constant currencies was driven by all regions with a strong performance across EMEA (11.8%), the Americas (19.0%) and APAC (23.7%).
The conversion ratio was 40.2% for 2018 against 37.4% for 2017. The operating margin was 10.0% for 2018 compared to 9.2% last year.
The profit margin improvement was driven by continued production effciency improvements across the organisation. The division has successfully leveraged on the global network, efficient IT infrastructure and back-office functions.
| CONDENSED INCOME STATEMENT AND KEY FIGURES (DKKm) |
2018 | 2017 |
|---|---|---|
| Revenue | 36,972 | 35,204 |
| Direct costs | 27,779 | 26,580 |
| Gross profit | 9,193 | 8,624 |
| Other external expenses | 1,854 | 1,798 |
| Staff costs | 3,560 | 3,490 |
| EBITDA before special items | 3,779 | 3,336 |
| Amortisation and depreciation | 70 | 88 |
| Amortisation of customer relationships | 16 | 23 |
| EBIT before special items | 3,693 | 3,225 |
| Gross margin (%) | 24.9 | 24.5 |
| Conversion ratio (%) | 40.2 | 37.4 |
| Operating margin (%) | 10.0 | 9.2 |
| Total invested capital | 11,144 | 11,377 |
| Net working capital | 1,808 | 1,539 |
| ROIC (%) | 32.8 | 27.8 |
| Number of full-time employees at year-end | 12,130 | 12,041 |
| AIR FREIGHT | ||
| Revenue | 18,892 | 17,579 |
| Direct costs | 14,265 | 13,361 |
| Gross profit | 4,627 | 4,218 |
| Gross margin (%) | 24.5 | 24.0 |
| Volume (tonnes) | 689,045 | 635,655 |
| Gross profit per unit (DKK) | 6,715 | 6,635 |
| SEA FREIGHT | ||
| Revenue | 18,080 | 17,625 |
| Direct costs | 13,514 | 13,219 |
| Gross profit | 4,566 | 4,406 |
| Gross margin (%) | 25.3 | 25.0 |
| Volume (TEUs) | 1,442,348 | 1,389,611 |
| Gross profit per unit (DKK) | 3,166 | 3,171 |
Exchange rate fluctuations had a negative impact on EBIT before special items of DKK 102 million in 2018.
Net working capital came to DKK 1,808 million at the end of 2018 against DKK 1,539 million at year-end 2017. The increase was mainly attributable to higher activity levels in 2018.
Return on invested capital was 32.8% in 2018 against 27.8% in 2017. The increase was mainly due to an increase in operating profit.
STRATEGIC AND OPERATIONAL HIGHLIGHTS In 2018, we concentrated on organic growth, sales and on increasing both individual and team productivity.
Our employees have done an impressive job, improving productivity, which was already among the highest in our industry.
While a significant part of our sales organisation is focused on local sales and the SME segment, our global sales organisation was successful in landing new, large accounts as well as developing existing accounts.
GEOGRAPHIC SEGMENTATION 2018
Division gross profit can be broken down by the following geographical areas:
APAC
In our local sales teams we strove to become even more customer centric, and our operational teams aimed to provide even better services. We worked on defining clear sales targets and, not least, focused on the face time with our customers.
On the digital front, we made progress on KPI reporting to customers. We now have an automated setup, operated from our shared services centre, where standardised reports are produced with the help of software robots (robotics).
On the supplier side, we have also made progress on digital integrations. This enables us to provide improved status information to customers.
For 2019, we are planning to onboard more customers to our digital customer interface, myDSV, with options for shipment booking, tracking, alerts and reports.
To optimise our global network we have restructured our Sub-Saharan activities in 2018. Futhermore, with our new office in Panama, we believe we are well positioned for further growth in the Central American market.
In 2019, we will continue to focus on winning market share and grow earnings.
We are confident that we have the best people in the business to drive the progress towards securing more large accounts, and our global sales organisation is gaining momentum.
In 2018, DSV Road focused on organic growth and improvement of productivity. As a result, DSV Road could report a 3% increase in number of shipments and an EBIT before special items of DKK 1,147 million against DKK 1,201 million in 2017. Adjusted for one-off gain in 2017, growth in EBIT before special items came to 8.2%.
Europe is the main market for DSV Road, representing almost 90% of revenue. North America is the largest DSV Road market outside Europe.
We estimate that the European road freight market grew 2-3% in 2018, in line with the underlying economic growth rate.
DSV Road achieved 3% growth in shipments in 2018, thus modestly outgrowing the market.
(Growth% is presented in constant currencies and adjusted for DKK 125 million one-off in 2017)
In Europe, the balance between supply and demand for haulage capacity was better in 2018 compared to a tough 2017. During 2018, the haulage capacity was tight in the busiest months. In general, we have been able to secure the necessary capacity, but the situation led to increasing freight rates. In North America, the capacity situation remains challenging due to structural shortage of drivers.
| GROWTH IN ROAD SHIPMENTS 2018 |
DSV | Market (Europe) |
|---|---|---|
| Shipments | 3% | 2-3% |
Market growth rate is based on DSV estimates
Revenue totalled DKK 31,243 million for 2018 (2017: DKK 30,627 million). In constant currencies, growth for the year was 3.8%.
The increase was mainly attributable to the growth in number of shipments.
We saw the strongest growth areas for DSV Road in Benelux, Scandinavia and Eastern Europe. North America also saw positive development.
Gross profit totalled DKK 5,308 million in 2018 (2017: DKK 5,287 million). In constant currencies, growth for the year was 2.0%. When adjusted for a DKK 125 million property gain in Q1 2017, growth in constant currencies was 4.5% for the year.
The increase in gross profit was mainly driven by growth in volumes.
The division's gross margin for 2018 was 17.0% (2017: 17.3%). The market remains highly competitive, leading to pressure on the gross margin. The gross margin was also impacted by a slight change in product mix as the division has grown in the domestic distribution market, which normally carries a lower GP margin than cross-border traffics.
EBIT before special items totalled DKK
1,147 million for 2018 (2017: DKK 1,201 million).
The decline in EBIT was due to the property transaction in Q1 2017. Adjusted for this the underlying growth was 8.2% in constant currencies.
Both North America and several European countries performed well and achieved growth in earnings in 2018.
2018 was also impacted by the successful turn-around of certain underperforming countries and activities.
The conversion ratio was 21.6% for 2018 (2017: 22.7%).
The division's operating margin for 2018 was 3.7% (2017: 3.9%).
Net working capital came to DKK -708 million at the end of 2018 against DKK -921 million at year-end 2017. The development was mainly attributable to a higher activity level. Return on invested capital was 26.8% in 2018 against 32.0% in 2017. Though lower than previous years, the level of return on invested capital is still very satisfying for the division.
| CONDENSED INCOME STATEMENT AND KEY FIGURES (DKKm) | 2018 | 2017 |
|---|---|---|
| Revenue | 31,243 | 30,627 |
| Direct costs | 25,935 | 25,340 |
| Gross profit | 5,308 | 5,287 |
| Other external expenses | 1,326 | 1,269 |
| Staff costs | 2,706 | 2,672 |
| EBITDA before special items | 1,276 | 1,346 |
| Amortisation and depreciation | 125 | 139 |
| Amortisation of customer relationships | 4 | 6 |
| EBIT before special items | 1,147 | 1,201 |
| Gross margin (%) | 17.0 | 17.3 |
| Conversion ratio (%) | 21.6 | 22.7 |
| Operating margin (%) | 3.7 | 3.9 |
| Number of full-time employees at year-end | 12,850 | 12,998 |
| Total invested capital | 4,342 | 4,215 |
| Net working capital | (708) | (921) |
| ROIC (%) | 26.8 | 32.0 |
Division gross profit can be broken down by the following geographical areas:
Our focus in 2018 was organic growth and improved financial performance. Adjusted for property gain we managed to improve the financial results and to turn around underperforming activities.
Financial performance is of course strongly linked to operational performance, and 2018 was very much the year of the customer: meeting customer demand and focusing on customer relations.
The customer demand for more digital services and real-time tracking of shipments continued in 2018, prompting us to speed up and complete the onboarding of all European Road countries to our digital portal, myDSV.
At present, the self-service portal allows customers to easily book and track shipments as well as access standard reports online – while still having the option of contacting a freight forwarder.
Further developments, e.g. the addition of online quotes, are planned for 2019.
Another digital project carried over from 2017 was the implementation of the DSV Driver app used by European drivers to scan pick-ups and deliveries. The app became available for download in April and by the end of 2018 close to 4,000 drivers were using the app, which feeds delivery status information into myDSV. Another initiative to improve real-time shipment tracking.
The development of a new transport management system (CWF) for our Road activities continued in 2018. In September, Austria became the second country to start using CWF as a pilot.
As in previous years, we added new and more efficient terminals to our roadmap in 2018: new terminals opened in Paris, Jönköping and Helsinki; and in the UK and Germany, we made improvements to existing terminals to increase productivity.
The above-mentioned projects will all run into 2019 and continue to demand focus from the organisation.
We will continue to develop our activities and strive to take market share in all regions, not least in Europe and North America, and are confident that we can take advantage of the momentum created in 2018. Focus will be on optimisation and automation and providing quality and excellent customer service through dedicated customer services centres.
In 2018, the contract logistics and omni-channel markets continued the upward movement from 2017. This led the division to achieve 13.2% growth in gross profit and 44.1% growth in EBIT before special items.
MARKET SITUATION AND PERFORMANCE
Activity levels in the global market for contract logistics were up in 2018. The estimated market growth was 3-4%, affording great opportunity to grow with the market.
While the growth applied to most industries, e-commerce once again took the lead with significant hype around the major online retail players.
As a result, warehouse occupancy rates went up and the demand for new warehouse capacity rose. DSV also took part in the general expansion of warehouse capacity in the market in 2018 by adding approximately 6% new warehouse capacity and replacement of existing, small and less efficient sites.
Revenue totalled DKK 13,229 million in 2018 (2017: DKK 11,362 million). In constant currencies, growth for the year was 18.3%.
The division achieved growth with both new and existing customers, mainly in the industrial, automotive and retail segments. This increase was handled both via new warehouses and through better utilization of existing capacity.
Gross profit totalled DKK 3,035 million in 2018 (2017: DKK 2,730 million). In constant currencies, growth for the year was 13.2%.
The increase in gross profit for the period was mainly attributable to higher activity levels. In 2018, we added approximately 9% new staff – mainly warehouse workers - to handle the increase in activity.
The division's gross margin was 22.9% in 2018 against 24.0% in 2017.
EBIT before special items totalled DKK 709 million in 2018 (2017: DKK 494 million). In constant currencies, growth came to 44.1%.
The conversion ratio was 23.4% in 2018 against 18.1% last year. The division's operating margin was 5.4% in 2018 against 4.3% in 2017.
Growth in earnings was mainly driven by strong performance in the EMEA region. The margin improvement was driven by a higher gross profit and improved performance in several locations.
Net working capital amounted to DKK 818 million on 31 December 2018 (2017: DKK 905 million). The improvement was achieved as a result of the division's focus on optimising NWC.
Return on invested capital was 17.9% in 2018 versus 12.4% last year. The increase was mainly due to higher operating profit.
With an occupancy rate of approximately 93%, DSV Solutions was able to report close to "full house" in 2018. This was the result of new customer wins and more business with existing customers.
The retail (including e-commerce), automotive and pharma industries were our most successful industries.
For several years, we have focused on optimising and consolidating our warehouse
| CONDENSED INCOME STATEMENT AND KEY FIGURES (DKKm) |
2018 | 2017 |
|---|---|---|
| Revenue | 13,229 | 11,362 |
| Direct costs | 10,194 | 8,632 |
| Gross profit | 3,035 | 2,730 |
| Other external expenses | 955 | 884 |
| Staff costs | 1,141 | 1,087 |
| EBITDA before special items | 939 | 759 |
| Amortisation and depreciation | 222 | 253 |
| Amortisation of customer relationships | 8 | 12 |
| EBIT before special items | 709 | 494 |
| Gross margin (%) | 22.9 | 24.0 |
| Conversion ratio (%) | 23.4 | 18.1 |
| Operating margin (%) | 5.4 | 4.3 |
| Number of full-time employees at year-end | 20,025 | 18,382 |
| Total invested capital | 3,947 | 3,992 |
| Net working capital | 818 | 905 |
| ROIC (%) | 17.9 | 12.4 |
Division gross profit can be broken down by the following geographical areas:
capacity, and we now see the positive impact of this consolidation. The construction of new warehouse capacity will continue in the coming years with several ongoing and planned projects.
We continue to focus on increasing productivity, through warehouse automation, standardised operating processes and implementation of planning tools.
The roll-out of our global WMS platform continues, and the platform is now used for more than 60% of the division's activity.
The preparation for a possible hard Brexit has impacted the activities of and planning for several customers during 2018.
Among other things, we have assisted in establishing continental European dispatch warehouses, replacing UK-based distribution centres.
In September, we acquired S&H Product Fulfilment. The company was rebranded DSV Multi-channel Fulfilment and continues as a stand-alone company in the DSV Group.
With this addition, DSV Solutions can now offer all services related to e-fulfilment in Europe – from webshop design to fulfilment of orders, payment and returns handling. The plan is to expand these standardised services globally.
We expect the positive market trend driving demand for more warehouse capacity and related logistics capabilities to continue into 2019.
Our focus will yet again be on winning more contracts and on expanding our business activities with existing customers. This is likely to result in more warehouse construction projects in 2019.
At the same time, we will continue to work on the consolidation and optimisation of existing warehouses, systems and processes to further optimise productivity.
We will also target growth in the pharma and healthcare industries. We already have multiple specialised pharma warehouses around the world, all of which are certified according to relevant ISO and GDP standards.
We maintain our goal of gaining market share, especially in the omni-channel market.
As a global freight forwarder, we are exposed to a variety of risks inherent in our daily business operations. Managing these risks by reducing the likelihood of occurrence as well as the financial impact of these to an acceptable level are a vital and integrated part of our managing activities.
Our risk management framework is based on structured risk identification, analysis and reporting processes. This provides the basis for risk assessments and subsequent initiation of relevant mitigation actions.
Our flat organisational structure ensures fast escalation and timely response to issues that may have a material impact on the Group's earnings, 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.
As illustrated, our risk management process
consists of two parallel processes within the organisation:
Every week, the Executive Board receives consolidated reports on risks and other operational matters of importance from across the Group, including risk mitigation actions undertaken by the relevant risk owners.
These reports form the basis of the Executive Board's day-to-day risk management activities and also serve as input for the ongoing reporting to the Board of Directors and the Audit Committee.
In addition, the reporting is used in the ongoing monitoring and reassessment of identified key risks as described in the following.
The ongoing operational risk management process is followed up on a yearly basis by an extensive Group-wide risk analysis, in which the risks observed by key employees across the Group are analysed and consolidated into a key risk map. These key risks are addressed by the Executive Board, the
Audit Committee and the Board of Directors as part of the strategic decision-making of the Group.
Key risks identified are assigned to individual risk owners within the Group ensuring that they are addressed and mitigated to an acceptable level.
The status of key risks is reported to the Audit Committee and formalised at yearend by presentation to and approval by the Audit Committee and the Board of Directors.
The latest analysis of the Group's internal and external strategic risks was carried out in the last quarter of 2018.
The analysis confirmed six overall key risk categories that may have a significant impact on the Group's earnings, financial position and achievement of other strategic objectives. The results of the risk analysis, including developments in the risk assessment since last year, are presented in the risk map to the right.
The overall key risks identified, the preventive actions taken to mitigate these risks and the overall development tendencies since last year are described in the following pages.
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 outages, cyber-attacks and failed IT implementation.
Furthermore, we rely on the scalability of our systems, continuous innovation and improvement of our IT landscape to be able to offer competitive services that meet our customers' expectations, improve our productivity and respond to new business opportunities as they arise.
Our IT strategy comprises continued centralisation and standardisation of our systems and processes. This strategy also applies to acquired companies, which we move to DSV's operational and administrative IT platforms as quickly as possible, only retaining systems that add value and which are not duplicated by existing DSV systems.
Our Global IT department oversees IT risks. In cooperation with the rest of the organisation, Global IT undertakes the implementation and operation of uniform systems, standards and controls, and the decommissioning of redundant systems and oversees the coordinated reporting on operational status, security risks, etc.
We focus on rolling out centrally managed solutions worldwide to reduce the number of software and hardware applications in use. This allows for central management and monitoring of platforms, master data, control systems and security functions.
In 2018, we experienced stable performance of our IT infrastructure - both in terms of operational stability and successful mitigation of cyber-attacks.
We have invested further in IT infrastructure following the trend from previous years, mainly focusing on upgrades to our server platforms, continued worldwide rollout of centralised operational, financial and reporting systems, and the implementation of additional cyber-attack mitigation measures.
The mitigation of security risks has been further strengthened through updates to our server platforms, backup systems and by additional investments in dedicated IT security staff functions.
Based on the investments made and the reliable track record of our systems, the probability of negative IT incidents occurring has been slightly reduced in the Group risk assessment for 2018.
Employees are a vital resource to DSV. Our business depends on highly qualified management teams and employees with technical and operational qualifications at all organisational levels, who are capable of handling situations out of the ordinary, and jointly contributing to the Group's financial results.
Failure to attract new talents or retaining existing, experienced key employees can potentially have long-term consequences for the operational, strategic and financial development of DSV.
To retain and attract the right colleagues, we strive to ensure that DSV is an attractive place to work.
We have done this by establishing a performance culture where our employees are empowered and have the ability to influence their everyday work life. Additionally, we offer clear career advancing opportunities to talented employees.
We accommodate this strategy through several initiatives undertaken locally and by our global HR department. Examples of focus areas include training and talent development programmes targeted at all organisational levels, from trainee programmes to executive training.
Because of the economic upturn in recent years, hiring and retaining the right people still present challenges in certain parts and/or geographic areas of our business.
To counter this we have continued to focus on various HR initiatives, including succession planning and talent management programmes. Additionally, extended resources have been assigned to our HR departments across the organisation.
Based on these continued efforts, the probability of failed employee retention/attraction occurring has been slightly reduced in the Group risk assessment for 2018.
The supply of logistics services and solutions, mainly in the business-to-business market, is our core activity. An economic recession leading to stagnation or declining economic growth will therefore directly impact our activity level and consequently our financial results.
Similarly, protectionist measures enacted by the major world economic powers may also have a negative impact on overall economic growth, although restrictions on cross-border world trade may be counterbalanced to some extent by increasing domestic activities and demand for related logistics services, such as customs clearance, etc.
To diversify our geographical exposure, we have in recent years focused on organic and acquisitive growth outside Europe, which historically has been our main market.
We combine this strategy with a continued focus on staying true to our core asset-light business model and with a high attention to process and cost optimisation. Combined with close monitoring of market developments and our financial results, this enables us to respond quickly to changes in activity levels.
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 potential slowdown in individual markets. We have a history of stable earnings margins, even in periods of declining freight volumes.
Following the trend from previous years, 2018 generally saw stable economic growth in most of the markets in which we operate.
We have seen the contribution from the Americas and APAC regions steadily increasing for more than a decade now, implying that close to 50% of our earnings today are generated outside of Europe.
However, even though we are a global network company and more diversified than ever, we are still impacted by regional economic fluctuations.
In 2018, we saw mixed signals and rising concerns about protectionist measures enacted by some of the major world economic powers. These have yet to manifest themselves in any measurable negative effect on our financial results, however the uncertainty is there and is something we are following closely. Hence, the likelihood of negative macroeconomic risks occurring has been increased in the Group risk assessment for 2018.
Growth through acquisitions is fundamental to our corporate strategy. As such, the current DSV network is to a large extent a result of past strategic acquisitions.
Acquisitions always entail a risk of unsuccessful integration of the acquired company, which could result in cost synergies, strategic advantages and economies of scale being delayed or not fully achieved.
Furthermore, deciding on and carrying out the wrong acquisition may be costly and take up valuable resources that could have been spent on other potential acquisition candidates.
DSV has a history of successful integration of acquired companies and realisation of expected synergies.
This success rests on several factors. First of all, we stress the importance of potential acquirees matching DSV's existing business model. Secondly, all acquisitions are based on a thorough due diligence process including all vital aspects (financial, operational, IT, legal and tax). In addition, our IT, reporting and operational systems are designed to be scalable to accommodate the effective integration of new entities into the Group.
The integration work in each country is based on clear ownership, where the local management team heads the integration based on guidelines from Group Management. Furthermore, our focus on centralisation of administrative processes and systems means that we are able to integrate, adapt and support a range of services for the acquired companies from an early stage of the integration process.
2018 marked the completion of the UTi integration. The acquisition was initiated three years ago and has been the largest and most complex in the history of DSV. The integration was completed according to plan.
The successful completion of the UTi integration has removed any remaining uncertainties and reaffirmed the capabilities of the DSV organisation to successfully carry out acquisitions and integrate businesses.
For this reason, the potential financial impact of failed M&A activities and the likelihood of occurrence has been lowered in the Group risk assessment for 2018.
As with most industries, the freight forwarding business is undergoing gradual changes – both in terms of technological developments and the competitive landscape. This development is driven by existing players and new entrants to the market.
In this regard, digitisation and automation of processes (quoting, booking, tracking, reporting and billing) are the most important developments we are seeing impacting the freight forwarding market.
These developments represent an opportunity to optimise workflows and increase productivity, but also imply higher service levels expected by our customers. Failure to adapt to this will lead to a gradual long-term loss of market share and earnings.
Our overall mitigation approach is centred on constant monitoring of the logistics market, technologies, customer offerings and other processes that could potentially impact the way we do business. We see new technologies as opportunities not threats, and we are always open to new ideas.
Based on this we focus on developing our services, systems and operational procedures to ensure that DSV has a strong and competitive product offering that fulfils our customers' requirements and expectations.
An indirect impact of new technologies and changes in the competitive landscape is that some of the basic freight forwarding services may become commoditised, leading to increasing price pressure. To compensate for this, we continuously seek to increase the scope of value-added services towards our customers.
Failure to adapt the existing DSV business model to new technologies, services or other related business opportunities remains a risk that we do not take lightly.
However, even though new technologies and related new ways of doing business continue to emerge, we are still to see new innovations that will have the potential to impact the DSV core business in any significant way in the foreseeable future.
Likewise, we feel comfortable with our current technological initiatives, keeping us competitive and on a par with the industry development.
Consequently, the probability of occurrence has been slightly reduced in the Group risk assessment for 2018.
Because of our global operations, we are subject to extensive national and international legislation and regulations. Statutory regulations relating to tax, customs, VAT and competition law are increasing in scope and complexity.
DSV, including Management and staff, may risk fines, prison sentences and claims for damages in case of non-compliance. Non-compliance may also have a long-term negative impact on DSV's reputation.
Compliance has high priority in DSV and our internal procedures and IT systems are designed to ensure compliance with relevant legislation and the DSV Code of Conduct.
This is embedded in our manuals and business processes, which are adopted throughout the organisation and contain clear guidelines on how employees should act in relation to particularly risky issues or situations.
At group level we monitor and manage areas of risk in close cooperation with all business units.
The transfer of UTi activities to DSV operational systems and compliance framework has strengthened the combined organisation and reduced the risk of non-compliance.
However, we still face increasing requirements and regulations from authorities and organisations. Additionally, the fines issued by the authorities in cases of non-compliance are also increasing. This puts pressure on our organisation, systems and procedures to mitigate the risk of non-compliance.
With the completion of the UTi integration, the probability of compliance risks occurring has been slightly reduced, whereas the potential financial impact of non-compliance has been slightly increased in the Group risk assessment for 2018.
Together, the Board of Directors and the Executive Board constitute the governing body of DSV. The ultimate authority rests with the shareholders in general meeting.
The Board of Directors supervises and outlines the overall visions, strategies and objectives for the development of the Group's business activities.
The Executive Board is responsible for the day-to-day management and the execution of the strategy, and furthermore contributes essential input to the work of the Board of Directors.
The Board of Directors has established audit, nomination and remuneration committees to perform various preparatory tasks relating to key areas of the Board's work.
The allocation of responsibilities between the Board of Directors and the Executive Board is laid down in the relevant Rules of Procedure.
The individual Division Managers are responsible for the day-to-day operations of the divisions supported by centralised Group functions.
Organisation
The Board of Directors of DSV currently has six members. According to the Company's Articles of Association, the Board of Directors must comprise at least five and not more than nine Directors. Directors are elected for a term of one year at a time, and new Directors are elected according to the applicable rules of the Danish Companies Act.
The composition of the Board of Directors is intended to ensure the diversity of the Board's competency profile and that the Board is able to perform its duties effectively. Overboarding is also taken into consideration when considering the Board composition.
Current competencies required of and possessed by the Board are knowledge of the transport sector, international commercial experience and experience in strategy, M&A, risk management, IT, human resources and accounting.
In instances where specialised knowledge or insight is required in supporting the work of the Board, services may be obtained from external advisors or specialists.
See page 37 for a description of the individual Directors' competencies and experience.
Once a year, the Board of Directors performs an overall self-evaluation, focusing on the results, composition and competencies of the Board. In this regard, diversity, overboarding, internal management cooperation, succession planning and focus areas for the coming year are also considered.
The Chairman of the Board is in charge of the self-evaluation process. When completed, the self-evaluation report is presented to and discussed by the Board.
The result of the self-evaluation conducted in 2018 did not give rise to any significant considerations and supports the current composition of the Board.
On this basis, the Board is considered to have the right competencies supporting the long-term value creation for our shareholders.
According to the Danish Recommendations on Corporate Governance, four of the six members of the Board of Directors are regarded as independent. Kurt K. Larsen (Chairman) and Jørgen Møller were members of the Executive Board and Division Management, respectively, until joining the Board of Directors and are therefore not regarded as independent Board members as defined in the Recommendations.
The Board of Directors held eight ordinary and three extraordinary board meetings in 2018. The content of the meetings is determined by the annual cycle of the Board, thus ensuring that all important policies are reviewed.
The Board of Directors and the Executive Board of DSV. Standing (from left): Jens Bjørn Andersen, Kurt K. Larsen, Jørgen Møller, Thomas Plenborg, Robert Steen Kledal, Jens H. Lund. Sitting (from left): Annette Sadolin, Birgit W. Nørgaard.
Besides the work laid down in the annual cycle, in 2018 the Board also focused on other ad hoc tasks such as merger and acquisition proposals and updated Recommendations on Corporate Governance.
The Board meeting attendance for 2018 is highlighted in the following:
| Meeting attendance 2018 | Board of Directors |
Audit Committe |
Nomination Committee |
Remuneration Committee |
|---|---|---|---|---|
| Kurt K. Larsen | 11/11 | 3/4 | 2/2 | 2/2 |
| Thomas Plenborg | 11/11 | 4/4 | - | 2/2 |
| Jørgen Møller | 10/11 | - | 2/2 | - |
| Annette Sadolin | 10/11 | 3/4 | 2/2 | - |
| Birgit W. Nørgaard | 11/11 | - | 2/2 | - |
| Robert Steen Kledal | 11/11 | - | - | - |
The Audit Committee consists of three members with expertise and experience in financial accounting.
The overall tasks of the Audit Committee are:
The Committee held three ordinary and one extraordinary meetings in 2018. Furthermore, the Committee maintains a close dialogue with relevant management levels during the year, both formal and informal. Besides the work laid down in the annual cycle, the adoption of new IFRS standards, with the main focus being on IFRS 16, various structural matters and other specific accounting matters were the focus areas of 2018.
The Rules of Procedure of the Audit Committee are available at investor.dsv.com/policies.cfm
The Nomination Committee consists of four members, who focus on ensuring an optimal composition of the Board of Directors and the Executive Board.
The overall tasks of the Nomination Committee are:
The Committee held two meetings in 2018, mainly focusing on the composition of the Board of Directors besides the talent management, diversity and succession planning processes of DSV.
The Rules of Procedure of the Nomination Committee are available at investor.dsv.com/policies.cfm
The Remuneration Committee consists of two members, who address the general remuneration policy of DSV.
The overall tasks of the Remuneration Committee are:
• to make proposals for the remuneration of members of the Board of Directors and the Executive Board;
• to ensure compliance with DSV remuneration policies for members of the Board of Directors and the Executive Board;
The Committee held two meetings in 2018, focusing among other issues on the updated Recommendations on Corporate Governance in respect of remuneration recommendations and the implications of the European Union Shareholders Rights Directive for the DSV remuneration policies and reporting.
The Rules of Procedure of the Remuneration Committee are available at investor.dsv.com/policies.cfm
The Remuneration of the Board of Directors and the Executive Board is carried out in accordance with the DSV Remuneration Policy and guidelines for incentive pay as adopted by the Annual General Meeting.
The Remuneration Policy and guidelines are designed to ensure that DSV is always able to attract and retain a qualified Management team to support the long-term value creation for our shareholders.
At the 2019 Annual General Meeting, the Board of Directors plans to propose a revised Remuneration Policy. The revised Policy is intended to reduce the cash bonus element of the Executive Board remuneration package, and instead increase the fixed salary.
In managing DSV the Board of Directors actively uses the Danish Recommendations on Corporate Governance of 23 November 2017, issued by the Danish Committee on Corporate Governance.
This implies using the Recommendations for defining management structures and procedures and acting in accordance with the principal intention of the Recommendations. The Board regularly assesses its procedures based on the Recommendations.
DSV has opted to derogate from one of the 47 Recommendations: 3.4.2 Independence of board committee members.
Our adoption of the Recommendations, including descriptions of internal controls and risk management systems in relation to financial reporting, is reported separately in accordance with section 107b of the Danish Financial Statements Act.
The statutory report on Corporate Governance 2018 is available at investor.dsv.com/corporate-governance
a report on remuneration of the Board of Directors and Executive Board is available at investor.dsv.com/corporate-governance
For details on payments made in 2018 and the DSV share option schemes, please refer to notes 5.3 and 5.4 of the consolidated financial statements.
Additionally, an upper limit on share-based payments has been introduced. These adjustments are intended to provide a tighter connection between the remuneration of the Executive Board and the value creation for the shareholders.
The current DSV Remuneration Policy and guidelines for incentive pay are available at investor.dsv.com/policies.cfm
Office Chairman Member since 2008 Up for re-election Yes Born 1945 Audit Committee Member Nomination Committee Chairman Remuneration Committee Chairman
Skills and experience • General management experience • Group CEO of DSV A/S 2005-2008
• Managing Director of DSV A/S 1991-2005
Other Board positions CM Polaris III Invest Fonden ME Wrist Ship Supply Holding A/S and one affiliated company
• Management experience from directorships and honorary offices • Strategy and financial management
• Professor of accounting and auditing at Copenhagen Business School
Office Deputy Chairman Member since 2011 Up for re-election Yes Born 1967 Audit Committee Chairman Nomination Committee - Remuneration Committee Member
CM Everyday Luxury Feeling A/S ME COWI Holding A/S
2002-2015
| Office | Member |
|---|---|
| Member since | 2015 |
| Up for re-election | Yes |
| Born | 1950 |
| Audit Committee | - |
| Nomination Committee | Member |
| Remuneration Committee | - |
Up for re-election Yes Born 1947 Audit Committee Member Nomination Committee Member Remuneration Committee -
CM Chairman of the board of directors of three companies in NO Invest A/S DC NNE A/S DC Dansk Vækstkapital I ME Dansk Vækstkapital II ME NCC AB* ME IMI Plc.* ME WSP Global Inc.* ME RGS Nordic A/S
ADM ApS
CM = Chairman DC = Deputy Chairman ME = Member * = Listed company
Office CEO Member since 2008 Born 1966
| Office | CFO |
|---|---|
| Member since | 2002 |
| Born | 1969 |
Other Board positions
| Up for re-election | Yes |
|---|---|
| Born | 1969 |
| Audit Committee | - |
| Nomination Committee | - |
| Remuneration Committee | - |
CM Chairman of the board of directors of 21 companies in the Wrist Ship Supply Holding
directors of five companies in the Wrist Ship Supply Holding
Office Member Member since 2010 Up for re-election Yes Born 1958 Audit Committee - Nomination Committee Member Remuneration Committee -
At year-end, the closing price of DSV shares on Nasdaq Copenhagen was DKK 429.20, down 12.2% since year-end 2017.
During the same period, the C20 Index decreased by 13.0%.
The average daily trading volume on Nasdaq Copenhagen was 460,961 DSV shares in 2018 (0.3% of shares issued).
At year-end 2018, the market capitalisation of DSV (excluding treasury shares) was DKK 76 billion against DKK 90 billion at the end of 2017.
On 31 December 2018, DSV had 48,237 registered shareholders. The registered shares totalled 167 million, corresponding to 89.1% of the share capital. The largest 25 of these shareholders owned 35.6% of the free floating share capital.
DSV has no majority shareholders and a 100% free float of the shares outstanding. The following shareholders have informed DSV that they hold more than 5% of the share capital:
CASH DISTRIBUTION TO SHAREHOLDERS
In line with our principle for capital allocation, DSV has increased both share buybacks and dividend paid over the last five years. The only exception was 2016, after the acquisition of UTi Worldwide Inc.
In 2018, DSV acquired 8.0 million treasury shares at a total purchase price of DKKm 4,161.
On 31 December 2018, the company held 10 million shares as treasury shares, corresponding to 5.3% of the share capital.
On 6 February 2019, the company's portfolio of treasury shares amounted to 10 million shares.
The purpose of the DSV's share buyback programmes is to accommodate the exercise of share options under incentive schemes and adjust the capital structure in accordance with the financial targets.
The shares were acquired under the authorisation granted at the Annual General Meeting and in compliance with the Safe Harbour principles.
The Board of Directors proposes ordinary dividends of DKK 2.25 per share for 2018 (2017: DKK 2.00).
Following the acquisition of treasury shares the Board of Directors plans to propose a reduction of the share capital by a nominal value of DKK 2 million at the next General Meeting.
At the scheduled meeting on 15 March 2019, the Board of Directors plans to authorise the Executive Board to distribute up to 3 million share options to senior staff members in accordance with the general guidelines for incentive pay for employees of DSV.
Share options are granted at the average quoted share price over the five business days preceding 31 March 2019.
The following authorities have been granted to the Board of Directors:
• Increase the company's share capital by issuing up to 38 million shares with or without pre-emptive rights for existing shareholders. The authority remains valid until 10 March 2021;
Through open and proactive communication, we aim to provide the basis for fair and efficient pricing of the shares.
To keep investors updated we host conference calls with Executive Management following the release of financial results. Executive Management and Investor Relations also travel extensively to ensure that both existing and potential investors can get access to the company.
We observe a four-week silent period prior to the publication of annual and interim reports.
DSV is covered by 27 equity analysts. For more information about analyst coverage, please visit investor.dsv.com
| Number of shares of DKK 1 on 31 December 2018: |
188,000,000 |
|---|---|
| Share classes: | 1 |
| Restrictions on transferability and voting rights: |
None |
| Listed | Nasdaq Copenhagen |
| Trading symbol: | DSV |
| ISIN code: | DK0060079531 |
DSV made a total of 58 Company Announcements in 2018 (Nos. 673-730). The most important announcements in 2018 are listed below:
| 8 February | No. 679 | 2017 Annual Report |
|---|---|---|
| 8 March | No. 685 | DSV A/S Annual General Meeting 2018 |
| 1 May | No. 690 | Interim Financial Report First Quarter 2018 |
| 1 August | No. 704 | Interim Financial Report H1 2018 |
| 11 October | No. 718 | Contact with CEVA Logistics AG |
| 23 October No. 719 | Contact with CEVA Logistics AG |
|
| 26 October | No. 720 | Interim Financial Report Third Quarter 2018 |
The financial calendar for 2019 is as follows:
| Activity | Date |
|---|---|
| Annual General Meeting | 15 March |
| Q1 2019 Report | 30 April |
| H1 2019 Report | 31 July |
| Q3 2019 Report | 25 October |
DSV is committed to being a responsible and reliable business partner as well as an active participant in the global community.
By working systemically within the framework of the United Nations Global Compact and supporting the Sustainable Development Goals, we report and improve on a wide range of related responsibility matters. This chapter is a summary of our Communication on Progress (COP) under the United Nations Global Compact. The summary highlights our responsibility focus areas and achievements in 2018.
As a global company, it is essential that all DSV employees act according to the same ethical standards. The standards are defined in the DSV Code of Conduct, which outlines the fundamental principles for acceptable behaviour and business conduct.
To ensure that DSV always acts as a responsible and trustworthy business partner, we make all employees aware of the Code of Conduct through an introduction in the global onboarding programme and with special training for managers.
In 2018, we reviewed and updated the DSV Code of Conduct. We will increase the amount of Code of Conduct training and introduce an e-learning module in 2019. The goal is to ensure that all employees act safely and understand the scope of their responsibility as part of DSV.
DSV performs services for customers worldwide, and because of our asset-light business model, we rely on a large supplier network. We expect every supplier to share and live up to the same ethical standards that we hold ourselves to.
In our Supplier Code of Conduct, our standards and requirements are specified and targeted for the suppliers to make it clear what we consider appropriate business conduct by suppliers when performing services on behalf of DSV.
In addition, we have processes in place for supplier selections on both a global and a local level. In 2018, we started developing more customised supplier screening processes matching the different types of suppliers. We will continue this effort in 2019 to make sure our standards are met throughout our supplier network and to emphasise the importance of a responsible and ethical business conduct from our suppliers.
As a freight forwarder, DSV is not in a position to directly influence and reduce the carbon footprint of the transports we organise. Our transports are mostly performed by suppliers who operate their equipment on market terms.
What we can do is to facilitate three kinds of environmental improvements:
Initiatives that take place in collaboration with customers can be based on a carbon emission report prepared by DSV for the
customers to provide complete transparency in carbon emissions. In 2018, we provided 75% more carbon reports to customers than in 2017. In 2019, we will develop our set-up for producing carbon emission reports to ensure good, transparent starting points for our dialogue about environmentally optimised transports.
DSV must be a good and safe place to work and we are fully committed to providing positive, productive and supportive working environments where we all feel valued and safe.
We contribute most directly to the following Sustainable Development Goals:
We provide development opportunities for all employees. Ranging from leadership and sales training to literacy courses, the programmes all serve to equip employees with the skills they need to excel in their role and to maintain employee turnover at an acceptable level.
To us, a good working environment is a safe working environment, and that is a DSV top priority. Both at Group and local levels, our health and safety departments and staff assess risks and make sure procedures for safe conduct are in place. If incidents or accidents happen, we register them and examine the cause, and we assess the need for adjustments to existing procedures.
The level of occupational accidents and illness remained at an satisfactory level in 2018.
In 2019, we will continue our efforts to secure the safety of all employees at DSV through an even better process for health and safety globally.
We make it a priority to engage in and support communities where we operate. We believe that long-term relations and transparent partnerships are paramount to achieving global, lasting results for improvement.
2018 was the second year with Red Cross | Red Crescent as DSV's international human aid partner. In the partnership, DSV provides support for transport and warehousing space for disaster preparedness, and we support Red Cross' efforts in Malawi and Cox's Bazar, Bangladesh. In addition, DSV made a donation to support Red Cross' emergency relief efforts in Indonesia following an earthquake and tsunami.
In addition, the local DSV countries interact with their communities to make a difference. The local engagements take many different shapes, from engaging with local Red Cross | Red Crescent associations, to sponsoring the transport of different items that serve a good cause, supporting local sports clubs or teaching safe conduct on the road.
In all areas of our responsibility efforts, we have and will continue to focus on engaging and collaborating with customers, suppliers and local communities. Because we believe that we can do more and make lasting improvements when we work together.
In DSV's Responsibility Report 2018, you can read more about:
The report is available at www.dsv.com/responsibility
We report separately on corporate social responsibility in the DSV Responsibility Report in accordance with section 99a of the Danish Financial Statements Act. The DSV Responsibility Report is our communication on progress (COP) under the United Nations Global Compact.
The DSV Responsibility Report 2018 is available at www.dsv.com/about-dsv/csr/csr-reports
The current composition of the Board of Directors satisfies the statutory gender distribution requirement under section 99b of the Danish Financial Statements Act on target figures for the under-represented gender.
We report separately on gender composition and related policies in the DSV Responsibility Report in accordance with section 99b of the Danish Financial Statements Act, to which reference is made.
The DSV Responsibility Report 2018 is available at www.dsv.com/about-dsv/csr/csr-reports
| 2018 | 2017 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Q1 | Q2 | Q3 | Q4 | Full year | Q1 | Q2 | Q3 | Q4 | Full year | |
| Income statement (DKKm) | ||||||||||
| Revenue | 18,380 | 19,491 | 20,237 | 20,945 | 79,053 | 18,223 | 18,924 | 18,735 | 19,019 | 74,901 |
| Gross profit | 4,120 | 4,450 | 4,472 | 4,447 | 17,489 | 4,220 | 4,217 | 4,114 | 4,054 | 16,605 |
| EBIT before special items | 1,156 | 1,449 | 1,507 | 1,338 | 5,450 | 1,129 | 1,240 | 1,313 | 1,196 | 4,878 |
| Special items (net costs) | - | - | - | - | - | 160 | 88 | 123 | 154 | 525 |
| Financial items (net costs) | 155 | (120) | 94 | 120 | 249 | 94 | 182 | 149 | 131 | 556 |
| Profit before tax | 1,001 | 1,569 | 1,413 | 1,218 | 5,201 | 875 | 970 | 1,041 | 911 | 3,797 |
| Profit for the period | 769 | 1,187 | 1,104 | 928 | 3,988 | 669 | 742 | 826 | 775 | 3,012 |
| Ratios (%) | ||||||||||
| Operating margin | 6.3 | 7.4 | 7.4 | 6.4 | 6.9 | 6.2 | 6.6 | 7.0 | 6.3 | 6.5 |
| Conversion ratio | 28.1 | 32.6 | 33.7 | 30.1 | 31.2 | 26.8 | 29.4 | 31.9 | 29.5 | 29.4 |
| Segment information (DKKm) | ||||||||||
| Air & Sea | ||||||||||
| Revenue | 8,414 | 9,095 | 9,625 | 9,838 | 36,972 | 8,470 | 8,873 | 9,044 | 8,817 | 35,204 |
| Gross profit | 2,145 | 2,387 | 2,359 | 2,302 | 9,193 | 2,116 | 2,217 | 2,199 | 2,092 | 8,624 |
| EBIT before special items | 795 | 988 | 1,013 | 897 | 3,693 | 690 | 843 | 903 | 789 | 3,225 |
| Road | ||||||||||
| Revenue | 7,676 | 7,862 | 7,812 | 7,893 | 31,243 | 7,633 | 7,684 | 7,514 | 7,796 | 30,627 |
| Gross profit | 1,306 | 1,318 | 1,373 | 1,311 | 5,308 | 1,433 | 1,316 | 1,279 | 1,259 | 5,287 |
| EBIT before special items | 241 | 322 | 345 | 239 | 1,147 | 378 | 281 | 311 | 231 | 1,201 |
| Solutions | ||||||||||
| Revenue | 2,848 | 3,111 | 3,417 | 3,853 | 13,229 | 2,678 | 2,913 | 2,757 | 3,014 | 11,362 |
| Gross profit | 699 | 741 | 758 | 837 | 3,035 | 671 | 690 | 646 | 723 | 2,730 |
| EBIT before special items | 127 | 175 | 184 | 223 | 709 | 66 | 128 | 115 | 185 | 494 |
For a definition of the financial highlights, please refer to page 81
| (DKKm) | Note | 2018 | 2017 |
|---|---|---|---|
| Revenue | 2.2 | 79,053 | 74,901 |
| Direct costs | 2.3 | 61,564 | 58,296 |
| Gross profit | 17,489 | 16,605 | |
| Other external expenses | 2.4 | 3,036 | 3,110 |
| Staff costs | 2.5 | 8,241 | 7,831 |
| Operating profit before amortisation, depreciation and special items |
6,212 | 5,664 | |
| Amortisation and depreciation | 2.6 | 762 | 786 |
| Operating profit before special items | 5,450 | 4,878 | |
| Special items, costs | 2.7 | - | 525 |
| Financial income | 2.8 | 130 | 94 |
| Financial expenses | 2.8 | 379 | 650 |
| Profit before tax | 5,201 | 3,797 | |
| Tax on profit for the year | 5.2 | 1,213 | 785 |
| Profit for the year | 3,988 | 3,012 | |
| Profit for the year attributable to: | |||
| Shareholders of DSV A/S | 4,000 | 2,981 | |
| Non-controlling interests | (12) | 31 | |
| Earnings per share: | 4.6 | ||
| Earnings per share of DKK 1 | 22.0 | 16.0 | |
| Diluted earnings per share of DKK 1 | 21.6 | 15.8 |
| (DKKm) | Note | 2018 | 2017 |
|---|---|---|---|
| Profit for the year | 3,988 | 3,012 | |
| Items that will be reclassified to income statement when certain conditions are met: |
|||
| Net exchange differences recognised in OCI | (138) | (430) | |
| Fair value adjustments relating to hedging instruments | 4.5 | (4) | 28 |
| Fair value adjustments relating to hedging instruments transferred to financial expenses |
- | 3 | |
| Tax on items reclassified to income statement | 5.2 | (2) | 6 |
| Items that will not be reclassified to income statement: | |||
| Actuarial gains/(losses) | 3.7 | (70) | 179 |
| Tax relating to items that will not be reclassified | 5.2 | 15 | (42) |
| Other comprehensive income, net of tax | (199) | (256) | |
| Total comprehensive income | 3,789 | 2,756 | |
| Total comprehensive income attributable to: | |||
| Shareholders of DSV A/S | 3,795 | 2,726 | |
| Non-controlling interests | (6) | 30 | |
| Total | 3,789 | 2,756 |
| (DKKm) Note |
2018 | 2017 |
|---|---|---|
| Operating profit before amortisation, depreciation and special items | 6,212 | 5,664 |
| Adjustments: | ||
| Share-based payments | 93 | 68 |
| Change in provisions | (329) | (279) |
| Change in working capital etc. | (520) | 944 |
| Special items | - | (488) |
| Interest received | 107 | 110 |
| Interest paid | (411) | (386) |
| Corporation tax, paid | (851) | (969) |
| Cash flow from operating activities | 4,301 | 4,664 |
| Purchase of intangible assets | (501) | (393) |
| Purchase of property, plant and equipment | (709) | (620) |
| Disposal of property, plant and equipment | 859 | 636 |
| Acquisition and disposal of subsidiaries and activities 5.1 |
(59) | (8) |
| Change in other financial assets | (34) | 60 |
| Cash flow from investing activities | (444) | (325) |
| Free cash flow | 3,857 | 4,339 |
| Proceeds from borrowings | 855 | 1,488 |
| Repayment of borrowings | (750) | (4,517) |
| Other financial liabilities incurred | 48 | (69) |
| Shareholders: | ||
| Dividends distributed 4.2 |
(380) | (342) |
| Purchase of treasury shares 4.2 |
(4,161) | (1,559) |
| Sale of treasury shares | 372 | 303 |
| Other transactions with shareholders | 16 | (19) |
| Cash flow from financing activities | (4,000) | (4,715) |
| Cash flow for the year | (143) | (376) |
| (DKKm) | Note | 2018 | 2017 |
|---|---|---|---|
| Cash flow for the year - continued | (143) | (376) | |
| Cash and cash equivalents 1 January | 1,348 | 1,714 | |
| Cash flow for the year | (143) | (376) | |
| Currency translation adjustments | (47) | 10 | |
| Cash and cash equivalents 31 December | 4.2 | 1,158 | 1,348 |
*The cash flow statement cannot be directly derived from the balance sheet and income statement.
| Adjusted free cash flow | 3,916 | 4,835 | |
|---|---|---|---|
| Special items (restructuring costs) | - | 488 | |
| Net acquisition of subsidiaries and activities | 59 | 8 | |
| Free cash flow | 3,857 | 4,339 | |
| (DKKm) | Note | 2018 | 2017 |
| (DKKm) | Note | 2018 | 2017 |
|---|---|---|---|
| Intangible assets | 3.2 | 16,742 | 16,573 |
| Property, plant and equipment | 3.3 | 2,490 | 2,431 |
| Other receivables | 291 | 257 | |
| Deferred tax assets | 5.2 | 851 | 965 |
| Total non-current assets | 20,374 | 20,226 | |
| Trade receivables | 4.4 | 13,252 | 12,557 |
| Contract assets | 3.4 | 1,554 | 1,300 |
| Inventories | 3.5 | 718 | 462 |
| Other receivables | 1,662 | 1,778 | |
| Cash and cash equivalents | 1,158 | 1,348 | |
| Assets held for sale | 3.3 | 94 | 717 |
| Total current assets | 18,438 | 18,162 | |
| Total assets | 38,812 | 38,388 |
| EQUITY AND LIABILITIES | |||
|---|---|---|---|
| (DKKm) | Note | 2018 | 2017 |
| Share capital | 4.1 | 188 | 190 |
| Reserves and retained earnings | 4.1 | 14,373 | 14,645 |
| DSV A/S shareholders' share of equity | 14,561 | 14,835 | |
| Non-controlling interests | (29) | (26) | |
| Total equity | 14,532 | 14,809 | |
| Deferred tax liabilities | 5.2 | 188 | 82 |
| Pensions and similar obligations | 3.7 | 915 | 1,124 |
| Provisions | 3.8 | 627 | 706 |
| Financial liabilities | 4.3 | 6,593 | 6,491 |
| Total non-current liabilities | 8,323 | 8,403 | |
| Provisions | 3.8 | 412 | 383 |
| Financial liabilities | 4.3 | 545 | 495 |
| Trade payables | 4.4 | 7,646 | 7,477 |
| Accrued cost of services | 3.4 | 2,813 | 2,539 |
| Other payables | 4,087 | 3,953 | |
| Corporation tax | 454 | 329 | |
| Total current liabilities | 15,957 | 15,176 | |
| Total liabilities | 24,280 | 23,579 | |
| Total equity and liabilities | 38,812 | 38,388 |
| 2018 | 2017 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (DKKm) | Share capital |
Reserves* | Retained earnings |
DSV A/S share holders' share of equity |
Non controlling interests |
Total equity |
Share capital |
Reserves* | Retained earnings |
DSV A/S share holders' share of equity |
Non controlling interests |
Total equity |
| Equity at 1 January | 190 | 4,195 | 10,450 | 14,835 | (26) | 14,809 | 190 | 4,642 | 8,584 | 13,416 | (38) | 13,378 |
| Profit for the year | - | - | 4,000 | 4,000 | (12) | 3,988 | - | - | 2,981 | 2,981 | 31 | 3,012 |
| Other comprehensive income, net of tax | - | (151) | (54) | (205) | 6 | (199) | - | (446) | 191 | (255) | (1) | (256) |
| Total comprehensive income for the year | - | (151) | 3,946 | 3,795 | (6) | 3,789 | - | (446) | 3,172 | 2,726 | 30 | 2,756 |
| Transactions with owners: | ||||||||||||
| Share-based payments | - | - | 93 | 93 | - | 93 | - | - | 68 | 68 | - | 68 |
| Dividends distributed | - | - | (380) | (380) | (2) | (382) | - | - | (342) | (342) | (13) | (355) |
| Purchase of treasury shares | - | (8) | (4,153) | (4,161) | - | (4,161) | - | (3) | (1,556) | (1,559) | - | (1,559) |
| Sale of treasury shares | - | 2 | 370 | 372 | - | 372 | - | 2 | 301 | 303 | - | 303 |
| Capital reduction | (2) | 2 | - | - | - | - | - | - | - | - | - | - |
| Addition/disposal of non-controlling interests | - | - | - | - | - | - | - | - | - | - | (14) | (14) |
| Dividends on treasury shares | - | - | 14 | 14 | - | 14 | - | - | 7 | 7 | - | 7 |
| Tax on transactions with owners | - | - | 1 | 1 | - | 1 | - | - | 220 | 220 | - | 220 |
| Other adjustments | - | - | (8) | (8) | 5 | (3) | - | - | (4) | (4) | 9 | 5 |
| Total transactions with owners | (2) | (4) | (4,063) | (4,069) | 3 | (4,066) | - | (1) | (1,306) | (1,307) | (18) | (1,325) |
| Other equity transactions: | ||||||||||||
| Transfer to retained earnings | - | (4,744) | 4,744 | - | - | - | - | - | - | - | - | - |
| Equity at 31 December | 188 | (704) | 15,077 | 14,561 | (29) | 14,532 | 190 | 4,195 | 10,450 | 14,835 | (26) | 14,809 |
* For a specification of reserves, please see note 4.1
| 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 |
| 3.1 | Impairment testing 57 |
|---|---|
| 3.2 | Intangible assets 59 |
| 3.3 | Property, plant and equipment 60 |
| 3.4 | Contract assets and accrued costs of services 61 |
| 3.5 | Inventories 61 |
| 3.6 | Leases 62 |
| 3.7 | Pension obligations 63 |
| 3.8 | Provisions 65 |
| Equity 66 |
|---|
| 4.2 Capital structure and capital allocation 67 |
| Financial liabilities 68 |
| Financial risks 69 |
| Derivative financial instruments 72 |
| 4.6 Earnings per share 73 |
| 4.7 Financial instruments - fair value hierarchy 73 |
| 5.1 | Acquisition and disposal of entities 74 |
|---|---|
| 5.2 | Tax 75 |
| 5.3 Share option schemes 77 | |
| 5.4 Remuneration of the Executive | |
| Board and the Board of Directors 79 | |
| 5.5 Fees to auditors appointed at | |
| the Annual General Meeting 79 | |
| 5.6 | Related-party transactions 79 |
| 5.7 Contingent liabilities and security for debt 80 | |
| 5.8 | Events after the reporting date 80 |
The 2018 Annual Report of DSV A/S has been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union and further requirements in the Danish Financial Statements Act.
The Annual Report of DSV A/S comprises the consolidated financial statements of DSV A/S and its subsidiaries.
The Board of Directors considered and approved the 2018 Annual Report of DSV A/S on 7 February 2019. The Annual Report will be submitted to the shareholders of DSV A/S for approval at the Annual General Meeting on 15 March 2019.
All amounts in the Annual Report are stated in Danish kroner (DKK) and rounded to the nearest million. 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 comparative figures.
We have implemented the International Financial Reporting Standards (IFRS) and amendments effective as of 1 January 2018 as adopted by the European Union.
Implementation of these standards and amendments has had immaterial impact on the Group's financial statements and are not expected to have any significant future impact.
Of the new standards and amendments implemented in 2018 the most significant are as follows:
IFRS 9 introduces several changes to IAS 39 - including a new impairment framework, new rules for hedge accounting and new requirements and guidance on classifications, measurement and disclosure of financial assets and liabilities.
IFRS 9 has been adopted applying the standard retrospective approach, with the practical expedients permitted under the standard and with no restatement of comparatives.
Implementation of the standard has resulted in only minor changes to existing accounting practices. The most significant change has been applied to impairment assessments of trade receivables as these are now considered based on the IFRS 9 expected credit loss model, where previously an incurred loss model was applied. The revised approach has had immaterial impact on the impairment assessment of trade receivables compared to prior practices, and no retrospective adjustment to equity has been made. Additionally, the new standard has not resulted in any material changes to classifications of financial assets or financial liabilities.
IFRS 15 introduces a new framework for revenue recognition and measurement.
IFRS 15 has been applied following the modified retrospective approach with any cumulative effects recognised in equity as of 1 January 2018 and with no restatement of comparatives.
Implementation of the standard has resulted in only minor changes to existing accounting practices, mainly relating to extended external disclosure requirements. The implementation has not resulted in any changes to existing revenue recognition practices applied by the Group and accordingly no retrospective adjustment to equity has been made.
In preparing the consolidated financial statements, Management makes various accounting estimates and judgements that affect the reported amounts and disclosures in the statements and in the notes to the financial statements. These are based on professional experience, historical data and other factors available to Management. By their nature, these include a degree of uncertainty and actual results may therefore deviate from the judgements and estimates at the reporting date. Judgements and estimates are continuously evaluated, and the effects of any changes are recognised in the relevant period.
Accounting judgements and estimates considered significant in the preparation and understanding of the consolidated financial statements are listed below and described in more detail in the relevant notes:
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 share capital are accounted for as associates and measured 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, income and expenses.
The Group holds interests in 300 entities and was composed as follows at 31 December 2018:
| ENTITIES | Region | |||
|---|---|---|---|---|
| (Number) | EMEA | Americas | APAC | Total |
| Subsidiaries | 201 | 40 | 49 | 290 |
| Associates | 9 | 1 | - | 10 |
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.
On initial recognition, foreign currency transactions are translated into the functional currency at the exchange rate ruling at the transaction dates. Foreign currency translation differences between the exchange rates at the transaction date and the date of payment are recognised in the income statement under financials. Monetary items denominated in a foreign currency are translated at the exchange rate ruling 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.
On preparation of the consolidated financial statements, the income statements of entities with a functional currency different from DKK are translated at the average exchange rate for the period, and balance sheet items are translated at the exchange rate ruling at the reporting date. Foreign exchange differences arising on translation of the equity of foreign entities and on translation of receivables considered part of net investment are recognised directly in other comprehensive income. Foreign exchange differences arising on the translation of income statements from the average exchange rate for the period to the exchange rate ruling at the reporting date are also recognised in other comprehensive income. The adjustments are presented under a separate translation reserve in equity.
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.
In preparing the Annual Report, Management seeks to improve the information 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 line 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.
The presentation of line 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 exceptional items. For a definition and reconciliation of Group results before and after special items, please see note 2.7 Special items.
The IASB has issued a number of new standards and amendments not yet in effect or endorsed by the EU and therefore not relevant for the preparation of the 2018 consolidated financial statements. DSV expects to implement these standards when they take effect.
Of these new standards, only IFRS 16 Leases is currently expected to have a significant impact on the consolidated financial statements when implemented.
IFRS 16 Leases will take effect on 1 January 2019 and will be implemented on this date following the modified retrospective approach with the cumulative effect of applying the standard recognised in the opening balance of retained earnings. The retrospective approach with full restatement of comparative figures will not be applied as disclosed in the 2017 Annual Report. Right-of-use assets will be measured as if IFRS 16 had been applied since the commencement date, discounted using an applicable incremental borrowing rate at the date of initial application. Comparatives are not restated.
IFRS 16 broadens the criteria for recognition of rightof-use assets and lease liabilities and will have a material impact on DSV's financial statements, as off-balance operating leases will be capitalised and accounted for similar to finance leases.
Reported operating profits will increase, as operating lease expenses will be replaced by depreciation and interest expenses. The impact on profit for the year will be neutral over time, but a timing effect will occur due to frontloading of interest expenses.
Reported cash flow from operating activities will increase, but will be offset by an increased cash outflow from financing activities, and, accordingly, there will be no change in total cash flow for the year.
The implementation of IFRS 16 will have no impact on DSV's agreement and terms with banks regarding long term funding.
Assuming that the 2018 year-end lease portfolio remains unchanged for 2019, implementation of the standard is estimated to impact the 2019 opening balance and fullyear income statement as outlined below.
Based on the estimates, Group invested capital - which was DKK 21.4 billion at year-end 2018 - will increase by 9.2-9.6 billion. The net interest-bearing debt of DKK 5.8 billion will increase by DKK 9.9-10.3 billion.
2018 (IAS 17) decrease (-) Change Balance sheet - 2019 opening balance effect: Right-of-use assets 193 + 9,200 - 9,600 Deferred tax asset 851 + 100 - 200 Reserves and retained earnings 14,373 - 450 - 650 Lease liabilities 192 + 9,900 - 10,300 Income statement - 2019 estimated full-year effects: Direct cost - 2,150 - 2,340 Gross profit + 2,150 - 2,340 Other external expenses - 580 - 650 Operating profit before amortisation, depreciation and special items + 2,730 - 2,990 Amortisation and depreciation + 2,430 - 2,640 Operating profit before special items + 300 - 350 Financial expenses + 350 - 370 Profit before tax - 20 - 50
Major accounting policy choices made in implementing the standard includes:
Increase (+)
31 December
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.
Further reference is also made to the comments on the profit performance of the Group and the divisions in Management's commentary.
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 operating segments reflect our divisional and Group reporting used for management decision-making.
Our business operations are carried out by three divisions, forming the basis for our segment reporting.
The Air & Sea division provides air and sea freight services across the globe.
The Road division provides road freight services across Europe, the US and South Africa.
The Solutions division offers contract logistics services, incl. warehousing and inventory management across the globe.
Our business segments are measured and reported until 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".
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 segments on a reliable basis are presented under "Non-allocated items and eliminations".
DSV operates in most parts of the world and has activities in more than 75 countries, which are divided into the following geographical regions:
Revenue and non-current assets are allocated to the geographical areas according to the country in which the individual consolidated entity is based. The corporate headquarters of DSV is located in Denmark, which is included in the EMEA segment. DSV business is based on transactions in our global network rather than in individual countries or regions. Therefore, goodwill is not allocated to regions.
Intersegment transactions are made on an arm's length basis.
DSV is not reliant on any major customers as no single external customer exceeds 5% of combined Group revenue.
| Air & Sea | Road | Solutions | Non-allocated items and eliminations |
Total | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| SEGMENT INFORMATION – DIVISIONS (DKKm) |
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |
| Condensed income statement | |||||||||||
| Revenue | 36,350 | 34,587 | 29,688 | 29,232 | 12,879 | 10,968 | 136 | 114 | 79,053 | 74,901 | |
| Intercompany revenue | 622 | 617 | 1,555 | 1,395 | 350 | 394 | (2,527) | (2,406) | - | - | |
| Divisional revenue | 36,972 | 35,204 | 31,243 | 30,627 | 13,229 | 11,362 | (2,391) | (2,292) | 79,053 | 74,901 | |
| Direct costs | 27,779 | 26,580 | 25,935 | 25,340 | 10,194 | 8,632 | (2,344) | (2,256) | 61,564 | 58,296 | |
| Gross profit | 9,193 | 8,624 | 5,308 | 5,287 | 3,035 | 2,730 | (47) | (36) | 17,489 | 16,605 | |
| Other external expenses | 1,854 | 1,798 | 1,326 | 1,269 | 955 | 884 | (1,099) | (841) | 3,036 | 3,110 | |
| Staff costs | 3,560 | 3,490 | 2,706 | 2,672 | 1,141 | 1,087 | 834 | 582 | 8,241 | 7,831 | |
| Operating profit before amortisation, depreciation and special items | 3,779 | 3,336 | 1,276 | 1,346 | 939 | 759 | 218 | 223 | 6,212 | 5,664 | |
| Amortisation and depreciation | 86 | 111 | 129 | 145 | 230 | 265 | 317 | 265 | 762 | 786 | |
| Operating profit before special items | 3,693 | 3,225 | 1,147 | 1,201 | 709 | 494 | (99) | (42) | 5,450 | 4,878 | |
| Condensed balance sheet | |||||||||||
| Total gross investments | 76 | 111 | 235 | 167 | 388 | 299 | 516 | 432 | 1,215 | 1,009 | |
| Total assets | 21,990 | 21,132 | 15,478 | 15,971 | 8,127 | 6,751 | (6,783) | (5,466) | 38,812 | 38,388 | |
| Total liabilities | 24,300 | 24,396 | 9,343 | 9,296 | 6,715 | 6,752 | (16,078) | (16,865) | 24,280 | 23,579 |
| Revenue | Non-current assets* | ||||
|---|---|---|---|---|---|
| GEOGRAPHICAL INFORMATION – MAJOR COUNTRIES (DKKm) |
2018 | 2017 | 2018 | 2017 | |
| USA | 12,181 | 10,899 | 275 | 235 | |
| Denmark | 7,575 | 7,052 | 1,493 | 1,201 | |
| Germany | 7,378 | 7,608 | 135 | 155 | |
| Sweden | 4,697 | 5,037 | 160 | 172 | |
| Italy | 4,400 | 4,314 | 245 | 314 | |
| Other | 42,822 | 39,991 | 1,706 | 1,725 | |
| Total | 79,053 | 74,901 | 4,014 | 3,802 |
| Revenue | Non-current assets* | ||||
|---|---|---|---|---|---|
| GEOGRAPHICAL INFORMATION – REGIONS (DKKm) |
2018 | 2017 | 2018 | 2017 | |
| EMEA | 56,078 | 53,392 | 3,396 | 3,241 | |
| Americas | 15,315 | 13,790 | 434 | 396 | |
| APAC | 7,660 | 7,719 | 185 | 165 | |
| Total | 79,053 | 74,901 | 4,015 | 3,802 |
* Non-current assets less tax assets and goodwill
Revenue comprises freight forwarding services, contract logistics and other related services delivered in the financial year.
Revenue from services delivered is recognised in accordance with the over-time recognition principle following the satisfaction of various milestones as the performance obligation is fulfilled towards the customer. Our main services comprise air, sea, road and solutions services as described in the following.
Air services comprise air freight logistics facilitating transportation of goods across the globe. Air services are reported within the Air & Sea reporting segment. Air services are characterised by short delivery times as most air transports are completed within a few days.
Sea services comprise sea freight logistics facilitating transportation of goods across the globe. Sea services are reported within the Air & Sea reporting segment. Sea services are characterised by longer delivery times averaging one month depending on destination.
Road services comprise road freight logistics facilitating transportation of goods by road networks mainly within Europe, 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 comprise contract logistics, incl. warehousing and inventory management across the globe.
Solutions services are reported within the Solutions reporting segment. Solutions services are characterised by very short delivery times, happening almost instantaneously as agreed actions under the customer contract are carried out.
Revenue from services delivered are recognised based on the price specified 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 the short delivery times.
Trade receivables are recognised as services delivered are invoiced to the customer and are not adjusted for any financing components as credit terms are short – typically between 14 to 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 reporting date.
Sale of services and geographical segmentation specifies as highlighted in the table below.
| SERVICES AND GEOGRA | EMEA | Americas | APAC | Total | ||||
|---|---|---|---|---|---|---|---|---|
| PHICAL SEGMENTATION (DKKm) |
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 |
| Air services | 8,447 | 7,971 | 5,946 | 5,132 | 4,499 | 4,476 | 18,892 | 17,579 |
| Sea services | 10,913 | 10,660 | 4,798 | 4,398 | 2,369 | 2,567 | 18,080 | 17,625 |
| Road services | 28,351 | 27,849 | 2,892 | 2,778 | - | - | 31,243 | 30,627 |
| Solutions services | 10,299 | 8,749 | 1,962 | 1,751 | 968 | 862 | 13,229 | 11,362 |
| Total | 58,010 | 55,229 | 15,598 | 14,059 | 7,836 | 7,905 | 81,444 | 77,193 |
| Non-allocated items and eliminations | (2,391) | (2,292) | ||||||
| Total revenue | 79,053 | 74,901 |
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 has 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 property projects are typically 8-18 months.
At the close of accounting periods, judgements are made regarding services in progress, including accrual of income and pertaining direct costs. These judgements are based on experience and continuous follow-up on services in progress relative to subsequent invoicing.
Revenue specifies as follows:
| REVENUE (DKKm) | 2018 | 2017 |
|---|---|---|
| Sale of services | 78,630 | 74,460 |
| Other operating income | 423 | 441 |
| Total revenue | 79,053 | 74,901 |
Sale of services includes revenue from freight forwarding services, contract logistics, sale of property projects and other related services. Sale of services recognised at a point in time constitutes below 3% of total revenue. Other operating income includes income from insurance contracts, rental income from terminals and buildings leases, and gains from disposal of non-current assets.
Direct costs comprise costs paid to generate the revenue for the year. Direct costs include settlement of accounts with haulage contractors, shipping 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 facilites and costs of property projects.
| DIRECT COSTS (DKKm) | 2018 | 2017 |
|---|---|---|
| Cost of carriers | 51,463 | 48,948 |
| Staff costs, hourly workers | 4,790 | 4,456 |
| Other costs of operation | 5,311 | 4,892 |
| Direct costs | 61,564 | 58,296 |
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.
| OTHER EXTERNAL EXPENSES (DKKm) |
2018 | 2017 |
|---|---|---|
| Other external expenses | 8,347 | 8,002 |
| Transferred to direct costs | (5,311) | (4,892) |
| Total other external expenses | 3,036 | 3,110 |
Staff costs include wages and salaries, pensions, 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 5.4 for detailed information on remuneration of Management and note 5.3 for detailed information on the Group's share option schemes and shares held by Management.
| STAFF COSTS (DKKm) | 2018 | 2017 |
|---|---|---|
| Salaries and wages, etc. | 10,927 | 10,408 |
| Defined contribution pension plans | 440 | 399 |
| Defined benefit pension plans | 19 | (82) |
| Other social security costs | 1,552 | 1,494 |
| Share-based payments | 93 | 68 |
| Total staff costs | 13,031 | 12,287 |
| Staff costs are recognised within the following Income statement line items: Hourly workers - recognised as Direct costs |
4,790 | 4,456 |
| Salaried employees - recognised as Staff costs |
8,241 | 7,831 |
| Total | 13,031 | 12,287 |
| Weighted average number of full-time employees |
47,479 | 45,154 |
| Number of full-time employees at year-end | 47,394 | 45,636 |
Amortisation and depreciation for the year are recognised based on the amortisation and depreciation profiles of the underlying assets (see notes 3.2 and 3.3).
| DEPRECIATION (DKKm) | 2018 | 2017 |
|---|---|---|
| Customer relationships | 28 | 41 |
| Software and other intangible assets | 286 | 243 |
| Buildings | 103 | 163 |
| Other plant and operating equipment | 345 | 339 |
| Total amortisation and depreciation |
762 | 786 |
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 operations or investment in future activities.
Special items comprise:
In the classification of special items, a Management judgement is applied to ensure that only exceptional items not associated with the ordinary operations of the Group are included.
| SPECIAL ITEMS (DKKm) | 2018 | 2017 |
|---|---|---|
| Restructuring costs relating to the acquisition of UTi |
- | 447 |
| Impairment and other costs relating to reorganisations |
- | 78 |
| Special items, costs | - | 525 |
Special items reconcile to the income statement line items as specified in the table below:
| 2018 | 2017 | ||||||
|---|---|---|---|---|---|---|---|
| SPECIAL ITEMS RECONCILIATION (DKKm) |
Reported income statement |
Special items |
Adjusted income statement |
Reported income statement |
Special items |
Adjusted income statement |
|
| Revenue | 79,053 | - | 79,053 | 74,901 | - | 74,901 | |
| Direct costs | 61,564 | - | 61,564 | 58,296 | 24 | 58,320 | |
| Gross profit | 17,489 | - | 17,489 | 16,605 | (24) | 16,581 | |
| Other external expenses | 3,036 | - | 3,036 | 3,110 | 256 | 3,366 | |
| Staff costs | 8,241 | - | 8,241 | 7,831 | 170 | 8,001 | |
| Operating profit before amortisation and depreciation |
6,212 | - | 6,212 | 5,664 | (450) | 5,214 | |
| Amortisation and depreciation | 762 | - | 762 | 786 | 75 | 861 | |
| Operating profit | 5,450 | - | 5,450 | 4,878 | (525) | 4,353 | |
| Special items, costs | - | - | - | 525 | (525) | - | |
| Financial income | 130 | - | 130 | 94 | - | 94 | |
| Financial expenses | 379 | - | 379 | 650 | - | 650 | |
| Profit before tax | 5,201 | - | 5,201 | 3,797 | - | 3,797 |
Financial income and expenses include interest, share of associates' profit/loss, foreign currency gains and losses and impairment of securities, payables and foreign currency transactions as well as amortisation of financial assets and liabilities, including finance lease obligations. Furthermore, realised and unrealised gains and losses on derivative financial instruments that cannot be classified as hedging contracts are included.
| Total financial income | 130 | 94 |
|---|---|---|
| Exchange differences recognised in PL | 60 | - |
| Share of associates' profit, net of tax | 2 | 3 |
| Interest income | 68 | 91 |
| (DKKm) | 2018 | 2017 |
Interest income includes interest on financial assets measured at amortised cost of DKK 68 million (2017: DKK 91 million).
| Total financial expenses | 379 | 650 |
|---|---|---|
| Exchange differences recognised in PL | - | 260 |
| Calculated interest on pension obligations, see note 3.6 |
24 | 32 |
| Interest expenses | 355 | 358 |
| (DKKm) | 2018 | 2017 |
Interest expenses include interest on financial liabilities measured at amortised cost of DKK 355 million (2017: DKK 358 million).
This chapter includes notes disclosures on the Group's invested capital that forms the basis of our business activities. Invested capital represents the Group's property, plant and equipment, 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 comprises significant intangible assets mainly relating to acquired goodwill from business combinations carried out over the years.
The carrying amount of goodwill is tested for impairment at least once a year together with other non-current assets of the Group.
Impairment testing is performed for each cash-generating unit to which consolidated goodwill is allocated, as defined by our divisional management and operational structure. The cash-generating units thereby 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.
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 if lower than the carrying amount. 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.
For goodwill impairment testing, a number of judgements and estimates are made on the development in revenues, gross profits, operating margins, future capital expenditures, discount rates and growth expectations in the terminal period. These judgements 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 as follows:
The Air & Sea division operates globally, so developments in the global economy and world trade therefore have a material impact on the division'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.
The Road division mainly operates on the European market, which means that the division's future net cash flow is affected by the growth rate in this region. Developments in gross profit per shipment, including truck and terminal utilisation rates, cost management initiatives and development in internal productivity (number of shipments per employee) also affect the division's cash flow.
The Solutions division operates globally, so developments in the global economy and world trade therefore have a material impact on the division's future net cash flow. Developments in warehouse lease costs and costs of related services, utilisation of warehouse facilities, cost management initiatives and development in internal productivity (number of order lines per employee) also affect the division's cash flows.
The expected future net cash flow is based on budgets and business plans approved by Management for the year 2019 and projections for subsequent years up to and including 2023. From 2023 onwards, DSV expects the growth rate to remain in line with the expected long-term average growth rate for the industry.
Goodwill has been tested for impairment at 31 December 2018. The tests did not result in any impairment of the carrying amounts.
The assumptions used, including a sensitivity analysis, are stated in the following. 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 analysis concluded that even negative changes that are remotely likely to occur will not result in impairment of goodwill in any of the three cash-generating units.
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 assets have also been tested for impairment together with goodwill at 31 December 2018. Similar to goodwill, no indication of impairment was identified in connection with these tests.
| GOODWILL IMPAIRMENT TEST | 2018 | 2017 | ||||
|---|---|---|---|---|---|---|
| AT 31 DECEMBER 2018 (DKKm) |
Air & Sea | Road | Solutions | Air & Sea | Road | Solutions |
| Carrying amount of goodwill | 8,929 | 4,112 | 2,467 | 8,987 | 4,053 | 2,419 |
| Budget period | ||||||
| Annual revenue growth | 4.0% | 3.0% | 5.0% | 4.0% | 3.0% | 5.0% |
| Operating margin | 10.0% | 5.0% | 6.0% | 9.0% | 5.0% | 6.0% |
| Terminal period | ||||||
| Growth | 2.5% | 2.5% | 2.5% | 2.5% | 2.5% | 2.5% |
| Pre-tax discount rate | 8.9% | 6.7% | 7.7% | 8.9% | 7.0% | 8.9% |
| Sensitivity analysis | ||||||
| Growth in budget period- allowed decline %points | 26.3% | 32.6% | 17.3% | 25.8% | 35.7% | 18.7% |
| Discount rate - allowed increase %points | 10.8% | 15.3% | 8.4% | 10.2% | 18.8% | 9.8% |
Only goodwill arising from business combinations is recognised in the financial 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, compared to the fair value of identifiable net assets on the date of acquisition.
Goodwill is not amortised, but is tested for impairment on a regular basis.
On initial recognition, customer relationships identified from business combinations are recognised in the balance sheet at fair value. Subsequently, customer relationships are measured at fair value less accumulated amortisation and impairment losses.
Customer relationships are amortised over a period of 8 years using the diminishing balance method.
Computer software bought or developed for internal use is measured at the lower of cost less accumulated amortisation and impairment losses and the recoverable 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 straightline basis over its expected useful life. The amortisation period is 1-10 years.
| 2018 | 2017 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| INTANGIBLE ASSETS (DKKm) |
Goodwill | Customer relationships |
Software | Software in progress |
Total | Goodwill | Customer relationships |
Software | Software in progress |
Total |
| Cost at 1 January | 15,461 | 1,311 | 2,041 | 288 | 19,101 | 16,125 | 1,346 | 1,585 | 506 | 19,562 |
| Additions from business combinations/previous period adjustments | - | - | - | - | - | (43) | - | 128 | (128) | (43) |
| Additions for the year | 59 | - | 63 | 377 | 499 | - | - | 177 | 216 | 393 |
| Disposals at cost | - | (3) | (69) | - | (72) | - | - | (95) | (67) | (162) |
| Reclassifications | - | - | 299 | (301) | (2) | - | - | 258 | (240) | 18 |
| Currency translation adjustments | (12) | 12 | (1) | (1) | (2) | (621) | (35) | (12) | 1 | (667) |
| Total cost at 31 December | 15,508 | 1,320 | 2,333 | 363 | 19,524 | 15,461 | 1,311 | 2,041 | 288 | 19,101 |
| Total amortisation and impairment at 1 January | 2 | 1,226 | 1,300 | - | 2,528 | 8 | 1,207 | 1,100 | - | 2,315 |
| Amortisation for the year | - | 28 | 286 | - | 314 | - | 41 | 243 | - | 284 |
| Amortisation of assets disposed of | - | (3) | (61) | - | (64) | - | - | (52) | - | (52) |
| Reclassification | - | - | (2) | - | (2) | - | - | 15 | - | 15 |
| Currency translation adjustments | (2) | 8 | - | - | 6 | (6) | (22) | (6) | - | (34) |
| Total amortisation and impairment at 31 December | - | 1,259 | 1,523 | - | 2,782 | 2 | 1,226 | 1,300 | - | 2,528 |
| Carrying amount at 31 December | 15,508 | 61 | 810 | 363 | 16,742 | 15,459 | 85 | 741 | 288 | 16,573 |
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 directly attributable expenses of 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 production of the individual asset are also added to cost.
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.
The cost of assets under finance leases is determined as the lower of the fair value of the assets and the present value of the future minimum lease payments. The internal rate of return of the lease, or an alternative borrowing rate, is used as the discount rate for the calculation of present value.
Subsequent costs, such as partial replacement of property, plant and equipment, 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 derecognised from the balance sheet and recognised in the income statement.
| 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 |
|---|---|---|---|---|---|---|---|
| 2,199 | 2,338 | 65 | 4,602 | 3,229 | 2,389 | 68 | 5,686 |
| 172 | 459 | 89 | 720 | 144 | 419 | 57 | 620 |
| (170) | (280) | (4) | (454) | (200) | (318) | - | (518) |
| (18) | - | (13) | (31) | (819) | - | - | (819) |
| (21) | 6 | (19) | (34) | (93) | (70) | (58) | (221) |
| (24) | (30) | (2) | (56) | (62) | (82) | (2) | (146) |
| 2,138 | 2,493 | 116 | 4,747 | 2,199 | 2,338 | 65 | 4,602 |
| 920 | 1,251 | - | 2,171 | 1,070 | 1,282 | - | 2,352 |
| 103 | 345 | - | 448 | 155 | 339 | - | 494 |
| (99) | (232) | - | (331) | (109) | (247) | - | (356) |
| (1) | - | - | (1) | (145) | - | - | (145) |
| (18) | 9 | - | (9) | (21) | (84) | - | (105) |
| (7) | (14) | - | (21) | (30) | (39) | - | (69) |
| 898 | 1,359 | - | 2,257 | 920 | 1,251 | - | 2,171 |
| 1,240 | 1,134 | 116 | 2,490 | 1,279 | 1,087 | 65 | 2,431 |
| 56 | 137 | - | 193 | 98 | 153 | - | 251 |
| 2018 | 2017 |
Depreciation is carried out on a straight-line basis over the expected useful lives of the assets. The expected useful lives are as follows:
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.
Assets held for sale, which amount to DKK 94 million at 31 December 2018 (2017: DKK 717 million), are measured at the lower of their carrying amount and fair value less costs to sell. The net gain is included in other operating income.
The depreciation period is determined based on estimates of the expected life and future residual value of the assets. The estimates are based on historical experience. A reassessment is made once a year to ascertain that the depreciation basis reflects the expected life and future residual value of the assets.
Contract assets and accrued costs of services includes accrued revenue and accrued costs from freight forwarding services, contract logistics and other related services in progress at 31 December 2018.
Contract assets are recognised when a sales transaction fulfils the criteria for revenue recognition but no final invoice has yet been issued to the customer for the services delivered.
Accrued costs of services are estimated and recognised when supplier invoices relating to recognised revenue for the reporting period have yet to be received.
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.
| Total | 718 | 462 |
|---|---|---|
| Property projects in progress | 674 | 410 |
| Stocks | 44 | 52 |
| (DKKm) | 2018 | 2017 |
Inventories mainly consists of land and buildings under construction held for the purpose of sale in the ordinary course of business (property projects).
In total, DKK 1,525 million relating to property projects has been recognised as an expense in 2018 (2017: DKK 890 million).
Leases are classified as either operating or finance leases. Leases where the significant risk and rewards of ownership are retained by DSV are classified as finance leases. Otherwise leases are classified as operating leases.
Finance leases are recognised at inception as lease assets and lease liabilities in the balance sheet at the lower of fair value or present value of the future minimum lease payments calculated using the interest rate implicit in the lease. Subsequently, the capitalised residual lease liability is measured at amortised cost and the lease asset less accumulated depreciations.
Lease payments on operating leases are recognised in the income statement on a straight-line basis over the term of the lease.
The Group has entered into leases on mainly terminals, warehouses and other operating equipment. Judgement is applied in determining the classification of these contracts as either finance or operating leases.
Land and buildings normally have a lease term of up to 10 years. Other plant and operating equipment normally have a lease term of up to 5 years.
In 2018, operating lease costs of DKK 2,093 million relating to land and buildings were recognised in the income statement (2017: DKK 1,997 million).
In 2018, operating lease costs of DKK 783 million relating to other plant and operating equipment were recognised in the income statement (2017: DKK 905 million).
| 2018 | 2017 | |||||
|---|---|---|---|---|---|---|
| Maturity (DKKm) | Future minimum lease payments |
Interest | Present value of minimum lease payments |
Future minimum lease payments |
Interest | Present value of minimum lease payments |
| 0-1 year | 14 | 1 | 13 | 5 | 1 | 4 |
| 1-5 years | 4 | 3 | 1 | 31 | - | 31 |
| > 5 years | - | - | - | - | - | - |
| Total | 18 | 4 | 14 | 36 | 1 | 35 |
| 2018 | 2017 | |||||
|---|---|---|---|---|---|---|
| Maturity (DKKm) | Future minimum lease payments |
Interest | Present value of minimum lease payments |
Future minimum lease payments |
Interest | Present value of minimum lease payments |
| 0-1 year | 57 | 9 | 48 | 62 | 12 | 50 |
| 1-5 years | 148 | 18 | 130 | 156 | 24 | 132 |
| > 5 years | - | - | - | - | - | - |
| Total | 205 | 27 | 178 | 218 | 36 | 182 |
| 2018 | 2017 | ||||
|---|---|---|---|---|---|
| Maturity (DKKm) | Land and buildings |
Other plant and operating equipment |
Land and buildings |
Other plant and operating equipment |
|
| 0-1 year | 2,162 | 615 | 1,847 | 685 | |
| 1-5 years | 5,816 | 936 | 4,791 | 922 | |
| > 5 years | 2,482 | 9 | 2,141 | 12 | |
| Total | 10,460 | 1,560 | 8,779 | 1,619 |
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 pension obligations. Pension 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.
In determining the pension obligation, the Group makes use of external and independent actuaries. The actuarial assumptions used in calculations and valuations vary from country to country owing to national economic and social conditions.
Net obligations at 31 December are specified as follows:
| PENSION OBLIGATIONS (DKKm) | 2018 | 2017 |
|---|---|---|
| Present value of defined benefit plans |
2,145 | 2,234 |
| Fair value of pension plan assets | 1,230 | 1,110 |
| Pension obligations, net | 915 | 1,124 |
Of these obligations, DKK 548 million relate to unfunded pension obligations (2017: DKK 961 million) and DKK 367 million relate to partly funded obligations (2017: DKK 163 million).
In 2018, net costs of DKK 483 million relating to the Group's pension plans were recognised in the income statement (2017: DKK 349 million) and break down as follows:
| PENSION COST 2018 (DKKm) |
Defined contribution plans |
Defined benefit plans |
Total |
|---|---|---|---|
| Staff costs | 440 | 19 | 459 |
| Financial expenses | - | 24 | 24 |
| Total costs recognised | 440 | 43 | 483 |
| 2017 (DKKm) | Defined contribution plans |
Defined benefit plans |
Total |
| Staff costs | 399 | (82) | 317 |
| Financial expenses | - | 32 | 32 |
| Total costs recognised | 399 | (50) | 349 |
Development in the present value of defined benefit obligations break down as follows:
| OBLIGATIONS (DKKm) | 2018 | 2017 |
|---|---|---|
| Obligations at 1 January | 2,234 | 4,008 |
| Current service cost | 36 | 61 |
| Past service cost from plan amendments, curtailments and |
||
| gains/losses on settlements | (6) | (143) |
| Calculated interest on obligations | 52 | 94 |
| Actuarial gains/losses arising from changes in financial assumptions |
46 | (52) |
| Actuarial gains/losses arising from changes in demographic assumptions |
(4) | (6) |
| Actuarial gains/losses arising from experience adjustments |
34 | (185) |
| Payments from the plan | (217) | (1,493) |
| Currency translation adjustments | (30) | (50) |
| Obligations at 31 December | 2,145 | 2,234 |
The expected average duration of the obligations is 18 years.
| PENSION OBLIGATIONS (DKKm) | 2018 | 2017 |
|---|---|---|
| 0-1 year | 106 | 140 |
| 1-5 years | 305 | 348 |
| > 5 years | 1,734 | 1,746 |
| Total obligations recognised | 2,145 | 2,234 |
| Pension plan assets at 31 December | 1,230 | 1,110 |
|---|---|---|
| Currency translation adjustments | (12) | (31) |
| Payments from the plan | (187) | (1,468) |
| Contributions to the plan | 284 | 91 |
| Return on plan assets excluding calculated interest |
6 | (64) |
| Calculated interest on plan assets | 29 | 62 |
| Pension plan assets at 1 January | 1,110 | 2,520 |
DSV expects to contribute DKK 66 million to defined benefit plan assets in 2019 (2018: DKK 73 million).
| Total | 100% | 100% |
|---|---|---|
| Insurance contracts | 35% | 45% |
| Bonds | 2% | 2% |
| Shares | 63% | 53% |
| (%) | 2018 | 2017 |
The table below 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 fairly probable changes, provided that the other parameters remain unchanged.
| — continued | Pension obligations Defined benefit obligation |
2,234 | ||||
|---|---|---|---|---|---|---|
| PENSION PLAN ASSETS Development in the fair value of pension plan assets break down as follows: |
Discount rate Increase of 0.5%point Decrease of 0.5%point |
1,981 2,333 |
2,061 2,424 |
|||
| PENSION PLAN ASSETS (DKKm) | 2018 | 2017 | Future wage/salary increase | as follows: | ||
| Pension plan assets at 1 January | 1,110 | 2,520 | Increase of 0.5%point | 2,165 | 2,287 | |
| Calculated interest on plan assets | 29 | 62 | Decrease of 0.5%point | 2,066 | 2,186 | |
| Return on plan assets excluding | Inflation | |||||
| calculated interest | 6 | (64) | Increase of 0.5%point | 2,267 | 2,410 | |
| Contributions to the plan | 284 | 91 | Decrease of 0.5%point | 1,977 | 2,074 | |
| Payments from the plan | (187) | (1,468) | ||||
| Currency translation adjustments | (12) | (31) | Life expectancy | Weighted | ||
| Pension plan assets at 31 December | 1,230 | 1,110 | Life expectancy increase of 1 year | 2,182 | 2,304 | |
| Life expectancy decrease of 1 year | 2,044 | 2,170 | ||||
The most significant defined benefit plans of the Group relate to Europe, with Sweden representing 23% (2017: 37%) and Germany 40% (2017: 32%) of the total net obligation of DKK 915 million (2017: DKK 1,124 million).
The most significant individual defined benefit plans of the Group are present in Sweden and Germany. No other countries have individual defined benefits 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 contribution plan. The plan in Germany covers both salaried and hourly workers employees. Under this plan, employees earn a fixed amount for each year in service. The plan has been closed for new employees since 1994.
We continuously work to change our defined benefit plans in DSV into defined contribution plans for the benefit of the Group and the employees. In 2018, we have implemented changes in some large countries which have reduced the pension plan assets as well as liabilities. The cost of defined benefit plans was also impacted in 2018.
Key assumptions on the most significant pension plans are
| KEY ASSUMP TIONS 2018 |
Discount rate | Future wage/salary increase |
Future rate of inflation |
||
|---|---|---|---|---|---|
| Sweden | 2.8% | 2.0% | 1.5% | ||
| Germany | 1.8% | 2.0% | 1.5% | ||
| Other | 1.0% - 6.8% | 0.0% - 10.0% | 0.0% - 2.1% | ||
| Weighted average |
2.4% | 2.2% | 1.7% | ||
| Mortality prognosis table |
|||||
| Sweden | DUS14 (w-c) | ||||
| Germany | RT Heubeck 2018G |
| KEY ASSUMP TION 2017 |
Discount rate | Future wage/salary increase |
Future rate of inflation |
||
|---|---|---|---|---|---|
| Sweden | 2.8% | 2.0% | 1.5% | ||
| Germany | 1.8% | 2.0% | 1.5% | ||
| Other | 1.0% - 6.8% | 1.0% - 9.0% | 1.0% - 2.5% | ||
| Weighted average |
2.4% | 2.2% | 1.8% | ||
| Mortality prognosis table |
|||||
| Sweden | DUS14 (w-c) | ||||
| Germany | Heubeck 2005G |
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 settlement of the relevant obligation and are discounted if deemed material.
Management continually assesses provisions, including contingencies and the likely outcome of pending and potential legal proceedings. The outcome of such proceedings depends on future events, which are by nature uncertain.
Management includes judgements by external legal experts and existing case law in assessing the probable outcome of material legal proceedings, etc.
Provisions have not been discounted as the effect thereof is immaterial. Provisions are expected to be settled within 2 years in all material respects.
Restructuring costs relate mainly to the integration of acquirees and the restructuring plans previously announced, which consist mainly of termination benefits and costs under terminated leases.
Provisions for disputes and legal actions relate mainly to probable liabilities taken over at the acquisition of enterprises.
Other provisions relate mainly to restoration obligations in connection with property leases and onerous contracts mainly relating to business combinations.
| PROVISIONS (DKKm) |
Restructuring costs |
Disputes and legal actions |
Other | Total |
|---|---|---|---|---|
| Provisions at 1 January 2018 | 136 | 342 | 611 | 1,089 |
| Additions for the year | 42 | 130 | 383 | 555 |
| Additions from acquisitions | - | - | 1 | 1 |
| Used for the year | (106) | (114) | (307) | (527) |
| Adjustment of provisions made in previous years | (5) | (54) | (9) | (68) |
| Currency translation adjustments | - | (1) | (10) | (11) |
| Provisions at 31 December 2018 | 67 | 303 | 669 | 1,039 |
| Provisions as recognised in the balance sheet: | ||||
| Non-current liabilities | 22 | 207 | 398 | 627 |
| Current liabilities | 45 | 96 | 271 | 412 |
| Provisions at 31 December 2018 | 67 | 303 | 669 | 1,039 |
This chapter includes disclosures on the financial basis and exposures of the Group's activities as illustrated by our capital structure and net working capital.
The capital structure is linked to our longterm financial target of a gearing ratio below 2.0xEBITDA (previously 1.0 -1.5x) 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 combinations and for share buybacks or distribution to the Company's shareholders.
Share capital At year-end 2018, the share capital of DSV A/S amounted to 188 million shares with a nominal value of DKK 1 each.
RESERVES SPECIFICATION - 2018 (DKKm) Share premium reserve Treasury share reserve Hedging reserve Translation reserve Total reserves Reserves at 1 January 4,744 (6) (35) (508) 4,195 Profit for the year - - - - - Other comprehensive income, net of tax - - (7) (144) (151) Total comprehensive income for the year - - (7) (144) (151) Transactions with owners: Purchase of treasury shares - (8) - - (8) Sale of treasury shares - 2 - - 2 Capital reduction - 2 - - 2 Other equity transactions: Transfer to retained earnings (4,744) - - - (4,744) Reserves at 31 December - (10) (42) (652) (704) RESERVES SPECIFICATION - 2017 (DKKm) Share premium reserve Treasury share reserve Hedging reserve Translation reserve Total reserves Reserves at 1 January 4,744 (5) (18) (79) 4,642 Profit for the year - - - - - Other comprehensive income, net of tax - - (17) (429) (446) Total comprehensive income for the year - - (17) (429) (446) Transactions with owners: Purchase of treasury shares - (3) - - (3) Sale of treasury shares - 2 - - 2 Reserves at 31 December 4,744 (6) (35) (508) 4,195
DSV shares consist of only one share class and include no special rights, preferences or restrictions. All shares are fully paid up.
Reserves as presented in the statement of changes in equity comprise share premium reserve, treasury reserve, hedging reserve and translations reserve, and specifies as follows:
The share premium represents positive differences between the nominal share capital and the amount paid by shareholders for newly issued shares.
The share premium is a distributable reserve.
In 2018 share premium reserve has been transferred to retained earnings.
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 back to meet obligations under the Company's incentive schemes and to adapt the capital structure.
The reserve is a distributable reserve.
The hedging 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.
The reserve comprises foreign currency translation adjustments arising on the translation of net investments and related hedging in entities with a functional currency other than DKK.
The reserve is dissolved upon disposal of entities.
| 2018 | 2017 | ||||
|---|---|---|---|---|---|
| TREASURY SHARES | Market value (DKKm) |
% of share capital 1 January |
% of share capital 31 December |
Million shares of DKK 1 (Nominal value) |
Million shares of DKK 1 (Nominal value) |
| Portfolio, beginning of year | 2,891 | 3.1% | 3.1% | 5.9 | 4.5 |
| Cancellation of treasury shares | (753) | (1.0%) | (1.0%) | (2.0) | - |
| Portfolio of treasury shares less cancelled shares | 2,138 | 2.1% | 2.1% | 3.9 | 4.5 |
| Purchased during the year | 4,161 | 4.2% | 4.2% | 8.0 | 3.3 |
| Sold during the year | (738) | (1.0%) | (1.0%) | (1.9) | (1.9) |
| Value adjustment | (1,275) | - | - | - | - |
| Portfolio, end of year | 4,286 | 5.3% | 5.3% | 10.0 | 5.9 |
The capital structure of DSV is intended to ensure financial stability for the purpose of reducing the Company's cost of capital and maintaining sufficient financial stability to reach its strategic objectives.
The gearing ratio was 0.9 at 31 December 2018 (2017: 1.0), which was in line with target level. The revised target gearing ratio is below 2.0xEBITDA but may deviate under extraordinary circumstances, e.g. as a consequence of acquisitions made.
The Group aims to spend its free cash flow in the following order of priority:
The Group increased its net interest-bearing debt by DKK 256 million in 2018 (2017: reduction of DKK 2,724 million).
DSV spent DKK 59 million on business combinations in the financial year 2018 (2017: DKK 8 million).
In 2018, the Group spent DKK 4,161 million on the purchase of treasury shares (2017: DKK 1,559 million). DSV A/S paid DKK 380 million as dividends (including treasury shares) on 8 March 2018, corresponding to DKK 2.00 per share (2017: DKK 342 million, corresponding to DKK 1.80 per share). It is proposed to distribute a dividend of DKK 2.25 per share for 2018 (2017: DKK 2.00).
Cash and cash equivalents comprise cash on hand and short-term liquid assets that are readily convertible to cash.
Of total cash and cash equivalents, DKK 883 million (2017: DKK 1,017 million) are subjected to restrictions implying that the cash may not be readily available for general use or distribution by the Group.
Major types of cash and capital restrictions specifies as follows:
| Total | 883 | 1,017 |
|---|---|---|
| Other collaterals | 7 | 8 |
| Insurance collaterals | 136 | 183 |
| Exchange control restrictions | 740 | 826 |
| RESTRICTIONS (DKKm) | 2018 | 2017 |
| CASH AND CAPITAL |
Exchange control restrictions comprise cash balances located 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 in Denmark (DSV A/S).
Insurance collaterals constitutes security for outstanding insurance contracts 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.
The financial liabilities of the Group are divided into four financing categories; bank loans and credit facilities, issued bonds, finance lease liabilities and other financial liabilities.
Bank loans and other borrowings and loans 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, corresponding 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 obligations relating to finance leases are described in further detail in note 3.6.
Other liabilities are measured at amortised cost, which in all essentials, corresponds to the net realisable value.
| Total | 7,138 | 6,986 |
|---|---|---|
| Current liabilities | 545 | 495 |
| Non-current liabilities | 6,593 | 6,491 |
| FINANCIAL LIABILITIES (DKKm) | 2018 | 2017 |
| Non-cash change | |||||
|---|---|---|---|---|---|
| FINANCIAL LIABILITIES FINANCING ACTIVITIES 2018 (DKKm) |
Beginning of year |
Cash flow | Foreign ex. movement |
Fair value change |
End of year |
| Loans and credit facilities | 2,027 | 855 | 13 | - | 2,895 |
| Issued bonds | 4,713 | (750) | 5 | 4 | 3,972 |
| Finance leases | 217 | (25) | - | - | 192 |
| Total liabilities from financing activities | 6,957 | 80 | 18 | 4 | 7,059 |
| Other non-current liabilities | 29 | 79 | |||
| Total financial liabilities | 6,986 | 7,138 |
| Non-cash change | |||||
|---|---|---|---|---|---|
| FINANCIAL LIABILITIES FINANCING ACTIVITIES 2017 (DKKm) |
Beginning of year |
Cash flow | Foreign ex. movement |
Fair value change |
End of year |
| Loans and credit facilities | 6,529 | (4,517) | 15 | - | 2,027 |
| Issued bonds | 3,234 | 1,488 | 1 | (10) | 4,713 |
| Finance leases | 294 | (77) | - | - | 217 |
| Total liabilities from financing activities | 10,057 | (3,106) | 16 | (10) | 6,957 |
| Other non-current liabilities | 26 | 29 | |||
| Total financial liabilities | 10,083 | 6,986 |
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, according to which the Group's debt must be repaid in case of a change of control. 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 2018. During 2018 the Group also successfully refinanced and extended part of its long term committed bank credit facilities resulting in longer duration on commitment and reduced credit margins.
The total duration of the Group's long-term loan commitments and the amounts drawn on its credit lines at 31 December 2018 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.
Due to its global activities, the Group is exposed to exchange rate fluctuations to a certain extent. DSV seeks to eliminate foreign currency risks by hedging currency exposures centrally via the Group's Treasury department. 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.
| LOAN FACILITIES | Amount (EURm) |
Amount (DKKm) |
Expiry of commitments |
Duration (years) |
Undrawn |
|---|---|---|---|---|---|
| Long-term loan I | 250 | 1,867 | 31-01-2022 | 3.1 | 775 |
| Long-term loan II | 180 | 1,344 | 31-12-2020 | 2.0 | 75 |
| Bond loan I | 134 | 1,000 | 24-06-2020 | 1.5 | - |
| Bond loan II | 100 | 750 | 18-03-2022 | 3.2 | - |
| Bond loan III | 100 | 750 | 18-03-2022 | 3.2 | - |
| Bond loan IV | 200 | 1,494 | 20-09-2024 | 5.7 | - |
| Long-term credit facility | 50 | 373 | 31-01-2022 | 3.1 | 223 |
| Total and weighted duration | 1,014 | 7,578 | 3.2 | 1,073 |
The Group's financial liabilities fall due as follows:
| Total | 14,471 | 15,088 | 8,148 | 5,403 | 1,537 |
|---|---|---|---|---|---|
| Interest rate derivatives | 37 | 41 | 8 | 30 | 3 |
| Trade payables | 7,477 | 7,477 | 7,477 | - | - |
| Finance leases | 217 | 254 | 67 | 187 | - |
| Issued bonds | 4,713 | 5,265 | 133 | 3,598 | 1,534 |
| Loans and credit facilities | 2,027 | 2,051 | 463 | 1,588 | - |
| FINANCIAL LIABILITIES - MATURITY 2017 (DKKm) |
Carrying amount |
Total cash flow, including interest |
0-1 year | 1-5 years | > 5 years |
| Total | 14,749 | 15,191 | 8,263 | 5,417 | 1,511 |
| Interest rate derivatives | 44 | 48 | 5 | 43 | - |
| Trade payables | 7,646 | 7,646 | 7,646 | - | - |
| Finance leases | 192 | 220 | 69 | 151 | - |
| Issued bonds | 3,972 | 4,371 | 155 | 2,705 | 1,511 |
| Loans and credit facilities | 2,895 | 2,906 | 388 | 2,518 | - |
| FINANCIAL LIABILITIES - MATURITY 2018 (DKKm) |
Carrying amount |
Total cash flow, including interest |
0-1 year | 1-5 years | > 5 years |
The Group is also exposed to foreign currency risks, partly on the translation 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. However, where debt is classified as hedging of net investments in foreign subsidiaries, fair value adjustments are recognised directly in equity under other comprehensive income. 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 DSV 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 larger expected short-term operational cash flows for up to 9 months. At year-end 2018 85% of USD and 65% of CNY of expected 9 months cash flows 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 underlying cash flow impact, significant changes in currency rates, especially USD/DKK, will result in more fluctuations in reported financial items. Unhedged intra group balances at 31 December are highlighted 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 foreign currency exposures below 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.
| Unhedged intra-group balances | Currency exposures - sensitivity analysis | |||||||
|---|---|---|---|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | |||||
| (DKKm) | 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 |
| CNY/DKK | (922) | 46 | (647) | 32 | 30 | 25 | 21 | 17 |
| EUR/DKK | (6,939) | 347 | (566) | 29 | 80 | 465 | 21 | 417 |
| GBP/DKK | 290 | 15 | 229 | 11 | 15 | 5 | 11 | 3 |
| SEK/DKK | (423) | 21 | (743) | 37 | 6 | 16 | 18 | 31 |
| USD/DKK | 1,977 | 99 | 3,151 | 158 | 55 | 349 | 50 | 285 |
| Total | n.a. | 528 | n.a. | 267 | 186 | 860 | 121 | 753 |
| 2018 | 2017 | |||||
|---|---|---|---|---|---|---|
| (DKKm) | Carrying amount |
Fixed/floating interest rate |
Expiry | Carrying amount |
Fixed/floating interest rate |
Expiry |
| Bank loans EUR | 2,394 | Floating | 2020-2022 | 1,532 | Floating | 2019 |
| Bond loans | 3,972 | Fixed/floating | 2020-2024 | 4,713 | Fixed/floating | 2020-24 |
| Convertible bonds | 50 | Fixed | 2019 | 47 | Fixed | 2019 |
| Overdraft facility | 451 | Floating | 2019 | 448 | Floating | 2018 |
| Loans and credit facilities at 31 December |
6,867 | 6,740 | ||||
| Current/non-current classification: |
||||||
| Non-current liabilities | 6,416 | 6,292 | ||||
| Current liabilities | 451 | 448 |
The most significant interest rate risk relates to the longterm floating-rate loans raised by the Parent. These loans are converted to fixed-rate loans by using mainly interest rate swaps with a duration of up to 120 months.
The Group's loans and credit facilities break down as shown on the previous page.
The Group is also exposed to interest rate risks on leases. The interest rates on the majority of the leases are fixed on an ongoing basis for periods of 24 to 48 months.
It is DSV Group policy that the average period of fixed interest rates on the Group's net borrowings must be at least 8 months, but not more than 45 months at any time.
At year-end 2018, 49% (2017: 78%) 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 31 months (2017: 38 months).
The weighted average interest rate on the Group's loans, credit facilities and interest rate hedging was 1.8% end of 2018 (2017: 2.2%).
A 1 percentage point increase in interest rates would reduce profit for the year by DKK 21 million (2017: DKK 18 million) and increase/reduce other comprehensive income by DKK 40 million (2017: DKK 56 million), based on average NIBD for 2018. The calculation method applied in the sensitivity analysis is unchanged compared to previous years.
The Group's credit risks mainly relate to trade receivables.
The Group is not dependent on particular customer segments or any specific customers, and all customers are subjected to individual credit assessments and credit limits in accordance with the Group 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.
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.
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 as P-2 or higher by Moody's.
Impairment of trade receivables are assessed on an ongoing basis and insurance policies taken out for the majority of these.
At 31 December 2018, credit insurances amounted to DKK 10,360 million, corresponding to 78% of total trade receivables (2017: DKK 9,398 million or 75%).
Loss allowances for impaired trade receivables are provided for following an expected credit-loss model. The model includes uninsured trade receivables and also factors in any own risk on insured receivables.
Expected credit-loss at 31 December 2018 is presented in the following table:
| EXPECTED CREDIT-LOSS (DKKm) |
Carrying amount |
Expected loss rate (%) |
Loss allowance |
|---|---|---|---|
| Current | 10,145 | 0.2% | 20 |
| Overdue 1-30 days | 2,280 | 1.3% | 29 |
| Overdue 31-60 days | 452 | 5.3% | 24 |
| Overdue 61-90 days | 203 | 12.8% | 26 |
| Overdue 91-120 days | 100 | 21.0% | 21 |
| Overdue >121 days | 312 | 38.5% | 120 |
| Total | 13,492 | 240 |
Current receivables are considered to have high creditworthiness with a low risk of loss.
The loss allowance provision for the year is specified below:
| PROVISION (DKKm) | 2018 | 2017 |
|---|---|---|
| Provision at 1 January | 227 | 365 |
| Adjustments for the year | 201 | 194 |
| Losses recognised | (68) | (112) |
| Reversal of provisions from previous years |
(119) | (201) |
| Currency translation adjustments | (1) | (19) |
| Provision at 31 December | 240 | 227 |
Impairment losses on trade receivables for 2018 amounted to DKK 68 million, corresponding to 0.1% of consolidated revenue (2017: DKK 112 million, or 0.2%).
Derivative financial instruments are recognised on the trade date and are measured at fair value. Positive and negative fair values are included in other current receivables or other current payables in the balance sheet. Positive 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 settlement of differences). Fair value is determined based on generally accepted valuation methods using available observable market data. Fair value changes which are classified as and fulfil the criteria for recognition 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 hedging 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 financials.
The Group mainly uses foreign exchange forward contracts to hedge foreign currency risks. The main currencies hedged are CNY and USD. The foreign exchange forward contracts are used as fair value hedges of currency exposures relating to external balance sheet assets and liabilities as well as expected short-term operational cash flows.
A gain on hedging instruments of DKK 17 million was recognised in the income statement for 2018 (2017: a gain of DKK 354 million). In the same period, a gain of DKK 43 million was recognised relating to assets and liabilities (2017: a loss of DKK 614 million). The net gain in 2018 primarily relates to unhedged intercompany positions.
The Group has obtained long-term loans on a floating rate basis, implying that the Group is 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.
The weighted average effective interest rate for existing interest rate instruments used as hedges of long-term loans was 0.9% at the reporting date (2017: 0.6%).
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 investments in foreign entities. The effectiveness of recognised financial instruments is assessed on a monthly basis, and any ineffectiveness is recognised in the income statement.
| EXTERNAL HEDGING | 2018 | 2017 | ||||
|---|---|---|---|---|---|---|
| INSTRUMENTS (DKKm) |
Currency instruments |
Interest rate instruments |
Total | Currency instruments |
Interest rate instruments |
Total |
| Contractual value | 8,749 | 1,226 | 9,975 | 21,707 | 2,347 | 24,054 |
| Maturity (year) | 2019-2020 | 2020-2023 | 2018-2020 | 2018-2023 | ||
| Fair value | 32 | (44) | (12) | 24 | (37) | (13) |
| Of which recognised in income statement |
39 | - | 39 | 30 | (2) | 28 |
| Of which recognised in OCI | (7) | (44) | (51) | (6) | (35) | (41) |
| 2018 | 2017 | |
|---|---|---|
| EARNINGS PER SHARE | Carrying | Carrying |
| (DKKm) | amount | amount |
| Profit for the year | 3,988 | 3,012 |
| Non-controlling interests' share of | ||
| consolidated profit for the year | (12) | 31 |
| DSV A/S shareholders' share of | ||
| profit for the year | 4,000 | 2,981 |
| Amortisation of customer relationships | 28 | 41 |
| Share-based payment | 93 | 68 |
| Special items, net | - | 525 |
| Related tax effect | (28) | (131) |
| Adjusted profit for the year | 4,093 | 3,484 |
| ('000 shares) | ||
| Total average number of shares | 188,548 | 190,000 |
| Average number of treasury shares | (6,456) | (3,972) |
| Average number of shares in circulation | 182,092 | 186,028 |
| Average dilutive effect of outstanding | ||
| share options under incentive schemes | 3,195 | 3,084 |
| Diluted average number of shares | ||
| in circulation | 185,287 | 189,112 |
| Earnings per share of DKK 1 | 22.0 | 16.0 |
| Diluted earnings per share of DKK 1 | 21.6 | 15.8 |
| Adjusted earnings per share of DKK 1 | 22.5 | 18.7 |
| Diluted adjusted earnings per share of DKK 1 | 22.1 | 18.4 |
Diluted earnings per share and diluted adjusted earnings per share have been calculated excluding out-of-themoney share options. The number of out-of-the-money share options was 0 in 2018 (2017: 0).
4.7 Financial instruments - fair value hierarchy
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).
The fair value of currency and interest rate 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.
The carrying value of financial liabilities measured at amortised cost is not considered to differ significantly from fair value.
Receivables and payables pertaining to operating activities and with short churn ratios are considered to have a carrying value equal to fair value.
Financial instruments are classified by category as follows:
| FINANCIAL INSTRUMENTS BY CATEGORY (DKKm) |
2018 Carrying amount |
2017 Carrying amount |
|---|---|---|
| Financial assets: | ||
| Currency derivatives | 32 | 24 |
| Trade receivables | 13,252 | 12,557 |
| Other receivables | 1,662 | 1,778 |
| Cash and cash equivalents | 1,158 | 1,348 |
| Financial assets measured at amortised cost |
16,072 | 15,683 |
| Financial liabilities: | ||
| Interest rate derivatives | 44 | 37 |
| Issued bonds measured at amortised cost |
3,972 | 4,713 |
| Loans and credit facilities | 2,895 | 2,027 |
| Finance lease liabilities | 192 | 217 |
| Trade payables | 7,646 | 7,477 |
| Financial liabilities measured at amortised cost |
14,705 | 14,434 |
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, tax on activities, contingent liabilities and security for debt, and transactions with Group Management, auditors and other related parties.
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 dependent 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 recognised 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 valuation methods. Identifiable intangibles 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. The effects of cross-period measurement period adjustments are recognised 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 income statement when incurred.
Goodwill and fair value adjustments arising from the acquisition of an acquiree whose functional currency differs from the presentation currency of the DSV 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.
In applying the acquisition method of accounting, judgements are an integral part of assessing fair values of several identifiable assets acquired and liabilities assumed, as observable market prices are typically not available.
Valuation techniques where judgements are applied typically relate to determining 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.
No material enterprises, non-controlling interests or activities were acquired or sold in 2018 or 2017.
Current tax payable and receivable is 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 adjustments 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.
Deferred tax is recognised based on temporary differences between the carrying amount and the tax value of assets and liabilties. 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, such temporary differences 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 according 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 carry-forwards, are recognised as other non-current assets at the expected value of their utilisation, either by elimination in tax on future earnings or by offsetting deferred 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 crystallise as current tax.
| TAX FOR THE YEAR | ||
|---|---|---|
| (DKKm) | 2018 | 2017 |
| Tax for the year is disaggregated as follows: |
||
| Tax on profit for the year | 1,213 | 785 |
| Tax on other changes in equity | (1) | (220) |
| Tax on other comprehensive income | (13) | 36 |
| Total tax for the year | 1,199 | 601 |
| Tax on profit for the year is calculated as follows: |
||
| Current tax | 1,197 | 946 |
| Deferred tax | 46 | (57) |
| Tax adjustment relating to previous years |
(30) | (104) |
| Total tax on profit for the year | 1,213 | 785 |
| Tax on other comprehensive income specifies as follows: |
||
| Fair value adjustment of hedging | ||
| instruments | (2) | 6 |
| Actuarial gains/(losses) | 15 | (42) |
| Total | 13 | (36) |
The Group recognises deferred tax assets, including the tax base of tax loss carryforwards, if it is estimated that there will be sufficient future taxable income 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 they are likely to be utilised.
| (DKKm) | 2018 | 2017 |
|---|---|---|
| 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% |
3.8% | 3.4% |
| Change in deferred tax from change in income tax rate |
0.6% | 6.8% |
| Tax effect of: | ||
| Non-deductible expenses/ non-taxable income |
(2.0%) | (2.8%) |
| Tax adjustment relating to previous years |
(0.6%) | (2.8%) |
| Tax asset valuation adjustments, net | (2.8%) | (8.2%) |
| Other taxes and adjustments | 2.3% | 2.3% |
| Effective tax rate | 23.3% | 20.7% |
Management's estimates of the likely outcome of disputes on taxes and duties are based on the knowledge available of the actual substance of the disputes and legal assessments, if available. The resolution of disputes can take several years and the outcome is subject to considerable uncertainty.
| Deferred tax at 31 December | 663 | 883 |
|---|---|---|
| Other adjustments | (138) | (275) |
| Tax on changes in equity | 16 | 178 |
| Tax adjustment relating to previous years | (52) | 179 |
| Deferred tax for the year | (46) | 57 |
| DEFERRED TAX NOT RECOGNISED IN THE BALANCE SHEET (DKKm) |
2018 | 2017 |
|---|---|---|
| Temporary differences | 10 | 138 |
| Tax loss carryforwards | 639 | 803 |
| Total tax assets not recognised | 649 | 941 |
Of tax loss carryforwards, DKK 639 million may be carried forward indefinitely.
The deferred tax assets and liabilities recognised are allocated to the following items:
| Intangible assets |
Property, plant and equipment |
Provisions | Other liabilities |
Tax base of tax loss carry forwards |
Total |
|---|---|---|---|---|---|
| (170) | (206) | 699 | 25 | 535 | 883 |
| (1) | 48 | (160) | (67) | 82 | (98) |
| - | - | 15 | 1 | - | 16 |
| - | - | - | - | (131) | (131) |
| - | 1 | (8) | 1 | (1) | (7) |
| (171) | (157) | 546 | (40) | 485 | 663 |
| (169) | 27 | 460 | 67 | 466 | 851 |
| (2) | (184) | 86 | (107) | 19 | (188) |
| DEFERRED TAX ALLOCATION 2017 (DKKm) |
Intangible assets |
Property, plant and equipment |
Provisions | Other liabilities |
Tax base of tax loss carry forwards |
Total |
|---|---|---|---|---|---|---|
| Deferred tax at 1 January | (148) | (234) | 575 | 63 | 488 | 744 |
| Recognised in profit/loss | (9) | 15 | 135 | (230) | 325 | 236 |
| Recognised in equity | - | - | (42) | 220 | - | 178 |
| Other adjustments | (12) | 12 | 38 | (16) | (260) | (238) |
| Currency translation adjustments | (1) | 1 | (7) | (12) | (18) | (37) |
| Deferred tax at 31 December | (170) | (206) | 699 | 25 | 535 | 883 |
| Balance sheet classification: | ||||||
| Deferred tax assets | (165) | 10 | 493 | 122 | 505 | 965 |
| Deferred tax liabilities | (5) | (216) | 206 | (97) | 30 | (82) |
The value of employee services received in exchange for share options granted corresponds to the fair value of the share options at the date of grant. The fair value of equitysettled share-based payment schemes is measured at the grant date and recognised in the income statement as staff costs over the period until the share options vest. The offsetting item is recognised directly in equity.
The fair value of the options granted is estimated on the basis of the Black & Scholes valuation model. The estimate takes into account the terms and conditions applicable to the grant of share options and Management's expectations of the development in the elements on which the valuation model is based. On 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 options earned.
The fair value of each equity-settled share-based payment scheme is calculated based on the Black & Scholes valuation model. The assumptions used are based on Management's estimates. The estimated volatility is based on the historical volatility over the preceding 3 years adjusted for any unusual circumstances during the period.
The valuation of the share options granted in 2018 and 2017 is based on the assumptions disclosed in the following table:
| ASSUMPTIONS | 2018 | 2017 |
|---|---|---|
| Share price | 477.5 | 357.0 |
| Volatility | 16.0% | 17.0% |
| Risk-free interest rate | 0.3% | 0.2% |
| Expected dividends | 1.0% | 1.0% |
| 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 grant (DKKm) |
|---|---|---|---|---|---|
| 2014 | 2,119,500 | 31.03.2017 - 29.03.2019 | 166.8 | 1,128 | 39.9 |
| 2015 | 2,168,000 | 03.04.2018 - 31.03.2020 | 215.0 | 1,164 | 39.7 |
| 2016 | 2,702,000 | 01.04.2019 - 31.03.2021 | 274.3 | 1,546 | 76.5 |
| 2017 | 2,723,500 | 01.04.2020 - 31.03.2022 | 357.0 | 1,574 | 101.8 |
| 2018 | 2,733,500 | 28.03.2021 - 28.03.2023 | 477.5 | 1,600 | 118.2 |
| SHARE OPTION SCHEMES AT 31 DECEMBER 2018 Scheme |
Board of Directors |
Executive Board |
Senior staff |
Total | Average exercise price per option |
|---|---|---|---|---|---|
| 2014 | - | - | 195,500 | 195,500 | 166.8 |
| 2015 | - | 170,000 | 644,200 | 814,200 | 215.0 |
| 2016 | - | 190,000 | 2,331,000 | 2,521,000 | 274.3 |
| 2017 | - | 190,000 | 2,438,500 | 2,628,500 | 357.0 |
| 2018 | - | 190,000 | 2,519,000 | 2,709,000 | 477.5 |
| Outstanding at 31 December 2018 | - | 740,000 | 8,128,200 | 8,868,200 | 353.1 |
| Exercise period open at 31 December 2018 Life (years) |
- - |
170,000 2.9 |
839,700 3.2 |
1,009,700 3.2 |
205.7 n.a. |
| Market value (DKKm) | - | 83.5 | 782.2 | 865.7 | n.a. |
DSV has launched incentive share-based payment schemes with the purpose of motivating and retaining senior staff and members of the Executive Board.
Retention is motivated by requiring continued service for a period covering 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 exercise period. In case of a change of control, all outstanding share options will vest. Exercise prices are set based on the quoted market prices leading up to the date of grant. 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 1,951 employees held share options at 31 December 2018 (2017: 1,847 employees).
Total costs recognised in 2018 for services received not recognised as an asset amounted to DKK 93 million (2017: DKK 68 million).
The average share price for options exercised in the financial year was DKK 508.3 per share at the date of exercise (2017: DKK 383.3 per share).
Outstanding share options for Executive Board members were granted to Jens Bjørn Andersen (430,000 options) and Jens H. Lund (310,000 options).
| OUTSTANDING SHARE OPTIONS | Board of Directors 1 |
Executive Board |
Senior staff |
Total | exercise price per option |
|---|---|---|---|---|---|
| Outstanding at 1 January 2017 | 64,000 | 700,000 | 6,807,000 | 7,571,000 | 214.4 |
| Granted | - | 190,000 | 2,533,500 | 2,723,500 | 357.0 |
| Exercised | (32,000) | (170,000) | (1,732,000) | (1,934,000) | 156.8 |
| Options waived/expired | - | - | (187,300) | (187,300) | 280.6 |
| Outstanding at 31 December 2017 | 32,000 | 720,000 | 7,421,200 | 8,173,200 | 274.1 |
| Outstanding at 1 January 2018 | 32,000 | 720,000 | 7,421,200 | 8,173,200 | 274.1 |
| Granted | - | 190,000 | 2,543,500 | 2,733,500 | 477.5 |
| Exercised | (32,000) | (170,000) | (1,705,000) | (1,907,000) | 195.1 |
| Options waived/expired | - | - | (131,500) | (131,500) | 321.4 |
| Outstanding at 31 December 2018 | - | 740,000 | 8,128,200 | 8,868,200 | 353.1 |
1) A member of the Board of Directors has previously received share options in the Director's former capacity as senior staff member at DSV.
| SHARES HELD BY MEMBERS OF THE EXECUTIVE BOARD AND THE BOARD OF DIRECTORS |
Shares held at 1 January 2018 |
Shares purchased |
Shares sold |
Shares held at 31 December 2018 |
Market value (DKKm) |
|---|---|---|---|---|---|
| Jens Bjørn Andersen1 | 50,000 | 100,000 | (100,000) | 50,000 | 21.5 |
| Jens H. Lund2 | 39,335 | 70,000 | (70,000) | 39,335 | 16.9 |
| Kurt K. Larsen3 | 172,310 | - | (32,720) | 139,590 | 59.9 |
| Thomas Plenborg | 5,099 | - | - | 5,099 | 2.2 |
| Annette Sadolin | 9,503 | - | - | 9,503 | 4.1 |
| Robert S. Kledal | 2,000 | - | - | 2,000 | 0.9 |
| Jørgen Møller | - | 32,000 | (30,555) | 1,445 | 0.6 |
| Birgit W. Nørgaard | 1,150 | - | - | 1,150 | 0.5 |
| Total | 279,397 | 202,000 | (233,275) | 248,122 | 106.6 |
1) Of which 50,000 shares are held in a custody account in the name of a related party.
2) Of which 31,200 shares are held in a custody account in the name of a related party.
3) Of which 52,500 shares are held in a custody account in the name of a related party.
Average
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 Remuneration Policy.
The aggregate remuneration for the members of the Executive Board for 2018 was DKK 32.9 million (2017: DKK 29.4 million).
The remuneration of the Executive Board breaks down as follows:
| EXECUTIVE BOARD | 2018 | ||||||
|---|---|---|---|---|---|---|---|
| REMUNERATION (DKKm) |
Jens Bjørn Andersen |
Jens H. Lund |
Total | ||||
| Fixed salary | 8.4 | 6.0 | 14.4 | ||||
| Pension | 3.3 | 2.5 | 5.8 | ||||
| Bonus | 3.5 | 2.7 | 6.2 | ||||
| Share-based payment | 3.8 | 2.7 | 6.5 | ||||
| Total | 19.0 | 13.9 | 32.9 |
| EXECUTIVE BOARD | 2017 | |||||||
|---|---|---|---|---|---|---|---|---|
| REMUNERATION (DKKm) |
Jens Bjørn Andersen |
Jens H. Lund |
Total | |||||
| Fixed salary | 8.2 | 6.0 | 14.2 | |||||
| Pension | 2.4 | 1.8 | 4.2 | |||||
| Bonus | 3.5 | 2.7 | 6.2 | |||||
| Share-based payment | 2.8 | 2.0 | 4.8 | |||||
| Total | 16.9 | 12.5 | 29.4 |
The aggregate remuneration for the Board of Directors of DSV A/S for 2018 was DKK 5.6 million (2017: DKK 5.6 million).
| Total | 5,629 | 5,600 |
|---|---|---|
| Jørgen Møller | 563 | 534 |
| Robert S. Kledal | 450 | 450 |
| Birgit W. Nørgaard | 563 | 563 |
| Annette Sadolin | 787 | 787 |
| Thomas Plenborg, Deputy Chairman | 1,238 | 1,238 |
| Kurt K. Larsen, Chairman | 2,028 | 2,028 |
| REMUNERATION (DKK '000) | 2018 | 2017 |
| (DKKm) | 2018 | 2017 |
|---|---|---|
| Statutory audit | 22 | 21 |
| Tax and VAT advisory services | 1 | 1 |
| Other services | 1 | 1 |
| Total fees to auditors appointed at the Annual General Meeting |
24 | 23 |
| Statutory audit | 5 | 4 |
| Tax and VAT advisory services | 7 | 7 |
| Other services | 2 | 2 |
| Others, total fees | 14 | 13 |
| Total fees | 38 | 36 |
Fee for other services than statutory audit services rendered by PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab to the Group amounts to DKK 0 million and consists mainly of sundry tax and advisory services.
DSV 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 the Executive Board.
No transactions were made in 2018 other than ordinary remuneration, as described in notes 5.3 and 5.4.
DSV holds ownership interests in 10 associates (2017: 9 associates). The Group's share of associates' profit for the year amounted to DKK 2 million (2017: DKK 2 million).
The carrying amount of the investment was DKK 38 million at 31 December 2018 (2017: DKK 35 million).
The Group had the following transactions with associates:
| ASSOCIATED COMPANIES TRANSACTIONS |
||
|---|---|---|
| (DKKm) | 2018 | 2017 |
| Sale of services | 202 | 221 |
| Purchase of services | 33 | 32 |
The Group had the following balances with associates at 31 December 2018:
| BALANCES (DKKm) | 2018 | 2017 |
|---|---|---|
| Receivables | 45 | 50 |
| Liabilities | 2 | 2 |
Contingent liabilities comprise possible obligations which have not yet been confirmed, are uncertain or cannot be measured reliably, but which may if realised 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 is met.
Management assesses the existence of contingent liabilities on an ongoing basis and in this regard considers if the criteria for recognising a provision is in effect.
These judgements may involve advise from external experts, legal advisors, etc.
Contingent liabilities 2018 As an international transport service provider, DSV is regularly involved in tax and VAT disputes, legal proceedings or inquiries from competition authorities. Management believes that current identified cases will have no material impact on the financial position of the Group.
A detailed disclosure of individual contingent liabilities is considered impracticable to disclose and has therefore not been included in the notes to the financial statements.
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.
At the reporting date, all liabilities relating to the bank guarantees provided were recognised in the balance sheet or described in note 3.6 as operating lease obligations.
At 31 December 2018, property, plant and equipment with a carrying value of DKK 193 million were pledged as security (2017: DKK 251 million).
The carrying amount of debt secured by pledges amounted to DKK 192 million (2017: DKK 217 million).
DSV has concluded IT service contracts. Costs related to these contracts are recognised as the services are provided.
DSV has made a private and indicative proposal to acquire Panalpina Welttransport Holding AG ("Panalpina"). The consideration offered per share in Panalpina consists of 1.58 shares in DSV and CHF 55 in cash. Based on the closing share price at 11 January 2019, the value of the offer was CHF 170 per share.
For additional information on the offer made and the contact with Panalpina Welttransport Holding AG, please see Company Announcement no. 734 and no. 735.
Key figures, financial and share ratios are calculated in accordance with 'Recommendations & Financial Ratios 2015' 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 calculated in accordance with IAS 33.
| Net interest-bearing debt (NIBD) |
= | Interest-bearing debt less interest-bearing assets and cash and cash equivalents |
|---|---|---|
| Net working capital (NWC) | = | Receivables and other current operating assets less trade payables and other payables and other current operating liabilities |
| Invested capital | = | NWC + property, plant and equipment, intangible assets including goodwill and customer relationships less long-term provisions |
| Adjusted earnings | = | The DSV A/S shareholders' share of profit for the reporting 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 |
| Adjusted free cash flow | = | Free cash flow adjusted for net acquisition of subsidiaries and activities, lease liability repayments, special items and normalisation of working |
| Gross margin | = | Gross profit * 100 | ||||
|---|---|---|---|---|---|---|
| Revenue | ||||||
| Operating margin | = | Operating profit before impairment of goodwill and special items * 100 | ||||
| Revenue | ||||||
| Conversion ratio | = | Operating profit before impairment of goodwill and special items * 100 | ||||
| Gross profit | ||||||
| Effective tax rate* | Tax on profit for the year | |||||
| = | Profit before tax |
capital in subsidiaries and activities acquired
| Operating profit before impairment of goodwill and special items * 100 | ||
|---|---|---|
| ROIC before tax | = | Average invested capital |
| Profit attributable to the shareholders of DSV A/S * 100 | ||
| Return on equity (ROE) | = | Average equity excluding non-controlling interests |
| Equity excluding non-controlling interests * 100 | ||
| Solvency ratio | = | Total assets |
| Net interest-bearing debt | ||
| Gearing ratio* | = | Operating profit before amortisation, |
| impairment of goodwill and special items | ||
| Share ratios | ||
| Earnings per share | = | Profit attributable to the shareholders of DSV A/S |
| Average number of shares | ||
| Earnings per share diluted | = | Profit attributable to the shareholders of DSV A/S |
| Average number of shares diluted | ||
| Adjusted earnings | ||
| Adjusted earnings per share diluted |
= | Average number of shares diluted |
| Number of shares | = | Total number of shares outstanding excluding treasury shares at the reporting date |
| Average number of shares | = | Average number of shares outstanding during the reporting period |
| Average number of shares diluted |
= | 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 |
The overview below is a list of active companies of the DSV Group at 31 December 2018 and shows the companies by segment and not by legal structure.
| Owner ship |
Air & | Solu | Group | Owner ship |
Air & | Solu | Group | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Company | Country | share | Sea | Road | tions | activity | Company | Country | share | Sea | Road | tions | activity |
| PARENT | Europe (continued) | ||||||||||||
| DSV A/S | Denmark | - | X | DSV Group Services A/S | Denmark | 100% | X | ||||||
| DSV Property ApS | Denmark | 100% | X | ||||||||||
| SUBSIDIARIES | DSV FS A/S | Denmark | 100% | X | |||||||||
| Europe | GP0615 ApS | Denmark | 100% | X | |||||||||
| DSV Österreich Spedition GmbH | Austria | 100% | X | X | Anpartselskabet af 25. januar 2017 | Denmark | 100% | X | |||||
| DSV Transport Ltd. | Belarus | 100% | X | X | DSV Real Estate Copenhagen A/S | Denmark | 100% | X | |||||
| DSV Air & Sea NV | Belgium | 100% | X | DSV Air & Sea Holding A/S | Denmark | 100% | X | ||||||
| Maartens Art Packers and Shippers B.V.B.A. | Belgium | 100% | X | DSV Air & Sea A/S | Denmark | 100% | X | ||||||
| ABX Worldwide Holdings NV/SA | Belgium | 100% | X | DSV Ocean Transport A/S | Denmark | 100% | X | ||||||
| DSV Road Holding NV | Belgium | 100% | X | X | DSV Real Estate Odense A/S | Denmark | 100% | X | |||||
| DSV Air & Sea Belgium NV | Belgium | 100% | X | DSV Air & Sea Denmark ApS | Denmark | 100% | X | ||||||
| DSV Solutions N.V. | Belgium | 100% | X | DSV Solutions Holding A/S | Denmark | 100% | X | ||||||
| DSV Logistics N.V. | Belgium | 100% | X | DSV Solutions A/S | Denmark | 100% | X | ||||||
| DSV Road N.V. | Belgium | 100% | X | DSV Road Holding A/S | Denmark | 100% | X | ||||||
| Marine Cargo Insurance (MCI) Agents N.V. | Belgium | 100% | X | DSV Road A/S | Denmark | 100% | X | ||||||
| DSV Air & Sea OOD | Bulgaria | 100% | X | DSV Road Services A/S | Denmark | 100% | X | ||||||
| DSV Road EOOD | Bulgaria | 100% | X | X | DSV Transport AS | Estonia | 100% | X | X | ||||
| DSV Hrvatska d.o.o. | Croatia | 100% | X | DSV Air & Sea Oy | Finland | 100% | X | ||||||
| DSV Air & Sea s.r.o. | Czech Republic | 100% | X | UTi Logistics (Finland) Oy | Finland | 100% | X | ||||||
| DSV Solutions s.r.o. | Czech Republic | 100% | X | DSV Solutions Oy | Finland | 100% | X | ||||||
| DSV Road a.s. | Czech Republic | 100% | X | DSV Road Oy | Finland | 100% | X | ||||||
| DSV Insurance A/S | Denmark | 100% | X | DSV Air & Sea SAS | France | 100% | X |
| Company | Country | Owner ship share |
Air & Sea |
Road | Solu tions |
Group activity |
Company | Country | Owner ship share |
Air & Sea |
Road | Solu tions |
Group activity |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Europe (continued) | Europe (continued) | ||||||||||||
| DSV Solutions SAS | France | 100% | X | UTi Italy SrL | Italy | 100% | X | ||||||
| DSV Road Holding S.A. | France | 100% | X | DSV Real Estate Novara S.r.l. | Italy | 66% | X | ||||||
| DSV Road SAS | France | 100% | X | DSV Road S.p.A. | Italy | 100% | X | ||||||
| ING REEIF WATTRELOS | France | 100% | X | Saima Caspian LLC | Kazakhstan | 100% | X | ||||||
| PORTIMMO | France | 100% | X | UTi Kazakhstan LLP | Kazakhstan | 100% | X | ||||||
| DSV Air & Sea GmbH | Germany | 100% | X | DSV SIA | Latvia | 100% | X | X | |||||
| DSV Air & Sea Deutschland GmbH | Germany | 100% | X | DSV Transport UAB | Lithuania | 100% | X | X | |||||
| UTi Logistik Deutschland GmbH - Hungary Branch | Germany | 100% | X | XB Luxembourg Holdings 1 SA | Luxembourg | 100% | X | ||||||
| DSV Solutions Group GmbH | Germany | 100% | X | XB Luxembourg Holdings 2 SARL | Luxembourg | 100% | X | ||||||
| DSV Solutions GmbH | Germany | 100% | X | DSV ROAD DOOEL Skopje | Macedonia | 100% | X | ||||||
| DSV Stuttgart GmbH & Co. KG | Germany | 100% | X | X | African Investments BV | Netherlands | 100% | X | |||||
| DSV Stuttgart Verwaltung GmbH | Germany | 100% | X | UTi (Netherlands) Holdings BV | Netherlands | 100% | X | ||||||
| Administration & Accounting Service GmbH | Germany | 100% | X | DSV Air & Sea Nederland B.V. | Netherlands | 100% | X | ||||||
| DSV Road GmbH | Germany | 100% | X | DSV Shared Services B.V. | Netherlands | 100% | X | ||||||
| DSV Immobilien GmbH | Germany | 100% | X | UTi International Networks BV | Netherlands | 100% | X | ||||||
| GP0615 ApS & Co. Am Zunderbaum KG | Germany | 100% | X | X | Russia Logistics B.V. | Netherlands | 100% | X | |||||
| DSV Real Estate Bochum ApS & Co. KG | Germany | 100% | X | DSV Solutions Holding B.V. | Netherlands | 100% | X | ||||||
| DSV Real Estate Peine ApS & Co. KG | Germany | 100% | X | DSV Solutions Nederland B.V. | Netherlands | 100% | X | ||||||
| DSV HELLAS S.A. | Greece | 100% | X | X | IMS Holdings BV | Netherlands | 100% | X | |||||
| UTi Networks Limited | Guernsey | 100% | X | DSV Multi-Channel Fulfilment B.V. | Netherlands | 100% | X | ||||||
| DSV Solutions Hungary Kft. | Hungary | 100% | X | S&H Fulfilment B.V. | Netherlands | 100% | X | ||||||
| DSV Hungaria Kft. | Hungary | 100% | X | X | VTS Beheer B.V. | Netherlands | 100% | X | |||||
| DSV Air & Sea Limited | Ireland | 100% | X | DSV Solutions (Dordrecht) B.V. | Netherlands | 100% | X | ||||||
| UTi Ireland Ltd. | Ireland | 100% | X | DSV Solutions (Moerdijk) B.V. | Netherlands | 100% | X | ||||||
| DSV Solutions Ltd. | Ireland | 100% | X | DSV Road Holding N.V. | Netherlands | 100% | X | ||||||
| UTI Inventory Management Solutions Limited | Ireland | 100% | X | DSV Road B.V. | Netherlands | 100% | X | ||||||
| DSV Road Limited | Ireland | 100% | X | DSV Air & Sea AS | Norway | 100% | X | ||||||
| DSV S.p.A. | Italy | 99.1% | X | X | X | DSV Solutions AS | Norway | 100% | X |
| Owner | Owner | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Company | Country | ship share |
Air & Sea |
Road | Solu tions |
Group activity |
Company | Country | ship share |
Air & Sea |
Road | Solu Group tions activity |
| Europe (continued) | Europe (continued) | |||||||||||
| DSV Road AS | Norway | 100% | X | DSV Air & Sea AB | Sweden | 100% | X | |||||
| DSV International Shared Services Sp. z o.o. | Poland | 100% | X | UTi Logistics AB | Sweden | 100% | X | |||||
| DSV Real Estate Warsaw Sp. z o.o. | Poland | 100% | X | DSV Solutions AB | Sweden | 100% | X | |||||
| DSV Real Estate Warsaw Sp. z o.o. | Poland | 100% | X | DSV Group AB | Sweden | 100% | X | |||||
| DSV Air & Sea Sp. z o.o. | Poland | 100% | X | DSV Road AB | Sweden | 100% | X | |||||
| UTi Poland Sp. Zo. o. | Poland | 100% | X | Sverige Ontime Logistics AB | Sweden | 100% | X | |||||
| DSV Services Sp. z.o.o. | Poland | 100% | X | DSV Road Property 1:31 AB | Sweden | 100% | X | |||||
| DSV Road Sp. z.o.o. | Poland | 100% | X | Göinge Frakt EK | Sweden | 100% | X | |||||
| DSV Solutions Sp. z.o.o. | Poland | 100% | X | DSV Road Property Holding AB | Sweden | 100% | X | |||||
| DSV Air & Sea Portugal, LDA | Portugal | 100% | X | DSV Logistics S.A. | Switzerland | 100% | X | X | X | |||
| DSV Solutions, Lda. | Portugal | 100% | X | DSV Air & Sea A.S. | Turkey | 100% | X | |||||
| DSV SGPS, Lda. | Portugal | 100% | X | DSV Road & Solutions A.S. | Turkey | 100% | X | |||||
| DSV Transitarios, Lda. | Portugal | 100% | X | DSV Logistics LLC | Ukraine | 100% | X | X | ||||
| DSV Solutions S.R.L. | Romania | 100% | X | X | X | DSV Air & Sea Limited | UK | 100% | X | |||
| DSV Solutions OOO | Russia | 100% | X | UTi (UK) Holdings Ltd. | UK | 100% | X | |||||
| DSV Road OOO | Russia | 100% | X | X | UTi Worldwide (UK) Ltd. | UK | 100% | X | ||||
| OOO DSV Transport | Russia | 100% | X | SBS Worldwide (Holdings) Ltd. | UK | 100% | X | |||||
| DSV Road d.o.o. | Serbia | 100% | X | Virtualized Logistics Ltd. | UK | 100% | X | |||||
| UTi Slovakia s.r.o. | Slovakia | 100% | X | SBS Worldwide Ltd. | UK | 100% | X | |||||
| DSV Solutions Slovakia s.r.o. | Slovakia | 100% | X | S. Black Ltd. | UK | 100% | X | |||||
| DSV Slovakia S.R.O. | Slovakia | 100% | X | X | DSV Air & Sea 2018 (UK) Limited | UK | 100% | X | ||||
| DSV Transport d.o.o. | Slovenia | 100% | X | X | DSV Peterborough Real Estate Limited | UK | 100% | X | ||||
| Tacisa Transitaria S.L. | Spain | 100% | X | DSV Road Holding Ltd. | UK | 100% | X | |||||
| DSV Solutions Spain S.A.U. | Spain | 100% | X | DSV Commercials Ltd. | UK | 100% | X | |||||
| Servicios Logisticos Integrados SLI, S.A. | Spain | 100% | X | DSV Road Ltd. | UK | 100% | X | |||||
| DSV Road Spain S.A.U. | Spain | 100% | X | DSV Pension Trustees Ltd. | UK | 100% | X | |||||
| DSV Holding Spain S.L. | Spain | 100% | X | DSV Solutions Ltd. | UK | 100% | X | |||||
| DSV Air & Sea, S.A.U. | Spain | 100% | X | DFDS Transport Ltd. | UK | 100% | X |
| Owner | Owner | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Company | Country | ship share |
Air & Sea |
Road | Solu tions |
Group activity |
Company | Country | ship share |
Air & Sea |
Road | Solu Group tions activity |
| North America | South America (continued) | |||||||||||
| DSV Air & Sea Inc. | Canada | 100% | X | UTi Logistics (Proprietary) Limited | Brit.virgin Is. | 100% | X | |||||
| DSV Solutions Inc. | Canada | 100% | X | Thomas International Freight Auditors Limited | Brit.virgin Is. | 100% | X | |||||
| DSV Road, Inc. | Canada | 100% | X | UTi Asia Pacific Limited | Brit.virgin Is. | 100% | X | |||||
| DSV Air & Sea, S.A. de C.V. | Mexico | 100% | X | UTi Kazakhstan Investments Ltd | Brit.virgin Is. | 100% | X | |||||
| UTi Services S.A. de C.V. | Mexico | 100% | X | DSV Air & Sea (Latin America) S.A. | Chile | 100% | X | |||||
| DSV Solutions S.A. de C.V. | Mexico | 100% | X | DSV Air & Sea S.A. | Chile | 100% | X | |||||
| DSV 4PL Inc. | United States | 100% | X | UTi Chile S.A. | Chile | 100% | X | |||||
| DSV Air & Sea Holding Inc. | United States | 100% | X | DSV Air & Sea S.A.S. | Colombia | 100% | X | |||||
| DSV Air & Sea Inc. | United States | 100% | X | UTi Colombia S.A. SIA | Colombia | 100% | X | |||||
| DSV Air & Sea International Holding Inc. | United States | 100% | X | DSV Air & Sea S.A. | Costa Rica | 100% | X | |||||
| DSV Solutions, LLC | United States | 100% | X | UTi (NA) Holdings NV | Curacao | 100% | X | |||||
| UTi Inventory Management Solutions Inc. | United States | 100% | X | DSV Air & Sea PA Inc. | Panama | 100% | X | |||||
| Market Industries LLC | United States | 100% | X | DSV Air & Sea S.A. | Peru | 100% | X | |||||
| Market Transport, Ltd. | United States | 100% | X | DSV Air & Sea Inc. | Puerto Rico | 100% | X | |||||
| Sammons Transportation, Inc. | United States | 100% | X | UTi Uruguay SA | Uruguay | 100% | X | |||||
| DSV Road, Inc. | United States | 100% | X | X | ||||||||
| Market Logistics Services, Ltd. | United States | 100% | X | Asia | ||||||||
| DSV Air & Sea Ltd. | Bangladesh | 100% | X | |||||||||
| South America | ABX LOGISTICS (Bangladesh) Ltd. | Bangladesh | 100% | X | ||||||||
| DSV Air & Sea S.A. | Argentina | 100% | X | UTI Pership (Pvt) Limited | ||||||||
| UTi Logistics Argentina S.A. | Argentina | 100% | X | - Bangladesh Branch (BDT) | Bangladesh | 100% | X | |||||
| DSV UTI Air & Sea Agenciamento | DSV Air & Sea Co., Ltd. | Cambodia | 100% | X | ||||||||
| de Transportes Ltda. | Brazil | 100% | X | UTi Worldwide Co. Ltd. - Cambodia Branch (USD) | Cambodia | 100% | X | |||||
| UTi Worldwide Inc. | Brit.virgin Is. | 100% | X | DSV Air & Sea Co., Ltd. | China | 100% | X | |||||
| Goddard Company Limited | Brit.virgin Is. | 100% | X | DSV Air & Sea Co., Ltd. (South East China) | China | 100% | X | |||||
| UTi International Inc. | Brit.virgin Is. | 100% | X | DSV Logistics Co., Ltd. | China | 100% | X | |||||
| Pyramid Freight (Proprietary) Limited | Brit.virgin Is. | 100% | X | UTi (China) Limited | China | 100% | X | |||||
| UTi Africa Services Limited | Brit.virgin Is. | 100% | X | DSV Air & Sea Ltd. | Hong Kong | 100% | X | |||||
| S-CHP Investments (Hong Kong) Ltd. | Hong Kong | 100% | X |
| Owner | ||||||
|---|---|---|---|---|---|---|
| Company | Country | ship share |
Air & Sea |
Road | Solu tions |
Group activity |
| Asia (continued) | ||||||
| UTi (HK) Limited | Hong Kong | 100% | X | |||
| Air and Sea Union Holdings Ltd. | Hong Kong | 100% | X | |||
| DSV Air & Sea Pvt. Ltd. | India | 100% | X | |||
| DSV Air & Sea International Private Limited | India | 100% | X | |||
| Swift Shipping and Freight Logistics Private Limited |
India | 100% | X | |||
| IndAir Carriers Pvt. Ltd. | India | 100% | X | |||
| UT Worldwide (India) Pvt. Limited | India | 100% | X | X | ||
| PT. DSV Transport Indonesia | Indonesia | 100% | X | |||
| PT J.H. Bachmann (Indonesia) | Indonesia | 100% | X | |||
| PT ABX LOGISTICS (Indonesia) | Indonesia | 100% | X | |||
| DSV Air & Sea Co., Ltd. | Japan | 100% | X | X | ||
| DSV Air & Sea Ltd. | Korea | 100% | X | |||
| DSV Air & Sea Sdn. Bhd. | Malaysia | 100% | X | |||
| DSV Logistics Sdn. Bhd. | Malaysia | 100% | X | |||
| UTi Worldwide (M) Sdn Bhd | Malaysia | 100% | X | |||
| UTi Inventory Management Solutions Sdn Bhd | Malaysia | 100% | X | |||
| UTi Pakistan (SMC-Private) Limited | Pakistan | 100% | X | |||
| DSV Air & Sea Inc. | Philippines | 100% | X | |||
| UTi (Global Logistics) Inc. | Philippines | 100% | X | |||
| DSV SHARED SERVICES MANILA (ROHQ) | Philippines | 100% | X | |||
| DSV Air & Sea Pte. Ltd. | Singapore | 100% | X | |||
| ABX LOGISTICS Singapore PTE LTD | Singapore | 100% | X | |||
| DSV Solutions Pte Ltd. | Singapore | 100% | X | |||
| Inventory Solutions (Singapore) Pte. Ltd | Singapore | 98% | X | |||
| UTi Pership (Pvt) Limited | Sri Lanka | 51% | X | |||
| DSV Pership (Private) Limited | Sri Lanka | 40% | X | |||
| DSV Air & Sea Co. Ltd. | Taiwan | 100% | X |
| Owner | ||||||
|---|---|---|---|---|---|---|
| Company | Country | ship share |
Air & Sea |
Road | Solu tions |
Group activity |
| Asia (continued) | ||||||
| UTi Holding Co., Ltd. | Taiwan | 100% | X | |||
| DSV Solutions Co., Ltd. | Taiwan | 100% | X | |||
| DSV Air & Sea Ltd. | Thailand | 100% | X | |||
| DSV Solutions Ltd. | Thailand | 100% | X | |||
| DSV Holding (Thailand) Co., Ltd. | Thailand | 100% | X | |||
| DSV Air & Sea Co., Ltd. | Vietnam | 100% | X | |||
| UTi Worldwide Vietnam Co. Ltd. | Vietnam | 100% | X | |||
| Middle East | ||||||
| DSV Air & Sea Ltd. | Israel | 100% | X | |||
| DSV Marine Insurance Agency Ltd. | Israel | 100% | X | |||
| Hermes Exhibition & Projects Limited | Israel | 50% | X | |||
| Carma Conveying & Carriage Limited | Israel | 50% | X | |||
| DSV - E-COMMERCE LTD. | Israel | 100% | X | |||
| DSV Solutions Ltd | Israel | 100% | X | |||
| U.T.I.-Inventory Management | ||||||
| Solutions Limited partnership | Israel | 100% | X | |||
| UTI IMS Ltd. | Israel | 100% | X | |||
| UTi Jordan Ltd. | Jordan | 100% | X | |||
| DSV Air & Sea (LLC) | UAE | 100% | X | X | ||
| Oceania | ||||||
| DSV Air & Sea Pty. Ltd. | Australia | 100% | X | X | ||
| UTi (Aust) Pty Limited | Australia | 100% | X | |||
| DSV Air & Sea Limited | New Zealand | 100% | X | X | ||
| UTi New Zealand Ltd. | New Zealand | 100% | X | |||
| Owner | Owner | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Company | Country | ship share |
Air & Sea |
Road | Solu tions activity |
Group | Company | Country | ship share |
Air & Sea |
Road | Solu Group tions activity |
| Africa | Africa (continued) | |||||||||||
| Frans Maas Algerie S.a.r.l. | Algeria | 100% | X | DSV Assembly Services (Pty) Ltd. | South Africa | 65.3% | X | |||||
| DSV Air & Sea (PTY) Limited | Botswana | 100% | X | Chilli Pepper Investments (Pty) Ltd. | South Africa | 100% | X | |||||
| Swift Freight International Burundi SA | Burundi | 100% | X | Imithi Distributors (Pty) Ltd. | South Africa | 100% | X | |||||
| DSV Swift SARL | Dr Congo | 100% | X | Chronic Medicine Dispensary (Pty) Ltd. | South Africa | 100% | X | |||||
| DSV-UTI Egypt Ltd. | Egypt | 100% | X | X | DSV Mounties (Pty) Ltd. | South Africa | 100% | X | ||||
| DSV Air & Sea Limited | Ghana | 100% | X | DSV Road (Pty) Ltd. | South Africa | 100% | X | |||||
| DSV Air & Sea Limited | Kenya | 100% | X | DSV Air & Sea Limited | Tanzania | 100% | X | |||||
| DSV Air & Sea LIMITED | Malawi | 100% | X | Swift Global Logistics | Togo | 100% | X | |||||
| DSV Air & Sea Limited | Mauritius | 100% | X | DSV Air & Sea Limited | Uganda | 100% | X | |||||
| DSV Transport Int'l S.A | Morocco | 100% | X | Swift Freight International (Zambia) Ltd. | Zambia | 100% | X | |||||
| Terminal Handling Company | Morocco | 100% | X | DSV Air & Sea Limited | Zambia | 100% | X | |||||
| DSV Air & Sea Limitada | Mozambique | 100% | X | DSV Air & Sea (Private) Limited | Zimbabwe | 100% | X | |||||
| Saima Nigeria Ltd. | Nigeria | 40% | X | |||||||||
| Nationwide Clearing & Forwarding Ltd. | Nigeria | 36.6% | X | Associates | ||||||||
| DSV Freight International Limited | Nigeria | 100% | X | DSV Air & Sea LLC | Egypt | 20% | X | |||||
| DSV Air & Sea Ltd. | Rwanda | 100% | X | MGM Lines Srl | Italy | 30% | X | |||||
| DSV Air and Sea (Proprietary) Limited | South Africa | 100% | X | Sama Al Imad General Transport LLC | Iraq | 30% | X | |||||
| Pyramid Freight (Pty) Limited | South Africa | 100% | X | GT Stevedores Oy | Finland | 25.5% | X | |||||
| DSV South Africa (Pty) Ltd. | South Africa | 75% | X | KM Logistik GmbH | Germany | 35% | X | |||||
| DSV Shared Services (Pty) Ltd. | South Africa | 100% | X | IDS Logistik GmbH | Germany | 28% | X | |||||
| UTi Logistics (Proprietary) Limited | Beavor Properties (Pty) Ltd. | South Africa | 25% | X | ||||||||
| - SC OCS Division | South Africa | 100% | X | Key Logistics, Inc. | United States | 49% | X | |||||
| DSV AFRICA HOLDING (Pty) Ltd. | South Africa | 100% | X | Union Temporal de Empres as LEY 18/1982 | Spain | 15.3% | X | |||||
| Scorpion Share Block (Pty) Ltd. | South Africa | 100% | X | T2O Egebjerg A/S | Denmark | 24.9% | X | |||||
| Marine Link (Pty) Ltd. | South Africa | 100% | X | |||||||||
| DSV Real Estate Johannesburg (Pty) Ltd. | South Africa | 100% | X | |||||||||
| Sisonke Partnership | South Africa | 100% | X | |||||||||
| DSV Solutions (Pty) Ltd. | South Africa | 100% | X |
The Board of Directors and the Executive Board have today discussed and approved the Annual Report of DSV A/S for the financial year 2018.
The Annual Report has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and further requirements in the Danish Financial Statements Act.
It is our opinion that 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 2018 and of the results of the Group's and the Parent Company's operations and cash flows for the financial year 1 January - 31 December 2018.
In our opinion, the Management's commentary includes a fair review of the development in the Group's and the Parent Company's operations and financial conditions, the results for the year, cash flow and financial position as well as a description of the significant risks and uncertainty factors that the Parent Company and the Group face.
We recommend that the Annual Report be approved at the Annual General Meeting.
Hedehusene, 7 February 2019
Jens Bjørn Andersen CEO
Jens H. Lund
CFO
Kurt K. Larsen Chairman
Birgit W. Nørgaard
Robert S. Kledal
Thomas Plenborg Deputy Chairman
Annette Sadolin
Jørgen Møller
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 2018 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 2018 in accordance with International Financial Reporting Standards 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.
The Consolidated Financial Statements and Parent Company Financial Statements of DSV A/S for the financial year 1 January to 31 December 2018 comprise income statement and statement of comprehensive income, balance sheet, statement of changes in equity, cash flow statement 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".
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.
We are independent of the Group in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) and the additional requirements applicable in Denmark. We have also fulfilled our other ethical responsibilities in accordance with 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.
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 2 years including the financial year 2018.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements for 2018. 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.
DSV has adopted IFRS 15 at 1 January 2018 using the modified retrospective application with any cumulative effects recognised in equity at 1 January 2018 and with no restatement of comparatives. 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. The determination of timing of revenue recognition is dependent on the application of the Group's accounting policies and terms in customer contracts.
We focused on this area because the process of accruing for services rendered around the balance sheet date (contract assets and accrued cost of services) is complex and dependent on Management estimates and relevant IT controls in certain operational systems.
Reference is made to notes 2.2 and 3.4 to the Consolidated Financial Statements.
Our audit procedures included assessing the accounting policies for revenue recognition applied by Management and comparing these to IFRS 15. We reviewed and discussed Managements assessment of implementing IFRS 15, including the impact on the opening equity, the income statement, the balance sheet and disclosures.
Moreover, we tested relevant internal controls, including IT controls, concerning the timing of revenue recognition and evaluated whether these were designed in line with the Group's accounting policies and were operating effectively.
We also selected a sample of revenue transactions during the year and traced these to underlying evidence.
In addition, we used data auditing tools to identify non-standard transactions and examined these.
For revenue, contract assets and accrued cost of services, we examined reports concerning services in progress and challenged the estimates made by Management in this regard.
The Group operates in many territories and is, consequently, subject to local laws and cross-border transfer pricing legislation, which complicates tax matters of the Group as a whole.
The Group also carries significant deferred tax assets that consist primarily of tax on provisions made at the balance sheet date and tax loss carry forwards. The utilisation of tax losses and tax amortisation balances is, inherently, uncertain, as it is dependent on the financial development of business activities in certain countries and regions.
We focused on this area because the valuation of deferred tax assets and income tax positions involves significant Management estimates.
Reference is made to note 5.2 to the Consolidated Financial Statement.
How our audit addressed the key audit matter Our audit procedures included assessing the Group's accounting policies and valuation models within the tax accounting area and comparing these to 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 in the tax accounting. As part of this, we reviewed correspondence with tax authorities and discussed assumptions made by Management with internal corporation tax specialists.
We tested management assessment of the recoverability over the carrying value of deferred tax assets arising from temporary differences and tax loss carry forwards on the basis of internal forecasts of future taxable income and evaluated the assumptions made by Management in this connection.
Management is responsible for Management's commentary.
Our opinion on the Financial Statements does not cover Management's commentary, and we do not express any form of assurance conclusion thereon.
In connection with our audit of the Financial Statements, our responsibility 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 commentary is in accordance with the Consolidated Financial Statements and the Parent Company Financial Statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement in Management's commentary.
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 as adopted by the EU and further requirements in the Danish Financial Statements Act, and for such internal control as Management determines 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 either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so.
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 includes 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 requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
Parent Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions 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.
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 applicable, related safeguards.
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 matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Copenhagen, 7 February 2019
PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab
CVR no 3377 1231
State Authorised Public Accountant mne9291
Lars Baungaard State Authorised Public Accountant mne23331
| Income statement | 93 |
|---|---|
| Statement of comprehensive income | 93 |
| Cash flow statement | 94 |
| Balance sheet | 95 |
| Statement of changes in equity | 96 |
| 1. Accounting policies | 97 |
|---|---|
| 2. Changes in accounting policies | 97 |
| 3. Management judgements | 97 |
| 4. New accounting regulations | 97 |
| 5. Revenue | 97 |
|---|---|
| 6. Fees to auditors appointed at the | |
| Annual General Meeting | 97 |
| 7. Staff costs | 97 |
| 8. Special items | 98 |
| 9. Financial income | 98 |
| 10. Financial expenses | 98 |
| 11. Tax for the year | 98 |
| 12. Intangible assets 98 |
|---|
| 13. Investments in Group entities 99 |
| 14. Receivables from Group entities and |
| other receivables 99 |
| 15. Equity reserves 99 |
| 16. Financial liabilities 100 |
| 17. Payables to Group entities and other payables 100 |
| 18. Deferred tax 100 |
| 19. Share option schemes 101 | |
|---|---|
| 20. Operating lease obligations 101 | |
| 21. Derivative financial instruments 102 | |
| 22. Financial risks 102 | |
| 23. Contingent liabilities and security for debt 103 | |
| 24. Related parties 103 | |
| 25. Gender representation 103 |
| Total comprehensive income | 1,271 | 1,610 |
|---|---|---|
| Other comprehensive income, net of tax | 7 | 20 |
| Tax on items reclassified to income statemnet | (2) | (6) |
| Fair value adjustments relating to hedging instruments transferred to financial expenses |
8 | 24 |
| Fair value adjustments relating to hedging instruments | 1 | 2 |
| Items that will be reclassified to income statement when certain conditions are met: |
||
| Profit for the year | 1,264 | 1,590 |
| (DKKm) | 2018 | 2017 |
| (DKKm) Note |
2018 | 2017 |
|---|---|---|
| Operating profit before amortisation, depreciation and special items | 236 | 185 |
| Adjustments: | ||
| Share-based payments | 16 | 11 |
| Change in working capital etc. | 1,966 | 1,918 |
| Special items | - | 41 |
| Dividend received | 1,059 | 1,481 |
| Interest received | 574 | 542 |
| Interest paid | (292) | (265) |
| Income tax paid | (16) | (34) |
| Cash flow from operating activities | 3,543 | 3,879 |
| Purchase of intangible assets 12 |
(406) | (365) |
| Sale of intangible assets | 4 | - |
| Purchase of property, plant and equipment | (83) | (69) |
| Acquisition of subsidiaries and activities | - | (2) |
| Change in other financial assets | 264 | 349 |
| Cash flow from investing activities | (221) | (87) |
| Free cash flow | 3,322 | 3,792 |
| Non-current liabilities incurred | 1,020 | 1,488 |
| Repayment of non-current liabilities | (750) | (3,956) |
| Shareholders: | ||
| Dividends distributed | (380) | (342) |
| Dividends on treasury shares | 14 | 7 |
| Purchase of treasury shares | (4,161) | (1,559) |
| Sale of treasury shares | 876 | 674 |
| Cash flow from financing activities | (3,381) | (3,688) |
| Cash flow for the year | (59) | 104 |
| (DKKm) Note |
2018 | 2017 |
|---|---|---|
| Cash flow for the year - continued | (59) | 104 |
| Cash and cash equivalents 1 January | 107 | 1 |
| Cash flow for the year | (59) | 104 |
| Currency translation adjustments | (2) | 2 |
| Cash and cash equivalents at 31 December | 46 | 107 |
The cash flow statement cannot be directly derived from the balance sheet and income statement.
| (DKKm) Note |
2018 | 2017 |
|---|---|---|
| Intangible assets 12 |
1,112 | 973 |
| Property, plant and equipment | 113 | 84 |
| Investments in Group entities 13 |
5,602 | 5,602 |
| Non-current receivables from Group entities and other non-current receivables |
14,573 | 14,837 |
| Total non-current assets | 21,400 | 21,496 |
| Receivables from Group entities and other receivables 14 |
4,831 | 4,498 |
| Income tax | - | 23 |
| Cash and cash equivalents | 46 | 107 |
| Total current assets | 4,877 | 4,628 |
| Total assets | 26,277 | 26,124 |
| (DKKm) | Note | 2018 | 2017 |
|---|---|---|---|
| Share capital | 188 | 190 | |
| Reserves and retained earnings | 15 | 7,530 | 9,898 |
| Total equity | 7,718 | 10,088 | |
| Deferred tax | 18 | 128 | 91 |
| Financial liabilities | 16 | 5,467 | 5,350 |
| Total non-current liabilities | 5,595 | 5,441 | |
| Financial liabilities | 16 | 219 | 71 |
| Income tax | 47 | - | |
| Payables to Group entities and other payables | 17 | 12,698 | 10,524 |
| Total current liabilities | 12,964 | 10,595 | |
| Total liabilities | 18,559 | 16,036 | |
| Total equity and liabilities | 26,277 | 26,124 |
| 2018 | 2017 | |||||||
|---|---|---|---|---|---|---|---|---|
| (DKKm) | Share capital |
Reserves* | Retained earnings |
Total equity |
Share capital |
Reserves* | Retained earnings |
Total equity |
| Equity at 1 January | 190 | 5,055 | 4,843 | 10,088 | 190 | 5,030 | 4,402 | 9,622 |
| Profit for the year | - | 222 | 1,042 | 1,264 | - | 111 | 1,479 | 1,590 |
| Other comprehensive income, net of tax | - | 7 | - | 7 | - | (85) | 105 | 20 |
| Total comprehensive income for the year | - | 229 | 1,042 | 1,271 | - | 26 | 1,584 | 1,610 |
| Transactions with owners: | ||||||||
| Share-based payments | - | - | 16 | 16 | - | - | 11 | 11 |
| Dividends distributed | - | - | (380) | (380) | - | - | (342) | (342) |
| Purchase of treasury shares | - | (8) | (4,153) | (4,161) | - | (3) | (1,556) | (1,559) |
| Sale of treasury shares | - | 2 | 874 | 876 | - | 2 | 672 | 674 |
| Dividends on treasury shares | - | - | 14 | 14 | - | - | 7 | 7 |
| Capital reduction | (2) | 2 | - | - | - | - | - | - |
| Other adjustments | - | - | (6) | (6) | - | - | 65 | 65 |
| Total transactions with owners | (2) | (4) | (3,635) | (3,641) | - | (1) | (1,143) | (1,144) |
| Other equity transactions: | ||||||||
| Transfer to retained earnings | - | (4,744) | 4,744 | - | - | - | - | - |
| Equity at 31 December | 188 | 536 | 6,994 | 7,718 | 190 | 5,055 | 4,843 | 10,088 |
* For a specification of reserves, please refer to note 15
As 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 the International Financial Reporting Standards (IFRS) as adopted by the European Union and further requirements in the Danish Financial Statements Act.
The accounting policies of the Parent are identical with the policies for the consolidated financial statements, except for the following:
Dividends from investments in subsidiaries are recognised as income in the Parent's income statement under financial income in the financial year in which the dividends are declared.
Investments in subsidiaries are measured at cost. If there is any indication 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 that lower value.
Foreign currency adjustments of balances considered part of the total net investment in enterprises which have a functional currency other than Danish kroner (DKK) are recognised in the income statement of the Parent under financials.
The Parent has implemented the International Financial Reporting Standards (IFRS) and amendments effective as of 1 January 2018 as adopted by the European Union.
Implementation of these standards and amendments has had no material impact on the financial statements or notes to the financial statements of the Parent, or resulted in any changes to recognition, measurement or classifications. Reference is made to Chapter 1 of the consolidated financial statements for additional information.
For the preparation of the Annual Report of DSV A/S, Management makes various accounting judgements that affect the reported amounts and disclosures in the statements and in the notes to the financial statements. These judgements are based on professional judgement, historical data and other factors available to Management. By their nature, judgements include a degree of uncertainty and actual results may therefore deviate from the judgements made at the reporting date. Judgements are continuously evaluated, and the effect of any changes is recognised in the relevant period.
Accounting judgements considered significant in the preparation and understanding of the financial statements of the Parent includes the following:
Management assesses annually whether there is an indication of impairment of investments in subsidiaries. If so, the investments will be tested for impairment in the same way as Group goodwill. At 31 December 2018 no impairment indicators have been identified.
The IASB has issued a number of new standards and amendments not yet in effect or endorsed by the EU and therefore not relevant for the preparation of the 2018 Parent company accounts. These standards are expected to be implemented when they take effect.
Of the new standards and amendments only IFRS 16 Leases is currently expected to have any noticeable impact on the Parent financial statements. The effect however is not expected to be material due to the limited number of leases applied by the Parent. Reference is made to Chapter 1 of the consolidated financial statements for additional information.
| (DKKm) | 2018 | 2017 |
|---|---|---|
| Intra-Group charges | 1,737 | 1,473 |
| Total revenue | 1,737 | 1,473 |
| (DKKm) | 2018 | 2017 |
|---|---|---|
| Statutory audit | 3 | 3 |
| Tax and VAT advisory services | - | - |
| Other services | - | - |
| Total fees | 3 | 3 |
For information on remuneration of the Executive Board and the Board of Directors, please see notes 5.3 and 5.4 to the consolidated financial statements.
| (DKKm) | 2018 | 2017 |
|---|---|---|
| Remuneration of the Board of Directors | 6 | 6 |
| Salaries etc. | 632 | 514 |
| Defined contribution pension plans | 26 | 23 |
| Total staff costs | 664 | 543 |
| Average number of full-time employees | 426 | 380 |
| (DKKm) | 2018 | 2017 |
|---|---|---|
| Impairment and other costs relating to reorganisations |
- | 70 |
| Special items, costs | - | 70 |
| (DKKm) | 2018 | 2017 |
|---|---|---|
| Interest income | 31 | 28 |
| Interest income from Group entities | 543 | 514 |
| Currency translation adjustments, net | 83 | 22 |
| Dividends from subsidiaries | 1,059 | 1,481 |
| Total financial income | 1,716 | 2,045 |
Interest income includes interest on financial assets measured at amortised cost of DKK 31 million (2017: DKK 28 million).
| Total financial expenses | 283 | 270 |
|---|---|---|
| Interest expenses for Group entities | 72 | 43 |
| Interest expenses | 211 | 227 |
| (DKKm) | 2018 | 2017 |
Interest expenses include interest on financial liabilities measured at amortised cost of DKK 211 million (2017: DKK 227 million).
Tax for the year is disaggregated as follows:
| (DKKm) | 2018 | 2017 |
|---|---|---|
| Tax on profit for the year | 93 | 43 |
| Tax on other comprehensive income | 2 | 6 |
| Total tax for the year | 95 | 49 |
| (DKKm) | 2018 | 2017 |
|---|---|---|
| Current tax | 63 | 23 |
| Deferred tax | 23 | 21 |
| Tax adjustment relating to previous years | 7 | (1) |
| Total tax on profit for the year | 93 | 43 |
| (DKKm) | 2018 | 2017 |
|---|---|---|
| Calculated tax on profit for the year before tax |
22.0% | 22.0% |
| Tax effect of: | ||
| Non-deductible expenses/ non-taxable income |
(15.6%) | (19.4%) |
| Effective tax rate | 0.5% | - |
| Total tax on profit for the year | 6.9% | 2.6% |
| 12. INTANGIBLE ASSETS | 2018 | ||
|---|---|---|---|
| (DKKm) | Software | Soft ware in progress |
Total |
| Cost at 1 January | 1,716 | 321 | 2,037 |
| Additions for the year | 41 | 365 | 406 |
| Disposals at cost | (31) | (5) | (36) |
| Reclassifications | 296 | (296) | - |
| Total cost at 31 December | 2,022 | 385 | 2,407 |
| Total amortisation and impairment at 1 January |
1,020 | 44 | 1,064 |
| Amortisation and impairment for the year |
261 | - | 261 |
| Amortisation of assets disposed of | (25) | (5) | (30) |
| Total amortisation and im pairment at 31 December |
1,256 | 39 | 1,295 |
| Carrying amount at 31 December |
766 | 346 | 1,112 |
| (DKKm) | 2017 | ||
| Cost at 1 January | 1,372 | 437 | 1,809 |
| Additions for the year | 156 | 209 | 365 |
| Disposals at cost | (70) | (67) | (137) |
| Reclassifications | 258 | (258) | - |
| Total cost at 31 December | 1,716 | 321 | 2,037 |
| Total amortisation and impairment at 1 January |
826 | 44 | 870 |
| Amortisation and impairment for the year |
225 | - | 225 |
| Amortisation of assets disposed of | (31) | - | (31) |
| Total amortisation and im pairment at 31 December |
1,020 | 44 | 1,064 |
| Carrying amount at 31 December |
696 | 277 | 973 |
Total value of financial lease assets amounted to DKK 0 million (2017: DKK 6.1 million).
DSV A/S owns the following subsidiaries, all of which are included in the consolidated financial statements:
| Owner ship 2018 |
Owner ship 2017 |
Registered office |
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 |
| UTi (NA) holdings NV |
100% | 100% | Willemstad, Curacao |
0 |
| Receivables from Group entities and other receivables at 31 December |
4,831 | 4,498 |
|---|---|---|
| Other receivables etc. | 173 | 157 |
| Fair value of derivative financial instruments |
41 | 31 |
| Receivables from Group entities | 4,617 | 4,310 |
| (DKKm) | 2018 | 2017 |
of low credit risk and any expected credit losses within the next 12 months immaterial.
Equity reserves are specified below.
| 2018 | ||||||
|---|---|---|---|---|---|---|
| (DKKm) | Share premium reserve |
Treasury share reserve |
Hedging reserve |
Development cost reserve |
Total reserves |
|
| Reserves at 1 January | 4,744 | (6) | (39) | 356 | 5,055 | |
| Profit for the year | - | 222 | 222 | |||
| Other comprehensive income, net of tax | - | 7 | - | 7 | ||
| Total comprehensive income for the year | - | 7 | 222 | 229 | ||
| Transactions with owners: | ||||||
| Purchase of treasury shares | - | (8) | - | (8) | ||
| Sale of treasury shares | - | 2 | - | 2 | ||
| Capital reduction | - | 2 | - | 2 | ||
| Other equity transactions: | ||||||
| Transfer to retained earnings | (4,744) | - | (4,744) | |||
| Reserves at 31 December | - | (10) | (32) | 578 | 536 |
| 14. RECEIVABLES FROM GROUP ENTITIES | 2017 | |||||||
|---|---|---|---|---|---|---|---|---|
| AND OTHER RECEIVABLES | (DKKm) | Share premium reserve |
Treasury share reserve |
Hedging reserve |
Development cost reserve |
Total reserves |
||
| (DKKm) | 2018 | 2017 | Reserves at 1 January | 4,744 | (5) | 46 | 245 | 5,030 |
| Receivables from Group entities | 4,617 | 4,310 | Profit for the year | - | 111 | 111 | ||
| Fair value of derivative financial instruments |
41 | 31 | Other comprehensive income, net of tax | - | (85) | - | (85) | |
| Other receivables etc. | 173 | 157 | Total comprehensive income for the year | - | (85) | 111 | 26 | |
| Receivables from Group entities and other receivables at 31 December |
4,831 | 4,498 | Transactions with owners: | |||||
| Purchase of treasury shares Sale of treasury shares |
- - |
(3) 2 |
- - |
(3) 2 |
||||
| Receivables from Group entities has been determined to be | Reserves at 31 December | 4,744 | (6) | (39) | 356 | 5,055 |
For a description of equity reserves please see note 4.1 to the consolidated financial statements.
| (DKKm) | 2018 | 2017 |
|---|---|---|
| Loans and credit facilities | 1,670 | 649 |
| Issued bonds | 3,972 | 4,713 |
| Other financial liabilities | 44 | 59 |
| Total financial liabilities | 5,686 | 5,421 |
| Financial liabilities as recognised in the balance sheet: |
||
| Non-current liabilities | 5,467 | 5,350 |
| Current liabilities | 219 | 71 |
| Financial liabilities at 31 December |
5,686 | 5,421 |
| Carrying amount | |||||
|---|---|---|---|---|---|
| (DKKm) | Expiry | Fixed/ floating |
2018 | 2017 | |
| Bank loans | 2020-2022 | Floating Fixed/ |
1,452 | 596 | |
| Bond loans | 2020-2024 | floating | 3,972 | 4,713 | |
| Cash | 2019 | Floating | 218 | 53 | |
| Loans and credit faci lities at 31 December |
5,642 | 5,362 |
Bank loans are subject to standard trade covenants. All financial ratio covenants were observed during the year.
The weighted average interest rate was 2.0% (2017: 2.5%).
| Non-cash change | |||||
|---|---|---|---|---|---|
| FINANCIAL LIABILITIES FINANCING ACTIVITIES 2018 (DKKm) |
Beginning of year |
Cash flow | Foreign ex. movement |
Fair value change |
End of year |
| Loans and credit facilities | 649 | 1,020 | 1 | - | 1,670 |
| Issued bonds | 4.713 | (750) | 5 | 4 | 3,972 |
| Total liabilities from financing activities | 5,362 | 270 | 6 | 4 | 5,642 |
| Other non-current liabilities | 59 | 44 | |||
| Total financial liabilities | 5,421 | 5,686 |
| Non-cash change | |||||
|---|---|---|---|---|---|
| FINANCIAL LIABILITIES FINANCING ACTIVITIES 2017 (DKKm) |
Beginning of year |
Cash flow | Foreign ex. movement |
Fair value change |
End of year |
| Loans and credit facilities | 4,586 | (3,956) | 4 | 15 | 649 |
| Issued bonds | 3,234 | 1,488 | 1 | (10) | 4,713 |
| Total liabilities from financing activities | 7,820 | (2,468) | 5 | 5 | 5,362 |
| Other non-current liabilities | 61 | 59 | |||
| Total financial liabilities | 7,881 | 5,421 |
| other payables at 31 December | 12,698 | 10,524 |
|---|---|---|
| Payables to Group entities and | ||
| Other payables | 467 | 448 |
| Payables to Group entities | 12,231 | 10,076 |
| (DKKm) | 2018 | 2017 |
| (DKKm) | 2018 | 2017 |
|---|---|---|
| Deferred tax at 1 January | 91 | 112 |
| Deferred tax for the year | 23 | 26 |
| Tax adjustments relating to previous years | - | (4) |
| Tax on changes in equity | 14 | (43) |
| Deferred tax at 31 December | 128 | 91 |
| Deferred tax as recognised in the balance sheet: Deferred tax liabilities |
128 | 91 |
| Deferred tax, net | 128 | 91 |
| Specification of deferred tax: Intangible assets |
169 | 153 |
| Current assets | (7) | (5) |
| Other liabilities Provisions |
12 (46) |
- (57) |
| Deferred tax at 31 December | 128 | 91 |
DSV A/S has issued share options to senior staff and members of the Executive Board of the Company. Please see note 5.3 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 2018.
Total costs recognised in 2018 for services received not recognised as an asset amounted to DKK 16 million (2017: DKK 11 million).
The average share price for options exercised in the financial year was DKK 499.5 per share at the date of exercise.
| (DKKm) | 2018 | 2017 |
|---|---|---|
| Operating lease obligations relating to operating equipment fall due: |
||
| 0-1 year | 45 | 70 |
| 1-5 years | 20 | 65 |
| > 5 years | - | - |
| Total | 65 | 135 |
DSV A/S has concluded leases with an average term of 3 years (2017: 3 years).
Operating lease costs of DKK 67 million relating to other plant and operating equipment were recognised in the income statement for 2018 (2017: DKK 68 million).
| Scheme | Exercise period | Board of Directors |
Executive Board |
Senior staff |
Total | exercise price per option |
|---|---|---|---|---|---|---|
| 2014 | 31.03.2017 - 29.03.2019 | - | - | 5,500 | 5,500 | 166.8 |
| 2015 | 03.04.2018 - 31.03.2020 | - | 170,000 | 36,500 | 206,500 | 215.0 |
| 2016 | 01.04.2019 - 31.03.2021 | - | 190,000 | 211,000 | 401,000 | 274.3 |
| 2017 | 01.04.2020 - 31.03.2022 | - | 190,000 | 244,500 | 434,500 | 357.0 |
| 2018 | 28.03.2021 - 28.03.2023 | - | 190,000 | 275,500 | 465,500 | 477.5 |
| Outstanding | - | 740,000 | 773,000 | 1,513,000 | 352.1 | |
| Exercise period open at 31 December 2018 |
- | 170,000 | 42,000 | 212,000 | 213.7 | |
| Life (years) | - | 2.9 | 3.4 | 3.2 | n.a. | |
| Market value (DKKm) | - | 83.5 | 65.9 | 149.4 | n.a. | |
| OUTSTANDING SHARE OPTIONS |
Board of Directors1 |
Executive Board |
Senior staff |
Total | Average exercise price per option |
|
SHARE OPTIONS SCHEMES AT 31 DECEMBER 2018
| OUTSTANDING SHARE OPTIONS |
Board of Directors1 |
Executive Board |
Senior staff |
Total | exercise price per option |
|---|---|---|---|---|---|
| Outstanding at 1 January 2017 | 64,000 | 700,000 | 567,500 | 1,331,500 | 209.9 |
| Granted | - | 190,000 | 263,000 | 453,000 | 357.0 |
| Exercised | (32,000) | (170,000) | (145,000) | (347,000) | 151.6 |
| Options waived/expired | - | - | (46,000) | (46,000) | 279.0 |
| Outstanding at 31 December 2017 | 32,000 | 720,000 | 639,500 | 1,391,500 | 270.0 |
| Outstanding at 1 January 2018 | 32,000 | 720,000 | 639,500 | 1,391,500 | 270.0 |
| Granted | - | 190,000 | 276,000 | 466,000 | 477.5 |
| Exercised | (32,000) | (170,000) | (131,000) | (333,000) | 185.9 |
| Options waived/expired | - | - | (11,500) | (11,500) | 317.5 |
| Outstanding at 31 December 2018 | - | 740,000 | 773,000 | 1,513,000 | 352.1 |
1) A member of the Board of Directors has previously received share options in the Director's former capacity as senior staff member at DSV.
Average
The weighted average effective interest rate for existing interest rate instruments was 0.9% at the reporting date (2017: 0.6%).
A gain on hedging instruments of DKK 23 million was recognised in the income statement for the financial year of 2018 (2017: a gain of DKK 231 million).
For the same period, hedged risks were recognised in the income statement by a gain of DKK 60 million (2017: a loss of DKK 209 million).
For more information on foreign currency and interest rate risk hedging, please see notes 4.4 and 4.5 to the consolidated financial statements.
Financial risks of the parent are handled within the risk management processes and framework of the Group. Please see 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 discounted, for which reason they cannot necessarily be reconciled to the related items of the balance sheet.
| 2018 | ||||||||
|---|---|---|---|---|---|---|---|---|
| EXTERNAL HEDGING INSTRUMENTS (DKKm) |
Contractual value |
Maturity | Fair value | Of which recognised in income statement |
Of which recognised in OCI |
|||
| Currency instruments | 11,655 | 2019-2020 | 42 | 39 | 3 | |||
| Interest rate instruments | 1,226 | 2020-2023 | (44) | - | (44) | |||
| Total | (2) | 39 | (41) | |||||
| 2017 | ||||||||
| (DKKm) | Contractual value |
Maturity | Fair value | Of which recognised in income statement |
Of which recognised in OCI |
|||
| Currency instruments | 24,607 | 2018-2020 | 9 | 23 | (14) | |||
| Interest rate instruments | 2,347 | 2018-2023 | (37) | (2) | (35) | |||
| Total | (28) | 21 | (49) | |||||
| 2018 | 2017 | |||||||
| FINANCIAL RISKS (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 |
359 | 4,315 | 1,511 | 6,185 | 189 | 4,201 | 1,534 | 5,924 |
| Other payables | 467 | - | - | 467 | 448 | - | - | 448 |
| Payables to Group entities | 12,231 | - | - | 12,231 | 10,076 | - | - | 10,076 |
Currency derivatives (41) (1) - (42) (17) 8 - (9) Interest rate derivatives 5 43 - 48 8 30 3 41 Total 13,021 4,357 1,511 18,889 10,704 4,239 1,537 16,480
| (DKKm) | 2018 | 2017 |
|---|---|---|
| Financial assets: | ||
| Derivative financial instruments | 42 | 31 |
| Receivables | 4,831 | 4,498 |
| Other receivables | 14,573 | 14,837 |
| Cash and cash equivalents | 46 | 107 |
| Total cash and receivables | 19,450 | 19,442 |
| Financial liabilities: | ||
| Interest rate derivatives | 44 | 37 |
| Currency derivatives | - | 22 |
| Issued bonds measured at amortised cost | 3,972 | 4,713 |
| Loans and credit facilities | 1,670 | 649 |
| Payables to Group entities etc. | 12,698 | 10,524 |
| Financial liabilities measured at amortised cost |
18,340 | 15,886 |
The fair value of financial assets and liabilities does not differ significantly from the carrying amount.
The valuation of financial instruments measured at fair value is based on other observable input than prices quoted in active markets (level 2). Interest rate swaps and foreign exchange forward contracts are valued using generally accepted valuation techniques based on relevant observable data.
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 domestic 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 receivables under the joint taxation arrangement amounted to DKK 33 million (2017: income tax and withholding tax receivable of DKK 23 million), which is included in the financial statements of DSV A/S.
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 7,272 million (2017: DKK 6,999 million).
Moreover, DSV A/S has issued several declarations of intent relating to outstanding balances between subsidiaries and third parties.
DSV 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.
No transactions were made in the financial year of 2018 other than ordinary remuneration, as described in notes 5.3 and 5.4 to the consolidated financial statements.
No transactions were made in 2018 other than as stated in the income statement and notes.
The Danish financial Statements Act § 99b requires Danish companies of a certain size to set targets for and report on gender representation in the company's top management, and further inform about policy about gender representation on lower management level.
At present, DSV A/S comply with the requirement of equal gender representation in the company's top management with a gender ratio of 33% women and 67% men.
Policy for gender diversity takes its cue from the antidiscrimination paragraph in the DSV Code of Conduct. The policy aims to ensure a balanced workforce as well as equal opportunity for all DSV employees. DSV A/S aims to reach a gender ratio of at least 22% women on lower management levels in 2020. The current level in 2018 Is 21%. This target has been pursued through a hiring and advancement practice and policy, focused on equal advancement possibilities for all talented and dedicated employees regardless of gender.
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