Annual Report • Feb 6, 2014
Annual Report
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"Closing the year with strong results, we are satisfied with our performance in 2013. Overall, we met the expectations announced in the beginning of the year despite low growth and fierce competition in the market. We are confident that 2014 will offer growth, however we are also prepared for difficult market conditions. The agenda for 2014 is clear: productivity and cost management, value-adding acquisitions and – most importantly – customer focus", says Jens Bjørn Andersen, CEO.
| (DKKm) | 2013 | 2012 | Q4 2013 | Q4 2012 |
|---|---|---|---|---|
| Net revenue | 45,710 | 44,912 | 11,857 | 11,408 |
| Gross profit | 10,005 | 10,054 | 2,526 | 2,512 |
| Operating profit before special items | 2,552 | 2.540 | 672 | 607 |
| Operating margin | 5.6% | 5.7% | 5.7% | 5.3% |
| Conversion ratio | 25.5% | 2.3% | 26.6% | 24.2% |
| Adjusted earnings | 1,788 | 1,745 | ||
| Adjusted free cash flow | 1,754 | 1,509 | ||
| Diluted adjusted earnings per share DKK | 10.05 | 9.48 | ||
| Proposed dividend per share DKK | 1.50 | 1.25 |
A separate company announcement about the launch of a share buyback programme of DKK 200 million will be issued today.
DSV will host an investor teleconference on 6 February 2014 at 2.00 p.m. CET. Reference is made to Company Announcement No. 524 for further details.
Questions made be addressed to Jens Bjørn Andersen, CEO, tel. +45 43 20 30 40, or Jens H. Lund, CFO, tel. +45 43 20 30 40.
This announcement has been forwarded to NASDAQ OMX Copenhagen and to the press. It is also available at www.dsv.com. The announcement has been prepared in Danish and in English. In the event of discrepancies, the Danish version shall apply.
Yours sincerely, DSV
Jens Bjørn Andersen Jens H. Lund CEO CFO
DSV A/S, Banemarksvej 58, DK-2605 Brøndby, tel. +45 43203040, CVR No. 58233528, www.dsv.com.
DSV is a global supplier of transport and logistics services.
DSV has offices in 75 countries all over the world and an international network of partners and agents, which makes DSV a truly global player offering services worldwide. By our professional and advantageous overall solutions, the approx. 22,000 DSV employees recorded worldwide annual revenue of 6 billion euro for 2013. www.dsv.com
| Financial highlights | 3 |
|---|---|
| DSV – at a glance | 4 |
| Financial data 2013 | 5 |
| Customers at the centre | 6 |
| Strategy and financial targets | 8 |
| Financial review | 11 |
| DSV Air & Sea | 16 |
| DSV Road | 20 |
| DSV Solutions | 23 |
| Risk management | 26 |
| Corporate governance | 28 |
| Shareholder information | 31 |
| Corporate social responsibility | 34 |
| CONSOLIDATED | |
|---|---|
| FINANCIAL STATEMENTS 2013 | 36 |
| Definition of financial highlights | 65 |
|---|---|
| The Board of Directors | |
| and the Executive Board | 66 |
| Statement by the Board of Directors | |
|---|---|
| and the Executive Board | 68 |
| Independent auditors' report | 69 |
| Financial data – Q4 2013 | 70 |
|---|---|
| Financial highlights – quarterly overview | 71 |
| GROUP STRUCTURE | 72 |
| PARENT 2013 | 75 |
EBIT before special items by division
| 2009 | 2010 | 2011 | 2012 | 2013 | |
|---|---|---|---|---|---|
| Income statement (DKKm) | |||||
| Net revenue | 36,085 | 42,562 | 43,710 | 44,912 | 45,710 |
| Gross profit | 8,898 | 9,320 | 9,819 | 10,054 | 10,005 |
| Operating profit before amortisation, depreciation and special items | 2,239 | 2,721 | 2,975 | 3,074 | 3,052 |
| Operating profit before special items | 1,703 | 2,202 | 2,426 | 2,540 | 2,552 |
| Special items, net | (688) | (5) | - | (275) | (129) |
| Net financial expenses | 555 | 537 | 431 | 246 | 298 |
| Profit for the year | 191 | 1,194 | 1,449 | 1,430 | 1,571 |
| Adjusted earnings | 799 | 1,290 | 1,546 | 1,745 | 1,788 |
| Balance sheet (DKKm) | |||||
| DSV A/S shareholders' share of equity | 5,501 | 6,549 | 5,279 | 5,348 | 6,218 |
| Non-controlling interests | 29 | 36 | 30 | 37 | 30 |
| Balance sheet total | 22,180 | 23,085 | 22,734 | 22,794 | 23,100 |
| Net working capital | 135 | 70 | 1 | 307 | 561 |
| Net interest-bearing debt | 6,890 | 5,872 | 6,585 | 6,561 | 5,949 |
| Invested capital including goodwill and customer relationships | 13,100 | 13,046 | 12,030 | 11,953 | 12,281 |
| Gross investment in property, plant and equipment | 488 | 334 | 576 | 453 | 246 |
| Cash flows (DKKm) | |||||
| Operating activities | 1,702 | 1,663 | 1,863 | 1,651 | 1,775 |
| Investing activities | (486) | (151) | (34) | (249) | (348) |
| Free cash flow | 1,216 | 1,512 | 1,829 | 1,402 | 1,427 |
| Adjusted free cash flow | 1,257 | 1,566 | 1,894 | 1,509 | 1,754 |
| Financing activities (excluding dividends distributed) | (1,373) | (1,346) | (1,712) | (912) | (1,152) |
| Dividends distributed | - | (52) | (105) | (190) | (235) |
| Cash flow for the year | (157) | 114 | 12 | 300 | 40 |
| Financial ratios (%) | |||||
| Gross margin | 24.7 | 21.9 | 22.5 | 22.4 | 21.9 |
| Operating profit margin | 4.7 | 5.2 | 5.6 | 5.7 | 5.6 |
| Conversion ratio | 19.1 | 23.6 | 24.7 | 25.3 | 25.5 |
| Effective tax rate | 58.5 | 28.1 | 27.4 | 29.2 | 26.1 |
| ROIC before tax including goodwill and customer relationships | 12.9 | 16.8 | 19.7 | 21.2 | 21.1 |
| ROIC before tax excluding goodwill and customer relationships | 35.8 | 53.2 | 62.5 | 71.1 | 72.0 |
| Return on equity | 4.0 | 19.7 | 24.3 | 26.9 | 27.3 |
| Solvency ratio | 24.8 | 28.4 | 23.2 | 23.5 | 26.9 |
| Gearing ratio | 3.1 | 2.2 | 2.2 | 2.1 | 1.9 |
| Share ratios | |||||
| Earnings per share of DKK 1 | 0.93 | 5.68 | 7.34 | 7.81 | 8.91 |
| Diluted adjusted earnings per share of DKK 1 | 3.93 | 6.16 | 7.82 | 9.48 | 10.05 |
| Share price at year end (DKK) | 94.00 | 123.30 | 103.00 | 145.70 | 177.80 |
| Proposed dividend per share | 0.25 | 0.50 | 1.00 | 1.25 | 1.50 |
| Staff Number of full time employees at year end |
21,280 | 21,300 | 21,678 | 21,932 | 22,021 |
*) For a definition of the financial highlights, see page 65.
DSV is a global supplier of transport and logistics solutions. The Group has approx. 22,000 employees worldwide. With own operations in 75 countries and agents and partners across the world we have global coverage.
We have an asset light business model. The actual transport operations are outsourced and we do not own any ships or planes and only a limited number of trucks and trailers.
Measured by revenue DSV ranks as number six among the world's largest freight forwarders and our network has mainly been created through a number of acquisitions during the past 15 years.
DSV is listed on NASDAQ OMX Copenhagen and the DSV share is among the 20 most traded shares on the Copenhagen stock exchange. No shareholder owns more than 5% of the share capital.
The three DSV Divisions together offer a complete range of transport and logistics solutions. In addition to physical transportation services we offer various related services, such as handling of freight documents, customs clearance, cargo insurance, warehousing and distribution.
Operational transport and logistics expertise is the key to success. And the same applies to efficient customer service. Our services are therefore tailored to the needs of each customer – across the globe.
The Air & Sea Division organises transports of cargo by air and sea. The Division offers conventional and industry-specific services through its global network supplemented by a Project Department, which handles exceptionally large and complex projects. Our approx. 6,300 employees handled 772,000 TEUs sea freight and 259,000 tonnes air freight in 2013.
With around 9,400 employees DSV Road is among the top three road freight forwarders in Europe, offering a complete European network. But there is more to DSV Road than road freight. Transport solutions combining road and rail transport are becoming an increasingly important part of our services. The Division offers transportation of full, part and groupage loads as well as temperature-controlled transport and other specialised services. With approx. 17,000 trucks on the roads every day and more than 200 terminals we deliver efficient, flexible and environmentally friendly transport solutions throughout Europe.
DSV Solutions specialises in logistics solutions across the entire supply chain, including freight management, customs clearance, warehousing and distribution, information management and e-business support. We provide our customers with a competitive edge by developing, optimising and implementing efficient solutions covering the entire supply chain. We employ approx. 5,800 employees and cover Europe, Asia and America.
Corporate social responsibility, CSR, is an integral aspect of the DSV Group's operations. As a global freight forwarder we acknowledge that our services affect the environment and society and that our CSR policy is therefore important to our customers. That is why DSV focuses on reducing carbon emissions from our transport activities and wants to take part in the efforts to create a transparent and fair market.
Net revenue +1.8% to DKK 45,710 million
Gross profit -0.5% to DKK 10,005 million
Conversion ratio 25.5% (2012: 25.3%)
Operating profit before special items +0.5% to DKK 2,552 million
ROIC 21.1% (2012: 21.2%)
Earnings per share +14.1% to DKK 8.91
NIBD -9.3% to DKK 5,949 million
Adjusted free cash flow +16.2% to DKK 1,754 million
Net revenue +1.7% to DKK 20,195 million
Gross profit +0.7% to DKK 4,298 million
Conversion ratio 32.4% (2012: 33.1%)
Operating profit before special items -1.4% to DKK 1,392 million
ROIC 21.4% (2012: 22.3%)
Air freight volumes 0%, while the market grew by 1-2%
Sea freight volumes +6% while the market grew by 2-3%
Net revenue +2.0% to DKK 23,117 million
Gross profit -1.1% to DKK 4,299 million
Conversion ratio 21.9% (2012: 21.5%)
Operating profit before special items +1.0% to DKK 942 million
ROIC 25.1% (2012: 24.8%)
Number of consignments +4% while the market remained unchanged
Net revenue +5.6% to DKK 5,470 million
Gross profit -2.0% to DKK 1,409 million
Conversion ratio 18.2% (2012: 17.4%)
Operating profit before special items +2.4% to DKK 256 million
ROIC 15.1% (2012: 13.6%)
Number of order lines +4% while the market remained unchanged
Financial data for Q4 2013 are presented on p. 70.
| (DKKm) | 2013 Outlook R |
2013 ealised O |
2014 utlook |
|---|---|---|---|
| Gross profit | 10,100-10,500 | 10,005 | 10,100-10,500 |
| Operating profit before special items |
2,550-2,750 | 2,552 | 2,500-2,700 |
| Net financials | (300) | (298) | (300) |
| Effective tax rate | 26% | 26% | 26% |
| Free cash flow* | 1,750 | 1,754 | 1,600 |
* Expected free cash flow adjusted for acquisition and divestment of subsidiaries.
In a market of low growth and fierce competition DSV reported lower than expected gross profit for 2013. On this basis we are pleased that the Group delivered an operating profit before special items and cash flows consistent with expectations.
DSV made four acquisitions in 2013. The integration of the companies is proceeding as planned.
| Annual revenue (DKKm) A |
rea | Division (primary) |
|
|---|---|---|---|
| Seatainers | 1,000 | Denmark/ global |
Air & Sea |
| Airmar Cargo | 45 | Colombia | Air & Sea |
| Ontime Logistics | 600 | Scandinavia | Road |
| SBS Worldwide | 450 | UK/USA | Air & Sea |
DSV delivered results on all parameters and created value for our shareholders in 2013, which turned out to be yet another challenging year.
We have a large number of different customers in DSV ranging from small to very large multinationals. They are all very welcome in DSV! Customers are the cornerstone of DSV, and we want to grow and develop with our customers – large and small. Our aim is to service the needs of all types of customers and we have organised our business to meet the needs of both the customer with one single shipment from Barcelona to Paris and the customer requiring more complex services covering multiple countries and transport modes.
During the year we have enlarged our network and announced new services in order for us to meet the increased demands for high-quality supply chain solutions. We listen to our customers and understand that their needs rapidly change. Consequently, we have to be proactive and deliver constant improvements, always supported by strong IT infrastructure. I am adamant that the transport and logistics companies which succeed in reinventing their services will be the future winners of our industry. In 2014 we will continue to make DSV's services even more attractive for both new and existing customers.
The global economy got off to a slow start but gradually improved during the year, and as the situation around the European debt crisis slowly improved volume growth started to materialise. As a consequence, the beginning of the year showed a negative variance to the previous year, but ended with a strong Q4 which outperformed Q4 2012. The three divisions have all shown satisfactory results in the past year with the Road and Solutions Divisions improving their performance compared to the previous year, and the Air & Sea Division very close to the performance of 2012. All three divisions have worked well together under the theme "One DSV", and I would like to thank each and every employee for their hard work and dedication during 2013.
Jens Bjørn Andersen CEO DSV A/S
DSV has a clear strategy of growing faster than the market, and it is satisfactory to conclude that we were successful in achieving this goal in most areas. We handled more shipments in 2013, but a fragmented and very competitive market impacted negatively on our gross profit per shipment. This development made the continued optimisation of business processes and systems even more important in 2013. Some tasks are best handled locally, whereas we can achieve higher quality and productivity levels by gathering a number of processes in regional and central shared service centres. During the past year we have established an international shared service centre in Warsaw, Poland, and it is our ambition to continue this development in the years to come.
...Customers are the cornerstone of DSV, and we want to grow and develop with our customers – large and small
DSV is already among the most efficient freight forwarders, but we believe that we can work smarter and make DSV even stronger. To support this transition we intend to initiate a programme called "Operational Excellence 2.0". It builds on the initiatives we started in 2012 and will enable us to manage the business even more efficiently in future. The programme will be initiated in 2014, and we expect to see the benefits of this investment during the second half of 2014 and the full-year impact in 2015.
Acquisitions have been high on the agenda at DSV in 2013. We have managed to strengthen our network by acquiring companies which will add value to all three divisions of DSV. All our acquisitions this year – Seatainers, Ontime Logistics, SBS Worldwide and Airmar Cargo – have progressed as planned. Growth through value creating acquisitions remains a very important element of our growth strategy and we expect that acquisitions will supplement the organic growth plans of DSV also in 2014.
A transparent and reliable capital allocation policy is imperative to DSV. While part of the cash flow in 2013 has been allocated to M&A, we are satisfied that it has been possible for us to continue our share buyback programme and increase dividend payments.
Loyal, dedicated and experienced employees are critical to our company and they are truly our greatest asset. Employee turnover at DSV has dropped, which is very good news. With the clear aim to attract and retain the best employees in our industry we will continue to invest in relevant training programmes, efficient IT systems and other initiatives which support a good working environment.
CSR is integrated in our activities. Responsible behaviour and a good reputation are a prerequisite for maintaining our position as a strong player in the global transport market.
Our customers are increasingly requiring reporting on and reduction of their carbon impact on the environment. We work closely together with our customers and this area has become an integral part of our service offerings to customers. In 2010 we set a target of a 15% reduction in carbon emissions per consignment before 2015. It is a pleasure to note that we have reduced emissions in 2013 and that we are therefore close to reaching the target. We have an obligation towards future generations to care about the environment, and a constant reduction of our environmental footprint is high on the agenda at DSV. As an asset light freight forwarder we depend to a large extent on the work of subcontractors, and we have therefore rolled out our Supplier Code of Conduct to a large number of suppliers. This is an important step in ensuring uniform service offerings and high compliance standards for our customers.
Most economists point to increased growth in the world economy in 2014 and, consequently, freight volumes are expected to grow. We are also – cautiously – optimistic about growth rates, but forecasts are obviously uncertain.
We have a clear goal of gaining market share in 2014 through high-quality service offerings to existing and new customers. We expect fierce competition in the market, but with possible future acquisitions and a continued focus on strict cost control the way should be paved for satisfactory results in 2014.
I would like to take this opportunity to thank all customers, shareholders, suppliers and employees for a good – and hectic – 2013. I look forward to a continued good cooperation!
We want to strengthen DSV's position among the world's leading transport and logistics companies, and we have therefore continued our efforts in 2013 to strengthen our strategic foundation.
As a global freight forwarding company we offer transport and logistics solutions to our customers based on an asset light business model, i.e. we do not own the transport equipment. This means that the actual transport operations are performed by external hauliers, shipping companies and airlines.
In addition to physical transportation services, our customers also demand various related services, such as handling of freight documents, customs clearance, cargo insurance, warehousing and distribution.
The transport and logistics market is fragmented with a number of large, global players and many small, local freight forwarding companies. Even the major, global players control relatively modest market shares and the world's 10 largest players are estimated to have an aggregate market share of approx. 35%. The estimated market share of DSV is 2.1%, and measured by revenue (2012) DSV ranks as number six among the world's largest freight forwarders.
Freight volumes are cyclical and sensitive to the global economic development. Over the last 20 years the aver-
Source: Journal of Commerce, based on 2012 revenue
age annual growth in freight volumes has been two to three times higher than global economic growth, partly driven by outsourcing of production activities to the Far East and the increasingly complex supply chains of the manufacturing companies.
The production outsourcing trend is estimated to have peaked, particularly in Europe and North America, and in the coming years the gap between freight volume growth figures and the underlying economic growth figures is expected to narrow. However, we expect that efficient logistics solutions will still be in high demand in future and that the global manufacturing industry will be characterised by complex supply chains with different components being manufactured in different parts of the world.
We also expect that increasing prosperity, e.g., in Asia and South America, and in the longer term also in Africa, will provide a basis for continued freight volume growth.
There is a growing desire among enterprises to reduce their overall logistics costs and a decreasing number consider transport and logistics operations as part their core competencies. This provides a basis for more outsourcing, thereby boosting the growth of transport and logistics providers relative to the underlying freight volume growth. We see increased outsourcing as the most likely scenario in the coming years. However, companies may also for various reasons want to insource transport and logistics functions that have previously been handled by external freight forwarders.
For a number of years, the largest transport and logistics providers have reported higher growth rates than the small players due to economies of scale and strong global networks.
This trend is expected to continue and lead to further consolidation in the industry.
We focus on five key strategies to support the continued development of the Group. The strategies build on a set of fundamental values and policies.
As a world leader in its field DSV must grow its market share over time. Management aims to achieve organic growth above the market growth rate in the markets in which the Group operates through targeted sales efforts and a strong service portfolio. In addition to organic growth, DSV aims to create growth through business acquisitions which can add further economies of scale and strengthen the Company's global network. We have a positive track record when it comes to the efficient and successful integration of acquirees. Management intends to make use of this capability also in future. The primary acquisition targets are air and sea freight providers which can strengthen the overall market position of the Air & Sea Division and increase the exposure in markets outside of Europe, but also bolt-on acquisitions in DSV Road and DSV Solutions.
Only by continuously offering high-quality services on competitive terms can we add value to our customers' supply chains, and we therefore have constant focus on optimising the Group's service offerings.
The customer segment of small and medium-sized enterprises is a strong vertical of DSV, and we aim to expand our market share in this segment. This objective is supported by targeted local sales efforts in the individual countries and a continued focus on optimisation and adaptation of products and services.
In addition, DSV Global Accounts works closely together with the local business units with the aim to increase our market share among large, global customers. These customers in particular demand transport and logistics services that are tailored to their business. Against this background,
Management has decided to target the Company's sales efforts at a number of industries where we have great expertise. The relevant industries include automotive, healthcare, aviation, consumer products and the energy sector.
Our corporate structure builds on the three Divisions, supported by strong Group functions, and is characterised by a flat, decentralised organisational structure.
The individual national managements are responsible for their respective operating activities and administration according to the guidelines communicated by Division and Group Managements.
The decentralised structure provides room for manoeuvring while taking account of local market conditions, culture and language. The national managements are close to the local customers and able to quickly make decisions when necessary.
Group Management determines the overall strategy and ensures alignment across the Divisions and execution of business development and streamlining plans to generate the highest possible profit for the Group. The central Group function is in charge of the shared service functions, comprising Global Accounts, IT, Group Procurement, Finance, Compliance, Sales & Marketing, etc. The shared service functions have grown considerably in recent years and are expected to continue this trend in relevant areas in the coming years.
Effective and efficient business processes are essential to satisfactory earnings in a competitive market characterised by low margins. The continued development and optimisation of business processes are therefore a vital element and we have established central functions to ensure that we make optimum use of the existing and efficient processes across the organisation and in each Division.
Our business processes are highly dependent on IT technology and it is crucial that IT platforms support the dayto-day operations in the best possible way. It is of great importance to Management that the development and implementation of IT systems are defined by the Group's operations, and this is a high focus area of the Group. IT systems are also a pivotal element of our services to customers, and it is therefore crucial that the systems are reliable and meet our customer's requirements.
The freight forwarding and logistics industry is highly dependent on human resources. At the same time it is also an industry which poses increasing demands on employees in terms of productivity improvements and readiness for change.
It is imperative for the Group to be able to attract and retain talented employees and managers. Human resources is an area of increasing focus at DSV, and we have a clear goal of motivating our employees and offering them competency development opportunities.
We have offices in 75 countries with different labour market rules and different cultures. It is important for our Company to offer attractive terms and a good working environment in all countries.
Relevant training programmes within sales, management and IT is an important tool in providing competency development and ensuring high motivation among employees. The training programmes are conducted locally and to an increasing extent also by central Group functions.
The strategic objectives of the Group are translated into the following targets for freight volume growth and financial ratios:
DSV aims to gain market share in all markets of the Group. The Air & Sea Division is measured against the global markets, whereas Road and Solutions are measured against the European market.
| A DSV T |
arget | ctual 2013 |
|---|---|---|
| Operating margin | 7% | 5.6% |
| Conversion ratio | 30% | 25.5% |
| ROIC (%) | 25% | 21.1% |
| A Air & Sea |
T arget |
ctual 2013 |
|---|---|---|
| Operating margin | 7-8% | 6.9% |
| Conversion ratio | 35% | 32.4% |
| ROIC (%) | 25% | 21.4% |
| A Road T |
arget | ctual 2013 |
|---|---|---|
| Operating margin | 5% | 4.1% |
| Conversion ratio | 25% | 21.9% |
| ROIC (%) | 25% | 25.1% |
| A Solutions T |
arget | ctual 2013 |
|---|---|---|
| Operating margin | 7% | 4.7% |
| Conversion ratio | 25% | 18.2% |
| ROIC (%) | 20% | 15.1% |
The targets are based on the assumption of a stable economic environment in Europe and globally during the period and average annual market growth of at least 2%.
Management expects that the targets set are achievable within a five-year time frame (from 2013). This timeframe is one or two years longer than previously expected, the main reason being that overall freight volumes were lower than expected in both 2012 and 2013.
Other targets are unchanged from the last annual report of the Company.
The targets set for the capital structure are:
The financial gearing ratio, i.e. net interest-bearing debt to EBITDA before special items, was 1.9 at 31 December 2013. Borrowed funds is an important part of the overall financing of the Group, and our target for the ratio of net interest-bearing debt to EBITDA before special items is approx. 2.0. The previous target was "below 2.0 x EBITDA before special items", but this adjustment specifies that we want a financial gearing ratio of approx. 2.0.
The Group's net interest-bearing debt to EBITDA ratio may exceed 2.0 in extraordinary periods due to acquisitions. As part of our efforts to achieve the capital structure targets the long-term loan commitments of the Group are constantly monitored to maintain an adequate duration and mix of bank loans and corporate bonds. At 31 December 2013 the average duration was 4.2 years.
The Group aims to spend free cash flow as follows:
Seasonality and individual transactions may lead to fluctuations in the free cash flow from quarter to quarter. Management continuously monitors that the realised and expected capital structure of the Group satisfy the targets set. Any adjustments of the capital structure are determined in connection with the release of financial reports and are made primarily by means of share buybacks.
Proposed dividends for 2013 amount to DKK 1.50 per share, corresponding to a 20% increase compared to 2012. We aim to ensure that, going forward, the dividend per share develops in line with the consolidated earnings per share.
DSV achieved satisfactory financial results for 2013 in line with the outlook previously announced. We achieved volume growth in most markets, but in an environment of fierce competition which caused earnings per shipment to decline.
Consolidated net revenue was up 1.8% and totalled DKK 45,710 million for 2013. Acquisitions contributed growth of 3.0%.
| G | rowth | DKKm |
|---|---|---|
| Net revenue 2012 | 44,912 | |
| Currency translation adjustments | (1.2%) | (554) |
| Acquisition and divestment of enterprises, net | 3.0% | 1,363 |
| Organic growth | - | (11) |
| Net revenue 2013 | 1.8% | 45,710 |
The Group's sea and road freight volumes and order lines increased in 2013, but average price per shipment dropped as a result of fierce competition and a change in product mix.
Exchange rate fluctuations impacted negatively on revenue by DKK 554 million, most notably in Air & Sea.
Consolidated gross profit dropped 0.5% and amounted to DKK 10,005 million for 2013. Acquisitions contributed growth of 1.9% while organic growth was a negative 0.7% causing the gross margin to drop to 21.9% from 22.4% in 2012.
| G | rowth | DKKm |
|---|---|---|
| Gross profit 2012 | 10,054 | |
| Currency translation adjustments | (1.7%) | (170) |
| Acquisition and divestment of enterprises, net | 1.9% | 188 |
| Organic growth | (0.7%) | (67) |
| Gross profit 2013 | (0.5%) | 10,005 |
As a result of the fierce price competition average earnings per shipment declined in most markets of the Group with a negative effect on consolidated gross profit. This situation impacted on Road and Solutions in particular.
Exchange rate fluctuations also impacted negatively on gross profit by DKK 170 million. This mainly affected the Air & Sea Division.
Diluted adjusted earnings per share grew by 6% on 2012 as a result of the higher adjusted profit and the lower number of outstanding shares
Consolidated operating profit before special items was DKK 2,552 million for 2013 against DKK 2,540 million for 2012. The organic growth was 1.6%.
| G | rowth | DKKm |
|---|---|---|
| EBIT before special items 2012 | 2,540 | |
| Currency translation adjustments | (1,4%) | (36) |
| Acquisition and divestment of enterprises, net | 0,3% | 8 |
| Organic growth | 1,6% | 40 |
| EBIT before special items 2013 | 0,5% | 2,552 |
EBIT before special items was affected by a decline in gross profit of DKK 49 million, while total overheads dropped by 0.8% or DKK 61 million. Furthermore, exchange rate fluctuations impacted negatively by DKK 36 million, most notably in the Air & Sea Division.
Staff costs (excluding production staff) increased by 1.6% and totalled DKK 4,943 million for 2013. The increase was mainly due to acquisitions, whereas improved productivity resulted in a decrease in wages and salaries in most of the existing business.
Other external expenses dropped 5.0%, totalling DKK 2,010 million for 2013. The significant reduction was partly a result of the reorganisations made in 2012 (project Operational Excellence) which more than compensated for the high costs related to acquisitions.
Amortisation, depreciation and impairment losses were down DKK 34 million on 2012. This was mainly due to gains from the sale of properties and lower amortisation and depreciation costs.
The conversion ratio for the Group was 25.5% for 2013, up from 25.3% in 2012. The operating margin was 5.6% for 2013 against 5.7% for 2012.
Adjusted for non-cash items relating to amortisation of customer relationships and costs of share-based payments, consolidated adjusted EBIT before special items grew by DKK 15 million to DKK 2,704 million for 2013 against DKK 2,689 million for 2012.
Special items amounted to DKK 129 million for 2013 and related mainly to restructuring costs in connection with the acquisition and disposal of companies and activities.
The effective tax rate was 26.1% for 2013, which was in line with disclosed expectations and a decrease compared to 2012 when the effective tax rate was exceptionally high at 29.2%.
Diluted adjusted earnings per share came to DKK 10.05 for 2013 compared to DKK 9.48 for 2012, corresponding to an increase of 6.0%.
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Profit for the year | 1,571 | 1,430 |
| Non-controlling interests' share of consolidated profit for the year |
(6) | 3 |
| DSV A/S shareholders' share of profit for the year |
1,577 | 1,427 |
| Amortisation of customer relationships | 113 | 109 |
| Share-based payments | 39 | 40 |
| Special items, net | 129 | 275 |
| Related tax effect | (70) | (106) |
| Adjusted profit for the year | 1,788 | 1,745 |
| Diluted average number of shares in circulation ('000) |
177,876 | 183,971 |
| Diluted adjusted earnings per share of 1 DKK |
10.05 | 9.48 |
The increase was due to the higher adjusted profit and the lower number of outstanding shares as a result of the share buybacks made.
The Group's funds tied up in net working capital came to DKK 561 million at 31 December 2013 against DKK 307 million at 31 December 2012. Working capital was affected by the recent acquisitions as well as an increasing pressure regarding payment terms and customer payment behaviour. Working capital increased mainly in Air & Sea.
Working capital as a percentage of revenue was 1.2% against 0.7% for 2012.
Cash flow from operating activities was DKK 1,775 million for 2013 against DKK 1,651 million for 2012. The increase was mainly due to the exceptionally large tax payments in 2012. In both 2012 and 2013 cash flow from operating activities was also negatively affected by the increase in net working capital and payments relating to previous years' provisions for restructuring, etc.
The free cash flow came to DKK 1,427 million for 2013 against DKK 1,402 million for 2012. The effect of acquisitions of subsidiaries and activities increased to DKK 269 million against DKK 106 million in 2012.
Net investments in property, plant and equipment totalled DKK 89 million for the year against DKK 174 million for 2012. Property, plant and equipment investments mainly related to computer software and other operating equipment.
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Profit before tax | 3,052 | 3,074 |
| Change in net working capital | (217) | (196) |
| Adjustment, non-cash operating items | (135) | 62 |
| Adjustment, other operating items | (925) | (1,289) |
| Cash flow from operating activities | 1,775 | 1,651 |
| Purchase and sale of intangibles, property, plant and equipment |
(89) | (174) |
| Net acquisition of subsidiaries and activities | (269) | (94) |
| Other | 10 | 19 |
| Cash flow from investing activities | (348) | (249) |
| Free cash flow | 1,427 | 1,402 |
| Proceeds from and repayment of short-term and long-term debt |
(576) | 138 |
| Allocated to shareholders | (935) | (1,493) |
| Exercised under share option scheme | 162 | 219 |
| Other transactions with shareholders | (38) | 34 |
| Cash flow from financing activities | (1,387) | (1,102) |
| Net change in cash and cash equivalents | 40 | 300 |
| Adjusted free cash flow | 1,754 | 1,509 |
Adjusted for the acquisition and disposal of subsidiaries and activities and normalisation of the working capital of acquirees, adjusted free cash flow amounted to DKK 1,754 million in 2013 against DKK 1,509 million in 2012 and was in line with the expectations announced.
In accordance with the capital allocation policy consolidated cash flows for 2013 were spent as follows:
The equity interest of DSV shareholders came to DKK 6,218 million at 31 December 2013, corresponding to a solvency ratio of 26.9%. The equity interest of DSV shareholders came to DKK 5,348 million at 31 December 2012, corresponding to a solvency ratio of 23.5%. Equity was mainly affected by the profit for the year, share buybacks and distribution of dividends.
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Equity at 1 January | 5,348 | 5,279 |
| Net profit for the period | 1,577 | 1,427 |
| Dividends distributed | (235) | (190) |
| Purchase of treasury shares | (700) | (1,303) |
| Sale of treasury shares | 162 | 219 |
| Actuarial gains/losses on pension plans | 16 | (115) |
| Adjustments relating to hedging instruments | 89 | (24) |
| Tax on changes in equity | (26) | 54 |
| Other adjustments, net | (13) | 1 |
| Equity at 31 December | 6,218 | 5,348 |
Net interest-bearing debt amounted to DKK 5,949 million at 31 December 2013 against DKK 6,561 million at 31 December 2012. The financial gearing ratio (net interestbearing to EBITDA before special items) was 1.9 at year end 2013. At year end 2012 the financial gearing ratio was 2.1.
Loans and credit facilities amounted to DKK 6,339 million of total net interest-bearing debt, DKK 5,807 million of which was long-term debt.
In June 2013 DSV issued DKK 1 billion worth of 7-year bonds with a coupon of 3.5% p.a. The bonds are listed on NASDAQ OMX Copenhagen. Since then we have issued corporate bonds totalling DKK 1.75 billion and thereby further diversified the Company's financing structure.
Undrawn loan and credit facilities amounted to DKK 1,791 million at 31 December 2013. At 31 December 2013 the total duration of the Group's long-term loan commitments was 4.2 years (2012: 3.7 years).
Financial income and expenses developed as expected in 2013 and constituted a net expense of DKK 298 million against DKK 246 million for 2012. In 2012 financials were exceptionally low.
In 2013 the average interest rate payable for the Group's long-term loans and credit facilities including the effect of interest rate swaps was 2.8% against 2.6% in 2012.
The invested capital including goodwill and customer relationships amounted to DKK 12,281 million at 31 December 2013 against DKK 11,953 million at 31 December 2012. The increase was mainly attributable to acquisitions.
Return on invested capital was 21.1% in 2013 against 21.2% in 2012. The low ratio was mainly due to an increase in average invested capital.
| (DKKm) | Results O 2013 |
utlook G 2014 |
rowth (%) |
|---|---|---|---|
| Gross profit | 10,005 | 10,100-10,500 | 1-5% |
| Operating profit before special items |
2,552 | 2,500-2,700 | (2)-6% |
| Net financial expenses | (298) | (300) | |
| Effective tax rate | 26% | 26% | |
| Free cash flow* | 1,754 | 1,600 |
*) Expected free cash flow adjusted for acquisition and divestment of subsidiaries.
The outlook for 2014 is based on the assumption of a stable development in the markets in which the Group operates.
| Sea | Growth 3-5% |
|---|---|
| Air | Growth 1-3% |
| Road | Growth 1-2% |
| Solutions | Growth 1-2% |
The consolidated performance forecast measured in Danish kroner (DKK) is based on the average exchange rates listed below:
| EUR | 746 |
|---|---|
| GBP | 896 |
| HKD | 70 |
| CNY | 91 |
| SEK | 86 |
| USD | 550 |
The separate divisional reviews provide additional information on expected market developments.
Project Operational Excellence 1.0, which was implemented in 2012, resulted in an annual reduction of overheads of approx. DKK 120 million.
In a market still characterised by low growth and fierce competition, efficient business processes are crucial to maintain the competitive position of the Group.
With the aim to further reduce overheads by 2% (DKK 150 million) per year we plan to invest in a number of streamlining and cost-saving initiatives in 2014.
The investments will relate to the establishment of our international Shared Service Centre in Poland and various other initiatives on both group and local level.
The investment programme is expected to give rise to a non-recurring expense of DKK 200-300 million that will be reported as special items for 2014.
We expect to realise approx. one-third of the total synergies in 2014 and to see the full effect of the initiatives in 2015.
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 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 the Group's subsidiaries and uncertainty in connection with the acquisition and divestment of enterprises.
Air & Sea organises transports of cargo by air and sea. The Division offers conventional freight services through its global network supplemented by a Project Department. The Division has approx. 6,300 employees.
The global air and sea freight market was characterised by weak growth throughout most of 2013. Market growth rates were weak in the first six months of the year in particular, but showed signs of improvement towards the end of the year.
Global sea freight volumes measured in number of containers (TEUs) grew by 2-3% in 2013. The Division reported 6% growth in sea freight volumes for 2013 and has thus gained market share. The sea freight volume growth was achieved in our existing Asia-Europe and Europe-North America routes, but the Division also reported growth in the Trans-Pacific trade lanes and routes related to the growth markets in Asia, Africa and South America. Acquirees attributed approx. 3% to the growth for 2013.
| 2013 DSV |
2013 Market |
|
|---|---|---|
| Sea freight - TEUs | 6% | 2-3% |
| Air freight - tonnes | 0% | 1-2% |
Market growth rates are based on own estimates.
Jørgen Møller Managing Director Air & Sea Division
The global air freight market declined in the beginning of 2013, but towards the end of the year growth rates picked up resulting in an average market growth rate of 1-2%. The air freight volumes reported by the Division for 2013 were in line with 2012, but the Division closed the year on a positive note reporting 7% growth for Q4 and maintains the overall target of gaining market share. Acquirees attributed approx. 1% to Division air freight growth for the year.
Both sea and air freight rates were influenced by a large injection of additional capacity into the market and relatively large rate fluctuations. The sea freight market in particular experienced major fluctuations on several trade lanes during the year.
By the acquisitions of Seatainers (April 2013), SBS Worldwide (September 2013) and Airmar Cargo (December 2013) the Division strengthened its network and pursued its strategy of growth through value-adding acquisitions.
The main business area of Seatainers was project transport for the wind power industry, which was a tough market with low activity levels in 2013. We expect improved market conditions in the coming years, and the acquisition of Seatainers has further strengthened DSV's position.
The UK and USA were the main markets of SBS Worldwide, and the acquisition thus boosted our market position and service offerings in a number of our core markets.
With the acquisition of the Colombia based Airmar Cargo the Division continued the expansion of its network in South America, and in Africa the integration of the Swift Freight organisation proceeded as planned.
In recent years the Division has focused on further developing its competencies and services in specific industries. The largest progress has been achieved in the automotive and aviation industries and we have seen positive results in these areas in 2013. We will continue developing our industry-specific competencies in the coming years.
The implementation of our global IT platform was more or less finalised at year end 2013. The system has strengthened the Division both in terms of customer service level and internal productivity.
Division revenue can be broken down by the following geographical areas:
condensed income statement
| (DKKm) | 2013 | 2012 | ||
|---|---|---|---|---|
| Net revenue | 20,195 | 19,855 | ||
| Direct costs | 15,897 | 15,586 | ||
| Gross profit | 4,298 | 4,269 | ||
| Other external expenses | 917 | 909 | ||
| Staff costs | 1,883 | 1,814 | ||
| EBITDA before special items | 1,498 | 1,546 | ||
| Amortisation and depreciation | 49 | 81 | ||
| Amortisation of customer relationships | 57 | 53 | ||
| EBIT before special items | 1,392 | 1,412 | ||
| Gross margin (%) | 21.3 | 21.5 | ||
| Conversion ratio (%) | 32.4 | 33.1 | ||
| Operating margin (%) | 6.9 | 7.1 | ||
| Number of employees at year end | 6,310 | 6,331 | ||
| Total invested capital (DKKm) | 6,734 | 6,303 | ||
| Net working capital (DKKm) | 1,185 | 943 | ||
| ROIC (%) | 21.4 | 22.3 |
Revenue was up 1.7% and totalled DKK 20,195 million for 2013, with a negative organic growth of 1.2%. Measured in local currencies total revenue growth came to 4.0% including acquisitions.
Gross profit was up 0.7% and totalled DKK 4,298 million for 2013. Measured in local currencies growth in gross profit totalled 3.4% including acquisitions.
The development in sea freight volumes had a positive effect on gross profit, but the market was characterised by fierce price competition in 2013. This situation contributed to the decline in average profit per unit (TEUs). Exchange rate fluctuations also impacted negatively on gross profit by DKK 111 million.
EBIT before special items dropped 1.4% and totalled DKK 1,392 million for 2013. Organic growth was a negative 1.1%. Measured in local currencies operating profit growth totalled 0.6% including acquisitions.
The conversion ratio was 32.4% for 2013 against 33.1% for 2012. The operating margin was 6.9% for 2013 against 7.1% for 2012.
The integration of acquirees impacted on the Division's operating margins. The acquired companies have relatively low conversion ratios, and the integration process and work to increase the financial ratios to the level of the rest of the Division are expected to be completed in 18-24 months.
Adjusted for the effect of acquisitions and currency differences overheads were unchanged from 2012. This was due to increased productivity as a result of the implementation of a new IT platform and various other cost management and process optimisation initiatives. Despite the acquisition of Seatainers, earnings on project logistics were lower than in 2012 which was mainly due to the reduced number of project tenders within, e.g., the wind power, oil & gas and industrial project segments.
Currency translation had a negative impact of altogether DKK 28 million on financial results in the Americas and Asia in particular.
| Sea freight | Air freight | |||||
|---|---|---|---|---|---|---|
| (DKKm) | 2013 | 2012 | 2013 | 2012 | ||
| Net revenue | 11,997 | 11,621 | 8,198 | 8,234 | ||
| Direct costs | 9,498 | 9,213 | 6,399 | 6,373 | ||
| Gross profit | 2,499 | 2,408 | 1,799 | 1,861 | ||
| Gross margin (%) | 20.8 | 20.7 | 21.9 | 22.6 | ||
| Volume (TEUs/Tonnes) |
772,142 | 725,806 | 259,365 | 259,057 | ||
| Gross Profit per unit (DKK) |
3,236 | 3,318 | 6,936 | 7,184 |
GROWTH
| C (DKKm) |
2012 | urrency translation adjustments |
Acquisitions, O net |
rganic O growth |
rganic growth |
2013 |
|---|---|---|---|---|---|---|
| Net revenue | 19,855 | (435) | 1,026 | (251) | (1.2%) | 20,195 |
| Gross Profit | 4,269 | (111) | 138 | 2 | 0.1% | 4,298 |
| EBIT before special items | 1,412 | (28) | 23 | (15) | (1.1%) | 1,392 |
The following long-term financial targets have been set for the Division:
| Target R | ealised 2013 | |
|---|---|---|
| Operating margin | 7-8% | 6.9% |
| Conversion ratio | 35% | 32.4% |
| ROIC (%) | 25% | 21.4% |
DSV expects that the global sea freight market will grow by approx. 3-5% in 2014, measured by volume, while the air freight market measured by volume is expected to grow by approx. 1-3%. We also expect that the project logistics market, especially the wind power segment, will see a positive development in 2014.
Management expects to achieve the goal of gaining market share in the markets in which the Division operates. However, competition is expected to remain fierce which may have a negative impact on earnings per unit carried.
In accordance with the financial targets set for the Division DSV Air & Sea is expected to achieve earnings growth in 2014.
| EBIT before | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Net revenue G | ross profit | special items O | perating margin C | onversion ratio | ||||||
| (DKKm) | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 |
| EMEA | 14,191 | 13,913 | 2,551 | 2.578 | 672 | 682 | 4.7 | 4.9 | 26.3 | 26.5 |
| APAC | 4,772 | 4,666 | 922 | 930 | 366 | 393 | 7.7 | 8.4 | 39.7 | 42.3 |
| Americas | 3,705 | 3,563 | 800 | 754 | 390 | 391 | 10.5 | 11.0 | 48.8 | 51.9 |
| Eliminations, etc. | (2,473) | (2,287) | 25 | 7 | (36) | (54) | - | - | - | - |
| Total | 20,195 | 19,855 | 4,298 | 4,269 | 1,392 | 1,412 | 6.9 | 7.1 | 32.4 | 33.1 |
With a complete European network the DSV Road Division is among the top three transport companies in Europe. The Division offers full load, part load and groupage services through a strong network of more than 200 terminals across Europe. The Division has approx. 9,400 employees.
The demand for road transport in Europe was still affected by the weak economic environment in most European countries and is estimated to have been in line with 2012. However, the situation improved in the second half of 2013, driven by increasing economic growth in several Northern European countries and the Southern European economies showing signs of stabilisation.
The total freight volume of the Road Division measured in consignments increased by approx. 4% on 2012, and Management estimates that DSV has gained market share in most European countries. Acquirees contributed approx. 1% to the volume growth in 2013.
| 2013 DSV |
2013 Market (Europe) |
|
|---|---|---|
| Consignments | 4% | Unchanged |
Market growth rates are based on own estimates.
Søren Schmidt Managing Director Road Division
In terms of capacity we estimate that there was a good balance between supply and demand in the international road freight market in Europe. Accordingly, freight rates on international transports also remained relatively stable. In terms of domestic transport and distribution some markets saw periods of scarce capacity and thereby higher freight rates. This scenario applied to Sweden and Germany in particular.
In respect of international and domestic road freight the markets were characterised by fierce competition and significant price pressure from customers.
In 2013 we continued our efforts to further develop our services and optimise the DSV network. Part of this work was the continued development and launch of the "DSV Daily Pallet" product offering daily departures across our Euopean network. Parcels are another attractive market for DSV, and we are therefore in the process of developing our "DSV Parcel" product.
But DSV Road is more than road freight. Intermodal transport solutions combining, e.g., road and rail are becoming an increasingly important part of our service offerings, enabling us to accommodate customers' demand for transport solutions with the lowest possible carbon footprint.
The development and streamlining of business processes and IT systems were also a high focus area in 2013. 7000
Division revenue can be broken down by the following geographical areas:
trailers have been equipped with GPS trackers as a means to help us maximise our use of transport equipment while delivering enhanced customer service. Furthermore, in 2013 we laid out the roadmap for an upgrade of our existing transport management system; a project planned to run for the next 3-4 years.
In 2013 DSV acquired Ontime Logistics, which has operations in Norway, Sweden and Denmark. By this acquisition DSV Road gained additional volume and competencies in a number of our core markets. Ontime Logistics was a lossmaking business at the time of acquistion, and the integration process and work to achieve the expected synergies are expected to be completed in 2 years.
| (DKKm) | 2013 | 2012 | |
|---|---|---|---|
| Net revenue | 23,117 | 22,654 | |
| Direct costs | 18,818 | 18,308 | |
| Gross profit | 4,299 | 4,346 | |
| Other external expenses | 975 | 1,020 | |
| Staff costs | 2,284 | 2,258 | |
| EBITDA before special items | 1,040 | 1,068 | |
| Amortisation and depreciation | 79 | 117 | |
| Amortisation of customer relationships | 19 | 18 | |
| EBIT before special items | 942 | 933 | |
| Gross margin (%) | 18.6 | 19.2 | |
| Conversion ratio (%) | 21.9 | 21.5 | |
| Operating margin (%) | 4.1 | 4.1 | |
| Number of employees at year end | 9,372 | 9,730 | |
| Total invested capital (DKKm) | 3,733 | 3,786 |
Net working capital (DKKm) (346) (396) ROIC (%) 25.1 24.8
Revenue was up 2.0% and totalled DKK 23,117 million for 2013, of which organic growth was 1.2%.
Gross profit was down 1.1% and amounted to DKK 4,299 million for 2013. Organic growth was a negative 1.5%. The gross margin was 18.6% for 2013 against 19.2% for 2012.
The 4% growth in consignments compared to 2012 did not create a corresponding increase in revenue or gross profit. This trend characterised all of 2013 and was to a great extent a result of price pressure in a highly competitive market. Also, the average size of part-load and groupage consignments decreased resulting in a lower average price per consignment.
The Division gained market share in the Nordic countries and Germany in domestic distribution, e.g., for the grocery industry. In this segment average price and gross profit per consignment are typically lower than for international distribution, and product mix therefore also had a negative effect on revenue and gross profit.
Fierce competition and periods of scarce capacity prevailed in the Nordic countries and in the Swedish domestic distribution market in particular, where the Division reported declining earnings in 2013.
EBIT before special items was up 1.0% and totalled DKK 942 million for 2013, of which organic growth was 3.3%.
The operating margin was 4.1% for 2013 and in line with 2012. The conversion ratio was 21.9% for 2013 against 21.5% in 2012.
Also in 2013 effective cost management was a major contributor to the improved operating profit reported by the Division despite the low gross profit. This was partly a result of the adjustment of overheads in 2012 (Project Operational Excellence), the full effect of which was achieved in 2013. Acquisitions had an adverse effect on the Division's operating margins.
| Target R | ealised 2013 | |
|---|---|---|
| Operating margin | 5% | 4.1% |
| Conversion ratio | 25% | 21.9% |
| ROIC (%) | 25% | 25.1% |
DSV expects the European road freight market to grow by 1-2% compared to 2013. The outlook for the European economy is still highly uncertain and growth rates will show regional differences. The most positive development is expected in Northern Europe, but we also expect a stable development in, e.g., Spain, France and Italy.
The Division aims to use its strong position and service offerings to gain additional market share.
We do not foresee any notably change in the competitive situation prevalent in 2013 for the coming year. This entails the risk that earnings per consignment may be squeezed even further.
The Division will maintain focus on productivity optimisation and adjustment of overheads.
| C (DKKm) |
2012 | urrency translation adjustments |
Acquisitions, O net |
rganic O growth |
rganic growth |
2013 |
|---|---|---|---|---|---|---|
| Net revenue | 22,654 | (115) | 297 | 281 | 1.2% | 23,117 |
| Gross profit | 4,346 | (28) | 46 | (65) | (1.5%) | 4,299 |
| EBIT before special items | 933 | (7) | (14) | 30 | 3.3% | 942 |
DSV Solutions specialises in logistics solutions across the entire supply chain, including freight management, customs clearance, warehousing and distribution, information management and e-business support. The Division has approx. 5,800 employees.
In 2013 the European logistics services market is estimated to have remained unchanged from 2012.
Division volumes measured in order lines (transactions) increased by approx. 4% in 2013 compared to 2012, while the market in general is estimated to have remained unchanged. On this basis we estimate that the Solutions Division gained market share in 2013.
| 2013 DSV |
2013 Market (Europe) |
|
|---|---|---|
| Order lines | 4% | Unchanged |
Market growth rates are based on own estimates.
The logistics services market was affected by surplus capacity in many European countries and many enterprises focused on reducing their overall logistics and supply chain management costs. This caused fierce price competition in connection with the renegotiation of contracts and participation in tenders.
Brian Ejsing Managing Director Solutions Division
GROSS PROFIT
During 2013 DSV Solutions established independent operations in Asia, mainly China, and most recently in the USA. Europe is still the main market of the Division, with the Netherlands, Belgium, Italy, Germany and the Nordic countries being the main areas, however many of our multinational customers would like us to be able to also cater for them outside Europe. In step with the increased global presence of the Air & Sea Division it is a logical strategy for the Solutions Division to keep up and seize the opportunities from this development.
The Division continues its development of industry specific logistics solutions, e.g., for the automotive, healthcare, chemical and retail industries. We succeeded in gaining market share in 2013, largely as a result of our efforts focused on these specific industries.
Furthermore, we offer tailored e-commerce solutions to existing as well as new customers and this area has shown a positive development in 2013. E-commerce related services make up less than 5% of the Division's activities, but we will undoubtedly see some of the highest growth rates in this particular area in the coming years.
Optimisation of internal processes and systems is an integral element of the Division's work and we have launched several projects relating both to new locations, where the level of utilisation is low in the start-up phase, and to the optimisation of our existing capacity.
Division revenue can be broken down by the following geographical areas:
condensed income statement
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Net revenue | 5,470 | 5,181 |
| Direct costs | 4,061 | 3,743 |
| Gross profit | 1,409 | 1,438 |
| Other external expenses | 444 | 502 |
| Staff costs | 541 | 541 |
| EBITDA before special items | 424 | 395 |
| Amortisation and depreciation | 133 | 110 |
| Amortisation of customer relationships | 35 | 35 |
| EBITA before special items | 256 | 250 |
| Gross margin (%) | 25.8 | 27.8 |
| Conversion ratio (%) | 18.2 | 17.4 |
| Operating margin (%) | 4.7 | 4.8 |
| Number of employees at year end | 5,838 | 5,428 |
| Total invested capital (DKKm) | 1,631 | 1,755 |
| Net working capital (DKKm) | 56 | 76 |
| ROIC (%) | 15.1 | 13.6 |
Revenue was up 5.6% and totalled DKK 5,470 million for 2013, of which organic growth was 5.4%.
However, gross profit dropped by 2.0% and amounted to DKK 1,409 million in 2013. Organic growth was a negative 2.0%. The gross margin was 25.8% for 2013 against 27.8% for 2012.
The low gross margin was mainly due to the influx of new customers with reduced profitability and price pressure in connection with the renegotiation of contracts. Moreover, the rate of utilisation was too low at some locations and the unutilised capacity impacted negatively on gross profit.
EBIT before special items was up 2.4% and totalled DKK 256 million for 2013, of which organic growth was 3.2%.
The operating margin was 4.7% for 2013 and in line with 2012. The conversion ratio was 18.2% for 2013, up from 17.4% in 2012.
The positive development in EBIT before special items despite the decrease in gross profit was a result of the Division's continued focus on productivity increases and cost base adjustments. The low cost level owes partly to the initiatives implemented under the Operational Excellence Project in 2012.
The start-up of Solutions activities in new countries and at new locations impacted negatively on the operating profit for 2013.
| T | arget R | ealised 2013 |
|---|---|---|
| Operating margin | 7% | 4.7% |
| Conversion ratio | 25% | 18.2% |
| ROIC (%) | 20% | 15.1% |
The European logistics services market is expected to grow by 1-2% in 2014.
We expect to gain market share in 2014 and to improve capacity utilisation. However, we also estimate that fierce competition and structural overcapacity in some markets will impact on the logistics services market in 2014.
| C (DKKm) |
2012 | urrency translation adjustments |
Acquisitions, O net |
rganic O growth |
rganic growth |
2013 |
|---|---|---|---|---|---|---|
| Net revenue | 5,181 | (30) | 40 | 279 | 5.4% | 5,470 |
| Gross profit | 1,438 | (4) | 4 | (29) | (2.0%) | 1,409 |
| EBIT before special items | 250 | - | (2) | 8 | 3.2% | 256 |
It goes without saying that running a business implies certain risks. The critical aspect is how the risks are identified and managed.
Effective risk management is an integral element of our work. The identification and assessment of key risks support the decision-making processes of Management, thereby enabling a timely response to issues that may have a material impact on the Group's earnings and financial position and the achievement of our other financial targets.
The transport and logistics market and customers' demands are constantly changing. That is why we need to be agile and able to exploit new opportunities when they arise. In connection with the development of new services, adaptation of existing services and entry into new markets DSV deliberately takes new, calculated risks. That is necessary in achieving our strategic objectives and drive growth. Increased regulation in our business areas also add to the constantly changing risk scenario. The objective of our risk management procedures is to ensure adequate identification and management of all key risks and avoid taking any unnecessary risks.
The Board of Directors has the ultimate responsibility and lays down the overall framework for the risk management process. The duty of monitoring compliance with Group risk management policies has been delegated to the DSV Audit Committee to a predominant extent. The Executive Board is responsible for identifying and addressing key risks on a day-to-day basis and to develop the risk management procedures of the Group.
Risk management at DSV is based on established risk management procedures ensuring proper mitigation and management of the Group's risks.
Risk management is an ongoing process involving the identification and registration of risks and assessment of the potential impact on Group earnings.
In continuation hereof, a thorough allocation is made of the organisational responsibility for the implementation of initiatives intended to mitigate any identified risks and for the continuous monitoring.
This is done on a continuous basis as well as through scheduled risk mapping analyses at regular intervals, but always according to the same structure. The risk mapping process provides an exhaustive charting and assessment of the Group's risks. Relevant employees of all business areas participate in this process, thoroughly reviewing known risks and identifying any new risks.
Procedures, guidelines and various key control systems have been prepared to monitor and mitigate the risks identified by the Group, thus ensuring optimal management of key risks.
Information on any identified risks are collected at central Group functions on an ongoing basis and then reported to the Executive Board. The Executive Board notifies the Board of Directors on a weekly basis of any matters of relevance to the risk management process and of any risk mitigation measures taken. The ongoing dialogue with the Board of Directors and the Audit Committee and regular reports from the Executive Board on the development in key risk factors provide an adequate risk management framework. In addition to the regular reports, the Audit Committee also receives status reports on the key risks at all Committee meetings.
Based on the most recent review of the risk scenario, Management estimates that the risks identified and the mitigation thereof are unchanged from last year in all essentials. The key risks which are estimated to have a potential effect on consolidated earnings and financial position in 2014 and the long-term achievement of the Group's objectives are described overleaf.
| Risk factors | Description |
|---|---|
| Macroeconomic trends |
|
| A decline in production and demand will have a direct, adverse effect on the de mand for transport and logistics services and consequently on our financial results. |
We expect stable development and moderate economic growth in our main markets in 2014, how ever we also recognise that economic predictions are uncertain. More than 80% of Group revenue is generated in the Europen market, for which reason developments in this region in particular may af fect earnings. Our asset light business model and flexible cost base are important elements in mitigating the risks related to the macroeconomic development. We have a history of stable operating margins, even in periods of declining freight volumes. The Group's reporting systems are designed to provide ongoing monitoring of changes in activity levels, operating results, cash situation, customer payment behav iour, etc., and ensure that any deviations are adequately addressed. |
| Consolidation in the transport industry |
|
| The transport industry is in a continu ous process of consolidation which may affect the competitive position of the Group. |
We expect that the consolidation trend in the transport industry will continue, and major acquisitions among our competitors may weaken the relative competitive position of the DSV Group. It is a central element of our corporate strategy to play an active part in the consolidation process with the aim to strengthen our competitive position. Acquisitions involve the risk that the integration process cannot be completed as planned which may have a negative impact on Group earnings. A strong and structured pre- and post-merger inte gration process has been implemented to mitigate this risk. |
| Application and implementation of IT systems |
|
| The business operations of DSV are highly dependent on IT systems. System outages may have a material impact on the Group's operations and earnings. |
Additional IT systems will be implemented in 2014 as part of the Group's overall IT system centralisa tion and optimisation process. The implementation of critical IT systems entails an increased risk of system outages and thereby also a risk of a negative impact on the consolidated profit. Optimisation of the IT production environment, including IT security, is an ongoing process at DSV, and we have established various minimum service level requirements. Several key control systems have been set up to monitor compliance with the required service levels for the Group's IT applications and thereby mitigate the risk of any negative effects of new implementations. |
| increased regulation and embargoes |
|
| Authorities and organisations enforce increasingly strict regulations relating to tax and VAT, licenses and competition law. Furthermore, an increasing number of countries and organisations are sub ject to embargoes. |
This development affects the Group's activities and increases the risk of violation of rules and regula tions. Violations may entail substantial fines and may therefore have a considerable, negative impact on the Group's performance. To mitigate this risk it is of high concern to DSV that IT systems and procedures are designed so as to ensure compliance with relevant legislation and alignment with internal CSR policies. These policies include clear guidelines on how employees should act in relation to particularly risky issues. The Group applies customer and supplier screening systems to ensure that all embargoes are observed. DSV has a clear corporate policy that current legislation must be observed, and Management has communicated a very clear message that no derogation from established policies is accepted. Man agement monitors the development in this field on a continuous basis and allocates the competencies required to keep up with the development. Most of the compliance related cases involving DSV originate from acquirees and concern activities prior to DSV's acquisition of the relevant entities. The financial risk related to such cases is mitigated by means of agreements with the seller in all essentials as well as through due diligence procedures to safeguard the Group from any involvement in such cases. |
| Transport agreements and damage to |
cargo , etc |
| DSV may incur liability for damage to cargo and transport equipment. |
This risk is typically mitigated by the conclusion of agreements restricting the potential liability of DSV, agreements on the transfer of risk to subcontractors or through insurance coverage. Policies on the conclusion of contracts have been implemented. These policies define the powers of authorisation and stipulate procedures regarding the review and approval of draft agreements by the Group Legal Department. |
| Financial ris ks |
|
| As a global group of companies DSV is exposed to financial risks |
The financial risks are managed and mitigated on corporate level. This concerns interest rate, exchange rate, credit, financing and liquidity risks. These factors are described in more detail in Chapter 4 of the notes to the consolidated financial statements. |
Corporate governance is of great importance at DSV. Our corporate structure and control environment are designed as a simple structure based on the Group's commercial activities with a clear division of management responsibilities.
The management structure of DSV consists of a board of directors and an executive board. The ultimate authority rests with the shareholders in general meeting. The Board of Directors supervises the development of the Group and determines the overall visions, strategies and objectives. The Executive Board is responsible for the day-to-day management and the execution of the strategy and contributes essential input to the work of the Board of Directors. The allocation of responsibilities between the Board of Directors and Executive Board is laid down in the relevant Rules of Procedure.
The Division Managers are responsible for the day-today operations of the Divisions with support from the centralised Group functions.
The Board of Directors currently has six members (Directors). According to the Articles of Association of the Company, the Board of Directors must comprise at least five and not more than nine Directors. The composition of the Board is intended to ensure that it has a diverse competency profile to be able to perform its duties as effectively as possible. Reference is made to page 67 for a description of the individual Directors' special competencies in relation to the work of the Board.
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 upper age limit for Directors stipulated in the Company's Articles of Association implies that Directors must retire at the first annual general meeting after having attained the age of 70.
In the financial year of 2013, the Board of Directors held nine ordinary board meetings and one strategy meeting. The content of the meetings is partly determined by the annual cycle of the Board, thus ensuring that all important policies are reviewed.
The Board of Directors conducts an overall performance evaluation of the Board as a whole once a year. This process also includes evaluation of the performance and competencies of the individual Directors to assess whether the mix of competencies is satisfactory and identify any need for further training. The Chairman of the Board is in charge of the self-evaluation, but may retain an external consultant to assist in connection with this process. The self-evaluation report is discussed by the Board of Directors and has not given rise to any further initiatives.
According to the Recommendations on Corporate Governance, three of the six members of the Board of Directors are regarded as independent persons. Kurt K. Larsen (Chairman) was a member of the Executive Board until he joined
the Board of Directors and is not regarded as an independent Board member. Erik B. Pedersen and Kaj Christiansen are not regarded as independent persons as they have both been Directors for more than 12 years.
The Board of Directors has established an audit committee with the primary task of monitoring the processes relating to the Group's financial reporting, control environment, financial resources and cash situation and determining the framework for the external audit. The Rules of Procedure of the Audit Committee are available at investor.dsv.com/governance.cfm. The Committee held three meetings in 2013.
DSV has adopted a Remuneration Policy which lays down the guidelines for determining and approving the remuneration of the members of the Board of Directors and Executive Board. The Remuneration Policy is designed to always reflect the goal of being able to attract and retain a competent Management. The Remuneration Policy is discussed and approved at the annual general meeting of the Company and is available at investor.dsv.com/governance.cfm.
The Recommendations issued by the Committee on Corporate Governance in May 2013 are actively used by the Board of Directors in its work, and the Board regularly assesses its procedures according to the Recommendations. DSV has opted to derogate from three of the 47 Recommendations: (1) the Recommendation on nomination committee, (2) the Recommendation on remuneration committee, and (3) parts of the Recommendation on diversity at management levels.
The Board of Directors regularly considers the need for nomination and remuneration committees, but has not found it necessary to establish such committees for the time being. In the assessment of the Board, the tasks which are to be undertaken by a nomination committee and a remuneration committee according to the Recommendations are performed efficiently by the chairmanship of the Board (chairman and deputy chairman). The chairmanship subsequently reports to the other Directors.
The Board of Directors discusses the Group's activities on a regular basis to ensure that the Group has optimal management teams at all management levels.
As the Board of Directors meets the gender-related composition requirement according to the Danish Companies Act DSV has not set specific goals in this respect. In the event that the Board of Directors no longer meets the statutory gender distribution requirement DSV has a legal obligation to set target figures for the under-represented gender and we intend to comply with this requirement.
The Board considers the issue of diversity, including international experience and gender, in relation to the Company's activities, both in connection with new appointments and the evaluation of the composition of Management. However, the Board sees no clear connection between fixed levels of diversity and the best possible governance of the Group. For that reason, the Board of Directors has not found it expedient to set specific targets for diversity at management levels so far.
For a detailed description of our position on the Recommendations, reference is made to investor.dsv.com/governance.cfm. The Recommendations are available in their entirety at www.corporategovernance.dk.
The Board of Directors has the overall responsibility for risk management and internal control in connection with the presentation of financial statements.
The Company's internal control and risk management systems relating to the financial reporting process are designed to minimise the risk of irregularities and significant errors in internal and external financial reports. The internal control and risk management systems are not designed according to one specific method package; rather, they are inspired by a series of methods.
The key elements of the Group's risk management and internal control systems in connection with the presentation of financial statements are summarised below.
The control environment in DSV is based on clear guidelines, a simple organisational structure, clear division of responsibilities and constant efforts to strengthen the control environment with due consideration of materiality and risk. This culture is driven from senior management level. The Board of Directors and the Executive Board believe that a strong control environment supported by the tone at the top is crucial to good risk management and effective internal control.
The entire corporate structure is designed as a simple structure based on the Group's commercial activities with a clear division of management responsibilities. The Group Executive Board is represented in the boards of directors of all material subsidiaries, which apply standard provisions regulating the power to bind the company. This supports the creation of a strong control environment throughout the organisation.
At least once a year the Board of Directors and Executive Board establish and approve all general policies, procedures and control systems in essential fields, including Code of Conduct, Corporate Social Responsibility Policy and the Rules of Procedure of the Board of Directors and Executive Board. In addition, policies have been adopted and manuals created within essential fields of financial reporting: accounting and reporting manual; finance, credit and authorisation policies; effective separation of functions and IT strategy.
The Group's central control and compliance functions are responsible for establishing essential policies and manuals and for the relevant follow-up in this respect.
The Audit Committee is also considered to support a strong control environment. As part of its annual responsibilities, the Audit Committee assesses the need for an internal audit function and in that connection formulates recommendations for the Board of Directors regarding the establishment of such function. The Audit Committee deems that the existing control and risk management systems are adequate, and DSV has opted not to establish an internal audit function for the time being.
The Board of Directors and Executive Board regularly assess key risks and internal control systems in connection with the presentation of consolidated financial statements. This implies, inter alia, that the risk factors and financial and management control systems relating to financial reporting are assessed by the Board of Directors at least once a year. This process includes an assessment of whether the organisational structure and allocation of human resources remain optimal.
The most material and risky items are identified and assessed annually and the identified risks are matched with internal procedures and controls. The items deemed to be the most material and risky are unchanged relative to last year and are described in more detail in Chapter 1 of the notes to the consolidated financial statements.
The control activities are designed to address the risks identified by Management. The purpose of the control activities is to verify that the established policies, manuals and procedures are followed and that any material misstatement is prevented, discovered and remedied. In that connection it is vital that the reasons for any misstatements are identified and eliminated. Minimum requirements of control systems that apply to all Group companies have been laid down on the basis of the risks identified. The control activities include procedures for authorisation, approval, reconciliation, results and liquidity analyses and effective separation of functions.
The control systems comprise both manual and automated controls. We also apply various key IT control systems. These key control systems are primarily targeted at corporate IT functions to help safeguard IT operations and thereby support the quality and reliability of the Group's financial reporting.
Group Management and the national managements of the subsidiaries in the various countries have high focus on financial ratios and follow-up in this respect. Monthly internal financial reports are subject to permanent internal control procedures, including central closing of reporting systems and central review and analysis of reports from the subsidiaries.
The review of the reports received is based on an assessment of materiality and risk factors relating to the individual subsidiary.
Detailed procedures and control systems have been established at Group level to ensure timely notification of NASDAQ OMX Copenhagen in accordance with applicable rules.
DSV has established standardised information and reporting systems to ensure that the financial reporting gives a true and fair view and is in compliance with legislation and that other internal control procedures of the Group are observed. Internal reporting instructions and control procedures are continuously revised and evaluated to constantly ensure that financial reports are reliable and transparent.
Management's position on risk management and changes in reporting requirements are regularly communicated through newsletters, by holding financial conferences for the financial managers of the subsidiaries, through the corporate intranet and dialogue with the individual national managements. Management emphasises an adequate level of internal communication within the framework of the current stock exchange legislation to ensure in the best possible manner that all employees are aware of their responsibilities within the organisation and accordingly are able to effectively and reliably perform their duties.
The internal control and risk management systems in connection with the presentation of financial statements are monitored at various levels. The monitoring consists of monthly reports to the DSV Management on comprehensive consolidated accounting data, the Group's segments and markets, and by means of regular control visits to Group entities and the Audit Committee's work. Furthermore, Management receives cash reports from the subsidiaries on a weekly basis. The monitoring of the financial reporting process by the Audit Committee is based on regular reports from the Group Finance Department, annual updates on the status of key financial reporting control systems and review of critical accounting estimates and policies. The reports are also reviewed by the external auditors, and the Board of Directors oversees the Executive Board to ensure that it responds effectively in case of weaknesses or deficiencies detected by internal control systems or external audits and that any agreed initiatives to improve risk management and internal control are implemented as planned.
DSV has also implemented a global whistleblower programme. The system enables the employees to anonymously report any material offences or suspicion thereof and contributes to strengthening the monitoring of compliance with Group policies. Information regarding the intended use of DSV's Whistleblower Programme has been communicated to all subsidiaries and is available to all employees at the corporate intranet.
The DSV share is listed on NASDAQ OMX Copenhagen and included in the OMXC20 Index as one of the 20 most traded Danish shares. At year end 2013 the total market capitalisation was DKK 31.1 billion and the share price increased by 22.0% in 2013.
The average daily trading volume on NASDAQ OMX Copenhagen was 452,000 shares in 2013, down 25% compared to 2012. NASDAQ OMX Copenhagen is the main trading market of the DSV share, but the share is also increasingly traded at alternative trading platforms and through overthe-counter and non-transparent trading.
At year end the closing price of the DSV share on NAS-DAQ OMX Copenhagen was DKK 177.80 and the share was up by 22.0% (excluding dividends distributed) in 2013. During the same period the OMXC20 (CAP) Index rose by 32.0%.
At year end 2013 the market capitalisation of DSV was DKK 31.1 billion, excluding the value of treasury shares, which is an increase of DKK 5.2 billion on 2012.
| Number of shares of DKK 1 at 31 December 2013 | 180,000,000 | |
|---|---|---|
| Share classes | 1 | |
| Restrictions on transferability and voting rights | None | |
| Listed | NASDAQ OMX Copenhagen | |
| Trading symbol | DSV | |
| ISIN code | DK0060079531 |
The Board of Directors proposes ordinary dividends of DKK 1.50 per share for 2013. Dividends of DKK 1.25 per share were distributed for 2012.
In the financial year of 2013 DSV acquired 4.9 million own shares at a total purchase price of DKK 700 million. The average price of the repurchased shares was DKK 144.1 and the total number of shares repurchased corresponds to 2.6% of the Company's share capital at the beginning of the financial year.
The purpose of the share buyback was to meet the exercise of share options under incentive schemes and adjust the capital structure in accordance with the financial targets. The shares were bought back under the powers granted at the Annual General Meeting of DSV on 21 March 2013 using the Safe Harbour Method.
At 31 December 2013 the Company held 4.9 million shares as treasury shares, corresponding to 2.7% of the share capital. As at 6 February 2014 the Company's portfolio of treasury shares amounted to 4,795,825 million shares.
Following the acquisition of treasury shares in 2012 the Company reduced its share capital. The share capital of DSV A/S was reduced by a nominal value of DKK 8 million on 18 April 2013. The capital reduction was carried out in accordance with the resolution passed at the Annual General Meeting on 21 March 2013 through the cancellation of 8 million treasury shares.
At the next General Meeting the Board of Directors expects to propose a further reduction of the Company's share capital of a nominal value of DKK 3 million.
Provided that the amendments to the guidelines on incentive pay are approved by the Annual General Meeting, at its meeting on 14 March 2014 the Board of Directors expects to authorise the Executive Board to allocate up to 3 million share options to senior staff members. The allocation will be made at the average quoted price on the five consecutive trading days preceding 31 March 2014.
The Board of Directors is authorised by the General Meeting to increase the Company's share capital. The total number of shares that may be purchased under the authority is 37.6 million. The authority is valid until 21 March 2017. The Board of Directors has also been authorised by the General Meeting to issue convertible debt instruments and warrants and to make the related capital increase. This authority is valid until 26 March 2015 and covers shares of a total nominal value of up to DKK 25 million. Shareholders have no pre-emptive rights if the Board of Directors exercises the said authorities.
The General Meeting also authorised the Board of Directors on 21 March 2013 to buy back a maximum of 18.0 million shares in the Company. At 6 February 2014 the remaining number of shares that may be purchased under the authority was 13,143,701. The authority is valid until 21 March 2018. The purchase price of treasury shares acquired under the authority may not deviate by more than 5% from the most recently quoted market price of the
shares at the date of acquisition. The authorities have been incorporated into the Company's Articles of Association. The Articles of Association are amended according to the rules of the Danish Companies Act. The latest amendment of the Articles of Association was made in connection with the Annual General Meeting on 21 March 2013.
DSV published a total of 40 company announcements in 2013 (Nos. 484-523). The most important announcements in 2013 are listed below:
| 20 February | No. 486 2012 Annual Report |
|---|---|
| 21 March | No. 490 Minutes of DSV's Annual General Meeting |
| 30 April | No. 493 Interim Financial Report First Quarter 2013 |
| 30 April | No. 494 Launch of new share buy-back programme according to the Safe Harbour Method |
| 17 June | No. 502 DSV A/S issues corporate bonds |
| 2 July | No. 505 Conclusion of share buy-back programme in DSV A/S |
| 30 July | No. 507 Interim Financial Report H1 2013 |
| 30 July | No. 508 Launch of new share buy-back programme according to the Safe Harbour Method |
| 24 October | No. 520 Conclusion of share buy-back programme in DSV A/S |
| 29 October | No. 521 Interim Financial Report Q3 2013 |
Other company announcements concerned share buybacks and insiders' trading in all essentials. For a complete list of company announcements published in 2013, please refer to investor.dsv.com/releases.cfm.
At 31 December 2013 registered shares in DSV A/S totalled 166 million, corresponding to 92% of the share capital. The largest 25 of these shareholders owned 39% of the entire share capital.
Of the registered shareholders, approx. 15% are private investors and 85% institutional investors.
| Category | Proportion of share capital (%) |
|---|---|
| Denmark | 30 |
| Foreign countries | 59 |
| Treasury shares | 3 |
| Not registered | 8 |
| Total | 100 |
No shareholders have reported that they own or control more than 5% of the Company's share capital.
| ABG Sundal Collier | HSBC |
|---|---|
| Alm. Brand Markets | Jyske Bank |
| Bank of America Merrill Lynch | Macquarie |
| Barclays Capital | Mainfirst |
| Berenberg Bank | Morgan Stanley |
| Cantor Fitzgerald | Nomura International |
| Carnegie Bank | Nordea Markets |
| Credit Suisse | Nykredit Markets |
| Danske Markets | RBC |
| Davy Research | SEB Equities |
| Deutche Bank | Sydbank |
| Goldman Sachs | Thompson Davis & Co. |
| Handelsbanken Capital Markets | UBS |
We plan and structure the Group's financial reports to the market and dialogue with investors and analysts with a view to ensuring a high and uniform level of information and an open and active dialogue.
The aim is to ensure that the development in the price of the DSV share always reflects the financial and operational development of the Company.
In line with our policy on communication with investors, equity analysts and other stakeholders, the Company's interim and annual reports are webcast and the DSV Management participates in investor meetings and conferences in Denmark and abroad. Finally, we host a Capital Markets
Day at regular intervals to give a more detailed presentation of the DSV Group.
It is our aim to make the investor relations pages at investor.dsv.com/index.cfm a natural venue and a complete source of information for current and potential investors. Annual reports, interim reports, investor presentations and other company announcements of the past five years are available at investor.dsv.com/financials.cfm, and investor related questions may be addressed to [email protected].
The communication between DSV and analysts, investors and other stakeholders is subject to special restrictions for a period of four weeks prior to the publication of the annual report and interim reports.
The financial calendar for 2014 is as follows:
| Activity | Date | Start of quiet period |
|---|---|---|
| Annual General Meeting | 14 March 2014 | |
| Q1 2014 Report | 30 April 2014 | 1 April 2014 |
| H1 2014 Report | 30 July 2014 | 1 July 2014 |
| Q3 2014 Report | 29 October 2014 | 1 October 2014 |
CSR is an integral part of DSV and our CSR strategy focuses on three essential areas where we believe that we can make a difference: environment and climate, business ethics and anticorruption, and employees and working environment.
Since 2009 DSV has actively supported the UN Global Compact Initiative and its focus on advancing key principles on anti-corruption, environment, human rights and labour. We will continually work to change and shape practices towards increased sustainability in our field of business. The following are excerpts of our 2013 progress report, which replaces the statutory report on corporate social responsibility in accordance with the exemption provision in section 99a of the Danish Financial Statements Act. The progress report is available in its entirety on our website at www.dsv.com/About-DSV/csr.
CSR is embedded into our business strategy. In addition to reducing and setting guidelines for our impact on the external environment our CSR initiatives support the increasing customer demand for sustainable products and services and thereby our ability to attract and retain customers and ultimately our earnings capacity. We focus on three areas of importance to DSV where we also believe that we can make a difference: environment and climate, business ethics and anti-corruption, and employees and working environment.
We are seeing that environment and climate are becoming increasingly important to a growing number of customers and sustainability an embedded element of branding and business strategies. The customers want a transport partner who satisfies a number of specific environmental requirements. Very often they demand individual carbon emission reports from our transport operations and to engage in an ongoing partnership to minimise emissions. To meet the new European standard for calculation and declaration of greenhouse gas emissions of transport services we have therefore in 2013 upgraded our IT platform for carbon emission reporting which forms the basis of the individual carbon reports to our customers. The upgrade will give our customers an improved basis for comparing the reports of different transport service providers.
Reducing our environmental footprint necessitates a mutual understanding between DSV and our customers on the need to maximise capacity utilisation. A better use of capacity may result in longer delivery times, but will also lead to reduced carbon emissions.
DSV has an overall target of improving energy efficiency and thereby reducing carbon emissions of suppliers and own operations by 15% per transport activity by 2015 compared to 2010 levels. To achieve this goal we must focus on optimising utilisation of the available capacity, improving fuel efficiency in collaboration with our suppliers and cooperating with our customers on adjusting cargo volumes to the capacity available.
We can establish that the various initiatives launched to increase energy efficiency have been succesful and increased energy efficiency has been obtained for all transport activities.
For air freight activities the energy efficiency improved by almost 5% compared to 2012 figures and by a total of 10% compared to the base year 2010. The energy efficiency of our sea freight activities improved by almost 11% compared to last year and by a total of 19% compared to the base year 2010. This means that we have reached the target for this area of a 15% improvement by 2015.
Despite a still fragmented and competitive market the Road Division managed to increase the energy efficiency considerably and is close to reaching the 15% improvement target. Compared to the base year 2010 energy efficiency increased by 14%, partly as a result of optimised capacity utilisation and partly an overall improvement in truck fuel consumption of almost 2%.
Management is engaged in the definition and communication of our corporate rules on business ethics; our Code of Conduct. The Code emphasises the importance of maintaining a high level of business ethics in our relations with all business partners – customers, shareholders, suppliers, public authorities, etc. Regardless where in the world we do business. We continually ensure that all employees, existing
as well as new, have been informed of and have access to read the Group's Code of Conduct.
In 2013 the communication of DSV's Supplier Code of Conduct that applies to all our suppliers has been a focus area of the Group. The Code describes what DSV considers appropriate business conduct from our suppliers when they perform services on behalf of or supply products to DSV. The purpose of the Code is to help ensure that our suppliers comply with the same guidelines as apply to all DSV employees. The roll-out of the guidelines will continue in 2014 and will involve the issuance of a special version aimed at small suppliers.
An important aspect of business ethics and anti-corruption in the transport industry is the dilemma relating to the use of facilitation payments. Facilitation payments are minor additional payments to an external party to expedite a routine matter where all rules and regulations have been observed, e.g., the issuance of a permit, visa, etc.
DSV has a zero tolerance approach to bribery which is clearly communicated in our Code of Conduct. Nor do we accept the practice of facilitaion payments. Unfortunately, it is common practice in certain countries and there may be cases where our employees may see no other option than to follow this practice. Our Code of Conduct contain guidelines for our employees on the difference between bribery and facilitation payments as well as guidelines on the required reporting of cases involving facilitation payments.
In 2013 we analysed the scale of this practice in a number of selected companies and noted that some countries have successfully reduced the use of facilitation payments to a minimum through various initiatives, whereas in other countries more targeted efforts are required. Based on our analyses and experiences we intend to continue our work to curtail the use of facilitation payments at DSV and, with time, completely end the practice of such payments.
Our employees are the backbone of DSV and their safety is therefore a key focus area at our company. We have a target of zero occupational accidents in our operations which we will achieve by continually minimising risks and improving routines and behaviour to increase our employees' safety at work.
Another important focus is to meet and comply with internationally proclaimed human rights and national provisions on labour rights. For that reason, Management has set targets dictating that no violations of such rules must be committed by DSV. No violations were reported in 2013 and the target is thus considered to have been achieved,
We have followed up on the occupational accidents reported by a number of selected companies and discovered that the total number of accidents in 2012 was lower than previously thought. Accordingly, the overall rate therefore landed on 7.9 occupational accidents per million working hours against 9.2 as previously reported. We can therefore establish that we actually reached our target already in 2012 of a 25% reduction in the rate of occupational accidents compared to the 2010 level. And we even managed to exceed the target by a fair margin as the rate dropped by a full 30% in 2012 compared to 2010. Additional resources have subsequently been allocated to strengthen reporting procedures in this area going forward.
The DSV Group maintained the low rate of occupational accidents in 2013 and Management intends to continue the efforts to reduce the number of occupational accidents at DSV. Hence, DSV aims to further improve the rate of occupational accidents every year.
| Income statement37 | |
|---|---|
| Statement of comprehensive income37 | |
| Cash flow statement38 | |
| Balance sheets, assets 39 | |
| Balance sheets, equity and liabilities 39 | |
| Statement of changes in equity 40 | |
| Notes 42 |
| (DKKm) | Note | 2013 | 2012 |
|---|---|---|---|
| Net revenue | 2.2 | 45,710 | 44,912 |
| Direct costs | 2.3 | 35,705 | 34,858 |
| Gross profit | 10,005 | 10,054 | |
| Other external expenses | 2.4 | 2,010 | 2,116 |
| Staff costs | 2.5 | 4,943 | 4,864 |
| Operating profit before amortisation, depreciation and special items | 3,052 | 3,074 | |
| Amortisation and depreciation of intangibles, property, plant and equipment | 2.6 | 500 | 534 |
| Operating profit before special items | 2,552 | 2,540 | |
| Special items | 2.7 | (129) | (275) |
| Financing income | 4.4 | 39 | 53 |
| Financing expenses | 4.4 | 337 | 299 |
| Profit before tax | 2,125 | 2,019 | |
| Tax on profit for the year | 5.2 | 554 | 589 |
| Profit for the year | 1,571 | 1,430 | |
| Profit for the year is attributable to: | |||
| Shareholders of DSV A/S | 1,577 | 1,427 | |
| Non-controlling interests | (6) | 3 | |
| Earnings per share: | 4.1 | ||
| Earnings per share of DKK 1 | 8.91 | 7.81 | |
| Diluted earnings per share of DKK 1 | 8.87 | 7.76 |
| (DKKm) | Note | 2013 | 2012 |
|---|---|---|---|
| Profit for the year | 1,571 | 1,430 | |
| Items that will be reclassified to income statement | |||
| when certain conditions are met: | |||
| Currency translation differences, foreign enterprises | (60) | (42) | |
| Fair value adjustment for the year relating to hedging instruments | 34 | (85) | |
| Fair value adjustment relating to hedging instruments transferred to financing expenses | 55 | 61 | |
| Tax on items reclassified to income statement | 5.2 | (20) | 23 |
| Items that will not be reclassified to income statement: | |||
| Actuarial gains/(losses) | 3.4 | 16 | (115) |
| Tax on items that will not be reclassified to income statement | 5.2 | (9) | 15 |
| Other comprehensive income, net of tax | 16 | (143) | |
| Total comprehensive income | 1,587 | 1,287 | |
| Statement of comprehensive income is allocated to: | |||
| Shareholders of DSV A/S | 1,593 | 1,284 | |
| Non-controlling interests | (6) | 3 | |
| Total | 1,587 | 1,287 |
| (DKKm) | Note | 2013 | 2012 |
|---|---|---|---|
| Operating profit before amortisation, depreciation and special items | 3,052 | 3,074 | |
| Adjustment, non-cash operating items etc.: | |||
| Share-based payments | 39 | 40 | |
| Change in provisions | (174) | 22 | |
| Cash flow from operating activities before change in net working capital and tax | 2,917 | 3,136 | |
| Change in net working capital | (217) | (196) | |
| Special items | (129) | (271) | |
| Interest paid | 32 | 46 | |
| Interest received | (292) | (282) | |
| Corporation tax, paid | (536) | (782) | |
| Cash flow from operating activities | 1,775 | 1,651 | |
| Purchase of intangible assets | (177) | (132) | |
| Purchase of property, plant and equipment | (226) | (446) | |
| Disposal of property, plant and equipment | 314 | 404 | |
| Acquisition of subsidiaries and activities | 5.1 | (269) | (106) |
| Disposal of subsidiaries and activities | 5.1 | - | 12 |
| Change in other financial assets | 10 | 19 | |
| Cash flow from investing activities | (348) | (249) | |
| Free cash flow | 1,427 | 1,402 | |
| Other non-current liabilities incurred | 2,485 | 750 | |
| Repayment of loans and credits | (3,003) | (547) | |
| Other financial liabilities incurred | (58) | (65) | |
| Shareholders: | |||
| Dividends distributed | 4.2 | (235) | (190) |
| Purchase of treasury shares | 4.2 | (700) | (1,303) |
| Sale of treasury shares, exercise of share options | 162 | 219 | |
| Other transactions with shareholders | (38) | 34 | |
| Cash flow from financing activities | (1,387) | (1,102) | |
| Cash flow for the year | 40 | 300 | |
| Cash and cash equivalents 1 January | 552 | 367 | |
| Cash flow for the year | 40 | 300 | |
| Currency translation adjustments | 115 | (115) | |
| Cash and cash equivalents 31 December* | 707 | 552 | |
| The cash flow statement cannot be directly derived from the balance sheet and income statement. | |||
| Statement of adjusted free cash flow | |||
| Free cash flow | 1,427 | 1,402 | |
| Net acquisition of subsidiaries and activities | 269 | 94 | |
| Normalisation of working capital in subsidiaries and activities acquired | 58 | 13 | |
| Adjusted free cash flow | 1,754 | 1,509 |
*) Cash and cash equivalents comprised DKK 359 million (2012: DKK 369 million) relating to subsidiaries' cash and cash equivalents in countries with foreign exchange control or other restrictions which imply that the cash is not readily available for general use by the Group.
| (DKKm) | Note | 2013 | 2012 |
|---|---|---|---|
| Intangible assets | 3.1 | 8,982 | 8,723 |
| Property, plant and equipment | 3.2 | 3,883 | 4,261 |
| Other receivables | 147 | 153 | |
| Deferred tax asset | 5.2 | 430 | 409 |
| Total non-current assets | 13,442 | 13,546 | |
| Trade receivables | 4.4 | 7,469 | 7,238 |
| Work in progress (services) | 676 | 629 | |
| Other receivables | 794 | 791 | |
| Cash and cash equivalents | 707 | 552 | |
| Assets held for sale | 12 | 38 | |
| Total current assets | 9,658 | 9,248 | |
| Total assets | 23,100 | 22,794 |
| (DKKm) | Note | 2013 | 2012 |
|---|---|---|---|
| Share capital | 4.1 | 180 | 188 |
| Reserves | 4.1 | 6,038 | 5,160 |
| DSV A/S shareholders' share of equity | 6,218 | 5,348 | |
| Non-controlling interests | 30 | 37 | |
| Total equity | 6,248 | 5,385 | |
| Deferred tax | 5.2 | 411 | 411 |
| Pensions and similar obligations | 3.4 | 1,034 | 1,078 |
| Provisions | 3.5 | 361 | 418 |
| Financial liabilities | 4.3 | 6,066 | 6,190 |
| Total non-current liabilities | 7,872 | 8,097 | |
| Provisions | 3.5 | 242 | 275 |
| Financial liabilities | 4.3 | 590 | 923 |
| Trade payables | 4,537 | 4,385 | |
| Work in progress (services) | 1,252 | 1,284 | |
| Other payables | 2,115 | 2,248 | |
| Corporation tax | 244 | 197 | |
| Total current liabilities | 8,980 | 9,312 | |
| Total liabilities | 16,852 | 17,409 | |
| Total equity and liabilities | 23,100 | 22,794 |
| Share | Treasure | Hedging | Translation | Retained | DSV A/S shareholders share |
Non controlling |
Total | |
|---|---|---|---|---|---|---|---|---|
| (DKKm) | capital | shares | reserve | reserve | earnings | of equity | interests | equity |
| Equity at | ||||||||
| 1 January 2013 | 188 | (10) | (107) | 16 | 5,261 | 5,348 | 37 | 5,385 |
| Profit for the year | - | - | - | - | 1,577 | 1,577 | (6) | 1,571 |
| Currency translation adjustments, foreign enterprises |
- | - | - | (60) | - | (60) | - | (60) |
| Fair value adjustments for the year relating to hedging instruments |
- | - | 34 | - | - | 34 | - | 34 |
| Fair value adjustments relating to hedging instruments transferred to financial expenses |
- | - | 55 | - | - | 55 | - | 55 |
| Actuarial gains/(losses) | - | - | - | - | 16 | 16 | - | 16 |
| Tax on other comprehensive income |
- | - | (20) | - | (9) | (29) | - | (29) |
| Other comprehensive income, net of tax |
- | - | 69 | (60) | 7 | 16 | - | 16 |
| Total comprehensive income for the period |
- | - | 69 | (60) | 1,584 | 1,593 | (6) | 1,587 |
| Transactions with owners: | ||||||||
| Share-based payments | - | - | - | - | 39 | 39 | - | 39 |
| Dividends distributed | - | - | - | - | (235) | (235) | - | (235) |
| Purchase and sale of treasury shares, net |
- | (3) | - | - | (535) | (538) | - | (538) |
| Capital reduction | (8) | 8 | - | - | - | - | - | - |
| Dividends on treasury shares | - | - | - | - | 12 | 12 | - | 12 |
| Other adjustments | - | - | - | - | (4) | (4) | (1) | (5) |
| Tax on transactions with owners | - | - | - | - | 3 | 3 | - | 3 |
| Total transactions with owners | (8) | 5 | - | - | (720) | (723) | (1) | (724) |
| Equity at 31 December 2013 |
180 | (5) | (38) | (44) | 6,125 | 6,218 | 30 | 6,248 |
The retained earnings reserve at 31 December 2013 comprised a negative balance between the purchase and sale of treasury shares of DKK 7,036 million (2012: a negative balance of DKK 6,501 million).
Sale of treasury shares relates to the exercise of share options in connection with incentive schemes.
| DSV A/S shareholders |
Non | |||||||
|---|---|---|---|---|---|---|---|---|
| (DKKm) | Share capital |
Treasure shares |
Hedging reserve |
Translation reserve |
Retained earnings |
share of equity |
controlling interests |
Total equity |
| Equity at 1 January 2012 |
190 | (4) | (106) | 58 | 5,141 | 5,279 | 30 | 5,309 |
| Profit for the year | - | - | - | - | 1,427 | 1,427 | 3 | 1,430 |
| Currency translation adjustments, foreign enterprises |
- | - | - | (42) | - | (42) | - | (42) |
| Fair value adjustments for the year relating to hedging instruments |
- | - | (85) | - | - | (85) | - | (85) |
| Fair value adjustments relating to hedging instruments transferred to financial expenses |
- | - | 61 | - | - | 61 | - | 61 |
| Actuarial gains/(losses) | - | - | - | - | (115) | (115) | - | (115) |
| Tax on other comprehensive income | - | - | 23 | - | 15 | 38 | - | 38 |
| Other comprehensive income, net of tax |
- | - | (1) | (42) | (100) | (143) | - | (143) |
| Total comprehensive income for the period |
- | - | (1) | (42) | 1,327 | 1,284 | 3 | 1,287 |
| Transactions with owners: | ||||||||
| Share-based payments | - | - | - | - | 40 | 40 | - | 40 |
| Dividends distributed | - | - | - | - | (190) | (190) | - | (190) |
| Purchase and sale of treasury shares, net |
- | (8) | - | - | (1,076) | (1,084) | - | (1,084) |
| Capital reduction | (2) | 2 | - | - | - | - | - | - |
| Dividends on treasury shares | - | - | - | - | 3 | 3 | - | 3 |
| Other adjustments | - | - | - | - | - | - | 4 | 4 |
| Tax on transactions with owners | - | - | - | - | 16 | 16 | - | 16 |
| Total transactions with owners | (2) | (6) | - | - | (1,207) | (1,215) | 4 | (1,211) |
| Equity at 31 December 2012 | 188 | (10) | (107) | 16 | 5,261 | 5,348 | 37 | 5,385 |
note structure has been changed in the 2013 Annual Report for the purpose of highlighting the elements into five chapters, focusing on different aspects of the financial information. Each chapter contains a brief policies and critical accounting estimates and judgements have been incorporated into the notes to make the
| 1 Basis of preparation of the consolidated financial statements |
Basis of preparation of the consolidated financial statements 43 |
||
|---|---|---|---|
| 2 Profit for the year | 2.1 | Segment information45 | |
| 2.2 | Net revenue46 | ||
| 2.3 | Direct costs46 | ||
| 2.4 | Other external expenses46 | ||
| 2.5 | Staff costs46 | ||
| 2.6 | Amortisation and depreciation for the year 46 | ||
| 2.7 | Special items 46 | ||
| 3 Operating assets and liabilities | 3.1 | Intangible assets 47 | |
| 3.2 | Property, plant and equipment48 | ||
| 3.3 | Operating lease obligations50 | ||
| 3.4 | Pension obligations50 | ||
| 3.5 | Provisions52 | ||
| 4 Capital structure and finances | 4.1 | Equity53 | |
| 4.2 | Capital structure and capital allocation54 | ||
| 4.3 | Net interest-bearing debt54 | ||
| 4.4 | Financial risks 55 | ||
| 4.5 | Derivative financial instruments 57 | ||
| 4.6 | Financial instruments 58 | ||
| 5 Other notes | 5.1 | Acquisition and disposal of entities59 | |
| 5.2 | Tax60 | ||
| 5.3 | Remuneration of the Executive Board and the Board of Directors61 |
||
| 5.4 | Share option schemes and shares held by Management62 |
||
| 5.5 | Investments in associates 64 | ||
| 5.6 | Fees to auditors appointed at the Annual General Meeting 64 |
||
| 5.7 | Contingent liabilities and security for debt64 | ||
| 5.8 | Related-party transactions64 | ||
The 2013 consolidated financial statements of DSV A/S have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union and Danish disclosure requirements for listed companies. The Annual Report of DSV A/S comprises the consolidated financial statements of DSV A/S and its subsidiaries and separate financial statements of DSV A/S. The Board of Directors considered and approved the 2013 Annual Report of DSV A/S on 6 February 2014. The Annual Report will be submitted to the shareholders of DSV A/S for approval at the Annual General Meeting on 14 March 2014.
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 that derivative financial instruments are measured at fair value. Non-current assets held for sale are measured at the lower of carrying amount before the change in classification 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 standards and interpretations that are effective for the financial year of 2013 and have prematurely implemented the IAS 36 "Impairment of assets" that was amended in 2013. Apart from the amendments of IAS 19 "Employee Benefits", which had only a marginal impact, no other changes have affected DSV's recognition and measurement of financial items for 2013 nor are they expected to have any future impact
. Minor reclassifications of comparative figures have been made, but had no effect on operating profit before special items, profit for the year, other comprehensive income, balance sheet or equity in the base year.
In the preparation of the consolidated financial statements of DSV A/S, Management makes various significant accounting estimates and judgements that may affect the reported amounts of assets, liabilities, income, expenses, cash flow and related information at the reporting date. The significant estimates are based on historical experience and other factors deemed reasonable in the circumstances. By their nature, such estimates are subject to some uncertainty and the actual results may deviate from these estimates. The estimates are continually evaluated and the effect of any changes is recognised in the relevant period.
The significant accounting estimates and judgements deemed by Management to be material for 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, DSV A/S, and the subsidiaries over which DSV A/S exercises control. 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.
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 entity operates.
On initial recognition, foreign currency transactions are translated into the functional currency at the exchange rate ruling at the transaction dates. Foregin exchange 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 exchange 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 rates 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 the net investment are recognised directly in other comprehensive income. Foreign exchange differences 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 adjustment is presented under a separate translation reserve in equity.
Key currencies and exchange rates applied in the preparation of the Annual Report:
| Currency | 31-Dec 2013 |
2012 | Annual average 2013 |
2012 | |
|---|---|---|---|---|---|
| Euro zone | EUR | 746.03 | 746.04 | 745.80 | 744.37 |
| UK | GBP | 891.95 | 913.20 | 878.14 | 918.37 |
| China | CNY | 89.29 | 90.79 | 91.34 | 91.88 |
| Homg Kong | HKD | 69.80 | 73.00 | 72.40 | 74.74 |
| Sweden | SEK | 83.56 | 87.14 | 86.24 | 85.61 |
| USA | USD | 541.27 | 565.91 | 561.60 | 579.79 |
The cash flows are calculated using the indirect method based on the operating profit before amortisation, depreciation and special items. The cash flow statement cannot be directly derived from the balance sheet and income statement.
For the preparation of the Annual Report, Management considers the optimum way of presenting the financial statements. It is important that the content is material to the user. This objective is pursued by making relevant rather than generic descriptions in the Management's Commentary and only including descriptions of risks, the mitigation thereof and value drivers, etc., that may have or had a material influence on the achievement of the Group's targets.
A judgement is made of whether more detailed specifications are necessary in the presentation of the Group's assets, liabilities, financial position and results or whether an aggregation of less material amounts is preferred. The notes to the financial statements are prepared with focus on ensuring that the content is relevant and the presentations clear. All judgements are made with due consideration of legislation, international accounting standards and guidelines and of the Annual Report as a whole presenting a true and fair view.
We have previously used the term "EBITA" for operating profit before special items. In future, we will use the term "EBIT before special items". Also, "EBITA margin" has been used as a term for:
Operating profit before special items x 100
Net revenue
In future, the term "operating margin" will be used.
A number of new standards and interpretations have been issued which had not become mandatory at the preparation of the 2013 Annual Report. None of these are expected to have any significant impact on the consolidated financial statements of DSV.
This chapter provides a specification of consolidated operating profit before special items. Our business segment structure builds on our three Divisions, which are measured by operating profit before special items. The financial results are presented below, and the profit development of the Group and Divisions is described in more detail in Management's commentary on pp. 11-25.
The business segmental reporting is based on the internal reporting provided to the Division and Group managements.
Our activities are divided into three divisions, forming the basis of the Group's business segments.
Air & Sea provides air and sea freight services through a global network.
Road provides road freight services across Europe.
Solutions offers contract logistics, incl. warehousing and inventory management.
Our business segments are measured by operating profit before special items. Segment results are accounted for in the same way as the consolidated financial statements. Income/expenses and assets/liabilities in the segments 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.
Assets are included in the segmental reporting to the extent they are used for the operation of the segment. Similarly, liabilities are included to the extent they are related to the operation of the segment. Assets and liabilities which cannot be attributed to either of the three segments on a reliable basis are presented under "Other activities, non-allocated items and eliminations".
DSV operates in almost all parts of the world and has activities in 75 countries in the following geographical regions:
*) In Management's commentary EMEA is presented as the Nordic countries, Southern Europe and Other Europe/EMEA.
| Segment information | Other activities, non-allocated items |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Air & Sea | Road | Solutions | and elimination | Total | ||||||
| (DKKm) | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 |
| Condensed income statement |
||||||||||
| Revenue | 20,195 | 19,855 | 23,117 | 22,654 | 5,470 | 5,181 | 718 | 624 | 49,500 | 48,314 |
| Intercompany revenue | (839) | (846) | (2,005) | (1,692) | (287) | (304) | (659) | (560) | (3,790) | (3,402) |
| Revenue | 19,356 | 19,009 | 21,112 | 20,962 | 5,183 | 4,877 | 59 | 64 | 45,710 | 44,912 |
| Amortisation and depre ciation of intangibles, property, plant and equipment |
106 | 134 | 98 | 135 | 168 | 145 | 128 | 120 | 500 | 534 |
| Operating profit | ||||||||||
| before special items | 1,392 | 1,412 | 942 | 933 | 256 | 250 | (38) | (55) | 2,552 | 2,540 |
| Special items | (129) | (275) | (129) | (275) | ||||||
| Net financials | (298) | (246) | (298) | (246) | ||||||
| Profit before tax (EBT) | (465) | (576) | 2,125 | 2,019 | ||||||
| Condensed balance sheet |
||||||||||
| Total gross investments | 350 | 152 | 205 | 241 | 103 | 183 | 183 | 127 | 841 | 703 |
| Total assets | 13,444 | 14,351 | 11,082 | 11,495 | 3,557 | 3,438 | (4,983) | (6,490) | 23,100 | 22,794 |
| Total liabilities | 10,009 | 11,633 | 7,092 | 7,531 | 3,302 | 3,481 | (3,551) | (5,236) | 16,852 | 17,409 |
| Geographical information | EMEA | Americas | APAC | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Net revenue | 39,178 | 38,686 | 3,109 | 2,944 | 3,423 | 3,282 | 45,710 | 44,912 | |
| Non-current assets * | 10,791 | 10,751 | 1,605 | 1,618 | 616 | 768 | 13,012 | 13,137 |
| Geographical information | Denmark Germany |
Sweden | Italy | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Net revenue | 6,505 | 6,147 | 5,455 | 5,425 | 4,561 | 4,271 | 4,420 | 4,701 | |
| Non-current assets * | 2,109 | 1,743 | 1,473 | 1,445 | 1,992 | 2,115 | 1,294 | 1,377 |
Inter-segment transactions are made on an arm's length basis.
*) Non-current assets less tax assets.
Revenue and non-current assets are allocated to the geographical areas based on 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.
Net revenue comprises the services provided in the financial year as well as changes in the value of work in progress. All kinds of discounts are offset against net revenue. Net revenue is measured excluding VAT and other tax collected on behalf of third parties.
At the close of accounting periods significant accounting estimates and judgements are made regarding work in progress, including accrual of income and pertaining direct costs. These estimates are based on experience and continuous follow-up on provisions for work in progress relative to subsequent invoicing.
Direct costs comprise costs paid to generate the revenue for the year. Direct costs include settlement of accounts with haulage contractors, shipping companies and airlines, etc., other direct costs, including staff costs relating to own staff used for fulfilling orders and rental of logistics facilities in Solutions, as well as other operating costs.
Other external expenses include expenses relating to marketing, IT, other rent, training and education, office premises, travelling and communications as well as other selling costs and administrative expenses.
Staff costs include wages and salaries, pensions, social security costs and other staff costs, but excluding staff costs recorded 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 period to which they relate. Reference is made to note 3.4 for detailed information on pension plans, note 5.3 for detailed information on remuneration of Management and note 5.4 for detailed information on the Group's share option schemes and shared held by Management.
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Salaries and wages etc. | 5,793 | 5,702 |
| Defined contribution pension plans | 282 | 259 |
| Defined benefit pension plans | 33 | 45 |
| Other social security costs | 1,026 | 1,035 |
| Share-based payments | 39 | 40 |
| 7,173 | 7,081 | |
| Transferred to direct costs | (2,230) | (2,217) |
| Total staff costs | 4,943 | 4,864 |
| Average number of full-time employees | 21,865 | 21,573 |
| Number of full-time employees at year end |
22,021 | 21,932 |
Amortisation and depreciation for the year are recognised based on the amortisation and depreciation profiles determined for the assets (see notes 3.1 and 3.2). The net gain or loss of the sale of property, plant and equipment and intangible assets is included in total amortisation and depreciation.
| and equipment | 500 | 534 |
|---|---|---|
| Total amortisation and depreciation of intangibles, property, plant |
||
| Net gain on sale of assets | (56) | (32) |
| Other plant and operating equipment | 172 | 185 |
| Buildings | 140 | 141 |
| Customer relationships | 113 | 109 |
| Software and other intangible assets | 131 | 131 |
| (DKKm) | 2013 | 2012 |
Special items are used in connection with the presentation of the profit or loss for the year to distinguish certain items from the other items of the income statement. The items are stated separately to give a true and fair view of the primary activities of the Group.
Special items consist of:
In connection with the use of special items it is crucial that they are significant items not directly attributable to the ordinary operating activities of the Group.
| Special items, net | (129) | (275) |
|---|---|---|
| Special items, total costs | 129 | 275 |
| Restructuring costs | 28 | 258 |
| Restructuring costs relating to acquisition and disposal of enterprises |
101 | 17 |
| (DKKm) | 2013 | 2012 |
Costs relating to the acquisition and divestment of enterprises were mainly non-recurring expenses in connection with acquisitions. Restructuring costs include non-recurring expenses defrayed by the Group for the purpose of streamlining business processes and adjusting overheads.
This chapter specifies the operating assets and liabilities which form the basis of our activities.
Goodwill
On initial recognition, goodwill arising from business combinations is recognised in the balance sheet at cost. Subsequently, goodwill is measured at cost less accumulated impairment losses.
Determination of cash-generating units to which consolidated goodwill is allocated is based on the management structure and system of internal financial control. Such determination is generally made at division level, i.e. for Air & Sea, Road and Solutions.
The carrying amount of goodwill is tested for impairment at least once a year together with the other non-current assets of the division to which the goodwill is allocated. Goodwill is written down to the recoverable amount through the income statement if the carrying amount is higher.
The recoverable amount is determined as the discounted value of the expected future net cash flow from the division to which the goodwill is associated. The calculation of the discounted net cash flow applies discount rates reflecting the risk-free interest rate with the addition of the risks related to the individual cash-generating units, including geographical location and financial risk.
The expected future net cash flow is based on budgets and business plans approved by Management for the year 2014 and projections for subsequent years up to and including 2018. From 2018 and onwards DSV expects the growth rate to remain in line with the expected longterm average growth rate for the industry.
On initial recognition customer relationships identified from business acquisitions are recognised in the balance sheet at fair value. Subsequently, customer relationships are measured at cost price less accumulated amortisation and impairment losses. Customer relationships are amortised on a straight-line basis over the expected duration of these relations, which is estimated to be 10 years.
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 is calculated as costs, salaries and amortisation directly or indirectly attributable to software. After commissioning software is amortised on a straight-line basis over its expected useful life. The amortisation period is 1-8 years.
In connection with the goodwill impairment test a number of estimates are made of revenue development, gross profit, operating margin, future capital expenditure, discount rate and growth expectations in the terminal period. The estimates are based on assessments of the individual division. The estimates are based on historical experience and assumptions of expected market developments, including the expected average long-term market growth rate.
The impairment test is based on the following key assumptions:
| 2013 | 2012 | |
|---|---|---|
| Air & Sea | ||
| Annual revenue growth | 5.0% | 5.0% |
| Operating margin | 7.3% | 7.1% |
| Terminal value growth rate | 2.0% | 2.0% |
| Pre-tax discount rate | 10.3% | 10.1% |
| Road | ||
| Annual revenue growth | 4.0% | 5.0% |
| Operating margin | 4.4% | 4.3% |
| Terminal value growth rate | 2.0% | 2.0% |
| Pre-tax discount rate | 10.3% | 10.1% |
| Solutions | ||
| Annual revenue growth | 5.0% | 5.3% |
| Operating margin | 5.1% | 6.2% |
| Terminal value growth rate | 2.0% | 2.0% |
| Pre-tax discount rate | 10.2% | 10.0% |
| 2013 | 2012 | |||||||
|---|---|---|---|---|---|---|---|---|
| (DKKm) | Goodwill | Customer relations |
Computer Software |
Total | Goodwill | Customer relations |
Computer Software |
Total |
| Cost at 1 January | 7,788 | 1,098 | 1,054 | 9,940 | 7,659 | 1,077 | 926 | 9,662 |
| Additions from acquisition of enterprises | 322 | 81 | - | 403 | 97 | 17 | - | 114 |
| Additions for the year | - | - | 179 | 179 | - | - | 132 | 132 |
| Disposals at cost | - | - | (12) | (12) | - | - | (5) | (5) |
| Currency translation adjustment | (72) | (18) | (7) | (97) | 32 | 4 | 1 | 37 |
| Total cost at 31 December | 8,038 | 1,161 | 1,214 | 10,413 | 7,788 | 1,098 | 1,054 | 9,940 |
| Total amortisation and impairment at 1 January |
10 | 619 | 588 | 1,217 | 10 | 509 | 460 | 979 |
| Amortisation and impairment for the year | - | 113 | 131 | 244 | - | 109 | 131 | 240 |
| Amortisation of assets disposed of | - | - | (11) | (11) | - | - | (4) | (4) |
| Currency translation adjustment | - | (12) | (7) | (19) | - | 1 | 1 | 2 |
| Total amortisation and impairment at 31 December |
10 | 720 | 701 | 1,431 | 10 | 619 | 588 | 1,217 |
| Carrying amount at 31 December | 8,028 | 441 | 513 | 8,982 | 7,778 | 479 | 466 | 8,723 |
The carrying amount of goodwill is allocated to the Group's cashgenerating units at the time of the acquisition.
| (DKKm) | Carrying amount 2013 |
2012 | 2013 | % 2012 |
|---|---|---|---|---|
| Air & Sea Road |
4,393 2,551 |
4,171 2,520 |
55% 32% |
53% 33% |
| Solutions | 1,084 | 1,087 | 13% | 14% |
| I alt | 8,028 | 7,778 | 100% | 100% |
Additions to goodwill from business combinations were DKK 302 million for 2013 (2012: DKK 97 million). In addition, adjustments to goodwill amounted to DKK 20 million in connection with adjustments relating to previous acquisitions.
As at 31 December 2013, the carrying amount of goodwill was tested for impairment. No indication of impairment of consolidated goodwill was identified.
Sensitivity tests have been performed to assess the probability that any probable changes in cash flows or discount rate will result in any impairment loss. The test showed that the probable changes in the fundamental assumptions will not make the carrying amount of goodwill exceed the recoverable amount.
Land and buildings, other plant and operating equipment are measured at cost less accumulated depreciation and impairment losses.
The cost comprises the acquisition price and costs directly associated with the acquisition until the time when the asset is ready for use. The cost of assets produced in-house comprises direct and indirect costs for materials, components, sub-contractors, wages and salaries. The present value of estimated costs for dismantling and disposing of the asset as well as restoration costs are added to cost if such costs 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 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. When the present value is calculated, the internal rate of return of the lease, or an alternative borrowing rate, is applied as the discount rate.
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 for the Group. The carrying amount of the replaced parts is derecognised from the balance sheet and recognised in the income statement.
Depreciation is provided on a straight-line basis over the expected useful lives of the assets. The expected useful lives are as follows:
The depreciation basis 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. If the residual value exceeds the carrying amount of the asset, depreciation will no longer be provided.
The carrying amount of non-current assets is tested once a year to determine whether there is an indication of impairment. If so, the recoverable amount is calculated. The recoverable amount is the higher of the fair value of an asset less the expected costs to sell and the value in use.
The value in use is calculated as the present value of expected future cash flow from the asset or the division of which the asset forms part. Any impairment losses are included in amortisation, depreciation and impairment losses.
Gains and losses on the disposal of property, plant and equipment are recognised in the income statement under amortisation, depreciation and impairment losses.
The depreciation periods are determined based on estimates of the expected lives and future residual value of the assets. The estimates are based on historical experience. A reassessment is made once every year to ascertain that the depreciation basis reflects the expected life and future residual value of the assets.
| 2013 | 2012 | |||||||
|---|---|---|---|---|---|---|---|---|
| (DKKm) | Land and buildings |
Other plant and operating equipment |
Property, plant and equipment in progress |
Total | Land and buildings |
Other plant and operating equipment |
Property, plant and equipment in progress |
Total |
| Cost at 1 January | 4,193 | 1,639 | 474 | 6,306 | 4,269 | 1,658 | 427 | 6,354 |
| Additions from acquisitions | 8 | 5 | - | 13 | - | 4 | - | 4 |
| Additions for the year | 28 | 124 | 94 | 246 | 48 | 137 | 268 | 453 |
| Disposals at cost | (231) | (114) | (48) | (393) | (174) | (187) | (202) | (563) |
| Transferred to assets held for sale | - | - | - | - | (30) | - | - | (30) |
| Reclassification | 368 | 72 | (440) | - | 30 | 6 | (36) | - |
| Currency translation adjustments | (66) | (42) | (18) | (126) | 50 | 21 | 17 | 88 |
| Total cost at 31 December | 4,300 | 1,684 | 62 | 6,046 | 4,193 | 1,639 | 474 | 6,306 |
| Total depreciation and impairment at 1 January |
895 | 1,130 | 20 | 2,045 | 760 | 1,091 | - | 1,851 |
| Depreciation for the year | 140 | 172 | - | 312 | 141 | 185 | - | 326 |
| Depreciation of assets disposed of | (48) | (91) | - | (139) | (24) | (161) | - | (185) |
| Transferred to assets held for sale | - | - | - | - | (4) | - | - | (4) |
| Impairment* | - | - | - | - | 13 | - | 20 | 33 |
| Currency translation adjustments | (26) | (29) | - | (55) | 9 | 15 | - | 24 |
| Total depreciation and impairment at 31 December |
961 | 1,182 | 20 | 2,163 | 895 | 1,130 | 20 | 2,045 |
| Carrying amount at 31 December | 3,339 | 502 | 42 | 3,883 | 3,298 | 509 | 454 | 4,261 |
| Of which finance leased assets | 376 | 12 | - | 388 | 395 | 27 | - | 422 |
*) Impairment losses are included in Special items.
Lease payments are recognised in the income statement on a straightline basis over the term of the lease.
The Group has concluded arm's length leases for buildings, including terminals and warehouses, and other operating equipment. Based on individual assessments of the leases, an assessment is made as to whether these leases are to be considered finance or operating leases in the financial statements.
Maturity
| (DKKm) | 2013 | 2012 |
|---|---|---|
| 0-1 year | 1,180 | 928 |
| 1-5 years | 2,712 | 2,263 |
| > 5 years | 2,023 | 1,716 |
| Total | 5,915 | 4,907 |
The leases have an average term of 4 years (2012: 4 years).
The Group has concluded back-to-back leases with several customers, securing future activity at some of its premises leased under operating leases. Of the lease obligations, approx. DKK 0.6 billion relate to backto-back leases (2012: DKK 0.5 billion).
Operating lease costs of DKK 1,140 million relating to land and buildings were recognised in the income statement for the financial year of 2013 (2012: DKK 1,116 million).
| (DKKm) | 2013 | 2012 |
|---|---|---|
| 0-1 year | 416 | 381 |
| 1-5 years | 616 | 512 |
| > 5 years | 5 | 9 |
| Total | 1,037 | 902 |
Leases of other plant and operating equipment typically have a term of up to 5 years.
Operating lease costs of DKK 558 million relating to other plant and operating equipment were recognised for the financial year of 2013 (2012: DKK 564 million).
Obligations relating to defined contribution pension 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, and contributions payable are recognised in the balance sheet under other current liabilities.
As regards defined benefit plans, an actuarial valuation of the value in use of future benefits payable under the plan is made once a year. The value in use is calculated on the basis of the assumptions of future development in wage/salary level, interest rates, inflation, mortality, etc. The value in use is only calculated for benefits to which the employees have become entitled during their employment with the Group. The actuarial calculation of the value in use less the fair value of any assets under the plan is recognised in the balance sheet under pension obligations. Pension costs of the year are recognised in the income statement based on actuarial estimates and financial expectations at the beginning of the year.
The differences between the calculated development in pension assets and liabilities and the realised values are recognised in other comprehensive income as actuarial gains or losses.
Changes in the benefits payable for employees' past services to the enterprise result in an adjustment of the actuarial calculation of the value in use, 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, the benefits will be recognised in the income statement over the period in which the employees earn the right to the adjusted benefits.
The actuarial assumptions used in calculations and valuations vary from country to country owing to national economic and social conditions. In the European countries, which have the most significant pension plans, the following assumptions are used:
| 2013 | 2012 | |||
|---|---|---|---|---|
| (DKKm) | Spread | Weighted average |
Spread | Weighted average |
| Discount rate | 2.85% | 3.00% | ||
| Future wage/ salary increase |
– 4.50% 2.00% – 3.80% |
3.88% 2.95% |
– 4.50% 2.00% – 3.40% |
4.01% 2.82% |
| Future rate of inflation | 1.75% – 2.50% |
2.10% | 1.75% – 2.50% |
2.08% |
Life expectancy is based on relevant statistics available on the individual countries included in the calculation.
In determining the obligation, the Group makes use of external and independent actuaries.
Net obligations at 31 December
| Pensions obligations, net | 1,034 | 1,078 |
|---|---|---|
| Fair value of pension plan assets | 1,692 | 1,528 |
| Present value of defined benefit plans | 2,726 | 2,606 |
| (DKKm) | 2013 | 2012 |
Of pensions and similar obligations DKK 828 million relate to unfunded pension obligations (2012: DKK 848 million) and DKK 206 million relate to partly funded obligations (2012: DKK 230 million).
Net costs of DKK 352 million (2012: DKK 342 million) relating to the Group's pension plans were recognised in the income statement for the financial year of 2013.
Net pension plan costs are recognised in the income statement as follows:
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Staff costs | 315 | 304 |
| Financial expenses | 37 | 38 |
| Total costs recognised | 352 | 342 |
Of this amount costs of DKK 70 million relate to defined benefit plans (2012: DKK 83 million), DKK 33 million were recognised as staff costs (2012: DKK 45 million) and DKK 37 million as financial expenses (2012: DKK 38 million). Net costs relating to defined benefit plans may be specified as follows:
| benefit plans | 70 | 83 |
|---|---|---|
| Total recognised for defined | ||
| Calculated return on plan asset | (65) | (66) |
| Calculated interest on obligations | 102 | 104 |
| Pension costs relating to current financial year |
33 | 45 |
| (DKKm) | 2013 | 2012 |
In addition, DKK 282 million relating to defined contribution plans were recognised for 2013 and included in staff costs (2012: DKK 259 million).
Cumulative actuarial losses including social security benefits are recognised in other comprehensive income. Actuarial gains/losses for the year was a decline of DKK 16 million (2012: an increase of DKK 115 million).
| Total | (494) | (510) |
|---|---|---|
| actuarial losses | (11) | (11) |
| Social security costs relating to | ||
| Accumulated actuarial losses | (483) | (499) |
| (DKKm) | 2013 | 2012 |
Developments in the present value of obligations relating to defined benefit plans:
| Obligations at 31 December | 2,726 | 2,606 |
|---|---|---|
| Additions from acquisitions | - | 1 |
| Benefits paid | (85) | (81) |
| Adjustment relating to change in pension plan |
22 | - |
| Actuarial losses arising from changes in economic conditions |
73 | 274 |
| Calculated interest on obligations | 102 | 104 |
| Pension costs relating to current financial year |
33 | 45 |
| Currency translation adjustments | (25) | 35 |
| Obligations at 1 January | 2,606 | 2,228 |
| (DKKm) | 2013 | 2012 |
The expected average duration of the obligations is 19 years.
Maturity of pension obligations:
| (DKKm) | 2013 | 2012 |
|---|---|---|
| 0-1 year | 78 | 75 |
| 1-5 years | 311 | 299 |
| > 5 years | 2,337 | 2,232 |
| Total obligations recognised | 2,726 | 2,606 |
Developments in the present value of pension plan assets:
| Pension plan assets at 31 December | 1,692 | 1,528 |
|---|---|---|
| Benefits paid | (85) | (84) |
| Paid up | 114 | 115 |
| Actuarial gains/losses on plan assets | 89 | 158 |
| Calculated interest on plan assets | 65 | 66 |
| Currency translation adjustments | (19) | 20 |
| Pension plan assets at 1 January | 1,528 | 1,253 |
| (DKKm) | 2013 | 2012 |
DSV expects to contribute DKK 114 million to defined benefit plan assets in 2014.
| Total | 100% | 100% |
|---|---|---|
| Insurance contracts | 64% | 57% |
| Bonds | 16% | 20% |
| Shares | 20% | 23% |
| (DKKm) | 2013 | 2012 |
| Total actual return on plan assets | 154 | 224 |
|---|---|---|
| Actuarial gains/losses on plan assets | 89 | 158 |
| Calculated interest on plan assets | 65 | 66 |
| (DKKm) | 2013 | 2012 |
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.
| (DKKm) | 2013 |
|---|---|
| Reported obligation | 2,726 |
| Discount rate | |
| Increase of 0.5% | 2,490 |
| Decrease of 0.5% | 2,997 |
| Future wage/salary increase | |
| Increase of 0.5% | 2,784 |
| Decrease of 0.5% | 2,674 |
| Inflation | |
| Increase of 0.5% | 2,977 |
| Decrease of 0.5% | 2,580 |
| Life expectancy | |
| Life expectancy increase of 1 year | 2,789 |
| Life expectancy decrease of 1 year | 2,662 |
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, contingencies and the likely outcome of pending and potential legal proceedings. The outcome of such proceedings depends on future events, which are obviously uncertain. Management includes judgements by external legal experts and existing case law in assessing the probable outcome of material legal proceedings, tax issues, etc.
| Restructuring | Disputes and legal |
|||
|---|---|---|---|---|
| (DKKm) | costs | actions | Other | Total |
| Provisions at | ||||
| 1 January 2013 | 190 | 297 | 206 | 693 |
| Additions from acquisitions | 25 | - | 35 | 60 |
| Applied for the year | (144) | (61) | (106) | (311) |
| Provisions for the year | 119 | 22 | 82 | 223 |
| Adjustment of provisions made in previous years |
(10) | (51) | 5 | (56) |
| Currency translation adjustments |
(1) | (1) | (4) | (6) |
| Provisions at 31 December 2013 |
179 | 206 | 218 | 603 |
| Expected time frame of provisions: |
||||
| Non-current liabilities | 79 | 150 | 132 | 361 |
| Current liabilities | 100 | 56 | 86 | 242 |
| Provisions at 31 December 2013 |
179 | 206 | 218 | 603 |
Provisions are not discounted because the resulting effect is immaterial.
Provisions are expected to be settled within 1-2 years.
Restructuring costs mainly relate to the integration of acquires and the restructuring plans previously announced which consist of mainly termination benefits and costs under terminated leases.
Provisions for disputes and legal actions mainly relate to probable liabilities taken over at the acquisition of enterprises.
Other provisions mainly relate to restoration obligations in connection with property leases and onerous contracts mainly relating to acquisitions. Other provisions also comprise provisions relating to earn-out agreements and ordinary complaints.
This chapter explains the Group's capital structure, earnings per share, net interest-bearing debt and finance related risks.
At year end 2013 the share capital of DSV A/S amounted to 180 million shares with a nominal value of DKK 1 each. All shares are fully paid up. In 2013 DSV A/S cancelled treasury shares of a nominal value of DKK 8 million.
The reserve comprises the nominal value of treasury shares. The difference between the market price paid and the nominal value as well as dividends on treasury shares are recognised directly in equity under retained earnings. Treasury shares are bought back to meet obligations under the Company's incentive schemes and adapt its 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 DSV A/S shareholders' share of currency translation adjustments arising on the translation of net investments and related hedging in entities with a functional currency other than DKK. Hedge accounting ceases upon disposal of the entity or if hedge accounting is no longer relevant.
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Share capital | 180 | 188 |
| Treasure shares | (5) | (10) |
| Hedging reserve | (38) | (107) |
| Translation reserve | (44) | 16 |
| Retained earnings | 6,125 | 5,261 |
| DSV A/S shareholders share of equity |
6,218 | 5,348 |
| Non-controlling interests | 30 | 37 |
| Total equity | 6,248 | 5,385 |
| Portfolio, end of year | 870 | 2.60% | 2.72% | 4.9 | 9.9 |
|---|---|---|---|---|---|
| Value adjustment | (41) | - | - | - | - |
| Sold during the year | (246) | (1.01%) | (1.06%) | (1.9) | (2.9) |
| Purchased during the year | 700 | 2.58% | 2.70% | 4.9 | 10.4 |
| Portfolio of treasury shares less cancelled shares | 457 | 1.03% | 1.08% | 1.9 | 2.4 |
| Cancellation of treasury shares | (991) | (4.26%) | (4.44%) | (8.0) | (2.0) |
| Portfolio, beginning of year | 1,448 | 5.29% | 5.52% | 9.9 | 4.4 |
| Market value (DKKm) |
% of share capital before cancellation |
% of share capital after cancellation |
Million shares of DKK 1 (Nominal value) |
Million shares of DKK 1 (Nominal value) |
|
| 2013 | 2012 |
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Profit for the year | 1,571 | 1,430 |
| Non-controlling interests' share of consolidated profit for the year |
(6) | 3 |
| DSV A/S shareholders' share of profit for the year |
1,577 | 1,427 |
| Amortisation of customer relationships | 113 | 109 |
| Share-based payment | 39 | 40 |
| Special items, net | 129 | 275 |
| Related tax effect | (70) | (106) |
| Adjusted profit for the year | 1,788 | 1,745 |
| ('000 shares) | ||
| Total average number of shares | 182,367 | 188,596 |
| Average number of treasury shares | (5,398) | (5,966) |
| Average number of shares in circulation | 176,969 | 182,630 |
| Average dilutive effect of outstanding share options under incentive schemes |
907 | 1,341 |
| Diluted average number of shares in circulation |
177,876 | 183,971 |
| Earnings per share of DKK 1 | 8.91 | 7.81 |
| Diluted earnings per share of DKK 1 | 8.87 | 7.76 |
| Adjusted earnings per share of DKK 1 | 10.10 | 9.55 |
| Diluted adjusted earnings per share of DKK 1 |
10.05 | 9.48 |
Diluted earnings per share and diluted adjusted earnings per share have been calculated excluding out-of-the-money share options. The number of out-of-the-money share options were 0 in 2013 (2012: 2,838,500 share options).
The capital structure of DSV is intended to ensure financial stability for the purpose of reducing its cost of capital and maintain sufficient financial stability to reach its strategic goals. The target for the Group's capital structure states that the ratio of net interest-bearing debt to EBITDA may must be approx. 2.0. The net interest-bearing debt to EBITDA ratio may exceed 2.0 in extraordinary periods due to acquisitions made by the Group.
The gearing ratio, i.e. net interest-bearing debt to EBITDA, was 1.9 at 31 December 2013 (2012: 2.1).
The Group aims to spend free cash flow as follows:
The Group has reduced its debt by DKK 612 million.
DSV spent DKK 269 million of consolidated free cash flow on four acquisitions in the financial year 2013. Reference is made to note 5.1 for more information.
In 2013 DSV spent DKK 700 million on the purchase of treasury shares (2012: DKK 1,303 million) and reduced the share capital by 8 million shares with a nominal value of DKK 1 each. (2012: 2 million shares of nominally DKK 1 each).
DSV A/S paid DKK 235 million as dividends on 27 March 2013, corresponding to DKK 1.25 per share (2012: DKK 190 million, corresponding to DKK 1.00 per share).
It is proposed to distribute a dividend of DKK 1.50 per share. (2012: DKK 1.25).
Financial liabilities The financial liabilities of the Group are divided into four financing categories:
Bank loans and other borrowings and loans obtained through the issuance of bonds are recognised initially 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.
Capitalised residual lease obligations are recognised as finance lease obligations.
Other liabilities are measured at amortised cost, which corresponds to the net realisable value in all essentials.
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Loans and credit facilities | 4,596 | 6,025 |
| Issued bonds | 1,743 | 748 |
| Finance leases | 269 | 312 |
| Other non-current liabilities | 48 | 28 |
| Total financial liabilities | 6,656 | 7,113 |
| Cansh and cash equivalents | 707 | 552 |
| Total financial liabilities | 707 | 552 |
| Net interest-bearing debt | 5,949 | 6,561 |
| Financial liabilities as recognised in the balance sheet: |
||
| Non-current liabilities | 6,066 | 6,190 |
| Current liabilities | 590 | 923 |
| Financial liabilities at 31 December | 6,656 | 7,113 |
We ensure that the Group has sufficient cash on demand in the form of short-term credit facilities and long-term credit lines from the main banks of the Group and through the issuance of bonds. The total duration of the Group's long-term loan commitments and the amounts drawn on its credit lines at 31 December 2013 are shown in the table below.
In Q2 2013 DSV issued a corporate bond of DKK 1,000 million with a coupon of 3.5%. The loan is a fixed-rate bullet loan with a duration of 7 years. The purpose of the bond loan is to further diversify the Group's long-term debt to make the Group less dependent on bank loans and to utilise the historically low interest rate level. The proceeds have been used to reduce the Group's long-term bank loans.
The loan agreements of the Group are subject to a covenant. The covenant of the Group is related to the ratio of net interest-bearing debt to EBITDA (operating profit before amortisation, depreciation and special items). Quarterly reporting on the development of the covenant is made to the Company's providers of funding. The covenant was observed in 2013.
List of commitments and amounts drawn on long-term credit facilities at 31 December 2013:
| Loan facilities | Amount (EURm) |
Amount (DKKm) |
Expiry of commitments |
Duration (years) |
Undrawn |
|---|---|---|---|---|---|
| Long-term loan I | 127 | 947 | 31/12/15 | 2.0 | 1 |
| Long-term loan II | 400 | 2,984 | 28/03/18 | 4.2 | 1,067 |
| Long-term loan III | 100 | 746 | 30/09/18 | 4.8 | - |
| Bond loan I | 101 | 750 | 23/11/20 | 6.9 | - |
| Bond loan II | 134 | 1,000 | 24/06/20 | 6.5 | - |
| Long-term credit facility I * | 52 | 390 | 31/12/14 | 1.0 | 241 |
| Long-term credit facility II | 100 | 746 | 20/04/16 | 2.3 | 482 |
| Other | 1 | 4 | 31/03/15 | 1.2 | - |
| Total and weighted duration | 1,015 | 7,567 | 4.2 | 1,791 |
*) Credit facilities expiring in 2014 with 12 months' notice at any time.
The Group's financial liabilities fall due as follows:
| Total | 11,262 | 12,098 | 5,523 | 4,663 | 1,912 | |
|---|---|---|---|---|---|---|
| Interest rate derivatives | 117 | 121 | 85 | 39 | (3) | |
| Trade payables | 4,537 | 4,537 | 4,537 | - | - | |
| Finance leases | 269 | 326 | 53 | 240 | 33 | |
| Loans and credit facilities | 6,339 | 7,114 | 848 | 4,384 | 1,882 | |
| (DKKm) | Carrying amount |
Total cash flow, including interest |
0-1 year | 1-5 years | > 5 years | |
| 2013 |
| 2012 | ||||||
|---|---|---|---|---|---|---|
| (DKKm) | Carrying amount |
Total cash flow, including interest |
0-1 year | 1-5 years | > 5 years | |
| Loans and credit facilities | 6,773 | 7,373 | 1,074 | 5,434 | 865 | |
| Finance leases | 312 | 378 | 62 | 279 | 37 | |
| Trade payables | 4,385 | 4,385 | 4,385 | - | - | |
| Interest rate derivatives | 210 | 217 | 120 | 97 | - | |
| Total | 11,680 | 12,353 | 5,641 | 5,810 | 902 |
The analysis of expected maturity is based on contractual cash flows, including estimated interest payments. Amounts have not been discounted for which reason they cannot necessarily be reconciled to the related items of the balance sheet.
Due to the operating activities of the Group it is exposed to exchange rate fluctuations to a certain extent. DSV seeks to eliminate foreign currency risks by hedging currency exposures centrally via the Treasury Department. The risk exposure is managed on a net basis by using primarily foreign exchange forward contracts.The Group's foreign subsidiaries are not affected where trading income and costs are denominated in the functional currency. This applies to a large part of the Group's activities. Moreover, a large proportion of the income and expenses of the Group are denominated in EUR and USD. The aggregate currency risk is therefore limited.
The Group is also exposed to foreign currency risks, partly on the translation of debt denominated in a foreign currency other than the functional currency of the relevant company and partly on the translation of net investments in entities 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 converted into DKK at the reporting date based on the average rates of exchange and the closing rates. It is assessed on an ongoing basis whether to hedge the Parent's net investments in subsidiaries. It is DSV Group policy to reduce net investments in Group subsidiaries on an ongoing basis by distributing the subsidiaries' profits as dividends
In general, the Group does not hedge euro positions as it expects the official Danish fixed exchange-rate policy against the euro to continue.
Exposure in major foreign currencies breaks down as follows:
| (DKKm) | Net position 2013 |
2012 | Exchange rate fluctuation |
Impact on profit/loss 2013 |
2012 | Impact on other comprehensive income 2013 |
2012 |
|---|---|---|---|---|---|---|---|
| CNY/DKK | 4 | (35) | +/- 5% | 7 | 8 | 7 | 13 |
| GBP/DKK | 19 | 14 | +/- 5% | 10 | 8 | 16 | 14 |
| HKD/DKK | (15) | - | +/- 5% | 5 | 5 | 5 | 8 |
| SEK/DKK | 13 | 15 | +/- 5% | 12 | 12 | 46 | 145 |
| USD/DKK | 74 | 121 | +/- 5% | 18 | 18 | 63 | 21 |
| Total | +/- 5% | 52 | 51 | 137 | 201 |
The effect of foreign currency translation has been calculated on the basis of the effect of a 5% change in average rates for 2012 and 2013. The effect on other comprehensive income has been calculated on the basis of the effect of a 5% change in year-end closing rates of exchange for 2012 and 2013. The method applied for the sensitivity analysis is unchanged compared to previous years.
The major interest rate risk relates to the long-term floating-rate loans raised by the Parent. These loans are refinanced to a fixed-rate loan by using mainly interest rate swaps with a duration of up to 120 months.
The Group's loans and credit facilities:
| Fixed/ | Carrying amount | |||
|---|---|---|---|---|
| (DKKm) | Expiry | floating interest rate |
2013 | 2012 |
| Bank loans DKK | 2015 | Floating | 742 | 943 |
| Bank loans EUR | 2015- | |||
| 2018 | Floating | 2,854 | 4,073 | |
| Bank loans other | 2015 | Floating | 4 | 9 |
| Bond loan | 2020 | Fixed | 1,743 | 748 |
| Mortgage loans | 2024 | 2015 - Floating/ fixed |
51 | 65 |
| Long-term | ||||
| credit facility | 2014- | |||
| 2016 | Floating | 413 | 73 | |
| Overdraft facility | 2014 | Floating | 532 | 862 |
| Loans and credit facilities at 31 December |
6,339 | 6,773 | ||
| Loans and credit facilities as recognised in the balance sheet |
||||
| Non-current liabilities | 5,807 | 5,911 | ||
| Current liabilities | 532 | 862 | ||
| Loans and credit facilities at 31 December |
6,339 | 6,773 |
The weighted average interest rate on loans and credit facilities was 2.1% (2012: 1.5%).
The Group also has an interest rate risk in connection with the finance and operating leases concluded. The relevant interest rates are fixed on an ongoing basis for periods of 24 to 48 months.
It is our policies that the average period of fixed interest rates on all net bank debts must be at least 8 months and not more than 40 months at any time.
At year end 2013, duration of the hedges on the bank and bond loans of the Group was 36 months (2012: 33 months).
The weighted average interest rate on the Group's loans and credit facilities including the effect of interest rate swaps was 2.8% in 2013 (2012: 2.6%).
An increase in interest rates by 1 percentage point will reduce profit for the year by DKK 10 million (2012: DKK -18 million) and have an impact on other comprehensive income of DKK 65 million (2012: DKK 108 million).
The method applied for the sensitivity analysis is unchanged compared to previous years.
Financials include interest, share of associates' profit/loss, exchange gains and losses on and impairment of securities, payables and foreign currency transactions as well as amortisation of financial assets and liabilities, including obligations under finance leases. Furthermore, realised and unrealised gains and losses on derivative financial instruments that cannot be classified as hedging contracts are included.
| Currency translation adjustments, net Total financial income |
- 39 |
23 53 |
|---|---|---|
| Share of associates' profit, net of tax | 7 | 7 |
| Interest income | 32 | 23 |
| (DKKm) | 2013 | 2012 |
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Interest expenses | 289 | 261 |
| Calculated interest on pension obligations, see note 3.4 |
37 | 38 |
| Currency translation adjustments, net | 11 | - |
| Total financial expenses | 337 | 299 |
The Group's credit risks relate mainly to trade receivables. The Group has no particular concentration of customers or suppliers and is not especially dependent on specific customers or suppliers. The credit risk of the Group is therefore deemed not material. The reported losses on receivables for the year was DKK 72 million, corresponding to 0.2% of consolidated revenue. (2012: DKK 78 million, or 0.2%).
In a number of situations, DSV receives security in the form of financial guarantees or charges for sales on credit, and the security provided is included in the assessment of the necessity to write down doubtful trade receivables. At 31 December 2013 credit insurance had been taken out for DKK 4,380 million of all trade receivables.
DSV is exposed to a 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 rating from Standard & Poor's is long-term A or higher. As a general rule, the Group only makes short-term deposits with banks rated as short-term A-2 or higher by Standard & Poor's and/or as P-2 or higher by Moody's.
The Group has issued an internal credit limit for each debtor. As set out in the Group Credit Policy trade receivables are rated on an ongoing basis. Insurance policies are taken out with a credit insurance company for the majority of the Group's receivables. Based on the internal credit policies and the risk assessment procedures of the Group the credit quality of unimpaired receivables is assessed to have, to a very great extent, a high quality and imply a low risk of loss.
Impairment losses relating to doubtful trade receivables:
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Impairment at 1 January Impairment for the year |
226 72 |
246 55 |
| Impairment losses recognised for receivables |
(57) | (78) |
| Reversal of impairments | (14) | 1 |
| Currency translation adjustments | (3) | 2 |
| Impairment at 31 December | 224 | 226 |
Provision is made for expected losses on an individual basis.
Overdue trade receivables not written down break down as follows:
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Overdue for 1-30 days Overdue for 31-120 days |
1,209 445 |
1,131 414 |
| Overdue for more than 120 days | 38 | 60 |
Derivative financial instruments are recognised as from the trade date and measured at fair value. Positive and negative fair values of derivative financial instruments are included in other current receivables or other current payables. 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). The fair value of derivative financial instruments is calculated on the basis of market data and recognised valuation models.
Changes in the fair value of derivative financial instruments which are classified as and meet the criteria for recognition as a fair value hedge of a recognised asset or liability are recognised in the income statement together with changes in the value of the part of the asset or liability that has been hedged.
Changes in the part of the fair value of derivative financial instruments which are classified as and meet the criteria for recognition as a future cash flow hedge and which effectively hedge against changes in the value of the hedged item are recognised in other comprehensive income as a separate hedging reserve. When a hedged transaction is carried out, any gain or loss on such hedging transaction is transferred from equity and recognised in the same item as the hedged item. In connection with hedging of proceeds from future loans, however, gains or losses on such hedging transactions are transferred from equity over the term of the loan.
Changes in the fair value of derivative financial instruments not meeting 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 SEK, NOK, GBP and USD. The foreign exchange forward contracts are used as fair value hedges of currency exposures relating to balance sheet assets and liabilities.
A gain on hedging instruments of DKK 116 million was recognised in the income statement for the financial year of 2013 (2012: a loss of DKK 34 million).
For the same period, hedged risks were recognised in the income statement by a loss of DKK 127 million (2012: a gain of DKK 57 million).
The Group has obtained long-term loans on a floating interest rate basis, which implies that the Group is exposed to interest rate fluctuations. The Group mainly uses interest rate swaps to hedge future cash flow relating to interest rate risks. Thereby floating-rate loans are refinanced as fixed-rate loans.
The weighted average effective interest rate for existing interest rate instruments used as hedges of long-term loans was 1.9% at the reporting date (2012: 1.9%).
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.
| (DKKm) | Currency instruments |
Interest rate instruments |
Total |
|---|---|---|---|
| Contractual value Maturity |
6,113 2014 |
6,730 2014-2020 |
12,843 |
| Fair value | 27 | (117) | (90) |
| Of which recognised in income statement |
27 | (21) | 6 |
| Of which recognised in other comprehensive income |
- | (96) | (96) |
| Currency instruments |
Interest rate instruments |
Total |
|---|---|---|
| 6,326 | 7,893 | 14,219 |
| 2013 | 2013-2016 | |
| 16 | (210) | (194) |
| 16 | (26) | (10) |
| other comprehensive income - |
(184) | (184) |
Financial instruments by category
| (DKKm) | 2013 Carrying amount |
2012 Carrying amount |
|---|---|---|
| Financial assets: | ||
| Currency derivatives | 27 | 16 |
| Trade receivables | 7,469 | 7,238 |
| Other receivables | 794 | 791 |
| Cash and cash equivalents | 707 | 552 |
| Total cash and receivables | 8,970 | 8,581 |
| Financial assets available for sale | 7 | 8 |
| Financial liabilities: | ||
| Interest rate derivatives | 117 | 210 |
| Issued bonds measured at amortised cost | 1,743 | 748 |
| Loans and credit facilities | 4,596 | 6,025 |
| Finance lease liabilities | 269 | 312 |
| Trade payables | 4,537 | 4,385 |
| Financial liabilities measured at amortised cost |
11,145 | 11,470 |
Derivative financial instruments – Level 2
The fair value of derivatives is determined based on observable market data using generally accepted methods. Internally calculated fair values are used and these are compared to external market quotes on a monthly basis.
The fair value of financial liabilities measured at amortised cost does not differ significantly from the carrying amount.
The carrying amount of trade and other receivables corresponds to estimated fair value.
DSV has no financial instruments measured at fair value on the basis of level 1 input (measured at fair value) or level 3 input (non-observable market data).
This chapter contains other statutory notes.
Newly acquired or established entities are recognised in the consolidated financial statements from the date of start-up or acquisition. Entities divested or otherwise ceasing to be subsidiaries or associates are recognised in the consolidated income statement until the date of disposal. On acquisition of entities over which the Parent obtains control the purchase method is applied.
Identifiable assets, liabilities and contingent liabilities of the acquirees are measured at fair value on acquisition.
Identifiable intangibles are recognised if they are separable or arise from a contractual right. Deferred tax is recognised for the revaluation.
The date of acquisition is the date on which DSV A/S or a DSV subsidiary actually obtains control of the acquiree.
The date of disposal is the date on which DSV A/S or a DSV subsidiary actually surrenders control of the entity divested or otherwise ceasing to be a subsidiary or an associate.
The consideration for acquirees consists of the fair value of the agreed consideration in the form of assets and liabilities transferred and equity instruments issued. If part of the consideration is subject to future events or the performance of contractual obligations, such part of the consideration is recognised at fair value on acquisition. Costs attributable to business combinations are recognised directly in the income statement when incurred.
Comparative figures are not adjusted for entities recently acquired, divested or otherwise ceasing to be subsidiaries or associates.
Positive differences (goodwill) between, on the one side, the consideration, the value of non-controlling interests in the entity acquired and the fair value of any participating interests previously acquired and, on the other, the fair value of identifiable assets, liabilities and contingent liabilities acquired are recognised as goodwill under intangibles.
Goodwill and fair value adjustments in connection with the acquisition of a foreign entity whose functional currency differs from the presentation currency of the DSV Group are treated as assets and liabilities belonging to the foreign entity and are translated into the functional currency of the foreign entity using the exchange rate ruling at the date of acquisition.
If, on acquisition, there is uncertainty connected with measurement of the identifiable assets, liabilities and contingent liabilities acquired, the first recognition is made on the basis of a preliminary calculation of fair value. If the allocation of acquisition price is considered preliminary and it subsequently turns out that the identifiable assets, liabilities and contingent liabilities had another fair value on acquisition than first assumed, goodwill may be adjusted for up to 12 months following the date of acquisition. The effect of the adjustments is recognised in equity at the beginning of the financial year and comparative figures are
restated. After that, goodwill is not adjusted. Any change in estimated contingent consideration is recognised in the income statement.
In 2013 the Group acquired activities in Denmark, Sweden, Norway, the UK, USA and Colombia relating to the Group's three business areas. No material activities were divested during the year.
On 13 February 2013 we concluded an agreement to acquire the companies of the Seatainers Group. The agreement covered the acquisition of Solutions, Road and Air & Sea related activities with particular focus on project activities and complex transport operations of renewable energy equipment.
On 24 June 2013 we concluded an agreement to acquire the activities of Airmar Cargo. Airmar Cargo is a former agent of DSV and a market leader in sea freight export services from Colombia to Central America and the Caribbean. The acquisition thus strengthened our presence and existing Air & Sea activities in South America.
On 10 July 2013 we concluded an agreement to acquire the Ontime Logistics Group. The acquisition boosted our position in the Nordic road freight market.
Finally, on 29 August 2013 we concluded an agreement with SBS Worldwide. By this acquisition we strengthened the market position of DSV Air & Sea, in particular in our important markets: the UK and USA.
The net purchase price of all four companies totalled DKK 269 million.
In total, the acquisitions contributed DKK 1,363 million to consolidated revenue and DKK 188 million to gross profit and DKK 8 million to the operating profit. If the acquired entities had been owned by DSV from the beginning of the financial year, this would have had no material effect on consolidated revenue or profit.
The assets and liabilities acquired include trade receivables and trade payables as well as goodwill related to the acquisitions. Based on a preliminary calculation of fair value, total assets, excluding goodwill, of DKK 496 million and total liabilities of DKK 690 million were recognised. Of total assets excluding goodwill, DKK 81 million related to identified customer relationships. Goodwill of DKK 302 million was recognised. In addition, goodwill relating to previous acquisitions was adjusted upwards by DKK 20 million. The transaction expenses related to the acquisitions were modest and have been recognised as special items in the income statement.
Due to the continuous adjustment of purchase considerations, the amounts recognised in relation to acquisitions are subject to change.
The Group acquired no material non-controlling interests and sold no material equity interests and sold no equity interests to non-controlling shareholders in 2013 or 2012.
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 the taxable income for previous years and for prepaid tax.
Deferred tax is recognised based on temporary differences between the carrying amount and the tax value of assets and liabilities. No recognition is made of deferred tax on temporary differences relating to amortisation or depreciation of goodwill, office properties and other items disallowed for tax purposes if, except at the acquisition of enterprises, such temporary differences arise 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 carryforwards, are recognised under 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 which 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 comprises current tax and deferred tax relating to the 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 to items included in other comprehensive income or equity.
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.
| Total tax for the year | 580 | 535 |
|---|---|---|
| Tax on other comprehensive income | 29 | (38) |
| Tax on other changes in equity | (3) | (16) |
| Tax on profit for the year | 554 | 589 |
| The tax for the year is disaggregated as follows: |
||
| (DKKm) | 2013 | 2012 |
Tax on profit for the year is calculated
| Total tax on profit for the year | 554 | 589 |
|---|---|---|
| Tax adjustment relating to previous years | (16) | 1 |
| Deferred tax | (4) | (60) |
| Current tax | 574 | 648 |
| as follows: |
The tax on profit for the year
breaks down as follows:
| Total | 26.1% | 29.2% |
|---|---|---|
| Other taxes and adjustments | 2.7% | 2.4% |
| Tax asset valuation adjustments, net | (2.8%) | 1.1% |
| Tax adjustment relating to previous years | (0.7%) | 0.0% |
| Non-deductible losses/non-taxable gains on shares |
(0.2%) | (0.5%) |
| Non-deductible expenses/ non-taxable income |
0.2% | (2.1%) |
| Tax effect of: | ||
| Change in deferred tax from change in corporation tax rate |
(0.3%) | (0.2%) |
| Adjustment of calculated tax in foreign Group enterprises relative to 25% |
2.2% | 3.5% |
| Calculated 25% tax on profit for the year before tax |
25.0% | 25.0% |
| Total | (29) | 38 |
|---|---|---|
| Actuarial gains/(losses) | (9) | 15 |
| Fair value adjustment of hedging instruments |
(20) | 23 |
Deferred tax recognised in the balance sheet
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Deferred tax at 1 January | 2 | 97 |
| Deferred tax for the year | (4) | (60) |
| Tax adjustment relating to previous years | (16) | (10) |
| Tax on changes in equity | 4 | (29) |
| Other adjustments | (5) | 4 |
| Deferred tax at 31 December | (19) | 2 |
| Total tax assets not recognised | 1,087 | 1,135 |
|---|---|---|
| Tax assets not recognised | 1,074 | 1,123 |
| Temporary differences | 13 | 12 |
| (DKKm) | 2013 | 2012 |
Of the unrecognised tax assets, DKK 872 million may be carried forward indefinitely. The remaining DKK 202 million can be carried forward for up to 18 years.
2013
| Total | 2 | (20) | 4 | (4) | (1) | (19) | 430 | (411) |
|---|---|---|---|---|---|---|---|---|
| Offsets | - | - | - | - | - | - | (70) | 70 |
| Tax base of tax loss carryforwards |
(244) | 21 | - | (2) | 2 | (223) | 220 | 3 |
| Other liabilities | 5 | 9 | (2) | (4) | 1 | 9 | 72 | (81) |
| Provisions | (194) | 17 | 6 | (6) | 1 | (176) | 176 | - |
| Property, plant and equipment | 237 | (39) | - | (7) | (3) | 188 | - | (188) |
| Intangible assets | 198 | (28) | - | 15 | (2) | 183 | 32 | (215) |
| (DKKm) | Beginning of year |
Recognised in profit/loss |
Recognised in equity |
Other adjustments |
Currency translation adjustments |
End of year |
Deferred tax assets |
Deferred tax liabilities |
2012
| Total | 97 | (70) | (29) | 3 | 1 | 2 | 409 | (411) |
|---|---|---|---|---|---|---|---|---|
| Offsets | - | - | - | - | - | - | (128) | 128 |
| Tax base of tax loss carryforwards |
(267) | 24 | - | - | (1) | (244) | 244 | - |
| Other liabilities | 8 | 6 | (13) | 5 | (1) | 5 | 66 | (71) |
| Provisions | (170) | (5) | (16) | (2) | (1) | (194) | 194 | - |
| Property, plant and equipment | 284 | (49) | - | - | 2 | 237 | - | (237) |
| Intangible assets | 242 | (46) | - | - | 2 | 198 | 33 | (231) |
| (DKKm) | Beginning of year |
Recognised in profit/loss |
Recognised in equity |
Other adjustments |
Currency translation adjustments |
End of year | Deferred tax assets |
Deferred tax liabilities |
.
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 is calculated using the principles of the Company's Remuneration Policy.
The aggregate remuneration for the Executive Board members was DKK 20.3 million (2012: DKK 20.3 million). Specification of the remuneration of the Executive Board:
| Jens Bjørn Andersen | Jens H. Lund | |||
|---|---|---|---|---|
| (DKKm) | 2013 | 2012 | 2013 | 2012 |
| Fixed salary Pension Bonus |
6.5 1.0 2.5 |
6.4 1.0 2.5 |
4.6 0.5 1.8 |
4.6 0.5 1.7 |
| Share-based payment |
2.0 | 2.1 | 1.4 | 1.5 |
| Total | 12.0 | 12.0 | 8.3 | 8.3 |
The aggregate remuneration for the Board of Directors of DSV A/S for 2013 was DKK 4.2 million (2012: DKK 3.8 million).
| (DKK 1.000) | 2013 | 2012 |
|---|---|---|
| Kurt K. Larsen, Chairman | 1,400 | 1,181 |
| Erik B. Pedersen, Deputy Chairman | 600 | 525 |
| Kaj Christiansen | 400 | 350 |
| Per Skov (resigned 2012) | - | 131 |
| Annette Sadolin | 600 | 525 |
| Birgit W. Nørgaard | 400 | 350 |
| Thomas Plenborg | 800 | 700 |
| Total remuneration of the | ||
| Board of Directors of the Parent | 4,200 | 3,762 |
The value of the employee services received in exchange for the grant of options is measured at the fair value of the options at the date of grant. The fair value of equity-settled share-based programmes is measured at the grant date and recognised in the income statement under staff costs over the period until the options are vested. The offsetting item is recognised directly in equity. On initial recognition of such share-based programmes an estimate is made of the number of options that the employees are expected to earn.
The estimated number of options is adjusted subsequently to reflect the actual number of options earned. The fair value of the options granted is estimated on the basis of the Black & Scholes valuation model. The estimate is based on the terms and conditions applicable to the grant of options and Management's expectations of the development in the elements on which the valuation model is based.
The market value is calculated according to 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 2013 and 2012 is based on the following assumptions:
| Assumptions | 2013 | 2012 |
|---|---|---|
| Share price | 142.00 | 128.00 |
| Volatility | 20.0% | 28.0% |
| Risk-free interest rate | 0.75% | 0.90% |
| Expected dividends | 1.50% | 1.75% |
| Expected remaining life (years) | 3.51 | 3.25 |
DSV has launched incentive share option schemes with a view to retaining staff, senior staff and members of the Executive Board. The schemes are also intended to make staff and shareholders identify with the same interests. All exercise prices are set on the basis of the quoted market price at the date of grant. The share options can be exercised by the employees by cash purchase of shares only. The obligation relating to the schemes is partly covered by the Company's treasury shares.
The share options were granted pursuant to the procedures laid down in the Remuneration Policy of the Group applicable in the relevant year.
A total of 1,212 employees held share options at 31 December 2013.
| Scheme | Number of employees |
Options granted |
Exercise price |
Market value at date of grant (DKKm) |
|---|---|---|---|---|
| 2009 | 984 | 1,941,000 | 41.10 | 17.6 |
| 2010 | 1,003 | 1,983,000 | 98.50 | 41.2 |
| 2011 | 1,011 | 1,977,000 | 129.90 | 46.9 |
| 2012 | 1,035 | 1,964,500 | 128.00 | 38.0 |
| 2013 | 1,059 | 1,996,000 | 142.00 | 31.5 |
| Exercise period | Executive Board |
Senior staff |
Total | Average exercise price per option |
|
|---|---|---|---|---|---|
| Outstanding share options of 2009 scheme | 02.04.12 - 31.03.14 | - | 134,000 | 134,000 | 41.10 |
| Outstanding share options of 2010 scheme | 02.04.13 - 31.03.15 | - | 472,605 | 472,605 | 98.50 |
| Outstanding share options of 2011 scheme | 01.04.14 - 01.04.16 | 170,000 | 1,646,000 | 1,816,000 | 129.90 |
| Outstanding share options of 2012 scheme | 01.04.15 - 31.03.17 | 170,000 | 1,684,000 | 1,854,000 | 128.00 |
| Outstanding share options of 2013 scheme | 02.04.16 - 29.03.18 | 170,000 | 1,787,000 | 1,957,000 | 142.00 |
| Outstanding at 31 December 2013 | 510,000 | 5,723,605 | 6,233,605 | 128.84 | |
| Exercise period open at 31 December 2013 | - | 606,605 | 606,605 | 85.82 | |
| Life (years) | 3.25 | 3.04 | 3.06 | ||
| Market value (DKKm) | 23.0 | 284.9 | 307.9 |
| Average exercise |
|||||
|---|---|---|---|---|---|
| Board of Directors* |
Executive Board |
Senior staff |
Total | price per option |
|
| Outstanding at 1 January 2012 | 260,000 | 720,000 | 6,437,000 | 7,417,000 | 93.93 |
| Granted in 2012 | - | 170,000 | 1,794,500 | 1,964,500 | 128.00 |
| Exercised in 2012 | (170,000) | (210,000) | (2,460,000) | (2,840,000) | 77.23 |
| Options waived/expired | - | - | (251,000) | (251,000) | 111.03 |
| Outstanding at 31 December 2012 | 90,000 | 680,000 | 5,520,500 | 6,290,500 | 111.43 |
| Granted in 2013 | - | 170,000 | 1,826,000 | 1,996,000 | 142.00 |
| Exercised in 2013 | (90,000) | (340,000) | (1,471,395) | (1,901,395) | 85.21 |
| Options waived/expired | - | - | (151,500) | (151,500) | 126.66 |
| Outstanding at 31 December 2013 | - | 510,000 | 5,723,605 | 6,233,605 | 128.84 |
The average consideration paid for share options exercised in the financial year was DKK 146.03 per share at the date of exercise.
Outstanding share options for Executive Board members were granted to Jens Bjørn Andersen (300,000 options) and Jens H. Lund (210,000 options).
*) A Director received share options in his former capacity as CEO and in connection with certain day-to-day managerial tasks.
| Shares at beginning of year |
Shares purchased in 2013 |
Shares sold in 2013 |
Shares at year-end |
Market value (DKKm) |
|
|---|---|---|---|---|---|
| Jens Bjørn Andersen1 | 44,500 | 200,000 | 194,500 | 50,000 | 8.9 |
| Jens H. Lund 2 | 10,000 | 140,000 | 111,865 | 38,135 | 6.8 |
| Kurt K. Larsen 3 | 232,590 | 90,000 | 90,000 | 232,590 | 41.4 |
| Erik B. Pedersen | 300,000 | - | 25,000 | 275,000 | 48.9 |
| Kaj Christiansen | 52,000 | - | - | 52,000 | 9.2 |
| Annette Sadolin | 3,885 | - | - | 3,885 | 0.7 |
| Total | 642,975 | 430,000 | 421,365 | 651,610 | 115.9 |
1) Of which, 50,000 shares are held in a custody account in the name of a related party, reference is made to Company Announcement No. 509.
2) Of which, 30,000 shares are held in a custody account in the name of a related party, reference is made to Company Announcement No. 510. 3) Of which, 145,500 shares are held in a custody account in the name of a related party, reference is made to Company Announcement No. 440.
Investments in associates comprise entities in which the Group directly or indirectly controls at least 20% but no more than 50% of the share capital. Investments in associates are measured using the equity method. Investments with negative net asset values are recognised at DKK 0.
DSV holds ownership interests in 22 associates. The aggregate revenue, profit/loss and assets and liabilities of associates are as follows:
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Revenue | 464 | 435 |
| Profit for the year Total assets |
23 190 |
25 182 |
| Total liabilities | 107 | 117 |
| DSV Group's share of profit for the year Total carrying amount at 31 December |
7 25 |
7 17 |
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Statutory audit | 16 | 16 |
| Tax and VAT advisory services | 5 | 4 |
| Other services | 5 | 2 |
| Total fees to auditors appointed by | ||
| the Annual General Meeting | 26 | 22 |
| Others, audit | 2 | 2 |
| Others, total fees | 2 | 2 |
| Total fees | 28 | 24 |
Accounting policies
Contingent liabilities comprise probable liabilities which have not yet been confirmed and which may result in a drain on the Group's resources or constructive liabilities which cannot be reliably measured.
In recent years, various competition authorities have carried out inspections of several international transport companies. The inspections are based on alleged violations of competition law in the transport industry. As an international transport provider, DSV has also received notifications and inquiries from the competition authorities. Management believes that these cases will have no material impact on the financial position of the Group. As an international transport provider DSV is regularly involved in tax and VAT disputes and other legal proceedings. The effects of some of these cases are recognised based on Management's assessment of their expected outcome. Other cases are expected to have no material impact on the future financial results of the Group.
As part of its ordinary operations DSV has provided bank guarantees relative 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 3.3 as operating lease obligations.
Property, plant and equipment provided as security Land and buildings with a carrying amount of DKK 183 million (2012: DKK 184 million) were pledged as security to mortgage banks.
Mortgage debt amounted to DKK 51 million at 31 December 2013 (2012: DKK 65 million).
Contracts
DSV has concluded IT service contracts. The costs related to these contracts are recognised as the services are provided.
DSV has no related parties with control.
Related parties of DSV with significant influence comprise associates, members of the associates' boards of directors, executive boards and senior staff as well as family members of those persons. Related parties also comprise companies in which the aforementioned persons have significant interests.
The Group had the following transactions with associates:
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Sale of services | 96 | 64 |
| Purchase of services | 243 | 160 |
The Group had the following outstanding balances with associates at 31 December:
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Receivables | 44 | 13 |
| Liabilities | 2 | 3 |
No transactions were made in 2013 other than ordinary remuneration, as described in notes 5.3 and 5.4.
Interest-bearing debt at year end less interest-bearing assets at year end.
The sum of receivables and other current operating assets less trade payables and other payables and other current operating liabilities.
The sum of the net working capital with the addition of property, plant and equipment, intangibles including goodwill and customer relationships and assets held for sale less long-term provisions and pension obligations.
Gross profit multiplied by 100 and divided by revenue.
Operating profit before amortisation, depreciation and impairment and special items multiplied by 100 and divided by revenue.
Operating profit before impairment of goodwill and special items multiplied by 100 and divided by revenue.
Operating profit before impairment of goodwill and special items multiplied by 100 and divided by gross profit.
Operating profit before impairment of goodwill and special items multiplied by 100 and divided by average invested capital including goodwill and customer relationships.
Operating profit before impairment of goodwill and special items multiplied by 100 and divided by average invested capital excluding goodwill and customer relationships.
Tax on profit for the year divided by profit before tax.
The DVS A/S shareholders' share of the profit for the year multiplied by 100 and divided by average equity excluding non-controlling interests.
Equity excluding non-controlling interests multiplied by 100 and divided by total assets.
Interest-bearing liabilities at year-end less interest-bearing assets at year-end divided by operating profit before amortisation, depreciation and special items (EBITDA).
The DSV A/S shareholders' share of profit for the year divided by the average number of shares.
The DVS A/S shareholders' share of profit for the year divided by the average number of fully diluted shares.
The DSV A/S shareholders' share of profit for the year, 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 earnings per share divided by the average number of fully diluted shares.
Total number of shares outstanding at year-end excluding treasury shares.
Average number of shares during the year including share options, but excluding out-of-the-money options measured relative to the average share price for the year.
Our operations are structured according to the following main segments:
EMEA: Europe, the Middle East and Africa. For some purposes
APAC: Asia, Australia and the Pacific
Americas: North and South America
Earnings per share and diluted earnings per share are calculated pursuant to IAS 33. The other financial ratios are calculated in accordance with 'Recommendations & Financial Ratios 2010' published by the Danish Society of Financial Analysts, except for financial ratios marked with * as these ratios are not included in the Recommendations.
Standing (from left): Annette Sadolin, Jens H. Lund, Jens Bjørn Andersen, Kurt K. Larsen, Thomas Plenborg, Kaj Christiansen. Sitting (from left): Erik B. Pedersen, Birgit W. Nørgaard.
CEO Born: 22 March 1966 Member of the Executive Board since: 2008 Jens H. Lund
CFO Born: 8 November 1969 Member of the Executive Board since: 2002
| Board positions | special competencies | ||
|---|---|---|---|
| Kurt K. Larsen | |||
| chairman Born: 17 September 1945 Member of the Audit Committee Board member since: 2008 Elected until: 2014 |
(Chairman) (Member) |
Polaris III Invest Fonden Ove Wrist & Co. A/S Wrist Ship Supply A/S O.W. Bunker & Trading A/S |
• General management experience • CEO of DSV A/S 2005-2008 • Group CEO of DSV A/S 1991-2005 |
| Erik B. Pedersen | |||
| Deputy chairman Born: 13 June 1948 Board member since: 1989 Elected until: 2014 |
• General management experience • Sector-specific production experience • Independent haulier 1976-2012 |
||
| Thomas Plenborg | |||
| member of the board Born: 23 January 1967 Chairman of the Audit Committee Board member since: 2011 Elected until: 2014 |
(Chairman) (Board member) |
Everyday Luxury Feeling A/S COWI A/S SAXO Bank A/S, chairman of audit committee |
• Professor of accounting and auditing at Copenhagen Business School • Management experience from directorships and honorary offices held • Experience with strategic and financial planning |
| Kaj Christiansen | |||
| member of the board Born: 20 February 1944 Board member since: 1995 |
• General management experience • Sector-specific production experience • Independent haulier 1978-2001 |
||
| Annette Sadolin | |||
| member of the board Born: 4 January 1947 Member of the Audit Committee Board member since: 2009 Elected until: 2014 |
(Chairman) (Deputy chairman) DSB A/S (Board member) |
Østre Gasværk Theatre Topdanmark A/S Topdanmark Insurance A/S Skodsborg Kurhotel & Spa A/S Skodsborg Health Centre A/S Ratos AB (Sweden) Ny Carlsberg Glyptotek (art museum) Blue Square Reinsurance NV |
• General global management experience from General Electric (GE), the reinsurance industry and other organisations • Acquisition and divestment of international enterprises • Experience from directorships at various large companies • Former executive officer of GE Frankona, Munich, Germany • Former CEO of Employers Reinsurance International |
| Birgit W. Nørgaard | |||
| member of the board Born: 9 July 1958 Board member since: 2010 Elected until: 2014 |
(Chairman) (Board member) |
NNE Pharmaplan A/S Energinet.dk Stakeholder Forum (Deputy chairman) The Danish Council for IT Projects Xilco Holding (CH) AG Xilco (CH) AG The Energy Technology Development and Demonstration Programme (EUDP) Dansk Vækstkapital K/S Dansk Vækstkapital Komple mentar ApS Lindab International AB IMI Plc. WSP Global Inc. (Genivar Inc. until 1 January 2014) |
• General management experiences from Grontmij NV (COO), Grontmij Carl Bro A/S (Managing Director), Danisco and McKinsey • Acquisition and divestment of enterprises • Financial management experience |
The Board of Directors and the Executive Board have today discussed and approved the Annual Report of DSV A/S for the financial year 2013.
The Annual Report has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and Danish disclosure requirements for listed companies.
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 2013 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 2013.
In our opinion, the Management's Commentary includes a fair review of the development in the Group's and 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 Group and the Parent Company face.
We recommend that the Annual Report be approved at the Annual General Meeting.
Brøndby, 6 February 2014
Jens Bjørn Andersen Jens H. Lund CEO CFO
Chairman Deputy Chairman
Kurt K. Larsen Erik B. Pedersen Kaj Christiansen
Annette Sadolin Birgit W. Nørgaard Thomas Plenborg
We have audited the consolidated financial statements and the Parent Company financial statements of DSV A/S for the financial year 1 January - 31 December 2013. The consolidated financial statements and the Parent Company financial statements comprise income statement, statement of comprehensive income, balance sheet, statement of changes in equity, cash flow statement and notes, including a summary of significant accounting policies for the Group as well as for the Parent Company. The consolidated financial statements and the Parent Company financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies.
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 Danish disclosure requirements for listed companies and for such internal control that Management determines is necessary to enable the preparation of consolidated financial statements and Parent Company financial statements that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on the consolidated financial statements and the Parent Company financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and additional requirements under Danish audit regulation. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statements and the Parent Company financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements and the Parent Company financial statements. The procedures selected depend on the auditors' judgement, including the assessment of the risks of material
misstatement of the consolidated financial statements and the Parent Company financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the Company's preparation of consolidated financial statements and Parent Company financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the consolidated financial statements and the Parent Company financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our audit has not resulted in any qualification.
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 2013 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 2013 in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies.
Pursuant to the Danish Financial Statements Act, we have read the Management's Commentary. We have not performed any further procedures in addition to the audit of the consolidated financial statements and the Parent Company financial statements. On this basis, it is our opinion that the information provided in the Management commentary is consistent with the consolidated financial statements and the Parent Company financial statements.
Copenhagen, 6 February 2014
Statsautoriseret Revisionspartnerselskab
State Authorised State Authorised Public Accountant Public Accountant
Jesper Koefoed Michael Groth Hansen
Net revenue +3.9% to DKK 11,857 million (organic growth +2.3%)
Gross profit +0.6% to DKK 2,526 million (organic growth +0.8%)
Conversion ratio 26.6% (2012: 24.2%)
Operating profit before special items +10.7% to DKK 672 million (organic growth +12.0%)
Net financial expenses was DKK 69 million (2012: DKK 10 million)
Effective tax rate 25.1% (2012: 30.2%)
Staff costs and other external expenses decreased by an aggregate of 2% despite higher costs relating to acquirees.
Financial items were as expected for the quarter, but were extraordinarily low in Q4 2012.
Currency translation differences impacted negatively on consolidated gross profit by DKK 75 million and on EBIT before special items by DKK 19 million.
Air & Sea Road Solutions
Net revenue +2.7% to DKK 5,298 million (organic growth +0.2%)
Gross profit +3.7% to DKK 1,117 million (organic growth +3.6%)
Conversion ratio 34.2% (2012: 31.7%)
Operating profit before special items +12.0% to DKK 382 million (organic growth +12.8%)
Volumes - Air +7%, while the market is estimated to have increased by 4-5%
Volumes - Sea +12%, while the market is estimated to have increased by 5-6%
The Division gained market share in both sea freight and air freight in Q4.
Earnings per TEU remained more or less stable, whereas earnings per tonne (air freight) dropped in a fiercely competitive market.
Acquirees contributed volume growth of approx. 4% for sea freight and 2% for air freight.
The project logistics market picked up in Q4, however Air & Sea Projects has failed to deliver on expectations since the Seatainers Group acquisition.
Exchange rates impacted negatively on gross profit by DKK 45 million and on EBIT before special items by DKK 13 million.
Net revenue +6.2% to DKK 5,965 million (organic growth +5.6%)
Gross profit -0.2% to DKK 1,058 million (organic growth -0.1%)
Conversion ratio 21.3% (2012: 20.3%)
Operating profit before special items +4.7% to DKK 225 million (organic growth +8.2%)
Number of consignments +4%, while the market is estimated to have increased by
Gross margin 17.7% (2012: 18.9%)
1-2%
The volume growth (consignments) of the previous quarters continued. Market growth picked up in most European countries in the last quarter of the year.
The market was still characterised by relatively low growth rates and fierce price competition, resulting in a low gross margin.
The integration of Ontime Logistics contributed to the growth of the Division but also had a negative effect on the earnings margin.
Net revenue +3.4% to DKK 1,380 million (organic growth +2.8%)
Gross profit -3.4% to DKK 345 million (organic growth -3.4%)
Conversion ratio 18.6% (2012: 18.8%)
Operating profit before special items -4.5% to DKK 64 million (organic growth -4.5%)
Number of order lines +3%, while the market is estimated to have remained stable
The Division reported a positive development in order lines in a stagnant market.
The market was still affected by price competition and surplus capacity, causing pressure on Division gross profit.
New locations also impacted negatively on results in Q4 due to low utilisation level in the start-up phase.
| 2013 | 2012 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | ||
| Income statement (DKKm) | |||||||||
| Net revenue | 10,981 | 11,406 | 11,466 | 11,857 | 10,819 | 11,372 | 11,313 | 11,408 | |
| Gross profit | 2,404 | 2,553 | 2,522 | 2,526 | 2,435 | 2,578 | 2,529 | 2,512 | |
| Growth 2013 on 2012 | (1.3%) | (1.0%) | (0.3%) | 0.6% | |||||
| EBIT before special items | 509 | 680 | 691 | 672 | 555 | 687 | 691 | 607 | |
| Growth 2013 on 2012 | (8.3%) | (1.0%) | - | 10.7% | |||||
| Special items, net | (2) | (23) | (42) | (62) | (251) | - | (3) | (21) | |
| Net financial expenses | 69 | 81 | 79 | 69 | 81 | 75 | 80 | 10 | |
| Profit before tax | 438 | 576 | 570 | 541 | 223 | 612 | 608 | 576 | |
| Profit for the period | 321 | 417 | 428 | 405 | 162 | 430 | 436 | 402 | |
| Gross margin | 21.9% | 22.4% | 22.0% | 21.3% | 22.5% | 22.7% | 22.4% | 22.0% | |
| Operating margin | 4.6% | 6.0% | 6.0% | 5.7% | 5.1% | 6.0% | 6.1% | 5.3% | |
| Conversion ratio | 21.2% | 26.6% | 27.4% | 26.6% | 22.8% | 26.6% | 27.3% | 24.2% | |
| Balance sheet (DKKm) | |||||||||
| Net working capital | 523 | 611 | 512 | 561 | (110) | 96 | 210 | 307 | |
| Net interest-bearing debt | 6,569 | 6,528 | 6,290 | 5.949 | 6.584 | 6,713 | 6,478 | 6,561 | |
| Cash flows (DKKm) | |||||||||
| Operating activities | 275 | 449 | 644 | 407 | 393 | 336 | 407 | 515 | |
| Investing activities | (43) | (87) | (257) | 39 | (99) | (102) | 159 | (207) | |
| Free cash flow | 232 | 362 | 387 | 446 | 294 | 234 | 566 | 308 | |
| Segment information | |||||||||
| Air & Sea | |||||||||
| Net revenue | 4,726 | 5,000 | 5,171 | 5,298 | 4,414 | 5,048 | 5,236 | 5,157 | |
| Gross profit | 994 | 1,090 | 1,097 | 1,117 | 998 | 1,088 | 1,106 | 1,077 | |
| Growth 2013 on 2012 | (0.4%) | 0.2% | (0,8%) | 3.7% | |||||
| EBIT before special items | 276 | 351 | 383 | 382 | 298 | 376 | 397 | 341 | |
| Growth 2013 on 2012 | (7.4%) | (6.6%) | (3.5%) | 12.0% | |||||
| Gross margin | 21.0% | 21.8% | 21.2% | 21.1% | 22.6% | 21.6% | 21.1% | 20.9% | |
| Operating margin | 5.8% | 7.0% | 7.4% | 7.2% | 6.8% | 7.4% | 7.6% | 6.6% | |
| Conversion ratio | 27.8% | 32.2% | 34.9% | 34.2% | 29.9% | 34.6% | 35.9% | 31.7% | |
| Road | |||||||||
| Net revenue | 5,666 | 5,800 | 5,686 | 5,965 | 5,785 | 5,756 | 5,494 | 5,619 | |
| Gross profit | 1,057 | 1,112 | 1,072 | 1,058 | 1,099 | 1,133 | 1,054 | 1,060 | |
| Growth 2013 on 2012 | (3.8%) | (1.9%) | 1.7% | (0.2%) | |||||
| EBIT before special items | 202 | 269 | 246 | 225 | 220 | 264 | 234 | 215 | |
| Growth 2013 on 2012 | (8,2%) | 1.9% | 5.1% | 4.7% | |||||
| Gross margin | 18.7% | 19.2% | 18.9% | 17.7% | 19.0% | 19.7% | 19.2% | 18.9% | |
| Operating margin | 3.6% | 4.6% | 4.3% | 3.8% | 3.8% | 4.6% | 4.3% | 3.8% | |
| Conversion ratio | 19.1% | 24.2% | 22.9% | 21.3% | 20.0% | 23.3% | 22.2% | 20.3% | |
| Solutions | |||||||||
| Net revenue | 1,344 | 1,372 | 1,374 | 1,380 | 1,285 | 1,275 | 1,286 | 1,335 | |
| Gross profit | 348 | 360 | 356 | 345 | 351 | 361 | 369 | 357 | |
| Growth 2013 on 2012 | (0.9%) | (0.3%) | (3.5%) | (3.4%) | |||||
| EBIT before special items | 45 | 76 | 71 | 64 | 55 | 59 | 69 | 67 | |
| Growth 2013 on 2012 | (18.2%) | 28.8% | 2.9% | (4.5%) | |||||
| Gross margin | 25.9% | 26.2% | 25.9% | 25.0% | 27.3% | 28.3% | 28.7% | 26.7% | |
| Operating margin | 3.3% | 5.5% | 5.2% | 4.6% | 4.3% | 4.6% | 5.4% | 5.0% | |
| Conversion ratio | 12.9% | 21.1% | 19.9% | 18.6% | 15.7% | 16.3% | 18.7% | 18.8% |
*) For a definition of the financial highlights, please refer to page 65.
The overview shows active companies of the DSV Group at 31 December 2013 by segment and not by legal structure.
| Country | Ownership share | Air & Sea | Road | Solutions | |
|---|---|---|---|---|---|
| Parent | |||||
| DSV A/S | Denmark | - | |||
| Subsidiaries | |||||
| Europe | |||||
| DSV Air & Sea NV DSV Road Holding NV |
Belgium Belgium |
100% 100% |
x | x | |
| ABX Worldwide Holdings NV/SA | Belgium | 100% | x | ||
| DSV Road N.V. | Belgium | 100% | x | ||
| Marine Cargo Insurance (MCI) Agents N.V. | Belgium | 100% | x | ||
| DSV Solutions NV | Belgium | 100% | x | ||
| DSV Air & Sea OOD | Bulgaria | 100% | x | ||
| DSV Road EOOD | Bulgaria | 100% | x | x | |
| DSV Air & Sea Holding A/S | Denmark | 100% | x | ||
| DSV Air & Sea A/S | Denmark | 100% | x | ||
| DSV Road Holding A/S | Denmark | 100% | x | ||
| DSV Road A/S DSV Insurance A/S |
Denmark Denmark |
100% 100% |
x | ||
| DSV FinCo A/S | Denmark | 100% | |||
| DSV Group Services A/S | Denmark | 100% | |||
| DSV Solutions Holding A/S | Denmark | 100% | x | ||
| DSV Solutions A/S | Denmark | 100% | x | ||
| Ontime Logistics Danmark A/S | Denmark | 100% | x | ||
| DSV Transport AS | Estonia | 100% | x | x | |
| DSV Air & Sea Oy | Finland | 100% | x | ||
| Ab Wasa Logistics Ltd Oy | Finland | 100% | x | ||
| DSV Road Oy | Finland | 100% | x | ||
| Uudenmaan Pikakuljetus OY | Finland | 100% | x | ||
| DSV Solutions Oy | Finland | 100% | x | ||
| DSV Road Holding S.A. | France | 100% | x | ||
| DSV Road SAS ING Reeif Wattrelos |
France France |
100% 100% |
x x |
||
| DSV Air & Sea SAS | France | 100% | x | ||
| Frans Maas Holding France S.A. | France | 100% | x | ||
| DSV Solutions SAS | France | 100% | x | ||
| DSV HELLAS S.A. | Greece | 100% | x | x | |
| DSV Solutions Holding B.V. | The Netherlands | 100% | x | ||
| DSV Solutions (Dordrecht) B.V. | The Netherlands | 100% | x | ||
| ABX LOGISTICS (Nederland) B.V. | The Netherlands | 100% | x | ||
| DSV Solutions Nederland B.V. | The Netherlands | 100% | x | ||
| Vastgoed Oostrum C.V. | The Netherlands | 100% | x | ||
| DSV Air & Sea B.V. | The Netherlands | 100% | x | ||
| DSV Road B.V. DSV Road Holding NV |
The Netherlands The Netherlands |
100% 100% |
x x |
||
| DSV Transport Ltd. | Belarus | 100% | x | ||
| DSV Air & Sea Limited | Ireland | 100% | x | ||
| DSV Road Limited | Ireland | 100% | x | ||
| DSV Solutions Ltd. | Ireland | 100% | x | ||
| Saima Avandero SpA | Italy | 99.1% | x | x | x |
| Logimek SRL | Italy | 100% | x | ||
| Saima Caspian LLC | Kazakhstan | 100% | x | ||
| DSV Hrvatska d.o.o. | Croatia | 100% | x | ||
| DSV Transport SIA | Latvia | 100% | x | x | |
| Sia BaltShip Latvia | Latvia | 100% | x | ||
| DSV Transport UAB | Lithuania | 100% | x | x | |
| XB Luxembourg Holdings 1 SA XB Luxembourg Holdings 2 SARL |
Luxemburg Luxemburg |
100% 100% |
|||
| DSV Road S.A. | Luxemburg | 100% | x | ||
| DSV Air & Sea AS | Norway | 100% | x | ||
| DSV Road AS | Norway | 100% | x | ||
| Kongeveien 47 AS | Norway | 100% | x | ||
| DSV Solutions AS | Norway | 100% | x | ||
| DSV Air & Sea Sp. z o.o. | Poland | 100% | x | ||
| DSV Road Sp. z.o.o. | Poland | 100% | x | ||
| DSV Solutions Sp.z o.o. | Poland | 100% | x | ||
| DSV International Shared Services Sp. z o.o. | Poland | 100% |
| Subsidiaries | |||||
|---|---|---|---|---|---|
| Europe (continued) | |||||
| DSV SGPS, Lda. | Portugal | 100% | x | ||
| DSV Solutions, Lda. | Portugal | 100% | x | ||
| DSV Transitarios, Lda. | Portugal | 100% | x | x | |
| DSV Solutions S.R.L. | Romania | 100% | x | x | x |
| OOO DSV Transport | Russia | 100% | x | ||
| DSV Road OOO | Russia | 100% | x | x | |
| DSV Solutions OOO | Russia | 100% | x | ||
| DSV Logistics SA | Switzerland | 100% | x | x | x |
| DSV Road d.o.o. | Serbia | 100% | x | ||
| DSV Slovakia S.R.O. | Slovakia | 100% | x | x | x |
| DSV Transport d.o.o. | Slovenia | 100% | x | x | |
| DSV Holding Spain S.L. | Spain | 100% | x | ||
| DSV Road Spain S.A.U | Spain | 100% | x | ||
| DSV Solutions Spain S.A.U | Spain | 100% | x | ||
| DSV Air & Sea S.A.U | Spain | 100% | x | ||
| DSV Solutions Ltd. | Great Britain | 100% | x | ||
| DSV Air & Sea Limited | Great Britain | 100% | x | ||
| DSV Road Holding Ltd. | Great Britain | 100% | x | ||
| DSV Commercials Ltd. | Great Britain | 100% | x | ||
| DSV Road Ltd. | Great Britain | 100% | x | ||
| SBS Worldwide (Holdings) Ltd. | Great Britain | 100% | x | ||
| Virtualized Logistics Ltd. | Great Britain | 100% | x | ||
| SBS Worldwide Ltd. | Great Britain | 100% | x | ||
| DSV Air & Sea AB | Sweden | 100% | x | ||
| DSV Group AB | Sweden | 100% | x | ||
| DSV Road AB | Sweden | 100% | x | ||
| Göinge Frakt EK | Sweden | 100% | x | ||
| DSV Solutions AB | Sweden | 100% | x | ||
| DSV Road Property Holding AB | Sweden | 100% | x | ||
| Sverige Ontime Logistics AB | Sweden | 100% | x | ||
| Gamla Industrologistik Hisingbacka AB | Sweden | 100% | x | ||
| DSV Air & Sea s.r.o. | Czech Republic | 100% | x | ||
| DSV Road a.s. | Czech Republic | 100% | x | x | |
| DSV Air & Sea A.S. | Turkey | 100% | x | ||
| DSV Road & Solutions A.S. | Turkey | 100% | x | x | |
| DSV Road GmbH | Germany | 100% | x | ||
| DSV Immobilien GmbH | Germany | 100% | x | ||
| POP Gesellschaft für Prozesslogistik mbH | Germany | 100% | x | ||
| Collico Verpackungslogistik und Service GmbH | Germany | 100% | x | ||
| Administration & Accounting Service GmbH | Germany | 100% | x | ||
| Jolkos Grundstücksverwaltungsgesellschaft mbH | Germany | 94% | x | ||
| DSV Air & Sea GmbH | Germany | 100% | x | ||
| DSV Solutions Group GmbH | Germany | 100% | x | ||
| DSV Solutions GmbH | Germany | 100% | x | ||
| DSV Stuttgart GmbH & Co. KG | Germany | 100% | x | ||
| DSV Logistics LLC | Ukraine | 100% | x | x | x |
| DSV Hungaria Kft. | Hungary | 100% | x | x | |
| ABX LOGISTICS (Austria) GmbH | Austria | 100% | x | ||
| DSV Österreich Spedition GmbH | Austria | 100% | x | x | |
| North America |
| DSV Air & Sea Inc. | Canada | 100% | x | x | |
|---|---|---|---|---|---|
| DSV Air & Sea, S.A. de C.V. | Mexico | 100% | x | ||
| DSV Air & Sea Inc. | USA | 100% | x | x | |
| DSV Air & Sea Holding Inc. | USA | 100% | x | ||
| ABX LOGISTICS (USA) Inc. | USA | 100% | x | ||
| BaltShip Inc. | USA | 100% | x | ||
| SBS Worldwide Inc. | USA | 100% | x | ||
| DSV Solutions Inc. | USA | 100% | x |
| Chile | 100% | x | |
|---|---|---|---|
| Chile | 100% | x | |
| Colombia | 100% | x | |
| Peru | 100% | x | |
| Argentina Brazil |
100% 100% |
x x |
Country Ownership share Air & Sea Road Solutions
| Country | Ownership share | Air & Sea | Road | Solutions |
|---|---|---|---|---|
| Asia | ||||
|---|---|---|---|---|
| DSV Air & Sea Ltd. | Bangladesh | 100% | x | |
| ABX LOGISTICS (Bangladesh) Ltd. | Bangladesh | 100% | x | |
| DSV Air & Sea (LLC) | United Arab Emirates | 100% | x | |
| Swift Freight International LLC | United Arab Emirates | 100% | x | |
| DSV Air & Sea Inc. | The Philippines | 100% | x | |
| ABX LOGISTICS Holding Philippines Inc | The Philippines | 97.6% | x | |
| DSV Air & Sea Ltd. | Hong Kong | 100% | x | x |
| ABX LOGISTICS (Hong Kong) Ltd. | Hong Kong | 100% | x | |
| Swift Global Logistics Limited | Hong Kong | 100% | x | |
| S-CHP Investments (Hong Kong) Ltd. | Hong Kong | 100% | x | |
| DSV Air & Sea Pvt. Ltd. | India | 100% | x | |
| Swift Shipping and Freight Logistics Private Limited | India | 100% | x | |
| PT. DFDS Transport Indonesia | Indonesia | 100% | x | |
| DSV Air & Sea Co., Ltd. | Japan | 100% | x | |
| DSV Air & Sea Co., Ltd. | China | 100% | x | |
| DSV Logistics Co., Ltd. | China | 100% | x | x |
| Swift Global Logistics Limited | China | 100% | x | |
| BaltShip (China) Co. Ltd. | China | 100% | x | |
| DSV Air & Sea Ltd. | Korea | 100% | x | |
| DSV Air & Sea Sdn Bhd | Malaysia | 100% | x | |
| DSV Logistics Sdn. Bhd. | Malaysia | 49% | x | |
| DSV Air & Sea Pte. Ltd. | Singapore | 100% | x | |
| ABX LOGISTICS Singapore PTE LTD | Singapore | 100% | x | |
| BaltShip (Singapore) Pte.Ltd. | Singapore | 100% | x | |
| DSV Air & Sea Co. Ltd. | Taiwan | 100% | x | |
| DSV Air & Sea Ltd. | Thailand | 100% | x | |
| DSV Air & Sea Co., Ltd. | Vietnam | 100% | x | |
| Other | ||||
| DSV Air & Sea Pty Ltd. | Australia | 100% | x | |
| DSV Transport Int'l S.A | Morocco | 100% | x | |
| Terminal Handling Company | Morocco | 100% | x | |
| DSV Air & Sea Limited | New Zealand | 100% | x | |
| BaltShip (NZ) Ltd. | New Zealand | 100% | x | |
| Saima Nigeria Ltd. | Nigeria | 40% | x | |
| Nationwide Clearing & Forwarding Ltd. | Nigeria | 36.6% | x | |
| DSV Air and Sea (Proprietary) Limited | South Africa | 100% | x | |
| Associates | ||||
| ABX-Penske Air & Sea Logistica Ltda | Brazil | 50% | x | |
| Swift Freight International Burundi SA | Burundi | 33.3% | x | |
| Swift Freight DRC San NCR KIN | DR Congo | 33.3% | x | |
| DSV Air & Sea LLC | Egypt | 20% | x | |
| DDT Brokerage Inc. | The Philippines | 100% | x | |
| GT Stevedores Oy | Finland | 25.5% | x | |
| FRANCE AIR GROUPAGE SA | France | 49.6% | x | |
| Swift Freight Forwarders (Ghana) Limited | Ghana | 33.3% | x | |
| Sama Al Imad General Transport LLC | Iraq | 30% | x | |
| MGM Lines Srl | Italy | 30% | x | |
| Swift Global Logistics Limited | Kenya | 33.3% | x | |
| Swift Global Logistics Limited | Mozambique | 33.3% | x | |
| Swift Freight International Nigeria Limited | Nigeria | 33.3% | x | |
| DSV Air & Sea (PVT) Limited. | Pakistan | 20% | x | |
| Swift Freight International Rwanda Limited | Rwanda | 33.3% | x | |
| Swift Global Logistics Limited | Tanzania | 33.3% | x | |
| Swift Global Logistics | Togo | 33.3% | x | |
| KM Logistik GmbH | Germany | 35% | x | |
| IDS Logistik GmbH | Germany | 28% | x | |
| Swift Freight International (Uganda) Limited | Uganda | 33.3% | x | |
| Swift Freight International Tours & Travels Limited | Uganda | 33.3% | x | |
According to agreement, control of DDT Brokerage Inc. has been transferred to a third party and the company is therefore treated as an associate.
Swift Freight International (Zambia) Limited Zambia 33.3% x
| Income statement76 | |
|---|---|
| Statement of comprehensive income76 | |
| Cash flow statement77 | |
| Balance sheet 78 | |
| Statement of changes in equity 79 |
| 1 | Significant accounting estimates and judgements80 | |||
|---|---|---|---|---|
| --- | -- | -- | --------------------------------------------------- | -- |
| 2 | Intra-Group charges80 | |
|---|---|---|
| 3 | Fees to auditors appointed at the Annual General Meeting80 | |
| 4 | Staff costs 80 | |
| 5 | Special items80 | |
| 6 | Financial income 80 | |
| 7 | Financial expenses80 | |
| 8 | Share options schemes81 | |
| 9 | Tax for the year82 |
| 10 Intangible assets82 | |
|---|---|
| 11 Investments in Group entities 82 | |
| 12 Receivables from Group entities and other receivables 82 | |
| 13 Deferred tax 82 | |
| 14 Financial liabilities 82 | |
| 15 Payables to Group entities and other payables83 |
| 16 Operating lease obligations83 | |
|---|---|
| 17 Security for debt and other financial liabilities 83 | |
| 18 Derivative financial instruments 83 | |
| 19 Financial risks84 | |
| 20 Related parties84 | |
| 21 Dividends84 | |
| (DKKm) | Note | 2013 | 2012 |
|---|---|---|---|
| Intra-group charges | 2 | 578 | 480 |
| Gross profit | 578 | 480 | |
| Other external expenses | 3 | 281 | 193 |
| Staff costs | 4 | 203 | 200 |
| Operating profit before amortisation, depreciation and special items | 94 | 87 | |
| Amortisation and depreciation of intangibles, property, plant and equipment | 126 | 118 | |
| Operating profit before special items | (32) | (31) | |
| Special items | 5 | - | (24) |
| Financial income | 6 | 912 | 917 |
| Financial expenses | 7 | 243 | 319 |
| Profit before tax | 637 | 543 | |
| Tax on profit for the year | 9 | 8 | 41 |
| Profit for the year | 629 | 502 | |
| Proposed distribution of profit | |||
| Proposed dividend per share is DKK 1.50 (2012: DKK 1.25 per share) | 270 | 235 | |
| Retained earnings | 359 | 267 | |
| Total distribution | 629 | 502 |
| (DKKm) Note |
2013 | 2012 |
|---|---|---|
| Profit for the year | 629 | 502 |
| Items that will be reclassified to income statement when certain conditions are met: | ||
| Fair value adjustment for the year relating to hedging instruments | 23 | (90) |
| Fair value adjustment relating to hedging instruments transferred to financials | 54 | 61 |
| Tax on other comprehensive income | (19) | 22 |
| Other comprehensive income net of tax | 58 | (7) |
| Total comprehensive income | 687 | 495 |
| (DKKm) Note |
2013 | 2012 |
|---|---|---|
| Operating profit before amortisation, depreciation and special items | 94 | 87 |
| Adjustment, non-cash operating items etc.: | ||
| Share-based payments | 7 | 6 |
| Cash flow from operating activities before change in net working capital and tax | 101 | 93 |
| Change in net working capital | 67 | 2,247 |
| Special items | - | (24) |
| Interest received | 912 | 913 |
| Interest paid | (243) | (319) |
| Corporation tax, paid | 26 | (190) |
| Cash flow from operating activities | 863 | 2,720 |
| Purchase of intangible assets 10 |
(168) | (122) |
| Purchase of property, plant and equipment | (14) | (6) |
| Change in other financial assets | 21 | (1,773) |
| Cash flow from investing activities | (161) | (1,901) |
| Free cash flow | 702 | 819 |
| Other non-current liabilities incurred Repayment of loans and credits |
1,723 (1,739) |
750 (471) |
| Shareholders: | ||
| Dividends distributed | (235) | (190) |
| Dividends on treasury shares | 12 | 3 |
| Purchase and sale of treasury shares | (462) | (919) |
| Cash flow from financing activities | (701) | (827) |
| Cash flow for the year | 1 | (8) |
| Cash at 1 January | - | 1 |
| Cash flow for the year | 1 | (8) |
| Currency translation adjustments | (1) | 7 |
| Cash at 31 December | - | - |
The cash flow statement cannot be directly derived from the balance sheet and income statement.
| (DKKm) | Note | 2013 | 2012 |
|---|---|---|---|
| Intangible assets | 10 | 489 | 441 |
| Property, plant and equipment | 16 | 8 | |
| Investments in Group entities | 11 | 5,602 | 5,292 |
| Other receivables | 783 | 1,114 | |
| Total non-current assets | 6,890 | 6,855 | |
| Receivables from Group enterprises and other receivables | 12 | 8,333 | 10,153 |
| Corporation tax | - | 21 | |
| Total current assets | 8,333 | 10,174 | |
| Total assets | 15,223 | 17,029 |
| (DKKm) | Note | 2013 | 2012 |
|---|---|---|---|
| Equity | |||
| Share capital | 180 | 188 | |
| Reserves | 3,229 | 3,213 | |
| Total equity | 3,409 | 3,401 | |
| Deferred tax | 13 | 89 | 84 |
| Financial liabilities | 14 | 5,564 | 5,253 |
| Total non-current liabilities | 5,653 | 5,337 | |
| Financial liabilities | 14 | 466 | 793 |
| Corporation tax | 8 | - | |
| Payables to Group enterprises and other payables | 15 | 5,687 | 7,498 |
| Total current liabilities | 6,161 | 8,291 | |
| Total liabilities | 11,814 | 13,628 | |
| Total equity and liabilities | 15,223 | 17,029 |
| (DKKm) | Share capital |
Treasury shares |
Hedging reserve |
Retained earnings |
Total equity |
|---|---|---|---|---|---|
| Equity at 1 January 2013 | 188 | (10) | (22) | 3,245 | 3,401 |
| Profit for the year | - | - | - | 629 | 629 |
| Fair value adjustments for the year relating to hedging instruments Fair value adjustments relating to hedging instruments transferred |
- | - | 23 | - | 23 |
| to financial expenses | - | - | 54 | - | 54 |
| Tax on other comprehensive income | - | - | (19) | - | (19) |
| Other comprehensive income | - | - | 58 | - | 58 |
| Total comprehensive income for the year | - | - | 58 | 629 | 687 |
| Share-based payments | - | - | - | 7 | 7 |
| Dividends distributed | - | - | - | (235) | (235) |
| Purchase and sale of treasury shares, net | - | (3) | - | (459) | (462) |
| Dividends on treasury shares | - | - | - | 12 | 12 |
| Capital reduction | (8) | 8 | - | - | - |
| Other adjustments | - | - | - | (1) | (1) |
| Total transactions with owners | (8) | 5 | - | (676) | (679) |
| Equity at 31 December 2013 | 180 | (5) | 36 | 3,198 | 3,409 |
The retained earnings at 31 December 2013 comprised the negative balance between the purchase and sale of treasury shares of DKK 6,773 million (2012: a negative balance of DKK 6,314 million). For a more detailed outline of movements in treasury shares, reference is made to note 4.1 of the consolidated financial statements.
| (DKKm) | Share capital |
Treasury shares |
Hedging reserve |
Retained earnings |
Total equity |
|---|---|---|---|---|---|
| Equity at 1 January 2012 | 190 | (4) | (15) | 3,854 | 4,025 |
| Profit for the year | - | - | - | 502 | 502 |
| Fair value adjustments for the year relating to hedging instruments | - | - | (90) | - | (90) |
| Fair value adjustments relating to hedging instruments transferred to financial expenses |
- | - | 61 | - | 61 |
| Tax on other comprehensive income | - | - | 22 | - | 22 |
| Other comprehensive income | - | - | (7) | - | (7) |
| Total comprehensive income for the year | - | - | (7) | 502 | 495 |
| Share-based payments | - | - | - | 6 | 6 |
| Dividends distributed | - | - | - | (190) | (190) |
| Purchase and sale of treasury shares, net | - | (8) | - | (911) | (919) |
| Capital reduction | (2) | 2 | - | - | - |
| Dividends on treasury shares | - | - | - | 3 | 3 |
| Other adjustments | - | - | - | (19) | (19) |
| Total transactions with owners | (2) | (6) | - | (1,111) | (1,119) |
| Equity at 31 December 2012 | 188 | (10) | (22) | 3,245 | 3,401 |
For the preparation of the Annual Report of DSV A/S Management makes various accounting estimates and judgements and determines the assumptions to be used as the basis for the recognition and measurement of assets and liabilities, contingent assets and liabilities and the income and costs reported. The estimates made and assumptions used are based on historical experience and other factors deemed by Management to be reasonable in the circumstances, but in the nature of things such experience and factors are uncertain and unpredictable. The assumptions may be incomplete or inaccurate and unforeseen events or circumstances may arise. Moreover, the organisation is subject to risks and uncertainties that may result in outcomes deviating from these estimates.
Management deems the following estimates and the pertaining judgements as well as the estimates and judgements stated in the consolidated financial statements to be essential for the preparation of the financial statements of the Parent.
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. In the assessment of Management, there was no such indication at 31 December 2013, and therefore investments in subsidiaries have not been tested for impairment.
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Intra-group charges | 578 | 480 |
| Total revenue | 578 | 480 |
Management fees invoiced by Group entities comprise remuneration for members of the executive boards of the subsidiaries.
| 2013 | 2012 |
|---|---|
| 2 | |
| 2 | 1 |
| 4 | 3 |
| - | 2 |
| - | 2 |
| 5 | |
| 2 4 |
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Remuneration of the Board of Directors | 4 | 4 |
| Salaries etc. | 184 | 183 |
| Defined contribution pension plans | 15 | 13 |
| Total staff costs | 203 | 200 |
| Average number of full-time employees | 293 | 284 |
For information on the remuneration of the Executive Board and the Board of Directors, please refer to note 5.3 of the consolidated financial statements.
| Total special items, net | - | (24) |
|---|---|---|
| Restructuring costs | - | (24) |
| (DKKm) | 2013 | 2012 |
| Total financial income | 912 | 917 |
|---|---|---|
| Dividends from subsidiaries | 586 | 382 |
| Interest income from Group entities | 302 | 487 |
| Interest income | 24 | 48 |
| (DKKm) | 2013 | 2012 |
Interest income relates to interest from cash included at amortised cost.
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Interest expenses | 217 | 211 |
| Interest expenses for Group entities | 20 | 95 |
| Currency translation adjustments, net | 6 | 13 |
| Total financial expenses | 243 | 319 |
Interest expenses relate to interest on loans included at amortised cost.
DSV A/S has issued share options to staff, senior staff and members of the Executive Board of the Company. Please refer to note 5.4 of the consolidated financial statements for a calculation of market values and a list of current incentive share option schemes.
| Exercise period | Executive Board |
Senior staff |
Total | Average exercise price per share option |
|
|---|---|---|---|---|---|
| Outstanding share options of 2009 scheme | 02.04.12 - 31.03.14 | - | 5,000 | 5,000 | 41.10 |
| Outstanding share options of 2010 scheme | 02.04.13 - 31.03.15 | - | 27,605 | 27,605 | 98.50 |
| Outstanding share options of 2011 scheme | 01.04.14 - 01.04.16 | 170,000 | 103,000 | 273,000 | 129.90 |
| Outstanding share options of 2012 scheme | 01.04.15 - 31.03.17 | 170,000 | 104,000 | 274,000 | 128.00 |
| Outstanding share options of 2013 scheme | 02.04.16 - 29.03.18 | 170,000 | 124,500 | 294,500 | 142.00 |
| Outstanding at 31 December 2013 | 510,000 | 364,105 | 874,105 | 131.88 | |
| Exercise period open at 31 December 2013 | - | 32,605 | 32,605 | 89.70 | |
| Life (years) | 3.25 | 3.12 | 3.20 | ||
| Market value (DKKm) | 23.0 | 17.6 | 40.6 |
| Average | |||||
|---|---|---|---|---|---|
| Board of Directors* |
Executive Board |
Senior staff |
Total | exercise price per share option |
|
| Outstanding at 1 January 2012 | 90,000 | 510,000 | 280,000 | 880,000 | 89.72 |
| Granted in 2012 | - | 170,000 | 114,000 | 284,000 | 128.00 |
| Exercised in 2012 | - | - | (42,000) | (42,000) | 41.10 |
| Outstanding at 31 December 2012 | 90,000 | 680,000 | 352,000 | 1,122,000 | 101.23 |
| Granted in 2013 | - | 170,000 | 135,500 | 305,500 | 142.00 |
| Exercised in 2013 | (90,000) | (340,000) | (102,395) | (532,395) | 72.95 |
| Options waived/expired | - | - | (21,000) | (21,000) | 135.33 |
| Outstanding at 31 December 2013 | - | 510,000 | 364,105 | 874,105 | 131.88 |
*) A Director received share options in his former capacity as CEO and in connection with certain day-to-day managerial tasks. The share options were granted pursuant to the procedures laid down in the Remuneration Policy of the Group then applicable.
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Tax for the year is disaggregated as follows: | ||
| Tax on profit for the year | 8 | 41 |
| Tax on other comprehensive income | 19 | (22) |
| Total tax for the year | 27 | 19 |
| Tax on profit for the year is calculated as follows: |
||
| Current tax | 11 | 40 |
| Deferred tax | 6 | (16) |
| Tax adjustment relating to previous years | (9) | 17 |
| Total tax on profit for the year | 8 | 41 |
| The tax on profit for the year breaks down as follows: |
||
| Calculated 25% tax on profit for the year before tax |
25% | 25% |
| Tax effect of: | ||
| Non-deductible expenses/ non-taxable income |
(22.3%) | (20.6%) |
| Tax adjustment relating to previous years | (1.4%) | 3.2% |
| Effective tax rate | 1.3% | 7.6% |
| Computer software | ||
|---|---|---|
| (DKKm) | 2013 | 2012 |
| Cost at 1 January | 803 | 681 |
| Additions for the year | 168 | 122 |
| Total cost at 31 December | 971 | 803 |
| Total amortisation and impairment at 1 January |
362 | 250 |
| Amortisation and impairment for the year | 120 | 112 |
| Total amortisation and impairment at 31 December |
482 | 362 |
| Carrying amount at 31 December | 489 | 441 |
DSV A/S owns the following subsidiaries, all of which are included in the consolidated financial statements
| Owner- Owner- ship share 2013 |
ship share 2012 |
Regi- stered office |
Subsidiary share capital (DKKm) |
|
|---|---|---|---|---|
| DSV Road Holding A/S | 100% | 100% | Brøndby, Denmark |
100 |
| DSV Air & Sea Holding A/S | 100% | 100% | Brøndby, Denmark |
50 |
| DSV Solutions Holding A/S | 100% | 100% | Brøndby, Denmark |
100 |
| DSV Insurance A/S | 100% | 100% | Brøndby, Denmark |
25 |
| DSV Group Services A/S | 100% | 100% | Brøndby, Denmark |
5 |
| DSV FinCo A/S | 100% | 100% | Brøndby, Denmark |
0.5 |
| Receivables from Group entities and other receivables at 31 December |
8,333 | 10,153 |
|---|---|---|
| Other receivables etc. | 54 | 54 |
| Fair value of derivative financial instruments |
42 | 23 |
| Receivables from Group entities | 8,237 | 10,076 |
| (DKKm) | 2013 | 2012 |
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Deferred tax at 1 January | 84 | 100 |
| Deferred tax for the year | 6 | (16) |
| Adjustments relating to previous years | (1) | - |
| Deferred tax at 31 December | 89 | 84 |
| Deferred tax at 31 December | ||
| Intangible assets | 92 | 94 |
| Current assets | (1) | (9) |
| Provisions | (2) | (1) |
| Deferred tax at 31 December | 89 | 84 |
| Breakdown of deferred tax: | ||
| Deferred tax liability | 89 | 84 |
| Deferred tax at 31 December | 89 | 84 |
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Issued bonds | 1,743 | 748 |
| Loans and credit facilities | 4,287 | 5,298 |
| Total financial liabilities | 6,030 | 6,046 |
| Financial liabilities as recognised in the balance sheet: |
||
| Non-current liabilities | 5,564 | 5,253 |
| Current liabilities | 466 | 793 |
| Financial liabilities at 31 December | 6,030 | 6,046 |
| (DKKm) | Expiry | Fixed/ floating |
2013 | Carrying amount 2012 |
|---|---|---|---|---|
| Bank loans (DKK) | 2015 | Floating | 742 | 943 |
| Bank loans (EUR)2016-2018 | Floating | 2,258 | 3,475 | |
| Bond loan | 2020 | Fixed | 1,743 | 748 |
| Other | 2014-2015 | Fixed | 13 | 13 |
| Cash | 2014-2016 | Floating | 1,274 | 867 |
| Loans and | ||||
| credit facilities at 31 December |
6,030 | 6,046 |
Bank loans are subject to standard trade covenants. All financial ratio covenants were observed during the year.
The weighted average effective interest rate was 2.2% (2012: 1.5%).
| Payables to Group entities and other payables at 31 December |
5,687 | 7,498 |
|---|---|---|
| Other payables | 122 | 163 |
| Fair value of derivative financial instruments |
126 | 201 |
| Payables to Group entities | 5,439 | 7,134 |
| (DKKm) | 2013 | 2012 |
| (DKKm) | 2013 | 2012 |
|---|---|---|
| Operating lease obligations relating to operating equipment fall due: |
||
| 0-1 year | 50 | 24 |
| 1-5 years | 13 | 24 |
| Total | 63 | 48 |
| The following is recognised in the income statement: |
||
| Operating leases relating to operating equipment |
23 | 18 |
| Total | 23 | 18 |
DSV A/S leases operating equipment under operating leases with an average lease term of 3.5 years (2012: 4 years).
DSV A/S has guaranteed for subsidiaries' outstanding balances with banks and liabilities to leasing companies, suppliers and public authorities, etc., in the amount of DKK 3,624 million (2012: DKK 3,262 million).
Moreover, DSV A/S has issued several declarations of intent relating to balances between subsidiaries and third parties.
DSV A/S and the other Danish Group entities registered jointly for VAT purposes 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. Corporation tax payments and withholding taxes payable under the joint taxation arrangement amounted to DKK 8 million (2012: Corporation tax receivable DKK 21 million), which is included in the financial statements of DSV A/S.
The weighted average effective interest rate for existing interest rate instruments was 1.8% at the reporting date (2012: 1.8%).
| (DKKm) | Of which | ||||
|---|---|---|---|---|---|
| recog- | |||||
| nised in Of which | |||||
| income | recog | ||||
| Contractual | Fair | state- | nised in | ||
| Currency | value | Maturity | value | ment | equity |
| Currency | |||||
| instruments | 7,358 | 2013 | 16 | 16 | - |
| Interest rate | |||||
| instruments | 7,518 2013-2016 | (193) | (23) | (170) | |
| Total | (177) | (7) | (170) |
The Group mainly uses foreign exchange forward contracts to hedge foreign currency risks. The main currencies hedged are SEK, NOK, GBP and USD. The Group is exposed to a low foreign currency risk. Foreign exchange forward contracts used to hedge net investments and satisfying the conditions of hedge accounting are recognised directly in equity. Other fair value adjustments are recognised in the income statement under financials.
The Group uses interest rate swaps to hedge interest rate risks. Thereby floating-rate loans are refinanced as fixed-rate loans. Interest rate swaps satisfying the conditions of hedge accounting are recognised directly in equity. Interest rate swaps not satisfying the conditions of hedge accounting as well as accrued interest are recognised in the income statement under financials.
The liabilities of DSV A/S fall due as listed below:
| Total | 6,400 | 4,488 | 1,855 | 12,743 |
|---|---|---|---|---|
| Interest rate derivatives |
82 | 39 | (3) | 118 |
| Payables to Group enterprises |
5,439 | - | - | 5,439 |
| Other payables | 122 | - | - | 122 |
| Loans and credit facilities |
757 | 4,449 | 1,858 | 7,064 |
| (DKKm) | 0-1 year | 1-5 years | Contractual cash flows, > 5 years incl. interest |
| Total | 8,322 | 4,867 | 835 | 14,024 |
|---|---|---|---|---|
| Interest rate derivatives |
107 | 93 | - | 200 |
| Payables to Group enterprises |
7,134 | - | - | 7,134 |
| Other payables | 163 | - | - | 163 |
| Loans and credit facilities |
918 | 4,774 | 835 | 6,527 |
| (DKKm) | 0-1 year | 1-5 years | Contractual cash flows, > 5 years incl. interest |
The analysis of expected maturity is based on contractual cash flows, including estimated interest payments. Amounts have not been discounted for which reason they cannot necessarily be reconciled to the related items of the balance sheet.
| Total financial liabilities measured at amortised cost |
11,590 | 13,343 |
|---|---|---|
| Payables to Group enterprises, etc. | 5,561 | 7,297 |
| Loans and credit facilities | 4,286 | 5,298 |
| Issued bonds measured at amortised cost |
1,743 | 748 |
| Derivative financial instruments | 111 | 193 |
| Financial liabilities: | ||
| Loans and receivables | 9,116 | 11,267 |
| Derivative financial instruments | 27 | 16 |
| Financial assets: | ||
| (DKKm) | 2013 Carrying amount |
2012 Carrying amount |
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 inputs 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.
In June 2013 DSV issued DKK 1.0 billion worth of 7-year bonds with a coupon of 3.5% p.a. The bonds are listed on NASDAQ OMX Copenhagen. Since then we have issued corporate bonds of a total of DKK 1.75 billion.
DSV obtained a corporate bond loan of DKK 750 million with a Danish pension fund in 2012. The loan is a fixed-rate bullet loan with a remaining life of 6.5 years.
DSV has no related parties with control. Related parties of DSV A/S with significant influence comprise members of the companies' boards of directors, executive boards and senior staff as well as family members of those persons. Related parties also comprise companies in which the aforementioned persons have significant interests.
No transactions were made in 2013 other than ordinary remuneration, as described in notes 5.3 and 5.4 to the consolidated financial statements. The Group had no other outstanding balances with the Board of Directors, Executive Board or senior staff.
No transactions were made in 2013 other than as stated in the income statement and notes.
See note 4.2 to the consolidated financial statements for more information.
The accounting policies of the Parent, DSV A/S, 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 this 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 are recognised in the income statement of the Parent under financials.
Banemarksvej 58 2605 Brøndby Denmark
Tel. +45 43 20 30 40 www.dsv.com
CVR-No. 58 23 35 28 37th financial year Annual Report for the year ended 31 December 2013
The Annual Report has been prepared in Danish and English. In case of discrepancies, the Danish version shall apply.
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