DSV Panalpina A/S : Announcement - Interim Financial Report Q1 2021

INTERIM FINANCIAL REPORT Q1 2021

Company Announcement No. 882

				27 April 2021
Selected key figures and ratios for the period 1 January - 31 March 2021
	Q1
(DKKm)	2021	Q1 2020	Q1 2021	Q1 2020
Key figures and ratios
Revenue	33,616	27,309	33,616	27,309
Gross profit	7,785	6,684	7,785	6,684
Operating profit (EBIT) before special items	3,067	1,566	3,067	1,566
Profit after tax	2,329	331	2,329	331
Adjusted earnings for the period	0	0	2,390	755
Adjusted free cash flow			1,690	915
Conversion ratio	39.4%	23.4%	39.4%	23.4%
Diluted adjusted earnings per share of DKK 1 for the last 12 months			33.7	19.0

Jens Bjørn Andersen, Group CEO: "Today, we are proud to announce our agreement to unite with Agility's Global Integrated Logistics. The combination of our two groups is a perfect match, and Global Integrated Logistics will add around 23% to DSV Panalpina's annual revenue and strengthen our global network, especially in the Air & Sea division. On an eventful day, we are also happy to report 106% growth in EBIT before special items in the first quarter of 2021 and an upgrade of the financial outlook for full-year 2021. The strong earnings growth in Q1 was driven by good performance in all business areas, and we benefit from cost discipline and the full-year impact from Panalpina synergies. The markets in air and sea are characterised by strong demand and tight capacity, and it takes an extraordinary effort by our staff to find good solutions for our customers under these challenging market conditions."

The agreement to acquire Agility's Global Integrated Logistics business in an all-share transaction is further described in this announcement and in Company Announcement No. 881.

Outlook for 2021

Based on the strong start to the year, the full-year outlook for 2021 previously announced is upgraded as follows:

• Operating profit before special items is expected to be in the range of DKK 11,250 - 12,000 million (previously DKK 10,500- 11,500 million).
• The effective tax rate is expected to approximate 23% (unchanged).

The financial outlook for 2021 is for DSV Panalpina stand-alone and excludes the impact from the acquisition of Global Integrated Logistics. The outlook will be updated upon closing, which is expected in Q3 2021.

Share buyback

A separate company announcement about the launch of a new share buyback programme of up to DKK 4,000 million will be issued today. The programme will run until 28 July 2021 or earlier if finalised.

Contacts

Investor Relations: Flemming Ole Nielsen, tel. [phone], [e-mail]

Investor Relations: Mads Kristian Hofmeister, tel. [phone], [e-mail]

Media: Maiken Riise Andersen, tel. [phone], [e-mail]

Yours sincerely,

DSV Panalpina A/S

DSV Panalpina A/S, Hovedgaden 630, 2640 Hedehusene, Denmark, tel. [phone], CVR No. 58233528, www.dsv.com.

DSV Panalpina Group

We provide and manage supply chain solutions for thousands of companies every day - from the small family run business to the large global corporation.

Our reach is global, yet our presence is local and close to our customers. More than 57,000 employees in more than 80 countries work passionately to deliver great customer experiences and high-quality services. Read more at www.dsv.com

Page 1 of 20

Financial highlights

		Q1 2021	Q1 2020
Results (DKKm)
Revenue		33,616	27,309
Gross profit		7,785	6,684
Operating profit before amortisation and depreciation (EBITDA) before special items		4,016	2,604
Operating profit (EBIT) before special items		3,067	1,566
Special items, costs		-	511
Net financial expenses		21	597
Profit for the period		2,329	331
Adjusted earnings for the period		2,390	755
Cash flows (DKKm)
Operating activities		2,603	1,346
Investing activities		(357)	(201)
Free cash flow		2,246	1,145
Adjusted free cash flow		1,690	915
Financing activities		(2,332)	(824)
Share buyback		(4,815)	(3,030)
Dividends distributed		(920)	(588)
Cash flow for the period		(86)	321
Financial position (DKKm)
DSV Panalpina A/S shareholders' share of equity		45,501	46,214
Non-controlling interests		(102)	(112)
Balance sheet total		101,586	96,370
Net working capital		3,646	3,532
Net interest-bearing debt		21,992	21,257
Invested capital		66,420	67,868
Gross investment in property, plant and equipment		269	220
Financial ratios (%)*
Gross margin		23.2	24.5
Operating margin		9.1	5.7
Conversion ratio		39.4	23.4
Effective tax rate		23.5	27.7
ROIC before tax		16.4	13.7
Return on equity (ROE)		13.6	10.0
Solvency ratio		44.8	48.0
Gearing ratio		1.5	2.0
Share ratios*
Earnings per share of DKK 1 for the last 12 months		27.6	14.5
Diluted adjusted earnings per share of DKK 1 for the last 12 months		33.7	19.0
Number of shares issued ('000)		230,000	235,000
Number of treasury shares ('000)		7,640	8,977
Average number of shares issued ('000) for the last 12 months		226,291	210,493
Average diluted number of shares ('000) for the last 12 months		230,911	213,892
Share price end of period (DKK)		1,244.5	618.2
Non-Financials
Number of full-time employees at 31 March		57,642	58,788
* For a definition of key figures and ratios, please refer to page 79 of the 2020 DSV Panalpina Annual Report.

Page 2 of 20 INTERIM FINANCIAL REPORT - COMPANY ANNOUNCEMENT NO. 882 - 27 April 2021

Management's commentary

The Group had a strong start to 2021 with growth in EBIT before special items of 106.3%. The significant growth in earnings was attributable to 21.3% growth in gross profit and improved conversion ratios in all divisions.

Driven by the growth in earnings, adjusted free cash flow came to DKK 1,690 million for Q1 2021, an increase of 84.7% compared to the same period last year.

FINANCIAL DEVELOPMENT 2020 - 2021
						Currency
(DKKm)					Q1 2020	translation	Growth	Growth %*	Q1 2021
Revenue					27,309	(1,124)	7,431	28.4%	33,616
Gross profit					6,684	(267)	1,368	21.3%	7,785
EBIT before special items					1,566	(79)	1,580	106.3%	3,067
Gross margin (%)					24.5				23.2
Operating margin (%)					5.7				9.1
Conversion ratio (%)					23.4				39.4
* Growth in constant currencies
Results for the period					Revenue by division, Q1 2021
Revenue
For Q1 2021, revenue amounted to DKK 33,616 million against
DKK 27,309 million last year. Revenue growth by division is
specified below:
(DKKm)	Q1 2021	Growth*
Air & Sea	22,924	45.5%
Road	8,056	3.0%
Solutions	3,609	9.0%
Group and eliminations	(973)
Total	33,616	28.4%
* Growth in constant currencies					Gross profit

The transport and logistics market volumes continue to recover after the COVID-19 crisis in 2020. For both air and sea freight, the capacity situation remains extremely tight. This is a continuation of the situation we have seen in recent quarters, which has led to record-high freight rates. The high rates were the main driver behind the growth in revenue in the Air & Sea division in Q1 2021.

The growth in the road freight and contract logistics markets accelerated during the quarter as activity picked up and comparisons from 2020 were impacted by the COVID-19 crisis. Growth in Solutions was also positively impacted by the acquisition of Prime Cargo.

Revenue was negatively impacted by currency translation of DKK 1,124 million in Q1 2021, mainly due to USD and currencies floating with USD.

For Q1 2021, gross profit amounted to DKK 7,785 million against DKK 6,684 million last year. Gross profit growth by division is specified below:

(DKKm)	Q1 2021	Growth*
Air & Sea	4,788	30.4%
Road	1,657	9.2%
Solutions	1,348	11.2%
Group and eliminations	(8)
Total	7,785	21.3%
* Growth in constant currencies

In Air & Sea the growth in gross profit was driven by improved yields (gross profit per TEU/tonne). This was partly due to benefits from the integration of Panalpina, but also due to the special market conditions with tight capacity and historically high freight rates.

Page 3 of 20 INTERIM FINANCIAL REPORT - COMPANY ANNOUNCEMENT NO. 882 - 27 April 2021

Road and Solutions realised higher gross margins than in Q1 2020. This is a continuation of the development from last year and driven by higher productivity and better utilisation of the network.

Gross profit by division, Q1 2021

The consolidated gross margin was 23.2% for Q1 2021, compared to 24.5% for Q1 2020. Both Road and Solutions achieved higher gross margins, but this was offset by a decline in Air & Sea due to the impact from pass-through revenue where higher freight rates cause lower gross margin.

Gross profit was negatively impacted by currency translation of DKK 267 million in Q1 2021.

EBIT before special items

EBIT before special items amounted to DKK 3,067 million for Q1 2021 against DKK 1,566 million last year. EBIT growth by division is specified below:

(DKKm)	Q1 2021	Growth*
Air & Sea	2,393	126.0%
Road	403	56.8%
Solutions	263	69.7%
Group and eliminations	8
Total	3,067	106.3%

* Growth in constant currencies

The growth in EBIT was driven by the increase in gross profit in all divisions and improved conversion ratios. Q1 2021 was the first quarter with full-year impact of the Panalpina integration synergies and the permanent COVID-19 cost savings initiatives.

Across the Group, EBIT before special items for Q1 2021 was positively impacted by the extraordinary market conditions and certain temporary cost savings, e.g. due to low travel activity. It should also be noted that earnings in Q1 2020 were negatively impacted by the first effects of COVID-19.

EBIT before special items was negatively impacted by currency translation of DKK 79 million in Q1 2021.

EBIT by division, Q1 2021

The conversion ratio was 39.4% for Q1 2021 (2020: 23.4%).

The improved productivity illustrates both the scalability of our internal processes and systems and strong cost management across the Group. The margin was also positively impacted by extraordinary strong yields in Air & Sea and certain temporary cost savings.

Financial items

Financial items totalled a net expense of DKK 21 million for Q1 2021, compared to DKK 597 million for the same period last year. Currency translation amounted to an income of DKK 158 million (2020: expense of DKK 407 million) and primarily relates to the currency impact from USD on intercompany loans.

(DKKm)	Q1 2021	Q1 2020
Interest on lease liabilities	119	114
Other interest cost, net	57	72
Interest on pensions	3	4
Currency translation	(158)	407
Financial expenses	21	597

Tax on profit for the period

The effective tax rate was at the expected level and came to 23.5% for Q1 2021, compared to 27.7% for Q1 2020.

Profit for the period

Profit for Q1 2021 was DKK 2,329 million, compared to DKK 331 million for the same period of 2020. The improved profit for the period was driven by higher EBIT, no special items costs (integration and restructuring) and lower net financial expenses.

Diluted adjusted earnings per share

The 12-month figure increased by 77.4% compared to last year and came to DKK 33.7 per share (2020: DKK 19.0 per share).

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Cash flow

CASH FLOW STATEMENT

(DKKm)	Q1 2021	Q1 2020
Cash flow from operating activities	2,603	1,346
Cash flow from investing activities	(357)	(201)
Free cash flow	2,246	1,145
Cash flow from financing activities	(2,332)	(824)
Cash flow for the period	(86)	321
Free cash flow	2,246	1,145
Repayment of lease liabilities (IFRS 16
impact reversed)	(745)	(785)
Special items (restructuring costs)	189	555
Adjusted free cash flow	1,690	915

Cash flow from operating activities was positively affected by higher EBITDA before special items, but this effect was slightly offset by an increase in NWC due to increased activity in the quarter.

Adjusted free cash flow for the period was DKK 1,690 million and significantly above the DKK 915 million for the same period last year.

Net working capital

On 31 March 2021, the Group's net working capital was DKK 3,646 million, compared to DKK 3,532 million on 31 March 2020.

Relative to full-year revenue, the net working capital amounted to 3.0% on 31 March 2021 (31 March 2020: 3.5%).

Optimisation of NWC continues to be a priority, but we consider the level by the end of Q1 2021 to be satisfactory, considering both seasonality and the high rate levels.

Capital structure and finances

DSV Panalpina A/S shareholders' share of equity

DSV Panalpina shareholders' share of equity was DKK 45,501 million on 31 March 2021 (DKK 47,385 million on 31 December 2020). Equity was positively impacted by the result for the period and currency translation on goodwill, but this was offset by distribution to shareholders.

DSV Panalpina reduced its share capital on 15 April 2021 through the cancellation of 6,000,000 treasury shares. Please refer to Company Announcement No. 878.

On 31 March 2021, the Company's portfolio of treasury shares was 7,639,561 shares. On 26 April 2021, the portfolio of treasury shares was 2,231,604 shares.

The solvency ratio excluding non-controlling interests was 44.8% on 31 March 2021 (31 March 2020: 48.0%).

DEVELOPMENT IN EQUITY

(DKKm)	Q1 2021	Q1 2020
Equity at 1 January	47,385	49,430
Profit for the period	2,334	328
Currency translation, foreign
enterprises	810	(467)
Allocated to shareholders	(5,735)	(3,618)
Sale of treasury shares	273	674
Other equity movements	434	(133)
Equity end of period	45,501	46,214

Net interest-bearing debt

Net interest-bearing debt amounted to DKK 21,992 million on 31 March 2021, compared to DKK 21,257 million on 31 March 2020.

On 25 February 2021, it was announced that DSV Panalpina had completed a new 10-year EUR 500 million Eurobond issue (approx. DKK 3,750 million). Please refer to Company Announcement No. 869.

The financial gearing ratio (NIBD/EBITDA) was 1.5x on 31 March 2021, compared to 2.0x last year. The main reason for the decline was the higher EBITDA. A new share buyback programme of DKK 4,000 million will be initiated and we maintain the target financial gearing ratio of below 2.0x

NIBD/EBITDA.

The weighted average duration of the Company's bonds, committed loans and credit facilities was 5.9 years on 31 March 2021, compared to 4.25 years on 31 March 2020.

Invested capital and ROIC

The Group's invested capital including goodwill and customer relationships amounted to DKK 66,420 million on 31 March 2021, compared to DKK 67,868 million on 31 March 2020. The decrease is mainly due to currency translation on goodwill.

Return on invested capital including goodwill and customer relationships was 16.4% for the 12-month period ended 31 March 2021, compared to 13.7% for the same period last year.

Return on invested capital excluding goodwill and customer relationships was 62.9% for the 12-month period ended 31 March 2021, compared to 41.8% for the same period last year.

Subsequent events

DSV Panalpina to acquire Agility's Global Integrated Logistics business

DSV Panalpina and Agility Public Warehousing Company K.S.C.P. (Agility) have reached an agreement that DSV Panalpina will acquire Agility's Global Integrated Logistics business, which is the global logistics division of Agility, in an all- share transaction by issuing 19,304,348 shares of 1 DKK/share to Agility, representing approximately 8.0% of all post- transaction outstanding shares of DSV Panalpina. Based on the DSV Panalpina share closing price of DKK 1,299.5 and an exchange rate of DKK 1.00 = USD 0.163 as of 26 April 2021,

Page 5 of 20 INTERIM FINANCIAL REPORT - COMPANY ANNOUNCEMENT NO. 882 - 27 April 2021