DSV Panalpina A/S : Announcement no. 900 - Interim Financial Report H1 2021

INTERIM FINANCIAL REPORT H1 2021

Company Announcement No. 900

				29 July 2021
Selected key figures and ratios for the period 1 January - 30 June 2021
(DKKm)	Q2 2021	Q2 2020	YTD 2021	YTD 2020
Key figures and ratios
Revenue	37,831	28,782	71,447	56,091
Gross profit	8,333	7,386	16,118	14,070
Operating profit (EBIT) before special items	3,571	2,613	6,638	4,179
Profit after tax	2,527	1,390	4,856	1,721
Adjusted earnings for the period	2,580	1,838	4,970	2,593
Adjusted free cash flow			2,817	3,356
Conversion ratio	42.9%	35.4%	41.2%	29.7%
Diluted adjusted earnings per share of DKK 1 for the last 12 months			37.1	20.8

Jens Bjørn Andersen, Group CEO: "We are proud to report strong results for the first six months of 2021, where we deliver an EBIT result equivalent to our full-year EBIT of 2019. This is a clear testament to the successful integration of Panalpina and a strong performance by our organisation in an extraordinary market environment. The logistics markets continue to be characterised by tight capacity, congestion and low visibility, and we are doing our best to find solutions for our customers and keep their supply chains flowing.

We still expect to close the Agility Global Integrated Logistics transaction in Q3 2021. The preparations for the integration are tracking the plans, and we look forward to combining the two global networks and creating an industry leader in logistics."

Outlook for 2021

Based on the strong financial performance for the first six months of 2021 and a positive outlook for the remainder of the year, we upgrade the full-year outlook for 2021 as follows:

• EBIT before special items is expected to be in the range of DKK 12,500 - 13,000 million (previously DKK 11,750-12,500 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 Agility's Global Integrated Logistics business. The financial 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 25 October 2021 or earlier if finalised.

Contacts

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

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

Investor Relations: Daniela Veleva, 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 21

Financial highlights

		Q2 2021	Q2 2020		YTD 2021	YTD 2020
Results (DKKm)
Revenue		37,831		28,782		71,447		56,091
Gross profit		8,333		7,386		16,118		14,070
Operating profit before amortisation and depreciation (EBITDA) before		4,545		3,666		8,561		6,270
special items
Operating profit (EBIT) before special items		3,571		2,613		6,638		4,179
Special items, costs		-		515		-		1,026
Net financial expenses		253		222		274		819
Profit for the period		2,527		1,390		4,856		1,721
Adjusted earnings for the period		2,580		1,838		4,970		2,593
Cash flows (DKKm)
Operating activities						4,491		4,373
Investing activities						(711)		(417)
Free cash flow						3,780		3,956
Adjusted free cash flow						2,817		3,356
Share buyback						(8,603)		(3,030)
Dividends distributed						(920)		(588)
Cash flow for the period						(1,912)		192
Financial position (DKKm)
DSV Panalpina A/S shareholders' share of equity						45,029		47,326
Non-controlling interests						(94)		(97)
Balance sheet total						102,147		95,013
Net working capital						5,144		3,367
Net interest-bearing debt						23,934		18,874
Invested capital						67,690		66,546
Gross investment in property, plant and equipment						407		383
Financial ratios (%)*
Gross margin		22.0		25.7		22.6		25.1
Operating margin		9.4		9.1		9.3		7.5
Conversion ratio		42.9		35.4		41.2		29.7
Effective tax rate		23.8		25.9		23.7		26.3
ROIC before tax						17.8		16.0
Return on equity (ROE)						16.0		10.5
Solvency ratio						44.1		49.8
Gearing ratio						1.5		1.6
Share ratios*
Earnings per share of DKK 1 for the last 12 months						32.8		14.8
Diluted adjusted earnings per share of DKK 1 for the last 12 months						37.1		20.8
Number of shares issued ('000)						224,000		230,000
Number of treasury shares ('000)						3,451		2,738
Average number of shares issued ('000) for the last 12 months						225,035		222,381
Average diluted number of shares ('000) for the last 12 months						229,596		225,623
Share price end of period (DKK)						1,462.5		809.8
Non-Financials
Number of full-time employees at 30 June						59,871		53,399

* For a definition of key figures and ratios, please refer to page 79 of the 2020 DSV Panalpina Annual Report.

Page 2 of 21 INTERIM FINANCIAL REPORT - COMPANY ANNOUNCEMENT NO. 900 - 29 July 2021

Management's commentary

The Group achieved a gross profit of DKK 16,118 million for the first six months of 2021, a growth of 18.0% compared to the same period last year. The growth was driven by higher activity and extraordinary market conditions following COVID-19.

EBIT before special items for H1 2021 came to DKK 6,638 million, up by 64.7%. The growth was attributable to the growth in gross profit and a higher productivity, reflected in a record-high conversion ratio of 41.2% for the Group.

For the rolling 12-month period ended 30 June 2021, the Group achieved 78.4% growth in diluted and adjusted earnings per share.

FINANCIAL DEVELOPMENT 2020 - 2021
(DKKm)		Currency
Q2 2020	translation	Growth	Growth %*	Q2 2021
Revenue	28,782	(628)	9,677	34.4%	37,831
Gross profit	7,386	(146)	1,093	15.1%	8,333
EBIT before special items	2,613	(70)	1,028	40.4%	3,571
Gross margin (%)	25.7				22.0
Operating margin (%)	9.1				9.4
Conversion ratio (%)	35.4				42.9
		Currency
(DKKm)	YTD 2020	translation	Growth	Growth %*	YTD 2021
Revenue	56,091	(1,752)	17,108	31.5%	71,447
Gross profit	14,070	(413)	2,461	18.0%	16,118
EBIT before special items	4,179	(148)	2,607	64.7%	6,638
Gross margin (%)	25.1				22.6
Operating margin (%)	7.5				9.3
Conversion ratio (%)	29.7				41.2
* Growth including M&A and in constant currencies

Acquisition of Agility's Global Integrated Logistics business

On 27 April 2021, DSV Panalpina announced an agreement to acquire Agility's Global Integrated Logistics business (GIL). Closing of the transaction is subject to relevant regulatory approvals and the overall steps in combining DSV and GIL are progressing according to plan. Closing is expected in Q3 2021. DSV Panalpina will acquire GIL, the global logistics division of Agility, in an all-share transaction.

GIL is a leading global transport and logistics provider with a strong footprint in emerging markets. GIL generated revenues of approximately USD 4.0 billion (DKK 26.0 billion) in 2020 and operates a global network across 100+ countries (including agents). GIL has a global workforce of approximately 17,000 people.

Based on 2020 annual revenue and headcount the combination with GIL is expected to increase DSV Panalpina's annual revenue by approximately 23%, which will rank the combined company in the freight forwarding industry top three with a pro forma revenue of approximately USD 22 billion (DKK 142 billion) and a combined workforce of more than 70,000 employees.

Transactional overview and further details of the agreement are provided in DSV Panalpina Company Announcement No. 881.

Results for the period

Revenue

For the first six months of 2021, revenue amounted to DKK 71,447 million, compared to DKK 56,091 million last year.

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Revenue growth by division is specified below:

(DKKm)			YTD
Q2 2021	Growth*	2021	Growth*
Air & Sea	25,948	40.3%	48,872	42.7%
Road	8,663	23.4%	16,719	12.7%
Solutions	3,997	23.5%	7,606	16.2%
Group and
eliminations	(777)		(1,750)
Total	37,831	34.4%	71,447	31.5%

* Growth including M&A and in constant currencies

In Air & Sea the revenue growth was driven by higher freight rates and also by double-digit growth in transported volumes, especially in Q2 2021. The market was negatively impacted by COVID-19 in Q2 2020, but activity levels have recovered in most markets, most significantly on the Trans-Pacific trade lanes.

The pandemic continues to create congestion at ports and lack of equipment, which impact available capacity for both air freight and sea freight. This has led to record-high freight rates and for sea freight the situation has worsened during Q2 2021.

Road and Solutions also saw strong growth in revenue, driven by recovery of volumes after the low point in Q2 2020. Growth in Road and Solutions was also positively impacted by a couple of small acquisitions (Prime Cargo and Globeflight).

Revenue by division, H1 2021

Gross profit

For the first six months of 2021, gross profit amounted to DKK 16,118 million, compared to DKK 14,070 million last year. Gross profit growth by division is specified below:

(DKKm)			YTD
Q2 2021	Growth*	2021	Growth*
Air & Sea	5,142	13.9%	9,930	21.3%
Road	1,768	22.9%	3,425	15.9%
Solutions	1,377	8.6%	2,725	9.9%
Group and
eliminations	46		38
Total	8,333	15.1%	16,118	18.0%

* Growth including M&A and in constant currencies

In Air & Sea, the growth in gross profit was driven by improved yields, mainly in sea freight, and in Q2 2021 also by growth in volumes. The yields were positively impacted by the extraordinary market conditions with tight capacity and high freight rates.

In Road and Solutions, the growth in gross profit was driven by a recovery in activity-levels after the lock-downs in 2020.

Gross profit by division, H1 2021

The gross margin was 22.6% for H1 2021, compared to 25.1% for the same period last year. The decline relates to Air & Sea and the impact from pass-through revenue where higher freight rates cause a lower gross margin.

EBIT before special items

EBIT before special items amounted to DKK 6,638 million for the first six months of 2021 compared to DKK 4,179 million last year. EBIT growth by division is specified below:

(DKKm)			YTD
Q2 2021	Growth*	2021	Growth*
Air & Sea	2,843	39.5%	5,236	69.0%
Road	476	82.4%	879	69.7%
Solutions	278	15.8%	541	37.0%
Group and
eliminations	(26)		(18)
Total	3,571	40.4%	6,638	64.7%

* Growth including M&A and in constant currencies

The growth in EBIT was driven by the increase in gross profit in all divisions combined with the effect of cost synergies and savings realised in prior periods.

Conversion ratio for the Group reached 41.2% for H1 2021 against 29.7% for the same period last year. The increase was driven by the full-year impact of synergies and cost savings but is also impacted by the current extraordinary market conditions.

EBIT by division, H1 2021

The improvement reflects the full-year impact of the Panalpina integration synergies and the Group's ability to navigate the current extraordinary market conditions. This is a result of a

Page 4 of 21 INTERIM FINANCIAL REPORT - COMPANY ANNOUNCEMENT NO. 900 - 29 July 2021

highly skilled organisation, scalability of internal processes and systems as well as strong cost management.

Financial items

Financial items totalled a net expense of DKK 274 million for H1 2021, compared to DKK 819 million for the same period last year.

Foreign exchange adjustments amounted to an income of DKK 82 million (H1 2020: expense of DKK 487 million) and was primarily related to intercompany loans and had no cash impact.

(DKKm)	YTD 2021	YTD 2020
Interest on lease liabilities	227	209
Other interest cost, net	122	114
Interest on pensions	7	9
Foreign exchange adjustments	(82)	487
Financial expenses	274	819

Tax on profit for the period

The effective tax rate was at the expected level and came to 23.7% for H1 2021, compared to 26.3% for H1 2020. The level of around 23% is a normalised level in a year without special items (related to integrations or restructuring programmes) or other non-recurring items.

Profit for the period

Profit for the first six months of 2021 was DKK 4,856 million, compared to DKK 1,721 million for the same period of 2020. The improved profit for the period was driven by higher EBIT, no special items and lower net financial expenses.

Diluted adjusted earnings per share

The rolling 12-month figure increased by 78.4% compared to last year and came to DKK 37.1 per share (2020: DKK 20.8 per share).

Cash flow

CASH FLOW STATEMENT

(DKKm)	YTD 2021	YTD 2020
Cash flow from operating activities	4,491	4,373
Cash flow from investing activities	(711)	(417)
Free cash flow	3,780	3,956
Cash flow from financing activities	(5,692)	(3,764)
Cash flow for the period	(1,912)	192
Free cash flow	3,780	3,956
Repayment of lease liabilities (IFRS 16
impact reversed)	(1,481)	(1,564)
Net acquisition of subsidiaries and activities	193	-
Special items (restructuring costs)	325	964
Adjusted free cash flow	2,817	3,356

Cash flow from operating activities was positively affected by higher EBITDA before special items, but this was offset by an increase in NWC due to higher revenue during H1 2021.

During 2021, DSV acquired Globeflight, a Road freight business based in South Africa.

Net working capital

On 30 June 2021, the Group's net working capital was DKK 5,144 million, compared to DKK 3,367 million on 30 June 2020.

Relative to full-year revenue, the net working capital amounted to 3.9% on 30 June 2021 (30 June 2020: 3.0%). Q2-20 was impacted by extended payment-terms on VAT, duties and other payments to authorities in certain countries.

During H1 2021 NWC has been impacted by higher activity across all divisions, but also by changes in the activity mix. Driven by higher volumes and rate increases, the Air & Sea division achieved the highest growth rate in H1 2021 and the division generally has a higher NWC than the other divisions.

Furthermore, funds tied up in a specific property development have temporarily increased our NWC with approximately DKK 900 million on 30 June 2021. The facility will be divested in Q4 2021 and adjusted for the above the underlying NWC would be 3.2% of full-year revenue.

Capital structure and finances

DSV Panalpina A/S shareholders' share of equity

DSV Panalpina shareholders' share of equity was DKK 45,029 million on 30 June 2021 (DKK 47,385 million on 31 December 2020). Equity decreased due to distribution to shareholders which was partly offset by profit for the period and currency translation.

On 30 June 2021, the Company's portfolio of treasury shares was 3,450,769 shares. On 28 July 2021, the portfolio of treasury shares was 4,326,844 shares.

On 15 April 2021, the share capital was reduced to DKK 224 million through the cancellation of 6 million treasury shares of DKK 1.

The solvency ratio excluding non-controlling interests was 44.1% on 30 June 2021 (30 June 2020: 49.8%).

DEVELOPMENT IN EQUITY

(DKKm)	YTD 2021	YTD 2020
Equity at 1 January	47,385	49,430
Profit for the period	4,854	1,713
Currency translation, foreign
enterprises	864	(1,347)
Allocated to shareholders	(9,523)	(3,618)
Sale of treasury shares	649	1,098
Other equity movements	800	50
Equity end of period	45,029	47,326

Net interest-bearing debt

Net interest-bearing debt amounted to DKK 23,934 million on 30 June 2021, compared to DKK 18,874 million on 30 June 2020.

On 25 February 2021, a 10-year EUR 500 million Eurobond (approximately DKK 3,750) million was issued.

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