DSV Panalpina A/S : Announcement no. 924 - Interim Financial Report Q3 2021

INTERIM FINANCIAL REPORT Q3 2021

Company Announcement No. 924

26 October 2021

Selected key figures and ratios for the period 1 January - 30 September 2021

(DKKm)	Q3 2021	Q3 2020	YTD 2021	YTD 2020
Key figures and ratios
Revenue	49,557	28,125	121,004	84,216
Gross profit	9,823	7,252	25,941	21,322
Operating profit (EBIT) before special items	4,472	2,725	11,110	6,904
Special items, costs	154	453	154	1,479
Profit after tax	3,161	1,337	8,017	3,058
Adjusted earnings for the period	3,331	1,746	8,301	4,339
Adjusted free cash flow			3,718	5,674
Conversion ratio	45.5%	37.6%	42.8%	32.4%
Diluted adjusted earnings per share of DKK 1 for the last 12 months			43.9	21.7

Jens Bjørn Andersen, Group CEO: "In August, we completed the acquisition of Agility's Global Integrated Logistics business and took over a well-run company and were joined by a team of skilled new colleagues. The integration is off to a good start, and in the coming period our two organisations will be merged into one. The transport markets continue to be characterised by disruption and imbalances causing extraordinary challenges for both our customers and us. Under the extraordinary market conditions, we are happy to report solid results across all divisions."

Outlook for 2021

On 11 October 2021, we pre-released the Q3 2021 numbers and upgraded the outlook for 2021. The guidance for 2021 is reiterated and the expected special items regarding the integration are added:

• EBIT before special items is expected to be in the range of DKK 15,250-16,000 million
• The effective tax rate is expected to be approximately 23%
• Transaction and integration costs (special items) is expected to be in the level of DKK 500 million in 2021

Synergies and integration costs

Once fully integrated, Agility's Global Integrated Logistics business is expected to contribute approximately DKK 3,000 million (previously 2,800 million) to the combined EBIT before special items on an annual basis. The integration is expected to be completed by the end of Q3 2022 and the full-year EBIT effect is expected in 2023. The estimated EBIT impact includes the underlying result in Agility GIL and synergies from the consolidation of operations, logistics facilities, back-office functions and IT infrastructure.

Around 30% of the EBIT contribution is expected to impact the income statement in 2021, around 85% in 2022 and 100% in 2023. Total transaction and integration costs are expected in the level of DKK 1,500 million. These costs will be charged to the income statement under special items. We expect that approximately DKK 500 million of the special items (transaction and integration costs) will materialise in 2021 and the rest in 2022.

Share buyback

A separate company announcement about the launch of a new share buyback programme of up to DKK 5,000 million will be issued today. The programme will run until 8 February 2022 or earlier if finalised.

Contacts

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

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

Yours sincerely,

DSV A/S

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

DSV 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. 75,000 employees in more than 90 countries work passionately to deliver great customer experiences and high-quality services. Read more at www.dsv.com

Page 1 of 22

Financial highlights

		Q3 2021	Q3 2020		YTD 2021	YTD 2020
Results (DKKm)
Revenue		49,557		28,125		121,004		84,216
Gross profit		9,823		7,252		25,941		21,322
Operating profit before amortisation and depreciation (EBITDA) before		5,516		3,713		14,077		9,983
special items
Operating profit (EBIT) before special items		4,472		2,725		11,110		6,904
Special items, costs		154		453		154		1,479
Net financial expenses		165		478		439		1,297
Profit for the period		3,161		1,337		8,017		3,058
Adjusted earnings for the period		3,331		1,746		8,301		4,339
Cash flows (DKKm)
Operating activities						6,271		7,139
Investing activities						788		(629)
Free cash flow						7,059		6,510
Adjusted free cash flow						3,718		5,674
Share buyback						(12,715)		(3,030)
Dividends distributed						(920)		(588)
Cash flow for the period						3,739		1,116
Financial position (DKKm)
DSV A/S shareholders' share of equity						74,225		48,122
Balance sheet total						156,365		94,944
Net working capital						8,815		3,402
Net interest-bearing debt						28,316		16,599
Invested capital						100,316		65,018
Gross investment in property, plant and equipment						745		676
Financial ratios (%)*
Gross margin		19.8		25.8		21.4		25.3
Operating margin		9.0		9.7		9.2		8.2
Conversion ratio		45.5		37.6		42.8		32.4
Effective tax rate		23.9		25.5		23.8		25.9
ROIC before tax						16.6		12.9
Return on equity (ROE)						15.0		7.1
Solvency ratio						47.5		50.7
Gearing ratio						1.6		1.3
Share ratios*
Earnings per share of DKK 1 for the last 12 months						40.8		15.3
Diluted adjusted earnings per share of DKK 1 for the last 12 months						43.9		21.7
Number of shares issued ('000)						240,000		230,000
Number of treasury shares ('000)						2,351		2,110
Average number of shares issued ('000) for the last 12 months						225,348		228,016
Average diluted number of shares ('000) for the last 12 months						230,194		231,787
Share price end of period (DKK)						1,540.5		1,037.5
Non-Financials
Number of full-time employees at 30 September						79,325		56,090

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

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Management's commentary

The Group achieved a gross profit of DKK 25,941 million for the first nine months of 2021, compared to DKK 21,322 million for the same period last year. The increase was driven by higher activity across all divisions and positive impact from extraordinary market conditions on the global transport markets.

EBIT before special items for the first nine months of 2021 came to DKK 11,110 million, compared to DKK 6,904 million for the same period last year. The increase was attributable to a combination of increased gross profit and higher productivity, reflected in a record-high conversion ratio of 42.8% for the Group.

Agility's Global Integrated Logistics business was included in the consolidated results as per 16 August 2021.

For the rolling 12-month period ended 30 September 2021, the Group achieved a 102% increase in diluted adjusted earnings per share.

FINANCIAL DEVELOPMENT 2020 - 2021
			Change
		Currency
(DKKm)	Q3 2020	translation	Agility GIL	Growth	Growth %*	Q3 2021
Revenue	28,125	183	4,395	16,854	59.5%	49,557
Gross profit	7,252	68	866	1,637	22.4%	9,823
EBIT before special items	2,725	30	270	1,447	52.5%	4,472
Gross margin (%)	25.8					19.8
Operating margin (%)	9.7					9.0
Conversion ratio (%)	37.6					45.5
			Change
		Currency
(DKKm)	YTD 2020	translation	Agility GIL	Growth	Growth %*	YTD 2021
Revenue	84,216	(1,569)	4,395	33,962	41.1%	121,004
Gross profit	21,322	(345)	866	4,098	19.5%	25,941
EBIT before special items	6,904	(119)	270	4,055	59.8%	11,110
Gross margin (%)	25.3					21.4
Operating margin (%)	8.2					9.2
Conversion ratio (%)	32.4					42.8
* In constant currencies excluding GIL impact

Integration of Agility's Global Integrated Logistics business

The acquisition of Agility's Global Integrated Logistics business (GIL) was closed on 16 August 2021, as of which date GIL has been included in the consolidated financial statements of DSV. DSV acquired GIL in an all-share transaction, and a total of 19,304,348 DSV shares was used as consideration. The enterprise value of the transaction was approximately DKK 30.2 billion.

GIL is a significant global provider of supply chain solutions, employing more than 17,000 employees globally and with a strong presence in the Middle East and APAC.

The business combination had a significant impact on the consolidated balance sheet of the Group, but only limited impact on the income statement year-to-date in 2021.

We have initiated the operational and legal integration of GIL, while focusing on maintaining a high service level towards our customers in the transition phase. Once fully integrated, GIL is expected to contribute with approximately DKK 3,000 million (previously 2,800 million) to the combined EBIT before special items on an annual basis. The EBIT impact includes synergies from the consolidation of operations, logistics facilities, back- office functions and IT infrastructure, and we expect full-year effect from 2023.

Around 30% of the EBIT contribution is expected to impact the income statement in 2021, around 85% in 2022 and 100% in

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2023. Total transaction and integration costs are expected in the level of DKK 1,500 million. These costs will be charged to the income statement under special items. We expect that approximately DKK 500 million of the transaction and integration costs will materialise in 2021 and the rest in 2022.

The GIL activities have been included in the existing DSV divisional structure. The acquisition will have the largest impact on the Air & Sea division. Approximately 75-80% of the activities of GIL are air and sea freight related and the rest are Road and Solutions services. For further information, please see note 6.

Results for the period

Revenue

For the first nine months of 2021, revenue amounted to DKK 121,004 million, compared to DKK 84,216 million last year. Adjusted for exchange rate fluctuations and excluding GIL, growth for the nine-month period was 41.1%.

Revenue by division compared to same period last year is specified below:

			YTD
(DKKm)	Q3 2021	Growth*	2021	Growth*
Air & Sea	36,861	85.0%	85,733	57.2%
Road	8,783	12.1%	25,502	12.5%
Solutions	4,739	20.3%	12,345	17.6%
Group and
eliminations	(826)		(2,576)
Total	49,557	59.5%	121,004	41.1%

* In constant currencies excluding GIL impact

The revenue growth in Air & Sea was driven by higher freight rates and higher transport volumes, mainly in air freight. The market was negatively impacted by COVID-19 in 2020, but activity levels have recovered in 2021 in most markets, most significantly on the Trans-Pacific trade lanes.

The pandemic continues to create operational disruption due to consequences of the COVID-19 lockdowns, 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 the situation has worsened during Q3 2021 for both air and sea freight.

The revenue contribution from GIL (1.5 months) came to DKK 4,395 million in Q3 2021, of which DKK 3,580 million was included in Air & Sea and was impacted by the same market factors.

Road and Solutions have also achieved strong growth in revenue, driven by a continued recovery of volumes compared to 2020 and market share gains in both divisions. Growth in Road and Solutions was also positively impacted by the addition of GIL and a couple of smaller acquisitions (Prime Cargo and Globeflight).

Revenue by division, YTD 2021

Gross profit

For the first nine months of 2021, gross profit amounted to DKK 25,941 million, compared to DKK 21,322 million last year. In constant currencies and excluding GIL, increase in gross profit was 19.5%.

Gross profit by division compared to same period last year is specified below:

			YTD
(DKKm)	Q3 2021	Growth*	2021	Growth*
Air & Sea	6,314	31.3%	16,244	24.7%
Road	1,745	5.9%	5,170	12.4%
Solutions	1,717	13.5%	4,442	11.1%
Group and
eliminations	47		85
Total	9,823	22.4%	25,941	19.5%

* In constant currencies excluding GIL impact

The increase in Air & Sea was mainly driven by volume growth in air freight and improved yields in sea freight. The yields were positively impacted by the extraordinary market conditions characterised by volatility, tight capacity and high freight rates.

The gross profit contribution from GIL (1.5 months) came to DKK 866 million in Q3 2021, of which DKK 624 million were included in Air & Sea. Similar to DSV, the gross profit from the GIL activities was positively impacted by the market conditions.

In Road and Solutions, the increase in gross profit was driven by growth in activity compared to 2020, as markets have generally recovered.

Gross profit by division, YTD 2021

The gross margin was 21.4% for the first nine months, compared to 25.3% for the same period last year. The decline mainly relates to Air & Sea, where higher freight rates cause higher pass-through revenue and thus a lower gross margin. Furthermore, the GIL business carries lower average gross

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margin.

EBIT before special items

EBIT before special items amounted to DKK 11,110 million for the first nine months of 2021, compared to DKK 6,904 million last year. In constant currencies and excluding GIL, increase in EBIT before special items was 59.8%.

EBIT by division compared to same period last year is specified below:

(DKKm)			YTD
Q3 2021	Growth*	2021	Growth*
Air & Sea	3,521	65.1%	8,757	67.5%
Road	465	(1.1%)	1,344	36.7%
Solutions	486	39.5%	1,027	38.1%
Group and
eliminations	-		(18)
Total	4,472	52.5%	11,110	59.8%

* In constant currencies excluding GIL impact

The increase in EBIT was driven by the increase in gross profit in all divisions combined with the effect of continued strong cost management and GIL activity.

The EBIT before special items from GIL (1.5 months) came to DKK 270 million in Q3 2021, of which DKK 198 million were included in Air & Sea. The EBIT contribution from GIL in Q3 was positively impacted by the extraordinary logistics markets and does not reflect normalised full-year result.

Conversion ratio for the Group reached 42.8% for the first nine months, compared to 32.4% for the same period last year. The increase was driven by the full-year impact of Panalpina synergies and cost savings, but was also positively impacted by the current extraordinary market conditions.

EBIT by division, YTD 2021

Transaction and integration costs

Transaction and integration costs (reported under special items, costs) totalled DKK 154 million for the first nine months of 2021 (2020: DKK 1,479 million) and consist of transaction and integration costs related to the acquisition of GIL.

Financial items

Financial items totalled a net expense of DKK 439 million for the first nine months, compared to DKK 1,297 million for the same period last year.

Foreign exchange adjustments amounted to an income of DKK 148 million (first nine months of 2020: expense of DKK 797

million) and were primarily related to intercompany loans between DSV entities in different countries and had no cash impact.

(DKKm)	YTD 2021	YTD 2020
Interest on lease liabilities	352	318
Other interest cost, net	224	165
Interest on pensions	11	17
Foreign exchange adjustments	(148)	797
Financial expenses	439	1,297

Tax on profit for the period

The effective tax rate came to 23.8% for the first nine months, compared to 25.9% for the same period last year. The effective tax rate for the Group is normally around 23%; however, the effective tax rate can be impacted by non-deductible transactions and integration costs during large integrations.

Profit for the period

Profit for the first nine months of 2021 was DKK 8,017 million, compared to DKK 3,058 million for the same period of 2020. The improved profit for the period was driven by higher EBIT and lower net financial expenses.

Diluted adjusted earnings per share

The rolling 12-month figure increased by 102% compared to last year and came to DKK 43.9 per share (2020: DKK 21.7 per share). The capital increase carried out in August 2021 has not yet fully impacted the average number of shares. The impact from the capital increase will gradually materialise over a 12- month period.

Cash flow

CASH FLOW STATEMENT

(DKKm)	YTD 2021	YTD 2020
Cash flow from operating activities	6,271	7,139
Cash flow from investing activities	788	(629)
Free cash flow	7,059	6,510
Cash flow from financing activities	(3,320)	(5,394)
Cash flow for the period	3,739	1,116
Free cash flow	7,059	6,510
Repayment of lease liabilities	(2,261)	(2,342)
Net acquisition of subsidiaries and activities	(1,631)	-
Special items (restructuring costs)	551	1,506
Adjusted free cash flow	3,718	5,674

Cash flow from operating activities was positively affected by higher EBITDA before special items, offset by an increase in NWC mainly caused by the high freight rates resulting in the significant growth in trade receivables during 2021.

Cash flow from investing activities amounted to DKK 788 million for the first nine months of 2021, compared to a negative cash flow of DKK 629 million for the same period of 2020. The development is due to the Agility GIL transaction, where a net cash position of DKK 1,819 million was included as positive cash flow from acquisition.

Page 5 of 22 INTERIM FINANCIAL REPORT - COMPANY ANNOUNCEMENT NO. 924 - 26 October 2021