PERSPECTIVES ON CSR DFDS GROUP September 2019
Disclaimer The statements about the future in this announcement contain risks and uncertainties. This entails that actual developments may diverge significantly from statements about the future. 2
Content • IR and CSR Søren Brøndholt Nielsen, Head of IR & Corporate Planning • DFDS’ CSR strategy Sofie Hebeltoft, Head of CSR • CSR from a Board perspective Claus Hemmingsen, Chair of DFDS’ Board of Directors 3
DFDS’ business model builds on 3 core activities Ferry routes Door-door solutions Contract logistics Catchment area A Pickup point Port terminal A Port terminal A Freight & passengers Port terminal B Port terminal B Delivery point Catchment area B 4
DFDS’ ferry and logistics network • DKK 16bn revenue • DKK 3.6bn EBITDA • 8,000+ employees • 23 ferry routes – incl. 9 passenger routes • 8 port terminals • 35 logistics locations 5
Roll on, roll off • Ro-ro/ro-pax shipping: roll on, roll off of freight units and passenger cars • Routes carry both unaccompanied and accompanied trailers • Other types of cargo, e.g. heavy industrial goods and containers, are placed on carrying equipment (mafis) and tugged on to the ship 6
FERRY TYPES Day ferry (ro-pax), Channel Freight ferry (ro-ro) Cruise ferry Combined freight and passenger ferry (ro-pax)
Our customers: Forwarders, industrials and passengers DFDS' three main customer groups, % of revenue Passengers Manufacturers 17% and retailers 36% Forwarders and hauliers 47% 8
DFDS structure, ownership and earnings split DFDS Group DKK bn Revenue 2018 per division 18 People & Ships Finance 16 14 12 11.1 Ferry Division Ferry Division Logistics Division 10 Logistics Division 8 6 Eliminations and other • 23 ferry routes – • Door-door transport 4 5.3 freight and • Contract logistics 2 0 passengers • 5,600 trailers and -2 • 57 ferries 3,500 containers • 8 port terminals • 2 sideport ships and EBITDA 2018 per division VSA/SCA* DKK bn 4.0 3.5 DFDS facts Shareholder structure 3.0 2.5 • Founded in 1866 • Lauritzen: 42% Ferry Division 28.6% margin 3.2 2.0 • Activities in 20 • Free float: 56% Logistics Division 1.5 European countries, • Nasdaq Copenhagen Non-allocated items 1.0 Turkey and Tunisia • Foreign ownership 8.1% margin 0.5 0.4 • 8,000 employees share: ~30% 0.0 -0.5 9 *Vessel sharing agreements/slot charter agreements on container ships
DFDS key figures – IFRS 16 applied from 2018 Revenue EBITDA & margin before special items DKK bn Margi rgin, % DKK bn 4.5 24 18 4.0 22 16 3.5 20 14 12 3.0 18 10 2.5 16 8 2.0 14 6 1.5 12 4 1.0 10 2 0.5 8 0 0.0 6 2015 2016 2017 2018 Q2 2019 LTM 2015 2016 2017 2018 Q2 2019 LTM Ferry Logistics Operating cash flow & NIBD/EBITDA Invested capital & ROIC before special items RO ROIC, C, % NIBD/E /EBITDA DKK bn Inv nv cap, p, DKK bn 3.5 3.5 24 20 22 18 3.0 3.0 20 16 18 2.5 2.5 14 16 12 14 2.0 2.0 12 10 1.5 1.5 10 8 8 6 1.0 1.0 6 4 4 0.5 0.5 2 2 0 0 0.0 0.0 2015 2016 2017 2018 Q2 2019 LTM 2015 2016 2017 2018 Q2 2019 LTM 10
IR AND CSR . 11
IR and CSR • Almost zero focus on CSR from analysts • Limited focus from investors – how are they ‘incentivised’? • A few exceptions • Questions concern mostly profit risk related to CSR-driven changes • Push or pull CSR-agenda — other topics in focus, e.g. Brexit and Turkish market development • Investment criteria seem overwhelmingly to be financial • Company size may shift focus to CSR 12
DFDS’ CSR STRATEGY . 13
The CSR journey in DFDS • Dedicated resource responsible for environmental issues for +15 years • Investments in scrubbers since 2009 • Group CSR strategy in 2018 • Innovative collaborations towards zero-emission 14
DFDS’ CSR journey • Nature of business has always fostered a high level of responsibility • Annual consumption of around 700,000 tons of bunker • Dedicated resource responsible for environmental issues for +15 years • Investment in scrubber development since 2009, implemented 2015 • Group CSR strategy developed and approved in 2018 • Focus on innovative collaborations towards zero- emissions 15
DFDS’ current CSR reporting • Annual CSR report covering: • Environment • Social and employee conditions • Human rights • Bribery and corruption • CSR strategy - underlying ambitions: • CO2 • Health & Safety • Gender in top management • Bunker consumption 16
DFDS’ possible future CSR reporting • SDG’s • CO2/unit • Gender split on all levels • Renewable energy • Recycling and waste management 17
Focus on employee engagement • CSR portfolio • Internal communication • SoMe activity 18
External reporting needs keep on increasing Customer requests Our experience 19
External reporting needs keep on increasing Customer requests via Investor requests via benchmark tools benchmark tools Our experience Investor analysis on Benchmark related to the industry or market public information 20
External reporting needs keep on increasing Lack of standards Time consuming and alignment Our experience Prioritisation and Value adding navigation 21
BOARD PERSPECTIVE . 22
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Board involvement in DFDS’ CSR development Board responsibilities include: • Monitoring development in society • Engaging Management and setting the agenda • Support Management, issue mandate to act/invest/change Board focus in DFDS: • Marine, Land and Employee Safety (HSSE) • The Organisation, Employees and working conditions • The 17 Global Sustainable Development Goals 24
External demands on Board for CSR development • Demands are mostly “soft” and not mandatory requirements • Board interprets and filters what happens in communities around us • Community demands not formalised - need to be filtered and assessed in relation to DFDS • Investor demands rarely expressed and seldom discussed • Employee demands often the most clear and worthwhile listening to • Board needs to act responsibly , safeguarding the overall sustainability of the company • Balance CSR Investments (time, money, partnerships etc) with Outcome (impact, image, profitability) 25
Management of engagement between Board and Management • Ideally CSR/Sustainability is an integral part of the interaction: • Place CSR/Sustainability firmly on the Board’s agenda • Formally include Sustainability in the Board’s Annual Wheel • Engage next level management, i.e. below C-suite • Place appropriate attention to the CSR/Sustainability reporting: • Goal setting, medium and long term • Reporting granularity • Follow up on outcomes 26
Keep balanced sector perspective in mind • DFDS is part of the infrastructure , both sea transport and logistics • Environmental footprint from emissions is key impact • Transport and logistics — on the other hand — enables trade and travel among nations, people and businesses • Positive impact on communities all over the world • Transport and logistics supports the social SDG’, e.g.: – No Poverty, Zero Hunger, Quality Education, Gender Equality, Decent Work & Economic Growth 27
Example 1 – Investment in MASH Energy • MASH Energy produces biofuel from agricultural waste • The biofuel is CO2 neutral and can be used in ships • DKK 10m investment for potential 24% ownership • CSR investment criteria vs traditional financial criteria 28
DFDS invests to improve air quality – key criteria Develop a sustainable and commercially viable marine biofuel to reduce environmental impact Scale up production to make it a serious alternative to fossil fuels Replace fossil fuels on DFDS vessels and become CO2 neutral without changes to engines and equipment 29
Example 2: Energy 2.0: New propulsion systems underway, partly driven by regulatory developments 30
Example 2 – Investment in long term ferry assets • DKK 1bn investment in renewal of Amsterdam-Newcastle ferries • 30 year plus ferries swopped for ferries with 15-year lifetime • 30-40 year lifetime for a new ferry • 5-10 year horizon before new standard for ferry propulsion system likely to emerge 31
Example 3 – collaborative strategy for zero-emissions • Huge task to transform energy infrastructure of transport sector • DFDS a niche European company • Independent strategy not a realistic option • DFDS part of ZEEDS project with complementary partners • Task: To develop infrastructure for green bunkering 32
Zero Emission Energy Distribution at Sea 33
Concept builds on renewable energy, fuel production and autonomous distribution – all at sea All based on known technology 34
74 wind turbines required to supply each hub. Upper deck ammonia production facility, lower deck hydrogen production from water for upper deck process 35
36 The DFDS network 8.000 employees 5.000 trailers 60 vessels 10 terminals 36
EPV: Energy providing vessels tank from bunkering bouy 37
Bunkering takes 2 hours at 6 knot speed Each hub can supply 147 ships with their annual energy consumption 38
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