Ladies and gentlemen, welcome to the DFDS conference call. I am George, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star one on your telephones. For operator assistance, please press star zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Torben Carlsen, CEO. Please go ahead, sir.
Thank you very much, and welcome to everybody. Apologies for the short notice to join this call. I'm joined today by Karina Deacon, our CFO, and Niklas Andersson, our head of our logistics business. If we turn to page three, we have some highlights of the transaction. It's a transport network with DKK 3.5 billion revenues, 3,700 employees. Once the transaction is approved by the EU, the competition authorities will transfer to DFDS. The acquisition replicates our ferry road business model in Northern Europe, now also to cover the Mediterranean region. We get access to end customers in the high-growth Turkey-Europe transport market, and with high growth, expectations are around 14% annual growth until 2028, in line with also the previous years.
The financial performance of the acquired network is stressed by the overcapacity that we've also seen in the remaining markets throughout Europe, but we have a plan, we believe, where we, with our existing colleagues and our new colleagues, will be able to get back to acceptable income levels after 2024. We are now in a period where we plan the integration, and we, of course, have restrictions on what we can do during this period, but we will spend the time wisely making sure that day one we are ready to kick off the integration plans.
If we move to page four, and I believe you may need to double-click to show the full page four, operator, then you've seen this slide during our Capital Market Day where we've had the expansion period from 2018 to 2023 and where Ekol fits into that expansion period, although we've only managed to sign the deal in 2024. And then, of course, we'll continue to focus on unlocking value from 2024 to 2026 and going into green transformation mode up until the end of this decade. Moving to page five, and again, I think you may need to double-click to show the whole page five.
We show how our model with freight routes, where we combine freight and where we do freight solo, as is in the case in the Mediterranean, and where we operate port terminals in combination with our door-to-door full-load transports, our part-load transports, and our complementary rail services and the complementary logistics solutions with varying degree of implementation around our network. We see that Ekol fits really, really nicely into this business model and this strategy. Ekol is the largest customer on our Mediterranean ferry network. They are the largest customer in our rail that connects Trieste and Sète to Northern Europe, Germany, and U.K... There are a number of very interesting customers' logos in Ekol's portfolio that we now get either further access to or new access to together with the existing business.
Moving to page six, looking at the transport market between Turkey and Europe, we expect with these growth rates that the market between 2023 and 2028 will double almost at this relatively stable rate at 14% annual growth. When we look at the different segments, then road is growing with a slower pace than sea, and therefore the market shares are changing with an increasing sea market share. This is, of course, not only Ro-Ro; this is also container and other modes of sea transport. But we expect this trend to continue also during this period. So this was a little bit background, and with that, Niklas on page seven forward will take us through what the company is and why this is an interesting company. Over to you, Niklas.
Thank you, Torben. As it says in the headlines, Ekol Logistics, the leading international transport network in Turkey, where the network offers full-load and part-load transports with a ratio of 60/40, as well as complementary service such as customs and other services as well. We look at the network. We see an increase of cargo control in BU Sète, which extends the DFDS operational model to Turkey by combining the ferry and logistics capabilities in line with remaining ferry network. Also, geographical expansion of logistics and a little bit to what Torben talked about on previous slides, we are expanding DFDS logistics to a high-growth market, and we expect future growth rates to be accelerated by near-shoring trends.
It's a complementary geographical footprint, the potential to create a pan-European network creating transport corridors in Western Europe and Eastern Europe for the existing network, DFDS Logistics to provide backloads to the existing Ekol network and to fill that network with backloads and have a better balance, and also potential for optimizing the international operations by consolidating in the network as well. Of course, all in all, a strong platform with value creation potential. With the size and the industry focus, which I will come into in the next slide, we see it's a perfect match to DFDS and DFDS Logistics. Next slide, please. Here you can see as well on the customer portfolio for Ekol, you can't see that, but I will allude to it. It's mainly European and global companies.
They are with production or assembly plants in Turkey and in Europe, connecting the very important route between the two countries, or Turkey and Europe. Primary sectors served are automotive, industrial parts, and textile and garments. And automotive and textile customers have highest revenue per customer, and combined revenue exceeds 60% of these different segment revenues. Next slide, please. As Torben alluded to, financial performance became challenged in 2023, and the revenue were lowered in 2023 to EUR 468 million due to challenging market conditions and some loss of market share. And the EBIT margin was 2.5% in 2023 as network utilization declined, where the adoption of the total network, where you can see on the right as well with the trucks and trailers, not adopted to the decline in the market and market share. And a total of around 6,000 transport equipment units are owned within this system.
Torben will come in more to the figures later. Next slide, please. Short on the business and integration plan to improve the financials. Phase 1 is to increase the acquired network's volume throughput. I talked about that on previous slides from our own and also the acquired network, improve the equipment utilization, and have the right amount of assets and insource several agency services. That will happen in the first phase. Phase 2, gain scale benefits from integration of existing and acquired network as well, move select volumes from different routes into our ferry and rail system and integrate our customs organizations together. Phase 3 is to provide the complementary logistics products and optimize even more throughout the network. And with that, I'll hand over back to Torben. Next slide, slide 11.
Thank you very much, Niklas. The transaction terms and completion expectations, it's an enterprise value of 7.6 x 2023 EBITDA or DKK 1.9 billion, sales or EV sales multiple of 0.55 based on 2023. We're financing the transaction with our existing funds and new third-party financing. We have clearance by the Turkish competition authority, but we need also clearance by the EU merger control. And as we say here, we expect that that should be cleared by the beginning of Q4 this year. If you move to page 12, then the outlook for DFDS changes in the revenue outlook as we expect a couple of months to impact so that our growth increases by 3 percentage points compared to previously announced. The EBIT outlook of DKK 2 billion-DKK 2.4 billion remains unchanged.
Net interest-bearing debt to EBITDA expected to increase by 0.3, closing probably to just exceed 3 x. Due to the lower than normalized earnings for Ekol at the moment, the acquisition, including the accounting implications of the acquisition, means that our ambition to achieve 10% ROIC in 2026 is moved to 2027. Other financial ambitions that we have communicated previously remain unchanged. Page 13, in summary, we see this as a strong, a high-growth addition to the DFDS network. Niklas covered some of the network benefits on the previous slide, but it means that we establish a door-to-door business to complement our Mediterranean business, again, completely similar to what we have on our strong North Sea routes. We get access to end customers in a high-growth Turkey-Europe transport market.
We believe that we know how to run a business like Ekol, and in conjunction with the skilled and strong people we acquire, we believe that we will have a very strong integration plan ready when the transaction is approved. So this was some high-level highlights. We'll obviously be more specific with some of the financial projections as well when we get to closing. For now, our focus is on making sure that the process with EU runs smoothly and that we plan the integration through our normal workstream setup during this period. So with that, over for questions.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and one at this time. Our first question comes from Ruairi Cullinane with RBC. Please go ahead.
Yes. Good afternoon. My first question is just how things have started off for the business in 2024. Secondly, you highlighted at your CMD that cash flow yields had been perhaps more attractive than ROIC in some of the logistics M&A you'd done. I just wondered how we should think about that in the context of this transaction? And then perhaps you won't be able to comment too much on this, but just how we should be thinking about 2025 EBIT contribution? Thank you.
Thank you, Ruairi. I think it's too early for us to guess on both 2024 and 2025. We are not surprised if 2024 is at the same subdued level as 2023, given how markets in general react at the moment, and also because some of the market shares that Ekol has lost is locked in also through 2024 and part of 2025. So that probably answers your first question. In terms of cash flow yield versus ROIC, there's no doubt that this will be accretive on cash flow yield before it becomes ROIC accretive. And in terms of EBIT, after the accounting, 2025 will be a relatively modest to neutral EBIT impact for the business.
This is also the reason for postponing the ROIC target by one year, because what we do expect to happen is that when we get to mid-2026, end of 2026, that we will have reached the traction that we require to meet our ROIC targets.
Thank you.
You're welcome.
Our next question comes from Dan Togo Jensen with Carnegie. Please go ahead.
Yes. Thank you. Congrats with finally making this transaction. Can you elaborate a bit maybe on the revenue of EUR 3.5 billion in Ekol? How much of that, so to say, is already a pass-through from DFDS, so to say, cost with DFDS? So how much can you say is already part of the internal or will become internal revenue in DFDS? And then maybe a CapEx question. You take over quite a lot of assets here in connection with this transaction. Can you elaborate a bit about the state of these assets? Have they pushed out CapEx so there is, so to say, a CapEx commitment hitting you in coming years due to this? And then maybe finally some flavor on how the numbers throughout 2023 have developed, the 2.5 percentage point EBIT margin that you allude to and also the revenue.
I guess, of course, it's an average. How has the sequential development been in terms of margin throughout 2023 in order to get some sort of an indication of where we should start the year of 2024? That's it. Thanks.
Thank you, Dan. In terms of internal revenue as it becomes, it's probably DKK 500 million that you can subtract when it gets consolidated in DFDS. In terms of CapEx, of course, when a business is for sale, the sellers are cautious with CapEx. We've had a so-called lockbox mechanism for a while, so you can say that some of the postponed CapEx are benefiting us at closing as additional cash. So we've not been too worried about it, at least not the last 12 months or so. In terms of the development, you're absolutely right. I guess the implicit question is there is a downward trend through 2023.
Do remember that most of 2024 will not hit us because it's very late in the year that there will be a closing s o we see very good initiatives and good things happening so that we believe that we will have a reasonable starting point, at least at the level of the average 2023, and then with upsiders, as explained before.
Sounds good. Thanks.
You're welcome.
Our next question comes from Ulrik Bak with SEB. Please go ahead.
Yes. Hello, Torben. Question on this market share loss that Ekol has experienced through 2023. Can you please elaborate on this development? And if you know who they have lost market shares to, is it due to the small scale of this particular freight forwarder, and how are you intending to change this development? And would they get any benefit from becoming part of DFDS? That would be my first question.
Well, I think when markets go down, obviously, freight forwarders fight vehemently for their market shares. And maybe Ekol had lost a little focus or taken their hands off the steering wheel, having maybe expected that this transaction would be a little bit faster, and then everybody else is trying to benefit from this. From our due diligence, we know the customers, but it's a variety of customers in primarily the automotive space. But it's also maybe a lack of innovation in terms of developing new customer routes and segments. So I think we have a good understanding of what has happened. In terms of what we can do, the focus we have on organic growth that we elaborated on during the Capital Markets Days is, of course, something that will expand into this region. Some of the customers, we know extremely well already.
Others, we have marginal exposure to, and they will now become quite big customers for us. We'll continue to operate in a fair and transparent way to the market so that those who compete for door-to-door business, they have the same access to ferry rates so that it becomes those with the right solutions for the customers that win. And there we have seen that we can go into such discussions with Niklas's organization with some confidence that we can pick up business and market share. And it's, of course, also easier to operate in a growing market than in a declining market. And there we see Turkey growing quite significantly.
So yes, we have discussed that at length, of course, with the sellers and their commercial organizations, how they see the market, and combined that with our own knowledge and have put down a first plan w e'll refine that during this integration phase.
Understood. Then second question on whether you can provide any color about the historical financials before the COVID years, particularly the EBIT margins, what level they were hovering at before COVID?
I would rather abstain from that since this is a carve-out. Ekol total consisted of a domestic contract logistics and transport business plus this international part. They have not, in the past, split it and reported separately. Of course, they do have some high-level knowledge about it, but it would be too much uncertainty to share that publicly. The 2023 levels is not an unusual level as far as we could derive from our analysis. 2022.
You mean the 2022 level?
Yeah, yeah.
Okay. Then third question on whether some of your customers, well, how they have reacted to this transaction. Of course, they have been seeing it coming for a long time, but do you see any risk of losing any volume from some of your other customers as you will increasingly probably compete with them now acquiring Ekol?
That's always a risk, of course, to lose customers. It has been good for us that the process with the authorities has been done in reverse order because they have, of course, been out asking the market. They've asked customers. They've asked competitors what they would feel about this transaction. They've come to the conclusion that this is not something that upsets the market to an extent that they should decline the transaction. I think we may come into the market with a, what should I say, a more predictable behavior in the market than maybe Ekol has been very innovative, quite aggressive, and have over a short period of time gained a lot of market share. There our approach is more as it has been in the North Sea. We, of course, want to gain business.
We develop business, but it's not maybe the best option for us to aggressively go after a customer that is already on board our vessels, but rather to see how we can develop new business, how we can convert from container business, how we can convert from the road. The road doesn't fight back as customers or competitors do. So yes, we are humble about this threat or complication, but we've just been able to demonstrate in all other markets that we can handle it without upsetting our customers.
Okay. Thank you.
As a reminder, if you wish to raise the follow-up question, you may press star and one. Ladies and gentlemen, we have a follow-up question from Ulrik Bak. Please go ahead.
Yes. Just a few more questions from my side. This transaction of DKK 1.9 billion, how is it structured? Is there an earnout element in there somewhere, or is it all upfront cash?
This is all upfront cash.
All right. And then in terms of synergy potential, I know you wrote a statement that.
Some of it is debt. Some of it is debt that you can say the equity value is more like EUR 200 million, EUR 1.5 million each. So some of it is leasing debt and other debt.
Okay. So cash impact DKK 200 million.
Yeah.
Understood. Yeah. Then question to the synergy potential. I know you wrote in the statement that you're still working on that, and you'll get some clarity towards closing. But can you still say a few comments on which areas and perhaps not the size of it, but yeah, anything that you might be able to quantify?
If we start with maybe the easy part, Europe, there we have complementary markets, but we also have overlapping markets. In both instances, there will be quite significant synergies. The way their significant France presence can work with our Belgium, Ghent presence to fill north-going where we may have south-going or vice versa. We will get access to some warehousing in Poland, a strong presence in Poland, which will help us fill the train we just started from Poland to the U.K., or to Holland. So there are a number of things which I would call low-hanging and low-risk things that we can do in the integration of the European network that will position us even stronger in a number of commercial discussions with customers, but also cost-wise. Then on the Turkish side, we are quite humble.
We will rely a lot on the management team that we inherit from Turkey. Of course, we'll sprinkle in some DFDS resources. But then we will have to look even closer at their network and see, are there some flows where today it makes sense for them to drive because of the composition of their equipment or other elements where we say, "Well, actually, it makes sense for us to put it on board the ferry. We can reduce the equipment, and then we can put it on the ferry routes and further on with the train from Trieste, for example." So I think in the Turkish side, I don't expect people synergies to any large extent. We don't have any on-the-ground logistics forces there in Europe.
We'll optimize it is mainly complementary and commercial opportunities, but there will be some overlapping offices where, of course, we will also find some synergies. So that's the main elements.
Okay. Then my final question is about the graph that you have about the transportation market size between Turkey and Europe growing at a CAGR of 14%. Can you provide a split between volume and price here?
No. As you have seen, this is the total. So this is including both. My guess is that 3%-4% of that is probably price, 3%-5%, let's call it.
That's clear. Thank you so much.
You're welcome.
Ladies and gentlemen, this was our last question.
Thank you very much. Thank you very much for joining again with a short notice. We look forward very much to talk more about this transaction once it gets clear and once we start being able to communicate more clearly on both the commercial and the cost benefits to the group from this transaction. Thank you very much, and enjoy the rest of the day.