Earnings Call: Q2 2018

Aug 1, 2018

Ladies and gentlemen, welcome to the DSV Interim Financial Report, H1 2018. For the first part of this call, all participants will be in listen only mode and afterwards, there'll be a question and answer session. Today, I am pleased to present CEO, Jens, Beyond Anderson, and CFO, Jens. Speakers, please begin your meeting. Yes. Hello, and welcome, everybody. Welcome to the conference call covering our half year twenty eighteen results. The concept will be as it has been for many, many quarters. We will go through the presentation, which be available online. We will do it as quickly as we can in order to leave, as much time as possible for your questions So if we go straight into the presentation after you have carefully studied the forward looking statements on Page number 3, we will go directly to page on page number 2, I'm sorry, we will go straight to page number 3 which is the highlights of Q2 and the 1st 6 months of 2018. On that, you can see that we have had what we consider a very strong quarter. We have just put that behind us. Where we did see a satisfactory growth in a gross profit, the growth was 9% for the quarter. And we now have 6% growth for the full year. But maybe more importantly, we did see a very strong growth in EBIT in the quarter of 21% Meaning that now year to date, we have seen a 15% growth in earnings. Combined with the fact that we see no big risks ahead of us, we, felt it appropriate also to upgrade the outlook, the full year outlook for the full year. So that is now between 5.3 6,000,000,000 Danish Kronos when it comes to the EBIT for the full year. And consequently, that is an uplift of SEK 200,000,000 and we have, as a consequent also lifted the items for the free cash flow with 200,000,000. So that now is DKK4.2 billion. As we've said many, many times, we think that the money best belongs in the focus of the shareholders. So we have also initiated a new share buyback program starting as of tomorrow of DKK1.2 billion. And please bear in mind that the numbers are just mentioned, the growth rates they are in constant currencies. Going to page number 4, you can see what we, consider another rock solid, very strong results from the Air And Sea division. We're very pleased about the development. We've seen a continuation of the strong performance in particularly air freight and we will see the growth rates later on. It's mainly driven by exports from the EMEA region and from Americas. The seafreight growth was more in line with the underlying market and we are happy about that since we have seen a weak development on the market on the trade lane from Asia to Europe, which has probably only grown about 1%. And since that is the biggest rate lane of DSV, the fact that we have managed to grow at the same pace as the market, we consider that pretty good The fact that we have had a very strong positive yield development is satisfactory and that has of course led to a significant growth in the EBIT, which came to DKK 988,000,000 for the quarter, which is a growth rate in constant currencies of a little over 20%. I think also the margins speak for themselves. More than 10% operating margin and the conversion ratio of more than 41%. I think the division can be extremely least about that. So going to Page 5, you can see, how the yield has developed, 1st airfreight. As you might have seen on the previous slide, we managed to grow the number of tons we moved in the quarter by 11% and on the normal circumstances when you outgrow the market in such a way, you will see a negative effect in the yields. We have not seen that in constant currencies. We have actually managed to grow the GP per unit with approximately or with 5 point or 4.0 percent to be accurate and this is something that is very good and it underpins what we have always said in DSV, growth should always be profitable. We are not growing for the sake of growth. Any growth should be profitable growth and I think we have demonstrated that in the quarter. When it comes to sea freight, We've grown in line with the market. The volumes number of TUs have grown approximately 4% which is what the global markets have also grown. And what is extremely good to see is that we have grown the yields also, the GP per TEU with the 6.7 percent, which has also helped tremendously on the growth in absolute numbers on the GP. So I think we can extend a very big thank you to the guys in Air And Sea. They have put behind them another very strong quarter. And I think we can be extremely pleased with the developments of the division. Then we go to page number 6, it's the Rogue division. I think we can also be very pleased with the results of the Rogue division. They've made SEK 322,000,000 in the quarter. And when you make SEK 322,000,000 in a quarter, I think it gives reason for celebration. So they should be happy and proud of what they have achieved. We did do one adjustment that you guys have to be aware of and that is the fact that we have put a renewed or an extra focus on our 4PL activities, which we are seeing a potential growth coming from. And if you want to be a true 4PL, operator, you need to operate the 4PL activities in a kind of independent activity in your company and we have moved those activities out of road to a unit in the DSV group entity And the gross profit for the quarter was negatively affected with approximately $22,000,000. So that is the reason that the growth rates in the GP seems not so exciting at first glance. But overall, good development. We've also grown volumes 5% which is strong. The market has only grown 2% to 3%. We believe that we will manage to to stabilize the gross margin around 17%. And with that said, we believe that the gross profit and consequently the EBIT will also continue to grow in the coming quarters. So last of the divisions, the solutions, we've seen a very strong continuation of the trend, which actually started in Q4 2017 where we did see very strong results. Good top line growth driven by a lot of verticals, but primarily I would say by retail, including e Commerce and also the Automotive have grown fairly well with us. We've seen a stable gross margin and we also see a nice development of E coming from higher productivity and an increase in profitability in several locations. Some of you have this morning asked if this is a supernatural EBIT margin we have of 5.6%. We think it is, is high. We recognize that, but please do remember that in earlier days, so to say, for instance, back when we bought France Mars some years ago and also after buying ABX, the EBIT margin of the Solutions division were significantly higher than what have seen in recent years and we actually do believe that we can get it up and also work towards achieving our long term financial targets of the division. But it's great to see also a strong set of numbers from the Solutions division, and they have also surprised us I can say in a positive way. So overall we are pleased about the developments of our company which wagging our plans. We are ahead of the plans, which is also the reason that we have lifted the guidance for the full year. And I'm sure some of you will ask about trade wars and impacts in the global economy, but I think we can take that when it comes the Q and A. So with that said, I will now leave the floor to Jens. So please, Jens? Well, thank you very much, Jenspia, and I would like to say it the investors. It's actually a special day today because it's, to Ian Spiani's 10 years anniversary as a CEO. So, quite good to note that the share price when you started was 100. That's correct. So now it's personally, I'd hope for more, but I guess we are okay with that. I'll do my best for the next 10 minutes. I'm sorry. Congratulations at least from me and on behalf of the whole team, we're proud to work together with you. And we will now come to the numbers I will not dwell too much about it. Many of them quite speak for themselves but we can see that we have managed to grow our GP with 9%. But actually our EBIT has grown with more than 20% if we calculate it in constant currencies. And of course, this is because we see that there's still a marginal conversion of the incremental volume that produce that is significantly higher than what we see for existing volume. On top of this, of course, it's still the benefit from sort of the full year impact of the UTI synergies that we have achieved as well, but good to see that it filters through into to the numbers. When it comes to financial items, we've, on several occasions to costs these internal loans that we have that we have to adjust over our P and L. Now the dollar has increased vis a vis some of our currencies up till quarter end. And this actually gives us an inflow in Q2 that eliminates our financial cost and actually produces an income So glad to see this, but in reality, it's internal paper money. And overall, our financial costs follows what we have guided so far. So we are in line with that. On the tax side, we still aim for 23 percent on a yearly basis. We are a bit higher right now, but we see that we should be able to achieve approximately 23% when the year is final. On the EPS, of course, you will see that quarter shows a dramatic development because of these FX movements. On a yearly basis, down to our year to date basis, we're down at 23%. It's probably more correct to say that it's somewhere around 20% mark. If we adjust for the FX movements, but still glad to see that we have significant growth in the income we generate per share because after all, that is what the investors pay for. If we move to the next slide, the cash flow, I would say that cash flow statement is pretty much as expected. On the half year results, we do normally see an outflow because we have optimized cash flow situation at year end. Normally, this is where we have the best position due to seasonality. So that's pretty normal. We're very confident with the cash flow and with our debt level, which is currently below one times EBITDA. And this is also the reason why that we've launched this share buyback program of 1,000,000,000, which is quite high if you consider it's for a quarter. The right calculations, I know that some of you sometimes speak about this if you calculate our work, it's 24.3%. So also very close to the financial target. We use this very for capital allocation internally. But if you want to compare to some of our peers that have grown organically, I know that they sometimes like to disclose their work. You should probably eliminate the impact of acquisitions in our numbers. And this would mean that we would have a work of 94% So I guess that's also a number that we can be satisfied with. Allocation to the shareholders on Slide 10, just basically for the accounting or accountability of what we do, we can see how we allocate the capital that we produce, and we expect now total distribution this year of almost 1,000,000,000 And I think that's in line with the cash we have produced for this period. So really nothing to say to that. On the guidance, it's on Slide 11. We will we have upgraded guidance with a couple of 100,000,000 top and bottom of the range. And, since Bjorn mentioned, basically cash flow adjusted as a product of this and also just the tax rate, which I talked about a little bit earlier. So nothing material to say about this. It's all as be expected. And I think we will very soon skip to the Q and A part and, please ask your questions, and we will ask them and answer session. And the first question is from the line of Damian Brewer from RBC. Please go ahead. Your line is now open. Good morning, everybody. Two questions from me. First of all, within the presentation elsewhere, you talk about further workflow digitization in the Air And Sea business. And also clearly that you rode TMS pilot now should be started. Could you talk a little bit more about what you mean by further digitization there and see and what sort of productivity that could generate? And indeed, any findings from the road TMS pilots so far? And then just secondly, notice that your average debt maturity is coming down slightly. It looks like it's around about 3 years. Do you intend to let that drop further or are you going to look at new or diversified sources of debt? Thank you. Yes. I think if we look at the productivity for example, for ANSI, we have a roadmap for this, where we continue to digitize the way we do. Right now, of course, quite a bit of focus on the both tracking and booking capabilities. And we also have some tools like driver app so that we can get the IOD, the information of delivery. We'll probably also get the POD, the proof of delivery with signature, when our driver is mature enough for that. So we will drive productivity with some of these initiatives. Then there's a lot of things going on when it comes to customer report and we use a lot of software robots. There are probably some of that will probably change over time to machine learning when we get better at it. And right now, we use software robots for this. We consolidate many of our activities and shared service centers. So each of these things are based on business cases and As you can see, basically, we trend towards the sort of long term guidance for financial targets 2020. We need to continue these kind of initiatives in order to get there. But, we are, of course, glad see that when we add volume to the platform, the margin or the incremental part can be produced very efficiently in structure. I think that's the whole point of all the work that we do, that we increase our productivity all the time. I mean, that's really at the end of the day when DSV is all about productivity. So if we take the road system, yes, we are making progress on the TMS platform. We are live, and we have far more now produce the blueprint that we need for the system, going forward. It's quite a piece of hard work, but we put all our resources in there. And, but it's still a long journey. We need to have a pilot this year and we need 1 more next year before we are 100% certain that we can roll it out But, but we make progress when it comes to that. Then on the debt side, it's It's right that we have now a duration on our debt portfolio of approximately 3 years. And I think we have listed on our balance sheet that we have seen, so we don't necessarily need the same duration. We issued a bond year ago or something like this. And we will look into it how to bankroll the company in the most efficient way. We may take out some facilities with banks with a certain duration on or perhaps a little bit later, evaluate whether we should do another bond. So So we're monitoring it and, I think we, with the current debt levels, I think we're okay. Okay, very clear. Thank you. Next question is from the line of Mark Macquarie from Barclays. Please go ahead. Your line is now open. Good morning, everybody. 2 sort of groups of questions for me. You've obviously reported and talked about a bit of a slowdown in, market growth in the second quarter particularly on the on the C side. So the first question is, do you see that slower growth continuing in the second half, or are you working on the basis that this has been a bit seasonal or a bit transient and it should come back again. Could you give us some sense as to what you're telling your people to work towards as market growth for and take market share and grow faster than the market. You're right. It seems like the markets have come down just slightly, we have said that for Q2, the market for sea freight was 3% and air freight 4% maybe coming down a little bit, but on from at least air freights perspective, a very high level. It's extremely difficult for us to get good intelligence about what's going to happen and in the extremely volatile world also that we will see in the next couple of quarters. But I think we should assume that we will see 3 4% growth rates within air and sea, both air freight and sea freight. And then we just have to go out and without jet dising the yields of course to go out and see if we can beat that and take markets yet. But then it's come down a little bit from beginning of the year, it's correct to say, to assume that. But your work in assumption is that it remains relatively stable roughly where we are at the moment in the second half. My second question was obviously no mentioned this morning of, M and A. Do you still have an active pipeline? Is it quieter than it was 6 months ago or fuller, what was the sort of sense out there on M And A? It's nothing has changed the mark. We are still extremely eager to do M and A. It's, we think about it every day. We talk about it every day. The company is getting more and more ready. We just don't want to raise expectations too high. You know, it's a fine balance. If we talk a lot about it, we're going to do something tomorrow. If we don't talk about it, people think we've forgotten about it. That's not the case. It is extremely important for us It is priority number 1 for the usage of the free cash flow. It's to do value creating M and A. But we've said it many times, it's there's been some speculation this morning also about the fact that valuation are too high now and that is the limiting factor for us. I don't necessarily see that as correct. I think the limiting factor is more kind of a willingness, from the seller side. We have some extremely attractive propositions, I think we can we can show to particular companies. But if they don't want to sell themselves to us, we can want to buy them as much as we want. But if they don't want to sell for reasons, we sometimes don't understand then there will be no transaction. So we have to be patient and stay in contact with these these companies we have on the pipeline. And then one day maybe things will change or other opportunities will arise and then I think we are we are ready both from a financial point of view of course with the deleverage we have done, but also from an operational point of view. So it's not all the table. Let me put it that way. Sure. Sounds sense. Although, obviously, the more your share price goes up, the higher the values on the investment bankers comp sheets and they run around trying to persuade people to sell. Investment Bank. Next question is from the line of Andy Chu from Deutsche Bank. Please go ahead. Your line is open. Good morning. And three questions for me, please. Just, just, maybe just to flesh out, fresh out your thoughts on trade wars, global economy, obviously you're the sort of 4th out of 4 in terms of reporting. So I just wondered if you're saying anything sort of to your sort of 3 quoted European peers, please, on the trade tariffs side? Secondly, just give us a little bit more information as to, the sort of low growth in Asia Europe and what you've seen there on the C side? And then again, another sort of interrelated question. In terms of industry exposure, I think you've collected solutions. Some pretty good growth driven by autos, but obviously that's one of the segments that is under if you like, sort of some scrutiny. Around trade tariffs? Is this a sort of a bit of a sort of, you know, ramp up before the storm, maybe some, comments there, please, on autos on the freight management and solution side? Thanks very much. Yes. On the trade wars, it's extremely difficult for us to find something positive in restrictions and tariffs being imposed. We have to say that having said that, It seems at least at this present moment in time that it's the case or the issue has been encapsulated to to the China U. S. Trade lanes. That represents approximately 10% of what we do in Air and Sea, not of all of these, we put in Air and Sea. So it's relatively isolated. So that's why we are not too concerned. We were extremely happy when we saw that there was an ease off in the tensions between the EU and the U. S, that's a more important trade lane for us. Still the most important trade lane is Asia to Europe and I don't expect anything to happen on that Also, I have to remember that the, the global supply chains have developed tremendously. They are extremely sophisticated now. And as an American company, materials for you for your production. You just don't change supplier overnight. It's not going to happen. So I think it we could potentially be exposed, but, and affected, but we don't expect it to be very dramatic. And the last thing I want say about this is also some of the items which will be hit are more bulky items that we are not into. We are not doing steel and soybeans and whatever. It's not an activity that we are in, but as I said, Of course, we could be impacted, but I think it will be to a limited degree. It's correct that there's been some weakness recently on Asia to Europe. The recent developments or statistics we can see there. They do stem from May. So, it's not super updated. But it seems like the The volumes have grown between 0% 1% only. So of course that has had a negative effect on us. On the total growth in sea freight when that is our by far strongest trade lane. And it's too early to say if that's going to continue or not, but it's not like it's falling off a cliff. When it comes to solution and you're right, we are We're strong in auto and in general, that has driven good growth for us, but also some retail business have really picked up e commerce. And then maybe we should have put FMCG in. I mean, we have been extremely successful in getting a lot of a fast moving consumer good clients into the solutions division recently also But one of the things we can also see, maybe not so much in terms of growth but in terms of profit improvement is that we see less failures in implementations. We have improved our skills, I would say, on implementing larger customers and some of the not so very profitable activities that we did in the past, we've actually meant to turn them into something, which was quite, which is quite good now. So it's a combination of those things. Great. And very helpful. And just in terms of the China U. S. Trade lanes, is that 10% air and sea exposure by volume or Is there any difference in terms of profitability just as a sort of just to clarify the 10% is by volume, is it? It's by volume, yes. That's correct. Yes. Next question is from the line of David Kerstens from Jefferies. Please go ahead. Your line is now open. Yes, good morning, gentlemen. I've got three questions, please. First of all, a follow-up on the business on Asia Europe with growth of around 1%. I think it's even more striking if you compare that to growth of 6% on the Trans Pacific I was wondering if you have any insight in the differential between Asia Europe and Trans Pacific Seafate growth. Secondly, on road freight, Could you quantify the working day impact of the timing of Easter? And I noticed you also lowered some of your gross margin target to 17%. Is that related to an increasingly tight capacity situation in road trade or is there also a mix effect from the transfer of the 4PL activities to the group. And then finally, regarding the tariffs and the increased do you also see opportunities to with increased complexity potentially leading to improved profitability on some activities? Greg, that's a lot of questions. But in terms of the complexity, you're right, you could speculate that some supply chains will move out of China to Bangladesh to Vietnam to other places in Malaysia. It's places where we have a strong foothold we can move quickly. We are agile. We can help our customers to set up new systems. So I think we're in a good position if supply chains there, they are changing definitely. So, when it comes to the mix or the GP margin enrolled, you're right. It's a combination of a lot of things. The 4PL that we're moving out, it has a consequence of approximately 0.2 points as far as I remember. So that plays a little role, but it's also to be realistic. We have been around the 17% mark for a very long time. And it just seems to be extremely difficult for us to move that upwards. And that does not mean that we cannot grow the GP absolute terms and consequently the EBIT also. So we're still relatively optimistic about that. When it comes to the impact of working days, we believe it's about $15,000,000 on EBIT And it's something we said we would see and I think that is also included in the numbers. I think maybe Jens will elaborate maybe later on. But then and the last, the first question you asked, we don't have a lot of insights as to the volumes. You're right. Trans Pacific has been strong. You can also speculate. Is that some kind of last minute express activity going on because of you want to get the products home before, tariffs are being imposed. We simply don't know. Did you want to put some The only thing I can say on the first one is U. S. Has shown quite a high growth rate as well at least, with the last sort of numbers we've seen from the U. S. So GDP has grown somewhat faster than Europe. So I guess that's sort of And sometimes you then see that the trade, there's a small multiplier on it when there's a lot of growth. So that can be the case. We are just speculating here, but I think that's probably what we see. It's not that major for us anyway. So, yes. Next question is from the line of Casper Blom from ABG. Please go ahead. Your line is now open. Quarter. Well done, everyone. First question is regarding the balance sheet, Jens Lund, you mentioned the target of net debt to EBITDA of between 1.1.5 and you're actually a little bit below that right now. How should we sort of really expect you to target this going forward? Do you really want to be around 1 or is it the midpoint of the range that should be the target? That's my first question. And then secondly, regarding the very strong volume growth in airfreight, is it sort of a bit of a catching up on the market growth that you didn't see last year and should we then sort of expect it to start slowing down now or has there been any particularly new initiatives implemented in order to capture more market growth here? That's my question. Thanks. Okay. The balance sheet, you're right. We are 0.93 if you take the 2 digits on it. We do billion. Now we would like to just to be above 1,000,000,000. If we can do that right now, we may once the new leasing rules, they come in, have just a single number instead of a range, we will discuss that once this becomes relevant. But we've launched another share buyback of 1,200,000,000 in a quarter. So we should level the company a little bit up. So that's how you should think about it. I think on the airfreight side, last year, you saw the impact of the integration. So we had less focus on sales. Now we have focus on sales and we have gained a lot of new customers and we can cross sell to these customers or services. So I think that's also what you've seen after other transactions that when we get quite a high growth and we developed fairly well. Once we can focus 100% on our operation, I think that's basically the explanation And I think that you can expect us to deliver solid performance vis a vis the market also going forward. That's great. Yes. But just coming back on the balance sheet here, it's more sort of when we sort of have to try and extract related how much could you potentially buy back in Q4 and next year? Is it really sort of the more one time EBITDA we should use as the as regarding to? And next question is from the line of Robert Johnson from Exane BNP Paribas. Please go ahead. Your line is now open. Good morning, everybody. A few questions from me, if I may. I first of all, on the Road division, the OpEx declined by around about GBP 150,000,000 during the first half of the year versus the first half of last year. Maybe just provide some color on how much of that was provided by synergies as opposed to underlying cost reductions, please. And then a couple of questions on the Air And Sea division. The OpEx was around about 1,400,000,000 during Q2. Would it be reasonable to assume that that run rate continues during Q3 and Q4? Or is that a little bit optimistic? And then the second question on Air and Sea, just a slightly broader one really. I appreciate that you only provide an EBIT figure for the division overall, but would it be possible to provide some color on the percentage of EBIT that comes from air nowadays versus the percentage of it comes from C? Maybe I can take the last question. And then it was some quite detailed questions you had about the OpEx. So, Jens can just prepare a little bit on that. When you analyze the or when you look at the presentation, you can see that the for Air and Sea is pretty evenly split. And I think you can say the same for EBIT. It is not possible. I wish we want to be as transparent as possible, but we simply, it would be too much work going into making an EBIT for each. Then you would have to do a lot of when you get out in some of the smaller countries, you don't have these 2, what you say, activity levels totally isolated. You will have people doing both and then it will simply be too much for us to split it out. So, but you can assume that the cost base, which goes into operating and handling this GP is more or less the same. So, it's too good and strong legs that we stand on. And even though we do see a stronger development on the volumes recently in air freight, then we are still fairly also in sea. So now, Jens, I don't know if you want. But on the road side, the concentric, I guess, you have understood that we move in this part of the volume out. It really doesn't really produce an EBIT but there's a GP and the costs attached to it. This, of course, has an impact on the figures that you see And then I think there's been, if you look at the numbers and have some quarter on quarter, you'll see that we have quite high cost in Q1 and a little bit lower in Q2. And I think this relates to some accrual issues where if you have to look at basically on a half year basis, when we run the company on a size like this, to get all the IT costs, I think we have approximately 25 plus cost drivers on the IT side in order to make it through activity based costing. And to have models that are in sync all the time, it is quite a bit of resources. So if you look at it, I would say that take the two quarters and them up and adjust for the concentric where we have already given the numbers to you, it's a little bit more than 1,000,000. Then I think you will be okay when it comes to the road side. I don't necessarily think that we will see what was due to calculate the decline in cost of 1,000,000, that must be an extrapolation of Q2 that you have. I wouldn't expect that to continue. So take the average of Q1 and Q2 and adjust for Concentrix and then you're okay for your model. Then was there another question as well? Yes, if you look at it. Yes, it was just on on the Aaron C division. I'm just trying to get a feel for kind of operational gearing going into the second half of the year. So really just trying to get a feel of how much additional volumes could be handled with the current cost base? I would look at it in another way, if I should model I would probably model a marginal conversion ratio of plus twothree. So plus 66%, I would because we do see that we can add volume at a higher conversion rate to significantly higher than what we already achieved today. There's still some synergy impact in the Q2 numbers when you look at the ANC. So, I think we will see a lot of impact from efficient systems, but in Denmark, we have a saying that trees, they don't grow into heaven. So there's only so much that we can do And I think if you model, let's say, 2 thirds in marginal conversion ratio, then you're okay. Next question is from the line of Ben Togo from Carnegie. Please go ahead. Your line is now open. Yes, thank you and good morning and congrats from us as well. The 200,000,000 upgrades you make in your guidance I could like some color on that, what drives it, which divisions business segments has has surprised you in particular compared to when you guided, let's say, from the full year? Yes, it's obvious when you look at it, I think we can say that road is tracking. They're actually a little bit ahead of the original plans that we had in we still have old fashioned budgets in our company and you might laugh at that, but it's what we have. They are better ahead of that. But of course, you will say the same to a slightly larger degree for solutions. They are also doing better than what we expected 3 months ago, but the division that really swings the needle is the air see, we had not 3 months ago, we had not expected to see the volume developments we have seen in in air freight. And we have not expected also the very strong yield developments that we have seen. So it is the Air and Sea. It is, it's it is the engine right now in our company. And that is the main reason that we are lifting the guidance now. And then, C, just to follow-up here, are you seeing some benefits also from at least in your part from the more soft rate environment here? Definitely. You can see that on the yields. It's been okay for us. There's been some volatility. There's been a lot of additional kind of surcharges, which are being put into the market also and at least it seems like we've managed to push that forward to the uses of the transport systems. And I think that is all the way it is. So I think it's been a good quarter for us. We've always said that we don't have a big opinion about the rates if they are high or low or whatever, but volatility is always good and we've had that. It's been a bit, been fairly okay. Congratulations on the new job, by the way. And then just another question relating to ANSI. You're tying up more cash of working capital in that part of the business is is that just a function of the high activity we are seeing in particularly in Air? And will that change throughout the second half improvements throughout the second half? Maybe Jens, you will take this 1. I think you see is that we get more so called Fortune 500 customers, very large customers, they demand long payment terms, but I guess the work is still okay if we do that business. So we have to invest a little bit in working capital in order to get that growth in the ANC division, but we are happy to do so. Next question is from the line of Blas Heindorf from SEB. Please go ahead. Your line is now open. Thank you. A couple of questions from my side as well. Firstly, back to the cost issues and I have a question regarding C and A other external expenses are going up, Jens, you talked earlier about still a bit of synergies kicking in here this year. But despite that, we can see that the other external costs are both quarter on quarter and also year on year. And I just wonder if you have any sort of good explanation for that? Think there's a you will probably see that as we invest more and more in automation, of course, there is a little bit of extra cost for some of these IT initiatives, I would say, this is sort of like a general trend last that you will see that Of course, we try to replace staff cost with this kind of thing. Apart from this, I would say that, as I said, there's been, I think you should look at on a half yearly basis for the MC and even and out we're working quite a large with our activity based costing right now in order to make sure that the allocations are correct. So that might have impacted there with a little bit too much cost here in Q2, if you look at it. So that's that's how I would see it. Okay. Then regarding the volumes, I understand that your geographical exposure may be a little bit different compared to some of your key competitors which may explain the growth rates, particularly in seafreight. But it is your impression that even with the a strong focus on exposures for Asia Europe. Have you been growing in line with the market? Have you actually been gaining market share on those trade lanes? I think if you look at it and you see that we have grown at the same level as the world kind of growth has happened on sea freight. And we are more exposed to weaker trade then that is the consequence of that will be or the logic reasoning will be that we have taken market share. So we are happy about that. When we are at markets, which are only growing, maybe not growing or growing 1% and we still have percent growth overall, then we are pleased about that. We but it's also important for us to say that only pleased about 4% growth in seafreight when we see a growth in yields of 6.7%. Had we seen a negative yield, then of course, we could not be happy about a growth rate of 4%. But we've said it many times and we'll say it again, it needs to be profitable growth. We don't believe the fact that we can go profitable business in the future. That is not the business model of DSV. It has never been and it will never be the business model of us. Okay. Then lastly, cash conversion, I know you already touched a little bit of on the net working capital and you need to invest a bit more But you're now guiding for sort of mid range, which is 5.45 and then free cash flow of 4.2 look at it historically, the CASK conversion has been close to 100%. Is there any chance that you're going to get back there? Yes, but if you look at it, it depends on cash conversion of what last year, of course, we converted you. Yes. Is that you need to adjust for tax interest costs, then I would say that outcome very close to a cash conversion of 100, wouldn't I, if I add all that up? I have to pay 300 in interest and then I have to pay tax as well. So if you take that, then I think we are okay. When it comes to Well, Asians, we can say no structural changes from previous years. That's nothing really that has impacted us. Nothing new. No, not at all. I think we will end up around the 2% level on net working capital at the end perhaps a little bit lower like we have expected out it last year. So it shouldn't be a big change on the working capital. And then we don't make significant investments. We'll make the normal investments that we typically do and sort of reinvest the depreciationamortization, I think that's what you can expect. Okay, all right. Thank you very much guys. The next question is from the line of Edward Stan first from HSBC. Please go ahead. Your line is now open. Good morning, everybody. Two questions please, if I may. The first is on looking at some of the staff numbers in the Air And Sea division. They've been going down for some time, presumably, as a result of synergy benefits. How sustainable is that in future? And conversely, looks like staff and office has been going up quite significantly in solutions. Is that contract related? I guess you could help me understand that a little bit. And secondly, on the 4PL business, you've taken that out into the group, as you explained. Could you perhaps just provide a little bit more flavor of the potential for that business and the relative size it is at the moment? Thank you. Maybe I'll kick off with the 4PL. It's and then Jens can answer the two first of your questions. We do see a significant interest from, from major big clients when it comes to 4PL services, we have to admit that we might not have had kind of a Tier 1 product when it comes to 4PL. Before we bought UTI, we did see that there was capabilities in UTI in a U. S.-based company called the Concentric, and we have seen that to be a credible 4PL player. You cannot have that activity insighted division, then you will not be considered a neutral 4PL operator with the customer. So we've we've extracted that now and taken it out, put it into group given it a new name and we will push that forward. So this will not drive, what you say, EBIT significantly in the short term, But I think we have some opportunities going forward. And then if we could both build this organically, but maybe also through acquisitions in the future, it would be quite attractive for us. It's something which is it's pretty pretty attractive right now. It's a good position to be in. So Jens maybe on the staff numbers for Air And Sea And Solutions, if you look at ANSI, you've seen that the numbers have come down for quite a while due to the last sort of impact of the integration. I think also there's been perhaps a few changes in ANSI where we have outsourced some of the different activities that we have So it could be that we've had some blue collar staff in certain areas that did some staffing of containers or stuff like that. And we typically are solves that. So you'll see that both white collar and blue collar that we've had in ANSI have come down. If you look at solutions, you will see that our activities, for example, in a country like India has grown quite a bit. You don't automate a lot in India because that is getting quite a low salary. So you will have a lot of headcount, but also here in Europe and in the U. S, we've grown quite a bit and that a reason why there's been quite a sort of activity based development in headcount and solutions mainly blue collar employees that do pick and pack activities. Yes. So I think that should answer your questions. And next question is from the line of Bruce Chan from Stifel. Please go ahead. Your line is now open. Yes, good morning, gentlemen. Most of my questions have been addressed. So maybe just, stepping back and looking at something a little more strategic post UTI, you're a bigger company now when you talked about higher penetration of Fortune 500 customers in the fold. You also mentioned that payment terms, or discussions around payment terms can be a little more challenging when you're dealing with these larger counterparties. Is there a reason to believe that the margin situation is similar or that maybe you have fewer opportunities for the value added business than with some of the traditional smaller SMB customers? And then, just a quick housekeeping question. Can you maybe remind us what you expect for this year and how much of that is devoted to technology? Thank you. Maybe I can talk a little bit about the first couple of things. I think I've said that a couple of times over the last 6 months or many times more maybe. We I think we're on a sweet spot right now in DSV. We have the bolster 2 worlds, the best of 2 worlds. We are still a little bit the new kid on the block amongst the bigger player are not the biggest and we don't necessarily want to be the biggest, but I think so far we have managed to keep our what we call entrepreneurial culture We empower our people. We have a we have a lot of we believe very much in the local decision making, giving the the good staff that we have on the ground, the options to take the decisions, which they feel is right for the customer We are flexible. We have a flat organization. At the same time, we have more stronger capabilities now in terms of of buying power. So we can also live up to the expectations when it comes to pricing from our customers. And they like that combination. And that is why we have grown. And when you look at the margins, the margins now already includes the addition of these customers that Jens talked about. So, we don't see a particular reason or we're not concerned that margins will be diluted. The gross margins of these very large customers might not be the highest but they are more professional. You can you can automate the processes much more. So the EBIT margin can actually be quite satisfactory on these large customers. Yes. And when it comes to the investment side, we've typically said that perhaps you invest sort of 0.50.6 percent of the turnover over. And I think that would be evenly distributed between, sort of intangibles and tangible assets. It's mainly, IT development that we invest in. And then, of course, racking for warehouses is typical also something that we spent some resources on. We lease all our facilities, so we don't invest a lot in that. Okay. Thank you. I think you had one more on the margin, whether there would be trucks to a lower margin. I think you had to kind of address that. But I don't think I think you see some forwarders. They seem to be what we would like to call IATA King. So they would be on the top of the IATA list. We would like to be EBIT Kings. That's something else. So we would like to make some money or profitable growth. And I think it doesn't go in line with DSV culture to go out and deploy capacity to service customers where we can't make, a difference at some value, whatever because then there's no room for our margin. So I don't think that you should expect us to do And the next question is from the line of Henrik Poula from Kepler Cheuvreux. Please go ahead. Your line is now open. Yes, thank you very much. Quick follow-up. Most of the questions have been answered, I suppose. Regarding airfreight, you managed to grow at a significant rate currently. And you said you're really focused on and the yield as well as the volume. However, there may be some capacity constraints during the peak season given that the type of growth you and some of your competitors are displaying at the moment. So what's your best guess of the evolution of GP per ton? Given the type of volume you're able to show and the capacity constraint you may face, that will be it for me. We don't model in a big change. We believe it will stay pretty, what you say, stable. You could, of course, anticipate maybe when you get into the hottest weeks in the peak in Q4 that you could see slightly weak development for a couple of weeks. But overall, on the long run, for the rest of the year, we believe that yields will be fairly stable as compared to what they are right now. Of course, we love double digit in anything. I mean double digit growth is fantastic. It's, it's, I think as Jens said before, We also need to be somehow realistic. So, I think we also said that after Q1 and we were wrong because we did see double digit also in Q2, but then We would be happy if we could see kind of a high single digit growth rates in air freight. It's extremely difficult to quantify We also have to remember comparisons do become more difficult also going forward, but have a good momentum. We're still gaining customers. We're also losing some customers. We have to remember that. But overall, we have We have a fairly good situation and we are optimistic. The next question is from the line of Dominic Edridge from UBS. Please go ahead. Your line is now open. Thanks very much. Just a couple for myself. Just firstly, going back staff costs. Obviously, we've seen them the staff numbers start to rise, but staff costs sequentially have been fairly flat. Could you just sort of discuss maybe the staff situation? Are you Are you sort of successfully offsetting any kind of inflation there or what the situation is, particularly in Europe? And then the second question was just looking at my DSV and obviously, particularly on the road freight side, you've obviously added on an online quotation service and tracking service. Can you just talk about that maybe in terms of how you see is that sort of addressing a new path to the market or is it just adding on something for existing customers? And then the second question is, do you see adding similar functionality to, particularly the Air And C business? I think if we look at the staff cost, I think one of the things you have to take into account is the FX impact. That sort of means something when you look at the numbers actually there has been some inflationary pressure. But in general, I think what we try to do is we try to take in a lot of young people as well into the organization and train them and use them. And for various positions, which they do really well and grow within the company. I think this sort of helps you to be in control of staff costs so that you don't end up in a situation where you don't have capacity. So that's certainly something that helps us well. Then I think we've been sort of investing in my GSV for quite a while, and we add more kids abilities on this platform. And It's not isolated only to road. It's important to say. Year. It's also for the other division predominantly and C, but as well But you will see that we are this is the portal. This is the solution that we have vis a vis our customers, our customers know it. They use it they're trained in how to use it. Perhaps we could learn a little bit from some of our peers to send a suite out every day that we have this solution it's not our culture to do like this, but we might market it a little bit harder because this whole customer interact and that you can do it in a very efficient way is, of course, important. And sorry, just a follow-up I mean, do you feel that that is that something that's just existing customers are just expecting more of from yourself in terms of, the sort of visibility or is it something also to attract maybe as you said, some of the some of these other customers who maybe want to deal with you on a different basis to maybe how you've dealt with customers historically? It's a you can look at it in different ways. If you, speak to a customer who's already a customer, a client of one of our large competitors. They would expect this clearly is something you need to have on the shelf. We also gain customers from mom and pop shops from smaller operations. They do not have these, skills that we have. They don't have the power to invest. It's been something which is also there's a cost associated with building over large operation or ports like my CSVs. So this is something where you can actually go in and have another value position to certain customers than what the really small customers are having. And I just looked at the numbers when Jens was talking and saw that, in Q2, we handled approximately 9,000,000 shipments and more than 80% of those bookings were received So the notion that we sit with pen and paper, I mean, it's wrong. We have 56,000,000 lines in our warehouse in the solutions division. I can tell you one thing. They all come in electronically. So we are We are highly digital and it's something that we will continue to pursue and it's something where we can you are right. Some customs will just expected. They don't get too overly excited about it because it's what they would expect, but other types of customers, they actually are very, very excited about it. And it's one of the reasons that we can actually also outgrow the market, I think. That was our final question for today. I'll now hand the call back to the speakers for any closing comments. Thank you for all participants for putting all the interesting questions to us. We were very pleased with the high interest that you have shown in TSB. I must say on behalf of the whole management and the board, we are extremely proud of the what the employees of DSV have produced in the In the last three months, it's amazing. We have continued a good trend. You have done fantastic. So thank you to all of the employees. If I can take this opportunity also for your hard work and work and dedications. You've done amazing, and we're proud of you guys. So thank you very much for that. We will go on roadshows now to all kinds of places in the world, try to elaborate on the results to the investors and then we will also continue working and we're looking forward to speaking to a lot of you in in the coming months. And if not, before, at least when we come out with the Q3 numbers. So on behalf of Jan Flon and myself and all the good employees of DSV. Thank you and goodbye here from, Copenhagen and Denmark.