Earnings Call: Q4 2019

Feb 7, 2020

Hello, and welcome to the DSV Interim Financial Report for the Full Year of 2019. For the first part of this, all participants will be in listen only mode. And afterwards, there will be a question and answer session. Today, I'm pleased to present Jens Andersson, CEO and Jens Lund, CFO. Please begin. Thank you very much. Welcome, everybody. Welcome, ladies and gentlemen, to this conference call where Jens Lund and myself will go through the full year 2019 results for DSV Panalpina. We there's no news in the format compared to what it normally is. So if you first take a look at the forward looking statements on Page 2 And after that, go to Page 3. You will see the agenda for this morning. Me, I'll be starting with the highlights. I will go through the integration update when it comes to the integration between DSV and Panalpina, go through 3 divisions, where after Jens Lund will take over and go through financial review, talk a little bit about the outlook we've given to the market this morning and also a very important slide talking about the allocation to shareholders of the company. And as normally, we will conclude the presentation with a Q and A session, where we once again will ask you to limit the questions you might have to 2 questions, please. So let's go straight into the results. The highlights is shown on Page 4. We have delivered the best by far best result ever in producing over DKK6.6 billion of EBIT for the full year. We are extremely happy and proud about that. It sets a new standard for our company, and it is a fantastic stepping stone to future growth when it comes to EBIT as well. As you know and as you will see in the following slides, there's a lot of numbers to go through. So I'll just dwell on a few of those. And that is the organic development in gross profit and EBIT for the year. Gross profit is up close to 6%, and the EBIT is up slightly above 8%, and this is on an organic basis. We also have produced satisfactory cash flow. When you take when you take everything into consideration about the integration of Panalpina. The outlook for 2020, we've given an outlook with a DKK 500,000,000 range this year from DKK 8,200,000,000 to DKK 8,700,000,000. That lies very well. That is in line with the business case we had when we acquired Panalpina. And it represents a growth in the EBIT between something like 20 3% and up to 30% increase year on year if we reach the high end of this range, which, of course, we will do everything we can to achieve. It goes without saying. So a very, very strong year, very good year, special year for DSV, of course, marked by the announcement 1st April of the acquisition of Panalpina, which was something we have been looking to do for a very long period of time. The integration update on Page 5 talks a little bit about how the integration between the two companies is going. Overall, we are very, very pleased with the integration. Things are going to plan. We have no setbacks. We have seen nothing As of 1st February, more than 20 countries have been on boarded, and that represents more than 60% of the Panalpina volume, which is as we speak now handled on the DSV IT platform. A big credit should go to the IT departments of both companies, but especially the guys coming from DSV, which have done a great, great job in welcoming the new colleagues into the DSV IT world. It's also important to say that it is of the larger countries which have been moved over. U. S. Was one of the first. We've moved China over, Hong Kong, Germany, Great Britain and others, the Nordic countries. And it is one of the most important things. So this is very, very satisfactory to see. We have still not seen any material customer loss from Panalpina, which is also something which is nice to see. And we are extremely pleased about that. The cost synergies are, as we have indicated earlier, DKK 2,300,000,000 and the expected time line is also maintained. You can see that we how the achievement of the cost synergies are outlined on the slide as well. Integration costs also, as expected, the equivalent to the cost synergies. Maybe a little bit more came into 2019 than what you have expected. But then the good news is that would be less coming then in 2020. So overall, we are very pleased with the integration. The company is coming together more and more day by day, becoming one company. And I'm 100% convinced that we will be a much stronger company together as we compare to being 2 individual companies. And this is also the clear feeling I get from traveling around in the organization, speaking to the employees of our company. Then we go to Page 6. It's the Air and Sea division. Once again, I've said it many times, rock solid developments, really, really impressive performance. Our margins are top. We stand comparison with the most in the industry. We've grown on an organic basis the gross profit close to 6% and the EBIT has gone up 12%. You can see a certain dilution, of course, of the margins now due to the fact that Panalpina obtained lower profit margins than DSV, but this is exactly as expected. And the hard work of restoring margins back to previous levels are ongoing as we speak. But again, a very, very strong set of numbers, both for Q4, but also for the full year. We have to remember that transport markets were relatively soft during the whole year, especially airfreight. But despite that, the division have managed to produce extraordinary strong numbers. Please also remember that this Q4 will be the last time where we try to split the volumes into 2. It will simply be impossible for us going forward talking about what came from ex DSV and what came from ex Panalpina. We will have to see the numbers as one from Q1 2020. Page 7, Air and Sea volumes. There was, of course, a significant, as you can see, impact from Panalpina. In Q3, we only saw impact about half of the quarter, whereas here in Q4, we do see the full impact. In sea freight, you have to remember that Panalpina counted the volumes a little bit different than what we do in DSV. But going forward, we will create as much transparency on this as possible. You can see that in DSV on a stand alone basis, we did see a relatively, I would say, weak development on airfreight. In the quarter, we were down 6%, where the market was down 4%. But if you actually exclude previously talked about industrial customer in Germany that we deliberately said goodbye to during the year. We estimate that we have a development which is in line with the market development because this volume from this particular customer accounted for about 2% of our volumes. In sea freight, we did see a much more positive development. So a growth of in the quarter of 6%, where the market was only growing 2%. So we did see outperformance also in Q4, which was a little bit of positive surprise because, as you know, we normally do see a slight less organic growth in times of integration. But overall, still strong developments, we think. And we will now, of course, work to see if we can get the margins back up as they were before. Road Freight is described on Page 8. Also record breaking results for the Road team. After some weakness in Q3, we I think remembering, I did believe that we indicated to you guys that Q4 would be much better. So the fact that we had an organic EBIT growth of 8.8% is, of course, extremely satisfactory to see. So a very, very strong end to the year, actually making it possible also for the road team to show an EBIT growth year on year. So we're very pleased about that. Some weaknesses in the market is still seen, especially in Germany, in the automotive sector and of course, in the U. K. Related traffics due to the Brexit. But overall, again, very, very strong results in Q4 and still also for the year, very, very strong margins that stand also here comparison to anybody in the market. So congratulations to the team doing growth rate really, really well done. The last slide before I hand over to Jens is the Solutions division. They just wanted to make a mark also with an EBIT result exceeding DKK 1 1,000,000, DKK 1,000,000,000 for the first time. This is they have entered into a new territory. Also here, we must say very, very strong execution from the team in the quarter. We actually do believe that this good momentum can continue in the future. You have to remember analyzing the different quarters. There is a clear pattern also where you will see that in previous years also Q4 is a very, very strong quarter. So the Q3 result does not necessarily mean that this is the rate you can expect going forward. But still very, very strong results. And in DSV, it's like once you have crossed a magic marker, it's I think Jens Lund and myself will have some difficulties seeing us going down below that mark again. And this is definitely also not the expectations from the leadership of the division. Good momentum, a lot of new customers coming in, better utilization in the warehouses and also a very good addition many places in the world from Panalpina Operations and Panalpina customers also. So also here, well done to the teams around the world doing contract logistics in DSV. You've done a really great job. So with that said, I will hand over to you, Jens. Well, thank you very much. And I'll quickly move on Slide 10. Here, of course, we can see that we had a revenue of DKK94 1,000,000,000. And it is due to the fact that we acquired Panalpina on the 19th August that we only account for a part of the Panalpina revenue. So if we had a full year impact, it would have been CHF 120,000,000,000 so quite a significant number. I think Jens Verne has spoken to many of the items. Perhaps we should just touch upon the IFRS 16 impact. Of course, it moves quite a bit between the different lines in our P and L. We have explained that before the year started. So hopefully, this is in line with your expectations. On another item that should be spoken about is just the amortization of customer relationships. It's basically a number you calculate in Excel. So there's no sort of cash flow behind the number. And some of you might want to take that into consideration when you do your modeling. Then on the special items, €800,000,000, it is a little bit higher than what we guided, but it's only accrual issue. So we will spend the remaining part of the money in 20 20. And of course, see if we can perhaps do it a little bit cheaper, but that's the budget that we have in place, €2,300,000,000 euros The financial items, an unpleasant surprise this quarter. It is actually when the accounting rules, they state that for certain types of intercompany loans, you have to adjust them via the P and L and not via the equity. It's a so called translation risk that we're talking about. And this had a negative impact here in Q4. This is mainly due to the Swiss francs. It's going up, and that causes this impact. Tax, a little bit higher. So probably mostly related to the restructuring where we've already moved a lot of units around. And it's there are different kind of small taxes that has been paid in relation to do this. So it's not a significant number, but for the quarter, of course, it looks a little bit high. GP, I guess, we have to get used to a somewhat higher GP level now that we got the leasing adjustment. So we are 25%. And then I think also another thing we should just quickly touch upon is the number of FTEs. It's at least a number that we care a great deal about. And we can see that from the end of Q3 until the end of the year, we have reduced the number white collar employees with more than 1,000. And this means that we are executing the integration according to our internal plans. If we move to the next slide, 11, the cash flow overview. I think IFRS have more or less managed to create a cash flow statement that is completely unreasonable. So this is basically the top of the thing that you have here. And also if you look at it in the annual report, what we then try to do is to make the adjustments that will give you the free cash flow, which we normally use in your models. And here, you can see that we are a little bit below €4,000,000,000 so €3,700,000,000 for the year. We would have hoped that we could create a higher cash flow than last year, but of course, we pay special items. And we also have a situation where the working capital, of course, is a little bit under pressure because when you integrate a company, sometimes it causes some fluctuations in the working capital. There are many items that needs to be dealt with And that causes a bit of commotion. So we are at 3% currently, and we have to get towards 2% mark. And we will work our way downwards during 2020. On the net interest bearing debt side, we are at 1.8x EBITDA. And of course, we still have the ratio of 2x EBITDA. But when we harvest the synergies and the Panalpina income comes into the joint P and L, we will get more debt capacity. Then we just added a number to the right on the bottom basically where we strip out the goodwill and calculate the return on invested capital before tax and goodwill because that will make it possible to compare the performance of our company with a company that has been built organically. If we move to the next slide, the outlook. We have guided a range between DKK8.2 billion and DKK8.7 billion in operational result. As I said, we would then spend the remaining part of the DKK2.3 billion. We've guided on special items. So we spent €800,000,000 in 'nineteen, and now we spent €1,500,000,000 in 'twenty. The tax rate is still €23,000,000 So no different tax rate than what we have in our old long term guidance. And when we look at the assumptions, I think some of the main ones are, of course, that we still expect a positive development. Of course, if you see big changes in that, it will impact us as well. And we also say that we might grow a little bit slower. We have said that all the way along due to the integration. So that's unchanged as well as an assumption. And then of course, we lose a little bit of Panalpina volume. And then we expect to harvest the synergies as we go along, and I think that's it. On a final note, I think as a shareholder, what you're always interested in is what's in it for me. And here, you can see the allocations for the shareholders both for 'nineteen, so nice payout there. But also for the 1st part of 'twenty, we already have sort of planned payouts of DKK7.7 billion. So if you add what we plan to do in the second part of 'twenty, we will surely surpass SEK 10,000,000,000. We will probably end up in the SEK 11,000,000,000, 12,000,000,000 range. So also a nice payout. And we are quite confident in the things that we do, and this is obviously the reason why we can be very firm on this guidance. Then on Slide 14, you have the dial in details, and you can find them there. And then I think we open for questions. And please remember, as we have a lot of questions in the queue and we want to get through as many as possible, Could you please limit yourself to one question and then you can always rejoin the queue. And the first is over the line of Alex Erving at Bernstein. Please go ahead. Hi, good morning. Two questions from me, please. First of all, the peso organic volume growth at Panalpina airfreight looks like it slowed down a bit from around 2% in the Q3 to minus 3% in the Q4. It would be good if you could please give us some color on the fact that are driving this change, both at a market and company level and how you see that evolving in 2020. And second, I'd like to talk a little bit about Wuhan coronavirus, please, and how you're thinking about the impact of this in 2020, a little around the mitigating actions you're taking to any disruption and any opportunities in helping existing customers to kind of recalibrate supply chain's response to this? Thanks very much. Okay, great. I'll take those questions. It's correct that Panalpina did see a weak development in Q4 for airfreight. There was actually an increase in perishables, but a decline in what we call general cargo. If you analyze the results of Panalpina before we came in, you would see that they had like a kind of declining development that did not necessarily stop just because of the fact that we came in. So that continued a little bit. There were some customers which were in the process of being terminated. We knew that when we came in. So the volume developments are actually as we had expected. This will in Q1 and during Q1 and Q2 stabilize. And we do believe that even though we cannot separate the volumes anymore, but it's our estimate that this will fade out and stabilize and that will kind of from here on be able to grow the volumes together. But it is correct that both Air and Sea were negative. And it's good. Let's address the corona straight away. And let's unless you have other very specific questions about the coronavirus, let's keep it to this. It's something we take extremely serious. We are very, very close to our staff in China. We do everything we can to make them feel that we care for them because this is what we do. They should not feel been let alone. We do everything we can to support our organization, supplying them with all the necessities that they need now, which could be sold out in locally in China. We are trying to source that from elsewhere on the globe. We are, together with a local management team, organizing ways of working from home. There are still a lot of areas in China where we do not go to the offices. And the only thing that we are saying is that we are very, very close to our customers, trying to help them as much as possible, very, very close to our staff. And we are kind of tackling the situation as it evolves day by day. It's still very, very early days. This is, as you know, the 1st week this week we are in right now. It is what should have been the 1st week, working week after Chinese New Year. So and the New Year holidays, so to say, have been extended many places. So it's still too early to have a full overview of the total impact, but we are together with customers working on emergency plans to the degree that it is possible getting cargo both in and out of China. But it is simply impossible for us to have an overview of the total implications that it could have for the supply chains in the world. We now go to the line of Mark McVicar at Barclays. Please go ahead. Your line is open. Good morning to you both. Hope you're well. Two questions really. First of all, you said that kind of 4 months in, you've had minimal customer losses. At what point do you think you'll have a totally clear picture of what's going to go and what's going to stay? And then the second question, kind of a follow-up is, are you beginning to see are your people in the field beginning to talk about or identify revenue synergies with those existing Panalpina customers? Yes. Thanks. And we are well. Thanks for asking. We are extremely well. So it's correct that it's still a little bit too early to say exactly what's going to stay and what's going to go. The outset is everything stays. And then we need to work with the particular volumes to make it profitable if that is not the case. I think the odd examples of agreements that we could not really understand, they have already been renegotiated. And I think we are close we are slowly getting to a situation where you would see a normalization, where we will treat all the new customers in the combined company as we did in the old days in DSV. And if we do lose a particular customer every once in a while, this is something that was also happening in DSV. And I would say if we lose a customer now, it would probably not only at least be to due to the integration, but it could be something. We have many 100 thousands of customers in the combined company. And of course, as we speak, we will lose some customers and we will also win some customers. And lately, you might have seen that we have also won some relatively large accounts, which we are very positive about. And we actually do see an increased interest from customers that we did not really speak to in the past, contacting us, asking us how we can do more business together. We can clearly see that we have kind of moved up in the rankings, which apparently it seems like it is attracting larger customers. And I'll also say the combination in DSV of a very strong local decentral empowered organization, but also more muscles from a central sales key account structure and DSV also seems to be working really well. So I think that's what we can say. Okay. And the revenue synergies, anything being identified by your people now in the countries? Yes. It's happening. Of course, there will be revenue synergies for sure. There's no doubt about that. There will be both revenue synergies and also some procurement synergies. And this is, of course, what should take us the last bit to get back to the, what you say, the margins that we had. But it's so difficult to quantify because it's we talk about so many offices, so many different customers. So we have to see that reflected in the overall numbers hopefully in the coming quarters. But of course, we would be extremely disappointed if we didn't see that. And we have heard a lot of stories about customers coming in now wanting to hear about a road product. But to exactly be able to quantify this is very, very difficult. Yes. But it's directional. Isn't it? That's right. Thank you very much. Yes. Thank you. We now go to Nordea and Markus Belanda. Please go ahead. Your line is open. Thank you. My two questions. First, regarding guidance. I'm just wondering whether or not you've accounted for the coronavirus effects in your guidance and if you have, by how much? The second question is regarding solutions, and you touched upon this earlier, but the revenue growth in Q4 versus Q3 is 36% in 2019. It's usually something along the lines of 10%. So I'm just wondering if there is anything special has happened this quarter or if there is an explanation for the very strong performance that you could go into in more detail? Thank you. Yes. I think on the coronavirus, all the uncertainty, I mean, we've guided a range and it's what we see now. We can't go in and change our anchor budgets for this. But I think we have guided a range for uncertainty. So nothing specific on that one. But of course, as you know, there's Brexit, there's the trade war, there's coronavirus, and that's the reason why we have a range. It's €500,000,000 It's bigger than it's ever been before. So that's a little bit on that. When we look at solutions, I think we've added volume from Panalpina. We had, what can I say, a Q3 that was perhaps a little bit lower than the previous quarters? And then I think also that there's one thing you shouldn't underestimate. And that is the value of all these campaigns, things like this that are going on for e commerce, etcetera. Many of these things, they actually happen here in the Q4. And I think there is a direction now that we do more B2C volume than we ever done before. That this follows also the consumer pattern a little bit. So I would think that as apart from this, I would say it's business as usual. We are growing. We are adding more capacity. We are driving the unit forward. And I think we also saw that the Panalpina volumes, they fitted nicely into our structure. So all in all, I think that's what happened in Q4 in Solutions. That's great. Thank you. We now go to the line of David Kerstens at Jefferies. Please go ahead. Good morning, gentlemen. Two questions, please. First on the Palapino synergies, you said 5% realized in 2019. That's roughly DKK 115,000,000. And I think about half the EBIT contribution of Panalpina in 2019. I just wanted to understand better how to get from the former reported numbers of Panalpina to the numbers that you include because it seems that they are a bit lower than what I have in my old Panalpina model? And secondly, on IMO 2020, we've seen a steep increase in freight rates during the month of December January up until Chinese New Year. Are you encouraged by the ability to pass this through to customers? And will this be a full pass through with no impact on yields in 2020? Thank you very much. Maybe I'll just quickly take the IMO well communicated from the industry. This is no surprise, no secret. Customers transport buyers, they have known about this for a very, very long period of time. And I would say that we have in general been very successful in passing this on to our customers. And we don't expect that to have any negative impact on the yields. And maybe, Jens, you can just elaborate a little bit on the Panalpina kind of I think what you miss on the calculation is probably the customer relations part as well. I think if you add that to it, then it should more or less add up because that's, of course, a significant number as well. And as I mentioned when I went through the numbers, it's something that you calculate in Excel. So there's no substance behind it. Well, that number is included in the reported EBIT contribution of Panalpina. Yes. Yes. All right. Thank you very much. Our next question is over the line of Casper Blom at ABG. Please go ahead. Your line is open. Thank you very much. First a question regarding the share buyback. You mentioned you might do something or will probably do something in the second half of the year also. I believe you previously mentioned the possibility of doing some sort of reversed Dutch auction. Has that been taken off the agenda? And should we expect, I can say, just a normal safe harbor buyback in the second half of the year? And then my second question, when sort of trying to bridge our way into Q1, Q2 and Q3, the volumes that you see in volume contribution from Panalpina in Air and Sea. Is this sort of a fair base to use into the next couple of quarters? Obviously, it's sort of adjusted for any kind of normal seasonality? Yes. I think I'll answer at least the share buyback. I can also take the other one. But the share buyback part is we actually did quite a bit of work to do a reverse absorption. But it turns out that from a compliance point of view, we simply couldn't make it work. So we have to continue the safe harbor method. I mean, there's nothing wrong with that, but we would have liked to do a faster adjustment of our capital structure. So now we're just committing to these probably $11,000,000,000 $12,000,000,000 on the year of reallocation of capital to the shareholder, and then we will have to grind our way through it with traditional safe harbor program. So that's one of the things that we didn't really succeed on. We had a lot good intentions, but as you know, the road to hell is covered with good intentions. Then on the volume, yes, I think if you use the run rate for the Q4, that's sort of the first time that we really got some visibility in the way that we account on the Panalpina volumes and also on the Panalpina financial numbers. So you should use that. We see that Panalpina, of course, had a higher quality than many companies we've bought, but there's still some differences in the way we measure and count. And that's the reason why you should use Q4 because it should be aligned. Okay. Our next question is over to the line of Lars Heindorff at SEB. Please go ahead. Your line is open. Yes, good morning. Two questions from my part as well. Firstly, regarding the outlook 2020, I don't know if you can give us an indication around net financials. You had this issue with the exchange rates, which caused net financials for 2019 to be a bit higher compared to what you guided or you've been indicating earlier on. That's the first part. And second part regarding the earnings contribution from Panalpina in Road. As far as I can calculate, it's negative in the Q4. I just want to hear any sort of explanation what's going on there. It's correct, Lars, that we did see negative contribution from Panalpina in Road in Q4. It was some stand alone business, which was being done in Germany. We are in the process of rectifying that, so to say, you shouldn't expect that to continue. This will very quickly, we hope, be turned into, 1st of all, 1st step, a breakeven business. And then, of course, it needs to carry a certain profitability in DSV if it needs to continue. But it is correct, as you say, we did see actually a negative impact in Q4 from some road business in Panalpina. And then Jens, maybe you could talk a little bit about the net financials in the outlook. Yes. I think, Lars, you should expect perhaps around the €300,000,000 in normal financial cost. And then, of course, the IFRS 16 will come probably with another €450,000,000 And then, of course, the translation part, we need to exclude that because one day, currency goes up or one day, it goes down, but there's no external counterpart on it. So of course, we then try to upstream as much as we can when we restructure and all these things to reduce it to the furthest possible extent. But I think we have to get used to that the way IFRS works and the way that the company is constructed these days, it will lead to some fluctuations on this line. So when there's a positive one, we have to remember to strip it out. And if it's a negative one like you saw this time, then we also have to strip it out and sort of exclude it. And I think there should be details in the numbers so that it is possible for you to see through this. Otherwise, we will have another look at it and make sure that this is also the case in the quarterly announcements. Okay. So the next question is from the line of Dan Togo at Carnegie. Please go ahead, Dan. Your line is open. Thank you. The first question is regarding the restructuring charges that you seem to be pushing a bit ahead of schedule, at least what you communicated before. Does this indicate that you're also ahead of, so to say, the integration of Panalpina? I know that you don't really change the underlying effect of the synergies and the timing of that. But could you conclude on the back of the restructuring cost that you are a bit ahead of your original plans? That's the first question. I Thank you, Vasu, to answer it. We are comfortable with the plans then, quite comfortable. We are at least not behind. Let me put it that way. That's I think what you can get on that one. Okay. Fine, fine, fine. And then second question on your guidance and what it implies for organic growth. In my calculation, almost actually negative when we look at the EBIT isolated negative to maybe an organic growth of only 5%. You come from 12% here in 2019 and you start out guiding 2% to 9%, as I recall it. It seems like there's a lot of precaution in this. You've touched upon some is it only down to Brexit coronavirus trade war, etcetera, on a negative side? Or are there other things we should be aware of? I would say predominantly is the areas you just covered. I think even before the latest and probably the biggest uncertainty, the coronavirus, there were still some uncertainties, of course, surrounding 2020. But these are the main factors. I think it would be responsible for us to be extremely, extremely bullish and not recognize these topics. This is why we give a range just to remove any doubt. We have a clear ambition of getting to the high end of that range and of course in an ideal world to make much more money. This is the only I wouldn't say the only thing, but this is of course something which is very, very high of the agenda of any leaders any leader in DSV. But we just felt that it would be appropriate also to take some precaution into the guidance. And I guess you can say that is what represents the lower end of the range. And also coming back again to the corona, it's simply not possible for us to say that we have put this amount of money aside or we have lowered the expectations with so much because of the corona. It's simply too early. It's simply too impossible for us to say exactly what effect will it have into the books. I hope we will get much more knowledge about this as the months progresses. Is it fair to argue also that some of the attention is taking away from, so to say, the underlying organic business out in the organization. And that's more focused on the integration in the process. And that's why organic growth in the integration process is maybe a bit on the soft side. If you analyze the results of DSV in previous after previous acquisitions, you'll probably see a similar pattern where we the 1st year and this is the year where the reintegration really happens since 2020. The whole organization works so hard on getting the 2 companies being put together. Some customers, not all I have to say, but some customers are a little bit reluctant giving more business to the company. They have a wait and see approach. They want us to prove that we can handle the business before they allocate new business to us. So you will see lower organic growth. You will see that it is more difficult to us than in a normal year to take market share when the integration is at its hottest, you could say. But then of course, we do expect that once the company has been put together, I truly believe that this company will be much, much stronger than what it was before and that we then will go out and take this is our clear aim to go out once the integration is over and grow faster than the market. This is almost a religion in DSV and we believe that also to be the case in the foreseeable future I can say. Okay. So our next question is over to the line of Robert Joynson at Exane BNP Paribas. Please go ahead. Good morning, everybody. Two quick questions from me. First of all, on the outlook, you said that you expect organic volume growth be close to the underlying market. For Air and Sea specifically, could you maybe just provide color on what growth rates you're assuming there? And then the second question on procurement synergies. I appreciate that they're difficult to quantify as you mentioned before. But maybe could you just provide some more anecdotal color on any procurement synergies that you've seen so far since closing the Panalpina deal? Thank you. Yes. But Robert, if we had to sit and just to discuss and exchange anecdotes, we could sit here all morning because we have a lot of really, really fun anecdotes that we could share with you guys, but I would refrain from doing that. But it is clear and I think we have tried to indicate that to you guys earlier also that we will see procurement synergies for sure. It goes without saying. It is the nature of the business. The larger you get, the more effect if you can handle the operations, the more, what you say, the cheaper you can also procure both airfreight, sea freight and other services. The problem a little bit is that you use this as a tool in the towards the competition also. You give a little bit of that away and that dilutes the margin. So that means that you don't get the full effect straightaway in the P and L. But I know we can see from the behavior from our large suppliers that we have moved up for some suppliers of airfreight. We are their largest customer now. And of course, we would be again extremely disappointed. We would do a terrible job if we could not turn that into our advantage. We have to do that. And I know this is also happening. But again, to put a particular number into a spreadsheet for us and to quantify it 100%, it's simply impossible. But you saw that UTI, I think that is what made it possible for us to even exceed our previous margins we had before we bought UTI after the integration was over. And of course, we can only hope for something similar to happen after this acquisition. There's a little bit of mix effect you have to take into consideration. When it comes to the outlook, we are not macro experts in DSV. Most of us at least, we are freight forwarders, but we lean towards or lean against other analysts who have views on this. And it seems like there's some consensus at least until now that world economy could grow up to 2% and we would expect both airfreight and sea freight to grow something in that neighborhood. This is the best estimate we have at this moment in time. We are now over the line of Satish Sivakumar at Citigroup. Please go ahead. Your line is now open. Yes. Thanks for taking my questions. I have a few. Firstly, on the integration, how does this 60 percent of volume migration onto DSV platform translates into integration synergies? And also, could you update on the Panalpina's Ford shared service centers and what are the targets for on the integration of those service centers? And secondly, in your presentation, you mentioned about the corporate bond issuance. Could you please give more color on the size and the date of the issuance? And lastly, if I can, on the Road division, if you could update on the rollout of the Cargo Link Way Forward transport management system, that will be helpful. Thank you. All these, and if I counted them, 4 questions, they fall into the expertise that you have, Jens. So I think if we take the integration first, it's correct that the countries that are now working on CargoWise, they represent 60% of Panalpina's volumes. Then actually what happens when they are moved over, there's a lot of volumes that can be moved day 1, and some of the volumes will gradually flow over so that it's 100% on the DSV platform. That will take a couple of months before it's then all on. But we can see from the KPIs that we get that we have significant volume now being produced on our own transport management system. So all that going according to plan. And of course, when we can take up the double handling, then we can realize more and more synergies, and we get the productivity in line with the productivity that we've been used to in DSV. The Panalpina staff, they will be able to operate just as efficient as the DSV employees. So that's really the journey we are taking on that one. If we take the shared service centers, I think it's important to state that we're transferring, of course, the Panalpina volumes and merging them into the DSV structure as well. So I think on the European shared service centers of Panalpina, they are virtually more or less moved into the DSV Shared Service Center. And then there's, of course, a couple of shared service centers in the Asia Pacific that are being closed. And then I think we will merge the one that is in Manila. So going forward, there will be a couple of large service centers. There will be one in Europe, and there will be one in Manila as well. And that's progressing very well. There's a good plan. There's good execution, and we're very pleased about that. Then about the corporate bond. Yes, we have mentioned that we will make a large share buyback, and we need to bankroll this. Then I mean, I can't say any specific dates on the bond because then we would have had to send a release, and we're not ready for that yet. But we're working on the documentation, getting that in place, and then we should, at a certain point in time, be ready to announce this to the market as well. And then on the Cargo Link Way Forward project, we work on it in Lithuania, and we've negotiated a deal with this vendor on the Cargoink way forward or that's almost final. And we're now pushing on to the next pilot country and then getting the functionality in. But we think we have the tool now that we need. And then we do have to extend the pilot so that we get all the functionality in. And there will probably be a couple of countries in the pilot phase, so still slow movement. But I think we are on the right path, and we see that the system, it works well. So I think that was your 4 questions. We now go to the line of Frans Hoyer at Handelsbanken. Please go ahead. Your line is open. Hi. Yes, I was wondering, you mentioned on Page 10, Slide 10 that with Panalpina for the full year, you would have had turnover of SEK 120,000,000,000 Could you give us the same number for gross profit and EBIT before special items, please? Can we not provide them to you after the call? Because we I assume we don't have them on the top of my head. Are they not in the report or something like this? It could be, could will be, sorry. Then I'll try a different article. I'll just ask Fleming to send them over to you. But I think the GP would probably have around DKK30 billion as far as I can recall it. And what was the other number you were asking was EBIT? Well, the same for EBIT before special, But But it's probably around SEK7 1,000,000,000 on the top of my head, if I should be able to say something, yes. And so okay, I'm trying to get at the underlying growth, the organic EBIT growth that you are factoring in, in your guidance. We've had that sort of conversation, I guess, around the guidance a couple of times now. But we have factored in, if you take the upper end of the guidance, some few percent in growth in the EBIT, I think that's the way we calculate it ourselves. But I think also here, Fleming will be very helpful to do this math together with you. And then of course, if you add the synergies on this and a little bit lower in the guidance, of course, there's also factored in that there might be a little slight negative growth. So it goes from slightly negative depending on the scenario and then to a slight positive organic growth in the guidance. I think that's all in this range that we're talking about. So probably from 2%, 3% negative to 2%, 3% positive, I think that's what we are talking about. That's great. That's very kind. The other question is about your whether there are any new insights around perishables and freight management at this stage? We published annual report this morning, and I can tell you there's been no developments since. So I think we are still investigating what how to deal with this from a strategic point of view. And of course, we have much more clarity on the numbers they produce right now. And we will then have to make up our mind about the return on the investors' capital. If they don't meet the hurdle rates, of course, we will have to discuss what to do about it. We now go to Bank of America, Mineta Chiani. Please go ahead. Your line is now open. Hi. I wanted to ask about the competitive pressures, if you're seeing anything on a GP per unit basis and if that's included in your guidance. And then secondly, on cash flow, the working capital, could you quantify the impact from Panalpina on the working bill? And are all the special items cash? While Jenshee, he does some calculations on the cash flow, I can talk a little bit about the competitive landscape and the pressure. As you called it, no big change towards the end of the year or the beginning of this year. It is always super, super tough working in a very, very fragmented industry as we are. We don't we have not kind of built any negative developments on yields into the guidance. We don't see ourselves as particularly vulnerable or anything right now. There is over a long, long period of time, our income per units have been fairly stable, both in high growth and low growth environments, both in environments with very high rates and also in environments with very low rates. There's the famous delay effect, of course, as we have talked about, but overall, we don't see any significant development. I would say most of our competitors, they have a fairly rational behavior. There's none of them who've gone absolutely crazy with the super low rates or being more aggressive than normal. So we expect on that front at least, 20 to be a fairly normal year. And then on the cash flow side, it's right that we have the 3.3% here at year end. And of course, there's been a slight outflow due to the sort of integration work, but probably also because there's more the percentage will come down towards the 2% that we used to have or be below. We will have to see that journey, how much we can work with it. It's clear that we can speed up invoicing, we can improve collection and we can make sure that we have the right terms on the credit side as well. But that's the journey we're on right now. And I think it's going to be interesting to see where it all ends up. But if you look at our NOC division in general, it has a higher consumption of working capital than the other divisions. So I think that's what we can say on the working capital right now and on the cash effect of it that we should be able to squeeze a little bit of cash flow out in the next year. We now go to Andy Chu at Deutsche Bank. Please go ahead, Andy. Your line is open. Good morning. Do you have any interest in any of the XPO assets in Europe, please? That's a very direct question, I must say. We did note that XPO have initiated some sort of process. We have our eyes and attention 100% focused on the integration of Panalpina. We cannot allow ourselves to be disturbed by anything else. We simply don't have, I would say, either the appetite really or the energy, so to say, to look at any potential further acquisitions at this moment in time. Most you have to remember also most not all, but most of these assets have been sort of passed been passed by our office some years ago. So we know them fairly well. And you could probably read in to the situation that we at least at that time decided not to pursue those opportunities. And I don't necessarily think that, that strategy or that decision has changed in DSV. So I think it was not as a direct answer as your question, but I think this is what we can say at this moment in time. Okay. We now go to Sam Bland of JPMorgan. Please go ahead. Your line is open. Good morning. Two questions from me, please, if I can. First one is on it's related to an early question on airfreight unit margins. Obviously, they've come up in the last 12 months organically in a weak volume environment. If you look forward into 2020, maybe volumes will strengthen a little bit. Do you expect to give any of that higher margin you're earning currently back as those volumes improve a little bit? And then on the expected sort of circa 5% Panalpina volume losses, Should we interpret those as regretted losses and that you're losing profitable business at the EBIT level? Or actually the reason it's being lost is because you're willing to walk away from it at the current level of profitability? Yes, thanks. Yes, that was really a good question, the last one, because we forgot to mention that. It's correct that a lot of this is not necessarily regrettable losses as you put it. It's actually something that we were not too sad to see go. For various reasons both Panalpina were not in a position to turn this into profit And you can also see that you might see some negative effect on the GP due to this customer loss, but you haven't seen any negative effect on the EBIT. In some cases, actually, you would have seen the contrary. So this is not something we are too worried about. So yes, thanks for asking that. In terms of airfreight margins, you're right. As we enter into this year under normal circumstances, we would expect the market to improve. Comparisons do get much easier. We will fight everything we can, of course, to keep the margins at the current levels. And this is the expectation we have at this moment in time. We have not built any negative developments in as we don't see that as very likely. But of course, small variances should be expected from quarter to quarter as you have always seen in DSV. Okay. Final question we have time for today is over to the line of Christian Nodelcu at UBS. So Christian, please go ahead. Thank you very much for taking my questions. Q2, if I may. First of all, we're seeing more and more airlines that are moving ahead with digital air cargo, so more live pricing, instant booking and so on. I guess the question there, do you see that as an opportunity to unlock productivity improvements for your operators and reduce cost there? And to what extent do you see that on a midterm as a risk for a renewed push from the airlines to try to get some of the volumes to sell directly to the BCOs? The second one, could you give us a bit of color in terms of the volume split for each DSV and Panalpina in terms of door to door volumes or door to door volumes versus port support or airport to airport contracts and how you see that dynamic, that volume split evolving going forward? Okay. I think I'll answer the I'll try to give you a little feedback on that. So on the digital air cargo, I think one of the things that we have in our enterprise architecture is that we try to have a very, what can I say, consolidated data and we try to have a high integrity because this drives productivity? Then whoever we can work with that is easy to interact with and for example, the airlines, if we can do this in a more efficient way then because we have more consolidated more better quality of the data, we can probably do it better than our competitors if they are not that organized. So this means that we will be able to take advantage of these productivity gains. Then of course, you are right, we then have to make the change management. But I think if you look at this company, it's all about change capacity. And we have a lot of change capacity. So I would say, it would be very painful if was not a big benefit for us. Whether they then want to go for some customers themselves, I don't think so. I think that they are not capable of coming up with, what can I say, the consolidation benefits that we have and also to give the commitments that we give? Of course, you will find specialties here and there, but in general, no, I don't see that happen. Then on the port to port, Odor, I would say DSV probably has, through its more decentralized structure, a culture where you do more end to end business because people, they are also measured very hard on how much income they generate per transaction. So the more work they do, the better it is. And I think Panalpina, perhaps, to a lesser extent, had this. So it represents an opportunity for us, and this is something that they're really trying to sell, of course, within the division. And I think most customers, they actually like that we go down that path because it means more control, and this is exactly what we want in the supply chain. So I think of course, it's a general answer because I don't have the splits, but this is at least the feedback that we get from the organization. Thank you very much. Okay. That was the final question for today. May I please pass it back to you for any closing comments at this stage? Good. Thank you very much. Thanks for all your extremely qualified questions. We really appreciate those. I'm sure we'll have bilateral discussions in the coming weeks with a lot of you. We'll meet some of you on roadshow activities. I will save the best to last, and that is a great, great amount of gratitude going from this head office up to the super strong organization of DSE. You have once again produced breaking market leading results that each of you can be extremely proud of. We are proud of you. You've done great. And we will not look over the shoulder. We have ambitious targets set for 2020 that I'm sure we will achieve together. So thank you to all of you guys. Let me use this opportunity also. I know a lot of DSV hard working employees. They also take the opportunity between customer calls to listen into this webcast as well. So thank you very much. We will be back with Q1 results before you know it. It will be extremely interesting to see, and we look forward to that date. Until then, thank you for listening in. Have a good day. Have a good weekend, and bye bye here from Denmark.