Welcome to the DFDS conference call. Throughout the call, all participants will be in listen-only mode, and afterwards, there'll be a question and answer session. Please note, the call is being recorded. Today, I'm pleased to present Torben Carlsen and Karina Deacon. Good morning, everybody. Here is Torben. Karina and I are also joined by Søren Br ø ndholt, our Head of Investor relations. We're here to speak about the earlier today announced acquisition or agreement to acquire HSF Logistics Group. If you turn to page two, with our strategy ship, we will start by going back to the Win23 strategy launched in 2018. Many of you will recall that there are four pillars, Pillar A talks about growing solutions to select industries. Today, we will not, at least during the presentation, talk about the other pillars. We can cover those if there are questions. Pillar A on the next page, the select industries we talked about that we would double back then were automotive, forest and metals, and cold chain. HSF Logistics that we announced as an acquisition today will more or less quadruple our cold chain business once it is approved by the authorities. Moving to page four, the acquisition is creating Northern Europe's leading cold chain logistics provider. The HSF Logistics Group include four main brands, HSF Logistics, operating primarily out of Holland, Eurofresh, a German brand, N&K Spedition, Scandinavian-based freight forwarder, and Skive Køletransport, a primarily Danish-based cold chain transport company. Total revenue around DKK 2.8 billion and EBITDA of DKK 320 million with 1,800 employees. We have agreed an enterprise value of around DKK 2.2 billion, and we have also agreed what we believe is an attractive transaction structure that leave our financial leverage unchanged. Karina will talk more about that later. Turning to the map on page five, you can see that the acquisition is geographically in the middle of DFDS's strongholds in Northern Europe. It will add strong market positions in the cold chain in Holland, Germany, and Denmark. In addition, bring expertise in meat logistics, where DFDS is only limited present today. Moving to page six, a little background on HSF. It's an old fourth-generation family-owned business founded 1923 in Nijmegen in Holland. It merged in 2017 with N&K Spedition, who a couple of years earlier had acquired Skive Køletransport. The main business of the group is to be a cold chain logistics provider to meat producers and other food producers operating in temperature-controlled supply chains. 2,500 customers and a business structure with three specialized focused business areas that we'll talk more about on the next pages. Historically, the financials have been fairly stable, we also see a fairly 2020, although we don't have the final numbers. The first main business area on page seven is between the continent and U.K., with integrated packaging and transport logistics for the food industry, where primarily pork and poultry is transported to the U.K. For the most part of that, using Dolav box pallets or other plastic packaging, making it an environmentally very attractive form of transport and also a transport where it is important to have both the loads out and the loads back, since the same equipment is being used in this closed system. This business has relatively large storage and cross-docking facilities in Nijmegen, including washing, etc., of the plastics. This part of the business is around 20% of group revenue, and the international part of the transport relies on a trucking operation intragroup provided from Poland. Moving to page eight. The second main business of HSF is Holland, Germany. Here it's mainly beef and veal transportation, and back loads from Germany include fruit, vegetable, dairy, and fries. Again, large storage cross-docking facility in Holland, and a very extensive hanging meat logistics facility in Holland. Again, around 20% of group revenue, 300 trucks, partly local, partly supplied by the Polish trucking operation. The 50% remaining revenue of the group is in starting point Scandinavia with N&K Spedition and Skive Køletransport. International freight forwarding of meat and fish from Scandinavia to U.K., Spain, Italy, and back loads of fruit and vegetables. Skive Køletransport, a very strong market position in Denmark with focus on dairy, frozen products, and also meat. Turning to page 10. A very strong trait of HSF is that in most of their transports, a number of value-added services are integrated into the business model. It's rental, repair, cleaning of reusable packaging. Strong offering of this packaging system that has been adopted well by slaughterhouses and logistics partners throughout HSF's geographical area. It also means that there is a relatively strong integration by HSF into the customer's supply chains. On page 11, we show first DFDS presence today in cold chain and how the acquisition of HSF complements and expands the presence primarily in Northern Europe, but also a little more unusual for DFDS in Africa and China, with relatively small operations. We will have a very significant fleet of trucks and reefers, and 2,500 people employed in this business segment. DKK 4 billion of the total DKK 8 billion logistics revenue will come from our cold chain operation once the transaction is complete. With this, I will turn over to Karina for more details of the transaction structure. Thank you, Torben. If we look at page 12, as we said, we have acquired HSF for an enterprise value of DKK 2.2 billion, which will give us an enterprise value to EBITDA multiple of around 7x based on the expected DKK 320 million in EBITDA. The acquisition is made by a new company owned by DFDS, where we will own 100% of the ordinary shares. We will pay DKK 930 million up front on closing, we will use that from our existing cash pool. We will enter into a structure where we will have non-voting preference shares to be owned by the sellers, and we have a call option to redeem those preference shares over a three-year period, amounting in total to DKK 810 million. In connection with the acquisition, we take over a net interest-bearing debt of DKK 460 million, that is excluding the IFRS 16 adjustment. All in all, when we look at the financial leverage and we include the earnings from HSF and the debt taken over, we are in a situation where the financial leverage will be basically unchanged by this transaction. We will remain 100% in control of the group, it will be fully consolidated into DFDS, as the preference shareholders only have protective rights. We will, of course, have to wait for the regulatory approval and some required employee consultations, we hope that we will be able to complete the transaction in around three months. Back to you, Torben. Thank you very much, Karina. As I said in the beginning, we are very pleased that we have been able to convince the owners of HSF that DFDS is the right home for them going forward. In particular, we are pleased because it is a significant pillar of our Win23 strategy to grow our cold chain business. We have created a leading provider in what we believe is a very attractive niche market. There's good overlap with our ferry transport infrastructure, with the heavy reliance on transportation from both Scandinavia and Holland to the U.K. We have not been able, at this stage, to determine the size of cost and commercial synergies, but we will come back with more details on that in connection with the closing of the transaction. This was our brief introduction, and we now pass over for any questions. Thank you. Ladies and gentlemen, if you have a question for the speakers, please press zero one on your telephone keypad and you'll enter a queue. After you're announced, please ask your question. Our first question comes from the line of Casper Blom from ABG Sundal Collier. The floor is yours. Please go ahead. Thank you very much. Torben and Karina and Søren, congrats on the deal. It has been on your wish list, I know. First question is this sort of a mission completed within cold chain, or is this an area that will still be on the M&A agenda for you? That is the first question, please. That's a good question. Of course, right now our full focus will be on a successful integration between DFDS and HSF. It is also obvious that we will get a very strong market presence in this area. Most likely, over time, new opportunities therefore will also appear exactly in an area where we are strong. Okay, fair enough. Second question. As I understand it, the seller will become a minority shareholder in this new company. Merely wondering if they will be entitled to receive part of the earnings in the period before you have bought back these preference shares. The sellers, they will not become minority shareholders. They will have preference shares, and there they will get dividends as declared, if any. They will also get an interest on their preference shares. They will not be minority stakeholders. We do have minority stakeholders in the companies today, and they will obviously be included as minority shareholders. Okay. Thank you very much. Then finally, the margin that HSF delivers is above your own logistics margin today. Is there a structural reason for this in this specific area, or are they basically just running a really good business? There is, in general, probably slightly higher margins in cold chain logistics than in ambient logistics. In addition, this business model we described, where they are tightly integrated with the supply chains of the customers, also allow them to bring more value-adding services than maybe in a traditional customer relationship, which is also helping increasing the margins. Are they also delivering a higher margin than the cold chain business that you already have? We can only see the whole logistics business, but if you look at the existing DFDS cold chain, is HSF then also with a higher margin, and would this mean that you could lift your existing margin? Our cold chain business is also very attractive. I think we are merging two high margin businesses here. My final question is then just sort of a hope here. Can you give any kind of quantification on potential synergies, or is that still too early in the process? That is too early. We will promise to come back with that around closing of this transaction. Okay, that's right. Thanks a lot. Our next question comes from the line of Ben Fogle from Carnegie. Please go ahead. Yes, thank you. I would just like to continue on synergies, because I understand these two businesses are quite complementary. Is it a fair statement to say that cost synergies are fairly limited? It is at least not an acquisition driven by cost synergies. You are correct in that. Can you elaborate maybe a bit on, not quantify, but elaborate where you do see some synergies on the commercial side? We believe that, of course we have limited access to, or no access to customer agreements on their side. With the expanded geographical scope, complementary geographical scope, the complementary offerings in the meat, in the fish business, the capabilities in packaging that we will pick up, that there will be a number of interesting elements that our customers will buy into. Likewise, HSF customers buying into some of our both geographical presences and skills. Then, as we also say in the presentation, there's a good geographical match with our infrastructure ferry business. There are, of course, opportunities to better utilize our ferries for HSF than they have done in the past. Okay. Thank you. Could you maybe explain a bit about the process here? Has this business or has it been up for tender? Or is it a long stretched process where you sort of say, have been going back and forth, maybe even have had some exclusivity to the owners of HSF? We know HSF and N&K since many years. They are customers with our ferry business. It was originally our ferry colleagues that picked up that this could be an opportunity. We have then, over a couple of rounds, discussed what the strategic ambitions and direction was of the owners of the HSF Group. This has now finally, after quite some years, matured in this transaction. It has been a pretty exclusive process. We believe it has been important for the sellers to find a home, a long-term owner, as opposed to maybe a financial buyer with similar values. It's been a good process where we know each other well already at the outset. Just finally, maybe to Karina on the IFRS 16. What will be the impact once you translate the lease assets and maybe some explanation on the assets, exactly what is the leasing commitment here? Just to get a grip on understanding of how the numbers will be impacted. We estimate at the moment that we'll get a lease liability of a little bit more than DKK 300 million. On the EBITDA side, we'll go for roughly DKK 320 up to around DKK 400 million under IFRS 16. Very helpful. Thanks a lot. Our next question comes from the line of Ulrik Bak from SEB. Please go ahead. Yes. Hello, Torben and Karina. Can you maybe give us a bit of a flavor of the 2020 numbers? I know you only presented the 2017 to 2019 numbers, but as 2020 has been an eventful year, so maybe you can shed some light about the development there. Yeah. They don't have the final numbers yet. They are a family-owned business, not extremely well integrated in their finances. Of course, we have some indications, and they had a rough April, May as we did. Especially the Dutch German business continued to be impacted by the restaurant close downs, also in Germany. The indications are that they will be fairly similar to 2019, in terms of profitability, with a strong recovery the last half year here, equal a little bit to what we are seeing in our own business. Okay. Thank you. That's very helpful. Also to the sellers, do you have a feeling or an idea of what the rationale for them to sell? You were talking about they were looking for a long-term buyer, but why sell at all? Again, they're family-owned, fourth generation. Didn't have children that were interested in taking over the business. Again, without having all the reasons, of course, from their side, they warmed to the idea when we started talking about a merger. As I mentioned before, it has been a multi-year process to get to this conclusion, where we have gotten gradually more and more accustomed to each other and understand each other's ideas. I think it has been an emotional day for the family giving this up, of course. I think they are comfortable that there will be more opportunities for their people and customers in combination with DFDS. Okay. Thank you. You also mentioned that you had some sort of exclusivity in the M&A process. Does that mean that you did not have competing bids? Was it more important for the family to get a long-term buyer than to get the highest price? Can you comment on that, please? Yeah. It was an exclusive bid. They had retained an advisor, and they had made some testings in the market. We think it had clearly a value that they knew that with DFDS it would be a lasting solution. The owners still live in these cities, in Winterswijk and Nijmegen, and I think they didn't want the situation, or they preferred if they could find a situation where maybe the company would not be sold every five or six years. That was a main element. When we look at the valuation, we think it's attractive when we have done our DCFs, and we also think it's attractive when we try to compare with peers in the market of a similar size and business. Yes, that makes sense. Thank you. Maybe a question for Karina. Can you please elaborate a bit on the deal structure and the mechanism to redeem the preference share? Are there certain targets that need to be met for it to cost these DKK 270 million per year for the next three years? Could it be less, or could it be more, depending on the performance of the target company? The price is fixed, and we have a call option to call these DKK 270 million over a three-year period. Should we elect to do it earlier, we can do so, but at the moment, the plan is that we will do it over a three-year period. The price is fixed. That's clear. Also a question on your financial position. As of September 30th, you had DKK 735 million in cash, and assuming you will generate the same amount or a bit more in Q4 as you did in Q3, you will just have enough cash to pay the upfront amount of DKK 930 million. In that context, how comfortable are you with your liquidity position following the deal? I'm very comfortable. As you say, we have sufficient cash to pay this DKK 930 million up front. You might also recall that we have a relatively large amount of committed facilities of DKK 3.5 billion. All in all, I think we're in a good financial position. Okay. That sounds great. No further questions from my side. Thank you. Our next question comes from the line of Marcus Bellander from Nordea. Please go ahead. Yes. Thank you. Just a few questions. First off, Karina, if you could clarify, you said something about that there are minorities in the business. How large are those minorities? This is a model primarily entertained by N&K in the way they have built some of the subsidiaries. Without committing completely, it's around 5% of the EBITDA is in theory, held by these minorities. It is done more like a bonus system for the managers that run the different activities. We will enter a dialogue with them, explaining, of course, that that's not normally how our bonus incentives are set up. On the other hand, if somebody prefers to keep these, for example, in the Polish truck operation and other places, it is also fine for us. We'll look into that as we begin the integration. It's not something that has a major impact on the cash flow. Okay. 5% of EBITDA, that would be 5% of net profit as well, roughly? Yeah. 5%-7%. Okay. Great. The second question, I'm just curious how closely you will integrate HSF. Will they retain their brand names, or will you change those? Will you merge offices in some places, or will it be a standalone business, basically? We will do a full integration. Niklas, our Head of Logistics, and Karina are already deeply involved in planning the integration. There is a one-year grace period before we can change names and brands. Everything else we can basically start as soon as competition authorities give their approvals. It will take time. They are run a little bit like two or maybe even three different companies. Their integration is not fully complete since they merged in 2017. Especially on the system side, on the financial side, it will take a little time before all our systems are in place. Okay, understood. Thank you. The last question, just curious where you think the risks associated with this acquisition are, if there are any. In your due diligence, what did you focus the most on? What were the red flags, if any? Where could this go wrong, basically, or how could this go wrong? Well, we always have to be humble, of course, but we have looked extensively into the impact of Brexit. We have looked extensively into the EU Mobility Package that come into play gradually, and especially in 2022, to see how that can impact the business. We have gained a lot of comfort in those areas. Brexit, of course, we know how we've been hit ourselves now. We think we can actually maybe help mitigate the impact when U.K. also starts putting their border controls fully in place later in the year. Other than that, we have, of course, acquired a business with heavy focus in food and meat where the growth is limited. We see that as a very good balance to our otherwise heavy automotive and textile exposure, where there's a lot of volatility typically. We actually see that this is a very good addition to our business in terms of the stability that this food logistics will add to DFDS. Okay. Got it. Thank you. It does indeed look like a good acquisition, congratulations on that. That's all from me. Thanks. Thank you, Marcus. The next question comes from the line of Ruairi Cullinane from RBC. Please go ahead. Good morning. First question, a follow-up from the previous one, I was just hoping you could talk me through any sort of Brexit teething problems that this business may have had. Secondly, could you confirm in which year you expect to deliver the 8% ROIC? Is that in the first year of the acquisition? I clearly understand the transaction structure designed not to impact financial leverage immediately. I was just wondering how comfortable you were with current levels of financial leverage. I know you've still got the ambition to move to three times in the next few years. If you could expand on that would be great. Many questions. Karina, I think we'll start a little bit on the Brexit teething problems. Yes. I think it's fair to say that HSF has had exactly the same problems as the rest of us have, with problems with getting to speak to the systems on the government side, the problems to have sufficient documentation from customers, et c. They are, like the rest of us, working through the pain. Of course, there will be, as Torben just said, a next hurdle when we then start looking into bringing stuff into the U.K., where we then need to abide to the stricter border controls. We have a set up in DFDS where we use extensively our back office center in Poznan, and there we believe that we can also contribute to HSF, especially April 1st and July 1st comes. I think that it's simply something we just all have to work our way through, and it's not something we see as a huge risk. We know the obstacles now, and we also know how to deal with them. Do you want to repeat your next question, Ruairi? Yes. I know you're targeting 8% ROIC. Do you expect to deliver that in year one from this acquisition, or will it take a little bit longer than that? It's probably realistic to expect two, three years before we reach that. We, of course, need to see exactly the 2020 results and form an opinion on the integration benefits over the next couple of months. We don't expect it already in 2021 to reach that level. Also because of the IFRS 16 impact that Karina talked about earlier. Okay, thank you. You're comfortable with current levels of leverage? Yes. Of course, we have a strategy that it should be between two and three, given that it is entirely a product of the passenger business not operating, we are comfortable. We've seen with the result that you got a sneak peek of in Q4 with an EBITDA at the same level as last year, without having a passenger business, we are able to keep reducing that leverage. We are very comfortable. With the structure we have in place here, we basically do not further increase the leverage. Thank you very much. Thank you. Our next question comes from the line of Stefan Roehle from KfW IPEX-Bank. Please go ahead. Your line's open. Thank you, and good morning. First question, you mentioned the antitrust authorities and the clearance here. Do you expect any issues here, and can you elaborate a little bit on the market share of HSF and of course, also then the combined group, in the different regions? It's very small market shares we expect. We don't expect any delays with the clearance. The markets, we need to look now, and we don't have access. There needs to be clean teams on both sides as this is being handled. It is very small in the way you define markets here. It's insignificant, and therefore, we don't expect any challenges. Okay. It's a quite huge and also fragmented market. Also with respect to your market position in the different three regions that you mentioned here. Correct. The second thing, you mentioned the stability of the business. On the other hand, the cold chain business now makes up, as I understood correctly, 50% of total sales in the Logistics Division. Is it something where you see this as a good balance, or when you feel comfortable, or is it something which you would diversify later on with other acquisitions in other logistics divisions? Well, as I said before, main focus now is of course on a successful integration. We believe that there will be commercial opportunities coming from this addition of HSF that we will pursue. The meat consumption as such is a relatively stable market development. We would of course not be pleased if we were not able, with this combined group, to create growth. Okay. Last thing, with respect to the integrations, do you expect any one-off charges by integrating HSF? You mentioned, for instance, the IT system, perhaps also the integration in your financial reporting and things like that. We will have one-off costs, and it's too early to quantify them at this stage. Okay, understood. Thank you very much. Our next question comes from the line of Lars Handel from SEB. Please go ahead. Your line is open. Thank you. Yes, morning, and congratulations with the deal. It looks like a fairly attractive price. One of the things that I struggle a little bit maybe to understand is the rationale behind, you said that there's not a lot of cost synergies. You expect some commercial synergies, although you didn't really expect a lot of growth, and the meat consumption is fairly stable, maybe even declining market going forward. Maybe if you could give us a little more insight to, what kind of commercial opportunities is it that you can pursue? Do you actually expect this business to grow? I can see the way you put it, Lars. It sounds a little bleak prospects. Back to where has DFDS historically been strong. We have been strong in cold chain. We've shown that we can generate attractive margins and growth, by having a strong position in the fish and the general cold chain in mid England. We believe by adding this business, we will further strengthen that. We have a business that we now take over that has very strong integration with their customers, with the whole plastics set up. We believe that we can replicate this setup with some of our customers, for example, in the agriculture area. Then there is actually quite impressive growth both in Skive Køletransport and N&K, with more general cold chain customers. Again, at a margin that is more attractive than in normal full load, ambient transportation. We do think that we'll be able to have a growing business with this, but also a business that will not have big dips like we sometimes see in some of our more volatile industries. HSF has demonstrated that through this COVID pandemic situation as well, that people eat the same amount of meat, whether there's a crisis or not. We see a lot of things that we can do on the commercial side. There will also be cost synergies. As we also said, there's also an excellent mix with our ferry infrastructure. It checks all the marks and see from our side of the chair, Lars. Yeah. No, I hope that you're right. Just one follow-up on that, is it that the contribution into the ferry, because if you look at the numbers that you have in the slides about how many trucks and trailers, et cetera, locations that they have, actually bigger than your existing cold chain, is the contribution to the ferry division a material part of the reason why you have made this acquisition? The acquisitions we do in the logistics space needs to be justifiable based on what we can do in logistics, and the same is true for this one. Of course, it is always an added element if the geographies match so that we can also see that will benefit from moving cargo from other ferry operators or tunnels to our own infrastructure. Okay. All right. Thank you very much. It is part of the upside here, but not a decisive one. Okay. Thank you. Thank you. Our next question comes from the line of Karsten Søndermølle from Maj Invest. Please go ahead. Your line is open. Hi, Torben and Karina. Congratulations on the acquisition. Just one question from me, actually. Could you talk a bit about the client concentration in the acquired activities and for how long these contracts with clients run? We have limited insight because of the non-clearance yet of the acquisition. Of course, we have a good understanding or a good hunch about what the main customers are. They do have on their top six, eight list some customers that represent more than EUR 20 million, EUR 30 million, EUR 40 million. Some of those customers also, is my guess, are customers that we have. We will have some significant customers coming out of this. Historically, we've seen at DFDS that the bigger we become with very large customers, the better we can utilize all our different skills throughout the systems and capabilities. We actually look forward to addressing some of these very large customers that we get in, and where even if we have EUR 40 million, EUR 50 million, EUR 60 million even of combined revenue with them, we are still fairly small. Typically, some of these customers want to consolidate suppliers. We see this more as a strength than as a weakness in this situation. Okay. Congratulations again. Thank you. Thanks, Karsten. Thank you. There are no further questions at this point. I'll pass back to Torben and Karina. Thank you very much, and thank you for the participation today at short notice and also the good and interesting questions. We look forward to starting now planning the integration, and as soon as the clearance come, we will start the actual integration. Have a good day.