For the first half of 2017, DSV has reported another good set of results, with widening margins and growing sales. An important part of this appears to be the contribution of UTi.
The forwarding business prospered surprisingly well, with net revenue up 12.1% for the first half of the year and adjusted gross profit up 9.9%. EBIT (Earnings Before Interest and Tax), after exceptionals, leapt by 61.7% to DKK1,533m, representing a hardening of margins from 6.1% over the same period last year to 8.8% this year.
Volumes of freight moved were up in the case of sea freight by 4% and in the air freight business by 8% over the half-year. The sea freight business saw some fall in profitability with gross profit per TEU edging down by 1.8% in underlying terms, however air freight saw margins rise by 1.4% in terms of gross profit per tonne.
Even more surprising was that the road freight business saw overall EBIT rise 24.6% on 8% more shipments. This outpaced market growth of 3%, in part due to the business generated by the other parts of DSV.
The contract logistics ‘Solutions’ business also did very well. Net revenue over the half-year climbed 25.7% whilst EBIT before special items jumped by 41.6%.
Much of the provision for special and exceptional items in the results are due to integration costs with the former UTi businesses.
The quality of both growth and profits appears to owe much to the effective way that DSV has absorbed UTi’s businesses. It seems that DSV has been able to turn contracts which were of marginal profitability into opportunities for high-margin growth. It might be speculated that one of the reasons for this was that UTi had considerable exposure to emerging markets where demand is growing rapidly but where logistics markets are less competitive. In other markets, such as North America, DSV has been able to consolidate UTi’s business into DSV’s existing capacity thus improving utilisation of assets. Remarkably, DSV terminated just 5% of UTi’s existing client contracts.
DSV’s performance has been so good that it announced a share buy-back programme of DKK1bn and hinted that it would start to look around for further acquisitions.
Source: Transport Intelligence, August 3, 2017
Author: Thomas Cullen
