- DFDS distributes approximately DKK 1.8 billion to
shareholders
- Focus on two major business areas:
- ro/ro liner traffic
- overnight passenger shipping - Modernization of fleet
Consequent to the sale of DFDS Dan Transport A/S in
September 2000 and DFDS Travel A/S in December 2000, the
Board of Directors and Management of DFDS have reevaluated
the strategy for the continuing business areas: DFDS Tor
Line and DFDS Seaways. The strategy reevaluation takes into
account the focusing of DFDS’ managerial and financial
resources on the shipping activities, and the continuing
Group’s significantly increased financial strength, and
thus also new business opportunities.
DFDS’ two primary business areas are ro/ro liner
traffic, which is organized in the division DFDS Tor Line,
and “cruise-ferry” activities, which are organized in the
division DFDS Seaways. The geographic focus area for both
primary business areas is Northern Europe.
Expectations to the annual accounts 2000
The net result for the year is expected to be
slightly higher than previously reported.
The operating result is expected to be lower than
previously reported, which, however, will be partially
offset by reduced financial costs. It is planned to
depreciate the remaining goodwill of DKK 64 million,
related to DFDS Tor Line’s activities in Norway, to DKK
0.
The profit from the sale of DFDS Dan Transport and DFDS
Travel is expected to be somewhat better than previously
reported, which more than offsets the reduced operating
profit and the planned depreciation of goodwill. The net
result for the year including extraordinary items is
expected to be DKK 965 million, and thus slightly higher
than previously reported (DKK 950 million).
As the sale was effective as of 30 September 2000 the
annual accounts will only include DFDS Dan Transport’s
result up until the time of sale. DFDS Dan Transport will
not be included in the consolidated accounts in the annual
accounts, but will be included with the result for the
period after tax in a line called “Result of non-continuing
activities.” In the annual accounts the accounting profit
from the sale will be entered as an extraordinary item. The
final profit calculation depends on the calculation of the
balance sheet in DFDS Dan Transport as of 30 September
2000.
DFDS Tor Line (ro/ro liner traffic)
- Focus on the Baltic Sea – Lisco
- Contracting for three ro/ro ships
- Agreement made with P&O Ferrymasters
- New concepts: ro/pax and lo/lo
DFDS Tor Line is market leader on the North Sea in ro/ro
liner traffic between Northern European transport and
industrial centers. DFDS Tor Line offers shipping-related
logistics solutions that make possible a close integration
between customers’ transport requirements, DFDS Tor Line’s
operational planning and capacity management, and external
transport suppliers. The customer base consists of 80%
forwarders and 20% industrial customers.
DFDS Tor Line’s turnover is expected to be DKK 2.3
billion for the year 2000.
The market
The annual market growth on DFDS Tor Line’s present
route network is expected to be around 5 – 8% in the coming
years. Market growth is driven by increased outsourcing of
transport and logistics activities by customers with
comprehensive transport requirements and large volumes. In
addition, there are an increasing number of logistics
contracts with customers for whom sea transport is an
important part of the transport chain.
Vision and business development
DFDS Tor Line’s vision is to become the leading
Northern European provider of ro/ro liner traffic and
shipping-related logistics solutions. In the coming years
DFDS Tor Line will thus seek to strengthen and expand its
present market position through acquisition of companies
and alliances, and by starting up new routes.
A geographic expansion of the route network toward the
east will be given high priority over the next few years,
and in that connection negotiations are in progress
regarding the takeover of the ro/ro activities in the
Lithuanian shipping company Lisco. The activities include
six ships and four routes which operate services between
Lithuania and Sweden and Germany. The investment in Lisco
is expected to be USD 25.0 million.
Fleet renewal
A strategic fleet renewal program is planned with a
view to strengthening DFDS Tor Line’s competitiveness. The
average age of the DFDS Tor Line fleet today is 16 years. A
gradual reduction of the average age of the fleet will
contribute to increasing the fleet’s flexibility,
operational reliability, and frequency, all essential
elements in DFDS Tor Line’s customer service and market
positioning. The renewal program is expected to include new
chartering of tonnage, chartering or acquisition of newer
ships and sale and/or phasing out of older tonnage. The
goal over a period of years is to reduce the average age to
around ten years.
Before the end of the first quarter it is thus expected
that DFDS Tor Line will contract for three newbuildings of
approximately 3,500 lane meters each. The newbuildings will
be entered into service on the Esbjerg-Immingham route.
DFDS Tor Line is also negotiating for an option to contract
for an additional two ships, to be entered into service on
the Gothenburg-Ghent route. It is expected that the
newbuildings will be built in the Far East.
Customers
With regard to customers, DFDS Tor Line will to
an increasing extent focus on industrial customers with
large requirements for shipping-related logistics
solutions. In consequence of this a gradual change in the
cargo mix between industrial customers and forwarders is
expected to take place, so that industrial customers will
represent a growing share of the total freight
turnover.
Also in the future, it will be of great importance to
DFDS Tor Line to maintain and further develop long-term
cooperation contracts with forwarders such as DFDS
Transport, Norfolkline, and P&O Ferrymasters. At the
end of 2000 DFDS Tor Line took over a ship and a number of
trailers from P&O Ferrymasters. The activities taken
over will continue to be used in P&O Ferrymasters’
traffic between Sweden and England, as the activities will
be leased back to P&O Ferrymasters. At the beginning of
2001 negotiations will begin on strengthening cooperation
between P&O Ferrymasters and DFDS Tor Line.
New concepts
As something new DFDS Tor Line will evaluate an
introduction of a ro/pax (combined passenger and freight)
concept on certain freight routes and on passenger routes
that do not follow the city-to-city concept. A ro/pax
concept will make possible a more rational combination of
transport of passengers and freight. Furthermore, DFDS Tor
Line will work on combining the ro/ro (roll on – roll off)
strategy with lo/lo (lift on – lift off) ships (container
ships) to the extent that this is to the benefit of
customers and financially advantageous.
Systems
In relation to the strategic focus on integrated
logistics solutions, DFDS Tor Line will continue to further
develop the IT-based handling systems and customer
interfaces, including Internet-based solutions in
particular.
DFDS Seaways
- Larger tonnage on Copenhagen-Oslo service
- Larger tonnage on Amsterdam-Newcastle service
through rotation
- New route to Poland
Today, DFDS Seaways is one of the leading shipping
companies in Northern Europe in the area of overnight
cruise ferry liner service, which is passenger shipping on
routes with a single overnight stay on board and emphasis
on a high degree of passenger comfort and the opportunity
for diversion and entertainment on board. The DFDS Seaways
route network consists of routes between attractive
Northern European cities – the city-to-city concept. The
customer base is primarily made up of car tourists,
“mini-cruise” passengers, and conference guests, and to a
lesser extent of freight customers. DFDS Seaways is market
leader on the North Sea and the Kattegat.
In the year 2000 DFDS Seaways expects to achieve a
turnover of DKK 2.1 billion.
The market
The annual market growth on the Company’s existing
route network is expected to be 3 – 5%. At the present time
the market for cruise ferry liner service is under the
influence of a number of factors which are believed to be
favorable for DFDS Seaways. Important trends are, among
others, more but shorter trips, as antidotes to a stressful
life-style, more individual trips, and an increasing senior
citizen market.
Vision and business development
DFDS Seaways’ vision is to be the leading cruise
ferry shipping company in Northern Europe. DFDS Seaways
plans to grow through an increase of tonnage and capacity
on the existing route network. In addition, there are plans
to establish a new route from Copenhagen to Poland in 2002.
DFDS Seaways will continually work on the possibilities for
making value-creating acquisitions of companies or entering
into alliances to achieve synergy advantages.
The leisure market is undergoing constant growth, and
DFDS Seaways is working on the possibilities for exploiting
this potential by establishing summer cruise activities in
Northern Europe and by further developing the leisure
activities in DFDS Canal Tours. In addition, DFDS Seaways
will evaluate the possibilities for developing leisure
activities or services in connection with the cruise ferry
routes. Tour operation could be one example of this.
Fleet renewal
In order to constantly live up to customers’
increasing expectations of a high degree of comfort and a
variety of on-board experiences, and to be in a position to
realize the route network’s full potential, a renewal of
the DFDS Seaways fleet is planned. The fleet will be
renewed through the use of a circulation strategy in which
new tonnage will be entered into service on the major route
Copenhagen-Helsingborg-Oslo, and tonnage that is still of
high quality from this route will be entered into service
on routes that require greater capacity and higher
quality.
DFDS Seaways is conducting concrete negotiations to
acquire a passenger ship, which will be entered into
service on the Copenhagen-Oslo route, thereby providing
extra capacity. The total investment including rebuilding
and adaptation will be approximately DKK 800 million. The
new ship will replace the QUEEN OF SCANDINAVIA, which,
according to plan, will be entered into service on the
Amsterdam-Newcastle route, thereby increasing capacity on
that route as well. Finally it is planned to transfer the
KING OF SCANDINAVIA to the new service to Poland, beginning
in 2002. Implementation of the above-mentioned acquisitions
and tonnage rotation is estimated to result in a growth in
turnover of around DKK 500 million in two years’ time, in
comparison with today.
Systems
DFDS Seaways will continue to develop IT-based
management systems and Internet-based booking and marketing
systems to reduce distribution costs and build up/maintain
customer data bases.
DFDS’ capital structure and use of sales proceeds
DFDS’ long-term goal for the capital
structure is a solidity of 30 – 35%.
With a basis in the strategy and the long-term goal for
the capital structure, at the Annual Meeting in the spring
of 2001 the Board of Directors will propose the
distribution of approximately DKK 1.8 billion to the
shareholders.
After distribution of approximately DKK 1.8 billion and
further reduction of debt, DFDS will still have significant
financial strength. The intention is to use this position
to finance financially value-creating company acquisitions
and other investments.
Maintaining a solidity requirement of 30 – 35% thus
means that DFDS will have at its disposal an investment
capacity of approximately DKK 4.0 – 5.0 billion after the
proposed distribution.
If DFDS is not successful in identifying and carrying
out financially value-creating company acquisitions and
investments in the immediate years ahead, a further
allotment to DFDS’ shareholders will be considered. DFDS’
dividend policy of a distribution of 30% of the result for
the year after tax will be maintained.
OPTIMIZE2003
To improve operating profit and ensure
satisfactory financial development in the Group as a whole
and in the individual divisions, a comprehensive
rationalization program called OPTIMIZE2003 will be
initiated. The purpose of the program is to ensure the
Company’s competitiveness and contribute to the realization
of the DFDS Group’s strategic and financial objectives, see
below.
Financial goal and EP-run development
The DFDS Group’s financial goal continues
to be a return on the invested capital of a minimum of
8.25% after tax. The financial goal is expected to be
achieved in 2003.
Implementation of the value-based management concept
Economic Profit (EP), which was introduced in mid-2000,
continues. EP has now been introduced as a major element in
the Group reporting system and in the board reports.
Acquisition of companies and major investments are
evaluated on a basis of their ability to create EP.
Implementation of the EP program will continue in 2001
and 2002.
Yours sincerely,
DFDS A/S
Jan Erlund
Chairman of the Board
Ole Frie
Presiding Director