DSV Annual Report 2022

17 DSV Annual Report 2022 Strategy and financial targets = III Outlook for 2023 and 2026 financial targets For 2023, we expect EBIT before special items of DKK 16,000-18,000 million. We maintain our 2026 financial targets and aim for a 45% conversion ratio for the Group. 2023 Outlook 2023 (DKKm) 2022 Outlook actual Operating profit (EBIT) before special items Effective tax rate 25,204 23.9% 16,000- 18,000 24.0% Assumptions for 2023 financial outlook After an extraordinary 2022, we expect a decline in our earn- ings and margins for 2023 as freight markets find a new nor- mal level after the pandemic. The World Bank projects global GDP growth in the level of 2-3% in 2023 - with lowest growth rates in the advanced economies. Normally, we expect transport volumes to grow in line with the economy, but in the second half of 2022, we saw volumes declining more than GDP due to reduction of inventory levels and normalisation of consumer behaviour after COVID-19. We expect this negative development in freight volumes to continue in the first part of 2023, but we expect a recovery in the second half of the year. We have based our guidance on the assumption of declines in air and sea freight volumes of 2-5% for the full year 2023. As transport markets continue to normalise, we expect that our gross profit yields in Air & Sea will decline compared to the average level in 2022. For Road and Solutions, we expect that markets will be flat or decline by low single digits in 2023. Across all divisions our aim of taking market share remains intact. We will monitor activity closely across our organisation and adjust our capacity and cost base accordingly. The outlook for 2023 assumes that the currency exchange rates, especially the US dollar against DKK, will remain at the current level. The geopolitical and macroeconomic environment remains uncertain, and unforeseen changes may therefore impact our financial results. 2026 financial targets While we expect decline in conversion ratio and ROIC in 2023 compared to the extraordinary levels in 2022 - mainly for Air & Sea our 2026 targets are unchanged. The targets are based on the assumption of stable global eco- nomic development during the period 2024-26, with average annual global GDP growth of at least 3% and transport market growth in line with GDP. All the way towards 2026 we will continue our focus on achiev- ing organic growth ahead of the market, and we see opportuni- ties to improve productivity across the Group. Our IT systems, infrastructure and back-office functions are scalable, providing opportunities to leverage operations in all three divisions. The targets are based on organic growth and do not include the potential impact from large acquisitions in the period. The strategic objectives of the Group are translated into the following targets: 2026 targets (%) DSV Group 2022 actual 2026 targets Conversion ratio ROIC (before tax) 48.3 25.1 >45.0 >20.0 Divisional targets for conversion ratio Air & Sea Road Solutions 59.7 >50.0 25.8 >30.0 29.0 >30.0 Forward-looking statements This Annual Report in- cludes forward-looking statements on various matters, such as expect- ed earnings and future strategies and expansion plans. Such statements are uncertain and involve various risks, because many factors, some of which are beyond our control, may result in actual developments differing considerably from the expectations set out in the 2022 Annual Report. Such factors include, but are not limited to, general economic and business conditions, exchange rate and interest rate fluctuations, the demand for our services, compe- tition in the transport sector, operational prob- lems in one or more of DSV's subsidiaries and uncertainty in connec- tion with the acquisition and divestment of enterprises.

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