Frans Maas integration costs hit DSV’s profits
published: cw 13, 2007 in Mergers & acquisitionsDSV, the Danish logistics company formerly known as DFDS, has announced annual pre-tax profit figures just 3% above last years at DKK1.01bn (€13.7m). EBIT was up 15% to DKK1.22bn on an increase in sales of 39% to DKK 32bn.
Dominating these results was the acquisition in 2006 of the troubled Dutch Road Freight company Frans Maas. The cost, not just of acquiring Frans Maas but also of re-structuring the company, has drained cash from DSV. It has raised its estimates of the costs of re-structuring from DKK250m to DKK450m, with DKK300m of this already spent.
Organic growth in the rest of DSV is around 7%, with the ‘Solutions’ business delivering a 10% growth in profits and ‘Air & Sea Forwarding’ a 46% increase. Solutions has been successful in gaining big contracts from Scandinavian customers, such as a recent deal to provide a logistics centre for Volvo, whilst Air & Sea Forwarding reflects buoyant demand in the sector generally. DSV has indicated that it will continue to invest in both of these businesses to keep-up with demand.
DSV has outlined cautious expectations for 2007 earnings, with an expected profits recovery of 30% and a more modest growth in revenue to over DKK35bn from this year’s DKK32bn. This reflects a belief that the costs of integrating Frans Maas will come to an end leading to higher profitability.
Although the management statements were bullish about the performance of the company, DSV indicated that it wished to grow more quickly than this year and that acquisitions would play an important part in this. Of course not only does it have to find high-quality companies that fit its strategy, it also has to avoid the sorts of problems that it has encountered at Frans Maas.
Source: Transport Intelligence
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