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Financial Targets

EARNINGS MARGINS AND ROIC
DSV total Target Actual 2016
Operating margin 7% 5.1%
Conversion ratio 30% 21.9%
ROIC 25% 21.5%
Air & Sea Target Actual 2016
Operating margin 7-8% 6.7%
Conversion ratio 35% 25.7%
ROIC 25% 23.5%
Road Target Actual 2016
Operating margin 5% 3.7%
Conversion ratio 25% 20.6%
ROIC 25% 35.8%
Solutions Target Actual 2016
Operating margin 6% 4.0%
Conversion ratio 25% 14.7%
ROIC 20% 14.0%
We retain our long-term financial targets from 2015 and expect to achieve them by 2020.
 
The long-term targets are based on the assumption of a stable global economic development during the period with global annual GDP growth of approx. 2% and transport market growth in line with GDP.
 
The main drivers for reaching the targets are above-market volume growth in all divisions and a continued successful integration of UTi.
 
ROIC targets are before tax.
 
During 2016, the acquired UTi activities have diluted DSV’s financial margins, but as synergies are realised, we expect to return to pre-UTi financial ratios by 2018. In 2019-2020, we see further opportunities to improve productivity.
 
Capital structure and allocation
 
Our capital structure is designed to ensure:
 
• Sufficient financial flexibility to meet the strategic objectives
• A robust financial structure to maximise the return for our shareholders.
 
Our targeted financial gearing ratio is set at 1.0-1.5. The ratio may exceed this range in periods with significant acquisitions, as with the acquisition of UTi. In 2016, our free cash flow has been used to reduce debt relating to the acquisition, and we expect to be back within the target range in 2017.
 
Our free cash flow allocation strategy is unchanged from prior years:
 
1. Repayment of net interest-bearing debt in periods when the financial gearing ratio is above target range
2. Value-adding investments in the form of acquisitions or development of the existing business
3. Distribution to the shareholders by means of share buybacks and dividends.
 
Share buybacks and dividend policy
 
Group Management continuously monitors that the realised and expected capital structure satisfies the targets set. Any adjustments of the capital structure are determined in connection with the release of financial reports and are made primarily through share buybacks.
DSV aims to ensure that the dividend per share develops in line with the consolidated earnings per share. Proposed
dividends for 2016 amount to DKK 1.80 per share (2015: DKK 1.70).