Annual Report and Accounts 2013

Group Chief Executive Officer's Review

In 2013, we continued to steer the business through a difficult macroeconomic environment, remaining focused on higher margin revenues while containing costs and improving efficiencies across our portfolio.

Driving our strategy with relentless focus over the course of 2013 has resulted in an excellent set of financial results.

We are pleased to report adjusted EBITDA6 of $1,414 million and earnings per share (EPS)7 of 72.8 US cents, which represents like-for-like growth of 9% and 27% respectively. We also increased our adjusted EBITDA margin to 46% as we focused on higher margin cargo during the year.

Our strong financial performance came despite slow volume growth. Economic headwinds combined with a highly utilised portfolio with limited spare capacity at key locations constrained our ability to significantly grow volumes in 2013. However, the addition of new capacity in 2014 combined with a projected improvement in global trade sets a promising tone for the year ahead. Our Market Review, highlights the key challenges we faced in 2013 and industry expectations for the year ahead.

capital expenditure

We continue to invest in our portfolio for future growth. Over the course of 2013, we spent $1,063 million in capital expenditure, predominately at our greenfield DP World London Gateway port and logistics park project in the UK, Embraport in Brazil and the expansion of our flagship Jebel Ali facility in the UAE.

These projects, consistent with the overall nature of our portfolio, are long-term investments, with the life of our concessions averaging approximately 40 years. Our strong cash flows and solid balance sheet mean we are well placed to invest today to meet the long-term needs of our customers, whether it is in developed markets requiring increased efficiencies or the capability to handle the increasing size of vessels, or in developing markets requiring increased port capacity to meet demand or updated infrastructure.

In the developed markets we have invested in the DP World London Gateway port, which offers a state-of-the art facility to meet the future demands of the industry. In short, our port provides the most efficient link between deep-sea shipping and the largest consumer market in the UK. We are seeing an increasing number of shipping lines calling at our facility and since the turn of the year, we have had eight unscheduled calls at the DP World London Gateway port, including an Asia-Europe service, as our port was less impacted by adverse weather due to its sheltered location.

In faster growing markets we have invested in the largest multi-modal terminal in Brazil (Embraport), which is in the port of Santos, 80 kilometres away from Sao Paulo, the country’s most populous city. Our terminal has seen encouraging demand since opening as the growth of the middle class population in Brazil and wider region continues to drive demand for containerised goods.

In 2014, we look forward to adding further capacity at Jebel Ali (UAE) and Rotterdam (the Netherlands). We are making good progress with Terminal 3 Jebel Ali and it remains on track to deliver four million TEU of additional capacity. Rotterdam is on schedule to open in the second half of 2014.

Alongside investing for the sustainable growth of our business, we also continually review our portfolio, disposing of or monetising assets where it makes strategic sense to do so. In 2013, we monetised some of our Hong Kong assets at attractive multiples, which subsequently reduced leverage and enabled the recycling of capital into markets that offer the potential to generate higher returns.

STRONG BALANCE SHEET

Our balance sheet remains strong with leverage (net debt to adjusted EBITDA) at a relatively low 1.7 times. This provides us with the headroom and flexibility to invest further should the right opportunities become available. However, we continue to implement strict financial discipline across our business units, and will only deploy shareholder funds if investment opportunities meet our internal rate-of-return requirements.

GLOBAL STRATEGY

2013 was also an important year with the communication of DP World’s strategy through a balanced scorecard framework which comprises four organisation-wide strategic pillars that are core to our business (corporate responsibility, corporate governance, communication and strategic implementation) and four strategic priority areas to support our mission and values and achieve our vision (financial, internal & operational, customer and people & learning). Further details regarding our strategy are outlined in Our Business Model and Our Strategy sections.

THE YEAR AHEAD

Moving to 2014, our overall financial goals remain the same. We will continue to focus on higher margin revenues while containing costs and improving efficiencies. We also expect a return to volume growth driven by a gradual pickup in the macro environment and new capacity coming on line. Importantly, our strong performance in 2013 comfortably positions us to meet our medium-term target of 100 million TEU capacity, an adjusted EBITDA margin of 50% and ROCE of 15% on our existing portfolio.

Further discussion regarding our Group financial performance in 2013, including a regional breakdown, is contained in the Chief Financial Officer’s Review.

Mohammed Sharaf Group Chief Executive Officer
6 Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) is calculated including our share of profit from joint ventures and associates on a basis which excludes separately disclosed items. 7 EPS (earnings per share) is calculated by dividing the profit after tax attributable to owners of the Company (before separately disclosed items) by the weighted average shares outstanding.