Annual Report and Accounts 2013

Chief Financial Officer's Review

“OUR RESILIENT PERFORMANCE ILLUSTRATES THAT A PORTFOLIO EXPOSED TO ORIGIN AND DESTINATION CARGO IN FASTER GROWING MARKETS, CONTINUES TO BE THE RIGHT BUSINESS MODEL TO PURSUE.”

YUVRAJ NARAYAN CHIEF FINANCIAL OFFICER

DP World has delivered another set of strong financial results in 2013, with profit attributable to owners of the Company growing 10.9% to $604 million.

In 2013, we achieved adjusted EBITDA of $1,414 million, while adjusted EBITDA margins reached a new high of 46%. On a like-for-like basis the growth was solid with adjusted EBITDA and EPS growing by 9% and 27% respectively, driven by margin growth in our Middle East, Europe and Africa region.

2013 revenues grew by 3.6% on a like-for-like basis, despite reporting a 0.5% decline in like-for-like consolidated volumes, which illustrates our ability to target higher margin cargo. Our 2013 like-for-like gross volumes grew marginally by 0.7%, due to a combination of being capacity constrained at key locations, including Jebel Ali (UAE), and tougher operating environments in the Asia Pacific and Indian Subcontinent region, particularly in the first half of 2013. After a difficult start to 2013, we were encouraged by our volume improvement and a strong second half of the year resulted in marginal full year volume growth.

middle east, europe and africa

Results before separately disclosed items 2013
(US$m)
2012
(US$m)
% change Like-for-like
at constant
currency % change
Consolidated throughput (TEU '000') 18,993 19,202 (1.1%) 0.4%
Revenue 2,124 2,112 0.6% 4.4%
Share of profit equity-accounted investees 8 24 (65.2%) 2.6%
Adjusted EBITDA 1,095 1,021 7.3% 10.1%
Adjusted EBITDA margin 51.6% 48.3% 52.7%16

Market conditions in the Middle East, Europe and Africa region were mixed. Resilience in our UAE and Africa portfolio mitigated the weaker markets elsewhere. In fact, the UAE delivered another record year with throughput reaching 13.6 million TEU despite being capacity constrained at the start of the year. Consolidated throughput for the region was down 1.1% for the year, but our revenue grew 4.4% on a like-for-like basis as our cargo mix favoured higher margin origin and destination and non-container traffic, particularly in the UAE. This translated into a strong financial performance with adjusted EBITDA improving by 7.3% to $1,095 million, while the adjusted EBITDA margin expanded to 51.6%.

asia pacific and indian subcontinent

Results before separately disclosed items 2013
(US$m)
2012
(US$m)
% change Like-for-like
at constant
currency % change
Consolidated throughput (TEU '000') 4,604 5,401 (14.8%) (3.9%)
Revenue 355 457 (22.2%) (7.6%)
Share of profit equity-accounted investees 90 111 (18.7%) (4.5%)
Adjusted EBITDA 220 299 (26.6%) (13.4%)
Adjusted EBITDA margin 61.8% 65.6% 59.8%17

It has been well documented that market conditions in the Asia Pacific and Indian Subcontinent region were challenging, particularly in the first half of 2013. Weaker than expected GDP growth in Asia combined with a depreciating currency and divestments and monetisations impacted reported volumes, which were down 15% for the year. However, on a like-for-like basis the decline was a more modest 4.0%. Reported revenues declined to $355 million while adjusted EBITDA fell to $220 million. However our focus on higher margin cargo and cost efficiencies meant that our margin was protected with an adjusted EBITDA margin of 61.8%. On a more positive note, we witnessed improved market conditions in the second half of 2013 in the region.

australia and americas

Results before separately disclosed items 2013
(US$m)
2012
(US$m)
% change Like-for-like
at constant
currency % change
Consolidated throughput (TEU '000') 2,480 2,494 (0,6%) (0.6%)
Revenue 594 553 7.5% 8.9%
Share of profit equity-accounted investees (14.0) (1.0)
Adjusted EBITDA 195 166 17.7% 31.7%
Adjusted EBITDA margin 32.9% 30.0% 34.7%18

The Australia and Americas region delivered a resilient performance with consolidated volumes down marginally by 0.6% in 2013. The Americas delivered a softer performance in the second half of the year due to tough prior year comparables. Overall our revenues in the Australia and Americas region grew by 7.5% to $594 million for the year and our focus on higher margin cargo meant that our adjusted EBITDA of $195 million was up by a pleasing 18% on the prior period, while adjusted EBITDA margins also grew to 32.9%.

CASH FLOW AND BALANCE SHEET

Cash generation remained strong with cash from operations standing at $1,299 million for 2013. Our capex reached $1,063 million as we delivered some key projects including the DP World London Gateway port (UK) and the expansion at Jebel Ali (UAE). Gross debt rose marginally to $5,035 million while net debt declined to $2,464 million. Our gearing remains relatively low with net debt to adjusted EBITDA standing at 1.7 times.

CAPITAL EXPENDITURE

We maintain our 2012-2014 $3.7 billion capital expenditure guidance as our projects remain on schedule and on budget. We look forward to adding further capacity at Jebel Ali (UAE) and Rotterdam (the Netherlands). The lower than expected reported capital expenditure in 2013 is due to timing differences and we expect that to unwind in 2014.

2020 Targets

In summary, we continue to work towards achieving our 2020 targets of 50% adjusted EBITDA margins and 15% ROCE on our existing portfolio. While reported adjusted EBITDA margin stood at 46%, the margin on a like-for-like basis was 47.6%. Our ROCE for our portfolio of assets reached 6.7% in 2013, up from 4.4% in 2010. We expect further ROCE improvement in the coming years as we continue to grow and increase utilisation levels across the portfolio.

Yuvraj Narayan Chief Financial Officer
16 Like-for-like adjusted EBITDA margin. 17 Like-for-like adjusted EBITDA margin. 18 Like-for-like adjusted EBITDA margin.