!
! !
The!Default!Risk!of!Scandlines!
Ex6post!the!opening!of!the!Femern!Connection !
Program:! ! MSc!in!Accounting,!Strategy!&!Control!
Author:! ! Mads!Hertz!Knutzon! ! CPR:!XXXXXX6XXXX!
Supervisor:!! ! Thomas!Ryttersgaard!
Date!of!submission:! 9th!October!2015!
!
Master!Thesis!
Copenhagen!Business!School!2015,!Department!of!Operations!Management!
Number!of!Pages:!80!!
EXECUTIVE!SUMMARY!
The! fixed! connection! connecting! Denmark! and! Germany! is! entering! the! final! part! of! its! approval!
process.! Economists! assisting! Femern! A/S! claims! that! continuing! ferry! operation! is! unprofitable.!
Scandlines!emphasize!that!they!have!no!intention!of!suspending!their!operation!between!Rødby!and!
Puttgarden.!!
The!subject!of!this!thesis!is!to!determine!the!default!risk!of!Scandlines!exSpost!the!opening!of!the!fixed!
connection.! The! construction! of! the! thesis! is! firstly! an! introductory! chapter! explaining! motivation,!
methodology!and!delimitations.!Furthermore,!it!presents!the!Problem!Statement.!!
The! following! chapter! is! conducting! a! presentation! of! both! Scandlines! and! the! fixed! connection.!
Subsequently!a!profitability!analysis!is!conducted!on!Scandlines!subsidiaries!Scandlines!Danmark!and!
Scandlines! Gedser/Rostock.! Ultimately! an! analysis! of! the! ultimate! parent! Scandferries! ApS! is!
performed.!It!is!followed!by!a!strategic!analysis!of!Scandlines’!macro!environmentalS,!industry!specificS ,!and!company!specific!factors.!
Based!on!the!financialS!and!strategic!analysis,!three!expected!scenarios!are!forecasted!and!valuated.!
The! scenarios! are! a! bestS,! baseS,! and! worstScase! scenario.! The! best! case! is! expecting! that! the! fixed!
connection!is!unable!to!be!funded!responsibly!and!ultimately!the!construction!is!cancelled.!The!base!
case! is! expecting! a! substantial! cut! in! leisure! customers,! but! expect! to! retain! shopping! and! freight!
segments.!The!worstScase!is!preparing!ferries!to!only!operate!during!opening!hours!of!the!Bordershop.!
The!revenue!on!ferry!operations!are!massively!decreased.!The!different!cases!yield!enterprise!values!
of!2.421!MEUR,!1.213!MEUR!and!1.027!MEUR!respectively.!The!results!emphasize!the!immense!impact!
a!fixed!connection!will!have!on!Scandlines!business.!!
Ultimately,!the!scenarios!have!been!submitted!to!a!default!analysis,!consisting!of!a!decomposition!of!
the!forecasted!return!on!equity.!A!calculation!of!Moody’s!Financial!Metrics!and!comparison!to!Industry!
ratings!is!conducted.!Conclusively!Altman’s!altered!Z’’SScore!is!used!to!produce!a!definitive!rating.!!
Scandlines! achieves! an! investment! grade! in! the! majority! of! the! bestScase! scenario.! The! worstScase!
delivers!a!BB+!rating!which!is!equivalent!to!a!speculative!grade.!The!base!case!achieves!a!BB!rating!in!
the!year!the!fixed!connections!opens!and!BB+!afterwards.!!
With!Scandlines!current!financial!leverage!they!will!be!exposed!to!a!medium!risk!of!default.!If!they!on!
the! other! hand! exploits! their! effective! business! and! adjust! their! organization! to! the! new! market!
conditions,!they!will!be!able!to!compete!with!the!fixed!connection!when!it!opens.!! !
CONTENTS!
1.0!Introduction! 5!
1.1#Motivation# 6!
1.2#Problem#Statement# 6!
1.3#Methodology# 7!
1.4!Structure! 7!
1.5!Models!and!theory! 8!
1.6#Delimitations# 12!
1.7#Data#collections#&#Criticism#of#sources# 13!
2.0!Presentation! 14!
2.1#Scandlines# 14!
2.1.1!Vision!&!Strategy! 15!
2.1.2!Products! 17!
2.1.3!Customers! 19!
2.2#The#Fixed#Connection# 20!
2.2.1!Timeline! 21!
2.2.2!Financial!Complications!for!The!Fixed!Connection! 22!
2.2.3!Expected!opening! 23!
2.2.4!Scandlines!and!The!Fixed!connection! 23!
2.3#Chapter#Conclusion# 25!
3.0!–!Financial!Analysis! 25!
3.1#Scandlines#Danmark# 26!
3.1.1!Return!on!invested!Capital! 26!
3.1.2!Decomposition!of!Profit!Margin! 27!
3.1.3!Decomposition!of!Asset!Turnover!Rate! 31!
3.2#Scandlines#Gedser#Rostock# 32!
3.2.1!Decomposition!of!Profit!Margin! 32!
3.2.2!Decomposition!of!asset!Turnover!Rate! 34!
3.3#Scandferries#aps# 35!
3.3.1!Selection!of!Peers! 35!
3.3.2!Return!on!Equity! 36!
3.3.3!Return!on!invested!capital! 37!
3.3.4!Financial!Leverage! 39!
3.4#Conclusion#on#Financial#analysis# 40!
4.0!–!Strategic!Analysis! 41!
4.1#PEST#–#Analysis# 41!
4.1.1!Political! 41!
4.1.2!Economic! 44!
4.1.3!Sociocultural! 45!
4.1.4!Technological!&!Environmental! 46!
4.2#Porters#five#Forces# 47!
4.2.1!Threat!of!new!Entrants! 47!
4.2.2!Bargaining!power!of!suppliers! 48!
4.2.3!Threat!of!substitute!products!or!services! 49!
4.2.4!Bargaining!Power!of!Buyers! 50!
4.2.5!Rivalry!among!existing!competitors! 50!
! #
4.3#SWOT#–#Analysis# 51!
4.3.1!Strenghts! 51!
4.3.2!Weaknesses! 52!
4.3.3!Opportunities! 53!
4.3.4!Threats! 54!
5.0!Valuation! 55!
5.1#Forecasting# 56!
5.1.1!Revenue! 56!
5.1.2!Cost!Structure!and!EBITDA!Margin! 58!
5.1.3!Depreciation!and!Amortization! 59!
5.1.4!NonScurrent!core!operating!assets! 60!
5.1.5!Net!Working!Capital! 60!
5.1.6!Net!InterestSbearing!Liabilities!and!equity! 60!
5.1.7!Borrowing!Rate! 61!
5.1.8!Tax! 61!
5.2#Weighted#Average#Cost#of#Capital#(WACC)# 61!
5.2.1!Capital!Structure! 61!
5.2.2!Cost!of!Debt! 62!
5.2.3!Cost!of!Equity! 62!
5.2.4!Calculating!Cost!of!Equity! 65!
5.2.5!Calculating!Weighted!Average!Cost!of!Capital! 66!
5.2.6!Estimation!of!Growth!in!Terminal!period! 66!
5.3#Valuation# 66!
5.3.1!Relative!Valuation! 68!
5.3.2!Sensitivity!analysis! 70!
6.0!Default!analysis! 71!
6.1#ScenarioSRatio#Analysis# 72!
6.2#Moody’s#Financial#Metric# 75!
6.3#Altman’s#ZSScore# 79!
6.3.1!Result!of!analysis! 80!
6.4#Part#Conclusion# 81!
7.0!Discussion! 81!
8.0!Conclusion! 84!
9.0!Appendix! 86!
Applied#Litterature# 86!
Books! 86!
Academic!Articles! 86!
Reports! 87!
Company!specific! 88!
Scandlines!Annual!Reports! 90!
Web!&!Written!media! 91!
Content#of#Appendix# 96!
!
! !
1.0!INTRODUCTION!
A! fixed! connection! over! Fehmarn! Belt! has! over! the! last! two! decades! became! more! of! a! reality.! The!
project!is!now!entering!the!last!part!of!the!approval!process!before!the!construction!can!commence.!
Which!consequences!will!a!fixed!connection!have!for!Scandlines,!the!current!supplier!of!transportation!
across!Fehmarn!Belt?!
Femern! A/S! is! founded! by! the! Danish! Government! and! are! responsible! for! the! construction! and!
operation!of!the!new!fixed!connection.!According!to!Femern!A/S,!the!new!connection!will!shorten!time!
spend!traveling.!Copenhagen!–!Hamburg!will!save!2½!hours!in!train!and!an!hour!in!car.!The!general!
infrastructure!between!the!two!cities!will!be!improved!and!have!great!influence!on!the!southern!part!
of!Zealand!and!on!Fehmarn.(Femern!A/S!1,!2015)!
Other!positive!effects!of!the!fixed!connection!is,!according!to!Dansk!Metal!and!Dansk!Industri1,!better!
international! connections,! which! widely! benefits! the! business! community! on! both! sides! of! the! Belt.!
They! also! focus! on! the! massive! amount! of! jobs! that! will! emerge! under! the! construction! of! the!
connection.!Furthermore,!they!call!it!“a!missing!link”!and!a!necessary!evil!for!securing!growth!and!jobs!
in!both!Denmark!and!the!countries!around!us.!(JyllandsSPosten!1,!2015)!
In! general,! the! fixed! connection! is! widely! supported! by! politicians! and! the! business! community.!
(Børsen! 1,! 2015;! Finans.dk! 1,! 2015;! JyllandsSPosten! 2,! 2015)! In! November! 2014! Femern! A/S!
published!a!financial!analysis!of!the!fixed!connection,!with!positive!results.!The!analysis!stated,!that!
when!the!fixed!connection!opened!it!would!in!no!way!be!profitable!to!continue!the!operation!of!ferries!
on!Fehmarn!Belt.!(Femern!A/S!2,!2014)!
In! spite! of! the! results! presented! in! the! financial! Analysis! provided! by! Femern! A/S,! Scandlines! has! a!
different! approach,! their! chief! of! communications,! Susanna! Brigitte! Kock! and! their! Head! of! HR,! Stig!
Dambmann!stated;!that!it!is!in!not!even!an!issue!to!terminate!the!operation!of!the!ferries,!when!the!
construction!of!the!tunnel!is!finished.!(Information!1,!2011;!Søfartens!Ledere,!2014)!
This! raises! the! question! as! earlier! stated.! Which! consequences! will! a! fixed! connection! have! for!
Scandlines?! Femern! A/S! believes! that! Scandlines! will! terminate! their! business! when! their! fixed!
connection!will!open.!!Scandlines!believes!that!they!can!still!turn!a!profit!with!a!fixed!connection!as!
competition.!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
1!Dansk!Metal!and!Dansk!Industri!are!unions!for!employees!and!employers.!!
This!thesis!will!investigate!Scandlines!situation!and!determine!which!scenarios!Scandlines!can!expect!
to! occur! after! the! opening! of! the! fixed! connection.! Furthermore,! it! will! establish! to! which! extend!
Scandlines!can!be!threatened!by!a!potential!default.!!
1.1!MOTIVATION!
When!the!fixed!connection!over!Fehmarn!Belt!opens,!the!competitive!environment!of!Scandlines!will!
change! drastically.! The! new! connection! will! have! a! transportation! time! by! car! of! 10! minutes.!
Scandlines!has!a!passing!time!of!45!minutes!excluding!waiting!time.!If!that!were!the!only!factor!taking!
into! consideration,! this! thesis! would! be! redundant! and! Scandlines! would! have! to! terminate! all!
operation! when! the! connection! opened.! Scandlines! have! however! made! it! clear! that! they! have! no!
intention!of!terminating!their!ferry!operation!after!the!opening!of!the!fixed!connection.!!
A!lot!of!experts,!consultants,!politicians,!authorities,!involved!parties!and!many!others,!contaminates!
the!media!with!their!opinions!and!numbers!that!advocates!for!their!cause.!!
The! motivation! behind! this! thesis! is! to! give! a! reasonable! overview! of! the! consequences! of! the! fixed!
connection! for! Scandlines! and! determine! if! there! is! room! for! two! competitors! facilitating! the!
transportation!across!Fehmarn!Belt.!!
!
1.2!PROBLEM!STATEMENT!
Scandlines!is!currently!performing!very!well!and!are!currently!among!the!best!performing!companies!
in!Denmark.!(Børsen!2,!2015)!However,!with!the!potential!threat!of!a!fixed!connection!opening!on!the!
exact! same! route,! their! business! environment! is! about! to! change.! But! how! much,! and! will! it! still! be!
profitable! to! operate! ferries! over! Fehmarn! Belt?! The! problem! statement! has! been! formulated! as!
follows:!
Which#scenarios#is#likely#for#Scandlines,#as#the#Femern#connection#may#or#
may#not#open,#which#consequences#will#the#possible#scenarios#have#for#the#
value#and#default#risk#of#Scandlines?#
! !
1.3!METHODOLOGY!
This! thesis! will! be! taking! point! of! departure! in! theoretic! frameworks! related! to! especially! Financial!
Statement!Analysis,!but!will!also!draw!on!elements!from!Corporate!Finance.!The!theoretical!aspects!
will!be!conceptualized!in!a!case!study!of!Scandlines!historical!performance,!their!current!situation,!the!
potential!future!scenarios,!and!furthermore!an!estimation!of!their!default!risk!after!the!opening!of!the!
fixed! connection.! To! make! the! thesis! as! easy! readable! as! possible,! the! theoretical! discussion! will! be!
conducted! within! this! section! to! create! the! most! satisfactory! reasoning! towards! the! selection! of!
theoretical!framework.!!
To! clarify! the! use! of! names,! Scandlines! will! be! used! as! a! reference! to! the! entire! group! and! will! be!
equivalent!to!the!legal!entity!of!Scandferries!ApS.!To!create!a!clear!distinction!Scandferries!ApS!will!be!
used! in! the! Financial! Analysis.! Scandlines! Danmark! will! be! utilized! when! referencing! the! subsidiary!
operating! Rødby/Puttgarden,! as! will! Scandlines! Gedser/Rostock! be! used! when! referencing! to! the!
subsidiary! operating! Gedser/Rostock.! Furthermore,! Rødby/Puttgarden! and! Gedser/Rostock! will! be!
used!referencing!the!routes.!!
1.4!STRUCTURE!
To!provide!the!thesis!with!the!best!foundation,!I!will!initially!set!the!stage!and!present!both!Scandlines!
and! the! fixed! connection.! The! presentation! of! Scandlines! will! contain! a! short! description! of! their!
strategy,!products,!and!customers.!The!fixed!connection!will!be!presented!through!an!elaboration!of!
the!important!points!in!time!that!will!emphasize!on!the!current!status!on!the!process.!!
Subsequently!the!historic!performance!of!Scandlines!Danmark!and!Scandlines!Gedser/Rostock!will!be!
analyzed!in!the!financial!analysis.!Scandferries!ApS!have!only!published!one!adequate!annual!report,!
2014.!Therefore,!their!2014!performance!will!be!compared!to!peers!leading!into!the!strategic!analysis,!
which! will! provide! an! image! of! the! external! conditions! that! are! influencing! Scandlines.! Moreover,! it!
will!supply!an!industrySspecific!overview!and!finally!a!firmSspecific!overview.!!
The! financial! and! strategic! analysis! will! deliver! the! basis! for! the! scenarios,! 3! scenarios! will! be!
determined!and!forecasted!and!subsequently!discounted!with!an!estimated!cost!of!capital,!which!will!
lead!to!the!final!valuation!of!the!scenarios.!The!forecasted!scenarios!and!valuations!will!finally!be!used!
to!depict!the!default!risk!at!each!scenario.!Finally,!I!will!conduct!a!sensitivity!analysis!and!discuss!the!
findings!of!the!thesis.!Ultimately!the!thesis!will!be!summarized!and!concluded.!!
! !
1.5!MODELS!AND!THEORY!
The! common! valuation! of! a! company! has! been! thoroughly! investigated.! The! general! consensus! in!
textbooks! is! a! research! framework! based! on! an! evaluation! of! historical! performance.! A! strategic!
analysis!to!determine!outside!influences,!industry!specificS,!and!business!specific!conditions.!The!two!
elements! are! the! foundation! on! which! the! forecasting! is! based! upon.! The! forecasting! is! used! to!
determine! future! cash! flows,! which! are! discounted! with! the! weighted! average! cost! of! capital! to!
determine! the! value! of! the! company! at! the! date! of! the! analysis.! (Elling! &! Sørensen,! 2003,! p.! 27;!
Petersen!&!Plenborg,!2012b,!p.!187)!
Analysts!have!tried!to!predict!default!for!many!years,!and!there!is!a!substantial!amount!of!literature!
covering!the!subject.!As!with!the!literature!on!valuation,!the!point!of!departure!has!been!taken!within!
the!literature!used!by!the!professors!in!the!relevant!classes!and!furthermore!crossSreferenced!with!the!
original!frameworks.!
The! different! theories! and! models! will! be! discussed! in! depth! in! the! following! paragraphs! and! the!
reasoning!behind!the!selections!will!be!elaborated!on.!!
1.5.1!FINANCIAL!ANALYSIS!
The!analysis!of!historic!performance!or!a!profitability!analysis!is!valuable,!both!in!terms!of!evaluating!
a!company’s!ability!to!run!their!business,!and!in!creating!the!foundation!to!construct!the!forecast!of!
future!performance.!(Hitchner,!2011,!p.!147)!
The!general!suggestion!in!textbooks!(Elling!&!Sørensen,!2003,!p.!100;!Hitchner,!2011,!p.!111;!Petersen!
&!Plenborg,!2012b,!p.!94)!is!to!make!a!decomposition!of!Return!on!Equity!(ROE)!or!Return!on!Invested!
Capital!(ROIC).!Both!(Hitchner,!2011,!p.!111;!Petersen!&!Plenborg,!2012b,!pp.!94,!120!&!134)!mention!
the! DuPont! framework! as! a! way! to! easily! determine! key! areas! of! interest.! Furthermore! Hitchner!
emphasizes! on! the! fact! that! the! model! is! easy! to! compute! and! interpret,! and! furthermore! is! of!
assistance!to!the!analyst!as!an!additional!tool!in!risk!management.!(Hitchner,!2011,!p.!111)!
The! framework! was! statistically! tested! by! (Soliman,! 2008)! He! found! it! very! advantageous! that!
compared! to! other! models! the! DuPont! model! focuses! on! the! operational! aspects! of! the! firm.! His!
analysis!suggests!great!value!in!focusing!on!changes!in!asset!turnover.!He!finally!concludes!the!DuPont!
framework!as!a!very!useful!tool.!!
Based!on!the!sources!above,!I!will!conduct!my!historical!performance!analysis!based!on!the!DuPont!
framework!to!cast!a!light!over!the!financial!drivers!of!Scandlines.!!
1.5.2!STRATEGIC!ANALYSIS!
To!generate!the!best!foundation!for!forecasting,!several!textbooks!emphasizes!on!the!importance!of!
the! strategic! analysis.! The! general! consensus! is! that! it! is! not! possible! to! make! an! adequate! forecast!
based! on! only! historical! performance.! It! is! therefore! important! to! establish! which! environment! the!
business!is!conducting!it!self!within.!Both!in!terms!of!macro!environmental,!industryS,!and!company!
specific!information.!(Elling!&!Sørensen,!2003,!p.!27;!Petersen!&!Plenborg,!2003,!2012b,!p.!187)!
(Petersen!&!Plenborg,!2012b,!p.!188)!elaborates!on!the!macro!environmental!analysis.!!If!the!market!is!
stable!and!product!simple,!the!forecast!can!mainly!be!based!on!historical!performance,!since!changes!
are!not!likely!to!occur.!However,!they!suggest!that!in!complex!markets!with!uncertain!prospects,!the!
analysis! has! to! be! thorough! and! the! forecast! ought! to! be! created! using! scenarios.! They! suggest! the!
PEST! analysis! as! a! framework! to! establish! the! macro! environmental! influences.! (Elling! &! Sørensen,!
2003,! p.! 45)! does! not! mention! the! PESTSanalysis! by! name,! but! suggests! that! factors! that! should! be!
analyzed! are! Political,! National! and! International! economy,! Social/cultural,! Technological,!
demographic,!and!environment.!Which!are!factors!that!align!with!the!PEST!framework.!!
For!industry!specific!analysis!the!textbooks!I’ve!come!across!all!mention!the!framework!of!Porters!5!
forces.!(Elling!&!Sørensen,!2003,!p.!48;!Hitchner,!2011,!p.!143;!Palepu,!Healy,!Bernard,!&!Peek,!2007,!p.!
43;!Petersen!&!Plenborg,!2012b,!p.!189)!
In!1979,!Michael!E.!Porter!wrote!the!article:!“How!competitive!forces!shape!strategy”!He!here!presents!
the!forces:!“Threat!of!new!entrants”,!“Bargaining!power!of!supplier”,!“Threat!of!substitute!products!or!
services”,!“Bargaining!power!of!customers”,!and!“Jockeying!for!position!among!current!competitors”.!
(Porter,!1979)!!
In!2008,!Harvard!Business!Review!published!a!new!article!of!Porter.!It!contains!comments!on!usage!of!
the!framework!and!furthermore!potential!pitfalls.!Such!as!defining!the!industry!to!broadly!or!narrowly!
or! paying! equal! attention! to! all! the! forces! instead! of! focusing! on! the! most! important! ones.! (Porter,!
2008)!
To!complete!the!Strategic!Analysis,!it!is!important!to!include!the!company!and!elaborate!on!how!the!
industry!and!macro!factors!are!relevant!for!it.!The!suggested!framework!for!this!effort!is!the!SWOT!
analysis.! Where! Strengths! and! Weaknesses! refers! to! internal! aspects! of! the! company,! where!
opportunities! and! threats! refers! to! external! aspects! that! could! be! of! significance! to! the! company.!
(Elling!&!Sørensen,!2003,!p.!62;!Hitchner,!2011,!p.!148;!Petersen!&!Plenborg,!2012b,!p.!192)!!
The!Strategic!Analysis!will!be!conducted!using!the!aboveSmentioned!frameworks.!
1.5.3!FORECASTING!
Forecast!can!be!constructed!using!two!different!approaches.!The!SalesSDriven!forecasting!approach!or!
the!LineSItem!approach.!Both!(Elling!&!Sørensen,!2003,!p.!192;!Petersen!&!Plenborg,!2012b,!p.!175)!
advocates!for!the!SalesSdriven!approach.!A!forecast!of!the!articulating!income!statement!is!constructed!
to! create! the! information! needed! in! the! valuation! models.! For! businesses! who! operate! in! monopoly!
similar! conditions! profit! margin! is! a! very! important! value! driver.! Asset! turnover! is! important! in!
businesses!who!are!pressured!by!high!competition.!(Petersen!&!Plenborg,!2003)!
(Petersen!&!Plenborg,!2012b,!p.!186)!recommends!analysts!to!work!with!a!more!detailed!set!of!valueS drivers!on!shortSterm!forecasting!and!a!more!aggregated!set!of!valueSdrivers!on!longSterm!forecasts.!!
The!length!of!the!forecasting!period!is!also!of!importance.!(Elling!&!Sørensen,!2003,!p.!186)!suggests,!
that! for! established! companies,! a! period! of! 5! years! can! be! enough,! they! further! elaborates! on! the!
period! of! newly! startSups! in! which! they! recommend! a! period! of! 10S15! years.! Scandlines! is! a! wellS established!company,!however,!their!business!environment!will!change!significantly!after!the!opening!
of! the! fixed! connection.! Therefore,! the! forecasting! period! must! be! prolonged! until! Scandlines!
experience!a!steadySstate!after!the!opening!of!the!fixed!connection.!The!estimated!opening!of!the!fixed!
connection! is! 1st! January! 2025,! why! the! forecast! is! prolonged! to! 2032! where! the! last! two! years! are!
terminal!periods.!!
Forecasting! is! a! very! delicate! field,! and! (Petersen! &! Plenborg,! 2012b,! p.! 198)! collected! forecasted!
values!of!Carlsberg’s!EPS!for!two!years!by!wellSknown!Analysts.!The!forecasted!values!fluctuated!7,8!
DKK! the! first! year! and! 11,4! DKK! the! following! year.! This! example! underlines! the! difficulty! of!
forecasting!and!confirms!the!importance!of!a!sensitivity!analysis.!(Petersen!&!Plenborg,!2012b,!p.!241)!!
There!is!no!way!to!be!certain!on!the!development!after!the!fixed!connection!is!opened,!therefore!this!
thesis! will! conduct! a! forecasting! and! furthermore! a! valuation! of! different! scenarios.! The! scenario!
analysis! is! set! to! create! a! range! within! the! value! of! Scandlines! is! likely! to! fluctuate! within! and! thus!
create!valuable!information!to!further!investigate!in!the!default!analysis.!!
1.5.4!VALUATION!
A! valuation! can! be! conducted! in! several! fashions.! The! two! most! popular! are! Present! Value! and!
Multiples.! It! is! within! these! two! approaches! this! thesis! will! conduct! the! valuation! of! Scandlines.!
Present!value!models!use!the!forecasted!cash!flows!and!discount!them!back!to!give!an!estimation!of!
the!value!of!a!company.!The!advantages!of!Present!Value!models!are!their!userSfriendliness!and!that!
they!produce!an!output!that!is!easy!to!understand!and!interpret.!(Petersen!&!Plenborg,!2012b,!p.!212)!!
Present! Value! models! offers! a! range! of! approaches! towards! valuation.! The! Dividend! Discount!
Approach,!The!Discounted!Cash!Flow!Approach,!Excess!Return!Approach,!and!Adjusted!present!value!
approach.!(Petersen!&!Plenborg,!2012b,!p.!210)!calculates!the!different!models!on!the!same!example!
and! they! yield! the! same! results.! Based! on! this! they! are! indifferent! towards! which! model! is! the! best!
one.! However,! since! the! Discounted! cash! flow! approach! has! its! value! highly! based! on! the! terminal!
period!and!the!Excess!Return!approach!has!lesser!weight!on!the!terminal!period.!It!seems!logical!to!
use! these! two! approaches.! More! specific! the! Enterprise! Value! approach! and! the! Economic! Value!
Added.!!
To!further!support!the!valuation.!Multiples!will!be!used!to!compare!Scandlines!against!its!peers!and!to!
provide!a!sanity!check!against!the!results!of!the!valuation.!An!article!written!by!(Petersen!&!Plenborg,!
2012a,!p.!226)!finds!that!Multiples!are!valuable!in!comparing!companies!and!stress!test!of!valuations.!
To! compare! companies,! the! Price/Earnings! ratio! has! been! selected! and! to! stress! test! the! valuation!
EV/EBITDA! has! been! chosen.! P/E! takes! the! market! value! of! the! companies! and! estimate! a! rating!
where!market!price!of!a!company’s!share!is!compared!to!the!earnings!of!the!company.!The!EV/EBITDA!
ratio!estimates!the!full!enterprise!value!of!the!company!and!divides!it!with!its!realized!EBITDA!for!the!
year.!!
The!selected!models!and!multiples!will!be!applied!on!each!of!the!scenarios!and!finally!discussed!in!the!
end!of!the!chapter.!!
1.5.5!DEFAULT!ANALYSIS!
On!each!of!the!scenarios!a!default!analysis!will!be!conducted!in!order!to!establish!which!consequences!
the!new!business!environment!has!on!Scandlines!future!as!a!going!concern.!!
(Aziz! &! Dar,! 2006)! conducted! a! massive! review! of! literature! on! the! subject! of! predicting! corporate!
bankruptcy.!They!divided!the!frameworks!into!three!categories:!Statistical!Models,!AIES!Models2,!and!
Theoretical! Models.! They! found,! that! statistical! models! were! the! most! used! in! past! studies.!
Futhermore,!Multiple!discriminant!analysis!(MDA)!and!logit!analysis!equaled!77%!of!the!statistically!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
2!Artificially!Intelligent!Expert!System!models!
models! used! with! MDA! being! the! most! popular.! The! review! concluded,! that! these! models! also!
provided!the!overall!most!reliable!methods!of!bankruptcy!prediction.!!
Two!of!the!first!models!within!this!field!to!generate!general!acceptance!were!the!ZSscore!(E.!Altman,!
1968)! and! the! OSScore! (Ohlson,! 1980).! Both! statistical! models! were! suggested! by! (Petersen! &!
Plenborg,! 2012b,! p.! 292),! Despite! the! fact! that! (Wu,! Gaunt,! &! Gray,! 2010)! compared! the! models! to!
more! recent! and! complex! prediction! models,! the! Hazard! model! (Shumway,! 2001)! and! the! BlackS ScholesSMerton!optionSpricing!model!(Hillegeist,!Keating,!Cram,!&!Lundstedt,!2004).!Both!seemed!to!
outperform! the! two! original! frameworks.! The! original! accountingSbased! approaches! were! also!
compared!by!(Agarwal!&!Taffler,!2008)!against!KMVStype!optionSbased!models!like!(Shumway,!2001)!
and! (Hillegeist! et! al.,! 2004).! They! concluded,! that! in! practice! accountingSbased! approaches! are! not!
dominated! empirically! by! the! optionSbased! models.! Furthermore! the! conventional! models! are! solid!
and!produce!a!significant!economic!benefit!versus!the!markedSbased!models.!!
Based!on!the!above,!the!Default!Analysis!will!be!based!on!an!alteration!of!the!ZSScore!Approach.!The!
original! framework! was! updated! with! two! other! versions.! In! the! original! framework,! some! factors!
have!to!be!calculated!using!market!values.!Market!values!are!not!available!for!Scandlines.!The!second!
framework!Z’SScore,!is!targeted!at!privately!held!companies.!This!would!be!applicable!to!Scandlines,!
however,! a! newer! version,! the! Z’’SScore! has! been! developed! for! nonSmanufacturing! companies.! This!
framework! was! the! best! fit! for! Scandlines! and! yielded! the! most! plausible! results.! (E.! I.! Altman! &!
Hotchkiss,!2005,!p.!248)!!
1.6!DELIMITATIONS!
It!is!not!within!the!scope!of!this!thesis!to!assess!what!strategy!Scandlines!should!pursue!after!the!fixed!
connection!is!opened.!But!to!give!Scandlines!an!indication!of!the!ramifications!of!the!fixed!connection!
based!on!the!chosen!scenarios!and!likelihood!of!default!within!these.!!
The! price! of! the! fixed! connection! will! not! be! analyzed! in! this! thesis! and! it! is! not! its! objective! to!
determine! whether! or! not! the! connection! is! going! to! be! built.! It! is,! however,! within! the! scope! to!
determine! the! political! landscape! the! fixed! connection! is! facing! to! determine! a! plausible! date! of!
completion.! As! further! discussed! in! chapter! 2,! the! current! date! of! completion! is! uncertain! based! on!
numerous!factors.!This!uncertainty!will!be!dealt!with!by!a!sensitivity!analysis,!which!will!investigate!
which!consequences!a!movement!in!date!of!completion!will!have!on!Scandlines!earnings.!!
Unfortunately,! the! accessible! financial! reports! of! the! whole! Scandlines! group! has! been! very! limited,!
and! only! the! 2014! annual! report! was! available.! 3i! became! sole! owner! in! 2013! and! they! altered! the!
structure!for!the!whole!organization.!The!2013!statement!are!only!consisting!of!three!months’!worth!
of!data,!and!no!notes!are!available!for!the!proSforma!all!year!information.!Annual!reports!from!earlier!
than! 2013! are! not! consolidated! group! reports! and! are! therefore! not! applicable.! It! has! not! been!
possible!to!retrieve!financial!numbers!from!the!German!subsidiaries,!why!a!reconstruction!of!all!the!
companies!to!a!consolidated!group!statement!were!not!possible!either.!This!depicts!the!very!limited!
historic!data!that!has!been!available.!!
The! collection! of! information! was! ended! 15th!of! September! 2015.! News! after! this! date! regarding!
Scandlines!or!the!fixed!connection!will!therefore!not!be!taken!into!account.!!
1.7!DATA!COLLECTIONS!&!CRITICISM!OF!SOURCES!
This!thesis!makes!use!of!both!empirical!and!theoretical!sources!in!order!to!supply!a!fulfilling!answer!to!
the!problem!statement.!The!foundation!of!the!research!outline!is!based!on!theoretical!framework!from!
relevant!courses!taught!at!Copenhagen!Business!School,!furthermore!the!original!literature!has!been!
examined!and!crossSreferenced!with!the!literature!used!in!lectures!and!additional!articles!to!create!a!
general! overview! of! common! convention! and! usage.! The! theoretical! frameworks! are! supported! by!
empirical! data! gathered! from! the! financial! statements! of! Scandlines! and! their! subsidiaries! and!
furthermore!strengthened!with!external!sources.!!
The!lack!of!historic!financial!knowledge!from!Scandlines!has!been!resolved!by!analyzing!the!available!
historic!performance!of!both!Scandlines!Danmark!and!Scandlines!Gedser/Rostock.!Furthermore,!2014!
performance! by! the! consolidated! Scandlines! group,! has! been! compared! to! a! selected! peer! group! to!
assess!the!level!of!Scandlines!performance.!It!is!recognized!by!this!author!that!this!is!not!the!optimal!
foundation! of! a! valuation! and! furthermore! a! default! analysis.! However,! based! on! the! opportunities!
available!it!is!deemed!to!be!the!best!possible!solution!that!still!supplied!the!necessary!information.!!
Information! gathered! from! Internet,! newspaper! etc.! is! collected! from! respectable! sources.! They! are!
deemed!trustworthy!based!on!their!reputation!at!stake.!The!empirical!data!is!foremost!selected!on!an!
account!of!relevance!and!date!of!publication.!Data!collected!from!internet!and!newspaper!is!gathered!
within!2015,!older!materiel!is!included!based!on!the!value!of!their!contribution.!The!books!are!widely!
used!in!academic!literature!and!are!furthermore!supported!by!academic!articles.!
Overall! it! is! my! opinion! that! this! thesis! makes! use! of! a! diverse! collection! of! sources! to! provide! a!
thorough!and!wellSinformed!answer!to!the!problem!statement.!
! !
2.0!PRESENTATION!
This! chapter! is! used! to! set! the! stage! and! thus! giving! an! overview! of! Scandlines! and! give! an!
introduction! to! the! process! of! building! the! fixed! connection.! I! will! shortly! point! out! the! values,!
strategy,!products,!and!customer!segments!of!Scandlines.!
The! fixed! connection! will! be! presented! with! an! elaboration! of! the! important! points! in! time.!
Furthermore,!the!current!status!on!the!project!will!be!commented!on.!The!future!outlook!of!the!project!
will!also!be!presented!and!conclusive,!a!finishing!date!will!be!established,!which!will!be!used!later!in!
the!forecasting!and!valuation.!!
I!will!comment!on!Scandlines!view!on!their!new!competitor!and!how!they!have!reacted!in!the!press.!
Additionally,! I! will! present! some! of! their! more! comprehensive! actions! they! have! taken! on! securing!
their!position!and!their!future!business.!!!
2.1!SCANDLINES!
Scandlines! is! a! major! European! shipping! company.! They! are! operating! the! ferry! lines! between!
Denmark! and! Germany.! Furthermore,! they! are! operating! Bordershops! in! both! Puttgarden! and!
Rostock.!!
Scandlines!was!originally!owned!and!driven!by!the!Danish!government,!but!when!the!fixed!connection!
over!Storebælt!opened!in!1995,!the!shipping!part!was!established!as!an!independent!company!under!
the!Danish!ministry!of!traffic.!In!1997,!DSB!Rederi!A/S!changed!its!name!to!Scandlines!Danmark!A/S.!
In!1998,!Scandlines!A/S!merged!with!their!German!collaborate!partner!Scandlines!Deutschland!GmbH.!
After! the! merger,! the! new! company! expanded! massively! with! routes! to! Finland! and! the! Baltics.!
(Scandlines!1,!2015)!
In! 2007! the! shares! of! the! government! in! Scandlines! were! bought! by! a! consortium! consisting! of! the!
private! equity! funds,! 3i! Group! and! Allianz! Capital! Partners! Gmbh,! who! both! had! 40%! each! and!
Deutsche!Seerederei!having!20%.!(Børsen!3,!2015)!In!2013!3i!bought!the!other!owners!shares!and!are!
today! the! sole! owner! of! the! Scandlines! group.! Since! 2012,! Scandlines! has! been! under! a! strategic!
restructuring! which! has! led! to! a! sale! of! the! routes! to! Finland! and! the! Baltic.! It! was! concluded! in!
January!2015!with!a!sale!of!the!HelsingørSHelsingborg!route.!!I!will!elaborate!on!this!in!the!following!
section.!(Scandlines!1,!2015)!
! !
2.1.1!VISION!&!STRATEGY!
Scandlines! vision! is! to! be! the! best! and! most! efficient! ferry! operator! in! the! market.! This! exact!
formulation!is!seen!a!lot!in!their!annual!reports!and!are!referenced!to!as!their!overall!goal.!(Scandlines!
Annual!Report,!2014)!
Since!the!private!equity!funds!bought!Scandlines,!3i!have!focused!Scandlines!business!area.!In!2008,!
Scandlines! facilitated! 23! routes,! which! now! in! 2015! has! been! reduced! to! two.! The! new! focused!
strategy!also!corresponds!with!the!vision!of!Scandlines,!furthermore!operational!improvements!across!
Scandlines!are!mentioned!as!a!part!of!their!good!performance!in!2014!and!are!thus!a!recurring!focus!
point!of!Scandlines.!(Scandlines!Annual!Report,!2014)!
2.1.1.1!RETAIL!SERVICES!
Scandlines! have! the! customers! in! focus.! Whenever! Scandlines! presents! a! press! release,! they! have! a!
paragraph!“about!Scandlines”!which!includes!the!following!quote.!!
The#main#focus#of#all#Scandlines’#activities#is#to#create#value#for#our#customers#on#board#our#ferries#as#
well#as#in#our#Bordershops.#(Scandlines#press#material)#
This!is!clearly!reflected!in!how!Scandlines!is!evolving!the!experience!on!both!their!ferries!and!in!the!
Bordershops.! In! 2011! Scandlines! decided! to! improve! the! experience! their! customers! had! on! the!
ferries.! They! restructured! the! ferries! with! a! more! varied! food! experience! and! they! increased! the!
quality!of!the!coffee!served.!Furthermore,!they!updated!the!interior,!improved!the!toilet!facilities!and!
created!new!playrooms!for!the!children.!All!done!with!great!results.!A!survey!showed!almost!four!out!
of!five!customers!where!very!happy!with!their!experience!onboard.!(Scandlines!Press!Release!1,!2012)!
Scandlines! is! also! improving! the! shopping! experience! in! the! Bordershops.! Currently! they! are!
educating! Sommeliers! to! improve! their! guidance! in! their! vine! section,! which! in! Puttgarden! has! the!
largest!selection!in!the!Northern!Region.!(Scandlines!Press!Release!2,!2014)!
Another! area! where! Scandlines! is! improving! the! customers’! value! is! in! their! conceptual! area! in! the!
Bordershops.!An!example!of!such!area!is!the!Glenfiddich!Whiskey!Corner!in!Bordershop!Puttgarden.!In!
2014,!the!corner!received!an!award!for!being!the!best!shopSinSshop!at!the!POPAI!Awards3!in!London.!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
3!POPAI!is!a!global!association!for!marketing!at!retail!locations.!Every!year!they!host!an!award!show!to!reward!
the!best!in!all!areas!of!inSstore!communication.!(http://www.popai.co.uk)!
Morten!HaureSPetersen,!CCO!of!Scandlines,!emphasizes!the!conceptual!areas!as!a!part!of!Scandlines’!
mission! to! improve! the! quality! of! the! shopping! experience! for! the! customers.! (Scandlines! Press!
Release!3,!2014)!!
In! the! strategic! analysis! I! will! elaborate! on! the! importance! of! the! focus! on! the! customers! and! their!
needs,!and!why!it!is!of!great!significance!if!Scandlines!will!create!the!ability!to!compete!with!the!new!
fixed!connection.!
2.1.1.2!ENVIRONMENTAL!STRATEGY!
In!the!beginning!of!2014!Scandlines!published!that!they!would!invest!more!than!300!million!Danish!
kroner!in!environmental!improvements!on!both!of!their!routes.!!The!first!leg!is!the!implementation!of!
hybrid!systems!in!all!of!Scandlines’!ferries.!The!first!ferry!is!currently!sailing!with!the!system!and!the!
other!three!ferries!on!that!route!will!also!get!the!system!installed.!(Scandlines!Press!Release!4,!2014)!
The! new! hybrid! ferries! are! the! first! of! their! kind! in! the! world.! The! hybrid! system! benefits! both! the!
environment!and!the!company!by!increasing!the!efficiency!of!the!ferry!engines.!Each!ferry!will!use!1,2!
million!liters!of!fuel!less!each!year!with!the!new!engines.!(Ingeniøren!1,!2014)!The!European!Union!
firstly! supported! the! green! initiatives! with! 48! MDKK! and! subsequently! with! 17! MDKK! and!
consequently!validating!Scandlines’!strategy.!Scandlines’!CEO!Søren!Poulsgaard!Jensen!states!that!the!
Hybrid!system!is!a!substantial!part!of!their!strategy!of!a!more!sustainable!ferry!operation.!(Scandlines!
Press!Release!5,!2013;!Scandlines!Press!Release!6,!2014)!The!effort!in!creating!more!sustainable!ferry!
operation! has! also! been! rewarded! with! a! Shippax! Award4,! an! award5!to! the! Senior! Chief! Engineer!
Carsten!Johansen’s!work!on!the!ferry!concerning!the!conversion!of!the!engine,!and!a!Ship!Efficiency!
Award6.!All!awards!were!given!in!2014.!(Scandlines!Press!Release!4,!2014;!Scandlines!Press!Release!7,!
2014;!Scandlines!Press!Release!8,!2014)!
The!next!step!for!Scandlines!environmental!strategy!is!the!completion!of!two!hybrid!ferries!that!will!
replace!the!two!ferries!on!the!Gedser/Rostock!route.!Scandlines!expect!them!to!be!in!route!the!in!the!
second!half!of!2015.!(Scandlines!Press!Release!9,!2015)!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
4!The!Shippax!Awards!are!handed!out!on!the!Ferry!Shipping!Conference,!the!conference!are!held!every!year!with!
participation!of!400!shipping!executives.!The!awards!are!given!to!the!most!innovative!solutions!on!ferries.!
5!The! award! was! giving! by! the! International! magazine”! Electric! &! Hybrid! Marine! Technology!
International.!Carsten!Johansen!won!the!prize!among!14!nominees.!!
6!The! award! was! given! at! Ship! Efficiency:! The! Event! 2014,! an! event! presenting! the! latest! in! maritime! energy!
efficiency.!Scandlines!was!awarded!the!Initiative!of!the!year!award.!!
Scandlines!vision!is!to!have!zero!emission!ferries!in!the!future.!This!however!is!conditioned!by!the!new!
fixed! connection! and! when! the! opening! of! this! will! be! a! fact.! (Scandlines! Press! Release! 10,! 2013)!
Furthermore! they! have! just! joint! the! Trident! Alliance.! Trident! Alliance! is! an! association! that!
cooperates! on! enforcing! all! maritime! sulfur! demands.! ! With! the! enrolment! Scandlines! commits! to! a!
firm! and! transparent! enforcement! of! the! new! sulfur! demands7!and! other! environmental! rules.!
(Scandlines!Press!Release!11,!2015)!
The! environmental! improvements! are! part! of! Scandlines! opportunities! and! strengths.! I! will! further!
elaborate!on!this!in!the!strategic!analysis.!!
2.1.2!PRODUCTS!
Scandlines!operates!seven!ferries!divided!between!the!routes!RødbySPuttgarden!and!GedserSRostock.!
They! deliver! frequent! departures! with! great! capacity.! Furthermore,! they! provide! retail! and! catering!
services! onSboard! and! two! land! based! Bordershops! in! Puttgarden! and! Rostock.! (Scandlines! Annual!
Report,!2014)!
2.1.2.1!TRAVEL!
The!RødbySPuttgarden!has!four!identical!doubleSended!ferries,!they!sail!at!a!30Sminute!interval!and!
the! crossing! time! is! 45! minutes.! The! RødbySPuttgarden! ferries! can! hold! 364! cars! and! 1.140!
passengers.! Scandlines! provide! 48! crossings! a! day.! They! also! operate! a! cargo! ferry! for! dangerous!
cargo.!(Scandlines!2,!2015;!Søfartens!Ledere,!2014)!
GedserSRostock!is!sailing!in!twoShour!frequency!and!with!a!crossing!time!up!to!two!hours.!The!route!is!
currently! awaiting! their! new! ferries! that! are! currently! being! rebuild! and! equipped! with! Scandlines!
new!hybrid!systems.!The!new!ferries!will!increase!capacity!on!the!route!and!the!new!ferries!can!each!
carry!1.300!passengers!and!460!cars!or!96!trucks.!The!current!ferries!can!carry!977!passengers!and!
210!cars!or!42!trucks.!!(Scandlines!Press!Release!9,!2015)!
Scandlines!offer!three!different!standard!types!of!tickets.!Economy,!Economy!Extra!and!Flex!on!RødbyS Puttgarden!the!prices!start!at!DKK!299,!DKK!579,!and!DKK!699.!On!GedserSRostock!the!prices!start!at!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
7!The!International!Maritime!Organization!enforces!new!sulfur!rules!by!1st!of!January!2015,!for!Scandlines!the!
limit!will!be!0,1%!Sulfur!emission.!(International!Maritime!Organization,!2015)!
DKK! 299,! DKK! 829,! and! DKK! 999.! Furthermore,! they! offer! other! types! of! tickets,! 1Sday! shopping!
tickets!starting!at!DKK!299!for!a!ticket!both!ways.!(Scandlines!3,!2015)!
I!will!in!the!strategic!analysis!elaborate!on!the!prices!in!regards!to!the!new!fixed!connection.!!
Scandlines!also!transport!cargo!on!the!routes.!In!2014!Scandlines!transported!7,5!million!passengers,!
1,8!million!cars!and!0,5!million!freight!units!on!their!routes.!(Scandlines!Press!Release!9,!2015)!
2.1.2.2!SHOPPING!AND!CATERING!
Scandlines!offers!a!variety!of!shopping!and!food!opportunities!on!the!ferries.!Furthermore,!they!have!
the!two!Bordershops!in!Puttgarden!and!in!Rostock.!!
Scandlines! delivers! different! opportunities! on! board! of! their! ferries.! On! their! home! page! they! state!
that!they!have!immense!focus!on!the!development!of!their!catering!experience.!They!offer!buffets!on!
their!ferries,!which!you!can!order!from!home!to!save!time.!They!also!offer!light!snacks!in!the!cafeteria!
if!a!full!meal!is!not!wanted.!(Scandlines!4,!2015)!
Scandlines! offer! the! opportunity! to! throw! a! party! or! hold! a! meeting! at! sea.! Scandlines! can! offer!
facilities,!which!can!hold!120!people!in!their!conference!room.!(Scandlines!5,!2015)!
Scandlines!is!capitalizing!on!the!fact!that!taxes!on!consumer!goods!are!lower!in!Germany!than!the!rest!
of!Scandinavia.!Scandlines!provide!TaxSfree!shopping!on!their!ferries!along!with!shopping!in!their!two!
Bordershops.!!
The!Bordershop!in!Puttgarden!is!one!of!the!largest!of!its!kind!in!the!world.!Scandlines!have!rebuild!one!
of!their!old!ferries!and!have!created!a!massive!shopping!opportunity.!The!shopping!area!is!8.000!sq.!m.!
and! the! Bordershop! in! Puttgarden! stock! more! than! 4.000! different! items.! Scandlines! offers! both!
international!and!local!products!in!the!segments!of!Beer,!Soda,!Candy,!Wine!and!Whiskey.!They!claim!
to! offer! more! than! 800! different! wines! and! more! than! 350! different! kinds! of! whiskey.! (Scandlines!
Press! Release! 3,! 2014)! According! to! Scandlines! Bordershop! Puttgarden! serves! more! than! 700.000!
customers!every!year.!(Scandlines!Annual!Report,!2014)!
The! Bordershop! in! Rostock! doesn’t! present! the! same! size! as! the! one! in! Puttgarden.! Bordershop!
Rostock!provides!a!shopping!area!of!1.200!sq.!m.!It!opened!in!May!2011!and!present!the!same!type!op!
products! and! inSstore! experience! as! Bordershop! Puttgarden.! Scandlines! points! out! that! Bordershop!
Rostock!is!an!important!part!of!strengthening!the!GedserSRostock!route.!(Scandlines!Annual!Report,!
2014)!
Scandlines! emphasizes! that! the! Bordershops! have! a! “unique! taste,! look! and! feel”Senvironment.! And!
both! provide! opportunity! for! customers! to! taste! and! feel! the! products! before! purchase.! Both!
Bordershops!also!offer!the!opportunity!to!order!from!home!and!the!staff!will!prepare!the!purchased!
products,!so!they!are!ready!when!the!customer!arrives.!(Scandlines!Press!Release!3,!2014)!
2.1.3!CUSTOMERS!
Scandlines! provides! products! for! a! variety! of! customers.! I! have! divided! them! into! four! categories.!
Leisure,!Business,!Shopping,!and!Cargo.!!!
Leisure! consists! of! what! the! other! categories! doesn’t! include.! In! 2014! this! category! provided! for!
approx.!half!of!all!traffic!on!Rødby/Puttgarden.!This!category!has!however!experienced!a!downwards!
facing!trend!since!2008,!however!2014!were!the!first!year!since!then!Scandlines!faced!positive!growth!
on!this!route.!(Appendix:!Table!1)!Detailed!numbers!are!not!available!for!Gedser/Rostock.!!
The! Business! category! has! not! available! traffic! numbers! published! by! Scandlines.! However,! I! find! it!
relevant! to! include! in! this! passage.! As! earlier! mentioned,! Scandlines! is! improving! heavily! on! their!
facilities!on!board!of!their!ferries,!and!have!also!included!facilities!for!conferences,!meetings!etc.!!
Shopping!Clients!have!become!an!increasingly!bigger!part!of!Scandlines!business.!In!2014!the!category!
was! slightly! higher! than! 25%! of! all! traffic! on! Rødby/Puttgarden.! IndexSwise,! the! category! has!
experienced!massive!growth!from!100!in!2001!to!251!in!2014.!(Appendix:!Table!1)!The!Bordershops!
accounted!for!51,5%!of!all!revenue!in!2014.!(Section!3.3.3.1)!
Cargo!is!a!solid!part!of!Scandlines!business!plan,!they!experienced!a!rather!solid!growth!over!the!past!
15!years.!Cargo!on!Rødby/Puttgarden!has!experienced!an!average!growth!of!almost!3%!over!the!past!
15! years.! (Appendix:! Table! 1)! Cargo! is! also! a! strong! part! of! Gedser/Rostock! and! have! experienced!
growth!where!the!other!segments!have!stalled!or!declined.!(Section!3.2.1.1)!
In! Chapter! 4,! I! will! construct! a! deeper! analysis! of! the! customer! groups! and! the! importance! of! them!
individually!going!forward!into!the!new!business!environment!with!the!new!fixed!connection.!!!
In! the! following! paragraph! I! will! introduce! the! fixed! connection.! Afterwards! I! will! point! out! how!
Scandlines! is! adapting! to! the! new! fixed! connection! and! what! actions! they! have! pursued! in! order! to!
delay!the!building!of!the!connection.!!
! !
2.2!THE!FIXED!CONNECTION!
The!fixed!connection!over!Fehmarn!Belt!has!been!a!vision!for!the!northern!European!infrastructure!
for!a!long!time.!The!connection!is!a!vital!part!of!what!is!popular!known!as!“The!Beeline”.!A!direct!track!
connecting!Stockholm!with!Paris!going!through!Copenhagen!and!Hamburg.!The!fixed!connection!is!a!
joint!project!by!the!Danish!and!German!government.!The!ownership!and!facilitation!will!be!conducted!
by!the!Danish!government,!to!support!this,!the!government!founded!Femern!A/S.!With!the!passing!of!
the! construction! act! in! April! 2015.! The! Danish! Parliament! officially! granted! Femern! A/S! with! the!
authority!to!build!and!operate!a!fixed!connection!over!the!Fehmarn!Belt.!!(Heinicke!&!Landanl,!2015)!
The!fixed!connection!will!be!a!lowered!tunnel,!which!will!contain!two!train!tracks!and!four!free!way!
tracks.!The!tunnel!will!be!18!km!long!and!the!estimated!time!of!passing!is!10!minutes!for!cars!and!8!
minutes!for!trains.!(Femern!A/S!1,!2015)!
The! most! recent! estimation! of! price! of! the! coastStoScoast! connection! is! 55! BDKK.! A! price! that! is! 9!
BDKK! more! than! first! estimated.! The! whole! project! is! valued! at! 64,4! BDKK.! The! fixed! connection! is!
user!financed.!The!Danish!government!has!supplied!a!state!guarantee!that!Femern!A/S!can!obtain!a!
loan!that!covers!the!construction!price.!(Femern!A/S!1,!2015)!The!price!is!equivalent!with!a!payback!
horizon!of!39!years.!(Femern!A/S!3,!2015)!This!means!that!the!project!is!still!a!“green”!project!and!will!
obtain!a!return!higher!than!the!required!4%.!The!estimation!is!around!4,5%.!Further!the!payback!ratio!
has!to!stay!under!40!years!to!retain!its!green!status.!A!payback!horizon!between!40S50!years!will!have!
yellow!status!and!a!payback!horizon!above!50!years!is!a!red!project,!which!will!ultimately!result!in!the!
fixed!connection!not!being!able!to!pay!of!the!interest!on!the!loan.!(Børsen!4,!2015)!!
In!the!financial!analysis!conducted!by!(Femern!A/S!2,!2014)!they!also!calculated!the!sensitivity!of!the!
payback!horizon.!A!number!of!factors!can!affect!Femern!A/S!negatively,!some!are!depicted!in!the!table!
below.! The! numbers! are! calculated! using! their! expected! base! scenario.! It! is! important! to! emphasize!
that! these! factors! are! calculated! by! Femern! A/S,! and! unless! the! base! scenario! is! correct,! the!
connections! funding! is! in! trouble.! One! of! the! factors! is! already! turning! out! to! be! different! than!
expected.!The!EU!has!at!this!point!determined!their!support!from!2016S2019!at!4,4!BDKK!Femern!A/S!
expects! 10,3! BDKK.! As! depicted! underneath,! a! reduction! of! only! 2! BDKK! in! the! EUSsupport! will!
increase! the! paybackShorizon! by! 2! years.! There! will,! however,! be! later! opportunities! to! request!
additional!support!from!EU.!Furthermore,!the!current!Minister!of!Transportation!is!investigating!the!
opportunity!to!increase!the!support!immediately.!It!is!impossible!to!determine!now!what!the!final!EUS grant!will!amount!to.!(Finans.dk!1,!2015;!JyllandsSPosten!3,!2015)!It!is!fair!to!estimate,!that!the!39Syear!
paybackShorizon!is!under!pressure.!Both!based!on!the!lower!than!expected!EUSsupport,!but!also!the!
fact!that!Scandlines!are!planning!to!continue!their!ferry!operation.!Even!if!Scandlines!plans!to!decrease!
their!crossings,!the!paySback!horizon!will!still!be!prolonged.!The!other!factors!will!first!be!evaluable!
postSopening.!!
EU#$#Support#is#reduced#with#2#BDKK## 2#Years#
Traffic#Growth#is#10%#less#than#estimated# 3#Years#
Income#from#traffic#is#10%#less#than#estimated# 6#Years#
Traffic#jump#is#under#half#of#expected# 9#years#
The#Ferries#continues#on#a#hourly$basis# 8#Years#
Table!1:!Factors!increasing!the!payback!horizon!(Børsen!5,!2015;!Femern!A/S!2,!2014)!(Own!Depiction)!
A!stress!test!of!the!ultimate!payback!period!of!50!years,!determines!that!the!maximum!construction!
price!of!both!the!coast!to!coast!connection!and!the!improvement!of!land!based!infrastructure!is!75,1!
BDKK.!Furthermore,!the!payback!horizon!can!survive!a!21!%!lower!income!from!traffic!and!still!obtain!
the!50Syear!payback!horizon.!(Femern!A/S!2,!2014,!p.!51)!
2.2.1!TIMELINE!
This! section! will! provide! an! overview! of! the! phases! the! fixed! connection! project! has! gone! through!
from!first!ideas!in!the!early!19th!century!up!until!the!current!status!of!the!connection.!!
The!fixed!connection!was!first!on!the!agenda!at!the!Danish!Parliament!in!1991.!The!investigations!for!
the!fixed!connection!commenced!in!1992.!In!1999!the!investigation!was!completed!with!8!suggestions!
for!suitable!constructions,!which!lead!to!the!investigation!of!interested!private!investors.!In!2004,!the!
Danish!and!German!Minister!of!Transportation!signed!a!joint!declaration!to!continue!the!realization!of!
a! fixed! connection! over! the! Fehmarn! Belt.! Femern! A/S! was! established! in! 2005,! where! the!
construction!of!financing!models!was!initiated.!In!2008!a!state!treaty!among!Denmark!and!Germany!
was!signed,!regarding!the!construction!of!the!fixed!connection.!Furthermore,!the!project!was!greatly!
supported!by!European!Union!and!named!a!key!project!in!terms!of!connecting!Scandinavia!and!central!
Europe.!In!2009!the!project!was!ratified!by!both!the!Danish!and!German!Parliament.!80%!of!the!votes!
was! for! the! fixed! connection.! In! 2013,! the! VVMSReport8!was! presented! by! the! Danish! Minister! of!
Transportation.!In!September!2013,!preparatory!work!commences!in!Denmark.!Femern!A/S!sends!an!
application! to! the! German! government! with! the! desire! to! get! the! project! approved.! This! application!
was! published! by! the! German! approval! authority! in! SlesvigSHolstein! which! caused! 3000! responses!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
8!VVMSreport!is!in!Danish:!Vurdering!af!Virkninger!på!Miljøet.!Or!in!English:!Environmental!Impact!Assessment!
(EIA)!
from!the!public,!which!has!to!be!analyzed!and!considered.!The!current!Minsters!of!Transportation!in!
Denmark!and!Germany!met!in!Berlin!the!24th!of!February!2015!to!discuss!the!fixed!connection!over!
Fehmarn!Belt!and!emphasizes!their!continued!strong!support!of!the!connection.!The!25th!of!February!
the!Danish!Minister!of!Transportation!presented!a!law!of!construction!and!operation!for!the!Danish!
Parliament.! 26th! of! February,! the! Ministry! of! Transportation! submits! an! application! to! the! EU! about!
economical! support! to! the! fixed! connections! construction! phase.! The! 28th! of! April,! the! Danish!
Parliament!approved!the!suggestion!for!a!Construction!Act!for!the!fixed!connection!over!Fehmarn!Belt.!
The! approval! completes! the! governmental! authorization! for! the! fixed! connection.! In! Germany,! the!
approval!of!the!connection!where!made!in!2009.!The!last!governmental!authorization!left!is!the!official!
building!permit!extended!by!the!authorities!in!SlesvigSHolstein,!this!process!is!ongoing.!When!given,!
the!construction!of!the!fixed!connection!can!begin.!!
2.2.2!FINANCIAL!COMPLICATIONS!FOR!THE!FIXED!CONNECTION!
During! the! first! half! of! 2015,! the! financial! foundation! of! the! fixed! connection! has! been! heavily!
criticized.! The! Traffic! Forecast! developed! by! Femern! A/S! has! also! been! criticized! for! being! to!
optimistic.!Firstly,!the!whole!decision!process!behind!the!connection!was!questioned!in!an!editorial!in!
Børsen.! (Børsen! 6,! 2015)! This! led! to! an! answer! from! the! then! minister! of! transportation! Magnus!
Heunicke.!He!stated!that!the!fixed!connection!project!was!thoroughly!analyzed!and!all!the!conducted!
analysis! on! the! project! was! recently! updated.! He! further! elaborated! that! the! Danish! Parliament! had!
the!best!foundation!to!approve!the!construction!act!on!the!28th!of!April.!(Børsen!1,!2015)!
In! February! Femern! A/S! had! to! raise! the! construction! price! of! the! connection! from! 46! BDKK! to! 55!
BDKK.!This!made!the!Ministry!of!Transportation!work!to!bring!the!construction!price!down.!A!longer!
construction!period!where!mentioned!as!a!possible!solution.!(Børsen!4,!2015)!!According!to!(Børsen!7,!
2015)! the! socioeconomic! return! has! fallen! to! 4,5! %! which! is! very! close! to! the! threshold! of! 4%.!
However,!in!the!same!article!Claus!F.!Baunkjær!CEO!of!Femern!A/S,!states!that!they!are!in!a!positive!
dialog!with!the!construction!conglomerates!about!a!lowering!of!the!price,!which!will!in!turn!increase!
the!socioeconomic!return.!The!timeShorizon!for!the!negotiations!is!September9,!where!the!new!prices!
will!be!presented!for!the!settlement!parties!in!the!Danish!Parliament.!!
Ultimo! June! the! European! Union! settled! on! the! financial! support! that! will! be! given! to! the! fixed!
connection.! And! it! is! only! half! what! was! expected.! This! further! shakes! the! uncertain! financial!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
9!The!result!of!the!negotiations!has!not!been!presented!before!the!handSin!of!this!thesis.!
foundation!that!lies!underneath!the!project.!It!is!however!possible!for!Femern!A/S!to!search!additional!
EUSsupport!before!2020.!(Altinget.dk!1,!2015)!
2.2.3!EXPECTED!OPENING!!
According!to!Femern!A/S’s!web!page,!they!still!expect!the!connection!to!open!in!2021.!(Femern!A/S!6,!
2015)!This!is!very!optimistic.!Femern!A/S!have!them!selves!stated,!that!the!construction!of!the!fixed!
connection!will!amount!to!6!½!years.!(Femern!A/S!7,!2012)!If!this!would!still!be!realistic,!the!opening!
would!at!the!earliest!be!2022.!Nevertheless,!the!fixed!connection!still!has!some!hurdles!to!overcome!
before!the!construction!can!commence.!!
The!newly!negotiated!prices!that!will!be!presented!to!the!settlement!parties!in!the!Danish!Parliament!
in!September!have!to!be!accepted.!The!lowering!of!the!prices!is!facilitated!by!a!prolonged!construction!
period,! which! also! makes! the! isolated! construction! phase! even! longer.! How! long! will! first! be!
announced! in! September.! The! German! authorities! still! have! to! approve! the! tunnel.! Until! the! 3000!
hearing! responses! have! been! satisfactory! handled! and! a! final! acceptance! have! to! be! conducted.!
Moreover,! the! problematic! lowering! of! EUSsupport! has! to! be! treated.! The! lack! of! EUSsupport! is!
furthermore!a!challenging!development!to!the!funding!of!the!connection.!!
Based! on! the! expected! prolonging! of! construction! time! and! unexpected! issues! arising! during! the!
construction!period,!it!seems!safe!to!say!that!6!½!years!does!not!suffice.!!A!reasonable!conservative!
estimate!of!a!new!construction!time!will!be!approximately!8!years.!!The!beginning!of!the!construction!
relies! on! the! earlier! mentioned! factors.! If! the! new! prices! are! accepted! a! Danish! initiation! can!
commence!in!2016.!(Børsen!7,!2015)!The!German!approval!is!still!absent,!but!an!optimistic!estimation!
will!be!that!a!German!approval!will!come!in!2016.!!
Based! on! this! information,! this! thesis! will! use! 1st! January! 2025! as! it’s! primary! opening! date.! I! will!
additionally! construct! a! sensitivity! analysis! to! determine! which! consequences! an! earlier! or! later!
opening!date!will!have.!
2.2.4!SCANDLINES!AND!THE!FIXED!CONNECTION!
Scandlines!has!on!several!occasions!emphasized!that!when!a!fixed!connection!will!open,!they!will!keep!
sailing.!In!their!Annual!Report!of!2014,!CEO!Søren!Poulsgaard!Jensen!stated:!!
We#are#ready#to#compete#–#on#fair#and#legitimate#conditions#(Scandlines!Annual!Report,!2014)#
This! quote! summarizes! Scandlines! actions! concerning! the! fixed! connection.! At! every! move! Femern!
A/S! makes,! Scandlines! have! been! there! to! make! sure! that! everything! is! done! by! the! rules.! In! the!
following,!I!will!elaborate!on!the!actions!they!have!taken.!!
5th! June! 2014:! Scandlines! submitted! an! official! complaint! to! the! European! Commission! and! in!
September! the! owner! of! Scandlines,! 3i,! submitted! their! own! complaint.! (Berlingske! 4,! 2014)! The!
complaint!concerned!the!State!Aid!Femern!A/S!was!provided.!The!complaint!questioned!the!unlimited!
nature,! in! both! amount! and! time! of! the! State! guarantees.! They! also! questioned,! in! their! opinion,!
obsolete! and! flawed! documentation! of! the! approval! of! said! state! aid.! Furthermore,! it! concerned! the!
fact! that! the! state! aid! also! covers! the! rerouting! and! downgrading! of! ferryScustomers! access! to! the!
landing!docks!of!Scandlines.!(Scandlines!Annual!Report,!2014)!The!European!commission!legitimized!
the!State!Aid!given!to!Femern!A/S!on!the!23rd!of!July.!The!State!Aid!was!approved!based!on!the!fact!
that!it!promotes!the!realization!of!an!important!project!of!jointSEuropean!interest.!!(JyllandsSPosten!2,!
2015)!!
As! earlier! mentioned,! the! German! authorities! had! a! hearing! in! 2014.! For! this! hearing,! Scandlines!
provided! an! answer! to! the! proposed! changes! and! construction! conformed! by! Femern! A/S.! In! the!
hearing! answer! Scandlines! challenges! everything! that! has! an! opportunity! to! affect! the! forward!
operation! of! their! ferries! and! once! again! emphasizes! that! the! ferries! will! continue! to! operate! postS opening.! Furthermore,! Scandlines! critiqued! the! Traffic! forecast! and! provided! additional! information!
and! observations! for! the! forecast! to! be! corrected.! BVU/Intraplan! who! have! conducted! the! Traffic!
forecast!for!fixed!connection!did!not!find!reason!for!an!update!to!the!conclusion!of!the!forecast.!I!will!
elaborate! on! the! expected! traffic! development! in! the! strategic! analysis! and! further! in! the! scenario!
forecasting.!!(Ministry!of!Transportation!1,!2015)!
Scandlines! had! DIW! ECON10!analyze! the! results! of! costSbenefit! analysis! of! Fehmarn! Belt! made! by!
Incentive11!for! Femern! A/S.! The! analysis! critiques! and! values! the! costSbenefit! analysis.! The! most!
important!is!that!over!50!years,!the!fixed!connection!will!provide!a!socioeconomic!return!of!26!BDKK,!
which!is!only!1%!over!the!critical!limit,!which!also!was!mentioned!earlier.!The!sensitivity!analysis!is!
inadequate! and! does! not! contain! satisfactory! risk! assessment.! As! an! example! the! analysis! does! not!
mention! that! with! a! series! of! unfortunate! circumstances,! the! project! can! provide! a! negative!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
10!DIW!ECON!is!an!economic!consultancy!bureau!based!in!Germany.!Established!in!2007.!They!provide!analysis!
at!firm,!sector,!and!economySwide!level.!(DIW!ECON,!2015a)!
11!Incentive! is! an! economic! consultancy! company! based! in! Denmark.! They! offer! analysis! in! a! social,! health,! or!
transportation!context!among!others.!(Incentive,!2015)!
socioeconomic!return.!Conclusively!DIW!ECON!does!not!find!the!CostSBenefit!Analysis!adequate!as!a!
decision!foundation.!(Berlingske!8,!2015;!DIW!ECON,!2015b)!
2.3!CHAPTER!CONCLUSION!!
The!chapter!has!outlined!nature!of!Scandlines!business.!Scandlines!has!a!rather!unique!profile!based!
on!the!ferry!operation!and!the!operation!of!the!Bordershops.!!
Scandlines! has! a! wellSdefined! plan! for! their! entire! business! and! are! aware! of! the! dangers! a! fixed!
connection!represents.!They!are!very!active!and!visible!in!the!debate!about!the!fixed!connection!and!
are!applying!all!the!pressure!on!the!decision!process!possible.!!
The!fixed!connection!is!very!close!to!the!ultimate!decision.!It!is!estimated!that!the!ultimate!decision!
will! be! definite! in! 2016.! The! funding! and! economy! of! the! connection! have! been! subject! to! a! lot! of!
questioning!from!involved!parties.!And!it!is!evident!that!the!construction!of!the!fixed!connection!not!
will!be!based!on!expectations!of!massive!returns,!but!more!on!the!fact!that!the!connection!represents!
an!important!gateway!between!continental!Europe!and!Scandinavia.!!
If!the!fixed!connection!is!ultimately!ratified,!this!thesis!expects!the!opening!of!the!fixed!connection!to!
be!1st!of!January!2025.!!
The!following!chapter!will!focus!on!the!financial!performance!of!Scandlines.!!
3.0!–!FINANCIAL!ANALYSIS!
As! commented! upon! in! the! introduction! and! delimitations,! the! annual! reports! available! from!
Scandferries!ApS!are!rather!limited!and!thus!a!complete!historic!profitability!analysis!of!Scandlines!is!
not! possible.! ! Therefore,! the! financial! analysis! will! be! conducted! by! analyzing! the! historical!
performance! of! the! subsidiaries! operating! respectively! RødbySPuttgarden! and! GedserSRostock.! The!
analysis!will!create!and!understanding!of!how!the!routes!have!performed.!!
The! performance! of! Scandferries! ApS! will! be! analyzed! using! peer! comparison.! A! range! of! peers! has!
been!analyzed!in!the!same!manner!as!Scandferries!Annual!Report!and!the!results!will!be!compared!in!
order!to!determine!the!performance!of!Scandferries.!!
As! mentioned! under! methodology,! the! financial! analysis! for! Scandferries! ApS! will! be! conducted! by!
decomposing! the! Return! on! Equity.! Since! Scandlines! Danmark! and! Scandlines! Gedser/Rostock! are!
subsidiaries! of! Scandferries,! their! financing! part! are! of! less! importance.! So! for! the! two! subsidiaries!
only!Return!on!Invested!capital!will!be!decomposed.!!
3.1!SCANDLINES!DANMARK12!
Scandlines!Danmark!is!operating!the!route!of!Rødby/Puttgarden.!They!are!further!the!parent!of!the!
other! routes! within! the! group.! The! subsidiaries! have! however! been! reformulated! to! other!
comprehensive!income!to!estimate!the!performance!of!the!Rødby/Puttgarden!route.!!
3.1.1!RETURN!ON!INVESTED!CAPITAL!
## 2009# 2010# 2011# 2012# 2013# 2014#
ROIC# 37,9%# 43,5%# 45,1%# 48,1%# 44,4%# 35,4%#
Profit#Margin# 34,8%# 36,6%# 35,9%# 39,8%# 32,8%# 30,2%#
Turnover,#Net#Core#Operating#Assets# 1,09# 1,19# 1,26# 1,21# 1,36# 1,17#
Table!2:!Decomposition!of!ROIC!(From!Core!Operations!6!Own!Depiction!(Appendix:!FT!5!&!6)!
The!performance!of!the!core!activities!has!in!general!been!very!positive.!And!an!average!on!over!42%!
is! very! high.! The! turnover! on! core! operating! assets! serves! as! a! multiplier! and! therefore! increases!
ROIC.! ! In! 2014! both! Profit! Margin! and! Turnover! decreased.! The! cause! will! be! analyzed! in! the!
decomposition!of!the!two!ratios!in!the!next!section.!!
## 2009# 2010# 2011# 2012# 2013# 2014#
ROIC,#NOPAT#/#Invested#Capital## 39,5%# 44,3%# 43,3%# 30,7%# 19,0%# 18,5%#
Profit#Margin,#NOPAT# 97,4%# 102,7%# 101,9%# 104,3%# 78,5%# 46,4%#
Turnover,#Invested#Capital# 0,41# 0,43# 0,42# 0,29# 0,24# 0,40#
Table!3:!Decomposition!of!ROIC!(Overall)!6!Own!Depiction!(Appendix:!FT!5!&!6)!
The!overall!ROIC!has!decreased!significantly!in!2013!and!2014,!the!reason!is!that!from!2013!to!2014!
Scandlines! moved! their! subsidiaries! from! Scandlines! Danmark! to! Scandferries.! This! decreased! both!
overall! profit! and! invested! capital.! The! decrease! in! Invested! capital! did! however! not! affect! the!
turnover! and,! the! massive! decrease! in! ROIC! stems! from! the! decrease! in! Profit! Margin.! Both! will! be!
further!elaborated!in!the!next!section.!!
! !
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
12!All!figures!are!in!MDKK.!
3.1.2!DECOMPOSITION!OF!PROFIT!MARGIN!
The! decomposition! will! be! conducted! in! two! stages.! First! the! development! within! revenue! and! the!
customer! segments! that! drive! the! revenue.! Secondly! the! cost! structure! will! be! analyzed! in! order! to!
clarify!the!development!that!is!responsible!for!the!fluctuations.!!
3.1.2.1!DECOMPOSITION!OF!REVENUE!
The!overall!revenue!has!experienced!a!small!increase!over!the!past!year,!however!the!general!increase!
is!achieved!in!2010.!From!then!the!fluctuations!has!been!small!and!both!negative!and!positive.!!
## 2009# 2010# 2011# 2012# 2013# 2014#
Revenue#$#Trend# 100# 109# 111# 110# 108# 109#
Revenue#$#Growth# ## 9,2%# 1,9%# $1,5%# $1,7%# 1,0%#
Table!4:!Revenue!Development!6!Own!Depiction!(Appendix:!FT!5)!
Rødby/Puttgarden!measures!their!revenue!into!three!customer!segments,!and!the!transport!numbers!
from!them!has!developed!as!follows.!!
## 2009# 2010# 2011# 2012# 2013# 2014#
Cars%&%Trend% 100% 97% 94% 93% 92% 92%
Cars%&%Growth% &6,6%% &3,5%% &3,0%% &0,7%% &0,9%% 0,2%%
$#Shopping#$#Trend# 100# 93# 92# 103# 101# 101#
$#Shopping#$#Growth# $12,3%# $7,8%# $0,6%# 10,8%# $2,4%# 0,1%#
$#Other/mainly#lesiure#$#Trend# 100# 98# 95# 88# 88# 89#
$#Other/mainly#leisure#$#Growth# $3,9%# $1,6%# $4,1%# $6,9%# $0,2%# 0,2%#
Table!5:!Car!segment!Development!6!Own!Depiction!(Appendix:!Table!1)!
In!general,!the!overall!car!segment!has!declined.!The!only!numbers!that!are!persisting!is!shopping.!The!
decline!will!be!further!elaborated!on!in!the!strategic!analysis,!but!is!mainly!driven!by!an!increase!in!
competition! from! airStraffic! and! especially! the! growth! in! lowSprice! aerial! companies.! Scandlines!
emphasize!in!their!annual!report!that!they!have!succeeded!in!providing!growth!in!transported!cars!in!
2014!in!an!otherwise!difficult!market.!(Scandlines!Annual!Report,!2014)!!
! !
## 2009# 2010# 2011# 2012# 2013# 2014#
Cars# 1.667.080## 1.611.330## 1.563.887## 1.553.028## 1.538.667## 1.541.944##
$#Trend## 100# 97# 94# 93# 92# 92#
$#Growth# $6,6%# $3,5%# $3,0%# $0,7%# $0,9%# 0,2%#
Freight#(Trucks)## 314.394## 351.323## 364.883## 369.864## 389.344## 412.150##
$#Trend## 100# 112# 116# 118# 124# 131#
$#Growth# $17,8%# 10,5%# 3,7%# 1,3%# 5,0%# 5,5%#
Busses# 27.993## 30.319## 30.455## 28.304## 28.719## 28.513##
$#Trend## 100# 108# 109# 101# 103# 102#
$#Growth# $7,7%# 7,7%# 0,4%# $7,6%# 1,4%# $0,7%#
Table!6:!Segment!Development!6!Own!Depiction!(Appendix:!Table!1)!
The! other! two! segments! are! freight! and! bus! transportation.! Freight! has! experienced! a! solid! growth!
since!2010.!This!is!a!segment!that!is!very!price!sensitive,!and!Scandlines!withholds!the!opportunity!to!
set!the!price!below!the!cost!of!utilizing!the!bridge!over!the!Great!Belt.!I!will!further!elaborate!on!some!
of!the!competitive!advantages!that!Scandlines!hold!in!this!sector!in!the!strategic!analysis.!!
The!transportation!of!busses!has!throughout!the!period!held!a!stable!level.!Bus!drivers!are,!as!truck!
drivers,!subject!to!a!45!min!rest!for!every!4,5!hours!driven.!This!could!be!a!reason!of!the!stabile!level!
since! the! crossing! time! of! the! ferry! is! 45! minutes.! I! will! further! elaborate! on! this! in! the! strategic!
analysis.!!
From!the!dissection!of!revenue,!it!seems,!that!the!large!growth!in!2010!stems!from!Freight!and!Bus!
transportation.! The! following! years! the! strong! sectors! are! Freight! and! Shopping,! where! leisure! and!
bus!transportation!experience!negative!growth!overall!with!other/mainly!leisure!experience!the!worst!
results!and!have!declined!way!below!the!2009!level.!!
! !
