CEVA’s financial ‘groundhog day’

Once again it is the ‘groundhog day’ of CEVA Logistics’ finances. As usual the company has delivered a respectable set of numbers.

Revenue increased 5.2% to US$6,994m whilst EBITDA is up from US$153m in 2016 to US$185m in 2017.

In Freight Management, revenue was up 8.9% with airfreight volumes up 11.6%. Unsurprisingly, in the current market, freight rates were higher. EBITDA increased by $11m to $76m over the past year.

Contract Logistics’ profit performance was not quite as strong with a $7m increase to $154m in 2017.  

As ever though, profits were crushed by the weight of debt servicing, resulting in a loss of $197m for 2017. The company has enough positive cash flow to service the debt but the chances of getting on top of its obligations remain academic.

Once again, the suggestion is being made that CEVA will be floated on the stock exchange with Reuters suggesting that it is aiming “for pre-summer IPO”.

The issue of how Apollo and other private equity investors will exit CEVA is one that has been kicking around for years. The suggestion of an IPO (Initial Public Offering) on the New York Stock Exchange has also been suggested for years. In the past, either market conditions or the condition of CEVA’s finances have precluded it.

It appears reasonably certain that earlier this year elements of the management of Geodis wished to buy CEVA but the price and disagreements within the French state-owned company led to the deal falling through. It may be that an IPO could be a means of flushing out other bidders.

Yet there is always one big question in the way of any such move. What do you do with the debt load that hangs around the company’s neck? The billions liable in a mixture of instruments, but particularly a large portfolio of bonds that has been restructured on more than one occasion, are the product of Apollo’s business model. A specialist in the junk bond market, Apollo’s founder Leon Black’s ability to manoeuvre debt instruments has been the key to his fortune. However, manipulating debt instruments is no substitute for corporate strategy and CEVA needs to ‘move-on’. Apollo and its fellow financiers want it and CEVA needs it. However, Apollo’s business is selling at the best price. Whatever happens, the near future of CEVA at the strategic level is likely to be complex, difficult and hard to predict.

Source: Transport Intelligence, February 27, 2018

Author: Thomas Cullen


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