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CEVA Logistics AG / Key word(s): Half Year Results
CEVA makes further progress in second quarter 2018
- Revenue up 5.1% year on year in constant currency
- Adjusted EBITDA of $77 million, up $7 million year on year
- EBITDA margin improved by 30bps in constant currency, driven by Freight Management
- Good business momentum following IPO
- Developing partnership with CMA CGM following regulatory approvals
- Refinancing underway, expected to be completed early August
(a) EBITDA excludes specific items and share-based compensation cost
"CEVA continues to perform well. We now have achieved seven consecutive quarters of strong top-line growth and stronger EBITDA" said Xavier Urbain, CEO of CEVA Logistics. "We continue to reduce our cost base, work on productivity and address our underperforming activities. In the first half of the year, margin growth has been skewed towards Freight Management, we expect Contract Logistics to make more progress in the second half of the year as we have largely addressed the issues. We are committed to further improving our margins and are moving in the right direction."
"Looking ahead, we are confident in further improving our performance this year and in meeting our medium-term targets."
Freight Management EBITDA increased by $7 million year on year to $27 million driven by improved yields in Air, increased productivity and progress in reducing losses in other FM activities. Profits were adversely impacted by increased cost in our US Ground business due to driver shortages, the impact of which is expected to reduce in coming quarters as we take mitigating actions. EBITDA margin improved by 70 bps to 3.2%.
For the first half year 2018, revenue in Freight Management increased by 7.0% year on year in constant currency and EBITDA was $42 million, up $12 million year on year.
The acceleration of revenue growth was driven by good volumes in existing contracts as well as the implementation of new business won previously; we had important contract start-ups in consumer/retail, automotive spare parts, technology and e-commerce.
Contract Logistics EBITDA was stable at $39 million. Improvements in productivity at many of the large, focus contracts were offset by issues in a limited number of operations in Italy and in the US. The issues have now been largely addressed and are expected to have a reduced impact over the second half of 2018. Our low margin contract initiative is also gaining traction. As such, we anticipate margins to trend upwards in the second half of 2018.
For the first half year 2018, revenue in Contract Logistics increased by 3.8% year on year in constant currency and EBITDA was $77 million, up $4 million year on year in constant currency. EBITDA margin improved by 10 bps year on year in constant currency.
Revenue in the second quarter 2018 was $1,848 million, up 7.3% year on year or 5.1% in constant currency. For the first six months of 2018, revenue was up 5.2% year on year in constant currency. Increased volume in existing contracts as well as new business implementations accounted for the growth despite certain contract losses. Revenue grew well across most sectors, particularly in industrials and healthcare but also in consumer/retail/
Adjusted EBITDA in the second quarter 2018 was $77 million, up $7 million year on year. EBITDA margin was 3.6% in the second quarter 2018, an improvement of 30 basis points in constant currency. For the first six months of 2018, Adjusted EBITDA was $143 million up $19 million or 15% year on year.
CMA CGM partnership
Both companies have worked closely together over the past weeks to exploit partnership opportunities in a number of areas, particularly to offer integrated end-to-end solutions and expand geographic coverage. The first contracts have been concluded, where CEVA was introduced to clients from CMA CGM, and further discussions are ongoing.
While CEVA will seek to exploit the opportunities from this partnership, all dealings with CMA CGM will be structured at arm's length and CEVA will continue to work closely with all its ocean carriers in the interest of its clients.
Repayment of Debt and Refinancing
The Company is currently in the process of raising new facilities to refinance the majority of our existing debt at lower interest rates and longer maturities. We have successfully placed a new $475 million Term Loan (TLB; at L+375bps with leverage step-down to L+350bps) and a new $585 million Revolving Credit and Ancillary Facility (at L+237.5bps). We have upsized the TLB in view of strong demand to provide the Company with even more headroom. CEVA has also announced a private offering of EUR300 million of senior secured notes. The refinancing is expected to complete early August, subject to market conditions.
Following the deleveraging from the IPO proceeds and refinancing, CEVA expects to reduce its finance charges by more than $100 million annually, subject to prevailing interest rates and currency drawings.
The Company is committed to further deleveraging with a target of 1.5x-2.0x net debt/adjusted EBITDA in the medium-term.
Medium-term, CEVA is confirming its targets to grow revenue above market and to increase EBITDA margins from the 3.3% achieved in 2017 to at least 4%; this should result in an additional approximately $100 million in Adjusted EBITDA.
The recording of the investor call will be available at the above address after the call.
Notes to Editors:
1. All references to EBITDA exclude specific items and share-based compensation cost
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CEVA - Making business flow
This news release contains specific forward-looking statements. These forward-looking statements include, but are not limited to, discussions regarding the proposed refinancing described above, its guidance for 2018 and beyond, discussions regarding industry outlook, CEVA's expectations regarding the performance of its business or joint ventures, its liquidity and capital resources, and other non-historical statements. These statements can be identified by the use of words such as "believes" "anticipates," "expects," "intends," "plans," "continues," "estimates," "predicts," "projects," "forecasts," and similar expressions. All forward-looking statements are based on management's current expectations and beliefs only as of the date of this news release and, in addition to the assumptions specifically mentioned in the above paragraphs, there are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including the effect of local and national economic, credit and capital market conditions, a downturn in the industries in which we operate (including the automotive industry and the air freight business), risks associated with CEVA's global operations, fluctuations and increases in fuel prices, CEVA's substantial indebtedness, restrictions contained in its debt agreements and risks that it will be unable to compete effectively. Further information concerning CEVA and its business, including factors that potentially could materially affect CEVA's financial results, is contained in the annual and quarterly reports of CEVA Logistics AG (and its predecessor CEVA Holdings LLC), available on the Company's website, which investors are strongly encouraged to review. Should one or more of these risks or uncertainties materialise or the consequences of such a development worsen, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those forecasted or expected. CEVA disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise.
The notes will be offered and issued only (i) in the United States, to persons who are "qualified institutional buyers" (as defined in Rule 144A under the Securities Act) and (ii) outside the United States, to persons who are not "U.S. persons" (as defined in Rule 902 under the Securities Act) in reliance on Regulation S of the Securities Act other than retail investors in the European Economic Area, whereby a retail investor is defined as a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as amended; or (ii) a customer within the meaning of Directive 2002/92/EC, as amended, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Directive 2003/71/EC, as amended.
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End of ad hoc announcement