CEVA Group Plc. Results For First Half And Second Quarter
By Pritha Dey
CEVA Logistics, one of the world’s leading non-asset based supply chain management companies, reported results for the three months ended June 30, 2012.
John Pattullo, CEO, said, “This was a difficult quarter, characterized by flat markets and customer caution, partially offset by our efficiency programs, global footprint and robust business model. Transpacific volume and weakness in Southern Europe remain a concern. As a result, we have introduced an even more rigorous approach to cost management to support delivery of our strategic plan.”
Revenue for the Group increased 5.5 percent to €1,808 million in the second quarter (2011: €1,713 million). Freight Management (FM) revenues increased 9 percent, while Contract Logistics (CL) grew 3 percent. Progress in FM was largely due to strong growth in our Ocean freight business, particularly out of Asia.
Adjusted EBITDA declined 13.6 percent to €70 million. There was solid performance in FM, which maintained EBITDA at the same level as the prior year. However, this was offset by declines in CL, where our business was affected by the general economic downturn, most evidently in Southern Europe, as well as certain one-off items, mainly in the prior year quarter, which accounted for approximately one-third of the decline. We continue to enjoy strong performance in Asia Pacific CL.
We are taking action to address the decline in profitability with a program addressing both direct and indirect costs and have identified substantial cost reduction opportunities in our FM network and certain underperforming CL contracts. This is over and above recent initiatives like Program UNO, where business processes have been standardized to achieve best-in-class customer service.
Net working capital increased to €9 million in the quarter, primarily due to seasonality. We continue to focus on improving net working capital and in particular reducing overdue receivables. Cash generated from operations during the Second Quarter improved to €22 million (2011: €17 million).
As previously announced, CEVA’s balance sheet was strengthened significantly in the first quarter via a transformational refinancing, eliminating over €500 million of CEVA indebtedness and over €350 million of CEVA Investments Limited securities. On 2 May 2012, CEVA refinanced its synthetic letter of credit facility due 2013 by increasing its existing tranche B term loan due 2016 by US$150 million. As a result of these transactions, CEVA has strengthened its balance sheet and lowered interest costs.