CEVA Holdings LLC - Results for the Full Year ended 31 December 2016
- Revenue growth accelerating, up 4.3% in Q4 in constant currency
- Adjusted EBITDA of $254 million, in line with PY in constant currency despite difficult peak season trading
- Free cash flow of more than $100 million in Q4, driven by strong working capital improvement
- Refinancing of 2018 maturities – launched exchange offer for 4% Notes earlier today with support already obtained from 65% of Noteholders and agreed extension of European ABS facility
- Excellence program expected to drive better performance in 2017
Hoofddorp, the Netherlands, 9 March, 2017 – CEVA Holdings LLC (“CEVA” or the “Company”), one of the world’s leading non‐asset based supply chain management companies, today reported results for the full year ended 31 December, 2016.
|($ million)||FY 2016||FY 2016 at constant Fx||FY 2015||Q4 2016||Q4 2016 at constant Fx||Q4 2015|
* Excluding specific items and share based compensation. Adjusted EBITDA includes the share of EBITDA of the Anji-CEVA joint venture.
“Despite industry-wide challenges in 2016, our full year results demonstrate that we continue to make positive headway,” said Xavier Urbain, CEO of CEVA. “In this context, I am very pleased with the Q4 performance where CEVA demonstrated healthy growth in all business lines and visible impact of our excellence program which supported us to deliver robust EBITDA in spite of the difficult peaks trading. The quarter also saw an impressive recovery in net working capital and strong cash flow.”
“Overall, 2016 was a year of significant progress in the transformation of CEVA, during which we had some important business wins, successfully addressed legacy issues and we continued to build a much stronger platform. The strong improvement in results, in many of our markets, were overshadowed by weaker performance in some countries, which we continue to address. We enter 2017 in a stronger position and I am confident that we will have a much better performance with our excellence program leading to further cost savings.”
Our Freight Management volumes increased significantly throughout the year and were ahead of market growth: Air Freight grew 7.5% in Q4, whilst Ocean Freight were up 8.9%. For the full year, Air and Ocean volume growth was 6.7% and 4.1%, respectively. CEVA won market share notably on the Asian trade lanes in both modes of transport.
Net revenue margins contracted in both Air and Ocean Freight in Q4 in view of the difficult peaks trading and a general increase in rates following the Hanjin bankruptcy. We believe we managed this period relatively well. Our efforts throughout 2016 on tradelane management, procurement, productivity improvements and automation resulted in a 12.5% increase in EBITDA in Freight Management in constant currency.
The rollout of our integrated Freight Management system, OFS, in the US went relatively smoothly and is completed. Our OFS system has now been successfully deployed across our global footprint and we will now focus on realizing the material benefits to productivity and service quality that will result from having a unified global system.
Our Contract Logistics business showed good growth in the second half of 2016 resulting from a number of important business wins and volume growth on existing contracts. Revenue growth in constant currency was 2.5% in the second half of 2016. Growth in some of our key markets was even stronger. The return to positive growth in Contract Logistics, after quite some time, positions us well going into 2017.
Earlier in the year we suffered from the weaker performance on certain contracts and start-up issues. We now have largely addressed these issues and stabilized performance in the second half of the year which resulted in stable EBITDA in constant currency vs. prior year in Q4. However, we have identified a number of contracts with further important improvement opportunities from applying internal best practices.
Revenue growth in Q4 was 4.3% in constant currency, our third consecutive quarter of improvement in year over year growth. Full year revenue was $6,646 million, down 1.4% in constant currency and resulting from declines in H1, mainly driven by decreases in Air and Ocean rates.
Adjusted EBITDA was $254 million in FY 2016 and $60 million for Q4, broadly in line with year-on-year in constant currency. The savings from our excellence program helped us to largely mitigate the negative impact from the difficult peaks trading in Freight Management.
Free cash flow in the last quarter was $103 million on the back of a strong recovery in net working capital which improved $71 million year-on-year for the last three months, largely reversing the outflows earlier in the year.
As a result, headroom from cash and equivalents as well as available facilities increased to $615 million at 31 December, 2016 vs. $576 million the year before.
As announced earlier today, CEVA commenced a private offer to exchange (the “Exchange Offer”) upon the terms and conditions set forth in a confidential Offering Memorandum and Consent Solicitation Statement (the “Offering Memorandum”) the $390 million of First Lien Senior Secured Notes due May 2018 (the “2018 Notes”) for its New First Lien Senior Secured Notes due September, 2020 (the “New 2020 Notes”). The New 2020 Notes will pay 6% cash and 3% PIK interest per annum, as compared to 4% cash interest per annum on our 2018 Notes. For additional details, see the separate press release announcing the Exchange Offer.
The Exchange Offer is currently scheduled to expire at 11:59 p.m., New York City time, on April 4, 2017 (unless extended). Subject to the satisfaction or waiver of the conditions precedent, the closing of the transactions contemplated by the Exchange Offer is expected to occur promptly after the expiration.
In addition to the Exchange Offer, CEVA has agreed with its banks to extend the maturity of its European ABS facility of €170 million from March, 2018 to March, 2020, subject to a successful Exchange Offer. The interest rate on this facility will remain unchanged.
The New 2020 Notes being offered in the Exchange Offer have not been registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act.
The Exchange Offer is being made, and the New 2020 Notes are being offered and issued only (i) in the United States, to holders of 2018 Notes who are “qualified institutional buyers” (as defined in Rule 144A under the Securities Act) or institutional “accredited investors” within the meaning of Rule 501 (a)(1), (2), (3) or (7) of Regulation D under the Securities Act and (ii) outside the United States, to holders of 4% Notes who (A) are not “U.S. persons” (as defined in Rule 902 under the Securities Act) and (B) are also “non-U.S. qualified offerees” (as defined in the letter of eligibility), in reliance on Regulation S of the Securities Act.
This press release is for information purposes only and shall not constitute an offer to sell or the solicitation of an offer to buy any security and shall not constitute an offer, solicitation or sale of any securities in any jurisdiction in which such offering, solicitation or sale would be unlawful. The offer to exchange the 2018 Notes in the Exchange Offer is being made only through and subject to the terms and conditions set forth in the Offering Memorandum that CEVA is distributing to eligible holders of the 2018 Notes. Eligible holders of the 2018 Notes should read carefully the Offering Memorandum before making any decision with respect to the Exchange Offer and the Consent Solicitation. The Exchange Offer is not being made to holders of the 2018 Notes in any jurisdiction in which the making or acceptance thereof would not be in compliance with the securities, blue sky or other laws of such jurisdiction. This press release, and any other material related thereto, is directed only at persons who: (i) fall within the definition of investment professional under article 19(5) of the United Kingdom Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Financial Promotion Order”); or (ii) are high net-worth entities and other persons falling within article 49(2)(a) to (e) of the Financial Promotion Order; or (iii) are persons falling within article 43 of the Financial Promotion Order; or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 in connection with the issue or sale of any New Notes) may otherwise be lawfully communicated or caused to be communicated (all such persons together being referred to as “Relevant Persons”). This press release is directed only at Relevant Persons and must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment activity to which this press release relates is available only to Relevant Persons and will be engaged in only with Relevant Persons.
For more information, please contact:
SVP Corporate Development
+41 799 333 083
CEVA - Making business flow
CEVA Logistics, one of the world’s leading non-asset based supply-chain management companies, designs and implements industry leading solutions for large and medium-size national and multinational companies. Approximately 40,000 employees in more than 160 countries are dedicated to delivering effective and robust supply-chain solutions across a variety of sectors where CEVA applies its operational expertise to provide best-in-class services across its integrated network. For more information, please visit www.cevalogistics.com.
SAFE HARBOR STATEMENT:
This news release may contain forward-looking statements. These statements include, but are not limited to, discussions regarding industry outlook, the Company’s expectations regarding the performance of its business, its liquidity and capital resources, its guidance for 2017 and beyond, and the 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 press 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 the Company’s global operations, fluctuations and increases in fuel prices, the Company’s substantial indebtedness, restrictions contained in its debt agreements and risks that it will be unable to compete effectively. Further information concerning the Company and its business, including factors that potentially could materially affect the Company’s financial results, is contained in the Company’s annual and quarterly reports, available on the Company’s website, which investors are strongly encouraged to review. Should one or more of these risks or uncertainties materialize 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.