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.
| Full Year | Q4 | |||||
| ($ million) | FY 2016 | FY 2016 at constant Fx | FY 2015 | Q4 2016 | Q4 2016 at constant Fx | Q4 2015 |
| Revenue* | 6,646 | 6,874 | 6,972 | 1,735 | 1,795 | 1,721 |
| Adjusted EBITDA* | 254 | 272 | 273 | 60 | 64 | 66 |
* 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.”
Freight Management
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.
Contract Logistics
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.
Financial results
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.
Refinancing
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.
