CEVA condemns ‘outrageous’ distress rumours

Rumours about CEVA’s distress over the past few months were condemned by CEO Marvin Schlanger as “outrageous, irresponsible and frankly offensive” in an interview with Transport Intelligence on Friday (3/5).

He categorically denied that CEVA was unable to pay any of its staff saying “during the re-capitalisation process business continued in the ordinary course of events, customers were serviced in the ordinary course of events, suppliers were serviced in the ordinary course of events, employees provided service to customers in the ordinary course of events”.

Schlanger emphasised that CEVA was now financially stable with half the debt, lower gearing and cash-flow improved to the tune of €130m.

Certainly in the annual report which was published on Friday there were some alarming numbers. Over 2012 depreciation, amortisation and impairments increased by €324m to €494m driven by the “impact on business valuations from significantly lower forecasted cash flows from revised internal five year projections, reflecting recent experiences and potential future challenging economic and competitive conditions.” As Mr Schlanger asserted this had no impact on the cash position of the company, none-the less it does reflect a lower valuation for the business as a whole.

Through 2012 the core of the business has had its problems as well. The Contract Logistics business increased its revenue by 3.7% but ‘Adjusted’ EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) fell by 24.4%. CEVA ascribes this fall both to poor market conditions in regions such as Southern Europe in short-term but also difficulties in managing the increasingly complex customer demands. Schlanger admitted that “complexity plays to our strengths” however in short-term, structuring contracts to reflect innovations in areas such as IT is proving a challenge for CEVA.

In Freight Forwarding things have been more predictable with a 6% increase in revenue but a 17% fall in ‘Adjusted’ EBITDA. The air freight market in particular proved to be difficult over 2012. Marvin Schlanger said that CEVA would refocus on this market in the coming year, with its performance being slightly overshadowed in the past by the rapid growth of sea-freight forwarding with the forwarding business. He admitted that “supply chain dynamics” were “challenged in short-term” with manufacturers feeling less urgency to get product into the hands of customers, however in the medium term he expected any acceleration of growth to have big effects on inventory and thus on air and sea freight demand.

CEVA’s past year has been tough both in terms of finances and the underlying business with the senior management alarmed at the potential for CEVA’s reputation being damaged. Consequently Marvin Schlanger is eager to “spread re-assurance” that the “financial uncertainty is off the table” not just to customers but also to CEVA’s employees. Perhaps CEVA also has to work to exploit its new financial stability in order to exploit the opportunities for faster growth that greater complexity offers.