Recapitalised CEVA is still in a difficult place

CEVA has reported its results for first quarter 2013, which also marks the first set of results it has published after restructuring in April.

In contrast with the general industry trend seen through 2012, CEVA’s revenue in first quarter 2013 fell by 6.3% year-on-year to €1.604bn. Tellingly, this was driven by a mix of organic fall in demand, the sale of businesses and the offloading of unprofitable contracts. On a constant currency basis – that is allowing for the fluctuation of the Euro- revenue was down 5.3%.

Operational profit measured in terms of ‘Adjusted’ EBITDA halved from €66m in Q1 2012 to €31m in Q1 2013. However, exceptional items drove operational profit into the red, with the company seeing a loss of €12m for the period. Adding in financing expenses, CEVA saw a loss before taxes of €122m for the quarter.

As ever, a huge element of CEVA’s loss was driven by its need to service its massive debts and these accounts make it powerfully apparent why CEVA had to restructure. However, worryingly, the health of its core business appears to be deteriorating as well.

The Freight Management business saw revenue fall by 6.8% over the quarter to €711m, whilst EBITDA fell 87.5% to €3m. CEVA ascribed the fall to the performance of the airfreight market, with its ocean freight forwarding business offsetting “softness in air freight volumes as market conditions continued to be challenging”.

The Contract Logistics business saw a significant fall in revenue of 5.9% to €893m, whilst EBITDA fell by one third year-on-year to €28m. This appears to be, in part, caused by specific loss making contracts which CEVA may be dumping aggressively, with the company stating that it addressed “underperforming CL contracts ….in a large manner in the quarter”.

The company also outlined its new debt position. CEVA now has a net debt of €1,289m, a fall of over €1.2bn on its peak level of debt. The profile of these liabilities are characterised by senior secured paper on a lower coupon than the junior bonds that have been retired, however the debt still features such instruments as ‘payment in kind’ facilities. It has reduced its debt serving costs by €130m, although on this quarter’s performance that would still not enable CEVA to break-even.