CMA CGM Logistics – about $30bn of hidden value
As Panalpina’s key shareholder, the Ernst Göhner Foundation rejected the “current” non-binding proposal from DSV, all eyes turned to Ceva Logistics.
But Ceva is also caught in the mist of speculation over its future, as it announced its preliminary financial results for 2018.
The release was offered “in the context of the launch of a proposed offering of $825m”, related to the likely change of control stemming from CMA CGM’s public tender offer.
While there were some high points in Ceva’s news, UBS noted that “investors will appreciate the gross profit beat, but will likely be disappointed with the further drop in margins”.
Ceva’s expected revenues grew 5.2% in 2018, year on year, to $7.35bn, with net revenue at $3.63bn.
Freight Management revenue growth looked strong, at an estimated 7.3% (7.2% in constant currency) to approximately $3.5bn, while revenue growth in Contract Logistics is estimated to be 3.3% (3.9% in constant currency) to around $3.85bn.
Other good news is that Ceva’s net debt was down to $1.1bn as at the end of December. Ceva said this was a “very significant decrease”, compared with $2bn a year earlier.
But Ceva said it expected adjusted ebitda for 2018 to be some $260m, down 7% on the previous year.
It said: “While Ceva teams have achieved continued progress in productivity, cost reduction and other margin improvement initiatives, ebitda has been negatively impacted by various one-time adverse events: contract logistics issues in Italy in the third quarter, as well as some changes in accounting estimates in the fourth quarter, reflecting a more conservative approach from management.”
It noted that without those events, adjusted ebitda would have been up 12%, at $314m.
In addition, it said Ceva had been facing negative foreign exchange impacts, mitigated by a capital gain of $14m in the Chinese joint-venture Anji Ceva Logistics Co.
Ebitda (before specific items and share-based compensation) was $198m, compared with $230m in 2017, a 2.7% margin compared with 3.3% in 2017.
Freight Management ebitda was $93m, up $17m on the previous year, while contract logistics was $105m versus $154m in 2017, down 31%.
Capital expenditure was relatively stable at some $109m in 2018, compared with $102m the previous year. Net working capital in the balance sheet was 2.3% of revenues at the end of 2018.
The company said 2018 had been “a year of structural changes for Ceva, not least of which was the company’s successful initial public offering on the SIX Swiss Stock Exchange, which was followed by a transformational refinancing that saw the company overhaul its pre-IPO structure, extend maturities and reduce interest costs”.
It added that it had since made “positive management and organisational adjustments, and remains focused on its long-term strategy rather than on short-term performance”.
It said both freight management and contract logistics had performed in line with expectations, although some one-time items had impacted profitability. But it said new business performance was good, with a strong pipeline of new customers, and there were opportunities with existing customers.
Its audited results will be out on February 28.
Last week Ceva Logistics’ directors recommended shareholders not to accept CMA CGM’s offer of Sfr30 per share. The board told shareholders its decision was “based on a comprehensive review of the revised business plan for the period up to 2023, developed with external advisors and based on an independent financial opinion.
“The valuation of the revised business plan indicates a midpoint value of Sfr40 per share,” it added.
The board said while it believed the Sfr30 per share offer was “reasonable from a financial perspective, and provides a fair exit opportunity for shareholders who wish to receive cash for their Ceva shares”, a number of factors had come to light since the French carrier first invested in Ceva last year, leading the board to believe shareholders should expect a higher price.
CMA CGM now owns just over 50% of Ceva, but speculation is rife in the market on what will happen next, with talk that DSV remains interested in its freight forwarding business. And with Panalpina rejecting DSV’s offer, it could decide to look again at Ceva.
Panalpina’s main shareholder, meanwhile, has told its board of directors it supports it in “pursuing an independent growth strategy that includes M&A”.
Panalpina said its board “continues to carefully review the situation with its professional advisers. Further announcements will be made as appropriate.”
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