Quarter Two 2018 CEVA Logistics AG - www.cevalogistics.com
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CEVA Logistics AG
Quarter Two 2018
www.cevalogistics.comCEVA Logistics AG
Quarter Two, 2018
Interim Financial Statements
Table of Contents
Unaudited Condensed Consolidated Three Months Income Statement ....................................................................................... 2
Unaudited Condensed Consolidated Six Months Income Statement ............................................................................................ 3
Unaudited Condensed Consolidated Statement of Comprehensive Income ................................................................................. 4
Unaudited Condensed Consolidated Balance Sheet ...................................................................................................................... 5
Unaudited Condensed Consolidated Statement of Cash Flows ..................................................................................................... 6
Unaudited Condensed Consolidated Statement of Changes in Equity .......................................................................................... 7
Notes to the Unaudited Condensed Consolidated Interim Financial Statements ......................................................................... 8
Cautionary statement: This document contains forward looking statements which are subject to risk factors associated with, amongst others,
the economic and business circumstances occurring from time to time in the countries and markets in which the Group (as defined below)
operates. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a wide range of
variables, which could cause actual results to differ materially from those currently anticipated.
1Unaudited Condensed Consolidated Three Months Income Statement
THREE MONTHS ENDED 30 JUNE THREE MONTHS ENDED 30 JUNE²
$ millions Note 2018 2017
Before Specific Before Specific
specific items items and specific items items and
and SBC SBC1 Total and SBC SBC1 Total
Revenue 6 1,848 - 1,848 1,721 - 1,721
Work contracted out (923) - (923) (858) - (858)
Personnel expenses (570) (12) (582) (520) (9) (529)
Other operating expenses (289) (18) (307) (284) 6 (278)
Operating expenses excluding depreciation, amortization and impairment (1,782) (30) (1,812) (1,662) (3) (1,665)
EBITDA 6 66 (30) 36 59 (3) 56
Depreciation (14) - (14) (13) - (13)
Amortization and impairment (17) - (17) (14) - (14)
Operating income 35 (30) 5 32 (3) 29
Finance income 2 - 2 2 - 2
Finance expense (53) (23) (76) (57) (12) (69)
Foreign exchange gain/(loss) 28 - 28 (13) - (13)
Net finance income / (expense) (23) (23) (46) (68) (12) (80)
Net result from joint ventures 4 - 4 5 - 5
Profit/(Loss) before income taxes 16 (53) (37) (31) (15) (46)
Income tax income/(expense) 8 (11) 3 (8) 1 - 1
Profit/(Loss) for the period 5 (50) (45) (30) (15) (45)
Attributable to:
Non-controlling interests - -
Equity holders of the Company (45) (45)
Earnings per share (in US$) 10
Basic & Diluted (1.15) (3.91)
Basic - adjusted 0.13 (2.61)
Diluted - adjusted 0.13 (2.61)
¹ Refer to Note 7 for details on specific items and non-cash share based compensation costs (SBC)
2
Accounting for a capital reorganization relating to the legal merger of CEVA Logistics AG and CEVA Holdings LLC has been applied
The accompanying notes are an integral part of the unaudited condensed consolidated interim financial statements.
CEVA Logistics AG – Quarter Two 2018 Interim Financial Statements 2Unaudited Condensed Consolidated Six Months Income Statement
SIX MONTHS ENDED 30 JUNE SIX MONTHS ENDED 30 JUNE²
$ millions Note 2018 2017
Before Specific Before Specific
specific items items and specific items items and
and SBC SBC1 Total and SBC SBC1 Total
Revenue 6 3,638 - 3,638 3,317 - 3,317
Work contracted out (1,798) - (1,798) (1,627) - (1,627)
Personnel expenses (1,119) (16) (1,135) (1,020) (16) (1,036)
Other operating expenses (602) (21) (623) (566) 2 (564)
Operating expenses excluding depreciation, amortization and impairment (3,519) (37) (3,556) (3,213) (14) (3,227)
EBITDA 6 119 (37) 82 104 (14) 90
Depreciation (33) - (33) (25) - (25)
Amortization and impairment (34) - (34) (28) - (28)
Operating income 52 (37) 15 51 (14) 37
Finance income 3 - 3 3 - 3
Finance expense (112) (23) (135) (104) (12) (116)
Foreign exchange gain/(loss) 10 - 10 (20) - (20)
Net finance income / (expense) (99) (23) (122) (121) (12) (133)
Net result from joint ventures 9 - 9 9 - 9
Profit/(Loss) before income taxes (38) (60) (98) (61) (26) (87)
Income tax income/(expense) 8 (17) 3 (14) (15) - (15)
Profit/(Loss) for the period (55) (57) (112) (76) (26) (102)
Attributable to:
Non-controlling interests - -
Equity holders of the Company (112) (102)
Earnings per share (in US$) 10
Basic & Diluted (4.42) (8.87)
Basic & Diluted - adjusted (2.17) (6.61)
¹ Refer to Note 7 for details on specific items and non-cash share based compensation costs (SBC)
2
Accounting for a capital reorganization relating to the legal merger of CEVA Logistics AG and CEVA Holdings LLC has been applied
The accompanying notes are an integral part of the unaudited condensed consolidated interim financial statements.
CEVA Logistics AG – Quarter Two 2018 Interim Financial Statements 3Unaudited Condensed Consolidated Statement of Comprehensive Income
THREE MONTHS ENDED 30 JUNE THREE MONTHS ENDED 30 JUNE
$ millions 2018 2017
Specific Specific
Before specific items and Before specific items and
items and SBC SBC1 Total items and SBC SBC1 Total
Profit/(Loss) for the period 5 (50) (45) (30) (15) (45)
Items that will not be reclassified to Profit and Loss:
Remeasurements of retirement benefit obligations - - - - - -
Items that may be reclassified subsequently to Profit and Loss:
Tax effects of items in OCI - - - - - -
Currency translation adjustment (55) - (55) (2) - (2)
Total comprehensive income/(loss) for the period, net of income tax (50) (50) (100) (32) (15) (47)
Attributable to:
Non-controlling interests - -
Equity holders of the Company (100) (47)
Total comprehensive profit/(loss) for the period (100) (47)
SIX MONTHS ENDED 30 JUNE SIX MONTHS ENDED 30 JUNE
$ millions 2018 2017
Specific Specific
Before specific items and Before specific items and
items and SBC SBC1 Total items and SBC SBC1 Total
Profit/(Loss) for the period (55) (57) (112) (76) (26) (102)
Items that will not be reclassified to Profit and Loss:
Remeasurements of retirement benefit obligations - - - - - -
Items that may be reclassified subsequently to Profit and Loss:
Tax effects of items in OCI - - - - - -
Currency translation adjustment (16) - (16) 30 - 30
Total comprehensive income/(loss) for the period, net of income tax (71) (57) (128) (46) (26) (72)
Attributable to:
Non-controlling interests - -
Equity holders of the Company (128) (72)
Total comprehensive profit/(loss) for the period (128) (72)
¹ Refer to note 7 for details on specific items and non-cash share based compensation costs (SBC)
The accompanying notes are an integral part of the unaudited condensed consolidated interim financial statements.
CEVA Logistics AG – Quarter Two 2018 Interim Financial Statements 4Unaudited Condensed Consolidated Balance Sheet
AS AT 30 JUNE AS AT 31 DECEMBER¹
$ millions Note 2018 2017
ASSETS
Non-current assets
Intangible assets 1,409 1,448
Property, plant and equipment 167 169
Investments in joint ventures 13 104 98
Deferred income tax assets 110 108
Prepayments 45 44
Other non-current assets 113 106
Total non-current assets 1,948 1,973
Current assets
Inventory 20 18
Trade and other receivables 1,113 1,053
Prepayments 85 65
Contract assets 3 142 -
Accrued income - 131
Income tax receivable 12 12
Cash and cash equivalents 327 295
Assets held for sale 12 4 -
Total current assets 1,703 1,574
TOTAL ASSETS 3,651 3,547
EQUITY
Capital and reserves attributable to equity holders
Share capital 9 4 1
Share premium 783 -
Convertible securities 378 -
Other reserves 2,312 2,319
Accumulated deficit (3,110) (2,997)
Attributable to equity holders of the Company 367 (677)
Non-controlling interests 3 3
Total Group equity 370 (674)
LIABILITIES
Non-current liabilities
Borrowings 11 1,422 2,197
Deferred income tax liabilities 9 8
Retirement benefit obligations 107 111
Provisions 130 125
Other non-current liabilities 56 60
Total non-current liabilities 1,724 2,501
Current liabilities
Borrowings 11 37 187
Provisions 64 68
Trade and other payables 1,398 1,449
Contract liabilities 3 40 -
Income tax payable 18 16
Total current liabilities 1,557 1,720
TOTAL EQUITY AND LIABILITIES 3,651 3,547
¹ Accounting for a capital reorganization relating to the legal merger of CEVA Logistics AG and CEVA Holdings LLC has been applied
The accompanying notes are an integral part of the unaudited condensed consolidated interim financial statements.
CEVA Logistics AG – Quarter Two 2018 Interim Financial Statements 5Unaudited Condensed Consolidated Statement of Cash Flows
THREE MONTHS THREE MONTHS SIX MONTHS ENDED 30 SIX MONTHS ENDED 30
ENDED 30 JUNE ENDED 30 JUNE JUNE JUNE
$ millions Note 2018 2017 2018 2017
Profit/(Loss) before income taxes (37) (46) (98) (87)
Adjustments for:
Depreciation, amortization and impairment 31 27 67 53
Finance income (2) (2) (3) (3)
Foreign exchange (gains) and losses (28) 13 (10) 20
Finance expense 76 69 135 116
Share of profit from equity accounted joint venture (4) (5) (9) (9)
Share based compensation costs 6 2 9 5
Changes in provisions:
Retirement benefit obligations - - (2) (1)
Long-term Provisions - (3) 7 (4)
Changes in working capital:
Inventory (5) - (4) (2)
Trade and other receivables (15) (52) (32) (29)
Prepayments and accrued income / contract assets 55 (16) (49) (29)
Trade and other payables including contract liabilities (32) 90 (34) (10)
Changes in non-current prepayments (3) (3) (3) (3)
Changes in non-current assets and liabilities (6) (2) (5) (5)
Cash generated (used for) / from operations 36 72 (31) 12
Interest cost paid (53) (40) (87) (71)
Other financing cost paid (28) (7) (33) (15)
Net income taxes paid (7) (6) (13) (17)
Net cash (used for) / from operating activities (52) 19 (164) (91)
Capital expenditure (32) (26) (53) (51)
Proceeds from sale of property, plant and equipment 1 2 1 3
Interest received - 3 3 5
Net cash (used for) / from investing activities (31) (21) (49) (43)
Issuance of shares 1 - 1 -
IPO proceeds (gross) 1,198 - 1,198 -
IPO transaction costs (16) - (16) -
Repayment of borrowings 11 (988) (82) (1,017) (98)
Proceeds from non-current borrowings 11 5 (5) 64 19
Proceeds from current borrowings 11 8 87 14 112
Net cash (used for) / from financing activities 208 - 244 33
Change in cash and cash equivalents 125 (2) 31 (101)
Cash and cash equivalents at beginning of period 203 239 295 333
Foreign exchange impact on cash and cash equivalents (1) (3) 1 2
Cash and cash equivalents at end of period 327 234 327 234
The accompanying notes are an integral part of the unaudited condensed consolidated interim financial statements.
CEVA Logistics AG – Quarter Two 2018 Interim Financial Statements 6Unaudited Condensed Consolidated Statement of Changes in Equity
Attributable
to equity Non-
Share Convertible Other Accumulated holders of the controlling Total Group
$ millions Share capital Premium Securities reserves deficit Company interest equity
Balance as at 1 January 2017¹ 1 - - 2,258 (2,800) (541) 3 (538)
Currency translation adjustment - - - 30 - 30 - 30
Share based compensation reserve - - - 5 - 5 - 5
Loss attributable to equity holders for the period - - - - (102) (102) - (102)
Balance at 30 June 2017 1 - - 2,293 (2,902) (608) 3 (605)
Restated as at 1 January 2018 2 1 - - 2,319 (2,998) (678) 3 (675)
IPO proceeds 3 817 378 - - 1,198 - 1,198
IPO transaction costs - (34) - - - (34) - (34)
Currency translation adjustment - - - (16) - (16) - (16)
Share based compensation reserve - - - 9 - 9 - 9
Loss attributable to equity holders for the period - - - - (112) (112) - (112)
Balance at 30 June 2018 4 783 378 2,312 (3,110) 367 3 370
1 Accounting for a capital reorganization relating to the legal merger of CEVA Logistics AG and CEVA Holdings LLC has been applied. Refer to Note 2 for details
of the capital reorganization accounting treatment
2 Refer to Note 3 for details on the restatement due to IFRS adjustments
The accompanying notes are an integral part of the unaudited condensed consolidated interim financial statements.
CEVA Logistics AG – Quarter Two 2018 Interim Financial Statements 7Notes to the Unaudited Condensed Consolidated Interim Financial Statements
1. General Information
CEVA Logistics AG (the “Company”) was established as a holding company on 21 February 2018 in Switzerland. The address of its registered
office is Grabenstrasse 25, 6340 Baar, Switzerland. The founder of the Company was CEVA Holdings LLC. On 3 May 2018 CEVA Holdings LLC
legally merged with CEVA Logistics AG, with CEVA Logistics AG being the surviving entity that then listed on the SIX Swiss Exchange.
CEVA Logistics AG and its subsidiaries (collectively, the “Group” or “CEVA”) design, implement and operate complete end-to-end Freight
Management and Contract Logistics solutions for multinational and small and medium sized companies on a local, regional and global level.
CEVA Logistics AG is the immediate parent of CEVA Group Plc, a company incorporated on 9 August 2006 in England and Wales as a UK public
company with limited liability.
On 4 May 2018, CEVA Logistics AG completed an IPO on the SIX Swiss Exchange with gross proceeds of CHF 821 million (US$ 820 million),
which successfully closed on 8 May 2018. At the same time, CEVA Logistics AG sold mandatory convertible securities to CMA CGM S.A. (“CMA
CGM”) in the amount of CHF 379 million (US$ 378 million), which will be converted to shares of CEVA Logistics AG upon the receipt of
regulatory approvals obtained on 9 July 2018, and the satisfaction of certain other conditions.
These unaudited condensed consolidated interim financial statements were approved and authorized for issue by the Board of Directors of
CEVA Logistics AG on 27 July 2018.
2. Basis of Preparation
The unaudited condensed consolidated interim financial information for the three and six months ended 30 June 2018 has been prepared
on a going concern basis and in accordance with IAS 34, ‘Interim financial reporting’. The unaudited condensed consolidated interim financial
information should be read in conjunction with the annual financial statements of CEVA Holdings LLC (predecessor entity to CEVA Logistics
AG following legal merger) for the year ended 31 December 2017, which have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union and in accordance with IFRIC interpretations. As from the merger the
preparation of the consolidated interim financial report is in conformity with IFRS as issued by the International Accounting Standards Board
(IASB) and comply with Swiss law. We have not identified any material differences between EU-IFRS and IFRS as issued by the IASB.
In order to effect the merger of CEVA Holdings LLC with the Company, the series A1 and A2 preference shares of CEVA Holdings LLC were
first converted into common shares of CEVA Holdings LLC. This resulted in 1.15 million CEVA Holdings LLC common shares. The holders of
these common shares were then entitled to receive 10 common shares of CEVA Logistics AG for each CEVA Holdings LLC common share held
after conversion of the A1 and A2 preference shares. This resulted in 11.5 million shares of CEVA Logistics AG being issued on merger and
prior to IPO.
Under the principles of capital reorganization accounting, the Company has reported the whole prior period results and statement of
comprehensive income of CEVA Holdings LLC and its subsidiaries rather than including them only from the capital reorganization date but
has reflected the new equity structure of CEVA Logistics AG from 1 January 2017 in doing so. This gives rise to a difference on consolidation,
called the capital reorganization reserve, which is included within other reserves as shown in the table below:
Preferred stock, Attributable
Common stock to equity Non-
and Additional Other Accumulated holders of the controlling Total Group
$ millions paid in capital Share Capital reserves deficit Company interest equity
CEVA Holdings LLC - Balance as of 1 January 2017 1,443 - 816 (2,800) (541) 3 (538)
Merger (1,443) 1 1,442 - - - -
CEVA Logisitcs AG - Balance as of 1 January 2017 - 1 2,258 (2,800) (541) 3 (538)
For the current reporting and comparatives, the financial statements of the individual Group entities were combined on a line-by-line basis
by adding together comparable items of assets, liabilities, equity and income and expenses. Balances, transactions and unrealized gains or
losses on transactions between the combined and consolidated entities, including their subsidiaries, were eliminated in full.
3. Accounting Policies
The accounting policies applied are consistent with those applied in the consolidated financial statements of CEVA Holdings LLC (predecessor
entity to CEVA Logistics AG following legal merger) as at and for the year ended 31 December 2017, and as described in those consolidated
financial statements which can be found at www.cevalogistics.com, except as described above.
New and amended standards adopted by the Group
The Group has applied the following standards and amendments for the first time for the financial year beginning on 1 January 2018:
IFRS 2, “Share Based Payments” – Clarifies the accounting for cash-settled share-based payment transactions that include a performance
condition, the classification of share-based payment transactions with net settlement features, and the accounting for modifications of
share-based payment transactions from cash-settled to equity-settled. This standard does not have any material impact on the financial
statements.
CEVA Logistics AG – Quarter Two 2018 Interim Financial Statements 8 IFRS 9, “Financial Instruments” – Addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS
9 was issued in November 2009 and October 2010, and further amended in July 2014. It replaces the parts of IAS 39 that relate to the
classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories:
those measured as at fair value and those measured at amortized cost. The determination is made at initial recognition. The classification
depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the
instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair
value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other
comprehensive income rather than the income statement, unless this creates an accounting mismatch. IFRS 9 relaxes the requirements for
hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item
and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes.
Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. IFRS 9 also introduces a single
impairment model and removes the need for a triggering event to be necessary for recognition of impairment losses.
The Group concluded that the classification and measurement basis for its financial assets and liabilities will be largely unchanged by
adoption of IFRS 9. The main impact of adopting IFRS 9 arose from the implementation of the expected loss model regarding trade debtors.
The calculated impact at 1 January 2018 under the “simplified approach” is US$3 million. No material impact on profit for future periods is
expected.
IFRS 15, “Revenue from Contracts with Customers”. This new standard on revenue recognition supersedes IAS 18 Revenue, IAS 11
Construction Contracts and related interpretations. The new standard establishes uniform requirements regarding the nature, amount,
timing, and time period of revenue recognition. Revenue is recognized when a customer obtains control of a good or a service and thus has
the ability to direct the use and obtain the benefits from the good or service. The standard provides a principles-based five-step model that
must be applied to all categories of contracts with customers.
The Group carried out a review of existing contractual arrangements as part of this process. We concluded that IFRS 15 does not have a
material impact on the Contract Logistics Business. Regarding the Freight Management business, the timing of revenue recognition from
certain types of contracts did change because according to IFRS 15 revenue is recognised overtime instead of at a point in time. As a result,
accrued income and trade and other payables balances are affected by US$13 million and US$11 million. This led to an increase of US$2
million in retained earnings. No material impact on profit for future periods is expected.
IFRS 15 requires contract assets and liabilities to be presented separately. The Group has presented US$142 million as contract assets and
US$40 million as contract liabilities as of 30 June 2018 on separate balance sheet lines (US$3 million non-current contract assets is included
in the non-current prepayments as of 30 June 2018). In prior periods, the amounts were presented as accrued income or included within
trade and other payables respectively.
IFRIC 22, “Foreign Currency Transactions and Advance Consideration”- This interpretation addresses foreign currency transactions: the date
of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset
or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction is established for each payment or
receipt. The new interpretation requires application for annual periods beginning on or after 1 January 2018. No material impact is expected.
Restated opening balance sheet 1 January 2018
IFRS 9 and IFRS 15 are adopted by using the modified retrospective method without restating comparatives. The following tables show the
adjustments recognized for each individual line item regarding the changes as described above. Line items that were not affected by the
changes have not been included. As a result, the sub-totals and totals disclosed cannot be recalculated from the numbers provided. The
adjustments are explained in more detail by above.
AS AT 31 DECEMBER 2017 IFRS 9 adjustment IFRS 15 adjustment AS AT 1 JANUARY 2018
$ millions
ASSETS
Trade and other receivables 1,053 (3) - 1,050
Accrued income 131 - 13 144
Total current assets 1,574 (3) 13 1,584
TOTAL ASSETS 3,547 (3) 13 3,557
EQUITY
Capital and reserves attributable to equity holders
Share capital 1 - - 1
Other reserves 2,319 - - 2,319
Accumulated deficit (2,997) (3) 2 (2,998)
Attributable to equity holders of the Company (677) (3) 2 (678)
Total Group equity (674) (3) 2 (675)
LIABILITIES
Trade and other payables 1,449 - 11 1,460
Total current liabilities 1,720 - 11 1,731
TOTAL EQUITY AND LIABILITIES 3,547 (3) 13 3,557
New standards and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2019,
and have not been applied in preparing these unaudited condensed consolidated interim financial statements:
IFRS 16, “Leases” – The new standard addresses the definition of a lease, recognition and measurement of leases and establishes principles
for reporting useful information to users of financial statements about the leasing activities of both lessees and lessors. A key change arising
CEVA Logistics AG – Quarter Two 2018 Interim Financial Statements 9from IFRS 16 is that most operating leases will be accounted for on balance sheet for lessees such as CEVA. The standard replaces IAS 17
“Leases”, and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2019.
The Group is currently working on implementing a new system that will help track all its leases so as to produce a full impact assessment of
IFRS 16: a significant impact is expected that will increase reported EBITDA, as current operating lease charges will be replaced by additional
depreciation and finance charges. On the balance sheet, both assets and liabilities will increase significantly from 1 January 2019. The Group
does not intend to retrospectively adopt this standard;
IFRIC 23, "Uncertainty over income tax treatments" - This interpretation clarifies the accounting for uncertainties in income taxes, and to be
applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is
uncertainty over income tax treatments under IAS 12. IFRIC 23 is effective for annual reporting periods beginning on or after 1 January 2019.
No material impact is currently expected.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.
4. Critical Accounting Estimates and Judgments
The preparation of financial statements in accordance with generally accepted accounting principles under IFRS requires the Group to make
estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure
of contingent assets and liabilities in the financial statements. Estimates and judgments are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The resulting accounting estimates will, by definition, rarely equal the related actual results. Actual results may differ significantly from these
estimates, the effect of which is recognized in the period in which the facts that give rise to the revision, become known.
In preparing these unaudited condensed consolidated interim financial statements, the significant judgments made by management in
applying the Group’s accounting policies and the key sources of estimation uncertainty, were the same (being impairment of goodwill, income
taxes, retirement benefits, provisions for onerous contracts, provisions and contingent liabilities) as those that applied to the consolidated
financial statements of CEVA Holdings LLC (predecessor entity to CEVA Logistics AG following legal merger) as at, and for, the year ended 31
December 2017.
5. Financial Risk Management
The Group’s operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial
position, results of operations and cash flows. The Group’s risk management objectives and policies are consistent with those disclosed in
the consolidated financial statements as at, and for, the year ended 31 December 2017.
The Group operates internationally and generates foreign currency exchange risks arising from future commercial transactions, recognized
assets and liabilities, investments and divestments in foreign currencies other than the US dollar, the Group’s reporting currency. The main
exchange rates are shown below:
2018 2017
June closing Three Month Average Six Month Average June closing Three Month Average Six Month Average
British pound 0.7572 0.7351 0.7273 0.7678 0.7818 0.7935
Euro 0.8559 0.8387 0.8267 0.8754 0.9097 0.9243
Chinese yuan 6.6171 6.3787 6.3708 6.7793 6.8603 6.8767
As a result of our global operations, our business, results of operations and financial condition may be materially adversely affected by
fluctuations in currency exchange rates. For example, we are subject to currency risks because our revenues may be generated in different
currencies from the currencies in which our related costs are incurred, and because our cash flow may be generated in currencies that do
not match our debt service obligations. In addition, our reporting currency is the U.S. dollar, and therefore our reporting results are subject
to translational risks relating to currency exchange rate fluctuations. Given the volatility of exchange rates, our failure to effectively hedge
or otherwise manage such currency risks effectively may materially adversely affect our financial condition and results of operations.
6. Segment Information
The Group’s operating and reporting segments are its Freight Management and Contract Logistics businesses which are the main focus of
the Group’s chief operating decision maker (“CODM”), the Executive Board of the Group (the “Executive Board”). This is the primary way in
which the CODM is provided with financial information. The Group’s internal organization and management structure is also aligned to the
two businesses. All reporting to the CODM analyses performance by Freight Management and Contract Logistics business activity, and
resources are allocated on this basis. Disclosure has been included in the segment note to reflect these operating segments. As additional
information the Group has also provided geographical information on its results.
The Executive Board considers the operations from a business perspective. In addition, information from a geographical perspective has also
been presented, which reflects the cluster basis on which the Company administers the operations of its business.
CEVA Logistics AG – Quarter Two 2018 Interim Financial Statements 10Operating segments
Freight Management, which includes the provision of international air, ocean, ground, customs brokerage, deferred air and pickup
and delivery, and other value-added services; and
Contract Logistics, which includes the provision of inbound logistics, manufacturing support, outbound/distribution logistics and
aftermarket logistics.
Additional geographical information
The Group is operating on a worldwide basis in the following geographical areas:
Americas – comprising North America; Central America; and South America clusters;
Asia Pacific – comprising South East Asia; Mekong; India sub-continent; Australia and New Zealand; Greater China; and North Asia
clusters;
Europe – comprising UK, Ireland and Nordics; Benelux; France; Germany; Central and Eastern Europe; Italy; Iberia; and BAMECA
(includes the Balkans, the Middle East and Africa) clusters.
The Executive Board assesses the performance of the operating segments (including joint ventures) based on EBITDA before specific items and
SBC. Interest income and expenditure are not included in the result for each operating segment that is reviewed by the Executive Board. The
information provided to the Executive Board is measured in a manner consistent with that in the financial statements.
Operating segments
The segment results for the three months ended 30 June 2018 and 30 June 2017 are as follows:
THREE MONTHS ENDED 30 JUNE
$ millions 2018
Freight Contract
Management Logistics Total
Total segment revenue 853 996 1,849
Inter-segment revenue - (1) (1)
Revenue from external customers 853 995 1,848
EBITDA before specific items and SBC 27 39 66
Specific items and SBC (30)
EBITDA 36
Depreciation, amortization and impairment (31)
Operating income 5
Net finance income / (expense) (46)
Net result from joint ventures 4
Profit/(Loss) before income taxes (37)
EBITDA before specific items and SBC, as a % of revenue 3.2% 3.9% 3.6%
THREE MONTHS ENDED 30 JUNE
$ millions 2017
Freight Contract
Management Logistics Total
Total segment revenue 789 933 1,722
Inter-segment revenue - (1) (1)
Revenue from external customers 789 932 1,721
EBITDA before specific items and SBC 20 39 59
Specific items and SBC (3)
EBITDA 56
Depreciation, amortization and impairment (27)
Operating income 29
Net finance income / (expense) (80)
Net result from joint ventures 5
Profit/(Loss) before income taxes (46)
EBITDA before specific items and SBC, as a % of revenue 2.5% 4.2% 3.4%
CEVA Logistics AG – Quarter Two 2018 Interim Financial Statements 11The segment results for the six months ended 30 June 2018 and 30 June 2017 are as follows:
SIX MONTHS ENDED 30 JUNE
$ millions 2018
Freight Contract
Management Logistics Total
Total segment revenue 1,656 1,983 3,639
Inter-segment revenue - (1) (1)
Revenue from external customers 1,656 1,982 3,638
EBITDA before specific items and SBC 42 77 119
Specific items and SBC (37)
EBITDA 82
Depreciation, amortization and impairment (67)
Operating income 15
Net finance income / (expense) (122)
Net result from joint ventures 9
Profit/(Loss) before income taxes (98)
EBITDA before specific items and SBC, as a % of revenue 2.5% 3.9% 3.3%
SIX MONTHS ENDED 30 JUNE
$ millions 2017
Freight Contract
Management Logistics Total
Total segment revenue 1,491 1,828 3,319
Inter-segment revenue - (2) (2)
Revenue from external customers 1,491 1,826 3,317
EBITDA before specific items and SBC 30 74 104
Specific items and SBC (14)
EBITDA 90
Depreciation, amortization and impairment (53)
Operating income 37
Net finance income / (expense) (133)
Net result from joint ventures 9
Profit/(Loss) before income taxes (87)
EBITDA before specific items and SBC, as a % of revenue 2.0% 4.1% 3.1%
Geographical information
The geographical results for the three months ended 30 June 2018 and 30 June 2017 are as follows:
THREE MONTHS ENDED 30 JUNE
$ millions 2018
Americas Asia Pacific Europe Total
Total segment revenue 616 467 765 1,848
Inter-segment revenue (1) - 1 -
Revenue from external customers 615 467 766 1,848
EBITDA before specific items and SBC 12 29 25 66
Specific items and SBC (30)
EBITDA 36
Depreciation, amortization and impairment (31)
Operating income 5
Net finance income / (expense) (46)
Net result from joint ventures 4
Profit/(Loss) before income taxes (37)
CEVA Logistics AG – Quarter Two 2018 Interim Financial Statements 12THREE MONTHS ENDED 30 JUNE
$ millions 2017
Americas Asia Pacific Europe Total
Total segment revenue 581 449 693 1,723
Inter-segment revenue (1) - (1) (2)
Revenue from external customers 580 449 692 1,721
EBITDA before specific items and SBC 17 16 26 59
Specific items and SBC (3)
EBITDA 56
Depreciation, amortization and impairment (27)
Operating income 29
Net finance income / (expense) (80)
Net result from joint ventures 5
Profit/(Loss) before income taxes (46)
The geographical results for the six months ended 30 June 2018 and 30 June 2017 are as follows:
SIX MONTHS ENDED 30 JUNE
$ millions 2018
Americas Asia Pacific Europe Total
Total segment revenue 1,201 912 1,526 3,639
Inter-segment revenue (1) - - (1)
Revenue from external customers 1,200 912 1,526 3,638
EBITDA before specific items and SBC 22 50 47 119
Specific items and SBC (37)
EBITDA 82
Depreciation, amortization and impairment (67)
Operating income 15
Net finance income / (expense) (122)
Net result from joint ventures 9
Profit/(Loss) before income taxes (98)
SIX MONTHS ENDED 30 JUNE
$ millions 2017
Americas Asia Pacific Europe Total
Total segment revenue 1,132 848 1,339 3,319
Inter-segment revenue (1) - (1) (2)
Revenue from external customers 1,131 848 1,338 3,317
EBITDA before specific items and SBC 21 34 49 104
Specific items and SBC (14)
EBITDA 90
Depreciation, amortization and impairment (53)
Operating income 37
Net finance income / (expense) (133)
Net result from joint ventures 9
Profit/(Loss) before income taxes (87)
7. Specific Items and SBC
THREE MONTHS ENDED THREE MONTHS ENDED SIX MONTHS ENDED 30 SIX MONTHS ENDED 30
30 JUNE 30 JUNE JUNE JUNE
$ millions 2018 2017 2018 2017
Personnel expenses 12 9 16 16
Other operating expenses 18 (6) 21 (2)
Items affecting EBITDA 30 3 37 14
Finance expenses 23 12 23 12
Total (income)/expense before income taxes 53 15 60 26
Tax expense (3) - (3) -
Total (income)/expense 50 15 57 26
CEVA Logistics AG – Quarter Two 2018 Interim Financial Statements 13The following table provides a detailed split on the specific items and SBC:
THREE MONTHS ENDED THREE MONTHS ENDED SIX MONTHS ENDED 30 SIX MONTHS ENDED 30
30 JUNE 30 JUNE JUNE JUNE
$ millions 2018 2017 2018 2017
Restructuring and transformation 5 9 7 15
Litigation and legacy tax (1) (9) (1) (7)
Other - 1 - 1
Subtotal specific items excluding IPO 4 1 6 9
IPO related operating costs 18 - 20 -
Share based compensation (non-cash) 8 2 11 5
Items affecting EBITDA 30 3 37 14
Finance expenses 23 12 23 12
Total (income)/expense before income taxes 53 15 60 26
Tax expense (3) - (3) -
Total (income)/expense 50 15 57 26
Restructuring and transformation
For the three months ended 30 June 2018 restructuring and transformation costs arose predominantly in the Italian and North American
clusters as part of the ongoing cost reduction initiatives. For 2017, severance costs and provisions were incurred, mainly in the North
American, Benelux, Italian, German and UKIN clusters.
Litigation and legacy tax
Litigation and legacy tax includes settlement payments received in the North America cluster, offset by costs relating to the CIL litigation and
independent contractors litigation in California. For 2017, the Group received a settlement payment related to an anti-trust claim.
IPO related operating costs
IPO related operating costs includes certain legal, accountancy and other professional fees incurred for external advice in relation to the IPO.
Share based compensation
Non-cash share based compensation costs are recognized in a similar manner as specific items. These relate to the issuance of shares in CEVA
Holdings LLC (predecessor entity to CEVA Logistics AG following legal merger) and grant of equity awards to certain members of management
under the CEVA Holdings LLC 2013 Long-Term Incentive Plan in July 2016. Additionally, a one-time grant was awarded to certain members
of management as a result of the IPO in April 2018. These costs are included within personnel expenses.
Finance expenses
Finance expenses include the accelerated write-off of capitalized debt issuance costs (US$8 million), as well as breakage fees (US$13 million)
relating to the debt that has been repaid and cancelled, and other finance costs relating to refinancing transactions pre IPO.
8. Income Tax
For the first six months ended 30 June 2018 the effective tax rate is (14.3)% (first six months ended 30 June 2017: (17.2)%) and is based on
an entity by entity calculation of forecasted effective tax rates for the full year. The difference between the expected tax rate (the Group’s
overall expected tax rate is calculated as the weighted average tax rate based on earnings before tax of each subsidiary and can change on a
yearly basis) and the effective tax rate is mainly due to uncertainty regarding the future utilization of losses or temporary differences, for
which no deferred tax asset has been recognized.
9. Share Capital
Number of common
shares Nominal value
1 January 2018¹ -
Issued share capital during the year 41,361,537 CHF 0.10
30 June 2018 41,361,537 CHF 0.10
Authorised and issued share capital as per 30 June 2018 41,361,537 CHF 0.10
¹ On 3 May 2018 CEVA Logistics merged with CEVA Holdings LLC and was the surviving parent Company of the Group. As a result of this capital reorganization
the share capital of CEVA Logistics AG has been reflected in the consolidated balance sheet as though the Company had always been the parent of the Group.
See Note 2 for further details.
On 21 February 2018, the Company was incorporated with 1,000,000 fully paid in registered shares with a nominal value of CHF 0.10 per
share issued at par value. On 10 April 2018, the Company issued 10,505,000 fully paid in registered shares with a nominal value of CHF 0.10
per share issued at par value.
The Company legally merged with CEVA Holdings LLC on 3 May 2018 with CEVA Logistics AG being the surviving entity.
CEVA Logistics AG – Quarter Two 2018 Interim Financial Statements 14On 8 May 2018, the Company successfully completed an IPO on the SIX Swiss Exchange and issued 29,856,537 new registered shares with a
nominal value of CHF 0.10 each for CHF 27.50 per share.
At the same time, CMA CGM made a strategic investment of CHF 379 million in convertible securities issued by CEVA in a concurrent private
placement. These securities, which have the same rights as shares, will convert to 13,779,826 registered shares once certain regulatory
approvals have been obtained or are mandatorily convertible into common shares (see Note 18 “Events after Balance Sheet Date”).
The proceeds from the IPO were primarily used to repay debt as disclosed in Note 11.
Each share has one vote. All shares have equal voting rights, and no preferential rights or similar entitlements exist.
10. Earnings per share
Basic earnings per share is calculated by dividing the profit (loss) for the period attributable to shareholders of the Company by the weighted
average number of shares outstanding during the period. Diluted earnings per share is calculated by adjusting the weighted average number
of shares outstanding during the period for the diluting effect of our share based compensation plans.
The calculation (both basic and diluted EPS) as at 30 June 2018 includes the CMA CGM convertible security that is redeemable in shares as
this instrument is mandatorily convertible regardless of whether regulatory approval for CMA’s investment is given.
Adjusted earnings per share represents the basic / dilutive earnings per share excluding specific items and share based compensation
expenses.
Profit for the period
THREE MONTHS ENDED THREE MONTHS ENDED
30 JUNE 30 JUNE
$ millions 2018 2017
Profit/(Loss) before tax (37) (46)
Income tax (8) 1
Profit/(Loss) for the period (45) (45)
Profit/(Loss) for the period attributable to noncontrolling interests - -
Profit/(Loss) for the period attributable to shareholders of the Company (45) (45)
SIX MONTHS ENDED 30 SIX MONTHS ENDED 30
JUNE JUNE
$ millions 2018 2017
Profit/(Loss) before tax (98) (87)
Income tax (14) (15)
Profit/(Loss) for the period (112) (102)
Profit/(Loss) for the period attributable to noncontrolling interests - -
Profit/(Loss) for the period attributable to shareholders of the Company (112) (102)
Weighted average number of shares
THREE MONTHS ENDED THREE MONTHS ENDED
30 JUNE 30 JUNE
Number of shares 2018 1 2017 2
Issued shares at April 1 11,505,000 11,505,000
Effect of issued shares during the period 18,909,140 -
Convertible securities to CMA CGM Group 8,727,224 -
Shares for basic earnings per share for the period 39,141,364 11,505,000
Effect of dilutive shares
Share options 712,395 -
Shares for diluted earnings per share for the period 39,853,759 11,505,000
1 538,900 potentially dilutive share options have been excluded from the computation of the diluted average number of shares outstanding as they would
have an anti-dilutive effect
2325,750 potentially dilutive share options have been excluded from the computation of the diluted average number of shares outstanding as they would
have an anti-dilutive effect
CEVA Logistics AG – Quarter Two 2018 Interim Financial Statements 15SIX MONTHS ENDED 30 SIX MONTHS ENDED 30
JUNE JUNE
Number of shares 2018 1 2017 2
Issued shares at January 1 11,505,000 11,505,000
Effect of issued shares during the period 9,454,570 -
Convertible securities to CMA CGM Group 4,363,612 -
Shares for basic and diluted earnings per share for the period 25,323,182 11,505,000
1 538,900 potentially dilutive share options have been excluded from the computation of the diluted average number of shares outstanding as they would
have an anti-dilutive effect
2325,750 potentially dilutive share options have been excluded from the computation of the diluted average number of shares outstanding as they would
have an anti-dilutive effect
Earnings and adjusted earnings per share
THREE MONTHS THREE MONTHS
ENDED 30 JUNE ENDED 30 JUNE
In $ 2018 2017
Basic & Diluted (1.15) (3.91)
Basic - adjusted 0.13 (2.61)
Diluted - adjusted 0.13 (2.61)
SIX MONTHS SIX MONTHS
ENDED 30 JUNE ENDED 30 JUNE
In $ 2018 2017
Basic & Diluted (4.42) (8.87)
Basic & Diluted - adjusted (2.17) (6.61)
Adjusted earnings
THREE MONTHS ENDED THREE MONTHS ENDED
30 JUNE 30 JUNE
$ millions 2018 2017
Profit/(Loss) for the period (45) (45)
Specific items 53 15
Adjusted Income tax (3) -
Non-controlling interest - -
Adjusted profit/(loss) attributable to shareholders of the Company 5 (30)
SIX MONTHS ENDED 30 SIX MONTHS ENDED 30
JUNE JUNE
$ millions 2018 2017
Profit/(Loss) for the period (112) (102)
Specific items 60 26
Adjusted Income tax (3) -
Non-controlling interest - -
Adjusted profit/(loss) attributable to shareholders of the Company (55) (76)
CEVA Logistics AG – Quarter Two 2018 Interim Financial Statements 1611. Borrowings
As at 30 June 2018 and 31 December 2017, the carrying amounts and fair value of borrowings were as follows:
30 JUNE 31 DECEMBER
$ millions 2018 2017
Carrying value Level 1 fair Level 2 fair Total fair Carrying value Level 1 fair Level 2 fair Total fair
value value value value value value
Non-current
Bank borrowings 973 - 990 990 1,165 - 1,138 1,138
Loan notes 423 443 - 443 1,008 995 - 995
Finance leases 26 - 26 26 24 - 24 24
Total non-current borrowings 1,422 443 1,016 1,459 2,197 995 1,162 2,157
Current
Bank overdrafts 21 - 21 21 131 - 131 131
Loan Notes - - - - 39 39 - 39
Bank borrowings 11 - 11 11 13 - 13 13
Finance leases 5 - 5 5 4 - 4 4
Total current borrowings 37 - 37 37 187 39 148 187
Total borrowings 1,459 443 1,053 1,496 2,384 1,034 1,310 2,344
Unamortized debt issuance costs 25 38
Total principal debt 1,484 2,422
The fair value of the loan notes has been presented using the available market price (Level 1) at the balance sheet date. The bank borrowings'
fair value has been presented using a valuation technique based on prices of recent over-the-counter transactions for these borrowings
(Level 2). The average floating interest rate for the six months ended 30 June 2018 was 3.9% (six months ended 30 June 2017: 3.6%) and
7.0% (three months ended 30 June 2017: 6.1%) for Euro and for US dollar denominated loans respectively.
As at 30 June 2018 the weighted average period to maturity was 2.3 years.
April 2017 Exchange offer and March 2018 Tack-on bond
On 7 April 2017, CEVA successfully completed an exchange offer for the 4% First Lien Senior Secured Notes due 2018, where US$351 million
of the notes were exchanged for CEVA’s new 9.00% First Lien Senior Secured Notes due 2020 (the “New 9% Notes”). After the exchange
approximately US$39 million principal amount of 4% First Lien Senior Secured Notes were outstanding. In addition, CEVA entered into
agreements with certain holders to exchange US$16 million of 12.75% Senior Notes for New 9% Notes. After the exchange approximately
US$26.5 million principal amount 12.75% Senior Notes were outstanding.
The New 9% Notes will pay 6% cash and 3% PIK (payment-in-kind) interest per annum.
On 19 March 2018, CEVA successfully completed its offering of US$50 million, in aggregate principal amount of the New 9% Notes, in a
private offering. The new notes were issued as additional notes under an indenture, dated as of 7 April 2017. Proceeds from the issuance of
the tack-on bond were used to repay the outstanding US$39 million aggregate principal amount of its 4.0% Senior Notes on 1 May 2018 and
the balance was used for general corporate purposes.
May 2018 IPO
On 8 May 2018, CEVA Logistics AG successfully completed an initial public offering (IPO) on the SIX Swiss Exchange. The Company received
aggregate gross proceeds of CHF 1.2 billion (equivalent to US$1.2 billion) from the IPO and the private placement of the CMA CGM convertible
securities.
Since the closing of the IPO, the Company has used the net proceeds from the IPO to repay debt as follows:
i. To repay US$184 million of drawings under the Existing Term Loans outstanding, on 14 May 2018;
ii. To redeem in full the US$300 million principal amount of 7.0% First Lien Notes and US$325 million principal amount of 9.0% 1.5
Lien Notes on 24 May 2018;
iii. To redeem in full the US$26 million principal amount of the 12.75% Senior Notes on 13 June 2018.
European Securitization due 2020
On 24 March 2016, the Company closed a €170 million (US$191 million) Pan-European Asset Backed Securitization (“the European
Securitization Facility”). The European Securitization Facility is a four year commitment (two year initially) from two banks and is based on
securitization of receivables from six European countries. As of 30 June 2018, the outstanding drawn amount under the facility was €150
million (US$175 million).
Australian Receivables Facility due 2020
On 22 May 2016, certain of the Company’s Australian subsidiaries of the Group renewed and extended CEVA’s A$40 million receivables
purchase facility. The renewal, among other things, extended the maturity of the facility to 30 April 2020 and amended certain economic
terms including facility margin. Additional amendments were made in 2017 which increased the facility limit to A$50 million. As of 30 June
2018, the outstanding drawn amount under the facility was A$41 million (US$30 million).
CEVA Logistics AG – Quarter Two 2018 Interim Financial Statements 17US ABL facility due 2020
On 19 November 2010, certain US subsidiaries of the Group (“the Originators”) and a new subsidiary, CEVA US Receivables, LLC (the
“Unrestricted Subsidiary”), entered into agreements establishing an Asset Backed Loan (ABL) Facility with an initial commitment amount of
US$200 million (the “ABL Facility”). On 30 November 2010, the committed amount of the ABL Facility was increased to US$250 million. The
ABL Facility was scheduled to mature on 31 December 2018, but was amended in November 2017 and now matures on 1 August 2020. The
commitment amount for the facility has been reduced to US$225 million. As at 30 June 2018, the outstanding drawn amount of the ABL
Facility was US$198 million.
Covenants
At the end of the quarter, if the outstanding amount under our US$250 million revolving credit facility exceeds 30% of the total facility, our
senior secured credit facilities require us to maintain a maximum ratio of secured first lien net debt to covenant EBITDA of 5.35 to 1.0,
calculated for the trailing four quarters (as determined under our senior secured credit facility agreement). As at 30 June 2018 there was no
debt outstanding under this facility.
The Group is in compliance with the covenants set forth in the documents governing its existing borrowings and believes that it has sufficient
liquidity to service its operating activities and continued growth ambitions for the foreseeable future.
The Company has launched its refinancing during the third quarter (see Note 18 “Events after Balance Sheet Date”).
12. Asset held for sale
The asset held for sale of US$4 million is related to the sale of a warehouse in the Benelux cluster.
The asset classified as held for sale is presented below:
AS AT 30 JUNE AS AT 30 JUNE
$ millions 2018 2017
Assets held for sale
Property, plant and equipment 4 -
Total non-current assets 4 -
TOTAL ASSETS 4 -
13. Joint ventures
The Group has an investment totaling US$104 million as at 30 June 2018 (31 December 2017: US$98 million), being a 50% interest in ANJI-
CEVA Logistics Co. Ltd (“Anji-CEVA”) with its registered address at No. 258 Miquan Road, Anting Town, Jiading District, Shanghai City, P.R. of
China. Anji-CEVA principally engages in contract logistics activities, including warehousing, distribution, transportation, domestic freight,
technical consulting and training. For the three months ended 30 June 2018, CEVA’s share in Anji-CEVA’s net result was US$4 million (three
months ended 30 June 2017: US$4 million). For the six months ended 30 June 2018, CEVA’s share was US$9 million (six months ended 30
June 2017: US$9 million).
The consolidated balance sheet of Anji-CEVA as at 30 June 2018, 31 December 2017 and 30 June 2017 is as follows:
AS AT 30 JUNE AS AT 31 DECEMBER AS AT 30 JUNE
$ millions 2018 2017 2017
Current
Cash and cash equivalents 166 144 166
Other current assets 676 410 432
Total current assets 842 554 598
Financial liablities (11) (7) (3)
Other current liabilities (787) (532) (580)
Total current liabilities (798) (539) (583)
Non-current
Assets 168 170 150
Total non-current assets 168 170 150
Other liabilities (3) - -
Total non-current liabilities (3) - -
NET ASSETS 209 185 165
CEVA Logistics AG – Quarter Two 2018 Interim Financial Statements 18The consolidated income statement of Anji-CEVA for the three and six months ended 30 June 2018 and 2017 is as follows:
THREE MONTHS ENDED 30 JUNE SIX MONTHS ENDED 30 JUNE
$ millions 2018 2017 2018 2017
Revenue 387 293 733 538
Operating expenses excluding depreciation, amortization and impairment (365) (272) (686) (498)
EBITDA 22 21 47 40
Depreciation,amortization and impairment (7) (6) (14) (10)
Operating income 15 15 33 30
Net finance income/(expense) (including foreign exchange movements) 1 - 1 -
Profit/(Loss) before income taxes 16 15 34 30
Income tax (expense) / Income (6) (4) (11) (8)
Profit/(Loss) for the period 10 11 23 22
Attributable to:
Non-controlling interests 3 2 6 4
Equity holders of the Company 7 9 18 18
The reconciliation from the net asset value to the carrying value of the joint ventures for the period ending 30 June 2018 and 2017 is as
follows:
$ millions 2018 2017
Opening net assets - 1 January 185 149
Allocated to non-controlling interest (41) (35)
Adjusted opening net assets - 1 January 144 114
Profit for the period 23 22
Non-controlling interest (6) (4)
Foreign exchange impact (6) -
Closing net assets - 30 June 155 132
Interest in joint ventures at 50% 78 66
Goodwill in joint ventures 26 25
Carrying value 30 June 104 91
The Company had no contingent liabilities towards the joint venture as at 30 June 2018 (31 December 2017: nil). There are no significant
restrictions on the ability of joint ventures to transfer funds to the Company in the form of cash dividends, or to repay loans or advances
made by the Company.
As part of the agreement in 2017 to renew the Anji-CEVA joint venture agreement it was agreed in principle that the joint venture parties,
CEVA and Anji Automotive Logistics Company Limited (Anji Logistics) (a subsidiary of Shanghai Automotive Industry Sales Corporation, or
SAIC), will be entitled to certain annual adjustment payments prior to or subsequent to the net profits distribution depending on certain
contributions made by the parties to the joint venture. During the quarter a formal agreement to this effect was entered into under which
JV pays a fee that is based on the difference between the ratio in joint venture revenue stemming from the SAIC-group versus non-SAIC-
group companies. This will be an operating expense and affect EBITDA; the economic consequences for CEVA are the same as if the
adjustment had been done subsequent to net profit distribution. For 2018 the JV will pay an annual adjustment payment to Anji-Logistics,
however, as the share of non-SAIC group revenues is expected to increase, the impact on CEVA is expected to reduce accordingly. As a result
of a strategic review that may occur in 2021 depending on the level of non-SAIC revenue achieved in 2020, the parties may amend the joint
venture agreement, including the profit sharing provisions, purpose of the joint venture and business transfers, or the parties may sell a
portion of their interests in the joint venture or the Anji-CEVA joint venture in its entirety. The agreement will have no impact on the dividend
CEVA will receive in 2018.
14. Commitments
Operating lease commitments
The Group leases various offices and warehouses under non-cancellable operating lease agreements. The lease terms are generally between
one and six years and the majority of lease agreements are renewable at the end of the lease period at market rates.
The Group also leases various motor vehicles, office and computer equipment under operating lease agreements.
During the three months ended 30 June 2018, US$88 million was recognized as an expense in the income statement in respect of operating
lease rentals (three months ended 30 June 2017: US$83 million). For the six months ended 30 June 2018, US$178 million was recognized as
an expense (six months ended 30 June 2017: US$164 million).
CEVA Logistics AG – Quarter Two 2018 Interim Financial Statements 19The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
AS AT 30 JUNE AS AT 31 DECEMBER
$ millions 2018 2017
Less than 1 year 332 340
1-5 years 656 688
Thereafter 146 180
Total 1,134 1,208
Of which guaranteed by third party / customers 78 129
Of the future lease payments, US$747 million (31 December 2017: US$759 million) relates to commitments in relation to multi-user/shared
facilities, while the remainder of US$387 million (31 December 2017: US$449 million) is dedicated to specific customers/facilities.
Guarantees
In the normal course of our business, we provide bank guarantees or letters of credit to various customs authorities, landlords, suppliers and
insurance underwriters. The principal sources of the bank guarantees or letters of credit are CEVA's US$230 million synthetic letter of credit
facility (US$275 million previously) or the US$250 million revolving credit facility.
As at 30 June 2018, US$206 million (30 June 2017: US$269 million) of letters of credit and guarantees were issued, but undrawn, under the
synthetic letter of credit facility of US$230 million. At the same date, no letters of credit were issued under the US$250 million revolving
credit facility (30 June 2017: US$0 million).
The committed Senior Secured Facilities are secured by substantially all of the assets of CEVA Group Plc and the assets of its restricted
subsidiaries excluding certain trade accounts receivables that are transferred to special purpose entities formed in connection with the US
ABL Facility, the European Securitization Facility and the Australian Receivables Facility. The amount of the Euro denominated facilities has
been converted to US dollar for the above presentation based upon the 30 June 2018 closing rate of 1.1683.
As at 30 June 2018, the Group has issued guarantees on behalf of its subsidiaries in the ordinary course of business in connection with lease
agreements, customs duty deferment and local credit lines amounting to US$267 million (30 June 2017: US$327 million), of which US$206
million (2017: US$269 million) was issued but undrawn under CEVA’s synthetic letter of credit facility. The obligations under the guarantees
issued by banks and other financial institutions have been secured by CEVA and certain of its subsidiaries.
15. Contingencies
Litigation and Legal Proceedings
The Company is involved in several legal proceedings relating to the normal conduct of CEVA’s business. While the outcome of these legal
proceedings is uncertain, the Company believes that it has provided for all probable and estimable liabilities arising from the normal course
of business, and CEVA therefore does not expect any un-provisioned liability arising from any of these legal proceedings to have a material
impact on CEVA’s results of operations, liquidity, capital resources or financial position.
Independent Contractor-Related Proceedings
The classification of drivers as independent contractors, which CEVA believes to be a common practice in its industry in the U.S., is challenged
from time to time by federal and state governmental and regulatory authorities, including tax authorities, as well as by individual drivers who
seek to have drivers reclassified as employees. We have previously been subject to claims relating to the classification of independent
contractor owner-operators. In 2009, the California Employment Development Department (“EDD”), based on a worker classification audit,
determined that certain individuals should be reclassified as employees for purposes of state unemployment tax, employment training tax,
disability insurance contributions, and personal income tax, and the EDD issued a tax assessment. CEVA has petitioned the EDD to review its
assessment, with a potential for abating a majority of the assessed taxes.
While CEVA cannot provide assurances with respect to the outcome of this matter and it is possible that CEVA could incur a material loss,
CEVA intends to vigorously defend itself. In connection with this, the Company has accounted for a provision in its accounts.
CIL Related Proceedings
CIL Limited (formerly CEVA Investments Limited), the former parent of CEVA Group Plc, is involved in a consensually filed liquidation
proceeding in the Cayman Islands and an involuntary Chapter 7 proceeding in the Bankruptcy Court for the Southern District of New York.
The Trustee in the Chapter 7 proceeding filed a claim against CIL Limited’s former directors, CEVA Group Plc, and affiliated entities relating
mostly to CEVA’s recapitalization in 2013. In 2015 the defendants filed motions to dismiss certain of the claims asserted by the Trustee, and
in January 2018, the Bankruptcy Court issued an order granting in part and denying in part the defendants’ motions. The Trustee
subsequently filed an amended complaint on 9 July 2018. Prior to this, the defendants filed motions for summary judgment which are
currently being briefed. The Company cannot provide assurances regarding the outcome of this matter and it is possible that if the Trustee
were to prevail on his claims, the Company could incur a material loss in connection with this matter, including the payment of substantial
damages and/or the unwinding of the recapitalization in 2013. However, the Company believes the claims are without merit and intends to
vigorously defend itself.
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