Annual Report 2018 Annual Report 2018
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Annual Report 2018 Report 2018 Creating customer value Table of contents Introduction 3 Corporate Governance Group Highlights in 2018 4 and Our history 8 Shareholder Chairman’s Letter 9 Information 57 Interview with Xavier Urbain, CEO 11 Corporate Governance Report 58 Compensation and Auditor’s Reports 87 Risk Management 106 Strategy and Shareholder Information and Business Investor Relations 109 Performance 14 CEVA Logistics in brief 15 The strategic partnership with CMA CGM 19 Financial Market and Industry 22 Statements 112 Information Technology 25 New Business 28 Consolidated Financial Statements Digitalization 30 and Auditor’s Report 113 Group Performance 32 Parent Company Accounts and Freight Management Performance 37 Auditor’s Report 208 Contract Logistics Performance 44 Anji-CEVA 49 Sustainability at CEVA 52 2 Annual Report 2018 CEVA Logistics Introduction Group Highlights in 2018 Global Player Approximately US$ Present in over Direct presence Exclusive agents 58,000 7.4 bn #5 #14 160 in about in more than employees; including Revenue globally in globally in Freight countries 60 100 contractors Contract Logistics 1 Management 2 countries countries 1 Transport Intelligence report, Global Contract Logistics 2018: Ranking based on revenue 2 Transport Intelligence report, Global Freight Forwarding 2018: Ranking based on revenue 4 Annual Report 2018 CEVA Logistics Introduction A Leading Global 2018 highlights Strategic relationship with CMA CGM – 19 April, 2018: CMA CGM becomes CEVA’s Logistics Company IPO on SIX Swiss Exchange strategic partner and anchor shareholder The IPO on the SIX Swiss Exchange in May 2018 has – 24 October, 2018: CMA CGM and CEVA extend Blue-Chip Customer Base transformed the company. It has allowed us to signifi- their cooperation. Public Tender Offer planned, cantly strengthen our financial position, which is expect- to take place in February and March 2019. Average relationship ed to accelerate growth with existing and new clients. – What CMA CGM brings to CEVA: And, the strategic partnership with CMA CGM, who has – Commercial footprint: significant cross- 57% 15 years a 33% stake in the Group at the time of the publication selling opportunities and stronger footprint of gross revenue with with top 30 customers top 100 customers of this report, will create further opportunities. in Ocean Freight Management – Support functions: opportunity to access Through the IPO and the concurrent private place- CMA CGM shared service center network Broad Service Range ment to CMA CGM, CEVA has raised gross proceeds with efficient processes of CHF1.2 billion which have been largely used to – Turnaround experience: proven track- Manages across over repay debt, and obtain approximately US$1.4 billion record of delivering turnaround 2 in new debt facilities. We have received very positive – A revised business plan for the medium-term, 9 m m 750 reactions from clients, successfully renego tiated with the support of CMA CGM was presented warehouse space Contract Logistics locations payment terms with suppliers and are also seeking to on 26 November, 2018 and approved by negotiate lower costs on some leases where rates were CEVA’s Board of Directors in January 2019. 477,000 t previously impacted by credit quality. New medium-term (2021) strategic targets Air Freight 5% average Revenue >US$9 billion Debt refinancing and credit rating annual growth Adjusted EBITDA 1 US$470 – 490 million 787,000 TEUs Following the deleveraging from the IPO and improved 2 Ocean Freight operating performance, CEVA received rating upgrades EBITDA US$410 – 430 million 4.5–5.0% margin from both S & P Global Ratings and Moody’s Investors 1 Adjusted EBITDA includes the 50% proportional contribution of the Service in May 2018. S & P’s long-term issuer rating now Anji-CEVA joint venture and excludes specific items and share-based compensation costs 2.2 m t stands at BB-, while Moody’s has assigned a corporate Ground Transport 2 EBITDA excludes specific items and share-based compensation cost in rating of B1. the table 5 Annual Report 2018 CEVA Logistics Introduction A balanced product, geographic and industry exposure1 1 Freight Contract Freight Management Excluding Management Logistics contribution from Air Ocean Ground Anji-CEVA JV 48% 52% 6% 3% 9% 2 Including temporary and Healthcare agency workers Other 5% 3 By 1% Energy Consumer Comprising Contract & Retail North America, business Logistics 3% Central America, Employees Technology Other 27% and South line 81% America clusters % revenue by business 15% 1% FY 2018 2 4 line Comprising FY 2018 South East Asia, Mekong, India, Australia and New Zealand, China, and North By Asia clusters industry 5 Europe, By % revenue Comprising Middle East FY 2018 UK, Ireland, and Africa 5 Nordics, Benelux, region France, Germany, 41% % revenue 3 Central and FY 2018 The Americas Eastern Europe, Italy, Iberia, 33% and BAMECA Industrial (Balkans, Middle Asia Pacific 4 & Aerospace Automotive East and Africa) clusters 26% 24% 25% 6 Annual Report 2018 CEVA Logistics Introduction Group key financials Revenue Adjusted EBITDA Net debt CEVA’s underlying business has continued to perform in line +5% -7% -43% 8,000 300 2,500 with expectations, albeit various one-time items have significantly 280 2,000 6,000 6,994 7,356 6,646 200 249 260 2,089 impacted profitability. New 1,500 1,918 business has remained promising 4,000 1,000 with a strong pipeline of new 100 1,192 customers as well as existing 2,000 500 customers as a positive conse- quence of the IPO. 0 0 0 2016 2017 2018 2016 2017 2018 2016 2017 2018 Freight Management Contract Logistics Revenue Revenue 4,000 Air 4,000 Good volumes across existing Good performance and further contract portfolio productivity improvements 3,724 3,848 3,000 3,508 3,000 3,644 Productivity improvements 3,270 3,002 Ocean across contracts and clusters with 2,000 2,000 Strong volumes and increased half of low margin contracts focus on standardization already terminated, repriced or 1,000 1,000 improved Ground 0 Driver shortage in North America 0 However, some one-time issues All numbers in US$ million. 2016 2017 2018 increasing cost per mile 2016 2017 2018 impacting profitability in Italy 7 Annual Report 2018 CEVA Logistics Introduction Our history CEVA is one of the world’s leading third-party logistics (3PL) companies, and many of the world’s best-known brands count on CEVA to serve their markets. We offer a broad spectrum of services in both Contract Logistics and Freight Management. Our origins can be traced back to one of the founding fathers of the modern freight and logistics industry – Ken Thomas, who in 1946 founded Thomas Nationwide Transport (TNT) in Australia with a single truck. Over the next five decades, TNT developed an enviable global 2006, TNT Logistics was sold to American CEVA Logistics is now listed on the SIX Swiss reputation, particularly in contract logistics. venture capitalists Apollo Management LP, Exchange and CMA CGM, the fourth largest who renamed the company CEVA Logistics. Six container shipping group in the world, has made In the United States, in 1984, Eagle Global months later, EGL was bought by Apollo. a significant investment in the company, with a Logistics (EGL) was formed in Houston, Texas. view to setting up a strategic long-term partner- Within little more than a decade it had become Thus, the current company was established in ship with CEVA. a global force in freight management – with 2007 through the merger of TNT Logistics A milestone for operations in over 100 countries. and EGL. CEVA had been halfway through its transfor- road transporta- mation journey at the time of the IPO and the tion from China to Europe – By 1996, TNT had been acquired by the Dutch Since 2014, our current CEO Xavier Urbain strategic partnership with CMA CGM opens up CEVA’s first truck postal and telecommunications company KPN, has, with a new management team, executed a significant opportunities to accomplish this arrived in Poland and two years later it was split into three divisions comprehensive transformation of the business journey more rapidly, and deliver its business and after 11 days in November 2018. – Logistics, Express and Post. In the autumn of and launched an IPO in May 2018. financial targets. 8 Annual Report 2018 CEVA Logistics Introduction Chairman’s Letter Dear Shareholder, this, a new governance structure has been put vis à vis clients and suppliers as a very different Let me first thank you for investing in in place, complying with Swiss listed-company company to do business with. As a consequence, standards and establishing a new Board of many new opportunities have emerged and CEVA. With this Annual Report covering Directors, which I am proud to chair. Our hopefully will materialize in the months to come. our first fiscal year after the Company’s Board of Directors includes eight non-executive Initial Public Offering (IPO), we want members, two of whom have been nominated Adapting the organization to a changing world to report our business, initiatives, and by CMA CGM. and evolving priorities has also been central to the Board’s agenda. A number of changes have results for 2018. In many respects, 2018 has been a challenging been made in the leadership team including the year albeit laying the foundations of a new and appointment (as of 1 January, 2019) of a Deputy The IPO was successfully completed stronger CEVA. CEO and Chief Operating Officer. This is a new on the SIX Swiss Exchange with our position and Nicolas Sartini will be expected to first day of trading on 4 May, 2018. The global macroeconomic and geopolitical accelerate our transformation, and make our As per our reporting date, CEVA now environment has been unhelpful with continuous leaner matrix organization deliver tangible out- has a diversified shareholder base news of trade war threats, tariff increases on large comes quickly.