CEVA Logistics sets out strategic goals
published: cw 51, 2006 in Mergers & acquisitionsWhat used to be TNT Logistics has from the 12 December been re-named as CEVA Logistics. An independent company with a turnover of ?3.5bn, it claims to be the largest “pure play contract logistics company in the world”.
Understandably the management of CEVA Logistics is keen to get across the message that TNT Logistics no longer exists and there is a new company in its place. However CEVA will retain TNT Logistics’ strategic focus on automotive/tyres, FMCG, consumer durables, hi-tech, and publishing. Its objective continues to be the leader in each of these sectors with a willingness to withdraw from businesses that it is weak in. It wants to build on what it believes is its strength in doing and retaining business with the biggest global companies, gaining volume from their need to have highly capable logistics partners for their global business.
CEVA has been heavily re-financed with ?1.2bn of debt that has helped its prime shareholder Apollo Private Equity pay for its purchase. Despite mutterings in the City over the lack of eagerness of investors, CEVA has sold over ?700m in bonds to creditors in an issue the company describes as being more than 100% oversubscribed. Standard & Poors rates its bonds as B+.
Talking to journalists after the launch of the new name and logo Dave Kulik, the CEO of CEVA outlined a strategy emphasising growth, but growth driven through the continuation of the existing strategic approach. He expects the company to expand by 8-10% a year whilst retaining the EBITA of around 6.5%. This growth will be largely organic. Both Dave Kulik and his head of business development Pierre Girardin believes this is quite possible even in the most even in slow moving sectors; a belief that is fundamental to a business so heavily exposed to the automotive sector. With more than 40% of its business in this sector CEVA must gain market share to fulfil its ambitions.
Certainly some of its automotive business has excellent prospects, such an the Anji-TNT business in China (which will retain the TNT name). But CEVA remains heavily dependent on zero growth areas such as European and US automotive with its largest automotive customer being FIAT.
To understand CEVA’s future better it might be informative to look at the detail. CEVA’s CFO, Ed Kraaijenzank, thinks that the key to the progress of the company is “tight control of costs” rather than any big “shiny” strategic moves. Asked about future acquisitions, Dave Kulik often cites his execution of the purchase of Wilson for TNT Group, implying that he would like to repeat such an exercise. But these ambitions appear curbed by that ?1.2bn of debt and the income stream Apollo needs to justify its acquisition.
Crucially Dave Kulik states that the time horizon of Apollo as an investor is 5 to 7 years; “make no mistake, Apollo is there to buy, improve and then sell its companies”.
Source: Transport Intelligence
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