Conclusion
2008 was a very difficult year for the CEVA Logistics Plc. The main reason for that is global economic crisis which brought significant problems to many companies providing logistics services because they depend on the world oil prices as petrol is required to run all of transport.14 Much of is required for the airplane transportation which plays a significant role for any logistics company. The question is how much all these companies were prepared for the hard times and how they managed to deal with the turnout decreases and financial problems. It seems that CEVA tried to write off most of its financial problems on the global recession, increased operation costs and fluctuating currency ratios. That is correct identification of the financial problems during the economic recession.
Sector of logistics transportation of cargos is huge. There are numbers of different logistics companies operating throughout the world. As a consequence, the competition among those firms is also huge. Therefore, the comparison of CEVA with the other firms is very important in order to have more realistic view on the company’s financial review.
Figures provided in the consolidated balance sheet and the income statement clearly identifies severe financial problems. The most important key ratios, such as ROCE were negative. This is absolutely unacceptable. Therefore it is highly undesirable to invest right now. CEVA has a large amount of debts which are due until 2012. There is absolutely no guarantee that the company will manage to pay them back. In addition, all the figures show that there is a quite large chance that the company might not manage to repay the loans back. This ratio is the most important as it show’s actual “health” of the group.
Identifying the actual weak side It was clearly seen that there are much more of negative than positive. First, the revenue generated has actually increased after 2007. However, the reason of that increase is the purchase of TNT Logistics. CEVA’s goodwill is declining showing that the investors do not trust the company and are not willing to invest money in it. The “public opinion” of the other to investors is very important.
The figures of the total lost for 2008 and half of 2009 are quite close (125 million EURO) and (109 Million EURO) respectively, which shows that the financial situation gets worse. Moreover, according to the updated figures, the total group equity was negative by the end of 2008 (136) millions EURO and in the middle of 2009 the negative figure increased even more to (196) millions EURO. All these key figures identify considerable problems in the company’s financial performance.
ROCE is the most important aspects in this case. The reason is quite reasonable. Ratio found in calculations was negative showing that there is no capital return. These key measures clearly that it is better not to do any business with that company for at least the nearest two year for sure. Moreover, the company has large debts with exceeding accounts receivable days. Also Altman Z- Score provided that company has possibility to get bankrupted within two years.
To sum up, the CEVA group has serious financial problems at this moment. More is yet to come next year with even worse financial results. However, it is interesting for the investor. CEVA will require significant cash increases to support its current position. My advice is to wait for a year or two and watching the company. If it will manage to cope with the financial problems during the economic recession and finish year 2010 with some improvements then it would be a high time to invest in order to gain the maximum profit.