UNITY GROWTH EXCELLENCE - CEVA Logistics

cevalogistics

UNITY GROWTH EXCELLENCE - CEVA Logistics

CEVA GROUP PLC

ANNUAL REPORT 2008

UNITY

GROWTH

EXCELLENCE


Forward Looking Statements Cautionary statement: the operating and financial review and certain other sections of this document

contain forward looking statements which are subject to a number of risk factors and uncertainties associated with, amongst others,

the economic and business circumstances occurring at present in the countries and markets in which the Group 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 any expected future events or results referred to in these forward looking statements.


TABLE OF CONTENTs

Review

CEVA at a Glance 4

2008 CEO Review 6

Our Vision & Strategy 8

Our Sectors of Focus 10

Our Operating Regions 12

Our Solutions & Services 14

Operations excellence 16

Sustainability 17

Executive Board 18

CFO statement 20

Operating and financial review 22

Summary of facilities and notes 25

Summary of corporate and financing structure 26

Risk factors 27

Management of financial, operating and legal risks 30

Financial statements

Directors’ report 33

Consolidated income statement 37

Consolidated balance sheet 38

Consolidated cash flow statement 39

Consolidated statement of changes in equity 40

Notes to the consolidated financial statements 41

Company balance sheet 83

Notes to the Company financial statements 84

Independent auditors’ report to the members of CEVA Group Plc 86

Logistics business, prior to the acquisition by CEVA 88

Description of key line items in the income statement 89

Certain definitions 90


CEVA AT A GLANCE

At CEVA we are focused on delivering operational

excellence to our customers, each and every day.

Uniting and working together, we focus on growing

our business by offering outstanding supply chain

services and developing our business to support

theirs. At every link of the supply chain, we help

make business flow.

In our first full year as an integrated business, we believe we

have performed solidly in difficult trading times, have a new

culture and business structure established and are well positioned

for continued progress. It is our belief that we have the momentum

and capability to succeed in the short and longer term.

Key Financial Results

€ millions 2008 2007 (proforma)

Revenue 6,329 6,298

EBITDA before specific items 320 5.1% 378 6.0%

Net Capital Expenditure 99 1.6% 77 1.2%

Operating Net Working Capital 126 220

Highlights

€6.3

Billion Revenue

AROUNd

50,000

Employees

MORE THAN

1,200

Locations in over 100 countries

CEVA Group Plc | Annual Report | 2008

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Our Global Footprint

Offices

Agencies

Our Sectors

13%

Automotive

Technology

Consumer & Retail

Industrial

Energy

Other

Revenue (€ millions)

2,864

Americas

6,329

Northern Europe

6,329

3,465

CEVA at a Glance

Southern Europe, Middle East & Africa

Asia Pacific

Employees

13,543

Contract Logistics Freight Management

49,630

49,630

36,087

CEVA Group Plc | Annual Report | 2008

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2008 CEO REVIEW

2008 started out as an exhilarating year for our

company. Then in the midst of a world economy

in turmoil we succeeded in outperforming market

growth during the second and third quarters of the

year whilst delivering a series of important structural

and systems changes to improve CEVA’s overall

performance. Our last two months of the year,

however, were affected by the ongoing economic

downturn, which had a disappointing impact on

revenues and profitability.

This downturn at the end of the year was caused by the softening

of volumes in our global airfreight business, where the global

market shrank by 12% in Q4, and in our automotive logistics

business; where production fell 23% in the final quarter,

compared to the same period in 2007. Prior to these volume

drops, we had seen promising growth, ahead of market averages

and I am pleased to note that all sectors and regions reported

a strong pipeline of new business wins and renewals. Although

automotive is our biggest sector, we are not reliant on this area

and have a diversified portfolio of customers and broad regional

coverage to help reduce the impact from the worst hit economies.

During our first full year of operating as an integrated company,

we have put in place strong foundations to drive long term

growth. We have a clearly defined strategy for the business, which

included launching an ambitious vision for CEVA. Our aim is that

by the end of 2010 we will become the most admired company

in the supply chain industry. Our route to achieving this goal is

driven by our three brand imperatives of unity, growth and

excellence.

Unity

From a Unity perspective, I am pleased to announce that the

integration of the business into one operating unit under the

CEVA brand is now complete, including the vast majority of the

rebranding efforts. Our shared vision and clear strategy is driven

forward by the integrated regional business structure. By the

middle of the year, we concluded that the integrated business

model we had piloted in Asia Pacific had proven its value for

our customers and this model has now been introduced across

the other three regions; Northern Europe, Southern Europe,

Middle East & Africa and the Americas.

We are aware that we will only achieve our goal of becoming

the most admired company in our industry if we succeed in

hiring and retaining the best people. In 2008, we have continued

to strengthen our senior management team and our focus on

leadership development has also started to take shape with

the launch in the last quarter of the CEVA Executive Leadership

Program. This Program is targeted at our top tier of management

and is designed to further accelerate the development of key

leaders within the Company. Additionally, we introduced

consistent global performance and appraisal systems to ensure

uniformity in measuring and rewarding the performance of our

staff, wherever they are around the world and programs to

continue building our people capabilities including focus on

Diversity and Inclusion.

We also succeeded in integrating several supporting IT systems,

including our financial reporting system and our customer

relationship management system. This has enabled us to extend

control and visibility over critical business information, an

essential commodity in our industry.

2008 also saw the launch of our Century Partnership Account

program. We have developed a key account management

program for our top 100 global customers. These customers

represent 52% of our business and this program focuses on

providing these key customers with integrated account

management across the world. The core component of this

program is one single account team responsible for managing all

customer contacts and for developing the capabilities required to

meet those customers’ supply chain needs.

Growth

Our second imperative has been to drive Growth across the

business in a measured and sustainable way. With the exception

of the first quarter of 2008, we saw our revenue perform better

than the market average; this has been driven, in part, by a

healthy business pipeline, which has generated new wins and

renewals across all business and geographical areas. Typically, in

the contract logistics area, our average contract length is between

three to five years and we have solid, long term relationships with

our customers. In addition, our hit rate on new business wins,

CEVA Group Plc | Annual Report | 2008

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in relation to the number of opportunities tendered averages

at 47% across the business.

Our focus on customers has been supported by a group of

‘breakthrough projects’ which, in combination, will greatly

enhance our capabilities and leadership. These projects span

the entire business and we believe that they will deliver a major

contribution to the Company’s results. The effort required to

deliver these projects is beyond ‘business as usual’, and these

projects, of which there are 17, are reviewed and evaluated at

each Executive Board meeting using our monthly tracking system

to monitor progress. Combined with our ongoing focus on key

areas such as reducing working capital and continuously assessing

opportunities for cost reduction, we believe we will be in a good

position to weather the current environment and continually

improve our business operating model.

Excellence

In the past 12 months, we also intensified our efforts to deliver

Excellence to our customers via our Operations Excellence

program. For instance, we developed new Smart Solutions

– standard modules for several industry sectors – with the added

advantage of making use of best practices and being tailored

to specific customer requirements. We also leveraged our

Zero Defect Start-up process, a framework for achieving

flawless implementations, whilst at the same time installing

our Global Standard Metrics to enable us to benchmark all our

sites worldwide on Key Performance Indicators like service,

productivity and safety.

The heart of our Operations Excellence framework is, however,

the renowned CEVA LEAN program, which delivers continuous

efficiency improvements to all our customers. We have now

introduced a ‘basic LEAN’ program so that the LEAN methodology

and culture can spread even more rapidly throughout the entire

organization. Our customers will benefit from efficiency

improvements, in three key areas: processes, inventory and cost.

2008 CEO Review

“ It has been my pleasure to lead

CEVA through its first full year as

an integrated business and to see

the powerful passion of our people

help deliver value for our customers.”

In recent times our industry has acknowledged its responsibility

for the environment. It is undisputed that our sector accounts for

approximately 5% of global carbon emissions. As one of the

leading supply chain companies, we have taken the first steps to

reducing the environmental impact of our activities.

2009 is going to be an unpredictable and challenging year, given

the current economic circumstances. To address these challenges,

we have already introduced reduction measures which wil not

restrict our ability to grow as we remain convinced that, even in

these challenging times, there will be many opportunities for us

to develop our business.

All in all, as our first full year as an integrated business, we believe

we have performed solidly in difficult trading times, have a new

culture and business structure established and are well positioned

for continued progress. It is our belief we have the momentum

and capability to succeed in the short and longer term.

John Pattullo

Chief Executive Officer

CEVA Group Plc | Annual Report | 2008

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OUR VIsION & sTRATEGY

At CEVA, we are passionate about contributing

to the success of our customers by providing

outstanding supply chain services. Day by day,

365 days a year, we aspire to be brilliant supply

chain experts, mastering all elements of

business logistics.

We design, implement and operate complex,

end-to-end Contract Logistics (CL) and Freight

Management (FM) solutions for large and medium

sized national and multi-national companies.

CEVA Group Plc | Annual Report | 2008

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CEVA’s Vision

By 2010, we will be the most admired company

in the supply chain industry.

2009 Game Plan

Our Vision & Strategy

To support our strategic imperatives of Unity, Growth and Excellence, we have identified five critical plays which will provide us

with competitive advantage in the market, these are:

Critical plays

• Cash – focus on reducing working capital and identifying

and implementing new balance sheet optimization

initiatives to build liquidity

• Project Uno – high level re-engineering and process blueprinting

of core FM processes

• Big Deals – drive higher hit rate on big opportunities with

key customers

• Discontinuous cost reduction – find, chart and support

implementation of new cost reduction projects

• 17 strategic breakthrough projects – these projects cover

the entire business and range from projects focusing on

people to customer processes and sustainability.

Foundations for Success




UNITY GROWTH EXCELLENCE

Common set of values – customer

first

Integrated, cohesive leadership

teams for each customer

Standard global customer facing

systems.

• We are a richly diverse organization

which operates seamlessly as one

team

• We cooperate to deliver world class

solutions for our customers

• We employ the best supply chain

professionals and develop this talent.




Customer Promise

We grow our capabilities to meet

customers needs

We grow geographically where

customers need us

We broaden the range of customer

‘touches’.

Employee Promise

• We develop every employee to their

maximum potential

• We foster an open and inspiring

environment in which all employees

can contribute

• Our growth is supported by our flat,

agile organization.

Daily management

Above and beyond these projects, the daily management

of our business is vital for success and we continue to focus

on the following areas:

• Continue momentum in targeting the emerging markets

of Brazil, Turkey, Middle East and South-East Asia

• Leverage strong presence in more mature markets of

USA, UK, Benelux, Italy, Germany and Australia


Global industry verticals teams drive focus and growth

in five target sectors:

– Automotive

– Technology

– Consumer & Retail

– Industrial

– Energy

• Continue momentum in cross selling FM and

CL capabilities. In 2008, cross-selling generated over

€200 million of new business and we currently have a strong

pipeline of new opportunities.




Operations excellence is evident

Good ideas travel quickly and get

re-applied

Smart Solutions capture best

practice.

• Everyday we strive to be better

• We encourage a performance driven

culture

• We are passionate about perfection.

CEVA Group Plc | Annual Report | 2008

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OUR sECTORs OF FOCUs

At CEVA, the value of our supply chain expertise

is enhanced by an industry-focused approach

that delivers unparalleled business and market

expertise. For our customers, it means they receive

appropriate support, products and solutions that

really meet the needs of their operating environment.

Customers benefit from enhanced supply chain skills

through latest sector knowledge, resource sharing

and the efficient transfer of best practice.

Global Knowledge Centers

In addition to our five dedicated sectors, CEVA also has three

areas where we employ specialists to develop and deploy

solutions to key industries. These three areas of focus are:

• Aerospace

• Healthcare

• Publishing.

CEVA recognizes the importance of these market areas and is

focused on developing global knowledge centers to support

customers and their logistical challenges. Over the past two years

these industries have developed and become more dynamic with

increasingly challenging needs. We are committed to developing

and delivering solutions that meet these demands at a local,

regional and global level.

From the 2008 AMR rankings,

CEVA currently works with all

but two companies in the top 25

and 56% are current participants

in the Century Program.

Century Partnership Accounts

In 2008, we also introduced our Century Partnership Account

Program. This program is our key account program for 100 CEVA

customers that have been selected by the Executive Board. These

accounts are global in scope and have major opportunities across

geographies and product lines and represent more than half of

our total business. The Century program is an integrated CL and

FM approach that will unify our sales teams and help CEVA achieve

our important growth goals. Strategic solution design, dedicated

account teams, and executive sponsorship are all key elements

to the Century program that empowers these leading companies

to meet their supply chain ambitions.

The AMR Research Supply Chain Top 25 identifies companies

that demonstrate leadership in applying demand-driven principles

to their global supply chains. Their goal is to show how supply

chain excellence contributes to economic value creation, and,

in so doing, to raise awareness of the importance and influence

of the profession.

From the 2008 AMR 1 rankings, CEVA currently works with all but

2 companies in the top 25 and 56% are current participants

in the Century Program.

1.

AMR Research provides research services for supply chain and IT services.

CEVA Group Plc | Annual Report | 2008

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Automotive

32%

Technology

23%

Consumer & Retail

15%

Industrial

13%

Energy

3%

The global automotive industry is one of the world’s

largest manufacturing bases. It is a challenging and

dynamic business environment, particularly in the

current economic climate, founded on mature,

traditional markets and the enormous potential from

emerging markets and lower cost supply sources.

In this environment, the supply chain is seen as

a source of competitive advantage.

CEVA is recognized as the market leader in automotive

logistics, servicing the needs of all major automotive

Original Equipment Manufacturers and suppliers and

The technology sector delivers innovative solutions,

supporting global outsourcing and supply chain

management, including reverse logistics. The market

environment is demanding, caused, in part, by the speed

at which new products are brought to market. Typically, our

technology customers require lower costs and continuous

improvement in order to maintain their leadership position

in the marketplace. We help them by using our global

knowledge and skill in the supply chain to deploy new ideas

and look for alternative solutions to meet these complex

challenges.

CEVA has developed a focused strategy to further grow this

sector. The strategy is already being implemented and we

In both the consumer and retail environments,

there is increasing pressure for greater flexibility

and responsiveness across the supply chain to meet

the needs of a customer base which is growing

increasingly vocal in its demands. In general, the

consumer market tends to be global, with retail looking

more at national models; however with the trend

towards global procurement continuing, more and

more retailers are requiring a global element within

their supply chain as well.

In the industrial sector, there is a need for customers

to transform from a regional to a global operational

model in order to broaden scale and improve cost

efficiencies. Typically, the industrial supply chain is

lengthening as customers start to outsource production

and assembly to low cost markets. Yet, this is juxtaposed

by end customers who require a faster response,

customized products and spare parts available on demand,

presenting our customers with significant service and

Due to the dynamic nature of the oil and gas industry,

our customers need to be able to mobilize resources

quickly and effectively anywhere and at anytime,

within an environment of stringent health and

safety regulations and continual cost pressure.

At CEVA, we have an in-depth understanding of the

required upstream and downstream activities and

have the right resources to supply parts and equipment

to wherever they are needed throughout the world.

Our Sectors of Focus

offering unparalleled integrated end-to-end solutions

to the automotive Industry.

We offer the following services to our customers:

• Material planning & Lead Logistics Partner solutions

• Inbound transportation solutions (road, air & ocean)

• Manufacturing support solutions

• Finished vehicles solutions

• Aftermarket warehousing and transportation

solutions.

are continually enhancing it. There are several important

components to our approach including; investing in talent

and technology to help meet our growth ambition.

We offer the following services to our customers:

• Network lead logistics

• Inventory management

• Manufacturing support

• After sales logistics

• Warehousing and distribution

• Reverse and repair

• Forwarding and transportation.

Customers in both these areas are looking to CEVA

to provide:

• Control and support with overseas sourcing

• Greater visibility and control along the entire length

of the supply chain

• The ability to reach end consumers efficiently and

effectively

• Upstream supply control

• Support optimizing in-store processes.

complexity challenges for the supply of capital goods and

associated products.

At CEVA, we have combined our process driven approach

with our industry-specific expertise. We work with Original

Equipment Manufacturers and other suppliers, to develop

logistics solutions that will improve supply chain visibility

and enable more proactive responses to customers.

Our global specialist team supports customers with

a comprehensive range of solutions from chartered or

scheduled air and ocean transportation, to overland

logistics and final delivery solutions. These solutions

utilize standard processes based on global best practice

to ensure high quality operations and service levels.

These logistics solutions are supported by CEVA’s

advanced IT systems which provide the tracking

capability to ensure operations will not be disrupted.

CEVA Group Plc | Annual Report | 2008

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OUR OPERATING REGIONs

In 2008, we strengthened our regional approach by

introducing the integrated business model we piloted

in Asia Pacific in all other regions to provide a better

service to customers and enhance our ability to offer

them an integrated approach to the supply chain.

Americas

There were many accomplishments in 2008 in the Americas

region as we focused on delivering our company vision to

successfully integrate our region and promote our unique

solutions that ensure value to our customers.

Across the region, CEVA was recognized by some of our largest

customers for superior performance. This included Dell selecting

CEVA as their Supplier of the Year. We were honored by Toyota

for the second year in a row with two Kaizen awards for process

improvement and cost savings. Fujitsu also recognized our efforts,

naming us Transportation Partner of the Year and we received the

Monster Cable’s Supplier Achievement Award.

In 2008, we enhanced an already powerful integrated and

competitive end-to-end supply chain solution for many of our

customers with the launch of CEVA Ground. With the combined

activities of CEVA and CEVA Ground, customers enjoy the

advantages of a closed network which creates a more secure

chain of custody and greater reliability. Additionally, we

initiated a new Guaranteed Delivery service in North America.

This customized, time critical service is supported by a centralized

control tower offering 24 hour support to customers. Our new

guaranteed and time-definite service options offer customers

an unprecedented suite of domestic expedited services that

gives them greater control, reduced risk, improved velocity

and ultimately reduced delivery cost for critical shipments.

We also enjoyed great success with our cross selling efforts. Last

year’s wins included our first cross sell success with a major home

improvement retailer that was an existing customer in our

CL division. We were able to expand our service reach through

direct sub-contract to the Freight Management division’s

owner-operator network. Additional cross-sell wins included

Fortune 500 companies from the healthcare, aerospace and

technology sectors. CEVA was also awarded a significant full

container ocean award for sundry products from a major grocery

chain; CEVA’s winning proposal was differentiated with our ILS

solution which synchronizes the customer’s supply chain activity

from purchase order to final delivery enabling dynamic decision

making capabilities across an international network. Other key

wins in the Americas included global forwarding awards from

Petrobras, a contract logistics award from GM in Brazil and a

significant expansion of our pool distribution business with

Ross Stores in the United States.

Northern Europe

In 2008, our people were challenged to deliver change and

execution across the Northern European region. The result has

been an integrated and dynamic region, leveraging common

resources and know-how, to create smart end-to-end supply chain

solutions which deliver growth and customer satisfaction. Across

all our sub-regions and sectors we have seen a steady flow of new

wins and renewals as testament to the success of this new

business model.

Our main achievement for the year was to establish the Northern

European Management team covering the four key sub-regions;

UK and Ireland; France, Benelux & Nordics; Central Europe and

Eastern Europe, with new leaders for three of the four regions.

By the the final quarter of the year, all of these regions had fully

integrated freight management and contract logistics under one

leadership team. The result has been that across the Region

we saw combined revenue growth of 9% after three years of

zero growth.

Across all our sub-regions, the benefits of the restructure have

been realized with a stronger focus on new business. We have

seen greater opportunity to cross-sell our capabilities which have

been well received in the market as more and more customers are

actively requiring these types of integrated end-to-end solutions.

We have also seen pleasing growth in the Consumer and Retail

market and leveraged our strength in Automotive to drive new

business and secure renewals with key customers. In addition,

our focus on our Century Accounts has paid real dividends in

Eastern Europe where we have received substantial new business

awards from these customers. CEVA’s global strategy to focus

more on Big Deals has helped our impressive growth in France,

Benelux & Nordics where we have seen the award of three such

deals in recent months with a strong and healthy pipeline to take

us into 2009.

Across the region, our operations have continued to focus on our

LEAN approach and, where appropriate, we have seen an ongoing

increase in the number of SMART solutions deployed for our

customers. In the middle of the year, we also launched CEVA

CEVA Group Plc | Annual Report | 2008

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Revenue €1,908 m

Employees 19,637

Revenue €1,626 m

Employees 12,742

Revenue €1,355 m

Employees 7,191

Ground Europe to support our road transport product offering for

customers, transferring the successful business model already

established in the US.

In conclusion, 2008 has enabled us to refocus our business into

an integrated model, which has already derived benefits. Despite

the ongoing challenges of the global economy, we are hopeful

that we will see this business model continue to strengthen our

relations with existing and new customers in 2009.

Southern Europe, Middle East & Africa (SEMEA)

Overall, 2008 was a pleasing year for the SEMEA region.

Customer retention held steady at 95% and all areas of the

region were successful in obtaining business with new customers

across all our sectors of focus. This was against a backdrop of a

challenging economic environment in several areas of the region.

Our ability to offset these challenges was achieved, in part, by our

ability to cross sell our integrated portfolio to new, and to expand

our service offering with existing, customers. In many instances,

our customers recognized our work with supplier awards, a great

testament to the commitment and dedication of our team in

the region. We also signed two important pan-European deals

with global leaders of the two-wheels and safety shoes sectors.

CEVA’s flexibility, innovation and pan-European logistics and

transportation management were the key success factors in

achieving these wins.

Across the region, we added new products to enhance our portfolio

in several different sectors including a technical solution in Italy;

dedicated to managing global sourcing and a new home delivery

solution. We also invested in areas of our infrastructure including

a new warehouse designed to adopt eco-sustainable solutions,

the completion of our Iberian domestic transportation network

– which now has 44 branches – the extension of our Balkans

domestic transportation business, and in the Middle East a CEVA

presence was established in most countries, either with offices or

agents, including; Saudi Arabia, Oman, Qatar, Iraq and Jordan.

Three small, but important, acquisitions were completed. In Italy,

we acquired Spedimacc, a key player in the technical courier

sector providing specialist installation skills before and / or after

transportation and Transitalia, a key transportation player in

magazine distribution where we now have a 25% share which will

Revenue €1,440 m

Employees 10,060

Our Operating Regions

Americas

Nothern Europe

Southern Europe,

Middle East & Africa

Asia Pacific

enable our business to provide a full and complete service offering

within this sector and will be a key driver for growth. In Turkey

we acquired Varan, whose widespread distribution network will

enable us to provide B2B and B2C delivery services.

Without doubt, 2009 will bring with it challenges due to the

tough economic business climate in some parts of the region, yet

we are confident that we are well positioned with a broad breadth

of services and customers to be able to continue to provide

superior service.

Asia Pacific

In Asia Pacific, our business has weathered the global turbulence

of 2008 with perseverance and solid trading; results achieved

include growth in revenues and earnings versus the previous year.

In 2008, Asia Pacific led the way for CEVA globally; driving full

integration across all countries and within the regional

Headquarters. This delivered great results for employee unity and

customer satisfaction and by delivering integrated solutions in a

combined way it helped our business achieve excellent results.

Worthy achievements for the region, included: comprehensive

growth with Eaton for broad based 4PL, 3PL and freight

management wins throughout the region. In addition, in

November 2008, CEVA China was proud to be recognized as

the best 3PL in China for supply chain services provided to Eaton.

The award was received from the China Supply Chain Council, after

a rigorous selection process from a panel of 20 industry experts.

A significant cross selling win with automotive tier one supplier,

Futuris Corp in Australia, has helped to convert a previous contract

logistics relationship into a comprehensive integrated supply chain

relationship including significant freight management growth.

We were awarded a major win with Dell Computers of more than

8,000 tons of freight per year out of Asia and have enhanced our

successful joint venture with Shanghai Automotive with powerful

new initiatives focused on ‘Lean To Grow.’ This has focused on

the massive growth of our inbound and outbound parts business

as well as our finished vehicle logistics business to further entrench

our market leading position in China, where our joint venture

with Anji manages the supply chain encompassing more than

one million vehicles annually.

CEVA Group Plc | Annual Report | 2008

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OUR sOLUTIONs & sERVICEs

At CEVA, we leverage our sector-focused expertise,

global and local resources and advanced technologies

to deliver a complete spectrum of supply chain

services. Within the business we employ some of

the leading experts in sector know-how and logistics

expertise who support our customers in delivering

the best solution to meet their needs.

sUPPLY CHAIN sERVICEs

Manufacturing Support Inbound Transportation Warehousing &

Distribution Centers

Our solutions include receipt and management

of raw materials and products at source. These

products are then checked, re-packaged or

other value-added services implemented before

onward transportation. CEVA manages the flow

of materials between hundreds of suppliers and

many plants supported by our advanced and

robust IT systems that link several locations

in an open environment. We have extensive

experience in material management both

on a regional and global basis and are able

to optimize transport to reduce the direct and

indirect costs and eliminate unnecessary stocks

to support this.

Use of Technology

CEVA provides a wide range of multi-modal

capabilities, time-definite services and complete

customs brokerage with web-enabled tracking

solutions. Our solutions combine detailed

knowledge of worldwide and local regulations

to ensure the smooth flow of cross border

shipments, coupled with the flexibility to select

the appropriate mode of transport dependent

on requirement. On a local and regional level,

we provide integrated transport services that

can be a dedicated or shared solution, and

part of an agreed customer solution including

other services such as route optimization and

specialist containerization services.

Our end-to-end supply chain services are underpinned

by leading and bespoke technology to

improve the visibility and control of products and

information as they travel to their final destination.

These services include warehouse and transport

management services which improve inventory

flows and enhance transport efficiencies. At the

heart of these technological solutions is MATRIX,

As one of the world’s largest warehouse

providers, CEVA offers dedicated and shared

warehousing options for the storing of our

customer’s goods, dependent on need. For

some customers, we operate a network of

distribution centers which creates an effective

route to market and may include a range

of value-added services to improve costs,

cycle times and inventory management.

For many customers we combine transport

and distribution and where these two

elements connect, we can provide additional

services such as distribution cross docking

and after market services.

our custom developed proprietary technology

which enables us to monitor the flow of goods,

provide transport optimization, warehouse

management and stock control for our customers.

In 2008, we launched our One View solution

which provides greater tracking visibility for our

FM customers.

CEVA Group Plc | Annual Report | 2008

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OUR sERVICEs CAN BE BROAdLY CATEGORIzEd

IN TWO MAIN AREAs

Contract Logistics – which includes warehousing and ground

based distribution, offered separately or in combination. Many

of our contract logistics customers also benefit from our SMART

methodology which transfers best practice and standardized

solutions for some of our key products. These services can be

charged in one of two ways – either ‘open book’ where costs are

passed on to the customer and CEVA receives a management fee.

Or ‘closed book’ with a price agreed up front. There are obviously

hybrid solutions and additional value share arrangements in place

across the business.

Our Solutions & Services

Outbound Transportation Aftermarket Services Final Mile Solutions

To support the final journey of products,

we operate dedicated and / or shared

transportation services that includes

the CEVA Ground range of finished goods

distribution services, which manages

transport networks on behalf of many

customers. Our outbound solution can be

utilized as part of a total package or on a

stand-alone basis and includes tools to assess

a customer’s entire transport requirements

to ensure cost and time efficiencies up to

the point of delivery.

Integrated Supply

Chain Management

Aftermarket logistics has received increasing

recognition as a differentiator between

manufacturers and is therefore a core activity

for CEVA. We operate spare parts warehousing

and distribution activities in all regions and a

wide range of aftermarket logistics including:

returns, repairs, reverse logistics and call

center services.

Freight Management – includes co-ordinating the movement

of products and materials by air, ground or ocean by the most

efficient mode of transport whilst meeting the customer’s

expectations in terms of cost, speed, reliability and protection of

goods. In many cases, we integrate contract logistics and freight

management services to provide our customers with a global

one-stop supply chain service. In the market we see a growing

trend for combining these services and CEVA is uniquely placed

to provide this.

CEVA can provide just one service or many

depending on customer needs. Increasingly we

co-ordinate several specific activities, managing

the complete supply chain and executing the

most critical activities or designing and

orchestrating the supply chain while third parties

perform the services under our management.

For finished goods, we also offer final mile

and home delivery. In the Americas this is

provided by the CEVA Home solution and we

have a strong network of one and two-man

home delivery crews in Europe who also

provide home delivery after sales set up,

installation and reverse logistics for faulty

or damaged items for many of our customers

dealing directly with the end-user.

For our customers utilizing CEVA in the role of

total supply chain management provider brings

with it the following benefits:

• A single point of contact for all supply chain

activities

• Optimization of service and costs across the

entire supply chain rather than only at local level

• Early detection of deviations to avoid escalation.

CEVA Group Plc | Annual Report | 2008

15


OPERATIONs EXCELLENCE

Our aim has always been to deliver solutions that

fully meet the customer’s expectations and then

to drive for continuous improvements day after day.

It is our belief that perfection is the only objective

we can pursue to fully live our passion for logistics.

This drive has manifested itself in a number of key

strengths that capture our expertise and know-how,

and define CEVA’s culture. Applied in a systematic

approach, they cover all stages in the implementation

and execution of our services and drive us toward

Operations Excellence.

SMART

CEVA’s Smart Solutions are a set of modules developed on the

basis of our wealth of experience around the world and our

understanding of specific industries. We have identified common

areas where our customer needs to standardize the core processes

of supply chain solutions. From this basis we can customize the

standard solutions to fit specific needs while benefiting from best

practice experience.

Customers benefit in various ways from these solutions:

• Faster identification of the right solutions for their business

– including the right people, equipment and systems that will

deliver the best results

• More time to evaluate the really unique aspects of the supply

chain

• Zero Defect Start-Ups – we can implement supply chain

solutions quicker and with less risk of error

• Higher levels of operational performance and efficiency

• Further performance benefits are achieved by applying our

sector expertise with similar customers.

Zero Defect Start Ups

Our Zero Defect Start Ups project management process aims

to deliver complete compliance at the start of a new project.

It is designed to meet customer-defined quality and service

expectations and has proven to deliver to that standard.

LEAN

Across our operations we deploy our LEAN methodology to realize

efficiency and quality through waste reduction based on the

sustainable, continuous improvement of operations. The LEAN

program was adapted from Toyota’s Production System and

focuses on eliminating waste at all levels from redundant motion

in warehouses, waiting times of vehicles at the cross dock to the

under-utilized potential of employees. Using our LEAN approach

we create a stable environment for our customers through

standardized work and continuous improvement, providing the

right conditions for materials flows to be enhanced and process

quality to be improved.

Global Standard Metrics

To measure the performance of all our operations around the

world objectively and consistently, we have introduced Global

Standard Metrics. These standardized performance

measurements not only enable us to evaluate and compare our

operations and derive best practice from the results, but they are

able to provide concise, comprehensive and unambiguous reports

to our customers.

OneLogic

2008 saw a significant year of tangible progress for CEVA’s Global

Procurement activity as its strategic program ‘One Logic’ rapidly

accelerated cost efficiency and eSourcing adoption. CEVA has

secured accreditation with the Chartered Institute of Purchasing

& Supply in its pursuit of functional excellence.

CEVA Group Plc | Annual Report | 2008

16


sUsTAINABILITY

Over recent decades the growing concern about

damage to the environment and other types of

pollution has driven our customers to take measures

to reduce and manage their own impact.

According to the research report ‘Supply Chain Decarbonization’,

that was produced by the World Economic Forum in January 2009,

5.5% of the total 50,000 mega tonnes of greenhouse gas emissions

are contributed by the logistics and transport market sector.

Recently attention has shifted to managing the environmental

impact of the full product life cycle, including supply chain

activities, which touches the heart of our business. At the same

pace, governments and other regulators are increasingly focused

on regulation to counterbalance the adverse impact of our

industry and to internalize the external costs of transport and

logistics activities.

CEVA’s sustainable business solutions

In light of these developments and types of statistics, CEVA

intends to continue to take a leadership role in the environmental

debate within the logistics industry. As one of the largest logistics

service providers in the world, we embraced a comprehensive

strategy to reduce the environmental impact of our business

during 2008.

The sustainability strategy that we launched in 2008 can be best

described as a practical business approach towards sustainability.

We believe that we can achieve the best results for the benefit

of society and the environment when we develop creative,

sustainable solutions that deliver strategic business opportunities

for our customers. In its execution we try to link all activities to

our daily operations.

Carbon footprint

Key projects that have been set up are the inclusion of a green

diagnostic module in our existing LEAN waves, leading to energy

and waste reduction measures that will be implemented at

specific sites with the aim to introduce green best practices in

all our locations. Another program aims to introduce sustainable

logistics solutions to our service portfolio. Last, but not least, we

have begun measuring our carbon emissions for specific customers

and for CEVA as a company, with the aim to get to achievable

reduction targets once we have the data available. We expect

that this process will lead to a first indicative disclosure of our

carbon footprint by the end of 2009.

CEVA Group Plc | Annual Report | 2008

17


EXECUTIVE BOARd

CEVA’s Executive Board structure reflects the multidimensional

nature of our business. Functions drive

professional excellence, sectors drive growth and

CEVA is managed operationally across four regions.

All functions and regions work together seamlessly

in order for CEVA to maximize potential. It is the role

of the Executive Board to maintain cohesion across

this structure.

CEVA Group Plc | Annual Report | 2008

18


6

2

3

9

4

10

John Pattullo 1 Chief Executive Officer

6

John spent most of his early career working in supply chain manage-

ment with Procter & Gamble. In 2005, John joined Exel, where he

was CEO of the €6 billion EMEA division (freight forwarding and

contract logistics). When Exel was acquired by Deutsche Post / DHL,

he then ran the €7 billion combined Exel and DHL contract

logistics business in EMEA. He became CEO in August 2007.

2

Stuart Young

Chief Financial Officer

Stuart joined CEVA from DHL / Exel where he had worked for

15 years. He served as CFO of Exel’s EMEA freight forwarding

and contract logistics business from 2002. Following the

acquisition by Deutsche Post he was appointed CFO of the

combined Exel and DHL contract logistics business in EMEA

and joined CEVA in early 2007.

3

Gianfranco Sgro

President – Southern Europe, Middle East and Africa

Gianfranco started his professional career in 1992 with TNT’s

Express and Mail divisions. In 1994 he joined the team that

established Fiat spare parts unit in Italy and Europe and

subsequently established TNT Automotive Logistics in Italy,

France, Spain and the UK. In 1995 he established TNT Logistics

Brazil and in 1999, was appointed President and Managing

Director of TNT Logistics South America. In 2003 he returned to

Italy and was appointed Managing Director of TNT Logistics Italy

and South America. He assumed his current role in August 2007.

4

Bruno Sidler

President – Northern Europe

Bruno joined EGL as President of Europe, Middle East and Africa

in February 2007. Prior to this, he had spent the majority of his

30 year career in the transportation industry with Panalpina

World Transport in a variety of management functions and

countries. In 1998 he was appointed CEO for the entire

Panalpina group, a €6 billion global freight forwarding business.

He was appointed to his current role at the end of 2007.

5

Vittorio Favati

President – Asia Pacific

With over 24 years of industry experience and 16 years with EGL

and now CEVA, Vittorio has held various national, regional and

international executive positions across the business. Upon the

completion of CEVA’s acquisition of EGL, in 2007 Vittorio was

tasked to lead the combined organization in Asia Pacific and

became the first region to fully integrate both businesses.

8

7

5

1

Executive Board

Joe Bento

President – Americas and Global Freight Management

Joe joined EGL in 1992 where he played a key role in the

company’s record growth. As the company’s top sales executive,

Joe quickly graduated to station, region and then corporate

management positions, including President and Chief Marketing

Officer. As President, Joe managed EGL’s top 50 global customers

accounting for US$1 billion in revenue. He was appointed to his

current role in August 2007.

7

Graeme Taylor

Group Director Human Resources

Graeme has held senior Human Resources roles across numerous

geographies and industries, including supply chain management,

financial services and consulting with companies such as such as

Lloyds Bank International, Price Waterhouse and Inchcape. Prior

to the formation of CEVA, Graeme was Global Human Resources

Director for TNT Logistics from 2000.

8

Dana O’Brien

Chief Legal Officer

After graduating from law school and spending one year clerking

at the Supreme Court of Texas, Dana started work as Corporate

Associate for Weil, Gotshal and Manges, LLP. In 1999, she joined

Quanta Services, Inc. and was appointed VP, General Counsel and

Corporate Secretary in 2001 and served in that capacity until

joining EGL in 2005 as as General Counsel, Chief Compliance

Officer and Corporate Secretary. She assumed her current role

following the merger in 2007.

9

Greg Weigel

EVP FM North America and Group Strategy Director

Greg has more than 26 years of experience within the transportation

and logistics industry. He joined EGL in 1997 and

progressed through to the position of Chief Operating Officer at

the time of the merger. He assumed his current role in late 2008.

10

Peter Dew

Chief Information Officer

Prior to joining CEVA in April 2008, Peter had spent his career

with the BOC Group; he became Chief Information Officer there

in 1998. When BOC was acquired by the Linde Group in 2006,

Peter became the CIO of the combined entity, before joining

CEVA in 2008.

CEVA Group Plc | Annual Report | 2008

19


CFO sTATEMENT

I am pleased to include this statement in our

2008 Annual Report, the first full year in which the

consolidated results of our Contract Logistics and

Freight Management business is presented. In

looking back at our performance during the course

of 2008, I am mindful of our considerable financial

achievements and how they have created a sound

and robust platform for our future development.

Our financial position is strong. We have good liquidity. Although

we are largely debt funded less than 1.5% of our total debt is

due for redemption each year until 2012. We have significant

available cash which at year end amounted to €164 million.

In addition to this we have €26 million of unused committed

facilities. As a result, I am satisfied that CEVA is in a position

where we do not need to negotiate existing facilities during this

difficult period.

Cash is a continued focus for the Group and cash generated in

2008 is a testament to this. Despite a difficult fourth quarter, our

operations generated cash before one off items. During 2008, we

have had to fund significant one off items, mainly relating to the

acquisitions which formed the Group such as rebranding and

integration. Most of these are now behind us with these programs

all but complete. We continue to manage our capital expenditure

carefully, whilst using our investment capacity to expand and

grow our business. Working capital is an area of continual focus

and 2008 has been another positive year in this regard, illustrated

by a 43% reduction in our net working capital which at year end

amount to €126 million. Excluding one offs, our cash conversion

was an impressive 98.3% in 2008.

We will continue to be cautious with our cash resources in 2009.

Capital expenditure will be reduced further without limiting our

ability to take on new business and grow; working capital will be

a continued focus area. We will also benefit from the reduction in

global interest rates on that part of our debt which is variable and

our cash taxes will reduce in 2009 with our tax planning strategy

taking effect.

Debt covenants are a focus for all companies in these difficult

times. We only have one maintenance covenant with which we

have to comply to and we are comfortably within this ratio.

Our financial results progressed well during the first 10 months

of 2008, after which the current economic slow down began to

impact our results. At constant 2007 exchange rates we finished

the year with total revenue of €6.6 billion and EBITDA of

€341 million. Our trading results were adversely impacted by

a number of factors including a significant slowdown in the

automotive manufacturing sector within our Contract Logistics

business and by a reduction in volumes in our Freight

Management business. So while we have maintained our

customer’s transport business the margin profile has changed.

To counteract the adverse impact of lower volumes and mode

shifts we have implemented a number of cost saving programs

which are expected to contribute to our earnings in 2009. The

initiatives include overhead cost reductions as we merge and

streamline our back office structures, continued roll out of our

LEAN program, additional procurement initiatives including

implementation of a global ocean freight procurement strategy,

IT offshoring and the curtailment of all discretionary spending.

I believe we have targeted opportunities where we can reduce

costs without limiting our ability to grow.

Another important achievement in 2008 includes the

harmonization of our IT applications and resources. These include

the launch of a new global Customer Relationship Management

tool (C-View) and the implementation of Hyperion Financial

Management (HFM). The former is our global sales tool for both

Contract Logistics and Freight Management which connects over

1,400 sales people and supports them in analysis and managing

the delivery of new solutions to current and potential customers.

HFM is our financial reporting and consolidation application

which is used by more than 400 finance personnel globally and

replaces two old legacy systems and supports world class financial

reporting and analysis. Both of these implementations went live

within their ambitious timelines and on budget.

CEVA Group Plc | Annual Report | 2008

20


“ Another important

achievement in 2008 includes

the harmonization of our

IT applications and resources.”

We finished the year having secured record new business wins

of €1.7 billion. Our pipeline of potential new business is the

largest it has ever been and our rate of converting these leads

into new customers has also increased year on year. Our strategy

of integrated Contract Logistics and Freight Management service

offerings is also showing tangible benefits. Cross selling wins

increased to €230 million and we expect this trend to continue as

our current and potential customers seek integrated supply chain

solutions.

In summary, 2008 has been a year of achievement for CEVA as

we have successfully integrated two diverse companies into one

unified organization, have a robust financing and liquidity

structure, laid important foundations for growth and built the

cohesion and resilience necessary to charter our course through

the current uncertain times.

Stuart Young

Chief Financial Officer

CFO Statement

CEVA Group Plc | Annual Report | 2008

21


OPERATING ANd FINANCIAL

REVIEW

The table below shows the Group’s key financial results on an

actual consolidated basis for 2008 and 2007 and on a proforma

basis for 2007. The 2007 profroma results are shown as if the

€ millions

acquisition of our Freight Management business had occurred

on 1 January 2007 instead of the actual acquisition date of

2 August 2007.

Consolidated

2008

Proforma

2007

Consolidated

2007

Revenue 6,329 6,298 4,785

Revenue growth 32.3% 4.5% 36.8%

EBITDA before specific items 320 378 301

% of revenue 5.1% 6.0% 6.3%

Net capital expenditure 99 77 67

% of revenue 1.6% 1.2% 1.4%

Operating net working capital 126 220 220

Cash generated from operations 245 n/a 262

Cash 164 175 175

EBITDA conversion into free cash 98.3% 64.8% n/a

Net debt 2,516 2,376 2,376

Return on capital employed 29.6% 31.6% 25.8%

Revenue

The primary reason for the growth in consolidated revenue is

the acquisition of our Freight Management business on

2 August 2007. As a result, CEVA is now the fourth largest supply

chain company in the world with revenues of €6.3 billion in 2008

(2007: €4.8 billion). CEVA operates throughout the world and is

impacted by fluctuations in foreign currency, particularly in the

US dollar and the British pound. At constant 2007 exchange rates

for those currencies, our revenues for the year ended 2008 were

€6.6 billion (2007: €4.8 billion).

Revenue has also grown when compared to the market due to our

high retention rates, cross selling between Freight Management

and Contract Logistics customers and record new business wins

with potential annualized revenue gains of €1.7 billion. Growth

has been driven by our ability to offer customers complete end

to end supply chain services on a global basis and our focus on

operational excellence, with new programs such as Smart

Solutions and Zero Defect Start Up being applied to customers

in addition to our existing programs such as LEAN.

EBITDA before specific items

EBITDA before specific items has increased by 6.3% in 2008 to

€320 million (2007: €301 million). EBITDA before specific items

is a key management measurement for the Group’s operational

performance. Specific items include amounts relating to

integration and rebranding costs, certain legal fees and the gain

on the buy back of our debt of €30 million. The main driver for

growth has been the acquisition of the Freight Management

business during 2007 and the incorporation of a full year’s

operational results in 2008. EBITDA before specific items was

adversely affected by the downturn in the world economy in the

latter part of 2008. The Freight Management business was

impacted by lower volumes, particularly in its airfreight business.

The Contract Logistics business was mainly impacted by reduced

volumes in our automotive inbound logistics sector.

Throughout the year, as we have integrated the business we

have sought to leverage our combined scale to optimize our cost

structure. This has taken the form of merging back office

functions where possible and an IT offshoring project. In addition,

as the current economic conditions began to impact CEVA in

Q4 2008 we initiated further cost containment and reduction

measures. We have targeted opportunities where we can reduce

costs without damaging our ability to grow.

Our EBITDA before specific items is also affected by currency

fluctuations, particularly the US dollar and the British pound.

At constant 2007 exchange rates our EBITDA before specific

items would have been €341 million (2007: €301 million).

Net capital expenditure

Net capital expenditure has increased to €99 million in 2008

(2007: €67 million) primarily due to the consolidation of the

Freight Management business for a full year, where there had

been an underinvestment in capital expenditure in the period

prior to the acquisition. Our capital expenditure represents 1.6%

of revenue reflecting CEVA’s asset light business model. This gives

the Group added flexibility during economic downturns such as

the one experienced since the last quarter of 2008. The Group

employs a rigorous capital expenditure approval process with all

capital and project expenditure greater than €0.1 million

requiring approval from the Group CEO and CFO.

CEVA Group Plc | Annual Report | 2008

22


Operating net working capital

Operating net working capital is monitored closely by management

and several programs have been introduced during the year to

reduce it. This has resulted in a significant reduction to

€126 million as at 31 December 2008 (2007: €220 million). These

programs have been enhanced during the start of 2009 to ensure

the reduction is sustained.

Cash generated from operations

Cash generated from operations during 2008 amounted to

€245 million (2007: €262 million) and was more than sufficient

to meet interest and tax requirements and to mostly fund specific

items of over €100 million. Non recurring items included

rebranding and integration costs, debt conversion fees, certain

legal advisor costs and the buy back of CEVA bonds. We are

forecasting a much lower level of non recurring items in 2009

as we have completed the integration and rebranding programs.

Cash and cash conversion

Cash at 31 December 2008 is €164 million (2007: €175 million).

The movement in cash largely relates to our funding of the

specific items described above. As the Group operates in diverse

political geographies we are working to release trapped cash

balances in order to increase our liquidity. With additional

facilities of €26 million available at 31 December 2008, the Group

Operating and financial review

has adequate headroom to fund both our daily operations and

continued growth ambitions.

Our cash conversion ratio increased mainly as a result of our

successful working capital programs during the year and strict

control of capital expenditure.

Net debt

Net debt has increased to €2.5 billion as at 31 December 2008

(2007: €2.4 billion). Of this increase, €68 million was due to the

strengthening of the US dollar during 2008 which adversely

impacted our US dollar denominated debt. In addition, due to

the instability within the financial capital markets, CEVA drew

down the balance of our revolving credit facility as

a precautionary measure to secure our headroom.

Return on capital employed

Return on capital employed has remained stable as both our

operating income and capital employed have not fluctuated

significantly during the year.

sEGMENT REsULTs

The tables below show the results of the Group’s businesses

on a reported basis:

€ millions Contract Logistics Freight Management

2008

Total

Revenue 3,465 2,864 6,329

EBITDA before specific items 192 128 320

% of revenue 5.5% 4.5% 5.1%

€ millions Contract Logistics Freight Management

2007

Total

Revenue 3,473 1,312 4,785

EBITDA before specific items 246 55 301

% of revenue 7.1% 4.2% 6.3%

Revenue

The Contract Logistics’ business revenue remained constant as

growth was offset by the downturn in the automotive inbound

sector. The downturn firstly impacted North America during

the second quarter and then impacted Northern and Southern

Europe during the latter part of 2008. Freight Management

revenue grew consistently until the fourth quarter when they were

impacted by reductions in volumes due to the slow down in

the world economy.

EBITDA before specific items

Within the Contract Logistics business, EBITDA before specific

items was impacted mainly by the downturn in volumes in

the inbound automotive logistics sector. Freight Management

EBITDA before specific items decreased during the final quarter

of the year due to reduced volumes and customers switched to

lower margin products.

CEVA Group Plc | Annual Report | 2008

23


The tables below show the Group’s operational performance on

a reported basis within our regional structure:

€ millions Northern Europe

Operating and financial review

2008

Southern Europe,

Middle East and Africa Americas Asia Pacific Total

Revenue 1,626 1,355 1,908 1,440 6,329

EBITDA before specific items 92 70 86 72 320

% of revenue 5.7% 5.2% 4.5% 5.0% 5.1%

€ millions Northern Europe

2007

Southern Europe,

Middle East and Africa Americas Asia Pacific Total

Revenue 1,360 1,302 1,208 915 4,785

EBITDA before specific items 92 80 87 42 301

% of revenue 6.8% 6.1% 7.2% 4.6% 6.3%

Revenue

Regional revenue has increased due to the acquisition of the

Freight Management business, particularly within both the

Americas and Asia Pacific regions where the Freight Management

business had substantial operations. Northern Europe has

experienced strong growth within the Benelux which partly

offsets a marginal decline in other countries arising from the

unwinding of contract losses and start up costs on new contracts.

Southern Europe experienced growth for three quarters of the

year, but was adversely impacted by the reduction in volumes in

the automotive sector during the final quarter. The Contract

Logistics automotive inbound operations within North America

were also impacted by the reduction in volumes during the last

quarter. Within the Freight Management operations revenue

growth was strong until the final period when the North America

domestic market place contracted. Asia Pacific revenue grew

strongly throughout the year within both China and Asia as the

domestic markets supported growth. Australia revenue was

adversely impacted by the reduction in volumes in the inbound

automotive market.

EBITDA before specific items

EBITDA before specific items is static in Northern Europe due to

growth within the Benelux region which was offset by contract

losses elsewhere, slower volumes and start up losses on new

contracts. Within Southern Europe the reduction in EBITDA before

specific items is due to the reduction in volumes in automotive

inbound during the last quarter. For the Americas, growth caused

by the acquisition of the Freight Management business was

offset by the downturn in the US economy, the reduced volumes

in automotive inbound and customers switching to lower margin

services within Freight Management. Asia Pacific’s EBITDA before

specific items has increased as the domestic markets supported

growth.

CEVA Group Plc | Annual Report | 2008

24


sUMMARY OF FACILITIEs

ANd NOTEs

The facilities and notes below were entered

into to part fund the acquisition of our Contract

Logistics business on 4 November 2006 and our

Freight Management business on 2 August 2007.

The facilities and notes described below are long

term in nature and do not require any repayments

until November 2012.

Senior secured facilities

On 4 November 2006, the Group entered into senior secured

facilities with certain banks for an initial amount of €500 million

to part finance the acquisition of TNT’s former logistics business.

These facilities were amended and restated on 4 January 2007

and were subsequently expanded on 2 August 2007 by

US$425 million to part finance the acquisition of EGL. The senior

secured facilities mature on 4 November 2013.

Second priority senior secured notes

On 13 August 2007, the Group issued US$400 million of

second-lien notes. These notes mature on 1 September 2014 and

have an annual coupon of 10%. Interest is payable on 1 March

and 1 September each year, commencing on 1 March 2008.

Senior notes

On 6 December 2006, the Group issued €505 million of senior

notes. The senior notes mature on 1 December 2014. Interest on

the senior notes is payable on 1 June and 1 December each year

and commenced on 1 June 2007. The senior notes bear interest

at 8.5% per annum. In November 2008, CEVA purchased senior

notes with a nominal face value of €12 million for a total cost

of €5 million. As a result of this transaction, CEVA Group Plc has

recorded a gain of €7 million as finance income in the income

statement.

Senior unsecured loan facility

On 2 August 2007, CEVA Group Plc entered into a US$1,400 million

senior unsecured loan facility. This facility was partially replaced

on 13 August 2007 when the Group issued US$400 million of

second priority senior secured notes. In 2008, the remaining

US$1,000 million senior unsecured loan facility was converted

into a senior unsecured loan, maturing in 2015. This senior

unsecured loan has a floating interest rate which is capped.

Senior subordinated notes

On 6 December 2006, the Group issued €225 million of senior

subordinated notes. These senior subordinated notes mature

on 1 December 2016 and interest is payable on 1 June and

1 December each year and commenced on 1 June 2007.

The senior subordinated notes bear interest at a rate of 10%

per annum. In November 2008, CEVA purchased senior

subordinated notes with a nominal face value of €37 million for

a total cost of €14 million. As a result of this transaction, CEVA

Group Plc has recorded a gain of €23 million as finance income

in the income statement.

CEVA Group Plc | Annual Report | 2008

25


sUMMARY OF CORPORATE

ANd FINANCING sTRUCTURE

Bond Notes

€493 million senior notes

€188 million senior subordinated notes

€287 million second priority senior

secured notes

Senior Facilities

€718 million senior secured term facility 1

€716 million senior unsecured loan

€186 million revolving credit facility 1

€183 million synthetic L / C facility 1

Senior and

senior subordinated

guarantees

Guarantor restricted subsidiaries 2

1. As at 31 December 2008, €186 million (2007: €60 million) was drawn under the revolving

credit facility and €156 million (2007: €132 million) of letters of credit were issued under

the synthetic L / C facility. The senior secured facilities are secured by substantially all of

the assets of the Company and certain of its subsidiaries.

2. CEVA Limited and certain of the Company’s operating subsidiaries located in Australia,

Belgium, Brazil, Canada, Germany, Hong Kong, Luxembourg, The Netherlands, United

Kingdom and the United States have guaranteed the notes. The guarantors represent

61% (2007: 54%) of our aggregated revenue before intercompany eliminations, and

CEVA Group Plc

CEVA Limited 2

Non guarantor restricted subsidiaries 3

Guarantor under the

senior secured facilities

Guarantor of the

senior notes and senior

subordinated notes

57% (2007: 53%) of our aggregated EBITDA for the year ended 31 December 2008.

The guarantors of the notes also guarantee our senior secured facilities on a senior

secured basis. Not all of the guarantors are borrowers under each of the senior secured

term facility, the revolving credit facility, and the synthetic L / C facility.

3. Our non-guarantor subsidiaries accounted for 39% (2007: 46%) of our total aggregated

revenue before intercompany eliminations, and 43% (2007: 47%) of our aggregated

EBITDA for the year ended 31 December 2008.

CEVA Group Plc | Annual Report | 2008

26


RIsk FACTORs

CEVA is impacted by a number of risk factors, some

of which are not within our control. Many of the

risk factors affecting CEVA are macroeconomic and

generally affect all companies, whereas others are

more particular to CEVA. This section outlines risks,

but is not intended to be an extensive analysis of

all risks that could affect us.

Indeed, some risks may be unknown to us or more material than

we currently estimate. All of them have the potential to impact

CEVA and its financial performance and should be considered

when reading this report. Further specific risks related to our

capital structure and legal proceedings that we face are included

in the section entitled ‘management of financial, operating and

legal risks’.

Regulatory risks

We are required to comply with various regulations and / or to

hold certain licenses and permits in various jurisdictions. Certain

countries require supply chain companies to hold national or

international transport licenses in order to perform their activities.

We cannot predict what impact future regulations may have on

our business. We may not be able to respond to new statutory

requirements. Failure to maintain required certificates, permits

or licenses, or to comply with applicable laws, ordinances or

regulations, can result in substantial fines or possible revocations

of authority to conduct operations. In addition, increased costs for

security as a result of governmental regulations that has been and

will be adopted in response to terrorist activities and potential

terrorist activities, government deregulation efforts, ‘modernization’

of the regulations governing customs clearance, and changes in

the international trade and tariff environment could require

material expenditures or otherwise adversely affect CEVA.

Industry-specific risks

A major part of the supply chain industry is the provision of

transportation services. Our ability to offer these services

effectively may be impacted by changes in fuel prices. Typically

our suppliers pass on increases in fuel prices to us and we pass

these price increases on to our customers through a surcharge.

We sometimes bear a portion of price increases over the short

term. If the price of oil were to increase beyond acceptable levels,

we and our customers may not be able to continue operating

effectively.

In addition, our ability to offer transport services is affected by

our access to third party providers. We do not maintain our own

fleet of airplanes or ships and therefore we rely on other

third party transportation service providers for some of our

Contract Logistics services and substantially all of our Freight

Management services. Access to competitive transportation

networks is important to supply chain companies. Available cargo

space could be reduced as a result of decreases in the number of

passenger airlines or ocean carriers serving particular

transportation lanes at particular times. This could occur as a

result of economic conditions, transportation strikes, regulatory

changes and other factors beyond our control, and can have a

significant impact on our ability to perform services.

Some of the activities in the industry are long term in nature

and / or outsourced from other organizations. For certain Contract

Logistics projects, CEVA acquires or leases on a long term basis

warehouses and distribution facilities and takes assignment of

employment arrangements from its customers. These

arrangements sometimes require investments in property, plant

and equipment, personnel and management capacity. If CEVA

acquires or takes over existing facilities of a customer, it may,

in some territories, assume by operation of law all rights and

obligations arising under the existing employment relationships

between CEVA’s customer and the customer’s employees. In

addition, CEVA frequently contracts with third parties to lease

warehouses and other assets. CEVA commits capacities on the

basis of projections of future demand, and our projections may

prove inaccurate as a result of changes to the economic

conditions or a decision by CEVA’s customers to terminate or not

to renew their contracts with CEVA. We generally strive to

minimize these risks for CEVA’s dedicated warehouses and other

assets by negotiating lease agreements with the same duration

as that of the assets deployed to service the contract. When CEVA

takes an assignment of existing employment relationships, it

seeks indemnities for employee service liabilities from the

previous employer. Our strategies, also employed by the majority

of operators in the industry, do not always fully mitigate

these risks.

Collective labor agreements cover a significant part of CEVA’s,

our suppliers’ and our customers’ workforces. Although we

believe that CEVA has constructive relations with its works

councils and unions, we cannot be certain that we will not

encounter strikes or other disturbances from this unionized labor

force, or that, upon expiration of existing agreements, new

collective labor agreements will be reached on satisfactory terms.

If workers engage in industrial actions, our business, financial

condition, and results of operations could suffer material harm.

CEVA Group Plc | Annual Report | 2008

27


Another industry-specific risk arises from use of the owneroperator

model in the United States. As is common in the

industry in the United States, the Company’s Freight

Management operations in the United States rely primarily on

independent contractor owner / operators as drivers. The

owner-operator model is periodically challenged by federal and

state governmental and regulatory authorities, including taxing

authorities, as well as individual drivers as private plaintiffs,

seeking to have drivers reclassified as employees rather than

independent contractors. If the drivers were to be reclassified,

that would have substantial financial, tax, and operational

impacts on the business. This risk is managed by operational,

legal, and tax personnel to monitor developments in this area

and ensure that the Company’s agreements and practices

continue to demonstrate independent contractor status.

Information technology risks

The provision and application of information technology is an

important factor in the supply chain industry. Among other

things, our information systems must frequently interact with

those of our customers and service providers that we rely on and

must function across multiple territories. Our future success will

depend on our ability to employ software that meets industry

standards and customer demands across multiple territories.

Although we have redundancy systems and procedures in place,

the failure of the hardware or software that supports our

information technology systems or the loss of data in the

systems, or the inability to access or interact with our customers

electronically through our websites could significantly disrupt

customer workflows and cause economic losses for which we

could be held liable and that would damage our reputation. We

expect our customers to continue to demand more sophisticated

and fully integrated information technology systems compatible

with their own information technology environment.

Risk Factors

“ Our business is potentially

impacted by a number of risk

factors, some of which are

within our control.”

If we fail to meet the demands of our customers or protect

against disruptions of our own and our customers’ operations,

we may lose customers, which could seriously harm our business

and adversely affect our operating results. In addition, a failure

to protect our confidential information from unauthorized use or

disclosure could diminish the value of our confidential

information and have a material adverse affect on our business,

financial condition and results of operations.

The Group operates internationally

The Group markets and sells its services internationally. Economic,

political and social conditions, including those related to wars,

civil unrest, acts of terrorism and other conflicts, may adversely

affect regional and global economics, the Group’s customers and

their ability to pay for services, including:




general political and economic instability in regional or

international markets, which could impede the Group’s ability

to deliver services to customers and adversely affect its

business, financial condition and results of operations;

changes in regulatory requirements, which could restrict the

Group’s ability to deliver services to its international

customers; and

export restrictions, tariffs, licenses and other trade barriers,

which could prevent the Group from adequately equipping its

facilities worldwide.

In addition, the Group is subject to heightened security measures

due to threats of terrorism. Some of the possible future effects of

such heightened security measures include reduced business

activity by customers, changes in security measures or regulatory

requirements for travel and the reduction of availability of flights

and other transportation options. Such security-related

developments could increase costs, make it difficult for the Group

to arrange for transport of its customers’ freight and increase

credit and business risks for customers. Responses to security

threats may materially and adversely affect the Group in ways it

cannot predict.

CEVA Group Plc | Annual Report | 2008

28


As CEVA continues to expand its business globally, its success

will depend, in part, on its ability to anticipate and effectively

manage these and other risks associated with international

operations. However, any of these factors could materially and

adversely affect its international operations and, consequently,

its business, financial condition and results of operations.

Adverse economic conditions

Unfavorable changes in economic conditions may result in lower

volumes, customers switching to lower margin services and

adversely affect our revenue and profitability. The global capital

and credit markets are currently experiencing high levels of

volatility and disruption. These conditions may adversely affect

certain of the Company’s customers and third party suppliers.

Were that to occur, the Company’s revenue and profitability

could also be adversely affected. Should customers’ ability to pay

deteriorate, additional bad debts may be incurred.

Risk of catastrophic events

A disruption or failure of the Company’s IT systems or operations

in the event of a major natural disaster, cyber-attack, terrorist

attack, or other catastrophic event could cause delays in providing

services or performing other mission-critical functions.

Risk Factors

Litigation risks

As a global Group, CEVA may be subject to formal or informal

investigations or litigation from governmental authorities in the

countries in which it does business. The Company is currently

subject to, and is cooperating with, enquiries and / or

investigations by the U.S. Department of Justice (DOJ), the

European Commission (EC), and governmental authorities in

certain other jurisdictions as more fully described herein at

page 70. At this time, the Company can not determine the

timing or outcome of the investigations, which could result in the

imposition of criminal and / or civil fines, penalties, damages or

other sanctions and which could have a material impact on the

Company’s financial position, results of operations and operating

cash flows. Additional information on the antitrust investigation

and other legal risk is disclosed in note 27 to the consolidated

financial statements.

Management of financial risks

Information on the management of financial, operating and legal

risks is provided in the following section.

CEVA Group Plc | Annual Report | 2008

29


MANAGEMENT OF FINANCIAL,

OPERATING ANd LEGAL RIsks

FINANCIAL RIsk MANAGEMENT

As a result of its operating activities, CEVA Group Plc is exposed to

financial risk resulting from changes in exchange rates, commodity

and fuel prices, as well as interest rates. We employ primary and

derivative financial instruments to limit interest and exchange

rates risks which can relate to transactions with fixed contracts as

well as planned contracts. The necessary framework of actions,

responsibilities, and controls has been established in internal

guidelines.

The Board of Directors of CEVA Group Plc is regularly informed

about existing financial risks and the financial instruments used

to manage the risks.

The characteristics and hedging goals for individual financial risks

are described in more detail as follows:

(A) MARkET RIsks

Interest rate risk management

Interest rate risks are identified centrally, monitored continually,

and managed actively in accordance with the internal guidelines of

the Board of Directors. Our interest rate exposure arising from our

borrowings and deposits is managed by the use of fixed and

floating rate debt, interest rate swaps, and forward foreign

exchange contracts. More information on the interest rate profile of

our debt is included in note 21 to the consolidated financial

statements.

Foreign exchange risk management

We operate on an international basis generating foreign currency

exchange risks arising from future commercial transactions,

recognized assets and liabilities, investments, and divestments in

foreign currencies other than the Euro, our functional and

reporting currency.

These risks are managed centrally with the objective of limiting

possible effects as much as possible while keeping internal cost

to a minimum. All Group companies are required to report their

relevant foreign exchange risk exposure with Group treasury.

To manage their foreign exchange risk arising from future

commercial transactions and recognized assets and liabilities,

entities in the Group use forward contracts, which are authorized

and executed by Group treasury. The Group has certain

investments in foreign operations, whose net assets are exposed

to foreign currency translation risk. Currency exposure arising

from the net assets of the Group’s foreign operations is managed

CEVA Group Plc | Annual Report | 2008

30


primarily through borrowings denominated in the relevant foreign

currencies.

For a more detailed discussion on financial risk management,

refer to note 4 to the consolidated financial statements.

Commodity risk

As a global logistics provider, CEVA is exposed to the risk of

an increase in fuel prices. We believe that the majority of the

increases in price risk can be passed on to customers and

therefore we have not entered into contracts to hedge any

specific commodity risk.

Credit risk

The Group’s exposure to credit risk is influenced mainly by the

individual characteristics of each customer. The demographics

of the Group’s customer base, including the default risk of the

industry and country, in which customers operate, has less of

an influence on credit risk.

CEVA’s credit policy determines that each new customer is

analyzed individually for creditworthiness before terms and

conditions are offered to the customer. The Group’s review

includes external ratings where available, and in some cases bank

references. Purchase limits are established for each customer and

these limits are reviewed periodically.

The Group establishes an allowance for impairment in respect

of trade and other receivables.

(B) GUARANTEEs

The total amount of guarantees as at 31 December 2008 was

€209 million (2007: €167 million) of which €156 million (2007:

€132 million) are on the CEVA’s Group Synthetic Letter of Credit

facility.

These guarantees were mainly issued in connection with CEVA’s

operating business obligations under lease contracts, customs

duty deferment, central and local credit lines. The obligations

under the guarantees issued by banks and other financial

institutions have been secured by CEVA and by certain of its

subsidiaries.

(C) NET dEBT ANd GEARING

CEVA’s capital structure is monitored closely by management and

we consider the applicable interest rates and maturity dates to be

favorable. We fund our financing structure using cash generated

from operations.

Operational risk management

Operational risk is the risk of loss arising from fraud, unauthorized

activities, error, omission, inefficiency, system failure or external

events. It is inherent in every business organization and covers a

wide spectrum of issues.

Management of Financial, Operating and Legal Risks

Led by the Executive Board, the Group has codified its operational

risk management process by issuing high-level standards,

supplemented by more detailed formal guidance. This explains

how the Group manages operational risk by identifying, assessing,

monitoring, controlling, and mitigating the risk, rectifying

operational risk events, and implementing any additional

procedures required for compliance with local regulatory

requirements. The processes undertaken to manage operational

risk are determined by reference to the scale and nature of the

Group’s operations.

In each of the Group’s subsidiaries, local management is

responsible for implementing the Group’s standards on

operational risk throughout their operations, and where

deficiencies are evident, rectifying them within a reasonable

timeframe. Subsidiaries acquired by the Group are required to

assess, plan, and implement the standard requirements within

an agreed timescale.

Legal risk management

Legal risks to the Company include those arising from the legal

requirements of various countries and jurisdictions around the

world, including legal obligations and prohibitions imposed by

statute, regulation, common law, contract, and other legal

sources. They may be manifested in a variety of situations,

including civil and criminal lawsuits, governmental inquiries and

investigations, and administrative procedures. Like operational

risks, they are inherent in every business organization and cover

a wide spectrum of issues.

CEVA has global and regional legal personnel to manage legal

risks by keeping abreast of applicable laws and regulations and by

implementing, monitoring, and enforcing the Company’s policies,

practices, and procedures (including its commercial practice

policies, code of business conduct, and other policies and

procedures) consistent with applicable legal requirements.

These efforts include development and implementation of the

Company’s compliance program, training in support of that

program, and aggressive management of legal and regulatory

issues and risks as they arise in litigation and other disputes.

These efforts are designed to identify, assess, monitor, and

minimize legal risks to the Company and thereby support

compliance with applicable legal requirements.

Refer to note 4 of the consolidated financial statements for

further information on financial risk management.

CEVA Group Plc | Annual Report | 2008

31


FINANCIAL sTATEMENTs

Directors’ report 33

Consolidated income statement 37

Consolidated balance sheet 38

Consolidated cash flow statement 39

Consolidated statement of changes in equity 40

Notes to the consolidated financial statements 41

1 General information 41

2 Summary of significant accounting policies 41

3 Critical accounting estimates and judgments 48

4 Financial risk management 49

5 Segment information 52

6 Specific items 54

7 Personnel expenses 55

8 Auditor remuneration 56

9 Finance income and expenses 56

10 Income tax expense 57

11 Business combinations 57

12 Intangible assets 58

13 Property, plant and equipment 59

14 Deferred income tax 60

15 Inventory 61

16 Trade and other receivables 61

17 Derivative financial instruments 62

18 Cash and cash equivalents 62

19 Joint ventures 63

20 Share capital 63

21 Borrowings 63

22 Retirement benefit obligations 65

23 Share based payments 67

24 Provisions 68

25 Trade and other payables 69

26 Commitments 69

27 Contingencies 69

28 Related party transactions 70

29 Events after balance sheet date 71

30 Group entities 72

31 Guarantor / non-guarantor financial information 77

Independent auditors’ report to the members of CEVA Group Plc 81

Company balance sheet 83

Notes to the Company financial statements 84

1 Accounting policies 84

2 Other information 85

3 Borrowings 85

4 Equity shareholders’ funds 85

5 Events after balance sheet date 85

Independent auditors’ report to the members of CEVA Group Plc 86

Logistics business, prior to the acquisition by CEVA 88

Description of key line items in the income statement 89

Certain definitions 90

CEVA Group Plc | Annual Report | 2008

32


dIRECTORs’ REPORT

The Directors present their report and the audited financial statements of CEVA Group Plc for the year ended 31 December 2008.

CEVA Group Plc was incorporated in England and Wales on 9 August 2006. At the date of this document, the authorized ordinary share

capital of £350,000 is divided into 350,000 ordinary shares of a par value of £1 each. As at 31 December 2008, 349,999 ordinary shares

of a par value of £1 each in CEVA Group Plc are held by CEVA Investments Ltd and one ordinary share of a par value of £1 is held by

Louis Cayman Second Holdco Limited, which is in turn a wholly owned subsidiary of CEVA Investments Ltd. Accordingly, CEVA Group Plc

is a wholly owned subsidiary of CEVA Investments Ltd.

The rights of the equity holders of CEVA Group Plc are contained in the Articles of Association of CEVA Group Plc. CEVA Group Plc is

managed by its Directors in accordance with those articles and in accordance with the laws of England and Wales.

PRINCIPAL ACTIVITIEs

CEVA is one of the world’s leading integrated supply chain logistics companies and offers a broad spectrum of services based on

our market leading Contract Logistics and Freight Management expertise and capabilities. CEVA designs, implements, and operates

complex supply chain solutions for multinational and large national companies on a local, regional, and global level. CEVA operates

an asset light model across all business units, with third parties providing the majority of the physical transportation and warehousing

assets that CEVA manages and uses for the benefit of customers. The integrated service offerings span the entire supply chain: contract

logistics services that include inbound logistics, manufacturing support, outbound / distribution and aftermarket logistics; freight

management services that include air, ocean and land-based transport, and other freight transportation related services, such as customs

brokerage, local pick up and delivery service, materials management, and trade facilitation. At 31 December 2008, CEVA’s combined

global network comprised over 1,200 locations, utilizing a total of 9.2 million square meters of warehousing space in over 100 countries.

CEVA has built leading market positions by understanding our target industry sectors and applying our expertise to design and

implement customized logistics solutions that address industry-specific supply chain requirements. CEVA has a deep expertise in a range

of industries; including automotive, technology, consumer & retail, energy, and industrial. CEVA’s knowledge of customers’ supply chain

functions and our sector expertise create competitive advantages for our customers, help us to develop more cost-effective solutions

for them, and put us in a strong position to grow our business.

REVIEW OF BUsINEss ANd FUTURE dEVELOPMENTs

Refer to the operating and financial review on page 22 for a review of the business.

For details of the principal risks and uncertainties facing the Group refer to page 27 and for the financial risk management objectives

and policies of the Group, refer to page 30.

Future trading prospects present a mixed picture, however we have reacted quickly to the economic downturn and implemented several

cost reduction projects and we continue to maintain a flexible and asset light business model.

REsULTs ANd dIVIdENds

The Group reported a loss for the year ended 31 December 2008 of €125 million (2007: a loss of €196 million).

No dividends were paid or recommended during the year or up until the signing of this annual report.

CHARITABLE ANd POLITICAL dONATIONs

During the year, CEVA made charitable donations of €181,161 (2007: €8,000) and political donations of €25,000 to non-EU political

organizations (2007: nil). No other political donations were made during 2008 or 2007.

OTHER dIsCLOsUREs

There are no significant differences between the market value and book value of land for the Group. The Group did not carry out

any research and development activities during the year.

CEVA Group Plc | Annual Report | 2008

33


GOING CONCERN AssUMPTION

In accordance with UK company law and best practice, the Directors are required to consider whether it is appropriate to prepare

the financial statements under the going concern principle. CEVA prepares annual budgets, five year forecasts and regularly supplements

the budgets with quarterly forecasts during the year. After reviewing the information in conjunction with our commitments to debt

repayments, management have concluded that the Group has adequate resources for the foreseeable future. Therefore the Group and

the Company have continued to adopt the going concern basis in the preparation of the financial statements.

EVENTs AFTER BALANCE sHEET dATE

On 10 February 2009, Gareth Turner stood down as Chairman of the Board of Directors and on the same day Marvin Schlanger was

appointed as a non-executive Director and Chairman. In addition, Lukas Kolff retired from the Board on 6 January 2009 and Tom White

was appointed to the Board as a non-executive Director on 22 January 2009.

BOARd OF dIRECTORs

The Board of Directors of CEVA Group Plc during the financial year are disclosed in note 7, personnel expenses on page 55.

At the date of this report, the following persons are members of the CEVA Group Plc Board of Directors:

Marvin Schlanger is currently Vice Chairman of the Board of Hexion Specialty Chemicals, Inc., a global chemical company with 2008

revenue of US$6 billion. He is also a Principal in the firm of Cherry Hill Chemical Investments, LLC, which provides management services

and capital to the chemical and allied industries. Marvin has been involved with a number of Apollo Companies over the past decade as

Chairman or at the Board level. He currently serves on the boards of UGI Corporation, Amerigas Partners LP, and Momentive

Performance Materials Company.

John Pattullo has been a member of the Board of Directors since August 2007. John spent most of his early career working in supply

chain management with Procter & Gamble. In 2005, John joined Exel, where he was CEO of the €6 billion EMEA division (Freight

Forwarding and Contract Logistics). When Exel was acquired by Deutsche Post / DHL, he then managed the €7 billion combined Exel

and DHL Contract Logistics business in EMEA.

Joshua Harris has been a member of the Board of Directors since November 2006. He is a founding Senior Partner at Apollo and

has served as an officer of certain affiliates of Apollo since 1990. Prior to that time, Mr. Harris was a member of the Mergers and

Acquisitions Department of Drexel Burnham Lambert. Mr. Harris is also a director of Allied Waste Industries, Berry Plastics,

Covalence Specialty Materials, Hexion Specialty Chemicals, Metals USA, Quality Distribution, Inc, UAP Holdings and Verso Paper.

Gareth Turner has been a member of the Board of Directors since August 2006. Mr. Turner has been a Partner at Apollo since 2005.

Prior to joining Apollo in 2005, Mr. Turner was employed from 1997 to 2005 by Goldman, Sachs & Co. as a Managing Director.

Stan Parker has been a member of the Board of Directors since November 2006. He has been employed by Apollo since 2000.

From 1998 to 2000, Mr. Parker was employed by Salomon Smith Barney. He serves on several boards of directors, including Affinion

and AMC Entertainment.

Paul Richardson joined the CEVA Board on 6 August 2008 as a non-executive Director. He has also assumed the role of Audit Committee

Chairman. Mr. Richardson is a UK national, currently living in New York. He is the Chief Financial Officer of WPP, the world’s largest

marketing services Group. Paul is a Chartered Accountant who worked for KPMG, Beecham Group and Hanson PLC before joining WPP

in 1993.

Tom White was appointed to the Board as a non-executive Director on 22 January 2009. Since 2007, Tom has been an operating

Partner at Apollo focusing on new business development and implementing strategically important operational improvements

for existing Apollo companies in the Distribution and Transportation sector. Prior to joining Apollo, Tom was CFO at Hub Group for

five years, a US based company specializing in the intermodal, truck brokerage and logistics sectors. Tom joined Hub Group from

Arthur Andersen, where he had been a senior Partner in the Chicago office.

CEVA has agreed to indemnify Joshua Harris, Gareth Turner, Lukas Kolff, and Stan Parker for losses relating to the services contemplated

by the management agreement with Apollo.

BOARd COMPENsATION

Apollo and its affiliates have the power to control us and our affairs and policies, including the election of our Directors and

management. The majority of members of our Board are partners or employees of Apollo. Each of our non-executive Directors except

for Paul Richardson is paid an annual retainer of €39,000 as well as €1,600 for each meeting of the Board or of a Board committee

attended and customary equity incentives are granted to these Directors. Paul Richardson is paid an annual retainer of €90,000 as well

as €1,600 for each meeting of the Board or of a Board committee attended and customary equity incentives.

CEVA Group Plc | Annual Report | 2008

34


EMPLOYEEs

CEVA has deployed a diversity and inclusion program during the year. Diversity is about understanding and maximizing differences –

the variety of perspectives, opinions and contributions that we each bring to the business; while inclusion is about leveraging diversity

to create an environment and culture that is welcoming, collaborative and productive. By embracing diversity and inclusion, CEVA is

better equipped to understand demographics and thus thrive in a global market. CEVA’s employees are a key asset to the business and

CEVA’s goal is to attract, motivate and retain the highest performing workforce in the industry. In order to realize CEVA’s full potential

the best talent, from any background, is allowed to rise to the top.

Applications for employment by disabled persons are always fully considered bearing in mind the respective aptitudes and abilities of

the applicant concerned. In the event of an employee becoming disabled, every effort is made to ensure that their employment with

the Company continues and the appropriate training is arranged. It is the policy of the Company that the training, career development,

and promotion of a disabled person should, as far as possible, be identical to that of a person who does not suffer from a disability.

CEVA has adopted policies and processes that are designed to support effective recruitment, retention and incentivization of skilled

employees and managers to fulfill their roles in the organization. CEVA provides employees with competitive salary packages with

incentives tied to the operational objectives of the Company and the relevant subsidiary as well as to performance targets.

In order to develop and train our employees, we have created a program of continuous education. This program serves to develop

the professional skills of the workforce and to prepare promising talent for future management positions. Our performance measurement

system, which is directly linked with our incentive programs, is designed to provide managers and employees with regular feedback on

their performance and to encourage the best work performance possible.

Consultation with employees or their representatives has continued at all levels, with the aim of ensuring that their views are taken

into consideration when decisions are made that are likely to affect their interests and that all employees are aware of the financial

and economic performance of their business units and of the Company as a whole. Communication with all employees continues

through in-house newsletters, frequent bulletins and the global intranet and includes two way feedback mechanisms.

POLICY ANd PRACTICE ON PAYMENT OF CREdITORs

CEVA agrees to terms and conditions under which business transactions with suppliers are conducted. It is CEVA’s policy that provided

a supplier is complying with the relevant terms and conditions, including the prompt and complete submission of all specified

documentation, payment will be made in accordance with the agreed terms.

It is Group policy to ensure that suppliers know the terms on which payment will take place when business is agreed. The average

number of days that payables were outstanding was 43 days for 2008 and 46 days for 2007.

sHAREHOLdERs

Our substantial shareholders are disclosed on page 70.

sTATEMENT As TO dIsCLOsURE OF INFORMATION TO AUdITORs

As required by Section 234ZA of the Companies Act 1985, the Directors of CEVA Group Plc have approved this report and confirmed

that, so far as we are aware, there is no relevant audit information (being information needed by the auditors in connection with

preparing their audit report) of which the Company’s auditors are unaware, and we have taken all the steps reasonably required to be

taken as a director in order to make us aware of any relevant audit information and to establish that the Company’s auditors are aware

of that information.

AUdITORs

In accordance with Section 384 of the Companies Act 1985, a resolution for the re-appointment of PricewaterhouseCoopers LLP

as auditors of the Company will be proposed at the annual general meeting.

sTATEMENT OF REsPONsIBILITIEs OF THE dIRECTORs OF CEVA GROUP PLC

The consolidated financial statements of CEVA have been prepared in accordance with International Financial Reporting Standards

as adopted by the European Union. The following statement, which should be read in conjunction with the statement of auditors’

responsibilities set out in the independent auditors’ reports respectively, is made with a view to distinguishing the respective

responsibilities of the Directors of CEVA Group Plc and of the auditors in relation to the consolidated financial statements (hereafter

referred to as ‘financial statements’).

CEVA Group Plc | Annual Report | 2008

35


In the context of preparing the financial statements for CEVA the Directors of CEVA Group Plc are responsible for:

• ensuring the maintenance of proper accounting records, which disclose with reasonable accuracy the financial position of CEVA

at any time from which financial statements can be prepared in accordance with International Financial Reporting Standards

as adopted by the European Union (UK GAAP for the Parent Company financial statements) and the Companies Act 1985;

• preparing financial statements for the financial year, which give a true and fair view, in accordance with International Financial

Reporting Standards as adopted by the European Union, of the state of affairs of CEVA (UK GAAP for the Parent Company

financial statements) as at the end of the financial year and of the results of operations for that year; and

• taking such steps as are reasonably open to them to safeguard the assets of CEVA and to prevent and detect fraud and other

irregularities.

The Directors of CEVA consider that in preparing financial statements for CEVA, they have used appropriate accounting policies,

consistently applied and supported by reasonable and prudent judgments and estimates, and that all accounting standards which

they consider to be applicable have been followed. The Directors of CEVA are required to prepare the financial statements on the going

concern basis unless it is inappropriate to presume that the Company will continue in business.

We publish our annual financial statements on our website at www.cevalogistics.com.

By order of the Board.

John Pattullo

Director

19 March 2009

CEVA Group Plc | Annual Report | 2008

36


CONsOLIdATEd INCOME sTATEMENT

€ millions Note

Before

specific

items

Revenue 5 6,329

Cost of materials (346)

Work contracted out (3,072)

Personnel expenses 7 (1,799)

Other operating expenses (792)

Operating expenses excluding depreciation, amortization and impairment (6,009)

Specific

items 1 Total

-

-

-

(10)

(39)

(49)

6,329

Before

specific

items

4,785

Specific

(346) (266) -

(3,072) (2,148) -

(1,809) (1,512) 1

(831) (558) (38)

(6,058) (4,484) (37)

items 1 Total

EBITDA 320 (49) 271 301 (37) 264

Depreciation and amortization excluding purchased intangibles (90)

Amortization and impairment on purchased intangibles (71)

Depreciation, amortization and impairment (161)

Operating income 159 (53)

Finance income (including foreign exchange movements) 9 15

Finance expense (including foreign exchange movements) 9 (292)

Net finance expense (including foreign exchange movements) (277)

Profit (after tax) from investments in associates -

(Loss) / profit before income taxes (118)

Income tax expense 10 11

Loss for the year (107)

-

(4)

(4)

30

-

30

-

(23)

5

(18)

(90) (80) -

(75) (49) (172)

(165) (129) (172)

106

172

-

(209)

45 42 -

(292) (176) -

(247) (134) -

(141)

- 3 -

41

(209)

16 (106) 78

(125) (65) (131)

4,785

(266)

(2,148)

(1,511)

(596)

(4,521)

Attributable to:

Minority interests - 1

Equity holders of the Company (125) (197)

Loss for the year (125)

1 Refer to note 6 for details on specific items.

2008

YEAR ENDED 31 DECEMBER

2007

(80)

(221)

(301)

(37)

42

(176)

(134)

3

(168)

(28)

(196)

(196)

CEVA Group Plc | Annual Report | 2008

37


CONsOLIdATEd BALANCE sHEET

€ millions Note 2008 2007 1

ASSETS

Non-current assets

Intangible assets 12 2,063

Property, plant and equipment 13 380

Deferred income tax assets 14 6

Prepayments 34

Other non-current assets 18

Total non-current assets 2,501

Current assets

Inventory 15 29

Trade and other receivables 16 988

Prepayments 28

Accrued income 157

Income tax receivable 13

Derivative financial instruments 17 18

Cash and cash equivalents 18 164

Total current assets 1,397

TOTAL ASSETS 3,898

EQUITY

Capital and reserves attributable to equity holders

Share capital 20 1

Share premium 382

Currency translation adjustment reserve (180)

Accumulated deficit (344)

Attributable to equity holders of the Company (141)

Minority interests 5

Total Group equity (136)

LIABILITIES

Non-current liabilities

Borrowings 21 2,527

Deferred income tax liabilities 14 103

Retirement benefit obligations 22 94

Provisions 24 74

Other non-current liabilities 16

Total non-current liabilities 2,814

Current liabilities

Borrowings 21 77

Provisions 24 39

Trade and other payables 25 1,091

Income tax payable 11

Derivative financial instruments 17 2

Total current liabilities 1,220

TOTAL EQUITY AND LIABILITIES 3,898

1 The 2007 comparatives have been restated following the finalization of the purchase price allocation. Refer to note 11 for further details.

AS AT 31 DECEMBER

The financial statements on pages 33 to 80 were approved by the Board of Directors on 19 March 2009 and were signed on its behalf by:

John Pattullo

Director

2,192

417

6

45

10

2,670

36

1,171

62

168

-

1

175

1,613

4,283

1

382

(67)

(219)

97

34

131

2,339

160

98

105

10

2,712

138

41

1,229

31

1

1,440

4,283

CEVA Group Plc | Annual Report | 2008

38


CONsOLIdATEd CAsH FLOW sTATEMENT

YEAR ENDED 31 DECEMBER

€ millions Note 2008 2007

Loss before income taxes (141)

Adjustments for:

Share based compensation 4

Depreciation, amortization and impairment 165

Finance income 9 (45)

Gain on disposal of property, plant and equipment (2)

Foreign exchange (gains) and losses 9 48

Finance expense 9 244

Profit (after tax) from investments in associates -

Change in provisions:

Retirement benefit obligations 22 (2)

Provisions 24 (31)

Changes in working capital:

Inventory 15 6

Trade and other receivables 16 142

Prepayments and accrued income 44

Trade and other payables 25 (105)

Changes in non-current prepayments (72)

Changes in non-current accrued liabilities (10)

Cash generated from operations 245

Interest paid (196)

Net income taxes paid 10 (52)

Net cash from operating activities (3)

Acquisitions (5)

Capital expenditure (106)

Proceeds from sale of property, plant and equipment 19

Increase / (decrease) in other non-current assets -

Interest received 6

Net cash used in investing activities (86)

Issuance of shares -

Repayment of non-current borrowings (72)

Repayment of current borrowings -

Proceeds from non-current borrowings 21 139

Proceeds from current borrowings -

Repayment of finance leases -

Dividends from associates -

Repayment upon business combination -

Net cash from financing activities 67

Change in cash and cash equivalents (22)

Cash and cash equivalents at beginning of period 175

Foreign exchange impact on cash and cash equivalents 11

Cash and cash equivalents at end of period 18 164

(168)

3

301

(18)

(3)

(24)

176

(3)

(32)

2

(2)

(86)

67

38

16

(5)

262

(130)

(9)

123

(1,430)

(82)

56

(1)

17

(1,440)

73

(292)

(54)

1,481

105

(2)

3

(85)

1,229

(88)

265

(2)

175

CEVA Group Plc | Annual Report | 2008

39


CONsOLIdATEd sTATEMENT OF CHANGEs

IN EqUITY

€ millions

Share

capital

Balance at 1 January 2007 1

Issuance of shares -

Currency translation adjustment -

Loss attributable to equity holders for the year -

Balance at 31 December 2007 / 1 January 2008 1

Movement in minority interests -

Currency translation adjustment -

Loss attributable to equity holders for the year -

Balance at 31 December 2008 1

Share

premium

310

72

-

-

382

-

-

-

382

Currency

translation

adjustment

reserve

(3)

-

(64)

-

(67)

-

(113)

-

(180)

Accumulated

deficit

(22)

-

-

(197)

(219)

-

-

(125)

(344)

Attributable

to equity

holders of the

Company

286

72

(64)

(197)

97

-

(113)

(125)

(141)

Minority

interests

33

-

-

1

34

(27)

(2)

-

5

Total

Group

equity

319

72

(64)

(196)

131

(27)

(115)

(125)

(136)

CEVA Group Plc | Annual Report | 2008

40


NOTEs TO THE CONsOLIdATEd

FINANCIAL sTATEMENTs

1 GENERAL INFORMATION

CEVA Group Plc (the ‘Company’) and its subsidiaries (together the ‘Group’ or ‘CEVA Group’) design, implement and operate complex,

end-to-end Contract Logistics and Freight Management solutions for large and medium sized national and multinational companies.

CEVA Group Plc was incorporated on 9 August 2006 in England and Wales as a public company with limited liability. The address of

its registered office is PO Box 8663, Excelsior Road, Ashby de la Zouch, Leicestershire LE65 9BA, United Kingdom.

The immediate parent of CEVA Group Plc is CEVA Investments Ltd, a company incorporated in the Cayman Islands. The ultimate

controlling party of CEVA Group Plc is Apollo Management VI, L.P.

The Company has senior and senior subordinated notes which are listed on the Alternative Securities Market of the Irish Stock Exchange.

These Group consolidated financial statements were authorized for issue by the Board of Directors on 19 March 2009.

2 sUMMARY OF sIGNIFICANT ACCOUNTING POLICIEs

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies

have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The consolidated financial statements of CEVA Group Plc have been prepared in accordance with International Financial Reporting

Standards (IFRS) as adopted by the European Union. They have been prepared under the historical cost convention, as modified by

the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

Presentation of financial information

In the presentation of the consolidated income statement, the Group separates specific items in order to disclose significant non-recurring

items. The principal events which may give rise to a specific item include the restructuring and integration of businesses, material litigation

and rebranding costs, amongst others. The Directors believe that the presentation of specific items in the consolidated income statement

provides relevant information that is more closely aligned to how management monitors the performance of the Group.

The presentation of revenue and the classification of certain operating expenses in the consolidated income statement have changed

from that disclosed in the 2007 consolidated financial statements. The Directors believe that this presentation of the income statement

provides more clarity on the expenses incurred by the Group. Refer to page 89 for a description of key line items in the income statement.

In accordance with IFRS 3 Business Combinations the Group has finalized the purchase price allocation for its acquisition of EGL Inc. (EGL).

This resulted in a change in the fair value of the acquired assets and liabilities and as a consequence the 2007 balance sheet comparatives

have been restated. Refer to note 11 for further information on business combinations.

The definition of the number of employees has changed from those persons who are directly employed or contracted by the Group

to include only those persons directly employed by the Group. As a result of this change, the total number of persons employed by

the Group has decreased and the 2007 comparatives have changed accordingly. Refer to page 90 for certain definitions.

New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2008

and have not been applied in preparing these consolidated financial statements:

• IFRS 8 Operating Segments introduces the ‘management’ approach to segment reporting. IFRS 8, which becomes mandatory for

the Group’s 2009 consolidated financial statements, will require the presentation and disclosure of segment information based on

the internal reports regularly reviewed by the Group’s Chief Operating Decision Maker in order to assess each segment’s performance

and to allocate resources to them. Under the management approach, the Group’s segment disclosure will not change significantly.

• Revised IAS 23 Borrowing Costs removes the option to expense borrowing costs and requires that an entity capitalize borrowing costs

directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The revised

IAS 23 will become mandatory for the Group’s 2009 consolidated financial statements. This revised standard will not constitute

a change in accounting policy for the Group as borrowing costs are currently capitalized in accordance with this standard. Therefore

there will be no impact on the Group’s consolidated financial statements.

CEVA Group Plc | Annual Report | 2008

41


• IFRIC 13 Customer Loyalty Programs addresses the accounting by entities that operate, or otherwise participate in, customer loyalty

programs under which the customer can redeem credits for awards such as free or discounted goods or services. IFRIC 13, which

becomes mandatory for the Group’s 2009 consolidated financial statements, is not expected to have any impact on the consolidated

financial statements.

• Revised IAS 1 Presentation of Financial Statements introduces the term total comprehensive income, which represents changes in equity

during a period other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive

income may be presented in either a single statement of comprehensive income (effectively combining both the income statement

and all non-owner changes in equity in a single statement), or in an income statement and a separate statement of comprehensive

income. Revised IAS 1, which becomes mandatory for the Group’s 2009 consolidated financial statements, is expected to have

a significant impact on the presentation of the consolidated financial statements.

It is likely that the Group will provide total comprehensive income in a single statement of comprehensive income for its 2009

consolidated financial statements.

• Amendments to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements – Puttable Financial

Instruments and Obligations Arising on Liquidation requires puttable instruments, and instruments that impose on the entity an

obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation, to be classified as equity

if certain conditions are met. The amendments, which become mandatory for the Group’s 2009 consolidated financial statements,

with retrospective application required, are not expected to have any impact on the consolidated financial statements.

• Revised IFRS 3 Business Combinations continues to apply the acquisition method to business combinations, with some significant

changes. Key changes include the requirement for contingent consideration to be measured at fair value, with subsequent changes

therein recognized in profit or loss. Transaction costs, other than share and debt issue costs, will be expensed as incurred. Any

pre-existing interest in the acquiree will be measured at fair value with the gain or loss recognized in profit or loss. Any non-controlling

(minority) interest will be measured at either fair value, or at its proportionate interest in the identifiable assets and liabilities of

the acquiree, on a transaction-by-transaction basis. Revised IFRS 3, which becomes mandatory for the Group’s 2010 consolidated

financial statements, will be applied prospectively and therefore there will be no impact on prior periods in the Group’s 2010

consolidated financial statements.

• Revised IAS 27 Consolidated and Separate Financial Statements requires accounting for changes in ownership interests by the Group

in a subsidiary, while maintaining control, to be recognized as an equity transaction. When the Group loses control of a subsidiary,

any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognized in profit or loss.

The amendments to IAS 27, which become mandatory for the Group’s 2010 consolidated financial statements, are not expected

to have a significant impact on the consolidated financial statements.

• Amended IFRS 2 Share-based Payment – Vesting Conditions and Cancellations clarifies the definition of vesting conditions,

introduces the concept of non-vesting conditions, requires non-vesting conditions to be reflected in grant-date fair value and provides

the accounting treatment for non-vesting conditions and cancellations. The amendments to IFRS 2 will become mandatory for

the Group’s 2009 consolidated financial statements, with retrospective application. This amendment is not expected to have

a significant impact on the consolidated financial statements.

2.2 Consolidation

Subsidiaries

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying

a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently

exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated

from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is

measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus

costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business

combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess

of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill.

Inter-company transactions, balances and unrealized gains on transactions between Group companies are eliminated. Unrealized losses

are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies

adopted by the Group.

Joint ventures

Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement and requiring

unanimous consent for strategic financial and operating decisions.

The Group’s interests in jointly controlled entities are accounted for by proportionate consolidation. The Group combines its share

of the joint ventures’ individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items

in the Group’s financial statements.

CEVA Group Plc | Annual Report | 2008

42


Transactions and minority interests

The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals

to minority interests results in gains and losses for the Group and are recorded in profit or loss. Purchases from minority interests result

in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of

the subsidiary.

Where losses applicable to the minority exceed the minority interest in the equity of the relevant subsidiary, the excess, and any further

losses attributable to the minority, are charged to the Group unless the minority has a binding obligation to, and is able to, make good

the losses. Where excess losses have been taken up by the Group, if the subsidiary in question subsequently reports profits, all such

profits are attributed to the Group until the minority’s share of losses previously absorbed by the Group have been recovered.

Associates

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies.

Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity.

Associates are accounted for using the equity method and are recognized initially at cost. The Group’s investment includes goodwill

identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group’s share

of the income and expenses and equity movements of associates, after adjustments to align the accounting policies with those of

the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share

of losses exceeds its interest in an associate, the carrying amount of that interest (including long term investments) is reduced to nil and

the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf

of the associate.

2.3 Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing related products or services (business

segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks

and returns that are different from those of other segments. The business segments are determined based on the Group’s management

and internal reporting structure.

Inter-segment pricing is determined at an arm’s length basis.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable

basis. Unallocated items mainly comprise borrowings and income tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets

other than goodwill.

2.4 Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic

environment in which the entity operates (the ‘functional currency’). The consolidated financial statements are presented in Euros (‘€’),

which is the Company’s functional and the Group’s presentation currency.

Transactions and balances

Foreign currency transactions are translated into Euros using the exchange rates prevailing at the dates of the transactions. Foreign

exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of

monetary assets and liabilities denominated in foreign currencies are recognized in profit and loss.

Group companies

The results and financial position of all Group entities (none of which has the currency of a hyperinflationary economy) that have

a functional currency different from the Euro are translated into Euro as follows:

a) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

b) income and expenses for each income statement are translated at average exchange rates; and

c) all resulting exchange differences are recognized as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings

and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation

is partially disposed of or sold, exchange differences that were recorded in equity are recognized in profit and loss as part of the gain

or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity

and translated at the closing rate.

CEVA Group Plc | Annual Report | 2008

43


2.5 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course

of the Group’s activities. Revenue is shown net of value-added tax and discounts and after eliminating sales within the Group.

The Group recognizes revenue when the amount of revenue can be reliably measured and it is probable that future economic benefits

will flow to the Group. This is usually when goods and services have been delivered but is dependent upon the contractual terms agreed

with the customer. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have

been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction

and the specifics of each arrangement.

Revenue in Contract Logistics represents the revenue from the delivery of goods and services to third parties less discounts, credit notes

and taxes levied on sales.

Freight Management revenue is derived from three principal sources: air freight forwarding, ocean freight forwarding and customs,

brokerage, import and logistics services. Revenue is recognized in gross terms as an indirect carrier and net of any billings for value

added taxes, customs duties, transportation costs and freight insurance premiums when acting as an agent for the direct carrier.

Freight Management is primarily a non-asset based carrier and as such, does not own transportation assets. The majority of air and

ocean freight revenue is obtained through the purchase of transportation services from direct (asset-based) carriers and reselling those

services to customers as an indirect carrier. Air and ocean freight forwarding revenue is also generated when acting as an authorized

cargo sales agent.

2.6 Lease payments

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.

Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line

basis over the period of the lease.

Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as

finance leases. Finance leases are capitalized at the lease’s commencement at the lower of the fair value of the leased property and

the present value of minimum lease payments.

Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance

outstanding. The corresponding rental obligations, net of finance charges, are included in borrowings. The interest element of the finance

cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance

of the liability for each period. The property, plant and equipment acquired under a finance lease are depreciated over the shorter of

the useful life of the asset and the lease term.

2.7 Finance income and expenses

Finance income comprises interest income on funds invested, changes in the fair value of financial assets at fair value through profit

or loss and gains on the purchase of financial liabilities. Interest income is recognized as it accrues in profit or loss.

Finance expenses comprise interest expense on borrowings and changes in the fair value of financial assets at fair value through profit

or loss. All borrowing costs are recognized in profit or loss using the effective interest method.

Foreign currency gains and losses are presented on a net basis.

2.8 Income tax

Income tax expense comprises current and deferred income tax. Income tax expense is recognized in profit or loss.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at

the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred income tax is recognized using the balance sheet method, providing for temporary differences between the carrying amounts

of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred income tax is not

recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business

combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries

and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred

income tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred income tax is

measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have

been enacted or substantively enacted by the reporting date. Deferred income tax assets and liabilities are offset if there is a legally

enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on

the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their

tax assets and liabilities will be realized simultaneously.

CEVA Group Plc | Annual Report | 2008

44


A deferred income tax asset is recognized to the extent that it is probable that future taxable profits will be available against which

the temporary difference can be utilized. Deferred income tax assets are reviewed at each reporting date and are reduced to the extent

that it is no longer probable that the related benefit will be realized.

Deferred income tax is not provided on the unremitted earnings of subsidiaries where the timing of the reversal of the remitting

temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable

future or where the remittance would not give rise to incremental tax liabilities or is not taxable.

2.9 Intangible assets

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of

the acquired subsidiary at the date of acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is

tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed.

Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating

units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose

identified according to operating segment.

Contractual customer relationships

Contractual customer relationships acquired in a business combination are recognized at fair value at the acquisition date. The contractual

customer relationships have a finite useful life and are carried at cost less accumulated amortization. Amortization is calculated using

the straight-line method to allocate the cost of the contractual customer relationships over their estimated useful lives of between

10 and 20 years.

Other intangibles

Other intangible assets mainly comprise computer software, licenses and brand names.

Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by

the Group are recognized as intangible assets when it can be demonstrated how the software product will generate probable future

economic benefits, there is adequate technical, financial and other resources to complete the development and to use the software

product are available and the expenditure attributable to the software product during its development can be reliably measured. Costs

associated with maintaining computer software programs are recognized as an expense as incurred. Computer software development

costs recognized as assets are amortized over their estimated useful lives which does not exceed three years.

Separately acquired licenses are shown at historical cost. Licenses acquired in a business combination are recognized at fair value at

the acquisition date. Licenses have a finite useful life and are carried at cost less accumulated amortization. Amortization is calculated

using the straight-line method to allocate the cost of licenses over their estimated useful lives of three to five years.

Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software.

These costs are amortized over their estimated useful lives which do not exceed three years.

Other intangible assets that are acquired by the Group, which have finite useful lives are measured at cost less accumulated

amortization and accumulated impairment losses. Other intangible assets are amortized on a straight-line basis over their estimated

useful lives of three to 20 years.

2.10 Property, plant and equipment

Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes

expenditures that are directly attributable to the acquisition of the asset. Purchased software that is integral to the functionality

of the related equipment is capitalized as part of the cost of that equipment.

Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable

that future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying

amount of the replaced part is written off. The costs of the day-to-day servicing of property, plant and equipment are recognized

in profit or loss as incurred.

Depreciation

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual

values over their estimated useful lives, as follows:

• Buildings 10-50 years

• Plant and equipment 2-10 years

• Other 3-10 years

CEVA Group Plc | Annual Report | 2008

45


The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its

estimated recoverable amount (note 2.11).

Disposal

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with

the carrying amount of property, plant and equipment and are recognized in profit or loss.

2.11 Impairment of non-financial assets

Assets that have an indefinite useful life, for example goodwill, are not subject to amortization and are tested annually for impairment.

Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying

amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its

recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes

of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating

units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at

each reporting date.

2.12 Financial assets

Classification

The Group classifies its financial assets into two categories: (a) at fair value through profit or loss and (b) loans and receivables.

The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its

financial assets at initial recognition.

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if

acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are designated

as hedges. Assets in this category are classified as current assets.

(b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as

non-current assets. The Group’s loans and receivables comprise trade and other receivables and cash and cash equivalents in

the balance sheet.

Recognition and measurement

Regular purchases and sales of financial assets are recognized on the trade date – the date on which the Group commits to purchase or

sell the asset. Financial assets carried at fair value through profit or loss are initially recognized at fair value, and transaction costs are

expensed in the income statement. Financial assets are derecognized when the rights to receive cash flows from the investments have

expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Financial assets at fair

value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortized cost using the effective

interest method.

Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented

in the income statement within ‘net financial expense’ in the period in which they arise. Dividend income from financial assets at fair

value through profit or loss is recognized in the income statement as part of other income when the Group’s right to receive payments

is established.

If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation

techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same,

discounted cash flow analysis, and option pricing models, making maximum use of market inputs and relying as little as possible on

entity-specific inputs.

2.13 Derivative financial instruments and hedging activities

The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Embedded derivatives

are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and

the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through

profit or loss.

Derivatives are recognized initially at fair value; attributable transaction costs are recognized in profit or loss when incurred. Subsequent

to initial recognition, derivatives are measured at fair value with changes recognized immediately in the profit or loss. The Group does

not apply hedge accounting.

CEVA Group Plc | Annual Report | 2008

46


2.14 Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted average cost method.

Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

2.15 Trade receivables

Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method,

less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that

the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties

of the debtor and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of

the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at

the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount

of the loss is recognized in profit or loss. When a trade receivable is uncollectible, it is written off against the allowance account for trade

receivables. Subsequent recoveries of amounts previously written off are credited to profit or loss.

2.16 Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with

original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on

the balance sheet.

2.17 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are

recognized as a deduction from equity net of any tax effects.

2.18 Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost;

any difference between the proceeds (net of transaction costs) and the redemption value is recognized in profit or loss over the period

of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least

12 months after the balance sheet date.

If a portion of a financial liability is purchased, the previous carrying amount of the financial liability is allocated between the portion

that continues to be recognized and the portion that is derecognized based on the relative fair values of those respective portions on

the date of the repurchase. The difference between (a) the carrying amount allocated to the part derecognized and (b) the consideration

paid, including any non-cash assets transferred or liabilities assumed, for the part derecognized shall be recognized in profit or loss.

2.19 Employee benefits

Pension obligations

The Group operates a number of defined contribution and defined benefit pension schemes.

(a) Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity

and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension

plans are recognized as a personnel expense in profit or loss when they are due. Prepaid contributions are recognized as an asset to

the extent that a cash refund or a reduction in future payments is available.

(b) Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The liability recognized in

the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet

date less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs.

The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present

value of the defined benefit obligation is determined by discounting the estimated future cash outflows by the yield at the reporting

date on AA credit-rated bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity

approximating to the terms of the related pension liability.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in excess of the greater of 10%

of the value of plan assets or 10% of the defined benefit obligation are charged or credited to personnel expenses in profit or loss over

the employees’ expected average remaining working lives.

Other long term employee benefits

Other long term employee obligations include long-service, sabbatical or jubilee leave, long term disability benefits and deferred

compensation not payable within 12 months after the end of the period. The expected costs of these benefits are accrued over

CEVA Group Plc | Annual Report | 2008

47


the period of employment using the same accounting methodology as used for defined benefit pension plans. These obligations are

valued annually by independent, qualified actuaries.

Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever

an employee accepts voluntary redundancy in exchange for these benefits. The Group recognizes termination benefits when it has

demonstrably committed to terminate the employment of current employees according to a detailed formal plan without possibility

of withdrawal or provided termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due

more than 12 months after the balance sheet date are discounted to their present value.

Share based compensation

The Group operates equity-settled share based compensation plans, under which CEVA Group Plc receives services from employees

as consideration for equity instruments (options) of CEVA Investments Ltd. The fair value of the employee services received in exchange

for the grant of the options is charged by CEVA Investments Ltd and is recognized as an expense by CEVA Group Plc. The total amount

to be expensed is recognized by reference to the fair value of the options granted, excluding the impact of any non-market service and

performance vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are

expected to vest. The total amount expensed is recognized over the vesting period, which is the period over which all of the specified

vesting conditions are to be satisfied. At each balance sheet date, the Group revises its estimates of the number options that are

expected to vest based on the non-market vesting conditions. The Group recognizes the impact of the revision to original estimates,

if any, in profit or loss, with a corresponding adjustment to CEVA Investments Ltd’s equity.

The proceeds received net of any directly attributable transaction costs are credited to CEVA Investments Ltd’s share capital (nominal value)

and share premium when the options are exercised.

Short term benefits

Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under short term cash bonus or profit-sharing plans if the Group has a present

legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be

estimated reliably.

2.20 Provisions

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated

reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by

discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and

the risks specific to the liability.

2.21 Trade payables

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

3 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.

The estimates, judgments and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of

assets and liabilities within the next financial year are outlined below.

3.1 Impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.9.

The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require

the use of estimates and assumptions consistent with the most up-to-date budgets and plans that have been formally approved by

management. Refer to note 12 for the key assumptions used for the value-in-use calculations.

3.2 Income taxes

The Group is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the worldwide provision

for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during

CEVA Group Plc | Annual Report | 2008

48


the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded,

such differences will impact the income tax and deferred income tax provisions in the period in which such determination is made.

3.3 Retirement benefits

Defined benefit schemes are reappraised annually by independent actuaries based upon actuarial assumptions. Significant judgment

is required in determining these actuarial assumptions. Refer to note 22 for the principal assumptions used.

3.4 Contingent liabilities

Legal proceedings covering a range of matters are pending in various jurisdictions. Due to the uncertainty inherent in such matters, it is

often difficult to predict the final outcome. The cases and claims against CEVA often raise difficult and complex factual and legal issues.

These are subject to many uncertainties and complexities, including but not limited to the facts and circumstances of each particular

case and claim, the jurisdiction and the differences in applicable law. In the normal course of business, we consult with legal counsel

and certain other experts on matters related to litigation.

We recognize a provision when it is determined that an adverse outcome is probable and the amount of the loss can be reasonably

estimated. In the event that an adverse outcome is possible and an estimate is not determinable, the matter is disclosed. Refer to note 27

for further information regarding contingent liabilities.

4 FINANCIAL RIsk MANAGEMENT

Financial risk factors

The Group’s operating activities expose it to a variety of financial risks, such as market risk (including foreign currency exchange risk,

interest rate risk, and commodity price risk), credit risk, and liquidity risk. The Group’s overall risk management program focuses on

the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. The Group

uses derivative financial instruments to hedge certain risk exposures. Risk management is carried out by our central treasury department

(Group Treasury) under policies approved by the Board of Directors. Group Treasury identifies, evaluates, and hedges financial risks in

close co-operation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written

policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, the use of derivative financial instruments and

non-derivative financial instruments, and investment of excess liquidity. Although the Group enters into derivative contracts for risk hedging

purposes, we do not apply hedge accounting.

The following analysis provides quantitative information regarding our exposure to the financial risks described above. There are certain

limitations inherent in the analyses presented, primarily due to the assumption that rates change in a parallel fashion and instantaneously.

In addition, the analysis is unable to reflect the complex market reactions that normally would arise from the market shifts assumed.

(a) Market risk

Foreign currency exchange risk

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 Euro, the Group’s functional and

reporting currency. Although we enter into hedging arrangements and other contracts in order to reduce our exposure to currency

fluctuations, these measures may be inadequate or may subject us to increased operating or financing costs.

The main two currencies of our external hedges are the British pound and United States dollar. Significant acquisitions are typically

funded in the currency of the underlying assets.

The main exchange rates are shown below:

2008 2007

Year end closing Average Year end closing Average

British pound 1.0449 1.2573 1.3597 1.4605

US dollar 0.7167 0.6832 0.6857 0.7295

We have established policies which require Group companies to manage their foreign exchange risk against their functional currency.

The Group companies are required to report their relevant foreign exchange risk exposure to Group Treasury. To manage their foreign

exchange risk arising from future commercial transactions and recognized assets and liabilities, entities in the Group use forward

contracts, transacted with Group Treasury. Foreign exchange risk arises when future commercial transactions or recognized assets

or liabilities are denominated in a currency that is not the entity’s functional currency.

CEVA Group Plc | Annual Report | 2008

49


CEVA has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure

arising from the net assets of the Group’s foreign operations is managed primarily through borrowings denominated in the relevant

foreign currencies.

A 5% strengthening of the Euro against the following currencies at 31 December would have increased (decreased) equity and profit or

loss by the amounts shown below. This analysis assumes that all other variables, in particular, interest rates, remain constant. The analysis

is performed on the same basis for 2007.

€ millions

Effect on profit

before tax

2008

Effect on

equity

Effect on profit

before tax

2007

Effect on

equity

British pound 1 25 (2) (15)

US dollar (2) 94 11 30

A 5% weakening of the Euro against the above currencies at 31 December would have had the equal but opposite effect on the above

currencies to the amounts shown above, on the basis that all other variables remain constant.

Cash flow and fair value interest rate risk

Interest rate risk is the risk that unexpected interest rate changes negatively affect the Company’s results, cash flows, and equity.

Any hedging activities are meant to protect CEVA against changes in interest rates.

It is CEVA’s policy to mitigate the effect of interest rate volatility on its results and cash flows through the use of cross currency interest

rate derivatives within the risk apetite constraints of the Company. In addition, we try to match the level of floating interest paid with

the operational cycle so as to create a natural hedge.

The table below shows the interest rate profile of the Group’s interest-bearing financial instruments as of 31 December 2008 and 2007.

€ millions 2008 2007

Carrying value

Fixed Rate Instruments:

Loans -

Loan notes 937

Variable Rate Instruments:

Financial liabilities 1,667

Total 2,604

Fair value sensitivity analysis for fixed rate instruments

Our debt instruments that bear interest at fixed rates are exposed to fluctuation in fair value resulting from changes in market interest

rates. The potential decrease in fair value resulting from a hypothetical 1% increase in market interest rates would have been

approximately €17 million.

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by

the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

The analysis was performed on the same basis as for 2007.

€ millions 2008 2007

Change in interest rate

Effect on profit

Euro +100 basis points (5)

Euro -100 basis points 5

US dollar +100 basis points (12)

US dollar -100 basis points 12

695

968

814

2,477

(4)

4

(12)

12

CEVA Group Plc | Annual Report | 2008

50


Commodity risk

As a supply chain company, CEVA is exposed to the risk of an increase in the price of fuels, principally diesel gasoline. We believe that

the majority of the increases in price risk is passed onto our customers and we have not therefore entered into any contract to hedge

any specific commodity risk.

(b) Credit risk

The collectability of accounts receivable is assessed on a monthly basis, where the method of determining the reduction is tailored

to the specific business environment and takes into consideration the history of the reporting unit. The Group is focusing strongly on

the cash generating capacity of its businesses and acknowledges the importance of strong credit control which is monitored through

periodic detailed analysis of overdue trade receivable balances.

Credit risk is the risk that counterparties fail to meet their contractual payment obligations through insolvency or default as well as

credit exposures to customers. The credit risk of a derivatives portfolio overlaps market risk, since it is the replacement value of

the portfolio that the Company is likely to lose if the counterparty fails. In order to reduce legal risk resulting from derivatives, CEVA

strives to have an International Swaps and Derivative Association agreement in place before entering into derivatives. For banks and

financial institutions, only independently rated parties with a minimum rating of ‘A+’ from Standard & Poor’s are accepted. Group Treasury

only trades with its defined relationship banking group unless trading outside this banking group may, under specific circumstances,

provide significantly better pricing or is desired due to the confidentiality with respect to the hedged item.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting

date was:

€ millions 2008 2007

Derivative financial instruments 18 1

Loans and receivables 996 1,184

Cash and cash equivalents 164 175

(c) Liquidity risk

Liquidity risk is the risk that the Company does not have sufficient headroom (cash and cash equivalents plus committed credit lines)

available to meet both our day-to-day operating requirements and debt servicing obligations (interest and debt repayment). Group

Treasury mitigates liquidity risk by ensuring that CEVA has adequate funding at its disposal at all times, enabling access to the money

markets and capital markets. This includes relationship management with all financial stakeholders, such as banks, rating agencies

and debt investors. Refer to note 21 of the consolidated financial statements for details on the Group’s covenants.

As at 31 December 2008, CEVA Group Plc had €164 million (2007: €175 million) in cash on its balance sheet. In addition to this cash,

CEVA Group Plc has access to €251 million (2007: €186 million) of committed credit facilities, of which €225 million (2007: €60 million)

was drawn. Total headroom at 31 December 2008 was therefore €190 million (2007: €301 million).

The table below analyses the amounts of interest bearing borrowings into relevant maturity groupings based on the remaining period

from the balance sheet date to the contractual maturity date:

€ millions 2008

Finance Leases Loan notes Bank borrowings Total

Less than 1 year 2 - 36 38

1-5 years 8 779 942 1,729

Thereafter 9 188 716 913

Total principal debt 19 967 1,694 2,680

Unamortized debt issuance costs - 30 46 76

Total carrying value 19 937 1,648 2,604

Of which included in current borrowings 2 - 75 77

Of which included in non-current borrowings 17 937 1,573 2,527

Trade and other payables of €1,091 million are payable within one year.

CEVA Group Plc | Annual Report | 2008

51


Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide

returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

CEVA has adopted a capital structure which utilizes a high proportion of structured debt to equity. We see our debt financing as being

a cheaper source of capital than equity financing. The structure of our debt and facilities is a combination of long term debt secured to

finance our two acquisitions and medium term facilities which are available to support shorter term liquidity requirements. Our interest

rates are semi-fixed and the maturity dates on our main bonds and notes do not begin to mature until November 2013. This has allowed

us to manage our debt position to give CEVA stability and predictability of both interest and principal repayments.

5 sEGMENT INFORMATION

Business segments

The Group comprises the following main business segments:

• Contract Logistics including the provision of inbound logistics, manufacturing support, outbound / distribution logistics and

aftermarket logistics; and

• Freight Management including the provision of air, ocean, ground based transportation and other freight transportation related

services (such as customs brokerage, local pick-up and delivery services, materials management and trade facilitation).

Geographical segments

The Group has operations in the following geographical segments:

• Northern Europe (including the United Kingdom, Ireland, the Nordics, Benelux, France and Central and Eastern Europe);

• Southern Europe (including Italy, Spain, Turkey and Greece), Middle East & Africa;

• Americas (including the United States of America, Canada, Brazil, Argentina and Mexico); and

• Asia Pacific (including Australia, China, Singapore and Thailand).

Business segments

The segment results for the year ended 31 December 2008 are as follows:

€ millions

Contract

Logistics

2008

Freight

Management Eliminations Consolidated

Total segment revenue 3,465 2,864 - 6,329

Inter-segment revenue 4 - (4) -

Revenue 3,469 2,864 (4) 6,329

Operating expenses excluding depreciation, amortization and impairment (3,291) (2,771) 4 (6,058)

EBITDA 178 93 - 271

Depreciation and amortization excluding purchased intangibles (64) (26) - (90)

Amortization and impairment on purchased intangibles (38) (37) - (75)

Depreciation, amortization and impairment (102) (63) - (165)

Operating income 77 30 - 106

Net finance expense (including foreign exchange movements) (150) (98) - (247)

Gains arising from intra-group restructuring - 29 (29) -

Loss before income taxes (60) (52) (29) (141)

Income tax expense 16

Loss for the year (125)

CEVA Group Plc | Annual Report | 2008

52


The segment results for the year ended 31 December 2007 are as follows:

€ millions

Contract

Logistics

2007

Freight

Management Eliminations Consolidated

Total segment revenue 3,473 1,312 - 4,785

Inter-segment revenue 1 6 (7) -

Revenue 3,474 1,318 (7) 4,785

Operating expenses excluding depriciation and amortization (3,252) (1,276) 7 (4,521)

EBITDA 222 42 - 264

Depreciation and amortization excluding purchased intangibles (67) (13) - (80)

Amortization on purchased intangibles (40) (181) - (221)

Depreciation and amortization (107) (194) - (301)

Operating income 115 (152) - (37)

Net finance expense (including foreign exchange movements) (100) (34) (134)

Profit (after tax) from investments in associates - 3 - 3

Loss before income taxes 15 (183) - (168)

Income tax expense (28)

Loss for the year (196)

Segment assets and liabilities at 31 December 2008 and capital expenditure for the year then ended are as follows:

€ millions Contract Logistics Freight Unallocated

2008

Consolidated

Assets 1,976 1,885 37 3,898

Liabilities 910 404 2,720 4,034

Capital expenditure 76 30 - 106

Segment assets and liabilities at 31 December 2007 and capital expenditure for the year then ended are as follows:

€ millions

Contract

Logistics

2007

Freight

Management Unallocated Consolidated

Assets 2,205 2,062 16 4,283

Liabilities 1,013 463 2,676 4,152

Capital expenditure 71 11 - 82

Geographical segments

The total revenue for the year ended 31 December 2008 as well as the segment assets at 31 December 2008 and the capital

expenditure for the year then ended are as follows:

€ millions Northern Europe

2008

Southern Europe,

Middle East and Africa Americas Asia Pacific Unallocated Consolidated

Revenue 1,626 1,355 1,908 1,440 - 6,329

Segment assets 950 886 1,221 804 37 3,898

Capital expenditure 23 27 39 17 - 106

CEVA Group Plc | Annual Report | 2008

53


The total revenue for the year ended 31 December 2007 as well as the segment assets at 31 December 2007 and the capital

expenditure for the year then ended are as follows:

€ millions Northern Europe

2007

Southern Europe,

Middle East and Africa Americas Asia Pacific Unallocated Consolidated

Revenue 1,360 1,302 1,208 915 - 4,785

Segment assets 1,008 821 1,970 468 16 4,283

Capital expenditure 24 23 20 15 - 82

6 sPECIFIC ITEMs

€ millions 2008 2007

Personnel expenses 10

Other operating expenses 39

Amortization and impairment on purchased intangibles 4

Finance income (30)

Total 23

Personnel expenses

The 2008 personnel expenses primarily relate to retention payments committed as a part of our acquisition of EGL and redundancy

costs incurred as we integrated our Contract Logistics and Freight Management businesses. The 2008 expense includes €1 million for

the retirement benefit obligations accruing to David Kulik (former CEVA Vice Chairman) who retired on 22 February 2008.

The 2007 personnel expenses include retention payments committed as part of our acquisition of EGL and benefits related to

the curtailment gains derived from our Italian pension plans net of increased expenses related to early retirement program costs in this

territory and the costs of various employee related litigation.

Other operating expenses

In 2008, other operating expenses mainly comprise expenses related to the on-going industry wide anti-trust investigation as well as

rebranding and integration costs. The 2007 other operating expenses consist of separation cost relating to the relocation from facilities

previously shared by the logistics business with TNT, costs related to the disentanglement of the shared IT infrastructure and costs

incurred to rebrand TNT Logistics to CEVA.

Amortization and impairment on purchased intangibles

As part of the acquisition of EGL and in accordance with IFRS, CEVA recognized a brand name for the Select Carrier Group (SCG).

In November 2008, the Group replaced the SCG brand with the launch of CEVA Ground (a United States based freight network).

Accordingly, the total book value of SCG brand of €4 million was derecognized.

Amortization for the year ended 31 December 2007 includes an accelerated amortization charge of €172 million to the EGL brand

name. In accordance with IFRS 3 Business Combinations, CEVA was required to assign a value to the brand name of the acquired

business (EGL) as if acquired by an average third party market participant who, it is assumed, would continue to use the brand into

the future. CEVA management, with the assistance of expert external advisors, allocated a value of €172 million to the EGL brand name.

We have chosen to have one corporate identity and as a result, have rebranded EGL’s operations to CEVA. As such, IFRS requires us to

amortize the notional value assigned to the EGL brand name over the period it was used, being four months.

Both of the above items are accounting entries only and are therefore non-cash transactions.

Finance income

In November 2008, CEVA purchased senior and senior subordinated notes with a nominal face value of €49 million (maturing on

1 December 2014 and 2016) at a total cost of €21 million (€19 million excluding accrued interest). As a result of this transaction

CEVA Group Plc has recorded a gain of €30 million which has been included in specific items.

(1)

38

172

-

209

CEVA Group Plc | Annual Report | 2008

54


7 PERsONNEL EXPENsEs

€ millions 2008 2007

Wages and salaries 1,572 1,311

Social security charges 197 195

Pension costs - defined benefit plans (note 22) 6 (17)

Pension costs - defined contribution plans 30 19

Share options granted to Directors and employees 4 3

Total personnel costs 1,809 1,511

Average number of people employed

The average number of persons (including executive Directors) employed by the Group during the year was:

2008 2007

Contract Logistics 38,552 37,870

Freight Management 13,283 5,243

Total 51,835 43,113

The increase in the average number of persons employed by the Group from 2007 to 2008 is a result of the acquisition of EGL on

2 August 2007.

Directors and executive management emoluments

€ thousands 2008 2007

David Kulik 1

1,000 1,473

John Pattullo 2

831 569

Joshua Harris 47 45

Gareth Turner 47 45

Lukas Kolff 3

47 45

Stan Parker 47 44

Paul Richardson 4

39 -

Daniel DiMaggio 5

- 215

Other executive management 6

2,311 817

Total 4,369 3,253

1 David Kulik retired from the Board of Directors on 22 February 2008. The payment relates to compensation for loss of office.

2 John Pattullo was appointed to the Board of Directors on 9 October 2007.

3 Lukas Kolff retired from the Board of Directors on 6 January 2009.

4 Paul Richardson was appointed to the Board of Directors on 6 August 2008.

5 Daniel DiMaggio retired from the Board of Directors on 31 August 2007.

6 With the Group's move to a regional structure, our other executive management team has expanded. As a result, the 2008 figures includes

emoluments received by the new members of the key management team.

Directors’ and executive management emoluments include salaries, accrued bonus provisions and share option expenses. No Directors

have had pensions funded by the Group. Other executive management received €147 thousands (2007: €69 thousands) for pension

related costs.

CEVA Group Plc | Annual Report | 2008

55


Share options granted to the Directors’ and executive management are shown in the table below.

Number of shares

Outstanding at

1 January 2007

David Kulik 12,750

John Pattullo -

Joshua Harris 1,172

Gareth Turner 1,172

Lukas Kolff 1,172

Stan Parker 1,172

Paul Richardson -

Daniel DiMaggio 6,750

Other executive management -

Total 24,188

Granted

during the

year

2,513

47,400

-

-

-

-

-

-

15,562

65,475

Forfeited

during the

year

-

-

-

-

-

-

-

(4,500)

-

(4,500)

Outstanding 31

December 2007 /

1 January 2008

15,263

47,400

1,172

1,172

1,172

1,172

-

2,250

15,562

85,163

Granted

during the

year 1

-

-

-

-

-

-

800

-

38,440

39,240

Forfeited

during the

year

(15,263)

-

-

-

-

-

-

(2,250)

-

(17,513)

1 With the Group's move to a regional structure, our other executive management team has expanded. As a result, options granted during the year includes those options held by the new members of

athe key management team prior to 2008. No options were granted to other executive management during 2008.

8 AUdITOR REMUNERATION

During the year, the Group obtained the following services from its auditor, PricewaterhouseCoopers LLP and its associates:

Outstanding at

31 December

2008

-

47,400

1,172

1,172

1,172

1,172

800

-

54,002

106,890

€ millions 2008 2007

Fees payable to the Company's auditor for the audit of the parent company and consolidated financial statements 3

Fees payable to the Company's auditor and its associates for other services:

The audit of the Company's subsidiaries pursuant to legislation 3

3

Services relating to corporate finance transactions - 4

Tax services 2

1

All other services 1

-

Total 9

11

Auditor remuneration is recognized in other operating expenses in profit or loss.

9 FINANCE INCOME ANd EXPENsEs

€ millions 2008 2007

Interest income on short term bank deposits 13

Net foreign exchange gains -

Other financial income 32

Finance income 45

Interest expense on bank borrowings 223

Finance lease liabilities 2

Net foreign exchange losses 48

Other financial expense 19

Finance expense 292

Net finance expense 247

Included in other financial income is a €30 million gain (2007: nil) on the repurchase of bonds. Refer to note 21 for further information

on the repurchase of bonds. The amortization of debt issuance costs of €14 million is included in other financial expense.

3

17

24

1

42

159

2

-

15

176

134

CEVA Group Plc | Annual Report | 2008

56


10 INCOME TAX EXPENsE

€ millions 2008 2007

Current tax expense 31

Deferred tax expense (47)

Income tax expense (16)

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the tax rates applicable in

the United Kingdom on the profits of the consolidated entities as follows:

€ millions

Theoretical tax charge / (income)

Permanent differences:

(40)

Non deductible other costs 3

Non taxable repurchase of debt (8)

Difference between local and UK tax rate (7)

Other movements:

Write-off deferred tax assets 14

Deferred taxes not recognized on losses 38

Impact of tax rate changes (11)

Other income tax expense (5)

Actual tax charge (16)

28.0% (50)

(2.4)% 1

6.0% -

4.8% 11

(9.7)% 34

(26.7)% 30

7.7% -

3.6% 2

11.3% 28

64

(36)

28

2008 2007

30.0%

(0.7)%

-

(6.5)%

(20.0)%

(17.7)%

-

(1.7)%

(16.6)%

The weighted average applicable tax rate is 11.3% (2007: (16.6)%). The 2007 rate was impacted by an impairment of deferred income

tax assets.

11 BUsINEss COMBINATIONs

EGL Inc. (EGL)

On 2 August 2007 the Group acquired all of the shares of EGL for a total purchase consideration of €1,465 million. During 2008, CEVA

finalized the purchase price allocation which resulted in the following fair value adjustments:

€ millions

Provisional

fair value

Cash paid 1,417

Direct costs relating to the acquisition 46

Total purchase consideration 1,463

Fair value

adjustments

-

2

2

Final

fair value

1,417

48

1,465

CEVA Group Plc | Annual Report | 2008

57


€ millions

Provisional

fair value

Fair value

adjustments

Intangible assets, excluding goodwill and contractual customer relationships 197

(5)

Contractual customer relationships 306

-

Cash and cash equivalents 74

-

Property, plant and equipment 119

(3)

Other non-current assets 12

-

Current assets, excluding cash and cash equivalents 596

(4)

Current liabilities (472)

(16)

Non-current liabilities, excluding deferred income tax liabilities (105)

-

Deferred income tax liabilities (190)

3

Fair value of net assets 537 (25)

Minority interest (1)

Goodwill 927

Total purchase consideration 1,463

Purchase consideration settled in cash 1,463

Cash and cash equivalents in subsidiary acquired 74

Cash outflow on acquisition 1,389

The change in the fair value of the acquired assets and liabilities has resulted in the 2007 comparatives being restated.

Other acquisitions

During 2008, four small acquisitions were completed resulting in additional goodwill of €11 million. The results of these businesses

are not material.

12 INTANGIBLE AssETs

€ millions Goodwill

Contractual

customer

relationships

-

27

2

2

-

2

Final

fair value

192

306

74

116

12

592

(488)

(105)

(187)

512

(1)

954

1,465

1,465

74

1,391

Other

intangibles Total

Net book amount at 1 January 2007 562 463 8 1,033

Balances acquired through business combinations 927 306 197 1,430

Changes to provisional purchase allocation 27 - (5) 22

Additions - - 12 12

Amortization - (50) (179) (229)

Exchange rate differences (49) (26) (1) (76)

Closing net book amount at 31 December 2007 1,467 693 32 2,192

Historical cost 1,467 750 213 2,430

Accumulated amortization - (57) (181) (238)

Net book amount at 31 December 2007 / 1 January 2008 1,467 693 32 2,192

Balances acquired through business combinations 11 - - 11

Additions - - 18 18

Amortization and impairment - (69) (18) (87)

Exchange rate differences (51) (19) (1) (71)

Closing net book amount at 31 December 2008 1,427 605 31 2,063

Historical cost 1,427 731 230 2,388

Accumulated amortization and impairment - (126) (199) (325)

Net book amount at 31 December 2008 1,427 605 31 2,063

CEVA Group Plc | Annual Report | 2008

58


Impairment tests for goodwill

Goodwill is allocated to the Group’s cash-generating units (CGUs) based upon their proportional business enterprise value as at the date

of acquisition. The business enterprise values were derived using the income approach. The carrying amount of goodwill at 31 December

as allocated to each of the Group’s five identified CGUs is as follows:

€ millions 2008 2007

Freight Management 915 917

Contract Logistics:

Northern Europe 204 226

Southern Europe, Middle East and Africa 144 148

Americas 112 105

Asia Pacific 52 71

Total goodwill 1,427 1,467

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections

based on the most recent financial budgets approved by management covering a five year period. Cash flows beyond the five year

period are extrapolated using an estimated perpetual growth rate of 2%. The growth rate reflects expectations regarding industry

growth for Contract Logistics and Freight Management but does not exceed the estimated long term growth rate for countries with

the highest contribution to earnings in the relevant CGUs. The pre-tax discount rate used in the CGU valuations was 11.7%.

No goodwill impairment losses were recognized for the year ended 31 December 2008 (2007: nil).

Sensitivity analysis was performed on the goodwill impairment testing by using (a) a 1% higher discount rate and by using (b) a 1%

lower growth rate for the cash flows projected beyond five years. Neither of these scenarios would have led to impairment.

Other intangibles

As part of the acquisition of EGL and in accordance with IFRS, CEVA recognized a brand name for the Select Carrier Group (SCG).

In November 2008, the Group replaced the SCG brand with the launch of CEVA Ground (a United States based freight network).

Accordingly, the total book value of SCG brand of €4 million was derecognized.

13 PROPERTY, PLANT ANd EqUIPMENT

€ millions

Land and

buildings

Plant and

equipment Other

Under

construction Total

Net book amount at 1 January 2007 195 136 33 12 376

Balances acquired through business combinations 72 31 15 - 118

Changes to provisional purchase allocation (3) - - - (3)

Additions 7 33 21 9 70

Disposals (41) (8) (4) - (53)

Depreciation (12) (40) (20) - (72)

Exchange rate differences (13) (5) (1) - (19)

Transfers 11 3 3 (17) -

Closing net book amount at 31 December 2007 216 150 47 4 417

Historical cost 230 196 70 4 500

Accumulated depreciation (14) (46) (23) - (83)

Net book amount at 31 December 2007 / 1 January 2008 216 150 47 4 417

Additions 11 42 25 10 88

Disposals (16) (2) - - (18)

Depreciation (14) (39) (25) - (78)

Exchange rate differences (18) (8) (3) - (29)

Transfers 1 (15) 20 (6) -

Closing net book amount at 31 December 2008 180 128 64 8 380

Historical cost 208 213 112 8 541

Accumulated depreciation (28) (85) (48) - (161)

Net book amount at 31 December 2008 180 128 64 8 380

CEVA Group Plc | Annual Report | 2008

59


Finance leases

The following assets held under finance lease are included in property, plant and equipment:

€ millions

Land and

buildings

Plant and

equipment Other Total

Under finance lease 31 December 2007 15 4 - 19

Under finance lease 31 December 2008 15 4 - 19

14 dEFERREd INCOME TAX

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset and when the deferred income

taxes relate to the same fiscal authority. The amounts are as follows:

€ millions 2008 2007

Before offsets:

Deferred income tax assets (124)

Deferred income tax liabilities 221

Net deferred income tax liabilities 97

After offsets:

Deferred income tax assets (6)

Deferred income tax liabilities 103

Net deferred income tax liabilities 97

The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances

within the same tax jurisdiction, is as follows:

Deferred income tax assets

€ millions Provisions

Balance at 1 January 2007 34

Balance acquired through business combinations 11

Income statement effect 1

Deferred income tax assets at 31 December 2007 / 1 January 2008 46

Transfers (11)

Income statement effect (6)

Deferred income tax assets at 31 December 2008 29

Deferred income tax liabilities

€ millions

Balance at 1 January 2007 30

Balance acquired through business combinations 18

Adjustment to provisional acquisition balances (3)

Exchange rate differences -

Income statement effect (9)

Deferred income tax liabilities at 31 December 2007 / 1 January 2008 36

Transfers 11

Exchange rate differences -

Income statement effect (11)

Deferred income tax liabilities at 31 December 2008 36

Goodwill and

other

intangibles

93

-

(30)

63

(3)

(9)

51

(109)

263

154

(6)

160

154

Losses

carried

forward Other Total

70

-

(70)

-

11

(2)

9

(60)

-

60

-

3

32

35

137

11

(39)

109

-

15

124

Property, plant

and equipment Intangibles Other Total

Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through

future taxable profits is probable. The Group did not recognize deferred income tax assets of €38 million (2007: €30 million) in respect

of losses amounting to €173 million (2007: €150 million) that can be carried forward against future taxable income for a period between

one year and an indefinite period of time.

116

172

-

2

(67)

223

(9)

(7)

(26)

181

4

-

-

-

-

4

(5)

-

5

4

150

190

(3)

2

(76)

263

(3)

(7)

(32)

221

CEVA Group Plc | Annual Report | 2008

60


Indemnification

TNT has certain obligations to indemnify and hold CEVA harmless from and against tax liabilities of the Group companies of

the Logistics business resulting from or in connection with transactions, events, acts or omissions which occurred on or before

4 November 2006.

15 INVENTORY

€ millions 2008 2007

Raw materials and supplies 18

Finished goods 11

Total inventory 29

Inventory is shown net of provision for obsolescence of €1 million (2007: €3 million).

Movements in inventory as well as changes in the provision for obsolescence are recorded in cost of materials in profit or loss.

16 TRAdE ANd OTHER RECEIVABLEs

€ millions 2008 2007

Trade receivables 923 1,122

Provision for impairment of trade receivables (30) (37)

Trade accounts receivable - net 893 1,085

VAT receivable 20 13

Other 75 73

Other receivables 95 86

Total trade and other receivables 988 1,171

Other receivables include amounts receivable from insurance companies, government departments, tax authorities and from

associated companies.

The fair value of trade and other receivables approximates its carrying amount.

As at 31 December 2008, trade receivables of €257 million (2007: €484 million) were past due but not impaired. These receivables

relate to a number of independent customers for whom there is no history of default. The ageing profile of trade receivables past due

but not impaired is as follows:

€ millions 2008 2007

Past due 0-30 days 177

Past due 31-60 days 40

Past due 61-90 days 17

Past due 91-120 days 10

Past due more than 121 days 13

Total 257

The year on year movement in overdue receivables reflects the high starting base following the acquisition of our Freight Management

business in 2007. During the year the ageing profile of receivables balances in the Freight Management business was realigned with

the underlying commercial terms.

17

19

36

338

84

33

12

17

484

CEVA Group Plc | Annual Report | 2008

61


The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:

€ millions 2008" 2007"

Euro 404

US dollar 282

UK pound 80

Other currencies 252

Total 1,018

Movements in the Group provision for impairment of trade receivables are as follows:

€ millions 2008" 2007"

At 1 January 37 27

Balance acquired through business combination - 12

Charged to other operating expenses - 6

Receivables written off during the year as uncollectible (5) (6)

Unused amounts reversed (2) (2)

At 31 December 30 37

The creation and release of the provision for impaired receivables have been included in ‘other operating expenses’ in the income

statement. Amounts charged to the allowance account are generally written off when there is no expectation of recovery.

The other classes within trade and other receivables do not contain impaired assets.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group

does not hold any collateral as security.

17 dERIVATIVE FINANCIAL INsTRUMENTs

€ millions

Contract /

notional

amount

Foreign exchange derivative contracts 191

Cross currency interest rate swaps 172

Total recognized derivative assets / (liabilities) 363

Fair values

assets

Fair values

liabilities

Contract /

notional

amount

Macintosh HD:Users:lynn:Desktop:CEVA tabellen deel 2:nieuwe van klant - gecorr font.xls

18 CAsH ANd CAsH EqUIVALENTs

Macintosh HD:Users:lynn:Desktop:CEVA tabellen deel 2:nieuwe van klant - gecorr font.xls

15

3

18

(2)

-

(2)

161

167

328

Fair values

assets

1

-

1

497

297

116

298

1,208

2008 2007

The maximum exposure to credit risk at the reporting date is the fair value of the derivative assets in the balance sheet.

Fair values

liabilities

€ millions 2008 2007

Cash at bank 88

Current bank deposits 76

Total cash and cash equivalents 164

(1)

-

(1)

160

15

175

CEVA Group Plc | Annual Report | 2008

62


19 jOINT VENTUREs

The Group has one significant joint venture being a 50% interest in Anji-TNT Automotive Logistics Company Ltd, a company which

is incorporated in China and provides contract logistics services. The following amounts represent the Group’s 50% share of the assets

and liabilities, sales and results of the joint venture. They are included in the consolidated balance sheet and consolidated income

statement.

€ millions 2008 2007

Assets

Non-current assets 20 20

Current assets 43 40

Liabilities

Current liabilities 46 38

Net assets 17 22

Income 147 138

Expenses 1 (142) (134)

Profit after income tax 5 4

Proportionate interest in joint venture's commitments 3 1

1 Included in expenses is € 3 million (2007: € 3 million) tax expense.

There are no contingent liabilities relating to the Group’s interest in the joint venture and no contingent liabilities in the joint venture itself.

20 sHARE CAPITAL

Number of ordinary shares

1 January 2007 310,000

Issued during the year 40,000

31 December 2007 / 1 January 2008 / 31 December 2008 350,000

At 31 December 2008, the authorized share capital comprised 350,000 ordinary shares (2007: 350,000). Ordinary shares have

a nominal value of £1 each. All issued shares are fully paid.

21 BORROWINGs

The carrying amounts and fair value of borrowings are as follows:

€ millions

2008 2007

Carrying value Fair value Carrying value Fair value

Non-current

Bank borrowings 1,573 1,619 1,354 1,393

Loan notes 937 489 968 885

Finance leases 17 17 17 17

Total non-current borrowings 2,527 2,125 2,339 2,295

Current

Bank overdrafts 42 42 21 21

Bank borrowings 33 33 115 115

Finance leases 2 2 2 2

Total current borrowings 77 77 138 138

Total borrowings 2,604 2,202 2,477 2,433

Unamortized debt issuance costs 76 76 74 74

Total principal debt 2,680 2,278 2,551 2,507

CEVA Group Plc | Annual Report | 2008

63


Non-current borrowings

The fair value of the non-current interest bearing debt has been determined using the market price at the balance sheet date.

The senior bank debt’s fair value approximates its carrying value as it is a floating rate facility. The average floating interest rate

for the period was 7.4% (2007: 8.0%) and 5.9% (2007: 6.8%) for US dollar and for Euro denominated loans respectively.

Current borrowings

The carrying amounts of current borrowings approximate their fair value. Included in non-current borrowings is €186 million (2007:

€60 million in current borrowings) of our revolving credit facility, which was drawn down in October 2008 to ensure that CEVA could

utilize the liquidity of this facility given the uncertainties in the banking sector.

Terms and debt repayment schedule

Currency Nominal interest rate Maturity

Senior secured term facility Euro EURIBOR + 3% November 2013

Senior secured term facility US dollar US LIBOR + 3% November 2013

Revolving credit facility Euro EURIBOR + 2.5% November 2012

Revolving credit facility US dollar Prime Rate + 1.5% November 2012

Second priority senior secured notes US dollar 10% September 2014

Senior unsecured loan US dollar US LIBOR + 5.75% August 2015

Senior notes Euro 8.5% December 2014

Senior subordinated notes Euro 10% December 2016

Bank overdrafts Euro Various Various

Finance lease liabilities Euro Various Various

Less than 1.5% of our total debt is due for redemption each year until 2012.

The carrying amounts of the Group’s borrowings are denominated in the following currencies:

€ millions 2008 2007

Euro 1,125 1,065

US dollar 1,474 1,406

Other currencies 5 6

Total 2,604 2,477

Bank borrowings

In addition to the term bank loans, the Group has a €183 million (2007: €179 million) synthetic letter of credit facility which is available

for the issuance of letters of credit and bank guarantees. On 31 December 2008, the facility consisted of €88 million (2007: €88 million)

and US$133 million (2007: US$133 million) respectively. Approximately €156 million (2007: €132 million) of letters of credit in various

currencies were issued on 31 December 2008 under the synthetic letter of credit facility. The synthetic letter of credit facility expires on

4 November 2013. The remaining amount undrawn as at 31 December 2008 is €27 million (2007: €46 million).

The Group has the following undrawn borrowing facilities which expire beyond one year:

€ millions 2008 2007

Floating rate 26 127

Fixed rate 27 46

Total 53 173

Interest rate and fees

The interest rates per annum applicable to loans under the senior secured facilities and senior unsecured loan facility are, in our option,

equal to either an alternate base rate or an adjusted Euro currency rate for a one, two, three or six-month interest period, or a nine or

12 month period, if available from all relevant lenders, in each case, plus an applicable margin. Euro currency loans are based on

adjusted EURIBOR if denominated in Euro and on adjusted LIBOR if denominated in any other currency.

CEVA Group Plc | Annual Report | 2008

64


Certain covenants and events of default

The senior secured facilities contain customary covenants and events of default that, among other things, restrict, subject to certain

exceptions, our ability, and the ability of our subsidiaries, to incur indebtedness, sell assets, make investments, engage in acquisitions,

mergers or consolidations and make dividend and other restricted payments.

In addition, our senior secured credit facility contains a covenant that requires us to maintain a maximum ratio of secured first lien net

debt to covenant EBITDA of 4.0 to 1.0, calculated for the trailing four quarters (as determined under our senior secured credit facility).

The definition of covenant EBITDA allows us to add back certain non-cash and non-recurring charges that are deducted in determining

net income (for example, rebranding costs) and to add the future benefit of specific cost reduction programs. The senior secured

facilities also contain customary affirmative covenants and events of default.

The Group is in compliance with all loan covenants.

Loan notes

The senior and senior subordinated notes are guaranteed, jointly and severally, on an unsecured basis, by each subsidiary that

guarantees the senior secured facilities.

The second priority senior secured notes are guaranteed by each of the issuer’s subsidiaries that guarantee the issuer’s senior secured

credit facilities. The notes are senior obligations of the issuer and are senior obligations of the guarantors secured by a second-priority

lien, subject to certain exceptions and permitted liens, on certain of our and the guarantor’s existing and future assets.

The senior notes contain customary covenants and events of default that, among other things, restrict, subject to certain exceptions,

our ability, and the ability of our subsidiaries, to incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or

consolidations and make dividend and other restricted payments.

The Group may redeem some or all of the senior and second priority senior secured notes at any time on or after 1 December 2010

(senior subordinated notes: 1 December 2011). In addition, the Group may redeem up to 40% of the aggregate principal amount of

the senior and senior subordinated notes on or prior to 1 December 2009 (second priority senior secured notes: 1 September 2010),

with the net proceeds from certain equity offerings at a specified redemption price. Prior to 1 December 2010 (senior subordinated notes:

1 December 2011; second priority senior secured notes: 1 September 2010), the Group may redeem some or all of the senior notes at

a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, plus a ‘make-whole’ premium. Upon

the occurrence of certain change of control events, each holder of senior notes and senior secured notes may require us to repurchase

all or a portion of its notes at a purchase price equal to 101% of the principal amount of the senior notes, plus accrued interest.

In November 2008, CEVA purchased senior and senior subordinated notes with a nominal face value of €49 million (maturing on

1 December 2014 and 2016) at a total cost of €21 million (€19 million excluding accrued interest). As a result of this transaction

CEVA Group Plc has recorded a gain of €30 million.

Finance lease liabilities

The table below sets forth the present value of minimum finance lease payments:

€ millions 2008

Less than 1 year 2

1-5 years 8

Thereafter 9

Total carrying value 19

Of which included in non-current borrowings 17

Of which included in current borrowings 2

22 RETIREMENT BENEFIT OBLIGATIONs

The Group operates a number of pension plans around the world most of which are defined contribution plans. CEVA has a small

number of defined benefit plans of which the main ones are based in Italy and The Netherlands.

Italian pension plan

In accordance with the Trattamento di Fine Rapporto (‘TFR’) legislation in Italy, employees are entitled to a termination payment

on leaving the company. The TFR regulation changed from 1 January 2007 and employees are now given the option to either remain

under the prior regulation or to transfer the future accruals to external pension funds. The funded provision for TFR maturing after

1 January 2007 is treated as a defined contribution plan under both options. An amount of €68 million at 31 December 2008

(2007: €70 million) has been recognized in the provision for pension liabilities in accordance with this legislation. The Group also has

CEVA Group Plc | Annual Report | 2008

65


an asset of €16 million (2007: €20 million) that is included in non-current prepayments. This asset reflects the right of the Group to

claim TFR payments for certain employees from their prior employers.

Dutch pension plan

Until October 2007, the pension benefits of the employees of CEVA in The Netherlands were accrued within the pension funds of TNT

N.V. By paying contributions to the TNT pension fund, CEVA settled its defined benefit liability as there was no additional actuarial or

investment risk for CEVA. In accordance with the sale and purchase agreement with TNT, the assets within the TNT pension fund

regarding the accrued pension benefits are for the risk of TNT. Therefore these assets and the liabilities are not accounted for by CEVA.

After October 2007, the Company established its own defined benefit scheme for the Company’s Dutch employees.

Amounts recognized in the balance sheet

€ millions 2008 2007

Present value of funded obligations 142

Fair value of plan assets 42

Total 100

Unrecognized actuarial losses (6)

Liability on the balance sheet 94

Movement in defined benefit obligations

€ millions 2008 2007

At 1 January 157

Balance acquired through business combinations 2

Service costs 5

Other costs 1

Interest costs 6

Actuarial loss / (gain) (5)

Exchange rate differences (9)

Benefits paid (12)

Curtailments (3)

Settlements -

Other -

At 31 December 142

Movement in plan assets

€ millions 2008 2007

At 1 January 57

Fair value of plan assets acquired through business combinations (2)

Expected return on plan assets 3

Actuarial (loss) / gain (11)

Exchange rate differences (9)

Employer contribution 5

Benefits paid (1)

Settlements -

At 31 December 42

157

57

100

(2)

98

150

42

2

2

3

3

(5)

(13)

(21)

(5)

(1)

157

28

35

3

2

(6)

1

(1)

(5)

57

CEVA Group Plc | Annual Report | 2008

66


Expense recognized in profit or loss

€ millions 2008 2007

Service costs 5 2

Interest costs 6 3

Other costs 1 2

Expected return on plan assets (3) (3)

(Gain) / loss on curtailment and settlements (3) (21)

Employer pension expense for the year 6

(17)

The actual return on plan assets was €8 million loss (2007: €5 million gain).

Principal actuarial assumptions

2008 2007

Discount rate 6.0% 6.1%

Expected return on assets 2.5% 7.1%

Rate of compensation increase 2.0% 2.4%

Inflation 2.9% 2.2%

Key assumptions inherent to the valuation of the Group’s pensions and the determination of our pension cost include employee turnover,

mortality and retirement age, discount rates, expected long term returns on plan assets and future wage increases. These assumptions

are based on independent actuarial advice and are updated on an annual basis. Actual circumstances may vary from these assumptions

giving rise to a different pension liability.

Expected service costs of post-employment benefit plans for the year ending 31 December 2009 are €14 million.

Plan assets are comprised as follows:

2008 2007

Equity 65% 70%

Fixed interest 21% 27%

Real estate 0% 1%

Cash 2% 2%

Other 12% 0%

Total 100% 100%

23 sHARE BAsEd PAYMENTs

All stock-based compensation is issued from the CEVA Investments Ltd 2006 Long Term Incentive Plan. The plan resides with

CEVA Investments Ltd the entity which has granted the awards. The expenses with respect to each separate installment will be

recognized in the appropriate vesting period as a charge from CEVA Investments Ltd to CEVA Group Plc.

Options granted to employees vest in three tranches after three or five years. The first tranche is strictly service based, vesting on each

of the first five anniversaries of the grant date. The remaining two tranches are both service and performance related and are measured

upon various internal metrics.

All options vest upon a qualified change in control.

CEVA Group Plc | Annual Report | 2008

67


The number and weighted average exercise prices of share options are as follows:

Number

2008 2007

Weighted average

exercise price Number

Weighted average

exercise price

Outstanding at 1 January 331,539 65.82 120,318 20.15

Granted during the year 17,324 63.02 211,968 95.22

Forfeited (39,132) - (747) -

Exercised (4,719) 37.02 - -

Outstanding at 31 December 305,012 74.20 331,539 65.82

Exercisable at the end of the year 32,522 59.65 13,294 40.28

The options outstanding at 31 December 2008 have an exercise price of €74.20 (2007: €65.82) and a remaining weighted average

contractual life of 8.38 years (2007: 9.27 years).

The fair value of services received in return for share options granted is based on the fair value of share options granted, measured using

the Black-Scholes Merton Model with the following inputs:

2008 2007

Weighted average share price 74.20 65.82

Exercise price 74.20 65.82

Expected volatility 37.03% 39.68%

Weighted-average expected life 7.17 years 7.17 years

Risk-free interest rate 3.98% 4.15%

Weighted-average option value 35.94 51.33

There are no expected dividends.

Expected volatility is estimated by considering historic average share price volatility of our industry peers.

Refer to note 7, personnel expenses, for the share option expense and the details of the options granted to Directors and executive

management.

24 PROVIsIONs

€ millions Legal claims Insurance Restructuring Other Total

Balance at 1 January 2008 68

Raised during the year 7

Utilized during the year (4)

Reversed during the year (6)

Exchange rate differences -

Balance at 31 December 2008 65

Of which non-current 53

Of which current 12

The economic outflow of the non-current portion is expected to occur within two to five years.

Legal claims

Legal claims consist of provisions for tax, legal, employee related and commercial litigation claims from third parties arising from CEVA’s

ordinary business activities.

Insurance

The insurance provision includes amounts provided during the year on self insurance schemes.

Restructuring

These provisions relates to various restructuring projects initiated as part of the Group’s cost containment program.

9

10

(2)

(1)

-

16

9

7

17

5

(8)

(1)

-

13

6

7

52

15

(45)

-

(3)

19

6

13

146

37

(59)

(8)

(3)

113

74

39

CEVA Group Plc | Annual Report | 2008

68


Other

Other provisions largely comprise provisions for dilapidations and dismantling costs, employee benefit obligations, onerous contracts

and other related costs.

25 TRAdE ANd OTHER PAYABLEs

€ millions 2008 2007

Trade payables 552

Personnel related accruals 104

Social security and other taxes 80

Accrued liabilities 355

Total trade and other payables 1,091

26 COMMITMENTs

Capital commitments

Capital expenditure for the acquisition of tangible fixed assets contracted for at the balance sheet date but not yet incurred totals

€7 million (2007: €4 million).

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 rate.

The Group also leases various motor vehicles, office and computer equipment under operating lease agreements.

During the year ended 31 December 2008, €242 million was recognized as an expense in the income statement in respect of operating

leases (2007: €299 million).

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

€ millions 2008 2007

Less than 1 year 229

1-5 years 453

Thereafter 140

Total 822

Of which guaranteed by third party / customers 185

Of the future lease payments, €582 million (2007: €600 million) relates to commitments in relation to multi-user / shared facilities

where the remainder of €240 million (2007: €235 million) is dedicated to specific customers.

Guarantees

The Group has issued guarantees in the ordinary course of business, in connection with lease agreements, customs duty deferment and

local credit lines amounting to €209 million (2007: €167 million) of which €156 million (2007: €132 million) are on the CEVA Group

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.

27 CONTINGENCIEs

The Group is involved in several legal proceedings relating to the normal conduct of our business. The Group does not expect any liability

arising from any of these legal proceedings to have a material impact on our results of operations, liquidity, capital resources or financial

position. The Group believes that it has provided for all probable and estimable liabilities deriving from the normal course of business.

Independent contractor litigation

Three independent contractor pickup and delivery (‘P&D’) drivers filed a complaint in California state court on 12 September 2005,

on behalf of themselves and similarly situated drivers in California alleging various causes of action based on their theory that the drivers

are employees and not independent contractors. The complaint requests (a) that the matter be designated as a class action on behalf

729

70

78

352

1,229

218

461

156

835

172

CEVA Group Plc | Annual Report | 2008

69


of all independent contractor P&D drivers working for EGL in California; (b) a declaratory judgment that EGL has violated the law; (c) an

equitable accounting and an unspecified amount of damages; and (d) restitution in the form of business expenses, unpaid overtime, meal

period compensation, unlawful deductions from wages, statutory penalties, interest, attorneys’ fees and costs. CEVA removed the case

to federal district court for the Northern District of California and the parties agreed to focus only on the individual claims of the three

named plaintiffs in the first phase of the proceedings. The court granted the Company’s summary judgment motions on all claims by

all plaintiffs in July 2007 and the plaintiffs have filed an appeal with the Ninth Circuit Court of Appeals, which is still pending.

Surcharge antitrust investigation and litigation

On 10 October 2007, EGL was the subject of a search warrant executed at their offices in Houston, Texas. The search warrant was issued

at the request of the Antitrust Division of the United States Department of Justice and it sought certain documents and information

related to EGL’s business practices. On the same day, a grand jury subpoena duces tecum was served on EGL’s custodian of records,

seeking production of certain similar documents and information. On 10 October 2007, an inspection by the European Commission was

conducted at the offices of EGL’s UK operating subsidiary and a request for documents and information was made on EGL’s UK group

of companies. In addition, a demand for documents and information, dated 11 October 2007, was received by EGL’s New Zealand

operating subsidiary from the New Zealand Commerce Commission. Eagle Global Logistics (Canada) Corp. has also received notice from

the Canadian Competition Bureau (‘CCB’), dated 11 October 2007, stating that the CCB has commenced an investigation into alleged

anti-competitive activity in the freight forwarding industry. In addition, a demand for information dated 5 September 2008, was

received by CEVA’s Japanese operating entity from the Japan Fair Trade Commission. Also, a demand for information, dated

1 December 2008, was received by CEVA’s Swiss operating entity from the Swiss Competition Commission. The Company understands

that the above-described requests are part of an industry-wide investigation into possible price-fixing and other improper collusive

activity in the freight forwarding industry with respect to certain accessorial and other charges. The Company is cooperating with

the respective authorities to provide requested information, including in response to further requests from various governmental

entities. CEVA has issued a new Code of Business Conduct and enhanced Antitrust and Competition Law Policies and Procedures that

strictly prohibit anti-competitive behavior of any kind and that apply to all CEVA subsidiaries, including EGL, Inc. and EGL Eagle Global

Logistics, LP. At this time, the Company can not determine the timing or outcome of the investigations, which could result in

the imposition of criminal and / or civil fines, penalties, damages or other sanctions and which could have a material impact on the

Company’s financial position, results of operations and operating cash flows.

On 3 January 2008, CEVA subsidiaries EGL, Inc. and EGL Eagle Global Logistics, LP were named along with other freight forwarders

as defendants in a putative class action lawsuit styled Precision Associates, Inc., et al. v. Panalpina World Transport (Holding) Ltd, et al.,

filed in the United States District Court for the Eastern District of New York. The lawsuit appears to be based on ongoing investigations

by the various governmental entities described above.

28 RELATEd PARTY TRANsACTIONs

Parent company

The immediate parent of CEVA Group Plc is CEVA Investments Ltd, a company incorporated in the Cayman Islands. The following table

sets forth the shareholders of CEVA Investments Ltd as at 31 December 2008 and 31 December 2007:

Number of shares

beneficially owned

Ownership

percentage

2008 2007

Number of shares

beneficially owned

Ownership

percentage

AIF VI Euro Holdings, L.P. 2,844,555 68.8% 2,844,555 68.8%

AlpInvest Partners Beheer 2006, L.P. 422,880 10.2% 422,880 10.2%

AAA Guarantor Co-Invest VI, L.P. 406,365 9.8% 406,365 9.8%

TNT 155,000 3.8% 155,000 3.7%

CEVA management investors 305,093 7.4% 310,649 7.5%

Total 4,133,893 100.0% 4,139,449 100.0%

Apollo is a related party by virtue of the fact that it manages AIF VI Euro Holdings, L.P., AlpInvest Partners Beheer 2006, L.P. and AAA

Guarantor Co-Invest VI, L.P. These entities together own 88.8% (31 December 2007: 88.8%) of the equity in CEVA Investments Ltd,

which in turn owns 100% of the equity of CEVA Group Plc.

CEVA Group Plc has a service agreement with Apollo for the provision of management and support services. The annual fee is equal to

the greater of €3 million per annum and 1.5% of the Group’s EBITDA. A fee of €5 million (2007: €3 million) is included in the income

statement for the year ended 31 December 2008.

Josh Harris, Gareth Turner, Lukas Kolff, Stan Parker and Tom White are Directors of CEVA Group Plc and also hold senior positions

within Apollo.

CEVA Group Plc | Annual Report | 2008

70


CEVA Group Plc has a payable to CEVA Investments Ltd, amounting to €19 million at 31 December 2008 (2007: €24 million).

This relates to intercompany cash pooling arrangements and is included within trade and other payables in the balance sheet.

Financing

To fund the acquisition of EGL, CEVA obtained a US$1 billion bridge facility. On 1 April 2008, the underwriting banks assigned loans

with an aggregate amount of US$509 million to affiliates of Apollo which paid these lenders an acquisition price that reflects a discount

to the par value of the loan. As a result of the assignment, CEVA Group Plc paid a fee of 1.6875% to each assigning lender in lieu of

a 2.0% conversion fee which would have been due to such lenders on 2 August 2008 if the loan remained outstanding at that time.

From the Group’s perspective, the terms and conditions of the assigned debt are no less favorable than those which were in place with

the underwriting bank.

Furthermore, from time to time, depending upon market, pricing and other conditions, as well as our cash balances and liquidity, we

or our affiliates, including Apollo, may seek to acquire notes or other indebtedness of CEVA through open market purchases, privately

negotiated transactions, tender offers, redemption or otherwise, upon such terms and at such prices as we or our affiliates may

determine (or as maybe provided for in the indentures or other documents governing the notes or other indebtedness), for cash or other

consideration. In addition, we have considered and will continue to evaluate potential transactions to reduce our outstanding debt, such

as debt for debt exchanges and other similar transactions, as well as potential transactions pursuant to which Apollo or its affiliates may

provide financing to CEVA or otherwise engage in transactions to provide liquidity to CEVA. There can be no assurance as to which, if

any, of these alternatives or combinations thereof we or our affiliates may choose to pursue in the future as the pursuit of any

alternative will depend upon numerous factors such as market conditions, our financial performance and the limitations applicable to

such transactions under our financing documents.

At 31 December 2008, funds managed by Apollo also hold €27 million (2007: nil) of senior subordinated notes.

Ultimate controlling party

The ultimate controlling party of CEVA Group Plc is Apollo Management, L.P. (‘Apollo’) and its affiliates.

Other related party transactions

Key management and approximately 320 other personnel in CEVA Group companies participate in the management equity plan

as disclosed in note 23. They also receive salaries and benefits as part of their employment compensation.

29 EVENTs AFTER BALANCE sHEET dATE

Board of Directors

On 10 February 2009, Gareth Turner stood down as Chairman of the Board of Directors and on the same day Marvin Schlanger was

appointed as a non-executive Director and Chairman. In addition, Lukas Kolff retired from the Board on 6 January 2009 and Tom White

was appointed to the Board as a non-executive Director on 22 January 2009.

CEVA Group Plc | Annual Report | 2008

71


30 GROUP ENTITIEs

The Group’s subsidiaries, joint ventures and associates are included in the table below. All entities are primarily involved in the provision

of Contract Logistics and Freight Management services.

All subsidiary undertakings are included in the consolidation. The proportion of the voting rights in the subsidiary undertakings held

directly by the Group does not differ from the proportion of ordinary shares held.

Country of incorporation Entity

Algeria CEVA Logistics Algerie EURL

Argentina Circle International Argentina S.A.

Holding if less

than 100%

Customized Logistics Argentina S.A. 51%

Eagle Global Logistics de Argentina S.R.L.

TNT Logistics Argentina S.A.

Australia * CEVA Freight (Australia) Pty Ltd

* CEVA Logistics (Australia) Pty. Limited

* CEVA Materials Handling Pty. Limited

* CEVA Pty. Limited

Austria A.S.S. Logistik Schrader Schachinger GmbH 50%

A.S.S. Logistik Schrader Schachinger GmbH & Co. KG 50%

CEVA Freight Austria GmbH

CEVA Logistics Austria GmbH

CEVA Logistics Central and Eastern Europe GmbH

Belgium * CEVA Freight Belgium N.V.

CEVA Logistics Belgium N.V.

CEVA NOPRI Logistics N.V. 81%

* EGL (Belgium) Holding Company BVBA

SVL Schrader Verteil + Logistik BVBA

Tecnologistica N.V.

Bermuda FACET Insurance Limited

Regga Holdings, Limited

Brazil * AV Manufacturing Indústria e Comércio de Peças e Acessórios Automotivos Limitada

* CEVA Freight Management do Brasil, Limitada

* CEVA Holdings Limitada

* CEVA Logistics Limitada

* CEVA Participações Limitada

* Circle Fretes Internacionais do Brasil Limitada

British Virgin Islands CEVA Central America Holding Limited

CEVA China Holding Limited

LSX Holding, Limited

LSX, Limited

Bulgaria Telis Bulgaria S.p.A. 51%

Canada * CEVA Freight Canada Corp.

* CEVA Logistics Canada, ULC

Cayman Islands CEVA Logistics Cayman

Chile CEVA Freight Management Logistica de Chile Limitada 99.99%

* Denotes a guarantor entity.

Circle Freight Corporation Agencia Chilena

Circle International Chile SA

Circle Outsourcing Services SA

CEVA Group Plc | Annual Report | 2008

72


Country of incorporation Entity

Holding if less

than 100%

China Anji - TNT Automotive Logistics Company Limited 50%

CEVA Freight (Shenzhen) Limited

CEVA Freight International (Shanghai) Company Limited

CEVA Freight Shanghai Limited

CEVA Logistics Company Limited Shanghai 70%

CEVA Logistics International Trading (Shanghai) Company Limited

Chongqing Anji - TNT Hongyan Automotive Logistics Company Limited 30%

Liao Ning A-Lean Automotive Logistics Company Limited 25%

Shanghai Anji - Suchi Warehousing and Transportation Company Limited 33%

Shanghai Anji - Tonghui Warehousing and Transportation Company Limited 40%

Colombia CEVA Aduanas Sociedad de Intemediacion Aduanera Limitada

CEVA Freight Management de Colombia Limitada

Costa Rica CEVA Freight Management Costa Rica, Sociedad de Responsabilidad Limitada

Czech Republic CEVA Freight Czech Republic s.r.o.

CEVA Logistics, spol. s r.o.

El Salvador CEVA Freight Management El Salvador, Limitada de Capital Variable

Finland EGL Eagle Global Logistics (Finland) Oy

France CEVA Freight Holdings France SAS

CEVA Freight Management France SAS

CEVA Logistics France SAS

Germany * CEVA Container Logistik GmbH

* CEVA Freight (Management) GmbH

* CEVA Freight Germany GmbH

* CEVA Logistics CEE Holding GmbH

* CEVA Logistics GmbH

* Exporta Gesellschaft fur Exportberatung GmbH

Max Gruenhut Aircargo GmbH (in liquidation)

Greece CEVA Logistics Hellas S.A.

Guatemala CEVA Freight Management Guatemala, Limitada

Hong Kong * CEVA FM (Hong Kong) Limited

* CEVA Freight (Hong Kong) Limited

* CEVA Logistics (Hong Kong) Limited

* Eagle Asia Holding Limited

* Freight Systems Limited

* Ozonic Limited

Hungary CEVA Logistics Hungary Kft.

India CEVA Freight (India) Private Limited

CEVA Logistics India Private Limited

Indonesia PT CEVA Freight Indonesia 95%

PT CEVA Logistik Indonesia

Ireland AVEC Logistics (Ireland) Limited

* Denotes a guarantor entity.

PT Hartapersada Interfreight 95%

EGL International Services Limited

CEVA Group Plc | Annual Report | 2008

73


Country of incorporation Entity

Holding if less

than 100%

Italy AVIOSERVIZI Jet Service S.r.l. 51%

C & C - Trasporti e Spedizioni Internazionali S.r.l.

Cell-Tel S.p.A. 43%

CEVA Automotive Logistics Italia S.r.l.

CEVA Freight Italy S.r.l.

CEVA Logistics Bari S.r.l. 75%

CEVA Logistics Holding Italy S.p.A.

CEVA Logistics Italia S.r.l.

CEVA Trasporti In-Bound Italia S.r.l.

S.I.T.T.A.M. Spedizioni Internazionali Trasporti Terrestri Aerei Marittimi S.r.l.

TEL I.S. Telecommunication Integrated Services S.p.A. 51%

Tmek Electronics S.p.A. 51%

Transitalia S.r.l.

Japan CEVA Logistics Japan, Inc.

Trasporti Editoriali S.r.l. 80%

Jordan Eagle Global Logistics LLC (in liquidation) 50%

Korea TNT Logistics Korea Chusik Hoesa

CEVA Logistics Korea, Inc.

Luxembourg * CEVA Freight Holdings Luxembourg S.a r.l.

Malaysia CEVA Freight (Malaysia) Sdn. Bhd.

CEVA Freight Holdings (Malaysia) Sdn. Bhd.

CEVA Logistics (Malaysia) Sdn. Bhd. 60%

Regga (Malaysia) Sdn. Bhd.

Unipearl Corporation Sdn. Bhd.

Mexico CEVA Freight Management Mexico S.A. de C.V.

CEVA Logistica de Mexico, S.A. de C.V.

CEVA Servicios de Mexico, S.A. de C.V.

Netherlands * CEVA Container Logistics B.V.

* CEVA Coop Holdco B.V.

* CEVA Districenter B.V.

* CEVA Freight Holdings B.V.

* CEVA Freight Holland B.V.

CEVA India Holding B.V.

* CEVA Logistics Dutch Holdco B.V.

* CEVA Logistics Finance B.V.

* CEVA Logistics Headoffice B.V.

* CEVA Logistics Holdings B.V.

* CEVA Logistics Netherlands B.V.

* Coöperatieve CEVA / EGL I U.A.

* Coöperatieve CEVA / EGL II U.A.

New Zealand CEVA Logistics (New Zealand) Limited

Northern Ireland CEVA Logistics NI Limited

Norway CEVA Logistics Norway AS

Oman CEVA Logistics LLC 65%

Panama CEVA Centram, S. de R.L.

CEVA Freight Management Panama S. de R.L. 55%

EGL Colombia Holding, S. de R.L.

Peru CEVA Logistics Peru S.R.L. 99%

Puerto Rico CEVA Logistics Puerto Rico, Inc.

EGL Agencia de Aduanas SAC 99%

Philippines CEVA Logistics Philippines Inc. 30%

* Denotes a guarantor entity.

CEVA Warehousing and Distribution, Inc. 99.99%

CEVA Group Plc | Annual Report | 2008

74


Country of incorporation Entity

Poland CEVA Automotive Logistics Poland Sp. z o.o.

CEVA Freight (Poland) Sp. z o.o.

CEVA Logistics Sp. z o.o.

Portugal CEVA Logistics (Portugal) - Logistica Empresarial, Lda.

Holding if less

than 100%

Qatar CEVA Logistics (Qatar) W.L.L. 49%

Romania CEVA Logistics S.R.L.

SITTROM Expeditii Internationale S.R.L.

Saudi Arabia Circle Freight International Al-Suwaiket, Limited 49%

Singapore CE Logistics (Asia) Private Limited

CEVA Asia Pacific Holdings Company Private Limited

CEVA FM (Southeast Asia) Private Limited

CEVA Freight (Singapore) Private Limited

CEVA Logistics Asia Private Limited

CEVA Logistics Singapore Private Limited

Circle Logistics (S) Private Limited

Concord Express (Singapore) Private Limited

LSX Development Private Limited

LSX Technology Private Limited

Timur Carriers (Private) Limited

Slovakia CEVA Logistics Slovakia, s.r.o.

South Africa CEVA Logistics South Africa (Proprietary) Limited

TNT Container Logistics (Proprietary) Limited

Spain CEVA Automotive Logistics España, S.L.

CEVA Freight (España), S.L.

CEVA Logistics España, S.L.

CEVA Logistics Holdings Spain, S.L.

CEVA Logistics Subirats, S.L.

CEVA Production Logistics España, S.L.

Sweden CEVA Logistics (Sweden) AB

Switzerland CEVA Freight (Schweiz) GmbH

CEVA Management GmbH

Taiwan CEVA Logistics (Taiwan) Company Limited

Concord Express (Taiwan) Company Limited

Thailand CEVA Freight (Thailand) Limited

CEVA Logistics (Thailand) Limited

CEVA Vehicle Logistics (Thailand) Limited

Tunisia CEVA Logistics Tunisia S.a.r.l.

Turkey CEVA Kargo Anonim Şirketi

CWBI Limited 48%

CEVA Lojistik Limited Şirketi

United Arab Emirates CEVA Logistics FZCO

* Denotes a guarantor entity.

CEVA Uluslararasi Taşimacilik Anonim Şirketi

Circle International Limited Liability Company 49%

EGL Arabia Limited Liability Company 49%

CEVA Logistics (U.A.E.) L.L.C.

49%

CEVA Group Plc | Annual Report | 2008

75


Country of incorporation Entity

United Kingdom CEVA Automotive Logistics UK Limited

* CEVA Container Logistics Limited

CEVA Distribution Limited

* CEVA Freight (UK) Holding Company Limited

* CEVA Freight (UK) Holdings Limited

* CEVA Freight (UK) Limited

* CEVA Limited

* CEVA Logistics Limited

* CEVA Network Logistics Limited

CEVA Showfreight Limited

* CEVA Supply Chain Solutions Limited

* Eagle Global Logistics (UK) Limited

* F.J. Tytherleigh & Co. Limited

Holding if less

than 100%

Fairlead Logistics Limited 51%

Louis No. 2 Limited

Newsagents Wholesale Corporation Limited

Newspaper Transport Limited

Paintblend Limited

United States of America * Alrod International, Inc.

Ashton Leasing L.P. 49%

* CEVA Freight Management International Group, Inc.

* CEVA Freight LLC

* CEVA Government Services LLC

* CEVA Ground US, L.P.

* CEVA International, Inc.

* CEVA Logistics Japan LLC

* CEVA Logistics Services U.S., Inc.

* CEVA Logistics U.S. Group, Inc.

* CEVA Logistics U.S. Holdings, Inc.

* CEVA Logistics U.S., Inc.

* CEVA Logistics, LLC

* CEVA Ocean Line, Inc.

* CEVA Trade Services, Inc.

* Circle International Holdings LLC

* ComplianceSource LLC

* Customized Transportation International, Inc.

* Eagle Partners L.P.

Eagle USA Import Brokers, Inc.

* EGL Eagle Global Logistics, L.P.

* EGL, Inc.

* EUSA Holdings, Inc.

* EUSA Partners, Inc.

* Global Logistics Aircraft LLC

* Harper, Robinson & Company, Inc.

Jet Urban Renewal Corporation

* Max Gruenhut International, Inc.

* Select Carrier Group LLC

Uruguay Circle International Latin America Holdings S.A.

Gadupal S.A.

* Denotes a guarantor entity.

CEVA Group Plc | Annual Report | 2008

76


31 GUARANTOR / NON-GUARANTOR FINANCIAL INFORMATION

In December 2006, CEVA Group Plc raised funds through an offering of securities which were admitted to trading on the Alternative

Securities Market of the Irish Stock Exchange (‘ISE’). The senior notes are jointly and severally guaranteed on a senior basis and

the senior subordinated notes are jointly and severally guaranteed on a senior subordinated basis by certain of the existing wholly

owned subsidiaries of the Logistics business. The Logistics subsidiaries who are ‘Guarantors’ are indicated in note 30. All other

subsidiaries are the ‘non-guarantors’.

When guarantees are provided for debt listed on the ISE, the ISE requires financial information relating to each group to be separately

presented in a note to the consolidated financial statements, presenting, in separate columns, the Guarantors (on a combined basis) and

the non-guarantors (on a combined basis), with an additional column reflecting eliminating adjustments, if material. This information is

disclosed in the tables below.

€ millions

Revenue 3,872

Cost of materials (181)

Work contracted out (1,822)

Personnel expenses (1,182)

Other operating expenses (533)

Operating expenses excluding depreciation, amortization and impairment (3,718)

EBITDA 154

YEAR ENDED 31 DECEMBER

2008

Guarantor Non-guarantor Eliminations Consolidated

2,504

(165)

(1,269)

(627)

(326)

(2,387)

Depreciation and amortization excluding purchased intangibles (55) (35)

Amortization and impairment on purchased intangibles (48) (27)

Depreciation, amortization and impairment (103)

(62)

Operating income 51

Net finance expense (including foreign exchange movements) (221)

Gains arising from intra-group restructuring 20

Profit / (loss) before income taxes (150)

Income tax expense 30

Profit / (loss) for the year (120)

Attributable to:

Minority interests -

Equity holders of the Company (120)

Profit / (loss) for the year (120)

117

55

(26)

189

218

(14)

204

-

204

204

(47)

-

19

-

28

47

-

-

-

-

-

-

(209)

(209)

-

(209)

-

(209)

(209)

6,329

(346)

(3,072)

(1,809)

(831)

(6,058)

271

(90)

(75)

(165)

106

(247)

-

(141)

16

(125)

-

(125)

(125)

CEVA Group Plc | Annual Report | 2008

77


€ millions

Revenue 2,602

Cost of materials (160)

Work contracted out (955)

Personnel expenses (964)

Other operating expenses (383)

Operating expenses excluding depreciation and amortization (2,462)

EBITDA 140

Depreciation and amortization excluding purchased intangibles (49)

Amortization on purchased intangibles (173)

Depreciation and amortization (222)

Operating income (82)

Net finance expense (including foreign exchange movements) (108)

Profit (after tax) from investments in associates 2

Profit / (loss) before income taxes (188)

Income tax expense (1)

Loss for the year (189)

Attributable to:

Minority interests -

Equity holders of the Company (189)

Loss for the year (189)

YEAR ENDED 31 DECEMBER

2007

Guarantor Non-guarantor Eliminations Consolidated

2,203

(20)

(106) -

(1,213) 20

(524) (23)

(236) 23

(2,079)

20

124

(31) -

(48) -

(79) -

45

(26)

-

1 -

20

(27) -

(7)

-

-

-

-

4,785

(266)

(2,148)

(1,511)

(596)

(4,521)

264

(80)

(221)

(301)

(37)

(134)

3

(168)

(28)

(196)

1 - 1

(8) - (197)

(7)

-

(196)

CEVA Group Plc | Annual Report | 2008

78


€ millions

AS AT 31 DECEMBER

2008

Guarantor Non-guarantor Eliminations Consolidated

ASSETS

Non-current assets

Intangible assets 1,251

812

-

2,063

Property, plant and equipment 233

147

-

380

Investment in associates 4,647

406

(5,053)

-

Deferred income tax assets 103

32

(129)

6

Amounts receivable from other CEVA companies 213

28

(241)

-

Prepayments 6

28

-

34

Other non-current assets 11

7

-

18

Total non-current assets 6,464

1,460

(5,423)

2,501

Current assets

Inventory 11

Trade and other receivables 656

Prepayments 16

Accrued income 59

Income tax receivable 6

Derivative financial instruments 14

Cash and cash equivalents 75

Total current assets 837

TOTAL ASSETS 7,301

EQUITY

Total Group equity 3,776

LIABILITIES

Non-current liabilities

Borrowings 2,541

Deferred income tax liabilities 141

Retirement benefit obligations 18

Provisions 24

Other non-current liabilities 7

Total non-current liabilities 2,731

Current liabilities

Borrowings 49

Provisions 20

Trade and other payables 719

Income tax payable 6

Derivative financial instruments -

Total current liabilities 794

TOTAL EQUITY AND LIABILITIES 7,301

18

672

12

102

7

4

89

904

2,364

1,151

225

80

76

50

9

440

28

19

719

5

2

773

2,364

-

(340)

-

(4)

-

-

-

(344)

(5,767)

(5,063)

(239)

(118)

-

-

-

(357)

-

-

(347)

-

-

(347)

(5,767)

29

988

28

157

13

18

164

1,397

3,898

(136)

2,527

103

94

74

16

2,814

77

39

1,091

11

2

1,220

3,898

CEVA Group Plc | Annual Report | 2008

79


€ millions

AS AT 31 DECEMBER

2007

Guarantor Non-guarantor Eliminations Consolidated

ASSETS

Non-current assets

Intangible assets 1,670

522

-

2,192

Property, plant and equipment 264

153

-

417

Investment in associates 2,925

400

(3,325)

-

Deferred income tax assets (6)

32

(20)

6

Amounts receivable from other CEVA companies 981

143

(1,124)

-

Prepayments 16

29

-

45

Other non-current assets 3

7

-

10

Total non-current assets 5,853

1,286

(4,469)

2,670

Current assets

Inventory 19

Trade and other receivables 760

Prepayments 36

Accrued income 62

Income tax receivable -

Derivative financial instruments 1

Cash and cash equivalents 77

Total current assets 955

TOTAL ASSETS 6,808

EQUITY

Total Group equity 2,574

LIABILITIES

Non-current liabilities

Borrowings 3,118

Deferred income tax liabilities 93

Retirement benefit obligations 21

Provisions 29

Other non-current liabilities 1

Total non-current liabilities 3,262

Current liabilities

Borrowings 83

Provisions 31

Trade and other payables 839

Income tax payable 18

Derivative financial instruments 1

Total current liabilities 972

TOTAL EQUITY AND LIABILITIES 6,808

17

737

26

80

-

-

98

958

2,244

851

396

67

77

76

9

625

55

10

690

13

-

768

2,244

-

(326)

-

26

-

-

-

(300)

(4,769)

(3,294)

(1,175)

-

-

-

-

(1,175)

-

-

(300)

-

-

(300)

(4,769)

36

1,171

62

168

-

1

175

1,613

4,283

131

2,339

160

98

105

10

2,712

138

41

1,229

31

1

1,440

4,283

CEVA Group Plc | Annual Report | 2008

80


Independent auditors’ report to the members of CEVA Group Plc

INdEPENdENT AUdITORs’ REPORT

TO THE MEMBERs OF CEVA GROUP PLC

We have audited the Group financial statements of CEVA Group Plc for the year ended 31 December 2008 which comprise the

consolidated income statement, the consolidated balance sheet , the consolidated cash flow statement, the consolidated statement

of changes in equity and the related notes. These Group financial statements have been prepared under the accounting policies set

out therein.

We have reported separately on the Parent Company financial statements of CEVA Group Plc for the year ended 31 December 2008.

REsPECTIVE REsPONsIBILITIEs OF dIRECTORs ANd AUdITORs

The directors’ responsibilities for preparing the Annual Report and the Group financial statements in accordance with applicable law

and International Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in the Statement of Directors’

Responsibilities.

Our responsibility is to audit the Group financial statements in accordance with relevant legal and regulatory requirements and

International Standards on Auditing (UK and Ireland). This report, including the opinion, has been prepared for and only for

the company’s members as a body in accordance with Section 235 of the Companies Act 1985 and for no other purpose. We do not,

in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or

into whose hands it may come save where expressly agreed by our prior consent in writing.

We report to you our opinion as to whether the Group financial statements give a true and fair view and whether the Group

financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation.

We also report to you whether in our opinion the information given in the Directors’ Report is consistent with the Group

financial statements. The information given in the Directors’ Report includes that specific information presented in the Operating

and Financial Review that is cross referred from the Review of Business and Future Developments section of the Directors’ Report.

In addition we report to you if, in our opinion, we have not received all the information and explanations we require for our audit,

or if information specified by law regarding directors’ remuneration and other transactions is not disclosed.

We read other information contained in the Annual Report and consider whether it is consistent with the audited Group

financial statements. The other information comprises only the sections listed in the ‘Table of Contents’ page under the headings

‘Review’ and ‘Financial Statements’. We consider the implications for our report if we become aware of any apparent misstatements

or material inconsistencies with the Group financial statements. Our responsibilities do not extend to any other information.

BAsIs OF AUdIT OPINION

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board.

An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Group financial statements.

It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the Group

financial statements, and of whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and

adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order

to provide us with sufficient evidence to give reasonable assurance that the Group financial statements are free from material

misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy

of the presentation of information in the Group financial statements.

CEVA Group Plc | Annual Report | 2008

81


OPINION

In our opinion:

• the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state

of the Group’s affairs as at 31 December 2008 and of its loss and cash flows for the year then ended;

• the Group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of

the IAS Regulation; and

• the information given in the Directors’ Report is consistent with the Group financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants and Registered Auditors

London, United Kingdom

19 March 2009

Notes:

• The maintenance and integrity of the CEVA Group Plc website is the responsibility of the directors; the work carried out by

the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes

that may have occurred to the financial statements since they were initially presented on the website.

• Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation

in other jurisdictions.

CEVA Group Plc | Annual Report | 2008

82


COMPANY BALANCE sHEET

€ millions Note 2008

AS AT 31 DECEMBER

2007

Fixed assets

Investments in subsidiary undertakings 310

Amounts owed by subsidiary undertakings 1,789

Total fixed assets 2,099

Current assets

Amounts owed by subsidiary undertakings 16

Prepayments and accrued income -

Income tax receivable 9

Total current assets 25

Creditors - amounts falling due within one year

Amounts owed to subsidiary undertakings 43

Accrued and other current liabilities 30

Total 73

Net current assets (liabilities) (48)

Total assets less current liabilities 2,051

Creditors - amounts falling due after more than one year

Borrowings 3

Other non-current liabilities 3

Net assets 374

Capital and reserves 4

Called up share capital 1

Share premium account 382

Profit and loss reserve (7)

Profit and loss account (2)

Total equity shareholders' funds 374

The financial statements on pages 83 to 85 were approved by the Board of Directors on 19 March 2009 and were signed on its behalf by:

John Pattullo

Director

Company balance sheet

1,674

310

1,765

2,075

120

1

1

122

166

23

189

(67)

2,008

1,632

-

376

1

382

-

(7)

376

CEVA Group Plc | Annual Report | 2008

83


NOTEs TO THE COMPANY FINANCIAL sTATEMENTs

1 ACCOUNTING POLICIEs

The principle accounting policies of CEVA Group Plc (the Company) are set out below. These policies have been consistently applied to

all the years presented.

1.1 Basis of preparation

The financial statements are prepared on a going concern basis and under the historical cost convention as modified by the revaluation

of certain financial assets and liabilities at fair value in accordance with the Companies Act 1995 and applicable United Kingdom

accounting standards (UK GAAP).

As permitted by section 230(3) of the Companies Act 1985, the Company’s profit and loss account has not been presented.

The CEVA Group Plc consolidated financial statements for the year ended 31 December 2008 contain a consolidated statement of

cash flows. Consequently, the Company has taken advantage of the exemption of FRS 1, (Revised 1996) ‘Cash Flow Statements’

not to present its own cash flow statement.

The CEVA Group Plc consolidated financial statements for the year ended 31 December 2008 contain related party disclosures.

Consequently, the Company has taken advantage of the exemption in FRS 8, ‘Related Party Disclosures’ not to disclose transactions

with other members of CEVA Group.

The CEVA Group Plc consolidated financial statements for the year ended 31 December 2008 contain financial instrument disclosures

which comply with FRS 29, ‘Financial Instruments: Disclosure and Presentation’. Consequently, the Company has taken advantage of

the exemption in FRS 29 not to present separate financial instrument disclosures for the Company.

1.2 Foreign currency translation

Foreign currency transactions are translated into Euros using the exchange rates prevailing at the dates of the transactions. Foreign

exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates

of monetary assets and liabilities denominated in foreign currencies are recognized in profit and loss.

1.3 Investments in subsidiary undertakings

Investments in subsidiary undertakings are stated at cost and reviewed for impairment if there are indicators that the carrying value

may not be recoverable.

1.4 Taxation

Full provision is made for deferred income taxation on all timing differences which have arisen but not reversed at the balance sheet

date. Deferred income tax assets are recognized to the extent that it is regarded as more likely than not that there will be sufficient

taxable profits from which the underlying timing differences can be deducted. The deferred income tax balances are not discounted.

1.5 Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost;

any difference between the proceeds (net of transaction costs) and the redemption value is recognized in profit or loss over the period

of the borrowings using the effective interest method.

CEVA Group Plc | Annual Report | 2008

84


2 OTHER INFORMATION

Employees

The Directors and certain other executive management of CEVA Group Plc were the only employees of the Company during the 2008

financial year. Directors’ emoluments are disclosed in note 7 of the consolidated financial statements.

3 BORROWINGs

€ millions 2008 2007

Loan notes 987

Bank borrowings 687

Borrowings 1,674

Loan notes include €505 million (2007: €505 million) of senior notes, €225 million (2007: €225 million) of senior subordinated notes

and US$400 million (2007: US$400 million) of second-lien notes.

The fair values, terms and debt repayment schedule of the loan notes and bank borrowings are disclosed in note 21 of the consolidated

financial statements.

4 EqUITY sHAREHOLdERs’ FUNds

€ millions

Called up share

capital

Balance at 1 January 2007 1

Issuance of shares -

Result attributable to equity holders for the year -

Balance at 31 December 2007 / 1 January 2008 1

Result attributable to equity holders for the year -

Balance at 31 December 2008 1

Share premium

account

309

73

-

382

-

382

Profit and loss

reserve

Further information on the share capital of the Company is shown in note 20 of the consolidated financial statements.

5 EVENTs AFTER BALANCE sHEET dATE

Refer to note 29 of the consolidated financial statements.

Independent auditors’ report to the members of CEVA Group Plc

-

-

(7)

(7)

(2)

(9)

969

663

1,632

Total equity

shareholders' funds

310

73

(7)

376

(2)

374

CEVA Group Plc | Annual Report | 2008

85


INdEPENdENT AUdITORs’ REPORT

TO THE MEMBERs OF CEVA GROUP PLC

We have audited the Parent Company financial statements of CEVA Group Plc for the year ended 31 December 2008 which comprise

the Company balance sheet and the related notes. These Parent Company financial statements have been prepared under the accounting

policies set out therein.

We have reported separately on the Group financial statements of CEVA Group Plc for the year ended 31 December 2008.

REsPECTIVE REsPONsIBILITIEs OF dIRECTORs ANd AUdITORs

The directors’ responsibilities for preparing the Annual Report and the Parent Company financial statements in accordance with

applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out

in the Statement of Directors’ Responsibilities.

Our responsibility is to audit the Parent Company financial statements in accordance with relevant legal and regulatory requirements

and International Standards on Auditing (UK and Ireland). This report, including the opinion, has been prepared for and only for

the Company’s members as a body in accordance with Section 235 of the Companies Act 1985 and for no other purpose. We do not,

in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into

whose hands it may come save where expressly agreed by our prior consent in writing.

We report to you our opinion as to whether the Parent Company financial statements give a true and fair view and whether the Parent

Company financial statements have been properly prepared in accordance with the Companies Act 1985. We also report to you whether

in our opinion the information given in the Directors’ Report is consistent with the Parent Company financial statements.

The information given in the Directors’ Report includes that specific information presented in the Operating and Financial Review that

is cross referred from the Business Review section of the Directors’ Report.

In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all

the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and

other transactions is not disclosed.

We read other information contained in the Annual Report and consider whether it is consistent with the audited Parent Company

financial statements. The other information comprises only the sections listed in the ‘Table of Contents’ page under the headings

‘Review’ and ‘Financial Statements’. We consider the implications for our report if we become aware of any apparent misstatements

or material inconsistencies with the parent company financial statements. Our responsibilities do not extend to any other information.

BAsIs OF AUdIT OPINION

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices

Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Parent Company

financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation

of the Parent Company financial statements, and of whether the accounting policies are appropriate to the Company’s circumstances,

consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to

provide us with sufficient evidence to give reasonable assurance that the Parent Company financial statements are free from material

misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy

of the presentation of information in the Parent Company financial statements.

CEVA Group Plc | Annual Report | 2008

86


OPINION

In our opinion:

• the Parent Company financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted

Accounting Practice, of the state of the Company’s affairs as at 31 December 2008;

• the Parent Company financial statements have been properly prepared in accordance with the Companies Act 1985; and

• the information given in the Directors’ Report is consistent with the Parent Company financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants and Registered Auditors

London, United Kingdom

19 March 2009

Independent auditors’ report to the members of CEVA Group Plc

Notes:

• The maintenance and integrity of the CEVA Group Plc website is the responsibility of the directors; the work carried out by

the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes

that may have occurred to the financial statements since they were initially presented on the website.

• Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation

in other jurisdictions.

CEVA Group Plc | Annual Report | 2008

87


LOGIsTICs BUsINEss, PRIOR TO

THE ACqUIsITION BY CEVA

INCORPORATION BY REFERENCE

Rather than include in this annual report some of the information included in our previous annual reports, we are incorporating this

information by reference, which means that we are disclosing important information to you by referring you to another document

posted on our website and filed with the Irish Stock Exchange (‘ISE’). The following document contains important information about us

and we incorporate it by reference:

• The CEVA Group Plc Annual Report for the year 2007, posted on our website and filed by us with the ISE.

Any statement contained in a document incorporated or considered to be incorporated by reference in this annual report shall be

considered to be modified or superseded for purposes of this annual report to the extent that a statement contained in this annual

report or in any subsequently posted or filed document that is or is considered to be incorporated by reference modifies or supersedes

such statement. Any statement that is modified or superseded shall not, except as so modified or superseded, constitute a part of this

annual report.

You can obtain the document incorporated by reference in this annual report from:

• Our website (http://www.cevalogistics.com/Investors/FinancialPublications.aspx) or

• The website of the ISE

(http://www.ise.ie/app_document_test.asp?progID=-1&uID=15330&FIELDSORT=docId).

You may also view a copy of this filing during normal business hours at the offices of BNY Financial Services PLC, the Irish Paying Agent

for our bonds, if and so long as our bonds are admitted to trading on the Official List of the ISE and are traded on the Alternative

Securities Market thereof and the guidelines of the stock exchange so require.

CEVA Group Plc | Annual Report | 2008

88


dEsCRIPTION OF kEY LINE ITEMs

IN THE INCOME sTATEMENT

Description of key line items in the income statement

Below is a brief description of the composition of the key line items of our consolidated income statement:

REVENUE

Revenue represents the delivery of goods and services to third parties less discounts, credit notes and taxes levied on sales. It also

includes other operating revenue that does not arise from our normal operations and includes rental income from temporarily subleased

property. In addition, revenue includes other income that mainly consists of net gains from the sale of property, plant and equipment.

OPERATING EXPENsEs

Operating expenses have been classified by nature of the expenses, as follows:

• Cost of materials includes the costs of materials directly attributable to the normal operating activities of the business including fuel,

packaging, pallets and utility costs

• Work contracted out includes amounts charged by third parties directly attributable to the normal operating activities of

the business. The majority of these costs relate to purchased transportation

• Personnel expenses are charged to the profit and loss account when due, and in accordance with employment contracts and

obligations. This includes all wage and social costs of both direct and indirect employees. It also includes agency costs of

non-permanent (subcontracted) warehouse personnel

• Other operating expenses include costs incurred for insurance, consultancy, audit, legal and miscellaneous costs. Additionally, this

includes expenditure associated with the rental of trucks and material handling equipment, as well as warehouse rental costs.

dEPRECIATION ANd AMORTIzATION EXCLUdING PURCHAsEd INTANGIBLEs

Depreciation and amortization is charged to profit or loss on a straight-line basis over the expected life of the related asset.

AMORTIzATION ANd IMPAIRMENT ON PURCHAsEd INTANGIBLEs

Amortization and impairment on contractual customer relationships and brands recognized upon the acquisition of the Contract

Logistics business from TNT N.V. and the Freight Management business from EGL Inc. is recognized in amortization and impairment

on purchased intangibles. Impairment is recognized in profit or loss when incurred.

NET FINANCE EXPENsE (INCLUdING FOREIGN EXCHANGE MOVEMENTs)

Interest income mainly relates to interest earned on loans and deposits and interest charged on overdue customer receivables. Interest

and similar expenses relates to interest charged on loans, financial leases and other borrowings.

INCOME TAX EXPENsE

Income tax represents the aggregate amount included in the determination of profit or loss for the period in respect of current tax

and deferred income tax. Current tax is the amount of income taxes payable / (recoverable) in respect of the taxable profit / (loss)

for a period. Deferred income tax represents the amounts of income taxes payable / (recoverable) in future periods in respect of taxable

(deductible) temporary differences and unused tax losses.

CEVA Group Plc | Annual Report | 2008

89


CERTAIN dEFINITIONs

In this Annual Report:

• Unless expressly stated otherwise or where the context otherwise requires, ‘the Company’, ‘we’, ‘us’, ‘our’, ‘Group’ and other similar

terms refer to CEVA Group Plc and its subsidiaries after giving effect to the EGL Acquisition

• ‘Apollo’ refers to Apollo Management VI, L.P. and its affiliates, which include AIF VI Euro Holdings, L.P., AlpInvest Partners Beheer

2006, L.P. and AAA Guarantor – CoInvest VI, L.P.

• ‘CAPEX’ or ‘capital expenditure’ is defined as amounts used during a particular period to acquire or improve long term assets such

as property, plant or equipment or intangible assets. Capital expenditure excludes items of a capital nature acquired as a part of

an acquisition

• ‘EBITDA’ or ‘earnings before interest, tax, depreciation and amortization’ is not a measurement of performance or liquidity under

IFRS and should not be considered as a substitute for profit / (loss) for the year, operating profit, net income or any other

performance measures derived in accordance with IFRS or as a substitute for cash flow from operating activities as a measure of

CEVA’s performance. Because not all companies calculate EBITDA identically, the presentations of EBITDA in this annual report may

not be comparable to other similarly titled measures of other companies

• ‘EBITDA conversion into free cash’ is calculated as EBITDA before specific items minus net capital expenditure plus operating

net working capital movements divided by EBITDA before specific items

• ‘EGL Acquisition’ refers to CEVA’s acquisition of the Houston based freight forwarder which was effectuated on 2 August 2007

pursuant to the terms of the EGL Merger Agreement

• ‘Gearing ratio’ is defined as net debt divided by total capital

• ‘Headroom’ is the sum of cash and cash equivalents plus committed facilities

• ‘IFRS’ refers to International Financial Reporting Standards as adopted by the European Union

• ‘Logistics business’ refers to the subsidiaries, businesses, assets and liabilities of TNT that were acquired on 4 November 2006 by CEVA.

• ‘Net capital expenditure’ is calculated as capital expenditure on plant and equipment and other intangibles less proceeds from the

sale of plant and equipment and other intangibles

• ‘Net debt’ is calculated as total principal debt less cash and cash equivalents

• ‘ROCE’ or ‘return on capital employed’ is calculated by taking operating income before specific items divided by operating net

working capital plus other intangibles and property, plant and equipment

• ‘Specific items’ are significant non-recurring items. The principal events which may give rise to a specific item include

the restructuring and integration of businesses, material litigation and rebranding costs, amongst others

• ‘TFR’ refers to ‘Trattamento di Fine Rapporto’ leaving service benefits provided to Italian employees that are mandatory

under Italian law

• ‘TNT’ refers to TNT N.V.

• ‘ONWC’ or ‘operating net working capital’ is defined as non-interest bearing current assets minus non-interest charging liabilities

and excludes taxation

• ‘$’ or ‘dollar’ or ‘United States dollar’ or ‘US dollar’ or ‘US$’ refers to the lawful currency of the United States of America

• ‘€’ or ‘Euro’ refers to the single currency of the participating Member States in the Third Stage of European Economic and Monetary

Union of the Treaty Establishing the European Community

• ‘£’, ‘British pound’ or ‘pounds sterling’ refers to the lawful currency of the United Kingdom.

CEVA Group Plc | Annual Report | 2008

90


For further information,

please contact:

Group Communications

+31 23 568 35 82

Copyright

CEVA, 2009

Design and Realization

Dart | Brand guidance & Design

Amsterdam, The Netherlands


CEVA Group Plc

CEVA House

Excelsior Road

Ashby de la Zouch

Leicestershire LE65 1NU

United Kingdom

CEVA Logistics

HeadOffice B.V.

Visiting address:

Siriusdreef 20

2132 WT Hoofddorp

The Netherlands

Postal address:

PO Box 483

2130 AL Hoofddorp

The Netherlands

+31 23 568 33 00

info@cevalogistics.com

www.cevalogistics.com

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