RATINGS RATIONALE

"The change in outlook to negative from stable reflects a deterioration in market conditions, depressing CEVA's operating performance and leading to weak credit metrics for the current rating," says Douglas Crawford, Moody's lead analyst for CEVA. The negative outlook reflects CEVA's high leverage and weak free cash flow for its rating and assumes that operating performance will not further deteriorate.

CEVA's operational performance in H1 2012 was below our expectations. According to the company's non-audited statements, revenue increased by about 4% year-on-year (YoY) to EUR3.5 billion, driven by FX movements following the weakening of the Euro. However, reported "adjusted EBITDA" of EUR136 million was down 11% YoY, impacted by falls in southern Europe and the Americas of 44% and 19% respectively as well as the impact of the floods in Thailand. The company has suffered as the market environment has become increasingly challenging in the contract logistics space and it has not been able to mitigate this with its extensive cost saving programmes. However, the B3 CFR assumes that in H2 2012 additional cost savings and increased profitability on new contracts, as well as its exposure to higher growth geographies outside of Europe, should stem the declines in EBITDA.

CEVA's liquidity position appears adequate for its near-term needs, with EUR199 million in cash and EUR90 million available under its credit facilities that mature in 2015 and reasonable covenant headroom under its senior secured leverage ratio covenant. We also expect that cash flow in H2 2012 will benefit from seasonal swings in working capital. Following the refinancing of debt maturing in 2013-2016 earlier this year, the first significant bond debt maturity is now in 2016.

In light of the negative outlook a rating upgrade is unlikely in the short-term unless there is an improvement in the company's operating performance leading to adjusted leverage below 6x and EBIT interest cover sustainably above 1x. Any upgrade would also anticipate sustained improvements in free cash flow generation.

A rating downgrade could occur as a result of adjusted leverage remaining over 7x, or a deterioration in CEVA's liquidity position or free cash flow generation.

CEVA's ratings were assigned by evaluating factors that Moody's considers relevant to the credit profile of the issuer, such as the company's (i) business risk and competitive position compared with others within the industry; (ii) capital structure and financial risk; (iii) projected performance over the near to intermediate term; and (iv) management's track record and tolerance for risk. Moody's compared these attributes against other issuers both within and outside CEVA's core industry and believes CEVA's ratings are comparable to those of other issuers with similar credit risk. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

CEVA Group plc is the fourth-largest integrated logistics provider in the world in terms of revenues (EUR 7 billion as at 30 June 2012 on a last-12-months (LTM) basis). As at financial year-end 2011, CEVA had a presence in more than 170 countries worldwide, employing around 51,000 people and managing approximately 10 million square metres of warehouse facilities.

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Douglas Crawford Vice President - Senior Analyst Corporate Finance Group Moody'sInvestors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Chetan Modi MD - Corporate Finance Corporate Finance Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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