Australia’s leading express and freight transport company Toll Group today unveiled solidresults for 2012/13, including stable express profits, despite “challenging” conditions but warned
that the outlook for 2013/14 depended heavily on how the slowing economy developed.The broadly-based group stressed that its Australian businesses had performed “solidly”,highlighted the lower losses at its Japanese express subsidiary and reiterated its focus on costsavings, organic growth as well as closer cooperation and cross-selling between divisions under the‘One Toll’ strategy.
Toll Group’s overall revenues for the year ending June 30, 2013, were flat at A$8.7 billion(€5.9bn). But total earnings before interest and tax (before non-recurring items) improved 3.7% toA$426 million and net profit after tax (before non-recurring items) was 3% higher at A$282 million.Reported net profit, including non-recurring charges of A$191 million, was A$92 million.
Managing director Brian Kruger said he was pleased Toll was able to grow underlying operatingearnings despite challenging market conditions. “We saw solid earnings from our core Australianbusinesses, reflecting the benefit of recent investments in those businesses to improveproductivity and returns. We are focussed on doing more with our existing global businesses andthis result reflects that increased discipline. We see this as the right approach given both thevolatile external environment and where Toll is in its development as a company.”
He added: “Particularly encouraging were the benefits we were able to achieve from our One Tollinitiatives. The One Toll programme has seen us take advantage of a number of cross-selling andcost saving initiatives across the group in the areas of fleet and property investment andprocurement processes. This is a multi-year programme so it has been great to see the tractiongained at this relatively early stage.”
Toll Global Express, the group’s largest business, had stable revenues of A$2.23 billion(€1.5bn), saw operating profits (EBITA) drop 3.4% to A$126.7 million and its profit margin declinedslightly to 5.7%. Once again, the loss-making Japan business dragged down the results in the homeAustralian market.
In Australia, Toll Global Express increased revenues by 6.1% to A$1.6 billion but operatingprofits dropped 4.2% to A$131 million and the profit margin slipped 0.6 percentage points to 8.3%.The network transport businesses were “resilient” despite challenging economic conditions and thecompany successfully built up its new B2C service Toll Consumer Delivery. But overall margins werenegatively impacted by downtrading by smaller, higher margin customers, start-up costs fromdeveloping new business opportunities and by losses at the Toll Dnata Airport Services (TDAS) jointventure.
Toll IPEC, the road express delivery business, increased its revenues across all significantlocations, maintained its margins through tight cost control and generated good EBITA growth, thecompany said. Revenue growth was strongest in Queensland and Western Australia thanks to demandfrom customers involved in the mining and resources industry.
In locations with a greater exposure to discretionary retail customers, such as New South Walesand Victoria, volume growth was achieved despite consumer spending conditions deteriorating in thesecond half. However, EBITA growth in these locations was hampered by additional handling costsassociated with depot capacity constraints and Toll is investing in new sites to increasecapacity.
Toll Priority, the air express freight business, recorded flat EBITA as revenue growth wasoffset by the impact of inflationary cost increases. “Volume growth in the current environment hasbeen challenging as customers have continued to focus on their premium freight spend, and there hasbeen a mix shift to lower customer spend bands which generate lower yields,” Toll explained.However, Toll Priority’s aviation business, Toll Air Express, had a strong year achieving earningsgrowth through external charters and overnight domestic air parcel services. The city courierbusiness Toll Fast also saw earnings slip.
In Japan, Toll Express saw revenues drop nearly 13% to A$632 million, which was a 3.2% fall inyen terms, but reduced its operating loss to A$4.2 million from A$5.4 million the previous yearthanks to cost reduction measures, particularly in pickup and delivery and overhead costs. Lookingahead, Toll said recent government reforms to the Japanese economy should have a positive impact onfreight volumes while it is looking into “opportunities” with other domestic express freightproviders where additional volume in specific geographic areas or freight categories will deliverbenefits to profitability.
Among the group’s numerous other businesses, Toll Global Forwarding, the air and ocean freightforwarder, had another very challenging year due to lower volumes. Revenues dropped to A$1.5billion and operating profits slumped to just A$6.3 million. Toll Global Logistics saw lowerrevenue of A$1.3 billion although underlying EBITA increased by 9%.
Looking ahead, Toll said the external business environment “remains uncertain, making thedisciplined capital management approach Toll is undertaking even more important” while the ongoinginvestment was helping support margins in the short and medium term and improving the group’s “leverage to any improvement in the external environment”.
Without making any specific financial forecasts for the 2013/14 financial year, Toll commented: “ While it is too early to be certain about the shape of overall Group earnings in 2014, they willbe supported by increased contributions from a range of One Toll activities, a strong focus oncontinued productivity and cost efficiencies and implementing targeted organic growthopportunities.”
