Australian express and transport conglomerate Toll Group is to sell its Global Express Asiabusiness and several other “non-core” activities in what appears to be a reversal of its expansion
into Asia launched several years ago.The company said the disposals were expected to raise around A$100 million and were intended torelease capital, drive improved returns for shareholders, and rationalise its portfolio ofbusinesses.
Toll Global Express Asia is an express parcel business headquartered in Singapore that operatesin markets including China and Hong Kong. The business was formed when Toll bought the DPEX Groupin 2010 from the Australian airline group Qantas, reportedly for more than A$40 million, as part ofToll’s ambitious plan to break into the Asian parcel and express market and establish a globalexpress, logistics and freight network. Qantas had itself bought DPEX in 2007 as part of its plansto expand in the Asian air express market and to complement its sizeable domestic expressbusiness.
Toll said at the time of the acquisition in 2010 that DPEX would support the group’s on-goinggrowth and development in the region, describing it as “an important addition to TGX’s Asia Pacificoperations that acquired Deltec, Skynet and Kwikmail businesses in the middle of last year and willprovide additional scale and coverage across a network of 19 countries in Asia”. It believed thatthe acquisition of DPEX was highly complementary to the growth of Toll Global Express’s TollPriority international express network in the Asia Pacific region.
However, Toll now concedes that the business lacks the critical mass needed to be competitive inthe region. “Whereas Toll Global Express Australia has significant scale and network advantages,Toll Global Express Asia lacks this critical mass and competitive advantage,” the group said. “Tollwill continue to work collaboratively with the new owner and our other global strategic partners inrelation to express freight being moved into, and out of, Australia.”
In addition to the sale of Toll Global Express Asia, the group is selling its 40% interest inBIC India, a less-than-truckload carrier that specializes in serving the automotive sector. Tollacquired its 40% interest in the business in 2009, “but has found it increasingly difficult to makeprogress with its plans for the business. Given these challenges, Toll has sold its interest to themajority shareholder.”
Other disposals announced today include the sale of its 50% stake in the Toll dnata AirportServices (TdAS) business, which it has agreed to sell to its joint venture partner, dnata. “While it was decided the joint venture was no longer core to Toll’s transport and logisticsoffering, the working relationship between dnata and other parts of Toll’s express freightoperations will continue,” Toll said.
The group has also agreed to the conditional sale of the assets of its Toll Marine LogisticsNorthern Australian marine freight business; the exit of Toll Marine Logistics Asia and thedisposal of all its remaining assets; and made a decision to pursue options for monetising itsSingapore TOPS supply base business.
Toll’s managing director Brian Kruger said these decisions reflected the company’s drive toimprove sustainable shareholder returns through a focus on return on capital employed. “Thesetransactions will have multiple benefits for Toll, including releasing significant capitalpresently tied up in real estate, exiting loss making businesses, and selling businesses that arenon-core to Toll to more natural long term owners,” he said.
“While the final timing of the various transactions announced today will vary between the firsthalf and second half of this financial year, we expect that they will all complete during thisfinancial year, resulting in an overall positive contribution to reported earnings. The cashproceeds from these transactions, excluding the sale of TOPS property assets, are expected to be inexcess of A$100 million.”
In full-year results reported in August, Toll Group achieved a revenue increase of 1.1% over theprevious year to A$8.8 billion (€6.2 billion). Total earnings before interest and tax were up 4.3%to A$444.4 million and net profit after tax was also up 5.7% to $298.5 million, excludingnon-recurring items.
Overall revenues for Toll Global Express declined by 0.3% to $2.227 billion because of fallingrevenues in its Japan Express business, where turnover dropped more than 6% to $589 million due todivestments. However, the Australian domestic operations of Toll Global Express achieved revenuegrowth of 2% to $1.637 billion despite “challenging” trading conditions in the road expressbusiness that led to a slide in profits. And revenue in the air express parcel business and in theToll Group’s labour service provider, Toll People, grew.
Overall profits for Toll Global Express declined by 5.9% to $119.2 million, primarily due tomargin pressure and down-trading in the Toll IPEC road express and distribution and the Toll Fastmetropolitan courier businesses. Costs were also affected by capacity constraints in Toll IPEC,higher maintenance costs in its Toll Priority air express business and continued investment in itsnew B2C service Toll Consumer Delivery.
Toll Express Japan made a $1.2 million profit, compared with a loss of $4.2 million the previousyear, reflecting the on-going success of cost initiatives, increased efficiencies as a result ofhigher volumes and lower personnel costs. Revenue declined mainly due to the divestment of abusiness in the previous year; and in May, KSU Logistics was sold, further impacting revenue in thefourth quarter.
