Accounting cuts, lack of public listing cited as JP Toll business underway
Toll Group managing director Michael Byrne has pointed to a strategy of efficiency and cost-cutting at accounting level as contributing to a turnaround at the Japan Post subsidiary.
Its ‘transformation’ strategy to reverse its direction was showing benefits earlier this calendar year, reporting it had returned to financial growth.
Now, its most recent results show that operating income for the first six months ended September 30, 2018, increased by A$219 million year-on-year (an increase of 5.5 per cent), owing to a “continuous increase in the operating income in the Global Logistics business”.
While operating expenses rose $205 million, personnel expenses decreased $7 million.
It meant, overall, net operating income (EBIT) increased by A$13 million year-on-year (an increase of 41.3 per cent year-on-year).
“We will continue to exert our efforts on the improvement in productivity and expect to expand our business performance in the second half of the fiscal year, including the peak season,” Japan Post says.
Speaking to yourmoney.com.au, Byrne confirmed media commentary that his directive from above was to “fix it – and hurry”, and pointed the finger at the accounting department.
“Blame Oracle,” he says.
“A lot of accounting and balance sheets and just doing journal entries and comparisons between debits and credits can all be done by an algorithm.
“And we can’t afford that overhead cost. Customers won’t pay for your back office. They want that to be streamlined.
“In Toll we say ‘standardise everything and turn it into sausages, everything that the customer can’t see or mince. And everything out front looks bright and shiny and for the customer.”
Part of Toll’s strategy with Japan Post is also building a new $1.2 billion logistics joint venture, JP Toll, which “aims to combine Japan Post’s post office network and Toll’s logistics experience to develop new services for companies wanting to move goods in and out of Japan”.
As part of the strategy, JP Toll aims to grow revenue from $600 million to $1.2 billion over the next 10 years.
Byrne admits not being listed on the ASX has helped him implement his plans more aggressively.
Asked if he could have undertaken the transformation if Toll were publicly listed, he says: “Not possible. It just couldn’t have happened. These are really tough things to fix.
“Shareholders want quarterly updates or quarterly returns. They’re not going to allow me to spend – we’ve spent $1.6 billion since I started to fix core fundamentals in the business.
“Public companies aren’t going to allow that.”