Write-offs and write-downs acknowledged but new deals are a silver lining
K&S Corporation bosses have acknowledged a difficult financial year but have pointed to positive portents as they strive to turn their ship around.
Addressing the company’s annual general meeting, the good news was $25 million in new deals last year and $35 million so far this year.
Added to that was a greater-than-expected contribution from its purchase last year of Aero Refuellers and a buoyant New Zealand business.
“Aero Refuellers has exceeded our pre-acquisition expectations and we anticipate that it will realise continued growth leveraging off the broader Group network,” MD and CEO Paul Sarant tells shareholders.
Established in September last year, the K&S Energy division picked up two additional major contracts were secured in quick succession and now services “several other major customers”.
“We expect to realise continued growth in fuel transport, with an expansion into the LPG and LNG markets in 2017 through recent contract successes, Sarant says.
The negative side was enumerated in its annual results report but details have been added.
“We have written off intangible assets in the Australian Transport CGU of $86.6 million,” Johnson says.
“The non-cash write off was made up of $77.8 million of goodwill, $6.2 million of brand names, $1.8 million customer contracts and $0.8 million of software.
“The carrying value of land and buildings surplus to our requirements was also written down by $8.2 million.
“We have also written down the carrying value of some Western Australian-based heavy haulage equipment that has been impacted by the downturn in the resource sector.
“In addition we have written down the value of some further surplus equipment.
“The total adjustment to the carrying value of equipment was $8.7 million.
“In March 2016, we completed an independent revaluation of freehold land and buildings that resulted in an increase to the asset revaluation reserve of $8.9 million for core land and buildings.”
Johnson notes the” continued severe downturn in the resource sector throughout Australia and a softening of related chemical demand”.
“Also written down was the carrying value of some Western Australian-based heavy haulage equipment that has been impacted by the downturn in the resource sector. In addition we have written down the value of some further surplus equipment.”
The total adjustment to the carrying value of equipment was $8.7 million.
The failure of steel firm Arrium saw $11.8 million in carrying value of last year’s contracts written off.
Administrator KordaMentha will sell Arrium’s various divisions.
“The timing and size of any recoveries out of the administration of Arrium is unknown,” Johnson says.
With Johnson noting the group’s “results have been impacted by the continued severe downturn in the resource sector throughout Australia and a softening of related chemical demand” the impact here has been felt by Chemtrans in north Queensland and Bulktrans in southern coalfields.
Against that, coal volumes grew in the second half and a new contract to deliver chemicals and fuel to Olympic Dam started during the year.
Formerly the rock on which the group stood, K&S Freighters has felt the economy’s torsions in this decade keenly, as has been well documented.
Its traditional linehaul strength has been undermined as international supply chains increasingly choose imports and local distribution and traditional industrial customers struggle with foreign competition and manufacturing continues to decline.
“The infrastructure of K&S Freighters allows the business to offer customers all facets of the current and emerging supply chains,” Sarant says.
“During the year we heavily focused on K&S Freighters’ core capability with a specific target to increase import and export activity nationally. This focus will continue.”
Northern Territory Freight Services’ (NTFS) and K&S Freighters’ operations were consolidated into one Adelaide site, allowing one externally rented facility to be let go.
“We indicated last year our intention to leverage our K&S Freighters and Regal networks,” Sarant says.
“In this regard we have recently commenced operating services from Perth to Darwin via Kununurra, as well as from the East Coast to Darwin. We expect more opportunities will be forthcoming.
“A major contract win with a large fuel distribution company ex Darwin was secured.”
There was no developments in talks with related entity Scott’s Transport Industries.