A strong focus on the bottom line delivers a 30.8 percent increase to profit for Toll Group despite flat revenues
Toll Group’s strong focus on the bottom line over the past year has seen annual net profits after tax and attributable to shareholders rise 30.8 per cent to $85 million.
CEO Brian Kruger putting the heavy lifting down to Toll’s Australian operations.
The pleasing performance came as revenues showed a 0.1 per cent rise to $8.719 billion.
“We saw solid earnings from our core Australian businesses, reflecting the benefit of recent investments in those businesses to improve productivity and returns,” Kruger states.
“We are focused on doing more with our existing global businesses and this result reflects that increased discipline.
“We see this as the right approach given both the volatile external environment and where Toll is in its development as a company.”
Proof of the discipline was a reduction in capital expenditure from $479 million to $392 million, with Resources, Logistics, Global Forwarding and Corporate expenditure sliced by between 30 and 60 per cent, while allowing for some investment rises for Global Express Domestic Forwarding and Specialised and Domestic Freight.
On the expenditure side, Toll’s direct transport and logistics costs rose by less than $20 million to $4.238 billion but it was able to reduce its fuel, oil and electricity costs from $393.5 million to $374.9 million and repair and maintenance was also down from $187.5 million to $175.8 million.
‘Employee benefits’ were up from $2.45 billion to $2.51 billion. Meanwhile, payments for property, plant and equipment and intangible assets fell from $478.6 million to $391.6 million.
Toll gained $55 million from the sale of the Toll Auto Vehicle distribution business, the Toll Refrigerated linehaul and warehousing business and Japan’s Sanko MIC. Automotive Holdings Group says it paid $6.18 million for the refrigerated business.
Smaller firms hoping or fearing the company’s famed acquisitive nature has waned recently will have the feeling reinforced, with the company stating:
“While it is too early to be certain about the shape of overall Group earnings in 2014, they will be supported by increased contributions from a range of One Toll activities, a strong focus on continued productivity and cost efficiencies and implementing targeted organic growth opportunities.”
The Australian operations of Toll Global Express achieved revenue growth in “difficult operating conditions while the overall margins were negatively impacted by down trading from smaller, higher margin customers, start-up costs from developing new business opportunities and by losses incurred at the Toll Dnata Airport Services (TDAS) joint venture.
“Performance from the network transport businesses have been resilient despite challenging macro conditions, with the business well positioned for any future upside in operating conditions.”
The Toll Specialised and Domestic Freight arm performed well, lifting revenues 4.3 percent to $1.4 billion and earnings before interest, tax and amortisation (EBITA) 15.4 per cent to $101 million.
Toll Express helped due to “ongoing investment in replacement fleet and leveraging IT to enhance customer service levels”, an initiative also underway at Toll NQX but to lesser effect due to increased competition and the cooling of the Queensland mining industry.
“Volumes in the less than full load market were lower as a result of the downturn in the resources sector, particularly with the exposure to the coal sector in Central Queensland.”
Toll Liquids saw continued strong organic growth due to contract wins with Shell, 7-Eleven and BP.
The business also renewed its Linde Group relationship for a further five years.
On the customer logistics alliance front, TGL Customised Solutions increased revenue and EBITA due to new business wins involving Rubbermaid, Ikea, Adidas and Unilever Ice Cream, coupled with volume increases from existing customers including Kmart, Cadbury, Nike and Hurley.
Two greenfield projects – Adidas Melbourne and Optus Yennora – were completed and became fully operational during the year.
Despite that, revenues for Toll Global Logistics fell 10.8 per cent.
By contrast, though held back by continuing issues with its Japanese business, the Toll Global Express unit’s revenues remained the same as last year, supported by local businesses.
Of these, Toll IPEC was a star, seeing its earnings before interest, tax and amortisation (EBITA) rise.
“Toll IPEC’s revenue grew across all significant locations, and margins were maintained through tight cost control, translating to good EBITA growth,” Toll says.
“Revenue growth was strongest in Queensland and Western Australia where the business serviced demand from customers exposed to the mining and resources industry,” Toll says.
But it was not all plain sailing, with south-eastern state retail exposure proving a challenge.
“In locations with a greater exposure to discretionary retail customers, such as New South Wales and Victoria, volume growth was achieved despite consumer spending conditions deteriorating in the second half.
“EBITA growth in these locations was hampered by additional handling costs associated with depot capacity constraints.”
Toll Domestic Forwarding revenues slid somewhat but gross earings rose, impacted somewhat by the Toll Refrigerated sale in July 2012.
This did not mean the firm was out of refrigerated altogether.
Toll Tasmania revenue increased “primarily driven by a number of new contract wins including Coles Refrigerated Interstate, Coles Tasmanian Intrastate, Tasmanian Dairy Products and Rand Transport.
“During the period, the business was successful in retaining contracts with Woolworths, Kraft and Fosters.
“Toll Tasmania also completed the acquisition of the Linfox Trans Bass business with operations commencing 17 June 2013” and with the purchase costing $6.5 million.