Toll cuts goodwill in global forwarding but says this will not affect operating earnings guidance
June 27, 2013
Toll has cut goodwill associated with its Toll Global Forwarding arm by $200 million but says this will not affect its operating earnings guidance for this financial year.
Earnings before interest and tax remain on course at $420-$430 million, as advised in February.
“The announced non-cash impairment is expected to result in an increase of approximately 2 percentage points to the company’s gearing ratio, but will not have an impact on Toll’s ability to fund its capital expenditure programme or to pay dividends,” Toll says.
“The company continues to be well within its banking covenants.”
The move follows the company’s annual intangible asset impairment testing process.
It observes that the global forwarding market conditions have further deteriorated over the past six months resulting in reduced growth and margin assumptions being used in the impairment testing process.
“While we still see global forwarding as an attractive market longer term, this impairment decision reflects the combination of current weak market conditions and uncertainty over the timing and extent of any recovery,” Managing Director Brian Kruger states.
“We are focused on the areas under our control, driving cost reductions and productivity improvements even harder.
“For the foreseeable future, our focus will be on driving costs out of the business and we will not look at further acquisitions in the global forwarding market until we are able to demonstrate improved operating performance in this division.”
Toll is seeking $15-$20 million in cost savings in the global forwarding business next financial year and $40-$50 million overall.
The full-year result is due in August 22.
