Toll underlying profits rise despite overall loss from Virgin sale
Australia’s leading transport group Toll Holdings announced a heavy full-year loss due to selling off its 63 pct stake in airline Virgin Blue but unveiled a strong rise in underlying profits.
In the year ending June 30, 2008, the group, which includes major express, parcel and courier businesses, made an overall net loss of AUD 695 million (EUR405 million). But this included a loss of AUD 952 million on discontinued operations, including a heavy AUD 1.2 billion writedown on the value of the Virgin Blue stake.
Toll announced in July that it would dispose of its holding in Virgin Blue by paying its shareholders a special dividend in the form of Virgin Blue shares. The group had previously said that the passenger airline was not a core business and that it wanted to focus on its global logistics activities while using the airline’s freight capacity under a long-term commercial agreement.
Net profits from continuing operations rose by 24pct to AUD258 million (EUR 150 million) on revenues up by 15.4pct to AUD5, 605 million (EUR 3,270 million). The operating profit (Ebit) was up by 18pct to AUD429 million (EUR 250 million). Toll managing director Paul Little commented: “We are pleased with the performance of our core operations, the integration of several new acquisitions and our balance sheet strength, which will all support our ongoing strategic development.”
In Australia, revenues grew to AUD4.42 billion thanks to 7.5pct organic growth and various acquisitions, including several express companies (Victorian Express, Couriers Australia and SkyNet). Operating profits were up 18pct at AUD347 million. The express operations, Toll noted, represent about 35pct of divisional revenue of AUD4.6 billion, or approximately AUD1.6 billion.
“The express and time sensitive operations of the company grew strongly throughout the year, supported by investment in a new national air linehaul network and targeted acquisitions. These express operations represent approximately 35pct of divisional revenue and are pivotal in servicing increased volumes arising from Asian direct sourcing activities of Australian customers,” Toll commented.
Toll IPEC, the road parcel express business, performed strongly during the year, benefiting from integrating services with group warehousing and distribution operations and utilising its comprehensive network to grow market share.
Toll Priority, the air express operator, also performed well and completed the acquisition of SkyNet, an international air express operator. “Whilst the cost of additional investment in the air linehaul network impacted results, it is expected that potential integration with the developing international Asian air network will drive additional profitable growth for Toll Priority,” the group said.
Looking ahead, Toll said that there is no deterioration in the Australian market yet, notwithstanding a number of challenging factors including increased interest rates, high fuel prices and currency volatility. In particular, it expected to benefit from more Australian companies looking to source directly from Asia.
“In the next twelve months, we expect industry rationalisation to continue with many larger and smaller players under pressure due to excess gearing, unsustainable business models and poor execution. As industry valuation multiples also reduce, it is likely that a range of acquisition opportunities will present themselves to the company,” Toll added.
