Toll bounces back

Toll MD Michael Byrne.

Toll Group, a subsidiary of Japan Post, has reported earnings before interest and tax (EBIT) of $119 million for the year ended 31 March 2018, an improvement of over 70% on financial year 2017.
Today’s result is the first time in three years that Toll reports growth in profit and revenue.
Some impressive numbers:

  • Revenue of $8.2 billion, up $309 million compared to last year.
  • Global Logistics reported an EBIT of $191 million, up 13%, off the back of strong performances in Asia and in key segments in Australia including government and defence, mining, energy and retail.
  • Global Express delivered a $59 million turnaround compared to last year’s result, driven by an improved operating cost structure from transformation activities in network consolidation and productivity.
  • Global Forwarding returned to profit, delivering close to a $9 million improvement to EBIT, despite reduced margins. This was delivered through cost improvement initiatives, including exiting unprofitable countries, which have set the business up for future growth. Customer satisfaction reached record levels in FY18.
  • A reduction of over 16% in total injuries in FY18 as a result of an increased focus and investment in this area, which the company says will continue to be a priority in the coming year.
  • Delivery of 1,000 new fleet and equipment, part of a six-year, $1.6 billion asset investment program. A further 1,500 of the latest in fleet will be added to its network this year. The safety technology and fuel-efficiency of these assets is expected to create new possibilities for the network with improved safety and maintenance costs as well as reduced emissions.
  • Close to $600 million investment in capital expenditure on fleet, vessels, infrastructure and technology, which resulted an overall negative cash outflow for the year.

Toll Group managing director Michael Byrne said the performance marks the successful execution of the first year of Toll’s transformation strategy.
“Having successfully delivered on the first year of our overall three year transformation program, we are a leaner business, creating more value for our customers. This turnaround has been driven by the 44,000 strong Toll team who have done an outstanding job of implementing this program of rapid and significant change,” Mr Byrne said.
“While Toll is much stronger than this time last year, we remain vigilant. Our transformation continues, and our results to date show that our strategy is the right one for today’s markets and the long-term opportunities ahead. We will continue to focus on delighting our customers, disciplined cash flow and being smarter with our costs.”

Toll Logistics, eCommerce pay off for Japan Post

Japan Post has reported its results for the period to 31 December 2017.
In Toll Group’s international logistics business, operating income (revenue) increased by 3.6% or A$218.0 million year-on-year, to reach A$6,206.0 million, owing to the increase in operating income mainly in the Global Logistics business. Net operating income (EBIT) for the last quarter from October to December 2017 was A$66.0 million, exceeding Q3 in the previous fiscal year as well as Q2 in this fiscal year. EBIT for the nine months ended December 31, 2017 was A$100.0 million, representing an increase of 20.5%, or A$17.0 million, year-on-year.
For the Postal and Domestic Logistics Business at Japan Post, revenue growth was driven by a continuous increasing trend in volume of Yu-Pack and Yu-Packet handled (25.0% increase year-on-year), themselves driven by growth in eCommerce markets. Operating income climbed 62.5% and net operating income rose by Y26.7 billion year-on-year to Y28.9 billion due to a rise in operating income exceeding an increase in expenses such as personnel expenses and collection, transport and delivery outsourcing expenses.
 

Toll acquisition ‘failure’ to affect Japan Post stock sale

A $15 billion sale of Japan Post stock could be negatively affected by its purchase of Toll Holdings, with fund managers saying the company ‘lacks growth potential’.
According to Reuters, Japan’s government said it will sell US$12 billion ($15 billion) worth of Japan Post Holdings stock in an announcement that fund managers reportedly gave a lukewarm reception.
“The company lacks growth potential appeal,” Kazuo Okabe, General Manager, Fukoku Capital Management, told Reuters. “I don’t think there will be strong demand from actively managed funds.”
Even after the ¥400.3 billion ($4.8 billion) writedown, a ruling-party lawmaker told Reuters that Japan Post needs to make more acquisitions in order to grow.
“Japan Post cannot expect to realise strong growth on its own, it needs to pursue acquisitions. Management should not be timid about them even after the failure of the Toll deal,” Reuters quoted the source.
According to Reuters, Japan Post’s chief executive has said the firm can achieve growth through organic means alone.

Japan Post tells Toll Group to shape up, fast

Michael Byrne, CEO of logistics company Toll Group, has shared that he is confident in his ability to return the company to profitability, and that Japan Post – which acquired Toll Group in 2015 – has given him orders to “fix it and hurry.”
In an interview with The Australian Financial Review (AFR), Byrne explained that at a recent leadership conference held in Melbourne, Japan Post executive Taneki Ono told assembled senior executives about the need to reverse the Australian logistics company’s fortunes to aid in Japan’s quest to help house those displaced after the 2011 earthquake and tsunami.
“We have a great moral obligation to help relieve those people of their suffering,” said Byrne. “That has now been explained deeply to the Toll management.”
In his first interview since taking over the role back in December 2016, Byrne told AFR that Japan Post was swift and decisive in bringing him on board.
Newly appointed Chairman, John Mullen, had worked closely with Byrne previously, when Mullen ran rail company Asciano and Byrne headed up Linfox. Mullen reportedly recommended Byrne for the position and started a rapid recruitment process.
“I was in Europe [on] holidays and got asked to go to Japan for the day,” said Byrne.
By the end of the day, after being interviewed by five of Japan Post‘s most senior people, he had the job.
Although disappointed with the Australian logistics company performance in 2017, Japan Post is “extremely supportive” of the operation, approving investments into the business, Byrne told AFR.
“If you boil down probably 1,000 pages of strategy, it’s fix it and hurry and get back to what we’re supposed to be doing – which is growing a world-class business.”

Toll facing lengthy three-year turnaround process

Embattled logistics powerhouse, Toll, is facing a painful three-year turnaround process, according to its Chairman, John Mullen.
In his first public interview since Toll parent company, Japan Post, revealed that it would book a US$S3.6 billion write-down on the Melbourne company, Mullen told The Australian that there are still “a lot of cultural and structural issues” to overcome to get Toll back to being a high-performing business.
Mullen, who took up his role in January at the same time that Japan Post appointed former Linfox executive Michael Byrne as Managing Director, said the company was facing a large-scale restructure, with the number of business units reduced from 24 to just 10.
According to The Australian’s Damon Kitney, he also revealed that Toll management was actively working on the sale or closure of a number of “poorly made and underperforming” acquisitions, particularly in the overseas freight forwarding business and in Europe.
While Mullen admitted the write-down in April was a bigger-than-expected reality check, he also said work was now under way to turn the boat around.
“The core business of Toll is strong and we expect to see improvements each year from today, but anticipate that it will take three years to complete this turnaround,” he told The Australian.
He added a new deal Toll signed with Amazon will see Toll compete in the business-to-consumer (B2C) space when the online giant comes to Australia in 2018, saying it was the first step of Toll facing the challenges of a changing marketplace.
“The issue is not so much the impact Amazon has on us, but the impact it will have on our customers. If they render the business model of some large retailers in Australia unworkable, if we are joined at the hip with them, then that is a challenge for us,” he said.
“We all need to realise the world is changing rapidly. A lot of older logistics companies are built around traditional distribution structures with large warehouses. We need to modernise that at Toll and be very nimble and ready to compete in the B2C market.”

Ex Toll boss Paul Little comments on Japan Post write-down

Paul Little, former boss at Toll Holdings, has spoken out on the news that the logistics firm has been given a $4.8 billion write-down by owner Japan Post.
Japan Post recently reported a ¥40 billion (A$480 million) loss for its first full financial year as a listed company, arising from a ¥400.3 billion ($4.8 billion) write-down on the Toll, which it bought in 2015.
Speaking with The Weekend Australian, Little commented that Toll’s legacy had been “trashed” and the company would need a major culture overhaul in order to remain relevant, adding that he was upset by the job cuts announced recently in the company’s new growth strategy.
“I left Toll the best part of five-and-a-half years ago and had no involvement in the acquisition by Japan Post,’’ said Little. “Since that has happened, a number of my quite close friends at senior management levels have lost their jobs. That has been right in my face. They were loyal and extremely well respected from an industry point of view.
The way they were removed from the company, it has happened so fast and without a lot of compassion. I find that personally quite upsetting.’’
The Australian reported that, under Little’s leadership, Toll’s market value reached a high of $8 billion and it had 50,000 employees. He also introduced an employee share scheme to allow staff to directly participate in the company’s growth.
In 2011, Little stepped down after an ambitious expansion in Asia resulted in write-offs and asset sales, he was then replaced by Brian Kruger who held the position until late 2016.
Little told the newspaper that the “can-do” culture he had known at Toll had morphed into one of “cost cutting and disposal of assets and shrinking the business.”
“Toll’s legacy has been trashed,” Little said. “It has gone from being a strong, proud and aggressive group to one that is being forced to undergo major surgery with retrenchments and a major restructure.
“And I believe that is the result of its culture. The company needs to look closely at changing its culture because the only way it will survive after this restructure is with a strong growth program.
“Toll is not a yield play, Toll is a growth play. Logistics now is a global playground and you need to have global cross-border capability to survive.’’
Little reported that he approached Japan Post, offering to be involved with the company under Japanese management, but his offer was refused.
Through selling his approximately five-per-cent stake in the company following the Japan post takeover, Little benefitted to the tune of $340 million.
“There is not much I can do about the fact that Japan Post overpaid for the company and I had a reasonable shareholding,” he said, adding: “The Japanese need to empower the Australian management if they are going to turn Toll around into a successful corporation.’’
 

Japan Post responds to Toll write-down

Toll Group parent company, Japan Post, has had to report a ¥40 billion (A$480 million) loss for its first full financial year as a listed company, arising from a ¥400.3 billion (A$4.8 billion) writedown on the Australian logistics business it bought in 2015.
According to The Financial Times, Toll’s operating income tumbled between April and December last year as low global resource prices weighed on the Australian economy and on the company’s core domestic business.
Other news outlets attributed the drop in performance to fierce competition in the Australian parcel industry, as well as redundant operations by independent business units and a high ratio of fixed costs.
In analysing the write-off, The Financial Times also pointed to the “large degree of discretion” Japan Post had initially allowed to Toll’s Australian management, something that Masatsugu Nagato – who became President of Japan Post Holdings last year, but wasn’t involved in the original deal – said would now change.
After bringing in ex-Linfox executive Michael Byrne as Managing Director and John Mullen as Executive Chairman, he told the newspaper that communication between Toll and Japan Post would be “closer” from here on and that governance would be improved by adding Japan Post executives to Toll’s management.
According to The Australian, one of them could be Japan Post’s head of global logistics strategy, Hiroshi Shiraishi, one of the architects of the company’s $6.5 billion purchase of Toll.
Nagato reportedly also pointed out that Toll would remain the “core” of the overall company’s globalisation plans, with the company stating, “We will continue to position Toll as the platform for global expansion and recover its financial results as soon as possible, and will carry out a structural reform program to contribute to the enhancement of the Group’s corporate value.”
Part of the program will reportedly be a renewed focus on “priority regions and businesses”, extensive cost reductions, as well as “customer-centricity, improvement of quality of service, differentiation and fostering an integrated sales-force.”

New growth strategy for Toll Group

In his first big move as Managing Director of Toll Group, Michael Byrne has announced a major restructure of the company’s workforce, to make Toll ‘leaner’ and more competitive – the result of a strategic review Toll undertook looking at the company’s readiness for growth.
“The business is simplifying the number of operational divisions from five to three aligning with core segments in Global Express, Global Forwarding and Contract Logistics, which will form the executive team,” the company said in a statement.
Byrne said, “This is a great company, with a proud history and tremendous potential.
“However, our industry is rapidly changing and faces significant challenges; Toll must adapt, quickly.
“Our 100-day review of the business has highlighted clear markets and opportunities to deliver on our priority to drive organic growth, as well as the need to make some tough calls to reduce complexity and overhead costs.
“As a result of the changes, Toll expects that approximately 1,700 roles will be impacted globally, including back office and operational roles,” he added.
“This is a tough decision that has not been taken lightly.”
Byrne added that Toll will fully support employees impacted by these changes, including offering redundancy entitlements, redeployment opportunities where available and career transition support.
“The restructure I am announcing today will transform Toll into an organisation that is leaner, more competitive and more customer-focussed,” he said.
The Financial Times shared a comment from Japan Post on the move: “We are confident that the implementation of the reforms that have been decided by the new management team will contribute to Toll’s future growth.”
 

Toll Group under pressure to improve performance

Melbourne’s Toll Group, which is now owned by Japan Post, could see a major reshuffle during the second half of the Financial Year.
According to the Australian Financial Review (AFR), senior Japan Post executives were in Melbourne earlier in the month to review the company’s performance since the $6.5 billion take-over last February.
“The expectation was that Toll would prove the springboard for Japan Post’s diversify away from its traditional and unprofitable post service by acquiring a broad and profitable channel into the Pacific freight and logistics business,” the AFR’s Matthew Stevens reported. “[However,] Toll’s new owner is deeply unhappy with the performance of the business since its acquisition.”
Earnings are said to have gone back during the current Financial Year, forcing a strategic revision, the AFR found.
Toll refused to comment on speculations regarding the consequences of such a revision, but told Stevens that, “we need to be positioned to deliver better solutions for our customers and to have an organisational structure that takes into account the challenging environment in the logistics industry.”
Brian Krueger, who led the negotiations with Japan Post as Chief Executive, retired in December and was replaced by ex-Linfox Chief Executive, Michael Byrne.
Since then, ex-Asciano Executive, Saul Cannon, has reportedly come on board as the company’s Director of Strategy.

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