When Toll Group released its results to the stock market and shareholders earlier this week the numbers were well above those predicted by analysts. Profits had been expected to be just above last year’s level, in the lead up to the announcement, but, in fact, came in at 5.7 per cent up on last year’s numbers.
Overall revenue for the group increased 1.1 per cent over 2013 to $8.8 billion. Earnings before interest and tax were reported as $444.4 million, up 4.3 per cent on last year. However, the headline figure which surprised some commentators was the $298.5 million net profit after tax (before individually significant items) at 5.7 per cent above.
“Over recent years we have been investing in our Australian network businesses with significant capital being directed into new fleet and depots,” said Brian Kruger ,Toll Group Managing Director commenting on the results. “While this is largely sustaining spend we have also been positioning ourselves for what we see as a strong demand for logistics services in Australia in the medium and long term.
“This year has seen new major depots completed including Bungarribee (Sydney), Brighton (Hobart) and Karawatha (Brisbane), with a major new depot under construction at Tullamarine (Melbourne) and work commenced on a new port side facility in Fremantle.”
The announcement put the improved performance down to restructuring and cost improvement initiatives. Toll also highlighted new contract wins which were identified as offsetting challenges due to adverse market conditions.
The statement said Toll Global Forwarding earnings benefitted from cost savings despite its markets remaining difficult, while Toll Global Logistics improved results from its Asian activities, with a continued solid result in Australia.
“Cost reduction programs across the Group started to deliver a lower cost base,” said Kruger. “Our ability to implement these types of programs has been facilitated by a realignment of our core operating divisions, improved labour productivity, lower handling and linehaul costs and a Group focus on driving continuous improvement and innovation.
“While we have seen the benefits of recent investments in our core Australian businesses in improving our cost base, we recognise that a continued focus on productivity and efficiency is necessary in the current environment to drive earnings growth.
“A highlight of this result was the strong free cash flow of $355.1 million generated by the Group, a $126.1 million increase on the prior year. The balance sheet remains strong, with gearing at 31 per cent ensuring sufficient balance sheet capacity to fund a range of growth initiatives.”
Toll said the external business environment remains difficult for the group. The company’s intention is to continue to look for business improvement initiatives and this will include cost reductions as well as investments in productivity enhancing projects.