The shareholders in Toll Group have reason to be happy. The bid for their company from Japan Post comes at a time when Toll is facing difficulties from both its key domestic market and its acquisitive business model.
The speed of Toll’s growth has slowed since 2011, with revenue and profits declining from its impressive performance of the previous decade to single digit percentage increases. The past half year, however has seen sales at the Australian company fall. Revenue for the period fell by 2.6% and EBIT (Earnings Before Interest and Tax) fell by 4%. Toll Group also took a series of hits from its write-downs of the Toll Marine Logistics business sold last year pushing net profit after tax down by 22%.
One of the underlying problems is the effect the fall in the price of commodities such as iron ore, coal and oil has had on Australian mining and Liquefied Natural Gas operations. This saw the ‘Toll Resources & Government Logistics’ division’s profits fall by 10% year-on-year to AUS$59.4m, made worse by the loss of Government contracts whilst ‘Toll Domestic Forwarding’ was also hit by the natural resources downturn with a fall in operating profits of 17%.
Other parts of Toll Group do continue to perform, with Toll Global Logistics and Toll Global Forwarding increasing profits and sales with contract wins and expansion of existing customers in Australia. The businesses in Asia also have strengthened in some cases with its Japanese Express business recovering profitability.
It appears that although the changes in the Australian economy are making life tougher for Toll, it is also the change away from the acquisitive business model and towards a focus on the running of its existing business that is affecting the company’s speed of growth. Brian Kruger, Toll Group’s CEO said, “This year will be something of a transformative year for Toll. Having spent the past few years primarily focussed on getting the culture right to allow us to drive portfolio and structural changes, continuous improvement and improved collaboration, we are moving into a more aggressive implementation phase.”