Toll’s revenue increased 1.1 per cent over the previous year to $8.8 billion. Total earnings before interest and tax (before individually significant items) were up 4.3 per cent to $444.4 million, and net profit after tax (before individually significant items) was also up 5.7 per cent to $298.5 million.
Restructuring and cost improvement initiatives, together with new contract wins, more than offset the “generally challenging market conditions experienced during the year”.
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.
The Australian domestic businesses continued to be pressured by the weaker mining sector and flat volumes in the retail sector. Significant restructuring activities were undertaken across a number of business units that will provide benefits in FY15 and beyond, along with investments to position the businesses for future growth. The restructuring included the realignment of a number of businesses as two of the group’s six divisions were amalgamated.
Toll Global Resources was able to mostly offset the impact of completed contracts and the decline of construction-based LNG projects with new contract wins and a strong performance from TOPS. However, the overall result was down due to a significant decline in earnings from its marine businesses in Australia and Asia, due to both weak market conditions and increased competition.
The group’s reported result includes net individually significant items of a $5.4 million after-tax charge, with the costs associated with major restructuring programs being partly offset by gains from business sales.
Dividend increased
A final fully franked dividend of 15.0 cents per ordinary share, an increase of 0.5 cents per share, will be paid to shareholders on 1 October 2014. The Toll Board has decided to continue the suspension of the Company’s Dividend Reinvestment Plan.
Managing director’s commentary
Toll Group managing director Brian Kruger said he was pleased with the result, given the difficult environment seen throughout the year.
"Over recent years, we have been investing in our Australian network businesses with significant capital being directed into new fleet and depots. While this is largely sustaining spending, 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 portside facility in Fremantle.
"Cost reduction programs across the group started to deliver a lower cost base. 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,” Mr Kruger said.
"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 (net debt to net debt plus equity) at 31% ensuring sufficient balance sheet capacity to fund a range of growth initiatives.
"I would again like to thank all the employees of Toll around to world for their dedication and hard work. This year has not been without its challenges but the commitment from our workforce has allowed us to deliver this result.”
Outlook
"The external business environment remains difficult. We will continue to pursue business improvement initiatives, including cost reductions and investments in productivity enhancing projects which, combined with our disciplined capital management approach, will see returns improved for shareholders and an increase in our leverage to any improvement in the external environment.
"We expect to generate between $40-50 million in cost savings during FY15 from investments in restructuring programs implemented or committed to in FY14, including the cost savings targeted in Toll Global Forwarding.
"Assuming no material change in the external environment, we expect that these savings, other efficiency gains and other growth initiatives will deliver higher earnings for Toll in FY15.”
