Transport and logistics group Toll Holdings was another company that soften up the market ahead of reporting the actual figures with its decision to distribute the 62% or so of Virgin Blue it owned to Toll shareholders and take a write-off.
It was a tacit recognition that the company had not only been dilatory in getting rid of the VBA stake it picked up in the Patrick takeover, but that it paid too much for Patrick. The financial strains at former associate Asciano further confirm that.
Toll should have really sold off the VBA stake when times were better in the aviation business and before oil prices surged.
Those surging oil and jet fuel prices have slashed VBA’s operating performance and caused the loss of value. Toll wanted more, and it didn’t come and it was stuck with the VBA stake.
The early announcement of the VBA distribution and write-down removed any confusion that would have existed had the announcement come yesterday, and the separation allowed the market to concentrate on the company’s non aviation operational performance.
Toll says its trading so far this financial year is well ahead of the previous financial year and the outlook for earnings is strong.
Toll booked an annual net loss for the year ended June 30 of $695 million after taking into account the adverse effect of a $952 million charge related mainly to the restructure of its investment in airline Virgin Blue Holdings and a gain on the sale of rail and ferry operations in New Zealand.
After-tax earnings from continuing businesses amounted to $258 million.
Toll CEO, Paul Little said that results to date for the 2009 financial year have remained solid and tracking well ahead of last year: "Based on current trading conditions, the outlook for the full year is for strong earnings and cashflow generation to continue across the business.”
Toll shares fell 17 cents lower to $6.88 in early afternoon trading, but then bounced as the overall market recovered. They closed up 31 cents at $7.36.
Mr Little said the company was pleased with the performance of its core operations, the integration of several new acquisitions and its balance sheet strength, which would all support ongoing strategic development.
The company said that the strength of ongoing cashflows and debt capacity would enable the company to pursue growth opportunities, both in Australia and in support of the group’s global forwarding and Asian contract logistics businesses.
During 2008, revenue from continuing operations grew to $5.6 billion from $4.9 billion, with "organic revenue growth" in Australia of 7.5% and 12.5% in Toll’s Asian operations.
Reported EBIT (earnings before interest and tax) from continuing operations, before one-off items, grew 18% to $429 million, compared to $365 million in the prior year.
"Revenue from Australia for the year grew from $4.05 billion to $4.4 billion. Excluding the impact of acquisitions and incremental fuel surcharges, revenue grew $304 million or 7.5%.
"Importantly the second half of the financial year continued to produce excellent organic growth, reflecting new contracts and growing market share across the businesses," Toll told the ASX.
"EBIT increased over 18% from $294 million to $347 million. Whilst EBIT margin grew from 7.21% to 7.84% for the year. Margin expansion was also achieved in the second half of the financial year.
"In New Zealand, continuing operations include the contract logistics and forwarding operations of TranzLink, following the sale of the rail and ferry assets back to the NZ Crown at balance date.
"Revenue for the year was NZ$255 million compared to NZ$234 million previously with EBIT of NZ$9.4 million growing from NZ$7.3 million previously.
"Total revenue for the year for Toll Asia was S$777 million compared to S$563 million in the prior year. Excluding the impact of the Sembawang Kimtrans acquisition, underlying revenue grew 12.5%.
"EBIT was S$82 million compared to S$73 million last year, an increase of 12%. As was the case with Australia, the underlying growth in revenue and EBIT for the second half of the financial year remained strong.
"Following the acquisition of the BALtrans group, effective 1 March, 2008, the new Toll Global Forwarding division was formed. The new division also includes the Australian International forwarding operations (previously included in Toll Australia) and the recently acquired Gluck business in Australia. Revenue for the year was $358 million with EBIT of $11 million," Toll said in its profit commentary.
Toll declared a final dividend of 11.5 cents per share, up 20% on a continuing business basis at a consistent payout ratio. That makes 25 cents for the year..
Brisbane-based bank and insurer, Suncorp Metway confirmed the guidance earlier this month for a sharply lower profit, and has let it be known in press briefings that it will start cutting staff.
Not ‘frontline’ staff, the company’s CEO, John Mulchay was quoted as saying, but back office folk who are out of sight and out of mind so far as customers are concerned.
As we said earlier when assessing the new guidance, Suncorp simply paid too much for Promina in 20096-07 at $7.9 billion and in doing so over concentrated its risk in insurance by adding the Promina business to its existing GIO and Suncorp brands.
So when all those storms, heavy rains, flood, hail etc hit NSW, Queensland, Melbourne and parts of New Zealand in 20
