Changes announced this week by Toll show the company is restructuring its organisation to concentrate on core business which will consistently create profits, and, ultimately, shareholder returns. This marks a point where Toll temporarily eschews its normal modus operandi of new acquisitions following one another at regular intervals.
The company is taking time to look at its massive portfolio and pick out the areas of interest on which it intends to concentrate and divest itself of some operations which are not performing as well as expected, or which are some distance from the core of the Toll operation.
“These decisions reflect our drive to improve sustainable shareholder returns through our focus on return on capital employed”, said Mr Brian Kruger, Managing Director of Toll. “These transactions will have multiple benefits for Toll, including releasing significant capital presently tied up in real estate, exiting loss making businesses, and selling businesses that are non-core to Toll to more natural long term owners.
“While the final timing of the various transactions announced today will vary between the first half and second half of this financial year, we expect that they will all complete during this financial year, resulting in an overall positive contribution to reported earnings. However, the first half reported result will include a negative impact of nonrecurring significant items relating to actions completed in the period, particularly the decision to exit from Toll Marine Logistics Asia.
“The cash proceeds from these transactions, excluding the sale of TOPS property assets, are expected to be in excess of A$100 million.”
Changes at Toll Offshore Petroleum Services (TOPS) in Singapore will see Toll continue to act as operator of the supply base, but sell off aspects of the site where it is landlord to a number of tenants on the base.
Toll has entered into an agreement with Cairns-based marine logistics provider Sea Swift for the sale of the assets of its Far North Queensland and Northern Territory marine freight operations business, Toll Marine Logistics, for $45 million and a minority 20 per cent stake in the new business. This includes the sale of two Cairns-based vessels servicing Weipa and the Torres Strait Islands, and two Darwin-based vessels.
The Toll Group will retain control of the Francis Bay terminal in Darwin, and the marine logistics work for LNG operations in Queensland and Western Australia, which will be the future focus of Toll’s marine logistics business.
“This is a good result considering the particularly difficult market conditions faced by Toll’s marine logistics business in Far North Queensland and the Northern Territory in recent years,” said Kruger.
Following the sale of 34 vessels to date, Toll will sell the rest of Toll Marine Logistics Asia, with its remaining 37 vessels, within the next six months. A Toll statement said the decision to exit these operations in Asia was primarily due to, “ongoing regulatory challenges and weak outlook for this market”.
Toll Global Express Asia, an express parcel business headquartered in Singapore is to be sold. A statement from Toll said the operation lacks a critical mass and competitive advantage.
Toll has agreed to sell its 50 per cent stake in Toll dnata Airport Services (TdAS) to its joint venture partner, dnata. The new owner is one of the world’s largest air service providers. The deal is, however, subject to approval from Australia’s Foreign Investment Review Board. The operation was seen as not being core to Toll’s transport and logistics offering.
Toll acquired a 40 per cent interest in BIC India in 2009, but has found it increasingly difficult to make progress with its plans for the Indian less than truckload carrier with key accounts in the automotive sector. Toll has sold its interest to the majority shareholder.