ANNUAL REPORT 2009 TOLL HOLDINGS LIMITED ANNUAL REPORT for Personal Use Only Use Personal For
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TOLL HOLDINGS LIMITED ANNUAL REPORT 2009 For personal use only TOLL HOLDINGS LIMITED ANNUAL REPORT 2009 TOLL HOLDINGS LIMITED ANNUAL REPORT 2009 ABN 25 006 592 089 ABN 25 006 592 089 Contents 1 Chairman and Managing Director’s Review 56 Statements of Recognised Income and Expenses 8 Globalisation and what it means for Toll 57 Balance Sheets 10 Providing Customers with Global Reach 58 Statements of Cash Flows 12 Board of Directors 59 Notes to the Financial Statements 14 Directors’ Report 138 Directors’ Declaration 21 Remuneration Report 139 Independent Audit Report 46 Corporate Governance Statement 141 Shareholder Information 55 Income Statements 142 Ten Year Summary REVENUE* EBIT* Billion dollars Million dollars 7 500 * 2007 and 2008 comparator 6.49 466 figures restated to reflect continuing operations post 6 demerger of Asciano, sale of 400 New Zealand rail and ferry 5 operations and demerger of Virgin Blue Australia. 300 4 3 200 2 100 1 06 07 08 09 06 07 08 09 0 0 EBITDA* EBIT MARGIN* TOTAL ORDINARY DIVIDENDS Million dollars Percent Million dollars 700 10 200 625 9.0 9 173 600 8 150 500 7 6 400 5 100 300 4 For personal use only 200 3 50 2 100 06 07 08 09 1 06 07 08 09 06 07 08 09 0 0 0 Toll Holdings Limited uses Greenhouse Friendly™ ENVI Carbon Neutral Paper ENVI is an Australian Government certified Greenhouse Friendly™ Product. Design by theballgroup.com.au – TOL0150 09/08 Text of this annual report printed on Envi Silk (pages 1-12) and Envi 50/50 (pages 13-144) – Carbon Neutral Paper. Chairman and Managing Director’s Review Dear fellow investor, In this time of uncertainty, you need to know that your company is well positioned to continue delivering strong results. We’ve been doing it for 23 years now and achieved it again in 2009. Even more importantly, this is a historic moment of great change and presents tremendous opportunities for Toll; ahead we see organic growth opportunities and significant expansion activity as we increasingly drive the globalisation of Toll’s unique business model. Our confidence is grounded in simple but compelling market realities: global trade never stops — it is arguably the most powerful economic engine there is, in both good times and in bad; we have one of our industry’s most effective, time-tested business models, a unique integrated model unusually combining the best of 3PL and 4PL capabilities, diversified across a wide range of market sectors and geographies; our customers are demanding more sophisticated cross-border and globally- based supply chain solutions; our global scale is growing For personal use only in an industry sector where scale really counts; and finally, there is the focused execution of more than 30,000 dedicated Toll people around the world. TOLL | ANNUAL REPORT 2009 1 Chairman and Managing Director’s Review If you take just one thing from this year’s annual report it should be this: we entered this turbulent period strong, and as long as economic conditions materially stay the same, we expect to exit it stronger. Before we discuss that in more detail however, let’s briefly review our performance in 2009. Toll 2009: solid, powerful, dependable cash flow In 2008-09 Toll earned a profit before non-recurring items and discontinued operations of $298 million, or 48 cents per share. Revenues increased 16 percent to $6.5 billion; EBITDA* grew from $569 million to $625 million, a rise of 10 percent; EBIT* grew from $429 million to $466 million, an increase of 9 percent, and cash flows from operating activities were again strong, generating $716 million after interest and tax. Our balance sheet is in excellent shape, we have high levels of cash and significant committed undrawn facilities; total assets exceed $5 billion, net debt is a very manageable $361 million and total equity is $2.6 billion. We have a gearing ratio of only 12.2 percent; interest cover is very strong at around 21 times, and during the last 12 months we have successfully refinanced a number of debt facilities, extending maturity dates for $350 million to late 2011 and further. This first-rate performance is all the more remarkable because our talented team of Toll people achieved it during the sharpest, most volatile, painful economic downturn experienced in more than a quarter of a century. It’s a tribute to the team’s prudent and disciplined management of our variable costs — fuel, labour, fleet and property — and to the diversity of our revenue sources, industry sectors and geographies in which we compete. Add it all up, and it’s clear why we maintain growth margins above industry averages and weather economic cycles better than most. We believe the true test of a company — its vision, business model, culture and people — is not apparent when times are good. It’s when times are not so good. As we have said before in previous annual reports, achieving such results over one, two or even five years as many great companies have done, is not really that unique. What’s gratifying here is to achieve consistent underlying performance over long periods through different economic cycles. It’s precisely this achievement that is one of Toll’s great strengths. We’ve stayed faithful to our vision of being the most successful provider of ‘integrated For personal use only logistics solutions’ to the Asian region providing customers with global reach — a vision we’ve been making steady progress towards for more than 23 years, through virtually every economic cycle. But before we discuss the continuing globalisation of Toll’s business model, and why we’re excited about the future, let’s review our 2009 divisional report card. * Pre acquisition accounting amortisation charges and non-recurring items. 2 Australia and New Zealand Trading results were noticeably stronger than anticipated in the first 6 months and underpinned the group’s annual result contributing about 80 percent overall. Revenue was up 5 percent to $4.8 billion. EBIT grew 5 percent from $354 million to $373 million and EBIT margins were maintained at a steady and consistent 7.6 percent, highlighting an elevated focus on operating efficiencies and variable cost control. Organic business again played an important role, growing a healthy and respectable 1.3 percent, an excellent result in these conditions. New contract wins from Coca-Cola, Bluescope, Westpac, Xstrata and Chevron will add growth and improve performance in the year ahead. And on the acquisition front, we successfully completed the acquisitions of Extra Transport and several smaller companies throughout this year. Highlights for the year included strong revenue growth across almost all of our Australian businesses: standout performers included the time sensitive business Toll IPEC, Toll Priority, Toll Express, NQX and QRX, although the later suffered slightly due to the effects of the floods in North Queensland. Our joint venture with Emirates, Toll Dnata Airport Services, continues to flourish and with the integration of the Skystar ground handling business now complete, we are seeing additional revenue flows. The best performing sectors were food and beverage within Toll Contract Logistics, substantially increasing volumes and returns. New business was also won by our specialist warehousing business in2store, as customers increasingly look to outsource more of their supply chains to reduce costs and increase efficiencies. Automotive was flatter domestically as this sector’s sales declined but this was more than offset by growing import-export activity and indeed international activity in China and India bodes well for this business. Toll Tenix was restructured by way of dismantling the joint venture with Tenix allowing us to focus solely on distribution services for the Australian Defence Forces and PDL Toll, our specialist defence logistics operations won business with the United Nations. The story in New Zealand, however, is a bit more sombre: the economy remains flat, hit particularly hard by the global economic downturn and although we’re vigilantly focused on tight control of variable costs and inefficiencies in our work practices, conditions remain tough for our New Zealand business. Before we close our commentary on Australia and New Zealand we want to reiterate a couple of important points made last year concerning these core markets: first, the increasingly For personal use only important levels of diversification of our expanding customer base and the spread of industry sectors in which we operate. Consider our top 20 customers represent less than one-third of the Group’s Australian and New Zealand total revenue and we compete in a number of key dynamic market sectors, the majority of which are demonstrating significant resilience in these more troubled economic conditions. For example, around 80 percent of the Australian TOLL | ANNUAL REPORT 2009 3 Chairman and Managing Director’s Review retail and Fast Moving Consumer Goods (FMCG) business is non-discretionary and the spend remains strong and buoyant. The story is pretty much the same for defence and government spending, resilient and reasonably insulated from the vagaries of the market, and as we write this, mining and resources continue to power ahead. Automotive, steel and the manufacturing sectors on the other hand, are more susceptible to market fluctuations and have indeed slowed. But where we might lose business locally in these sectors, we’re more often than not picking up internationally as production increasingly moves to Asia. And in more ways than one: with our significant and ever expanding presence in the Asian region we are capturing new revenues from this growing two-way trade, as well as leveraging experience from one geographic area to open up opportunities in another.