HY20 Interim Results Announcement
Unaudited results for the six months ended 31 December 2019 (1H20)
- TIL Logistics Group confirms 1H20 result in line with January 2020 guidance, with EBITDA of $8.7m prior to NZ IFRS 16 adjustments.
- Including NZ IFRS 16 adjustments, TIL reported revenue of $174.6m, EBITDA of $23.8m and a Net Loss After Tax (NLAT) of $(2.2)m. Excluding NZ IFRS 16 adjustments, NLAT was $(0.3)m.
- Adverse market conditions continue including softening business confidence impacting sales, increasing margin pressure and higher cost environment.
- 1H20 result primarily impacted by underperformance from the Freight division, partially offset by favourable performances from Specialist and International divisions. The comparative 1H19 period also included sales from a number of one-off events not repeated in 1H20.
- A detailed review of the Freight division has identified a number of areas for operational improvement and initiatives are underway to lift performance.
- As previously advised, no interim dividend has been declared.
- Improved 2H20 performance (cf 1H20) expected due to commencement of new project work and as management initiatives in the Freight division are implemented.
See attached release for summary table
New Zealand freight and logistics company, TIL Logistics Group Limited (NZX:TLL), has today reported its results for the six months to 31 December 2019.
Including NZ IFRS 16 adjustments, TIL reported revenue of $174.6m, EBITDA of $23.8m and a Net Loss After Tax of $(2.2)m. On a like for like basis, prior to NZ IFRS adjustments, EBITDA was $8.7m with a net loss of $(0.3)m. In line with TIL’s dividend policy, no interim dividend has been declared. The result is in line with the guidance provided in January 2020.
The year-on-year profit decline was primarily a result of an under-performance from the Freight division, with Freight’s EBITDA down $4.1m on the prior comparative period (pcp); as well as lower earnings in the Warehousing & Logistics and Bulk Liquids divisions due to costs associated with growth initiatives and customer contracts. The two smaller divisions, Specialist and International, both had a positive six-month performance and were up on pcp.
The divisional results for Freight and Warehousing reflect the restructure of NZL Group warehousing and freight services into the relevant divisions (previously NZL Group was wholly recognised in the Warehousing division). This resulted in an additional $13.3m of revenue being reported in the Freight division; and a corresponding decrease in the Warehousing division (1H19: $14.9m).
While adverse market conditions, increasing pricing pressure and the higher cost environment were contributors to Freight’s underperformance, management has also identified a number of areas for operational improvements within this division.
Initiatives are now being implemented to lift the performance of the Freight division, including the merger of TIL’s Freight and Bulk Liquids businesses and brands into a single Transport division with a stronger management structure and an increased focus on sales and marketing functions.
Cost management remains a focus with a number of recent procurement initiatives expected to deliver long term cost benefits. Technology is playing an important role in the business, delivering both benefits for customers as well as increased insight into the business. This is intended to allow for more informed, agile decision making and the ability to better manage commercial arrangements.
Net bank debt as at 31 December 2019 was $84.5m. TIL has completed the renegotiation of its funding arrangements with ASB, which includes changes to the banking covenants. The Board has prioritised the reduction of debt to provide balance sheet headroom.
Chair of TIL Logistics Group, Trevor Janes, said: “The fundamentals of the TIL business remain strong, and the company remains one of New Zealand’s largest domestic freight and logistics providers. The 1H20 result was disappointing and while we are seeing growth in several divisions, management has also identified a number of areas for operational improvement. A turnaround plan is in place and we expect to see the initial benefits from this start to flow through in the second half.”
The start of the second half of the financial year has seen the impact of Chinese New Year and the Coronavirus on imports into New Zealand. This has had a flow on effect across a number of sectors in which TIL operates, such as the logging sector. Management will continue to monitor the situation closely.
A major focus in 2H20 will be on the restructure and turnaround of the new Transport division, in particular the Freight business, and, while there will be some related restructure costs, the company anticipates seeing early benefits start to flow through in 2H20.
In addition, TIL will continue to focus on building on the strength of its regional brands; leverage the expanded capacity and services across the Group to grow revenue from new and existing customers; deliver further efficiencies; and improve the management of commercial arrangements, a task that is expected to be assisted by the new technology system which is currently being implemented.
An improved 2H20 (cf with 1H20) is anticipated with new project work in the Specialist division and early benefits from the Freight division turnaround. FY20 EBITDA is expected to be in the range of $23 million to $24 million. This assumes that there is no material negative impact from the COVID-19 virus and is subject to any project timing fluctuations in the Specialist division.
CEO of TIL Logistics Group, Alan Pearson, commented: “The movement of freight plays a vital role in New Zealand’s economy. More than 90% of freight is moved by road, with rail and coastal shipping mainly used for greater distances. TIL remains one of the country’s largest freight providers and, combined with our warehousing & logistics services and international expertise, we are well positioned to meet the demand of customers looking for an end to end solution. We have identified a number of opportunities to drive improvement and efficiencies in our business, which will add value for both our customers and TIL shareholders.”
 More information on the impact of NZ IFRS 16 Leases can be read in TIL Logistics Group’s Interim Financial Statements and 1H20 Results Presentation released to the market on 2 March 2020