TIL Logistics Group is reporting sales growth with full year net profit after tax of $2 million.
However, the company is warning of an expected “recessionary downturn” in FY21 which will have flow on effects for its operations.
Taking into account pre-NZ IFRS16 accounting adjustments, its net profit after tax was up 50% to $6m compared to $4m for the same period last year.
Sales for the 12-month period were $333.8m, with Q4 FY20 sales down approximately $17m compared to the previous period, due to COVID-related restrictions.
TIL chief executive Alan Pearson says “FY20 was a tough year for our business and many others”.
“We believe the work we are doing to ensure our business is suitably positioned for the softer economic conditions ahead will not just allow our company to survive but to take advantage of opportunities in the sector and grow.
“Our directors, managers and people have extensive industry knowledge and expertise, some of which has been built up over decades of working in the sector and through economic cycles. We believe this experience will be of benefit as we face the challenges of the coming year and make the most of opportunities which will come our way,” Pearson says.
Overall, its margins were in line with or above the prior year for all divisions, excluding its freight business which underwent a “review and reset” in FY20. The freight division did improve in the second half after “a disappointing” first half result, the company says.
Its warehousing & logistics, international and specialist divisions all experienced year-on-year earnings growth.
COVID-19 disruptions “had a material impact on all TIL’s businesses” including bulk liquids which was impacted by reduced fuel demand during lockdown.
As a result, the company has not declared a final dividend and is now “focused on cost reductions and right sizing the business for economic slowdown”.
The company expects EBITDA for FY21 to be at least that of the FY20 result of $57.4m post NZ IFRS16 adjustments.
As well as a freight division reset, TIL also purchased the remaining 50% shareholding of Cromwell-based freight business ATL Haulage.
The deal was completed in March following negotiations with HWR Richardson Group after 10 years of joint venture partnership.
Speaking at the time of the acquisition, Pearson says the change of shareholding “will allow ATL to further enhance its freighting opportunities within Central Otago and offer a more streamlined service to its customers and suppliers”.
There were no changes to ATL’s operations or staff but now sits under TIL Logistics Group as a 100% owned subsidiary.
The HWR head office functions of ATL such as finance, safety and sustainability, IT and HR will also move under TIL operations.
The company also expanded its warehousing footprint and secured a major windfarm project.
The bulk liquids division also resolved commercial matters with a key customer and is in the process of negotiating an extension to the contract from 2021.
Despite the essential service status of some of TIL’s businesses, COVID-related restrictions “had a material impact” on many of the group’s customers, with flow on effects for TIL’s operations and earnings, it says.
“The health, safety and wellbeing of staff and customers was the priority during this period, and actions were quickly taken to respond to the pandemic environment,” TIL says.
The company received government wage subsidies of $10.7m which allowed TIL to retain and pay over 1500 employees at least 80% of their wages, or 100% if working.
“Since the lifting of alert level 4 in May 2020, TIL’s businesses have begun to recover, however, recent further restrictions in Auckland are testament to the continuing volatility of this COVID environment,” the company says.
Despite this, the international and specialist divisions continued their trends of half yearly sales growth, with specialist (acquired in the 2018 calendar year) benefitting from the commencement of a major windfarm project in 2H20.
Warehousing & logistics was in line with the prior year, with growing utilisation of the new warehouse capacity which has come online in the last 12 months partially offsetting the additional costs associated with this growth.
With the freight division undergoing a significant reset “after a disappointing first half performance”, actions were taken to lift performance with “a stronger management and operational structure, an increased focus on sales and marketing functions and identifying opportunities to better utilise the group’s scale and competitive advantage”.
“These actions are part of a continuing programme which is designed to drive improving revenue and margins for the freight division in FY21,” the company says.
TIL is also putting a focus on sustainability measures with the use of more electric forklifts, green building standards for new warehouses and an ongoing partnership with Hiringa Energy around hydrogen fuel solutions.
TIL says it has sound working capital with a solid year-end cash position of $11.9m. Borrowings increased to $86.3m, reflecting the acquisition of the remaining 50% shareholding in ATL.
The board has not declared a final dividend for FY20 given “the recessionary outlook and the sense that the full impact of COVID-19 has still to be felt”.
Outlook
TIL expects challenges from COVID-19 to continue in FY21 with the flow on effects to be felt “for some time” and given the expected economic downturn it “retains a cautious outlook”.
The company “does see windows of opportunity” with COVID-19-related Government fiscal stimulus likely to support increasing freight volumes; a global trend of businesses using third party warehousing and logistics providers (3PL) such as TIL; and continuing high demand in some sectors such as food and beverage, aquaculture, viticulture and other primary industries.
“TIL already has a footprint in these sectors and will look to build on its reputation and expertise to grow its market share,” the company says.
“The current environment has demonstrated the benefits of being a group of scale, with the ability to invest into health and safety, training, systems and infrastructure, and TIL is well positioned to take advantage of opportunities within the industry.
“The company has identified four areas of focus for FY21 being the continuing turnaround of the freight division, carefully targeted organic and acquisition growth, and building stronger connections and synergies across the group. Cash and cashflow management remains a priority. Technology is a key enabler for the group’s strategy, with new systems currently being refined to further enhance efficiencies and performance,” it says.
TIL confirms its view that EBITDA for FY21 is expected to be at least that of the FY20 post NZ- IFRS16 result of $57.4m.
