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The chairman of the Japan Post-owned Toll Holdings says it will take three years to complete a turnaround of the embattled Australian logistics group, which he said had suffered from cultural and structural difficulties and a “lamentable’’ communication regime with its major shareholder.
John Mullen, who took up his role in January at the same time that Japan Post appointed former Linfox executive Michael Byrne as Toll managing director, said a restructuring program would result in a further 2000 job losses at Toll and a reduction in its business units from 24 to as few as 10.
He also revealed that Toll management was actively working on the sale or closure of a number of “poorly made and underperforming’’ acquisitions, particularly in the overseas freight forwarding business and most notably in Europe.
And he revealed Nicola Wakefield-Evans, the sole remaining independent director from the period before Japan Post paid a bumper price of $6.5 billion for Toll in 2015, would be resigning from the Toll board. It will now carry only internal directors for up to 12 months, ahead of Mr Mullen leading the rebuilding of an independent board of ideally up to eight directors once the company is on the road to recovery.
“The core business of Toll is strong and we expect to see improvements each year from today, but anticipate that it will take three years to complete this turnaround,’’ Mr Mullen said in an interview with The Australian, his first public comments since Japan Post revealed in late April that it would book a shock $US3.6bn writedown on Toll.
“It was a reality check that was expected, but was perhaps a bit bigger than anybody thought.
“There are a lot of cultural and structural issues to overcome to get Toll back to being a high-performing business, but I think they are achievable.’’ Mr Mullen also revealed Japan Post had just signed up to work with internet retailing behemoth Amazon in Japan, which could help Toll’s moves to compete in the business-to-consumer space when Amazon comes to the Australian market.
“The issue is not so much the impact Amazon has on us, but the impact it will have on our customers. If they render the business model of some large retailers in Australia unworkable, if we are joined at the hip with them, then that is a challenge for us,’’ Mr Mullen said.
“We all need to realise the world is changing rapidly. A lot of older logistics companies are built around traditional distribution structures with large warehouses. We need to modernise that at Toll and be very nimble and ready to compete in the B to C market.’’
Under a new reporting and governance structure, approval will now be required from Japan Post for Toll to undertake “material matters’’, while some key group executives will also relocate to Australia.
“There was a considerable lack of communication before — the flow of information back to Japan Post as a shareholder was pretty lamentable. Japan Post just wants transparency,’’ Mr Mullen said.
“It certainly wants to be involved and across the detail. But it is not preventing the management here from delivering on a day-to-day basis.
“Like a lot of Asian companies it is a long-term thinker. It wants results quickly and we are committed to delivering.’’
Japan Post will now pursue a “One Toll’’ vision for its Australian subsidiary, after revealing its estimated earnings before interest and tax would be only $69 million in 2017. That compares to a budgeted $408m, which was up from $266m in 2016.
Toll management is now streamlining the company’s brands and approach to customers and driving productivity from eliminating inefficiencies and duplicated divisional overheads.
The changes will be accompanied by a major IT transformation to modernise and integrate the company’s IT systems and platforms.
“The amount of decentralisation was allowed to run a bit riot. There was nowhere near enough central control and discipline for an organisation as large as Toll. Often a customer would receive four or five different visits from a Toll sales team,’’ Mr Mullen said.
“There was also multiple duplication of business units, very little sharing, and a lack of modern procurement expertise in its activities.’’
Mr Mullen previously ran DHL Express’s global business from Germany and the US, and its Asian business from Singapore and Hong Kong, before he took the helm of stevedoring group Asciano in 2011.
Asciano was sold to Brookfield and the Chris Corrigan-backed Qube Logistics last year in a $9bn deal.
Japan Post said in April it would concentrate Toll’s operations in “priority regions and businesses and withdraw from unprofitable operations”.
“There have historically been a number of acquisitions that haven’t worked very well, especially some of the overseas forwarding investments, including several in Europe. We are actively working through exiting those,’’ Mr Mullen said. “We are trying to cut our cloth to suit.”
There has been speculation that investment banks have been sounding out potential buyers for Toll’s intermodal domestic forwarding business, which offers end-to-end Australian domestic freight forwarding by road, rail and sea. But Mr Mullen said Toll’s shipping assets were not for sale.
This article first appeared on www.theaustralian.com.au
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