Toll says Asian investments paying off

Transport and logistics group Toll Holdings Ltd says its investments in Asia are starting to pay off, and Toll will make more acquisitions in the region soon.

Toll reported a 10.3 per cent rise in first half profit to $236.7 million, saying earnings and cashflow would continue to grow.

Like-for-like net profit grew by 18 per cent to $248 million, excluding discontinued operations and development costs related to airline Virgin Blue, in which Toll holds the majority 62 per cent stake.

Toll managing director Paul Little said Toll's strategy of expanding into Asia was now delivering for the company, with strong underlying revenues being generated in Asia at the present time.

The outlook for Toll's Asian businesses was "very positive" as the group built scale and capability across the supply chain.

"We expect organic revenue and earnings growth to accelerate," Mr Little said.

Toll shares rose 8.09 per cent, or 76 cents, to end at $10.15.

Mr Little said Toll would continue to make "value-accretive acquisitions in Asia as they present themselves".

"Further acquisitions to support our international forwarding strategy are expected in coming months," he said.

Toll recently added to its Asian operations, taking control of Hong Kong-based freight forwarding and logistics company BALtrans Holdings Ltd.

Toll also has a small stake in privately owned, Hong Kong-based freight forwarder Cargo Services.

Last year, Toll acquired Singapore-based logistics provider Sembawang Kimtrans Ltd.

In 2006, Toll acquired Singaporean logistics provider SembCorp Logistics (SembLog) for about $1 billion.

Toll said that the Virgin Blue board was assessing expressions of interest designed to increase shareholder value.

Toll has previously indicated that it intends to reduce its stake in Virgin Blue to deploy capital to its logistics operations.

"In the last three months the VBA (Virgin Blue) board has initiated a detailed review to maximise shareholder value," Mr Little said.

"It is clear that the level of liquidity in the listed stock (Virgin Blue) is not supportive of shareholder value.

"A number of expressions of interest have been received designed to unlock value, and these are currently being assessed."

Mr Little said it was too sensitive at this stage to discuss valuation expectations.

Toll said it believed the development of Virgin Blue was proceeding well, even though it was heavily affected in the short term by fuel prices and a competitive market.

Toll said the volatility in global financial markets had not yet caused any slowdown in markets in which Toll operated.

"In fact, we see that the current financial global climate may well present some excellent opportunities for us," Toll chief financial officer Neil Chatfield said.

Toll's core logistics operations in Australia, Asia and New Zealand had all performed well so far in the second half and were generating the growth that Toll was looking for.

"So we expect a strong full year outlook," Mr Chatfield said.

Toll said that in the first half, underlying operations throughout the group had generally performed well ahead of last year.

The group's Australian operations had achieved record EBIT (earnings before interest) margins on the back of strong revenue growth and cost control.

Toll Australia continued to benefit from high volumes associated with the resources sector and a buoyant retail sector.

Margins in the group's New Zealand operations increased despite difficult trading conditions, reflecting cost controls and a selective capital expenditure program.

In Asia, revenue and earnings both grew, partly as a result of continued activity in the offshore supply and marine logistics sector, and new contracts and contract renewals in Malaysia, Vietnam and China.

Toll's revenue for the six months to December 31, 2007 rose by 8.3 per cent to $4.12 billion.

Group underlying EBIT from continuing operations and pre-Virgin Blue development costs was $431 million - up 13 per cent.

Toll declared an interim dividend of 13.5 cents, down from 16 cents last year.


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