Trading Update and 1H20 Guidance
Jan 17 2020
New Zealand freight and logistics company, TIL Logistics Group Limited (NZX:TLL, “TIL”) is today providing a trading update and guidance for the six months ended 31 December 2019 (1H20) and an outlook for the full year ending 30 June 2020. The update follows the completion of the Christmas trading period and a detailed performance review across the business.
As noted at the Annual Meeting in October 2019, the higher cost environment and softening business confidence continue. While market share has been retained across all divisions, sales volumes have been affected, particularly in the Freight division, with increasing competitive pricing pressure, lower sales across a range of customers and a softer Christmas trading period than anticipated, as well as the loss of a significant customer for NZL. Overall, 1H20 EBITDA for the Freight division is expected to be approximately $4.1m lower than 1H19.
Revenue for the Bulk Liquids division is in line with the prior year, however the expected uplift from a major new contract has not yet eventuated. Additional costs have been incurred to serve this key customer and TIL is progressing discussions with that customer to recover those costs under the terms of its contract.
Significant investment has been made into new warehouse builds in 2019 and 2020. These are resulting in significant additional capacity in both the North and South Islands which will assist future sales, with a corresponding increase in overheads as expected.
Specialised Lifting and Transport continues to be a solid acquisition, with a number of large windfarm projects underway or in the pipeline, in addition to other specialised moving projects. A strong first half performance is predicted to improve further in the second half as new major projects come onstream.
The International division’s 1H20 performance is above the prior year and it continues to deliver a consistent trading performance, with a large event logistics project pre-Christmas, on top of the normal seasonal lift in inbound volumes.
Taking the above into account, TIL is expecting 1H20 EBITDA of approximately $8.4 - $8.8 million (1H19: $14.1 million). This excludes the impact of IFRS16. Given the reduction in expected 1H20 earnings, and in line with its dividend policy, the Company is not expecting to declare an interim dividend. Dividends are expected to resume in 2H20.
TIL has initiated a number of cost savings initiatives and management changes in response to the performances of the Freight and Bulk Liquid divisions in the first six months of FY20. Several roles have been disestablished from 1 January 2020 and a new management structure has been proposed for the Freight division that will refresh TIL’s customer and sales focus. In addition, a new position of Company Secretary & General Counsel has been created, which will be filled by Charles Bolt (most recently Company Secretary & General Counsel of Fletcher Building) from the end of January 2020. Charles’ appointment is expected to result in further improvements in TIL’s management of its customer contracts and commercial matters.
TIL retains the support of its banking partner and is in discussions with ASB on amendments to the terms of its funding arrangements to ensure it remains in compliance with its banking covenants.
Management’s focus is on using the expanded capacity and services across the group to grow revenue from new and existing customers; and to drive further efficiencies and cost savings, a task that will be assisted by the new technology system which is currently being implemented. A number of new and growth opportunities have been identified across a range of sectors and TIL is currently tendering for a number of multi-million dollar contracts with new and existing customers.
A stronger FY20 second half is anticipated with 2H20 EBITDA expected to be in line with the prior comparative period (2H19: $14.0m). This is principally due to significant new work being secured by TIL’s Specialist division as well as anticipated improvements in the Freight business.
TIL will be releasing its half year results to 31 December 2019 to the market in mid/late February 2020.
 Following a restructure, from 1 July 2019 the NZL Group Limited freight and warehousing services were separated into the relevant TIL divisions. Previously NZL Group was reported as part of the Warehousing & Logistics division.