Christmas has come early for investors in Toll Holdings Limited (ASX: TOL) after the company announced plans to sell $100 million worth of assets during this financial year.
The sales will free up capital, exit loss making businesses, and focus on businesses where Toll has a better competitive position and enjoys competitive advantages.
The businesses to be sold are:
- Singapore Toll Offshore Petroleum Services supply base (eventually; not included in the $100m sale figure)
- Toll Marine Logistics Northern Australia
- Toll Marine Logistics Asia
- Toll Global Express Asia
- Sale of 50% stake in Toll dnata Airport Services Joint Venture
- Sale of 40% interest in BIC in India
The general theme behind most of the sales (both Marine Logistics and BIC) is that difficult market conditions and weak outlooks are hindering growth, while Toll-dnata JV and Global Express Asia are being sold because they're no longer core to Toll's transport offering.
Shareholders should expect a negative impact to earnings due to one-off significant items in the first half, while the sales are expected to deliver a positive overall contribution to full year earnings.
While I was disappointed to see BIC and Global Express Asia on the chopping block given their proximity to developing regions (ideal places for Toll to build a foothold), the decision seems fair enough given difficulties achieving scale and competitive advantages in the regions.
It is however counterintuitive to what the RBA wants big companies to do, with streamlining companies the direct antithesis of developing and innovating new businesses.
Be that as it may it's still good news for shareholders who can expect to benefit as part of Toll's 'drive to improve sustainable shareholder returns through our focus on return on capital employed'.
If you're not thrilled about the sales, rest easy knowing that they represent just a small portion of Toll's huge asset base.
