Japan Post outlines strategy to staunch Toll bleeding
Announcement conrms speculation of a goodwill writedown and reports of job cuts
JAPAN POST HOLDINGS’ recent announcement to the Tokyo Stock Exchange confi rms speculation of a goodwill writedown and reports of job cuts but the extent of the writedown will come as a shock and the pain for the workforce is about to begin.
The announcement reveals Japan Post’s analysis of why its $ 6.5 billion purchase has resulted in a $ 4.5 billion reduction in goodwill – from $ 5.2 billion in 2015 – and $ 400 million in trade mark and fi xed asset value.
This is put down to a failure of the business model that served it well during the period of economic expansion in Australia and China, which saw it involved in more than 100 instances of mergers and acquisitions (M& A) but proved inadequate during tougher times.
While managing acquired companies as autonomous and independent business units (BUs) and clarifying their roles and responsibilities were strengths then, it meant a lack of cost competitiveness was not apparent and units continued to carry redundant operations.
The model allowed for a lack of cohesion, with back office operations not integrated and the IT system not centralised, resulting in a high ratio of fi xed costs.
“An inefficient way of managing businesses such as multiple BUs competing with one another to get their own business partners whilst sales are declining due to the slowdown of the Australian economy,” the critique reads.
Though stated at different times in the yearly cycle, 12-monthly earnings before interest and tax for Toll is given as falling from $ 379 million last fi nancial year to June 2016 to $ 266 million in the 12 months to March 2016, and to $ 69 million to March 2017.
The response partly recognises that some of Toll’s weaknesses were understood and being addressed three years ago with the One Toll program.
It sees fi ve steps to improvement: • Reorganisation targeting at realising
One Toll • Extensive cost reduction • Customer centricity, improvement of
quality of service, differentiation • Fostering an integrated sales force • Concentration in priority regions and businesses and withdrawal from unprofitable operations. This process started in January with the senior management restructure that brought in chairman John Mullen and MD Michael Byrne, the loss of 300 full-time managerial positions in February and March, and the reduction of 1700 other positions starting April and ending in the next fi nancial year.