Ja­pan Post out­lines strat­egy to staunch Toll bleed­ing

Australian Transport News - - CONTENTS -

An­nounce­ment conrms 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.

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