Media Release

5 September 2001

TOLL ON TRACK FOR CONTINUING GROWTH 

Toll Holdings, Australia’s leading provider of integrated transportation and logistics services, has posted another record earnings result in the year to 30 June 2001.

Earnings before interest and tax (EBIT) for the full year grew by over 38% to $70.6 million on revenues of $1.603 billion, up 18% on the previous year.

EBIT margin increased 17.4% to 4.4%, continuing the strong margin expansion of the past four years. Excluding the results of the Finemore business acquired in March 2001, Toll’s EBIT margin improved by over 23% to 4.64%. All divisions achieved higher margins.

Earnings growth continued to be driven by efficiencies flowing from improved fleet utilisation, investment in new infrastructure and the introduction of new systems technologies, as well as ongoing cost control.

The company has maintained its momentum in earnings and margin growth and captured integration benefits across operations despite a slowdown in economic growth during the middle of the year and challenges faced with high fuel prices and the introduction of the GST.

Recent acquisitions, including Finemores, did not have a material impact on earnings for the year, although they were slightly earnings per share positive and results were in line with plan.

Profit after tax of $49.2 million for the year was another record for the company, up 25% on the previous year’s $39.3 million, which was before an abnormal income tax gain of $1.06 million.

Divisional Performance

Long Distance

Revenue for the Long Distance division (excluding the impact of the Finemores acquisition) was $689 million for the year, with EBIT margins growing strongly across all operations.

The increase in revenue came largely from Toll Express and Toll Ipec. Revenues from Refrigerated Roadways contracted as planned following the reshaping of the business during 2000.

Toll Express and Toll Ipec performed exceptionally well during the year. Both further strengthened their market position and produced strong EBIT and margin growth.

Refrigerated Roadways continued its improvement, with performance well ahead of the previous corresponding period.

All other Long Distance businesses, including Toll SPD and Toll Tasmania, recorded higher EBIT than in the previous year.

Delay in the privatisation of National Rail Corporation frustrated opportunities for earnings growth from rail operations, and the inefficiencies of this network continue to limit the use of rail as a cost effective transport alternative. The impending sale of National Rail should benefit all rail users in the future.

Toll North

Total revenues for Toll North were $337 million for the year, with new depots, new equipment and sound cost control programs contributing to EBIT growth.

Both NQX and QRX performed above plan and benefited from reduced cost structures. Flat conditions in the mining and buildings sectors, particularly in the first half of the year, restricted revenue growth.

Logistics

Revenues for the Logistics division grew to $338 million for the year.

Earnings margins continued to improve due to cost reductions, technology improvements, and greater operational efficiencies across all contracts held in the division.

EBIT growth was particularly strong in the Ports, Food and Retail and Automotive sectors.

Toll Technologies

Toll Technologies revenue grew to $109 million for the year, compared to $29 million last year. It included the first full-year contribution from Removals Australia, which was acquired in February 2000.

Since the end of the 2001 financial year, Removals Australia, Movinghome.com.au and the International Corporate Relocations businesses have been integrated into Toll Transitions, forming a total relocation management service organisation.

Customer reliance on TollWorks (the Group’s freight and operational management system) and TollConnect (the Group’s suite of customer-related systems) continues to expand. Rollout of these systems to the Finemore operations is now being prepared.

The focus on technology is intensifying in the area of customer integration, to offer customers greater transparency across all elements of their supply chains.

A recent alliance with WebMethods will provide application and business-to-business integration software to allow closer integration of TollWorks and TollConnect with customer systems. We also expect that WebMethods products will facilitate greater use of the fully integrated service model across our customer base.

Finemore Acquisition

All operations of Finemores, acquired in March 2001, have now been integrated into the Toll divisional structure.

In the period leading up to the acquisition, uncertainty and distraction for Finemore management caused operational and financial performance to deteriorate, and underlying profitability suffered as a result.

Since acquisition, however, synergy benefits have exceeded expectation and enabled the business to meet plan.

Additional synergies are expected over the next two years. These, together with a more focused and accountable management, mean future results will meet or exceed our projections at the time of the acquisition.

Financial

Earnings per share (fully diluted) grew by 17% to 77.8 cents during the year. The company has declared a final dividend of 18 cents per share, compared to 15 cents previously, with franking of 70%, compared to 50% previously.

The total dividend for the year of 33 cents per share represents an 18% increase over last year’s dividend of 28 cents.

Group gearing was 71.6% at the end of the year with net debt of $140 million. Net interest cover remained strong at 15 times. Excluding the 6.53% unsecured subordinated convertible notes that were issued during May 2001, net debt has been reduced to $26 million.

Capital expenditure amounted to $58 million for the year, mainly relating to new warehousing and fleet upgrading. Expenditure on acquisitions, including Finemore, was $133 million for the year. The company is continuing to focus on selective capital expenditure that will generate superior returns, with an emphasis on infrastructure development and technology.

Return on equity was 25% for the year, representing continued strong returns well in excess of the company’s weighted average cost of capital.

Outlook

Finemore and other recent acquisitions present further avenues for growth, as do major new contracts such as Nike warehousing and the Albany woodchip project due to come on stream during the 2002 financial year. Results to date for the current financial year are in line with plan. Assuming economic conditions remain stable, we expect earnings to grow strongly during 2002, with a target of a minimum of 15% EBIT growth.

The privatisation of the National Rail Corporation and FreightCorp, will provide a unique opportunity for the development of an efficient rail network. Toll will participate in the sale process, the final outcome of which should be known around the end of December 2001. In a separate statement the company today announced it had formed a consortium with Lang Corporation to bid for these businesses.

The company has a strong balance sheet and is excellently positioned to expand operations through further acquisitions and organic growth. It will also pursue investments in Asian operations, through selective partnering with our major customers. Together, industry consolidation in Australia and opportunities in the Asian market will facilitate the achievement of the company’s growth strategy and continue to provide superior returns for our shareholders.