Revenues slip only slightly as profit plunges on on-off items
K&S Corporation has suffered an alarming full year profit loss of $104.2 million after a financial year it describes as “difficult and challenging”.
The downturn in mining and resources, which had kept the company firmly in the black when the boom was on, has now hit home in the eastern states as well as in the west.
“Our results have been impacted by the continued severe downturn in the resource sector in our Western Australia businesses, and a softening of mining related chemical demand.
“Our east coast operations were also impacted by the downturn in the resources sector.”
It adds that “imports are still impacting the demand for locally manufactured goods, which in turn reduces demand for long haul transport services”.
Much of the profit result, which otherwise would have come in at a positive $3.9 million, down 70 per cent on last year’s result, was due to write-offs including for its insurance investment.
“We have written off intangibles assets in the Australian Transport CGU of $86.6 million,” K&S says.
“The non-cash write off was made up of $77.8 million of goodwill, $6.2 million of brand names, $1.8 million customer contracts and $0.8 million of software.
“The carrying value of land and buildings surplus to our requirements was also written down by $8.2 million.”
This has extended to WA, which had helped the company’s bottom line earlier in the decade, when the boom was on and the east coast market was suffering.
“We have also written down the carrying value of some Western Australian based heavy haulage equipment that has been impacted by the downturn in the resource sector.
“In addition we have written down the value of some surplus equipment. The total adjustment to the carrying value of equipment was $8.7 million.”
Written off also was write off the carrying value of $11.8 million due to customer Arrium’s receivership and break-up.
There was some silver lining, though, with its Comcare self-insurance licence to June 2024, the New Zealand business and some other business units improving, and the acquisition of Aero Refuellers contributing to the group and expected to provide growth opportunities along with $20 million in revenue in the coming year.
To stem outgoings, the company has undertaken property lease cost reductions, the rationalisation and replacement of specified fleet, employee reductions and IT solutions “introduced to support customer service, operational efficiencies and cost reduction initiatives”.
Fleet expenses fell from $145 million to $129.7 million and contractor expenses from $187.6 million to $183.1 million
But it continues to invest in equipment “to support new business growth, improve productivity and reduce cost in our existing business”.
It acquired fleet totalling $51.7 million, $36.4 million of which was in hire-purchase agreements and the $15.3 million balance in cash.
Employee expenses also nudged upwards from $219.1 million to $225.7 million.
Smart Logistics, in which it has a 50 per cent stake, saw revenues fall from $69.6 million to $61.9 million but net profit rise from $232,000 to $264,000.