MOVE Logistics Group Limited (MOV) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the MOVE Logistics Group First Half 2025 Interim Results Call. [Operator Instructions]. I'd now like to hand the conference over to Mr. Paul Millward, CEO. Please go ahead.

Good morning, everyone, and thanks for joining us today for MOVE's 2025 First Half Results Presentation. I'm Paul Millward, MOVE's CEO; and with me is Lee Banks, our CFO. We'll start with presentations from myself and Lee before we open up for shareholder questions. Now before we dive in, a quick recap. This is my first results call with MOVE since joining back in September to lead the transformation. It's been a challenging period, very focused on cost efficiency and rightsizing the organization at pace. I've been impressed by how the team has stepped up to make MOVE future fit, whilst continuing to deliver for our customers. I do want to acknowledge the full MOVE team for their support. And of course, to our customers and business partners, we really appreciate the partnerships we have. Now looking at the last 6 months. We've been laser-focused on executing the Accelerate transformation program. As a result, we have seen a significant improvement in our performance with our earnings loss reduced by over 50% and a positive gross margin expansion. This is despite the weak market conditions, which continue to impact on demand and activity. Gross margin percentage was materially higher with an increase of 5.2 basis points from first half 2024, as the cost reduction program progresses. Our normalized earnings continued to improve and the latest October to December quarter was our strongest since quarter 4 2023. We commenced Accelerate our transformation program in July last year at the start of our financial year with 3 goals: firstly, to recalibrate our business; secondly, to drive profitable revenue growth; and thirdly, to ensure a strong financial platform for our business. These plans are not about tinkering around the edges, but are about driving the level of change that is required to ensure we are a profitable business from FY '26. The momentum of the plan is now becoming evident. As you can see in these graphs, we've reported a significant improvement over the past 6 months, which is accelerating, particularly in the second quarter, where we can see the focus on taking cost out alongside the relevant levers that expand gross margin. Income for the last quarter was up 12% versus prior quarter. Gross margin dollars were up 13%, meaning our loss was halved versus the previous quarter. And whilst normalized EBT was still negative, the momentum is clearly there. I wanted to share our highlights to reinforce the progress we are making. Accelerate is well embedded across the business, and we have a clear, simple action plan. The majority of the benefits will start to be seen from the second half of our financial year onwards. We've well progressed on our cost reduction and cash improvement program, and this is supporting our gross margin expansion. The network is now more streamlined with the right people and assets in the right places. We have made good progress, but let me be clear, there is significant opportunity still in this space. We've continued to deliver customer service excellence, and this is translating into more revenue in 3 of our 4 businesses with some pleasing momentum being seen in our freight business in particular. People will go into the second half of the year with a strengthened leadership team with 2 key appointments: Jeff Vincent, as GM Freight and Fuel and Blackburn, as GM of Warehousing. Renewed funding arrangements are in place, which Lee will share more about shortly, and MOVE has a smaller Board of 3, who are super focused on business performance and outcomes to deliver shareholder value. Now the market conditions have been tough for the past 2 years and around 70% of our clients are in the retail sector, which is typically cyclical. When pressures ease for New Zealanders, the sector will bounce back. Now looking in more detail at each of our divisions. Freight is our largest business in terms of revenue and was the foundation for the original MOVE business. Positively, we're now seeing good momentum towards positive EBT. Our last quarter of normalized earnings for freight was the strongest in 2 years, driven by revenue growth and reduced costs. Freight does represent the biggest opportunity to step change our group financials and the execution of the plan is well on track. We've got strong partnerships with key customers, and we are increasing what we do for them, and we've got a strong sales pipeline in place. Contract logistics is made up of our Warehousing division and our fuel business. Now warehousing, the sector is challenged. There's significant excess capacity, there's weak demand in a very competitive market. This is a focus for us. We have a clear winning and market plan alongside a productivity plan, and this will be driven by our GM warehousing. The fuel business, meanwhile, continues to perform strongly. We're one of the largest providers in New Zealand with a very positive long-term customer partnership. The specialist business continues to go from strength to strength, and there's a healthy pipeline of work in place. Our team has a great reputation in this area, and we considered the experts on many projects. Their results are benefiting from revenue growth, as well as cost reduction. The team are particularly proud of the $1.9 million normalized EBT result, which is a strong return on $10.3 million of revenue. Our international business is made up of freight forwarding and other services, as well as the oceans business, which is the Trans-Tasman shipping route. We moved to a time charter model with a new larger vessel from September 2024 and exited the Atlas Wind vessel, which incurred around $1.1 million in costs, including relocation expenses. The new vessel in service is attracting good interest, and we've got solid foundational customers on board, which now utilize the majority of the capacity to ensure that we do have a viable business moving forward. I'll now hand over to Lee to talk to the financials.

Thanks, Paul. There were 2 key drivers behind our results. The weak economy, which continues to impact on customer demand and activity and on the positive side, the early benefits coming through from the Accelerate transformation plan are improving the bottom line. The priority focus has been on cost reduction, gross margin expansion and cash flow generation. The majority of the businesses delivered improved earnings with warehousing being the exception. At a group level, this resulted in last year's normalized EBT loss being reduced by more than 50% to $6.1 million. This includes $1.1 million of costs related to the exit of the Atlas Wind. Gross margin expanded to 29%, an improvement of 5.2 basis points from 1H '24, largely as a result of the cost reduction program alongside more efficient operations. Reducing costs has been a major focus for us. We have successfully lowered our operating expenses by $16.8 million year-on-year, primarily through reductions in people and transport costs. We are targeting an additional $3 million to $4 million plus in cost reductions across the group in the second half of the financial year. In August last year, we entered into a new funding partnership with a combination of a bank facility with ANZ and the Invoice Finance funding. This is working well for us. We remain in compliance with all our banking covenants, and we have just renewed our ANZ facility with extended tenure to August 2026 and amended covenants and other provisions to give the group more headroom for expected performance this year. The Board is comfortable we have sufficient funding in place to execute the Accelerate program through to completion. We have taken a prudent approach to capital expenditure with the sale of surplus fleet being a focus. Operating cash flow was $8.9 million for 1H '25 compared to $10.3 million in 1H '24, which included the benefit of a positive interest rate swap. Working capital management remains a key focus. I'll now hand back to Paul.

Thanks, Lee. Looking forward, whilst inflation has eased and there are some signs of improved business confidence, a material impact on market conditions is not expected to be seen until at the earliest mid-2025. A lift in market activity and customer demand, combined with improvements from the transformation plan alongside a far more performance-driven culture will enable our earnings growth. We remain on track to achieve our goals being positive adjusted net operating cash flow and a significant improvement in normalized EBT in FY '25 and a return to positive normalized EBT in FY '26. Whilst there is still much work to do, we do have a very clear plan in place and are well on the way to building a stronger business that is future fit, and it delivers. Our focus remains on productivity improvements and positioning MOVE for stronger market activity and demand. And whilst we have achieved significant cost out, we are targeting an additional $3 million to $4 million plus in annualized cost out in the second half. The team remains focused on extracting the full value of the Accelerate transformation plan. I look forward to reporting another 6 months of improvement when we announce our full year results. On a final note, I'd like to thank shareholders. I acknowledge MOVE's performance has been subpar for some time, and I do hope you can see the positive progress that we are now making. Thanks for your support and patience, as we execute our plan. I'll now hand back to our facilitator for questions.

There are currently no phone questions at this time. So I'll now hand over for any webcast questions to be addressed.

Thank you. First question is regarding the ANZ $5.5 million loan. The requirement to repay this over the next 13 months looks onerous. How do you see the group meeting those repayments? Yes. So the cash flow from our forward-looking plan definitely supports these repayments. Next question is around staff. With so many branch managers and key people having left or in the process of leaving, what is the plan to replace them? Is it seems the strategy is simply to load up the remaining people with this workload.

We've done comprehensive work to make sure that we've got the right structure to support our strategy and to support the right activity in market. So we're very comfortable with the changes we have made. So we're very comfortable in that space.

Another question. The FTL fleet is now back at the branches. So is it now a strategy to exit this market?

No. So the FTL business and sector is a very important sector to us. What we're in the process of doing is integrating and supporting those customers through our network. Now our network is national, and we believe that's a stronger way to make sure we support our customers in the right way.

How much of the business is now made up of owner drivers and leased vehicles? Are there any sites, which you own, which could be sold off if underutilized?

In terms of the property question around sites, so we've done a review of our network, and a lot of our changes have been more around making sure we've got the right people and that the sites are doing the right services relevant to the right geographical areas. As we shared previously, we have got some sites in the warehousing space that are access to requirements. So we're actively trying to find either new customers to fill them or to offload or reassign those leases, but it's a couple of sites there.

Another question. What is the $3 million to $4 million cost reduction target of that?

It's a pretty broad program, and that's the number we're sharing. We're actually being far more ambitious with what we're targeting. We've still got some space around how we just be more efficient everywhere, whether that's overheads, people, it's across the board.

Are you looking to offload the fuel business or anything else?

The fuel is a very successful business. We've got a great partnership. It's working exceptionally well. So absolutely no intention to offload fuel, and it's a very strategic and successful [ partner ].

After all costs, what is the bottom line number?

We're not providing guidance given where the economy is at the moment. But as we shared our goals for this year in terms of profit is to return a far more stronger normalized EBT number. And in FY '26, we will return to a positive EBT number, so a profitable business in FY '26.

There's been a strong performance on the back of peak season volumes. How are you expecting to get through the lower volume periods of January and February?

It's just the normal cycle of a business that is seasonal and has its ups and downs. We're being far more prudent around how we use temporary labor and the balance between fixed and temporary labor. One of the things we're also trying to strengthen, which we still have a bit of work to do is to get a better mix of customers so that we have a more stable business through the year. So it's ongoing. But in terms of our financials, we obviously plan for the bigger months and the lower months.

Will the business continue to sell excess assets at a similar rate to that in the first half?

There is still an opportunity to offload some assets. It's a difficult market. There's a number of players in our situation that have excess assets. I'd be guessing to say what the exact demand for that is. But I think we're running on plan with what we have managed to divest. And so, we're progressing well in that space.

What is the current line haul utilization sitting at?

That's commercially sensitive, so I can't share that. What I can share is that we have made good progress. This is a metric that we measure very closely now, and we're making really good progress. We've got specific targets in the space, and it's a key metric. Therefore, when we make progress on this, our P&L will improve significantly.

What are the transport owner driver to company-owned assets percentage today?

I must admit, I don't know the specific number on this one because it's always evolving. So I'm happy if anyone wants -- whoever has asked this question, if you do want to contact me, happy to talk you through on a one-on-one basis.

[indiscernible] the ISO tank business, is there a plan to expand this being that it's generally higher margin work than container shipping?

Yes, we've actually picked up a little bit of business in this space. So it's a very small segment of our business. So we'll just see how the demand is. But yes, we're cognizant that there's potentially some good demand in the space.

[ That's all the ] online questions we have.

Okay. If there's no more questions, thank you for your time and your support, and we'll close the call.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.