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

Thank you for standing by, and welcome to the MOVE Logistics Group results call. [Operator Instructions] I would now like to hand the conference over to Mr. Paul Millward, CEO. Please go ahead.

Good morning, everyone. Thanks for joining us today. Before we start, I just want to acknowledge the tragic loss of one of our drivers in an incident 2 weeks ago. Whilst the findings haven't been formally released, the family has shared that it was a medical event, and our thoughts and condolences are with his family at this very difficult time. Today, we will go through this year's results, the progress we've been making under our Accelerate Transformation Program and the outlook going forward. Lee Banks, our CFO, is with me and will talk to MOVE's financial results. We will be happy to take your questions at the end. A brief reminder of who we are and the scale of our business. We have an extensive nationwide network with strong connection into key centers in the regions. We provide end-to-end supply chain solutions. This covers freight, warehousing, trans-Tasman shipping and specialized haulage services. At the center of it all are our customers and a team that's passionate, experienced with strong capability. We have a brand that's recognizable and a strong market position. And the steps we're continuing to take to streamline the business will ensure we're ready to capture growth when demand returns. We delivered on our financial targets for the year with normalized earnings before tax improving significantly year-on-year, alongside positive net adjusted operating cash flow. While there is more work to do, good progress has been made, and we have a clear plan in place to continue the momentum. Our results reinforce the progress of the transformation program. We retained revenue despite low demand in a highly competitive market. Earnings did improve significantly, up 61% year-on-year and the fourth quarter of FY '25 was our strongest in 2 years, which is a great sign. We also lifted gross margin, thanks to our broad cost out and efficiency program. Gross margin percentage increased by 4.1 percentage points and in absolute dollars, we were up 13.4%, which is a material step change. The Accelerate plan was launched this time last year and identified 3 main streams of activity. Firstly, to recalibrate our business. Secondly, to drive profitable revenue growth. And lastly, to ensure balance sheet resilience. The plan has been well executed by the team, and we are now a far stronger organization with most legacy issues resolved. A significant amount of effort has been put into the transformation of MOVE over the last year. We've strengthened the organization with a refreshed leadership team, divested surplus or aged assets and rightsized our network. Operationally, we have retained key customers. Costs have been reduced circa $27 million, and we have delivered a turnaround in the Freight and Fuel business. There is 1 year of the Accelerate program left to go, and our focus is now from moving from cost out to value creation. This snapshot highlights our progress over the last 2 years and the positive momentum we've seen into the program. Earnings and gross margin have improved strongly, whilst revenue has remained reasonably flat despite the weak market. We did need to structurally fix our gross margin position and the progress here is significant and is on track. Looking now at our individual business units, where 3 of MOVE's 4 businesses delivered significantly improved normalized earnings year-on-year. It was a very challenging trading environment in FY '25, ongoing economic headwinds, low business and consumer confidence and cost of living pressures, all weighed on demand against the backdrop of several years of recession in New Zealand. Lower demand led to increased competitor activity and aggressive and unsustainable pricing by some market participants. Activity was further affected by the disruption to the inter-island ferry service as well as extreme weather events. And whilst New Zealand's long-awaited recovery seems to keep stretching out, we can see from talking with our partners that sentiment is starting to lift slightly. We are strategically expanding the diversity of our customer base, which will reduce production risk and ensure greater balance and resilience through the cycles. We are confident that our level of transformation and cost culture and capability will mean that we are positioned well when the economy has recovered. A real highlight of the year has been the turnaround of MOVE's Freight and Fuel business, which delivered increased revenue and improving gross margins despite a competitive market. The division's normalized earnings loss improved by 90% year-on-year and did move to a positive result in quarter 4 FY '25. It is worth noting that we restructured our Freight and Warehouse divisions this year, and moved the fuel service into freight. Our Fuel business continues to perform strongly, underpinned by a long-term partnership with Z Energy. Warehousing has been an ongoing challenge. There are limited barriers to entry in warehousing. Almost anyone can open up a shared and offer storage. However, not everyone can deliver quality, cost-effective solutions with access to an integrated national network like MOVE. We saw a significant expansion of industry capacity during and post-COVID. However, as customers have returned to just-in-time models, this turned into a glut. Aggressive pricing take -- pricing tactics have been used and storage costs have now dropped below pre-COVID levels. A reset of the business is underway with new leadership and the past few months have involved significant work to stabilize the operation and lay the groundwork for a sustainable turnaround. The priority focus has been on retaining and building our customer base with a big step-up in service and delivery metrics. We've improved our processes and systems across the business with stronger disciplines now in place. We've also rightsized our teams and our sites to match workflow demand, including the exit of 2 properties, which were surplus to needs. This will provide material upside in FY '26. A strong commitment to customer partnerships and service excellence has seen retention of key customers as well as new business wins, which are commencing in the first half of this financial year. Specialist is a great business. It's very project focused, particularly infrastructure projects, roading, energy, plus movement of large difficult items. It had a good year despite a number of projects which were deferred into the second half of FY '26. Energy generation projects such as wind farms are picking up, and we are considered experts in the space. So we're well positioned. We're also doing more work up in the Pacific Islands, where they have limited local resources for specialized haulage and the pipeline for work for specialists for the next 2 years is looking very healthy. Finally, our International business. This is a smaller division. It has been a softer year for freight forwarding, particularly in Australia. Our trans-Tasman shipping service is going very well. We moved to a time charter model with a new vessel in September last year, and have recently renewed contracts with foundational customers who utilize the majority of the capacity. The result this year did include costs of $1.1 million related to the disposal of the previous vessel. I'll now hand over to Lee to talk to our results in more detail.

Thanks, Paul. This year's result reflects a year-on-year improvement in earnings, margin and operating cash flow despite the impact of adverse trading conditions on customer demand and revenue. We delivered our financial targets and structural benefits and value from the transformation plan are now being realized. Net loss after tax reduced by $32.5 million to $15.6 million with consistent improvement across the year. Our big focus this year was on cost out, and we achieved a $27 million reduction in operating expenses. This comprises labor savings of approximately $15 million and a further $12 million in cost out and efficiency improvements. Transport costs as a percent of freight revenue were down 5.1 percentage points year-on-year. Gross margin improved strongly despite the flat revenue result, highlighting the effectiveness of the cost out and the efficiency program. Gross margin percentage was up 4.1 percentage points year-on-year, with gross margin dollars up 13.4%. This provides us with stronger operating leverage. And when volumes return and increased activity will drive further gross margin expansion. Normalized earnings growth was seen across all divisions, except Warehousing. Normalized earnings were up 61% on the prior year with 4 consecutive quarters of improving normalized EBT. In Q4 '25, we saw our strongest quarterly normalized EBT result in 2 years. Funding and capital remains an important focus for the Board and management. We established a new funding partnership in August last year. And in February this year, we extended our bank facility through to August 2026. We have a prudent approach to capital expenditure and the sale of surplus equipment remains a focus. Operating cash flow benefited from improved operating results and disciplined working capital management. This was up 35% to $25.3 million, with adjusted net operating cash flow of $0.3 million. Thank you. I'll now hand you back to Paul.

Thanks, Lee. We are very clear about the work we still need to do to deliver the value and performance that our shareholders expect from us. Our goals can be summarized in the following: a strong team that delivers, delighting our customers, effective use of our assets and finally, financial strength and value creation. Our 4-year new horizons road map clearly sits on our pathway to FY '28 as we reset and step up. Our focus is firmly on achieving our goal to become the preferred logistics provider in New Zealand. Now with 1 year of the Accelerate program left to run, we are moving from cost out to value creation as we continue to build on the strong foundational platform that has been established over the last year. Our priorities this year are clear: to continue building value on our Freight business, which is our largest business unit and our largest opportunity. In Warehousing, we need to step change our performance. Work is already underway on this, and we are seeing momentum of customer retention and new business wins. Auckland capacity and customer mix is improving coming into summer, and we're very focused on filling capacity in the South Island. Productivity initiatives are underway, and we will see the benefits of the site exits this year. We will continue to invest in our people and capabilities, including technology to enable data-driven business decisions and the right systems to win in the market. At the heart of it all are our customers and simply delivering excellent customer service and solutions that create value. Whilst the timing and speed of an economic recovery still remain uncertain, MOVE is positioned well with the right-sized business providing broad and relevant propositions across the freight and logistics sector, underpinned now by a low cost base, our national network, a great team and strong partnerships. We are starting to move from cost out to value creation. The focus on gross margin has created a stronger foundation with the full benefits of the cost-out program to be realized in the current year. A lift in market activity and customer demand, combined with improvements from the transformation plan will enable earnings growth. We do remain on track to return to positive normalized EBT in FY '26. Now before we turn to your questions, I just want to recognize and thank our people. In a tough environment, that have stepped up and their energy, adaptability and drive continues to be our greatest assets. Thank you. We're now happy to take any questions, and I'll hand back over to the operator to manage these.

[Operator Instructions] I will now hand over to Jackie for webcast questions.

Thank you. So our first question is from [ Paul Grant ]. Do you think there will be any months in FY '26 when you achieve a positive net profit after tax?

I can't put an exact month on it. We've got a clear plan and a clear forecast. At the moment, we're in the slower months. In the Freight and Logistics sector, July, August are slower months and then it starts to ramp up.

Next question is from [ John Raidon ]. With the equity in the company eroding and net profit after tax not ensured to be positive in this financial year, are we likely to see a capital raise coming up?

As to our announcement today, we are -- our outlook is that we are expecting a positive EBT. However, we continue to be focused on our structure and our capital to ensure we have adequate capital to run both the business and support our growth.