Sydney-headquartered multi-modal logistics operator Qube has announced “solid” company earnings today. ASX-listed Qube revealed a small increase in revenues and a large increase in profits.
Financial summary
Australia’s financial year runs from July to June. In the first half of the 2019 financial year (i.e. the six months to December 2018) Qube generated AU$837 million (USD$598.6 million) of revenues, up five percent on the previous corresponding period. Earnings before interest taxation and amortisation stood at AU$93.6 million, up 20.2 percent compared to July-December 2018. Qube did not release an EBITDA figure. Net profit after tax stood at AU$61.5 million, up 36.1 percent on the prior corresponding period.
On releasing today’s earnings, Qube’s managing director, Maurice James, said: “this is a very solid first half result which, again, highlights Qube’s strong market positions and the importance of our diversification strategy. Qube was able to deliver very strong earnings growth despite challenges in some parts of the business”.
About Qube
Qube is a complex group of businesses and entities. It has a workforce of over 6,000 employees and has a presence in over 125 locations in Australia, New Zealand and South East Asia. It operates five main businesses. Qube Ports is a bulk, vehicle, and general cargo stevedoring (longshoreman) company. It has facilities in over 40 Oceania and South East Asian ports. Qube Logistics provides road and rail box transport, warehousing and distribution, container parks and related services, intermodal logistics services and freight forwarding.
The group also has an infrastructure and property business unit that is building a large logistics park in Sydney’s west. Boxes will be railed to Moorebank from Port Botany and shipped by road around the west of the city and interstate by road and rail. Qube Bulk is a bulk handling specialist that works in road and rail transport, stockpile management and ship loading. There is also a Strategic Assets division responsible for a variety of joint venture projects such as a grain-loading facility and a bulk liquids handling facility, both at Port Kembla.
Qube also owns a 50 percent stake in Patrick Terminals one of the big two container stevedoring (longshoreman) companies in Australia. Patrick has a 41.5 percent market share (as measured by container lifts). The other 50 percent of Patrick is owned by a consortium of financial investors.
Revenues
Qube’s consolidated first half operational revenues were AU$837m. About 53 percent of those revenues, AU$440.4 million, were generated by Qube’s Port & Bulk division. A further 43 percent of those revenues, AU$362.6 million, were generated by the company’s logistics arm. The other four percent, another AU$34 million, were generated from property rental, management fees and from other, incidental, sources.
Costs
As may be expected for such a large, complex, organisation, Qube incurred a variety of large expenses. Excluding finance costs, it racked up about AU$749 million of expenses. The single largest expense was its workforce which, at AU$321.5 million, accounted for 43 percent of its costs. The company spent a further AU$204.5 million, about 27 percent of its total expenses, on direct transport and logistics costs. The other AU$215 million, about 28.8 percent, was incurred across several lines of expenses, which were, in descending order of cost, energy (AU$63.1 million); depreciation and amortisation (AU$59.9 million); occupancy and property (AU$45.7 million); repairs / maintenance (AU$42.1 million) and professional fees (AU$4.9 million).
Balance sheet
Qube had AU$452.7 million in total current assets, mostly receivables and cash, as at December 31, 2018. Its current assets position increased slightly, by just under six percent, for the immediately prior period of the six months ending June 2018.
As may be expected from a major logistics operator and transport developer, Qube has substantial non-current assets. As at December 31, it owned AU$3.8 billion of non-current assets, including property, plant and equipment (AU$1.1 billion). Qube owns AU$796.8 million of unspecified investment properties. There is also an intangibles account of AU$838 million, of which AU$709.5 million is classified as goodwill and likely relates to the AU$9.0 billion mega-acquisition by Qube of Asciano, the former owner of the Patrick Terminals.
On the current liabilities side, Qube owes AU$312.2 million, mostly comprised of payables (AU$168.4 million), provisions (AU$78.1 million) and borrowings of AU$50 million, which expires in July this year.
It’s on the non-current liabilities side of the ledger that the numbers get serious. Qube has about AU$1.5 billion of liabilities, of which AU$1.13 billion are borrowings. The company reports that, during the first half of the financial year, it restructured its debt by increasing the number of facilities with new and existing lenders. The effect was to increase the average maturity of its borrowings to a little over five years and to give Qube access to undrawn debt facilities of about AU$800 million.
“Qube remains conservatively leveraged with a leverage ratio (being net debt divided by [net debt plus equity]) of 28.1 percent and significant headroom to Qube’s financial covenants, thereby ensuring it continues to be well positioned to fund its growth in a manner consistent with its prudent approach to its balance sheet,” the company said in a statement.