Time and again this publication has cautioned investors about relying on the advice of financial advisers. In most instances, as with the article by Alexis Assadi we reported on earlier, the money manager or adviser has an ulterior motive and misinformed investors. In this article, found in Hellenic Shipping News, the anonymous author (perhaps not even a financial adviser) has been paid to recommend that investment-seekers buy shares in a company called Toll Holdings, or Toll Group.
To demonstrate what terrible investment advice this is, we investigated Toll Holdings to expose the truth. This is what we uncovered …
Headquartered in Australia, Toll Group is part of Japan Post, a Japanese state-owned conglomerate. Japan Post bought the group as part of an attempt to catapult itself into the realm of global logistics. Instead, it has had to contend with what it says is weakening demand for logistics services, due to a slower Australian economy.
It was in February of 2015 that Japan Post made a A$6.5 billion cash takeover bid for the company. The purchase of Toll was completed a few months before the $12 billion IPO of Japan Post Holdings. The Japan Post IPO was pitched toward retail investors — stressing both the rock-solid reliability of the Japan Post brand and the newly globalised profile acquired through the Toll purchase. The IPO is estimated to have lured hundreds of thousands of Japanese families into the stock market for the first time. That same group of unsuspecting investors saw their Japan Post shares trade (for extended periods) below the IPO price of ¥1,400 per share.
Following the completion of the Toll purchase, Japan Post Holdings said it would report a Y40 billion ($360 million) loss for its first full financial year as a listed company, due to losses from Toll Holdings. The forecast loss at Japan Post arises from a ¥400.3 billion write-down of Toll Holdings, which the company deemed necessary after it was discovered that goodwill exceeded the original estimate and that Toll Holdings’ performance failed to live up to expectations. As a result, Japan Post is now writing off all the goodwill on its books for Toll — about $4.5 billion worth — and taking a further $400 million hit on the value of the Toll trademark and fixed assets.
Making matters worse for Japan Post, Toll’s operating income tumbled to $83 million between April and December of 2016, down more than two-thirds on the same period in 2015. In mid-2017, amid the continued losses, Toll Holdings Limited had to move quickly to implement changes recommended in an urgent 100-day strategy review. The recommendations in the report aimed to reduce Toll’s operational business units and eliminate 1700 jobs, mostly in Australia. The total job loss equates to approximately 4 per cent of Toll’s global workforce.
The Toll write-off has wiped out Japan Post’s earnings for the past year and dragged the Japanese conglomerate into the red to a total of ¥40 billion ($480 million) — its first loss since privatisation a decade ago. Japan Post had previously forecast a full-year net profit of ¥320 billion.
If investors were to follow the investing advice of the Hellenic Shipping News’ article and invest in Toll Holdings, the fake news and comments could have cost them a significant amount of money; just as it cost Japan Post a significant amount of money. This is once again an example of why investors need to beware of people offering investment advice. Their intentions may be self-serving and motivated by something other than helping others and encouraging financial success.