Mainfreight – Half Year 2018 Presentation

MAINFREIGHT LIMITEDHALF YEAR RESULTTO SEPTEMBER 2017

Result Summary
Revenue
 
up
 
7.3%
 
to
 
$1.23
 
billion
Foreign
 
exchange
 
effect
 
negligible
An
 
increase
 
of
 
$83.15
 
million
EBITDA
 
at
 
$88.77
 
million,
 
up
 
2.8%
An
 
increase
 
of
 
$2.42
 
million
Net
 
surplus
 
after
 
tax
 
before
 
abnormal
 
items
 
up
 
1.1%
 
to
 
$42.77
 
million
Trading
 
through
 
October,
 
and
 
into
 
November
 
reflects
 
further
 
financial
 
improvements
 
and
 
we
 
expect
 
this
 
to
 
continue
 
with
 
strong
 
pre
‐
Christmas
 
volumes
 
across
 
the
 
global
 
network
REVENUEREVENUE
EBITDAEBITDA
NET
 
SURPLUS
NET
 
SURPLUS
OUTLOOKOUTLOOK

Dividend
Interim
 
dividend
 
of
 
19.0
 
cents
 
per
 
share
Books
 
close
 
8 December
 
2017;
 
payment
 
on
 
15
 
December
 
2017
2.0
 
cent
 
increase
 
on
 
prior
 
year’s
 
interim
 
dividend
 
reflects
 
profitability
 
and
 
confidence
 
for
 
full
 
year
 
result
DIVIDENDDIVIDEND

Capital Management
NZ$
 
MILLION
THIS
 
YEAR
LAST
 
YEAR
Operating
 
cash
 
flow
57.15
52.03

Net
 
capital
 
expenditure
 
totalled
 
$32.34
 
million;
 
of
 
which
 
$7.68
 
million
 
is
 
property
 
development,
 
$11.0
 
million
 
is
 
software
 
development,
 
and
 
the
 
balance
 
plant
 
and
 
equipment
 
across
 
Europe,
 
New
 
Zealand
 
and
 
Australia

Expected
 
full
 
year
 
capital
 
expenditure
 
~$60
 
million
Below
 
initial
 
expectations
 
as
 
land
 
settlements
 
likely
 
in
 
the
 
2019
 
financial
 
year

First Half Review
A
 
difficult
 
first
 
half;
 
less
 
than
 
satisfactory
 
performance
 
in
 
Asia
 
and
 
Americas
Inhibitors
 
included:
Region
EBITDA
 
Impact

Easter
 
trading
 
effect
 
NZ/AU
NZ$2.8
 
million

Kaikoura earthquake
 
transit
 
issues
NZ
NZ$3.0
 
million

Air
 
freight
 
tonnage
 
reduction
AS/US
US$3.7
 
million

Establishment
 
costs
 
of
 
new
 
warehouse
EU
EU€0.6
 
million

Software
 
implementation
 
NZ/EU
NZ$1.1
 
million

Sales
 
growth
 
of
 
7.3%

Strong
 
market
 
share
 
gains
 
and
 
profitability
 
in
 
Australia

September/October
 
improved
 
trading
 
in
 
all
 
regions

Half Year Analysis: Revenue
$000
THIS
 
YEAR
LAST
 
YEAR
VARIANCE
New Zealand:
 
NZ$
316,867
287,546
10.2%

Australia:
 
AU$
292,914
257,650
13.7%

USA:
 
US$
203,058
226,097
(10.2)%

Asia*:
 
US$
37,612
31,448
19.6%

Europe:
 
EU€
162,511
136,475
19.1%

Total
 
Group:
 
NZ$
1,225,583
1,142,437
7.3%

(excl FX)
 
7.4%

*
 
Inter
‐
company
 
totalled
 
US$19.10
 
million
 
for
 
Asia,
 
down
 
from
 
US$33.54
 
million
Revenue
 
including
 
inter
‐
company
 
for
 
is
 
Asia
 
down
 
12.7%

Half Year Analysis: EBITDA
$000
THIS
 
YEAR
LAST
 
YEAR
VARIANCE
New Zealand:
 
NZ$
38,446
37,163
3.5%

Australia:
 
AU$
20,829
16,092
29.4%

USA:
 
US$
8,442
9,812
(14.0)%

Asia:
 
US$
2,025
4,729
(52.7)%

Europe:
 
EU€
8,403
7,650
9.8%

Total
 
Group:
 
NZ$
88,766
86,348
2.8%

(excl FX)
 
2.8%


New Zealand

Revenue
 
growth
 
continues
 
to
 
be
 
dominated
 
by
 
Transport
 

Excluding
 
Disruption
 
Surcharge,
 
revenue
 
increase
 
at
 
6.5%

EBITDA
 
improvement
 
across
 
all
 
divisions,
 
however
 
subdued
 
in
 
Transport
 
as:

Inter
‐
Island
 
volumes
 
decline

Higher
 
roading costs
 
for
 
inter
‐
island
 
volume

Increased
 
labour
 
costs
 
for
 
inter
‐
island
 
movements

Costs
 
associated
 
with
 
software
 
implementation
Revenue:
 
$317m
     
10.2%
EBITDA:
 
$39m
  
3.5%

New Zealand

Transport

Continues
 
to
 
gain
 
market
 
share

Commencement
 
of
 
rail
 
services
 
(first
 
week
 
of
 
November)

Pre
‐
Christmas
 
volumes
 
very
 
strong

Expectations
 
of
 
a
 
strong
 
second
 
half

Prior
 
year
 
second
 
half
 
impacted
 
by
 
earthquake

Logistics

Opened
 
additional
 
warehouse
 
in
 
Christchurch
 
to
 
offset
 
inter
‐
island
 
freight
 
delays/supply
 
chain
 
efficiencies

Utilisation
 
and
 
activity
 
levels
 
strong
 
leading
 
into
 
Christmas

Air
 
&
 
Ocean

Revenue
 
levels
 
up
 
year
 
on
 
year

Import
 
volumes
 
continue
 
to
 
outweigh
 
exports

Australia

Strong
 
sales
 
and
 
EBITDA
 
growth
 
in
 
Transport
 
and
 
Logistics;
 
Air
 
&
 
Ocean
 
sales
 
growth
 
and
 
EBITDA
 
contribution
 
muted
 

Transport

Sales
 
growth
 
strong

Net
 
margin
 
improvements

Market
 
share
 
gains
 
as
 
quality
 
of
 
service
 
increases

Expansion
 
of
 
network

Bendigo,
 
November
 
2017

Toowoomba,
 
early
 
in
 
2018

Cautious
 
about
 
management
 
of
 
volumes
 
through
 
peak
 
period
Revenue:
 
$293m
     
13.7%
EBITDA:
 
$21m
  
29.4%

Australia

Logistics

Activity
 
and
 
utilisation
 
levels
 
continue
 
to
 
improve

Land
 
acquisition
 
remains
 
high
 
on
 
agenda

Melbourne
 
x2

Adelaide

Brisbane
 
(leased)

Sales
 
growth
 
continues

Air
 
&
 
Ocean

Sales
 
growth
 
less
 
than
 
expected

Focus
 
on
 
Mainfreight
 
trade
‐
lane
 
development
 
continues

Expectation
 
of
 
improving
 
performance

The Americas

Disappointed
 
at
 
lack
 
of
 
overall
 
progress

Trading
 
expectations
 
across
 
all
 
3
 
divisions
 
did
 
not
 
materialise;
 
small
 
improvements
 
in
 
October

Domestic

Sales
 
gains
 
in
 
every
 
day
 
freight
 
has
 
not
 
adequately
 
replaced
 
freight
 
forwarding
 
losses

Strong
 
focus
 
on
 
getting
 
six
 
key
 
hubs
 
profitable

Logistics

Customer
 
gains
 
continue;
 
Newark
 
facility
 
benefiting

New
 
warehouse
 
for
 
Chicago
 
–leased
 
– 20,000m
2
Revenue:
 
$203m
     
(10.2)%
EBITDA:
 
$8m
  
(14.0)%

The Americas

Air
 
&
 
Ocean

If
 
abnormal
 
prior
 
year
 
airfreight
 
account
 
excluded,
 
shows
 
market
 
share
 
gains,
 
just
 
not
 
quickly
 
enough

CaroTrans revenue
 
decline
 
halted

Focus
 
on
 
core
 
USA
 
branch
 
improvements
 
in
 
profit
 
and
 
quality

Asia

EBITDA
 
performance
 
yet
 
to
 
improve
 
from
 
year
 
end
 
2017

In
‐
country
 
revenue
 
gains
 
are
 
at
 
lower
 
margins

Loss
 
of
 
inter
‐
company
 
airfreight
 
revenue
 
(USA)
 
impacted
 
margins

Senior
 
management
 
change
 
brings
 
strong
 
focus
 
on
 
branch
 
profitability
 
improvements
Revenue:
 
$38m 19.6%
EBITDA:
 
$2m
  
(52.7)%

Europe

Pleasing
 
revenue
 
improvement
 
across
 
all
 
three
 
divisions

Logistics

Successfully
 
implemented
 
new
 
warehouse
 
(NL)
 
in
 
June;
 
new
 
warehouse
 
opened
 
in
 
Ghent
 
(BE)
 
in
 
September

Sales
 
pipeline/customer
 
gains
 
provide
 
further
 
confidence

New
 
warehouse
 
in
 
Born
 
(NL)
 
will
 
open
 
in
 
March
 
2018
Revenue:
 
€163m 19.1%
EBITDA:
 
€8m 9.8%

Europe

Forwarding/Transport
 

Revenue
 
growth
 
contributed
 
to
 
operational
 
pressure

Network
 
capacity
 
issues
 
throughout
 
Europe
 
on
 
the
 
increase
 
–rate
 
reviews
 
underway

New
 
dock
 
in
 
Genk
 
(BE)
 
to
 
assist
 
cross
‐
dock
 
congestion
 
in
 
‘s
‐
Heerenberg

Air
 
&
 
Ocean

Revenue
 
growth
 
in
 
both
 
imports
 
and
 
exports

USA
 
heavily
 
weighted;
 
Asia
 
growing

Network
 
expansion
 
in
 
Italy;
 
further
 
branches
 
likely
 
to
 
open
 
in
 
Germany
 
in
 
2018

Group Outlook
Indicators
 
for
 
first
 
five
 
weeks
 
of
 
second
 
half
 
show
 
further
 
profit
 
improvement

The
 
inhibitors
 
present
 
in
 
the
 
first
 
half
 
are
 
reduced/eliminated

Expectations
 
are
 
for
 
a
 
stronger
 
second
 
half
 
versus
 
the
 
prior
 
comparative
 
period

Confidence
 
of
 
an
 
improved
 
full
 
year
 
result

Financial Calendar F17
DATE
F18 – 12
 
months
 
ended
 
31
 
March
 
2018
29
 
May
 
2018
Taking expressions
 
of
 
interest
 
for
 
Europe
 
Investor
 
Day
20 June
 
2018
Annual
 
Meeting
 
of
 
Shareholders
26
 
July
 
2018
F19
 
–6
 
months
 
ended
 
30
 
September
 
2018
14
 
November
 
2018