Mainfreight Interim Report September 2018 to Shareholders

MAINFREIGHT LIMITED
INTERIM REPORT
TO SHAREHOLDERS
SIX MONTHS TO
30 SEPTEMBER 2018
(UNAUDITED)
REGISTERED OFFICE
2 Railway Lane, Otahuhu
P.O. Box 14-038, Panmure, Auckland
Phone 09-259-5500
www.mainfreight.com
Balance Sheet as at 30 September 2018
30 Sept30 Sept31 March
201820182017
$000$000$000
Shareholder’s Equity
Accumulated Surplus 612,880 537,031 583,359
Share Capital 85,821 85,821 85,821
Revaluation Reserve 51,579 50,972 51,254
Defined Benefit Pension Reserve (239) (449) (232)
Foreign Currency Translation Reserve 4,077 (13,235) (10,644)
TOTAL EQUITY 754,118 660,140 709,558
Non-current Liabilities
Bank Term Loan 277,595 284,892 270,753
Employee Entitlements 3,856 745 3,634
Deferred Tax Liability 21,835 23,769 21,526
Finance Lease Liability 3,948 2,565 4,507
307,234 311,971 300,420
Current Liabilities
Bank - - 36
Trade Creditors & Accruals 355,666 284,152 298,916
Employee Entitlements 56,093 50,698 53,373
Finance Lease Liability 1,956 1,838 2,077
Provision for Taxation 2,234 7,569 12,323
415,949 344,257 366,725
TOTAL LIABILITIES AND EQUITY $1,477,301 $1,316,368 $1,376,703
Non-current Assets
Property, Plant & Equipment 605,584 586,300 582,310
Software 49,956 45,326 49,374
Brand Names 8,096 11,262 7,863
Goodwill 216,681 204,093 207,919
Other Intangible Assets 8,237 10,065 9,164
Deferred Tax Asset 9,189 9,149 8,882
897,743 866,195 865,512
Current Assets
Bank 85,318 67,487 80,521
Trade Debtors 432,321 330,872 361,737
Income Tax Receivable - 644 270
Properties Available for Sale 8,473 - 7,852
Other Debtors 53,446 51,170 60,811
579,558 450,173 511,191
TOTAL ASSETS $1,477,301 $1,316,368 $1,376,703
Statement of Changes in Equity for the Six Months Ended 30 September 2018
DEFINED
BENEFIT
PENSION
RESERVE
FOREIGN
CURRENCY
TRANSLATION
RESERVE
ASSET
REVALUATION
RESERVE
ORDINARY
SHARES
RETAINED
EARNINGSTOTAL
DEFINED
BENEFIT
PENSION
RESERVE
FOREIGN
CURRENCY
TRANSLATION
RESERVE
ASSET
REVALUATION
RESERVE
ORDINARY
SHARES
RETAINED
EARNINGS
TOTAL
0182 lirpA 1 ta ecnalaB
Profit for the period
emocnI evisneherpmoC rehtO
Total Comprehensive Income for the Per iod
Transaction with Owners in Their Capacity as Owners:
Shares Issued
stsoC emehcS erahS evitucexE
Supplementary Dividends
Dividends Paid
Foreign Investor Tax Credit
30 September 2018 ta ecnalaB
Statement of Changes in Equity for the Six Months Ended 30 September 2017
Statement of Changes in Equity for the Twelve Months to 31 March 2018
1702 lirpA 1 ta ecnalaB
Profit for the period
emocnI evisneherpmoC rehtO
Total Comprehensive Income for the Per iod
Transaction with Owners in Their Capacity as Owners:
deussI serahS
stsoC emehcS erahS evitucexE
Supplementary Dividends
Dividends Paid
Foreign Investor Tax Credit
1802 hcraM 13 ta ecnalaB
85,821 51,254 (10,644) (232) 583,359 709,558
55,703 55,703
325 14,721 (7) 15,039
- 325 14,721 (7) 55,703 70,742
-
-
(989) (989)
(26,182) (26,182)
989 989
85,821 51,579 4,077 (239) 612,880 754,118
0172 lirpA 1 ta ecnalaB
Profit for the period
emocnI evisneherpmoC rehtO
Total Comprehensive Income for the Per iod
Transaction with Owners in Their Capacity as Owners:
Shares Issued
stsoC emehcS erahS evitucexE
Supplementary Dividends
Dividends Paid
Foreign Investor Tax Credit
30 September 2017 ta ecnalaB
85,821 50,616 (12,037) (420) 518,982 642,962
42,217 42,217
356 (1,198) (29) (871)
- 356 (1,198) (29) 42,217 41,346
-
-
(824) (824)
(24,168) (24,168)
824 824
85,821 50,972 (13,235) (449) 537,031 661,040
DEFINED
BENEFIT
PENSION
RESERVE
FOREIGN
CURRENCY
TRANSLATION
RESERVE
ASSET
REVALUATION
RESERVE
ORDINARY
SHARES
RETAINED
EARNINGSTOTAL
85,821 50,616 (12,037) (420) 518,982 642,962
107,678 107,678
638 1,393 188 2,219
- 638 1,393 188 107,678 109,897
-
-
(1,497) (1,497)
(43,301) (43,301)
1,497 1,497
85,821 51,254 (10,644) (232) 583,359 709,558

Mainfreight Segmental Reporting
The Group operates in various geographical freight markets.
Geographical Segments
Mainfreight Six Months Ended September 2018 ($000’s)
This Year
RevenuesEBITDATotalAssets
New Zealand 316,867 38,446 438,047
Australia 314,319 22,351 305,730
The Americas 284,037 11,809 188,813
Asia 52,611 2,833 55,733
Europe 257,749 13,327 345,123
Intercompany - - (17,078)
Total Group $1,430,994 $108,342 $1,477,301
Last Year
RevenuesEBITDATotalAssets
Total Group $1,225,583 $88,766 $1,316,368
EBITDAis defined as earnings before net interest expense, tax,
depreciation, amortisation, abnormals, share based payment expense,
minority interests and associates.
112,004 42,772 55,896
Abnormal Items
(291) (906) (7,224)
98 351 2,898
Income Tax on Abnormal Items
(193) (555) (4,326)
Abnormal Items After Taxation
Profit Before Taxation for the Year78,005 60,818 153,046
Income Tax Expense (22,302) (18,601) (45,368)
Net Profit for the Year 55,703 42,217 107,678
Profit Before Abnormal Items and
Taxation for the Year
Net Profit Before Abnormal Items
for the Year
Income Statement for the Six Months
Ended 30 September 2018
30 Sept30 Sept31 March
201820182017
$000$000$000
Operating Reven ue1,430,994 1,225,583 2,616,189
511 --emocnI tseretnI
1,430,994 1,225,583 2,616,700 euneveR latoT
Transport Costs(875,751) (748,541) (1,605,459)
Labour Expenses Excluding Share Based Payments (305,700) (266,441) (538,483)
Occupancy Expenses and Rental Recharge
(40,247) (35,727) (73,192)
Depreciation and Amortisation Expenses (26,080) (23,115) (47,788)
Other Expenses (100,954)
(86,108) (183,941)
(7,567) (3,927) (3,966)stsoC ecnaniF
78,296 61,724 160,270
Income Tax on Profit Before
Abnormal Items
(22,400) (18,952) (48,266)
Financial result for the six months ended 30 September 2018 (Unaudited)
Commentary
Mainfreight is pleased to report our six monthly financial results to 30 September 2018, with comparisons to the same
period last year.
Revenue $1.43 billion Up $205.41 million or 16.8%
EBITDA $108.34 million Up $19.58 million or 22.1%
Net profit (before abnormals) $55.90 million Up $13.12 million or 30.7%
Adjusted for foreign exchange impact, revenue is up 13.2%, and EBITDA up 19.3%.
This satisfactory performance is attributable to ongoing growth and profitability across all five regions in our global
network. Our offshore divisions are now contributing 58.1% of EBITDA, totalling $62.92 million. Sales generated
offshore in this first half year totalled $1.09 billion, 76.0% of our total revenue.
Within this result, our Air & Ocean division contributed significantly to both revenue and EBITDA performance, and our
expectation is that this division of the business will contribute more over time.
Trading through October and into November has seen the trend of improved financial performance continue.
Divisional Performance (figures in local currencies)
New Zealand (NZ$)
Revenue $343.12 million Up $26.25 million or 8.3%
EBITDA $45.43 million Up $6.98 million or 18.2%
Strong regional freight growth and reliable rail services, compared to the long periods without South Island rail in the prior
year, has assisted our Domestic operations to deliver sales growth and increase EBITDA performance. Our Air & Ocean
operation has also improved their trading results compared to the same period last year, with Logistics (warehousing)
remaining level with the prior year.
Domestic freight volumes were at record levels for this six-month period, with existing customer and new business
increases, particularly from regional New Zealand, where we continue to invest in infrastructure to strengthen our
services to those communities.
Our Air & Ocean division has seen a lift in revenue and EBITDA as our global network trategy bears fruit.
The Logistics operations are also performing well at the revenue level, and with increased levels of warehouse
utilisation, will require additional commitment to new facilities, impacting EBITDA returns in the short-term but positioning
for further growth.
Pre-Christmas freight volumes across all three divisions are at record levels.
Australia (AU$)
Revenue AU$341.70 million Up AU$48.79 million or 16.7%
EBITDA AU$22.52 million Up AU$1.69 million or 8.1%
The continuing increase in sales revenues across all three divisions has assisted an improved financial performance,
albeit with slower growth at the EBITDA level as higher growth-related overhead costs impacted our Transport division
through the first quarter.
Improving quality in our Transport division is attracting new customers and assisting in the retention of our current loyal
customer base. Freight volumes continue to grow heading into the pre-Christmas period. The use of rail is assisting to
ease pressure on road transport.
Our Logistics warehousing activity continues to find growth, necessitating further short term warehouse leases as
volume increases. The new purpose-built facility in Sydney is expected to assist early in the New Year.
Air & Ocean, like the other divisions, has achieved improved revenue and EBITDA results for the first half year as
international freight volumes assist performance.
Asia (US$)
Revenue US$40.33 million Up US$2.72 million or 7.2%
EBITDA US$3.17 million Up US$1.15 million or 56.6%
Renewed energy and a clear international Air & Ocean freight strategy within our Asian operations has seen financial
performance improve markedly compared to the same period last year.
Network development across Southeast Asia has also gained momentum with our first Malaysian operation opening
post-result, on 15 October 2018. We also expect to have our first Japanese operation open early in 2019, with
licensing and business documentation requirements completed and accepted by Japanese authorities.
The Americas (US$)
Revenue US$237.15 million Up US$34.10 million or 16.8%
EBITDA US$10.99 million Up US$2.55 million or 30.2%
A pleasing result from our North American operations, with performance improvement largely driven by our Domestic
Transport operations, where new customer gains have lifted revenue and EBITDA.
Our Logistics division has also secured new business, improving warehouse utilisation across all five locations.
Further gains are expected as the year progresses, likely necessitating new facilities.
Our Air & Ocean operations saw revenues increase but we were unable to convert this to positive returns as gross
margins declined. Improvements in margin are evident during October and November, providing confidence for an
improved EBITDA result from Air & Ocean at year end.
Trading within the CaroTrans wholesale business has been steadily improving during the year, with an increase in
revenue and EBITDA.
All our USA divisions have seen trading conditions in October and November remain positive, and it is our expectation
for this current level of improvement to continue.
Europe (Euro €)
Revenue EU€182.33 million Up EU€19.82 million or 12.2%
EBITDA EU€10.40 million Up EU€2.00 million or 23.8%
We continue to find further financial and operational improvement in our European business, with sales growth across
all divisions.
Our Domestic forwarding operations contributed significantly to this improvement, providing improved EBITDA
results through better line-haul and pick-up-and-delivery management. Whilst our Belgian forwarding operations are
yet to be profitable, the infrastructure investment in two new cross-docks is assisting.
Our Logistics operation grew sales revenue, but saw EBITDA at similar levels to the prior period, as new warehouse
leases and new customer implementations increased overhead costs.
Similarly to our global Air & Ocean development, our European Air & Ocean division achieved improved revenues
and EBITDA contributions.
Trading through October and November sees current trends continue and expectations are for a satisfactory year end
result.
Group Operating Cash Flows
Operating cash flows were NZ$71.00 million compared to the prior year’s half year figure of NZ$57.15 million.
During the half year, net capital expenditure totalled $40.19 million of which $21.14 million related to property
development.
Dividend
The Directors of Mainfreight have approved an interim dividend of 22.0 cents per share, up 3.0 cents on last year’s
interim dividend level, reflecting current profit levels and ongoing confidence for further improvement at the year end
result.
This dividend will be fully imputed and will be paid on 14 December 2018, with books closing on 7 December 2018.
A supplementary dividend will be paid to non-resident shareholders.
Outlook
This first half result is satisfactory, compared with a somewhat muted result in the prior year, and provides us with a
good platform for further improvement over the longer term.
To have all regions contributing improved financial and operational results is pleasing. Therefore it is our expectation
that financial performance will continue to be better for the full year, delivering another improved full year profit.
Our land and building projects are generally progressing well. Capital expenditure for land and buildings for the full
year is likely to be in line with our projections.
Importantly, these new and refurbished land and building projects will bring improved facilities complementing the
development of our network and providing our people with the resources to develop further growth over the long term.
Mainfreight will release its financial results for the full 2019 financial year to the market on 28 May 2019.
New Zealand 343,120 45,426 471,840
Australia 370,530 24,418 333,419
The Americas 345,655 16,018 234,783
Asia 58,786 4,623 66,839
Europe 312,903 17,857 389,360
Intercompany - - (18,940)
Statement of Comprehensive Income for the
Six Months Ended 30 September 2018
Net Profit for the Year 55,703 42,217 107,678
Other Comprehensive Income
Exchange Dif ferences on Translation of Foreign Operations
13,780 (1,198) (1,978)
Income Tax effect
Revaluation of Land including Foreign Exchange Movements
Income Tax effect
325 356 638
(7) (29) 325
Defined Benefit Pension Provision
- - -
Income Tax effect
- - (137)
941 - 3,371
Other Comprehensive Income for the Year, Net of Tax
15,039 (871) 2,219
Total Comprehensive Income for the Year, Net of Tax
70,742 41,346 109,897
Statement of Cash Flows for the Six Months
Ended 30 September 2018
Operating Activities 71,006 57,148 140,236
Investing Activities (40,187) (32,131) (64,729)
Financing Activities (29,918) (31,898) (69,767)
FXRate Fluctuations on Cash Held 3,932 3 380
NETINCREASE (DECREASE) IN CASH 4,833 (6,878) 6,120