Mainfreight Annual Meeting Results 2019

MAINFREIGHT LIMITED

Mainfreight Lane | off Saleyards Road | Otahuhu 1062 | New Zealand
Tel +64 9 259 5500 | Fax +64 9 270 7400
PO Box 14-038 | Panmure | Auckland 1741 | New Zealand

Supporters of
MAINF R E IG HT – G LOB AL LO G IS T IC S





MAINFREIGHT LIMITED



S
CRIPTED ADDRESS
AND
P
RESENTATION




24
th
Annual Meeting of Shareholders

4.00 pm, Tuesday 30 July 2019

CHAIRMAN’S ADDRESS

Welcome to our 41st Annual General Meeting since our beginnings in 1978,
and our 24th since listing on the New Zealand Stock Exchange in 1996.

The year ended March 2019 produced the continuation of nine consecutive
years of record results.

1. Record profits up $29M to $141M before abnormals.
2. Global sales up $330M to $2.95B – that represents sales in excess of
close to $57M per week.
3. Income tax payable for the year increased by $9M to $54M.
4. The discretionary bonus payable to our worldwide team increased by
$6.5M to $27.2M
5. Our annual dividend paid to shareholders increased by $11M to $56M.
6. The average annual return from share growth, including dividends, over
the past 10 years is 27.9%.

On November 6th this year, we will celebrate 30 years since our beginnings in
Australia.

Breaking into the Australian market was probably the most difficult challenge in
our history, apart from the beginnings of Mainfreight in the late 1970’s and
early 1980’s in New Zealand. In Australia, over 2001-2003 we managed to lose
close to AU$20M – and it took huge effort and personal courage to recover,
and eventually prosper.

Today we are a respected member of the Australian transport industry, and
this year and in the future, are likely to generate more revenue than from New
Zealand.

In our Annual Report (which I know you will all have read) I wrote “Could it be
that a sharing of a percentage of the profits amongst the people who helped
make them, should be an essential part of capitalism”?

In the last week, a New Zealand film “Capital in the 21st Century” has been
showing at the New Zealand International Film Festival. The film is based on a
book by French economist Thomas Piketty. The film, which is highly
recommended, suggests that it is the accumulation of excessive capital (wealth)
by too few members of society which has caused much destruction – from the
French Revolution, the Russian Revolution, two world wars, the 1930’s
depression, the 2008 Global financial crisis and the election of populist political
leaders.

Following these events, the new leaders have promised a more equal society,
but this has seldom happened.

Piketty suggests that the years 1950–1980 (a period perhaps well known to
many Mainfreight shareholders here today) was a golden age of relative
equality, and quite unique.

We are proud to advise our shareholders of the sharing of our success in the
paying of, not only a profit sharing bonus, but also the full payment of our
income taxes. We strongly believe that the payment of income taxes means
that we are contributing to society – to health and education, roading etc.
Individuals and companies which are not paying a fair share of taxes are
enabling themselves to accumulate excessive wealth, and are not contributing
to the welfare of their own countries.

Piketty suggests that the non-payment of taxes by some huge global
companies, and by others registering themselves and their companies in
various tax havens, robs governments of legitimate income and foments social
unrest – and finally rebellion.

Many would agree.

How do we see the year ahead?

The year ended March 2019 was an extraordinary year – lifting our net profit
before abnormals by 26%. We have much momentum, new projects and
opportunities, and a belief that we can deal with – and sometimes even
prosper – as business ebbs and flows, and great nations bicker at their own
expense.

Climate change is the most serious challenge that the world as we know it is
now facing. Dealing with this change must be tackled by individuals,
organisations, business, governments and countries. We must not blame
others, or wait until “they” do something. Every individual can and must
contribute. Mainfreight will continue to do all that we can to deal with climate
change.

In closing, I would again like to acknowledge our shareholders. Many of our
larger investors have been long-term supporters, and we enjoy the long
association with many of our smaller shareholders. We appreciate your loyalty,
and emphasise our commitment to remaining a New Zealand-listed company.


Fellow shareholders, I would now like to ask the Group Managing Director, Don
Braid, to give his presentation.

Group Managing Director’s Presentation

Please refer to separate PowerPoint slide presentation.



For further information, please contact Don Braid, Group Managing Director,
telephone +64 9 259 5503, +64 274 961 637 or email don@mainfreight.com.

---

MAINFREIGHT LIMITED
ANNUAL MEETING OF SHAREHOLDERS
30JULY 2019

Page 2
A quick look back at F19 ...
8,079 Team membersup 506
260 Branchesup 13
24 Countriesup 2 (Malaysia & Japan)
Revenue up 12.9% to $2.95 billion (excluding FX up 10.8%)
An increase of $337.39 million
Offshore revenues now exceed $2.24 billion
EBITDA at $257.05 million, up 19.5% or $41.94 million
Excluding FX up 18.0%
Net surplus after tax before abnormal items up 26.0%
to $141.08 million
REVENUE
EBITDA
NET SURPLUS
GROWTH
“It’s just rear vision mirror stuff”

Page 3
Discretionary Bonus/ Dividend / Earnings Per Share
Payable at Board’s discretion to qualifying team members
Up $6.5 million to $27.2 million
Total dividend for year 56.0 cents per share, up 11.0 cents or 24.4%
from 45.0 cents in the previous year
Adjusted earnings per share 140 cents, up from 111 cents in the previous
year
DIVIDEND
EARNINGS
BONUS
“Sharing the profits”

Page 4
Contribution: New Zealand vs Offshore
Revenue F19
Offshore
75.7%
NZ
24.3%
Net Profit F19
Offshore
56.6%
NZ
43.4%
“Becoming a more global business”

Page 5
Performance by Division –Our 3 Core Products
NZ$000THIS YEARLAST YEARVARIANCEVAR ex FX
GroupRevenue2,954,0872,616,70012.9%

10.8%

EBITDA
257,049215,114
19.5%

18.0%

TransportRevenue1,450,9421,297,01311.9%

10.2%

EBITDA
156,681128,38222.0%

21.2%

WarehousingRevenue346,567289,08019.9%

17.5%

EBITDA
37,28233,14212.5%

10.9%

Air & OceanRevenue1,156,5781,030,60712.2%

9.6%

EBITDA63,08653,59017.7%

14.9%

“We’re keeping busy”

Page 6
Our Customers
Total customers: 35,000+
Primarily FMCG, Food/beverage, DIY, retail, pharmaceutical and
manufacturing
Top 500 customers produce 56% of revenue
31% of Top 500 now utilize all three products, up from 28% last year
27%
42%
31%
1 Division2 Divisions3 Divisions
32%
40%
28%
1 Division2 Divisions3 Divisions
20192018
“Customers spin our wheels”

Page 7
Core Strategic Initiatives
Intensification of our network
Globally, regionally, within cities
Be closer to our customers
Our network: not agents or others
Added value and simple, effective technology
High quality, purpose-built facilities
Dedicated, motivated, energetic and well-rounded team of people
“Shortest strategic plan in the world”

Page 8
Our Areas of Focus
It’s about our People
Culture
Sharing our strategy and direction
It’s about our Network
Customers that fit, and help our intensification
It’s about our Quality
Our customers matter
It’s about our Growth
Sales – organic growth
3 core products: Transport, Air & Ocean, Warehousing
Growth mindset – all contribute to winning business
“People make it happen”

Page 9
Capital Expenditure
This year; delayed settlements on property transactions
Expected capital investment next two years
Land and building projects underway
$430 m
37
$90 m
“Always bite off more than you can chew”

Page 10
Our Network Model –Why?
Decentralised, provide services where our
customers need them
Offer fully integrated, end-to-end service
Retain freight in our network
Control quality, consistency and service
Capitaliseon organic growth
“Giving the responsibility to our people works”

Network Intensity –eg, Melbourne

Melbourne: Epping II
Targeted completion: April 2020
“The little yellow digger ...”

Melbourne: Dandenong
Targeted completion: mid-2021
“Size does matter”

Page 14
Other Locations: Recently completed and planned
Sydney: Kookaburra
Completed: early 2019
“Flying the flag”

Page 15
Sydney: Kookaburra
Completed: early 2019
Sydney: Enfield
Planning underway
“Rail rocks”

Page 16
Mt Maunganui: Mangatawa
Targeted completion: late 2020
“This will be special”

Page 17
West Auckland: Hobsonville
Targeted completion: 2021
“Westies”

Page 18
Netherlands: Zaltbommel
Completed: late 2018
“ There ain’tno hills in the Netherlands”

Page 19
Plus a raft of smaller Warehousing and
Transport facilities in various regions and
countries – leased and owned
“Stand by Whakatane, Levin, Lille, Manchester, El Paso ...”

Page 20
Trading Updates: Overview
First quarter to June 2019 ahead of prior year
Could have been better
Fewer trading days in April: New Zealand & Australia
most affected
Improved contributions from Europe and the Americas
(and to a lesser extent from Asia)
Air & Ocean and Warehousing divisions across all
regions contributed better than Transport
Expect half year to show improvement
Sales pipelines reasonably full
Economic conditions concerning, but expect to offset
with stronger sales activity
“It’s the long-term stuff that really counts”

Page 21
External Factors
Maintaining watch; will present
opportunities
Lower volumes on direct trade-lanes;
partially offset by increases in other
Southeast Asia/USA lanes
Evidence of slowing international trade;
looking to market share activity to
offset wherever possible
Sales / Sales / Sales
China/USA
Global Trade
BREXIT
“Wewill take every point on offer”

Page 22
What Fuels our 100-year Journey?
Our people: individuals who get us, will grow our culture,
and are with us for a career
Our customers: be effective and useful for them
Quality: be better than expected and keep improving
Growth: think bigger and bolder
Longevity: think next decade, not next quarter
Be here for future generations!
“We still have so much to do”

Page 23