Mainfreight Limited — Annual Report 2018

May 29, 2018

PRELIMINARY FULL YEAR REPORT ANNOUNCEMENT

Mainfreight Limited For Full Year Ended 31 March 2018

Preliminary full year report on consolidated results (including the results for the previous corresponding full year). This report has been prepared in a manner which complies with generally accepted accounting practice and fairly presents the matters to which the report relates and is based on unaudited financial statements, which are in the process of being audited. The Listed Issuer has a formally constituted Audit Committee of the Board of Directors.

Income Statement for the Year Ended 31 March 2018

Income Statement for the Year Ended 31 March 2018
Note 2018 2017 $000 $000 Operating Revenue 2,618,349 2,333,088 Interest Income 511 503 Total Revenue 2,618,860 2,333,591 Transport Costs (1,607,317) (1,432,556) Labour Expenses Excluding Share Based Payments (538,483) (476,256) Occupancy Expenses (73,192) (65,792) Depreciation and Amortisation Expenses (47,788) (43,492) Other Expenses (183,941) (160,942) Finance Costs (7,567) (7,728) Non-cash Share Based Payment Expense - (55) Profit Before Abnormal Items and Taxation for the Year 160,572 146,770 Income Tax on Profit Before Abnormal Items (48,353) (43,606) Net Profit Before Abnormal Items for the Year 112,219 103,164 Abnormal Items 4 (7,224) (2,448) Income Tax on Abnormal Items 4 2,898 807 Abnormal Items After Taxation 4 (4,326) (1,641) Profit Before Taxation for the Year 153,348 144,322 Income Tax Expense (45,455) (42,799) Net Profit for the Year 107,893 101,523 Earnings per share for profit attributable to the ordinary equity holders of the company are: Cents Cents Basic Earnings Per Share: Total Operations 107.14 101.10 Diluted Earnings Per Share: Total Operations 107.14 100.97 Statement of Comprehensive Income for the Year Ended 31 March 2018 Net Profit for the Year 107,893 101,523 Other Comprehensive Income Other comprehensive income to be reclassified to profit or loss in subsequent periods: Exchange Differences on Translation of Foreign Operations (1,988) (5,260) Income Tax effect 3,371 (2,155)	2018 2017 $000 $000 2,618,349 2,333,088 511 503
	2,618,860 2,333,591 (1,607,317) (1,432,556) (538,483) (476,256) (73,192) (65,792) (47,788) (43,492) (183,941) (160,942) (7,567) (7,728) - (55)
	160,572 146,770 (48,353) (43,606)
	112,219 103,164 (7,224) (2,448) 2,898 807
	(4,326) (1,641) 153,348 144,322 (45,455) (42,799)
Net Other comprehensive income to be reclassified to profit (loss) in subsequent periods	1,383 (7,415)
Other comprehensive income not to be reclassified to profit or loss in subsequent periods: Revaluation of Land including Foreign Exchange Movements Income Tax effect	638 (789) - -
Net Other comprehensive income not to be reclassified to profit (loss) in subsequent periods	638 (789)
Other comprehensive income not to be reclassified to profit or loss in subsequent periods: Defined Benefit Pension Provision Income Tax effect	325 (635) (137) 215
Net Other comprehensive income not to be reclassified to profit (loss) in subsequent periods	188 (420)
Other Comprehensive Income for the Year, Net of Tax Total Comprehensive Income for the Year, Net of Tax	2,209 (8,624) 110,102 92,899

Balance Sheet as at 31 March 2018

Note Current Assets Bank Trade Debtors Income Tax Receivable Properties Held for Sale Other Receivables Non-current Assets Property Plant & Equipment Software Goodwill Brand Names Other Intangible Assets Deferred Tax Asset TOTAL ASSETS Current Liabilities	2018 2017 $000 $000 80,521 75,312 361,737 314,888 270 1,829 7,852 - 60,811 48,008
	511,191 440,037 483,488 484,244 98,822 86,462 49,374 43,086 207,919 200,721 7,863 10,546 9,164 10,814 8,581 8,855
	865,211 844,728
	1,376,402 1,284,765
Bank	36 947
Trade Creditors & Accruals Employee Entitlements Provision for Taxation Finance Lease Liability Non-current Liabilities Bank Term Loan Employee Entitlements Deferred Tax Liability Finance Lease Liability Shareholders' Equity Share Capital Retained Earnings Revaluation Reserve Foreign Currency Translation Reserve Defined Benefit Pension Reserve TOTAL EQUITY TOTAL LIABILITIES AND EQUITY	295,000 261,206 53,373 47,907 12,323 14,121 2,077 1,801
	362,809 325,982 270,753 283,029 3,634 3,800 22,296 23,879 4,507 2,473
	301,190 313,181 85,821 85,821 586,211 521,619 51,254 50,616 (10,651) (12,034) (232) (420)
	712,403 645,602
	1,376,402 1,284,765

The accompanying notes form an integral part of these financial statements.

Statement of Changes in Equity for the Year Ended 31 March 2018

2018				Foreign	Defined
			Asset	Currency	Benefit
$000	Ordinary		Revaluation	Translation	Pension	Retained
	Shares		Reserve	Reserve	Reserve	Earnings	Total
Balance at 1 April 2017	85,821		50,616	(12,034)	(420)	521,619	645,602
Profit for the Year		-	-	-	-	107,893	107,893
Other Comprehensive Income		-	638	1,383	188	-	2,209
Total Comprehensive		-	638	1,383	188	107,893	110,102
Income for the Year
Transactions with Owners in Their Capacity as Owners:
Supplementary Dividends		-	-	-	-	(1,497)	(1,497)
Dividends Paid		-	-	-	-	(43,301)	(43,301)
Foreign Investor Tax Credit		-	-	-	-	1,497	1,497
Balance at 31 March 2018	85,821		51,254	(10,651)	(232)	586,211	712,403
2017				Foreign	Defined
			Asset	Currency	Benefit
$000	Ordinary		Revaluation	Translation	Pension	Retained
	Shares		Reserve	Reserve	Reserve	Earnings	Total
Balance at 1 April 2016	73,912		52,303	(4,619)	-	459,477	581,073
Profit for the Year		-	-	-	-	101,523	101,523
Transfer of Revaluation Reserve for Land Sold		-	(898)	-	-	898	-
Other Comprehensive Income		-	(789)	(7,415)	(420)	-	(8,624)
Total Comprehensive		-	(1,687)	(7,415)	(420)	102,421	92,899
Income for the Year
Transactions with Owners in Their Capacity as Owners:
Shares Issued	11,854		-	-	-	-	11,854
Executive Share Scheme Costs		55	-	-	-	-	55
Supplementary Dividends		-	-	-	-	(1,212)	(1,212)
Dividends Paid		-	-	-	-	(40,279)	(40,279)
Foreign Investor Tax Credit		-	-	-	-	1,212	1,212
Balance at 31 March 2017	85,821		50,616	(12,034)	(420)	521,619	645,602

Cash Flow Statement for the Year Ended 31 March 2018

Note Cash Flows From Operating Activities Receipts from Customers Interest Received Payments to Suppliers and Team Members Interest Paid Income Taxes Paid NET CASH FLOWS FROM OPERATING ACTIVITIES Cash Flows From Investing Activities Proceeds from Sale of Property, Plant & Equipment Proceeds from Sale of Software Repayments by Team Members Purchase of Property, Plant & Equipment Purchase of Software Advances to Team Members Establishment of Franchises and Acquisition of Subsidiaries NET CASH FLOWS FROM INVESTING ACTIVITIES Cash Flows From Financing Activities Proceeds of Long Term Loans	2018 2017 $000 $000 2,580,429 2,307,424 511 503 (2,388,030) (2,132,227) (7,567) (7,729) (45,107) (36,745)
	140,236 131,226 4,507 5,822 46 38 213 4 (51,509) (47,696) (17,726) (19,603) (10) (212) (250) -
	(64,729) (61,647) 1,974 -
Proceeds of Share Issues	- 11,854
Dividend Paid to Shareholders Repayment of Loans NET CASH FLOWS FROM FINANCING ACTIVITIES NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS Net Foreign Exchange Differences CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD CASH AND CASH EQUIVALENTS AT END OF PERIOD Comprised Bank and Short Term Deposits Bank Overdraft	(43,300) (40,279) (28,441) (57,131)
	(69,767) (85,556) 5,740 (15,977) 380 (2,394) 74,365 92,736
	80,485 74,365
	80,521 75,312 (36) (947)
	80,485 74,365

The accompanying notes form an integral part of these financial statements.

1 Corporate Information

The preliminary full year report announcement of Mainfreight Limited ("the parent") and its subsidiaries ("the Group") for the year ended 31 March 2018 were authorised for issue in accordance with a resolution of the Directors.

Mainfreight Limited is a company limited by shares incorporated in New Zealand whose shares are publicly traded on the NZX Main Board (New Zealand Stock Exchange).

2 Accounting Policies

Accounting policies remain consistent with the 2017 prior year financial statements.

3 Required NZX Disclosures

Movements in Ordinary Shares on Issue

Movements in Ordinary Shares on Issue
	2018	2017
	Shares	Shares
Closing Balance	100,698,548	100,698,548
Average Balance During Year	100,698,548	100,417,298

In June and July 2016 a total of 1,125,000 redeemable ordinary shares were fully paid by the participants at an average price of $10.56 per share.

At 31 March 2017 and 31 March 2018 there were no partly paid shares outstanding.

Net Tangible Assets

	2018 2017 $000 $000
Net Tangible Assets	487,457 423,521
Net Tangible Assets per Security (cps) Net Tangible Assets includes Software and Deferred Tax Assets and Liabilities. Dividends Paid and Proposed Recognised Amounts Declared and Paid During the Year to Parent Shareholders Final Fully Imputed Dividend for 2017: 24.0 cents (2016: 23.0 cents) Interim Fully Imputed Dividend for 2018: 19.0 cents (2017: 17.0 cents) Unrecognised Amounts Final Fully Imputed Dividend for 2018: 26.0 cents (2017: 24.0 cents)	484.08 421.76 2018 2017 $000 $000 24,168 23,160 19,133 17,119 43,301 40,279 26,182 24,168

After the balance date, the above unrecognised dividends were approved by directors' resolution dated 28 May 2018. These amounts have not been recognised as a liability in 2018 but will be brought to account in 2019.

4

Abnormal Items

During the year the Group had $7,224,000 of abnormal expenses (2017 $2,698,000). The related after tax expense was $5,048,000 (2017 $1,891,000).

In the year the Group had no abnormal gains (2017 $250,000). The related after tax gain was $722,000 (2017 $250,000).

These items comprised of:

	2018 Year		Pre-Tax Tax $000 $000	After Tax $000
	Brand Name Impairment ***		(3,763) 941	(2,822)
	Redundancies Tax Rate Changes 2017 Year Redundancies Earnout Accrual Written Back		(3,461) 1,235 - 722	(2,226) 722 (4,326) After Tax $000 (1,891) 250 (1,641)
			(7,224) 2,898
			Pre-Tax Tax $000 $000 (2,698) 807 250 -
			(2,448) 807

• *** With the process of rebranding our European operations to Mainfreight underway it was decided to impair the purchased brand of Wim Bosman by one third in the 2018 financial year. This impairment entry has no cash impact.

5 Annual Report and Annual Meeting

The annual report is expected to be available on 26 June 2018. The Annual Meeting is to be held at the Barrel Hall, Villa Maria Estate, 118 Montgomerie Road, Mangere, Auckland at 4.00pm on Thursday 26 July 2018.

6

Segmental Reporting

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses whose operating results are regularly reviewed by the entity’s chief operating decision maker and for which discrete financial information is available.

The Group operates in the domestic supply chain (i.e. moving and storing freight within countries) and air and ocean freight industries (i.e. moving freight between countries).

New Zealand, Australia, The Americas and Europe are each reported to management as one segment as the businesses there perform both domestic and air and ocean services.

The accounting policies of the operating segments are the same as those described in the notes in note 2 with the exception of deferred tax and the fair value of derivative financial instruments which are not reported on a monthly basis. The segmental results from operations are disclosed below.

Geographical Segments

The following table represents revenue, margin and certain asset information regarding geographical segments for the years ended 31 March 2018 and 31 March 2017.

New Australia The Asia Europe Zealand Americas Operating Revenue - Sales to customers 666,156 675,217 610,913 117,304 549,270 outside the group - Inter-segment sales 294 18,631 40,811 64,084 30,228 Total Revenue 666,450 693,848 651,724 181,388 579,498 EBITDA 98,633 54,040 26,906 6,861 28,976 Depreciation & Amortisation 21,174 7,173 5,786 644 13,011 Capital Expenditure 33,463 7,860 6,495 240 21,173 Trade Receivables 85,475 92,321 94,181 15,212 93,488 Non-current Assets 372,010 174,896 83,823 11,094 223,388 Total Assets 473,466 299,228 200,561 50,897 371,190 Total Liabilities 201,965 145,993 114,016 21,996 198,969 New Australia The Asia Europe Zealand Americas Operating Revenue - Sales to customers 609,238 568,056 615,280 89,328 451,689 outside the group - Inter-segment sales 999 17,379 13,785 73,809 20,182 Total Revenue 610,237 585,435 629,065 163,137 471,871 EBITDA 91,021 44,930 26,205 8,806 26,580 Depreciation & Amortisation 18,943 6,843 5,341 639 11,726 Capital Expenditure 38,627 6,222 6,875 577 14,998 Trade Receivables 85,043 80,743 78,418 14,016 73,746 Non-current Assets 363,308 178,398 86,536 18,261 198,225 Total Assets 455,008 289,716 186,934 51,637 318,548 Total Liabilities 208,496 143,285 104,208 23,853 176,399 Reconciliation between Segment EBITDA and the Income Statement Profit from Operations Before Abnormal Items and Taxation for the Year Interest Income Derivative Fair Value Movement Non-cash Share Based Payment Expense Finance Costs Depreciation & Amortisation EBITDA	New Australia The Asia Europe Zealand Americas 666,156 675,217 610,913 117,304 549,270 294 18,631 40,811 64,084 30,228	Inter- Segment - (154,048) (154,048) - - - (18,940) - (18,940) (18,940) Inter- Segment - (126,154) (126,154) - - - (17,078) - (17,078) (17,078) 2018 $000 160,572 (511) - - 7,567 47,788 215,416	2018 $000 2,618,860 -
	666,450 693,848 651,724 181,388 579,498		2,618,860
	98,633 54,040 26,906 6,861 28,976 21,174 7,173 5,786 644 13,011		215,416 47,788
	33,463 7,860 6,495 240 21,173 85,475 92,321 94,181 15,212 93,488 372,010 174,896 83,823 11,094 223,388 473,466 299,228 200,561 50,897 371,190 201,965 145,993 114,016 21,996 198,969		69,231 361,737 865,211 1,376,402 663,999
	New Australia The Asia Europe Zealand Americas 609,238 568,056 615,280 89,328 451,689 999 17,379 13,785 73,809 20,182		2017 $000 2,333,591 -
	610,237 585,435 629,065 163,137 471,871		2,333,591
	91,021 44,930 26,205 8,806 26,580 18,943 6,843 5,341 639 11,726		197,542 43,492
	38,627 6,222 6,875 577 14,998 85,043 80,743 78,418 14,016 73,746 363,308 178,398 86,536 18,261 198,225 455,008 289,716 186,934 51,637 318,548 208,496 143,285 104,208 23,853 176,399		67,299 314,888 844,728 1,284,765 639,163
			2017 $000 146,770 (504) - 55 7,729 43,492
			197,542

EBITDA is defined as earnings before net interest expense, tax, depreciation, amortisation, abnormal items, royalties, share based payment expense, minority interests and associates.

There are no customers in any segment that comprise more than 10% of that segment's revenue.

Bank term loan is allocated based on segment net assets excluding bank term loan.

The geographical segments are determined based on the location of the Group's assets.

APPENDIX 7 – NZSX Listing Rules

EMAIL: announce@nzx.com

Notice of event affecting securities

NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10. For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required.

Number of pages including this one (Please provide any other relevant details on additional pages)

Fu of	ll name Issuer	Mainfreight Limited	Mainfreight Limited	Mainfreight Limited	Mainfreight Limited	Mainfreight Limited
N m	ame of officer ake this notice	authoris	ed to							Authority for e.g. Directors			event, ' resolution
							Tim Williams									Directors Resolution
C nu	ontact phone mber		(09)	259 5500					Contact fax number	(09) 270 7402					e			28 5		2018
N Ti	ature of eve ck as appropr	nt iate		Bonus Issue Rights Issue			If ticked, state whether: Capital Ca	ll	Taxable Dividend	/ If tic	Non Taxable ked, state	Conv F	ersion ull				In	Rights Issue terest Renouncable
				non-renouncable			change		X	whet	her: In	terim Y	ear X		S	pec	ial
E D cl	XISTING se escription of th ass of securiti	curitie e es	s affec	ted by this					If more than on	e secu	rity is affecte	d by the event, u	se a separate fo ISIN		rm	.
				Ordinary Shares														NZMFTE0001S9
																		If unknown, contact NZX
D	etails of se	curitie	s issu	ed pursuant t	o t	his event			If	more	than one clas	s of security is to	be issued, use ISIN		a s	ep	ara	te form for each class.
D cl N be	escription of th ass of securiti umber of Secu issued follow	e es rities to ing eve	nt
												Minimum Entitlement						If unknown, contact NZX Ratio, e.g 1 for 2 for
C P St St	onversion, Ma ayable or Exer rike price per rike Price ava	turity, C cise Da security ilable.	all te for any	issue in lieu or	dat					Tick pari	if passu	Treatment of Fr pr OR ex of ra	actions ovide an planation the nking
						e Enter N/A if not applicable
M	onies Asso	ciated	with E	vent In dollars	an	Dividen d cents		d pay	able, Call payabl	e, Ex S P	ercise price, C ource of ayment	onversion price,	Redemption pri		ce,	A	ppli	cation money.
																	Revenue
	Amount p (does not	er secur include	ity any exc	luded income)	$0.260
	Excluded i (only appli	ncome cable to	per sec listed	urity PIEs)
	Currency Total mon	ies			NZ $						Suppleme di de NZSX List	ntary vidend tails - ing Rule 7.12.7	Amount per in dollars an Date Pay		se d c ab	cur en le	ity ts		$0.045882
					$26,181,622														20 July, 2018
T In is	axation the case of a sue state strik	taxable e price	bonus								Amo	untper Security i	n Dollars and ce		nt	s to	six deci		malplaces
							$		Resident Withholding Tax		$0.018056			Imp (Giv	uta e d	tio et	n Credits ails)		$0.101111
									Foreign Withholding Tax				FW (Giv		P C e d	re et	dits ails)
											$
Timing Record Date 5 For calculation		pm of entitle	(Refer ments	Appendix 8 in th -	e NZ		SX Listing Rules)				Application Date Also, Call Payable, Di Interest Payable, Exe Conversion Date. In t of applications this m last business day of t		vidend / rcise Date, he case ust be the he week.
							13 July, 2018								20		July, 2018

Notice Date

Entitlement letters, call notices, conversion notices mailed

OFFICE USE ONLY

Ex Date: Commence Quoting Rights: Cease Quoting Rights 5pm: Commence Quoting New Securities: Cease Quoting Old Security 5pm:

Allotment Date

For the issue of new securities. Must be within 5 business days of application closing date.

Security Code:

Security Code:

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