Mainfreight Limited — Interim / Quarterly Report 2017

Nov 14, 2017

MAINFREIGHT LIMITED HALF YEAR RESULT TO SEPTEMBER 2017

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Result Summary
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Revenue up 7.3% to $1.23 billion REVENUE Foreign exchange effect negligible An increase of $83.15 million

EBITDA at $88.77 million, up 2.8% EBITDA An increase of $2.42 million Net surplus after tax before abnormal items up 1.1% to $42.77 million NET SURPLUS

Trading through October, and into November reflects further financial OUTLOOK improvements and we expect this to continue with strong pre‐Christmas volumes across the global network

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Dividend
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Interim dividend of 19.0 cents per share DIVIDEND 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

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Capital Management
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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

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First Half Review
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• 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

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Half Year Analysis: Revenue
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$000	THIS YEAR	LAST YEAR	VARIANCE
New Zealand: NZ$ 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:	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%	

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New Zealand
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Revenue: $317m 10.2% EBITDA: $39m 3.5%

• 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

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New Zealand
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 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

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Australia
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Revenue: $293m 13.7% EBITDA: $21m 29.4%

• 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

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Australia
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• 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

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The Americas
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Revenue: $203m (10.2)% EBITDA: $8m (14.0)%

• 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]

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The Americas
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• 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

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Asia
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Revenue: $38m 19.6% EBITDA: $2m (52.7)%

• 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

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Europe
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Revenue: €163m 19.1% EBITDA: €8m 9.8%

• 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

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Europe
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• 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

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Group Outlook
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• 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

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Financial Calendar F17
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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

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