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Mainfreight Limited Interim / Quarterly Report 2020

Nov 12, 2019

66230_rns_2019-11-13_1469f15d-e7b8-4aac-ae58-0c12279dd06b.pdf

Interim / Quarterly Report

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MAINFREIGHT LIMITED HALF YEAR RESULT TO 30 SEPTEMBER 2019

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Result Summary

Without IFRS 16: “apples with apples” Revenue $1.500 billion up 4.9% (up 4.4% with FX) EBITDA $119.11 million up 9.9% (up 9.7% with FX) Net profit $62.21 million up 11.7% (up 11.2% with FX) Under IFRS 16: “apples with oranges”* Revenue $1.500 billion up 4.9% EBITDA $176.46 million up 62.9% Net profit $59.13 million up 6.2% Under IFRS 16, total assets increase by $587.59 million to $2.203 billion

  • EBITDA: Earnings before net interest expense, tax, depreciation, amortisation, abnormal items, royalties, share based payment expense, minority interest and associates

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Page 2

First Half 2020 Review

  • Satisfactory result reflecting improvements in Europe and Americas

  • New Zealand and Australia contending with slowing economies and higher overhead costs

  • Asia result disappoints, impacted by USA trade tariffs, Hong Kong disruptions and network expansion costs

  • Trading into second half remains ahead of prior year

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Page 3

Dividend / Net Debt

DIVIDEND

Interim dividend of 25.0 cents per share Books close 6 December 2019; payment on 13 December 2019 Increase of 3.0 cents or 13.6% over last year’s interim dividend

NET DEBT

Net debt increase of $57.25 million (since 31/3/19) to $187.73 million Gearing ratio at 17.5%, previously 13.5% (at 31/3/19)

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Page 4

Ca ital Mana ement p g

NZ$ MILLION THIS YEAR LAST YEAR
Operating cash flow
73.96
71.00

Capital expenditure totalled $90.53 million for the period, including

Estimated F20 full year capital expenditure
$170 million

Estimated F21 full year capital expenditure
$190 million

Land & Buildings
$72.44 million

Plant & Equipment
$10.98 million

Information Technology
$ 7.11 million

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Page 5

Half Year Analysis: Revenue

$000 THIS YEAR LAST YEAR VARIANCE
New Zealand: NZ$ 362,571
343,120
5.7%

Australia: AU$ 360,423
341,703
5.5%

USA: US$ 244,039
237,154
2.9%

Asia: US$ 35,991
40,333
(10.8)%

Europe: EU€
193,766
182,329
6.3%
Total Group: NZ$ 1,500,466 1,430,994 4.9%
(excl FX) 4.4%

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Page 6

Half Year Analysis: EBITDA

$000
UNDER IFRS16
THIS YEAR
PRE IFRS16
THIS YEAR
PRE IFRS16
LAST YEAR
PRE IFRS16
VARIANCE
New Zealand: NZ$ 58,747
46,778
45,426
3.0%

Australia: AU$ 40,940
22,624
22,518
0.5%

USA: US$ 18,803
13,439
10,990
22.3%

Asia: US$ 3,543
2,794
3,172
(11.9%)

Europe: EU€
23,702
13,898
10,405
33.6%

Total Group: NZ$
176,457
119,113
108,342
9.9%

(excl FX) 9.7%

 Of the NZ$10.77 million increase in EBITDA, NZ$9.42 million was generated “offshore”		 UNDER IFRS16
THIS YEAR		 PRE IFRS16
THIS YEAR		 PRE IFRS16
LAST YEAR		 PRE IFRS16
VARIANCE
58,747
40,940
18,803
3,543
23,702		 46,778
45,426
3.0%

22,624
22,518
0.5%

13,439
10,990
22.3%

2,794
3,172
(11.9%)

13,898
10,405
33.6%
176,457 119,113 108,342 9.9%

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Page 7

Product Performance

NZ$000 THIS YEAR LAST YEAR VARIANCE
VAR ex FX
Group
Revenue
1,500,466
1,430,994
4.9%

4.4%

EBITDA#
119,113
108,342
9.9%

9.7%

Transport
Revenue
759,107
720,252
5.4%

5.5%

EBITDA#
70,859
67,733
4.6%

4.8%

Warehousing
Revenue
179,591
162,062
10.8%

11.4%

EBITDA#
19,831
15,261
29.9%

30.8%

Air & Ocean
Revenue
561,768
548,680
2.4%

1.0%

EBITDA#
28,423
25,348
12.1%

10.0%

# EBITDA pre-IFRS 16

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Page 8

New Zealand

Revenue: $363m 5.7% EBITDA: $47m 3.0%

  • Slowing economic conditions

  • Growth across all 3 divisions; better EBITDA improvement from Warehousing and Air & Ocean

  • Transport

  • Established customer volumes lower than the year prior

  • Chemcourier inter‐Island volumes down; more product warehoused in Christchurch

  • Continue to take market share

  • Rate review 1 August

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Page 9

New Zealand

  • Air & Ocean

  • Revenue growth improvement: export/import, sea/air

  • Perishable market share gains

  • Warehousing

  • Improving utilization across new sites assisting revenue and profitability

  • Now in 16 sites, up 3 – with additional sites planned

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Page 10

Australia

Revenue: AU$360m 5.5% EBITDA: AU$23m 0.5%

  • Revenue growth in all 3 divisions; poorest in Transport

  • EBITDA improvement in Air & Ocean and Warehousing; Transport contribution down

  • Celebrating 30 years in Australia in 2019

  • Transport

  • Increased labour costs: team numbers and salary increases (Melbourne branches worst affected)

  • Gross margins improving – rate review Sep‐19 assisting

  • Market share gains not enough to offset down‐trading of current customer base

  • South Dandenong (Melbourne) development in planning phase

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Page 11

Australia

 Air & Ocean

  • Improved performance in Perishable sector assisting

  • Revenue growth in export sector

  • Import sea freight volumes less than same period last year

  • Gross margins improving

 Warehousing

  • Revenue and EBITDA improvement

  • Utilisation levels up in most sites

  • New Sydney site (Kookaburra) now at capacity

  • Construction underway for second site at Epping (Melbourne)

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Page 12

The Americas

Revenue: US$244m 2.9% EBITDA: US$13m 22.3%

  • Improvement in revenue across all 3 Mainfreight divisions; CaroTrans’ revenue declined

  • EBITDA improvement in all

  • Transport

  • Improving margins with better fixed line‐haul utilization

  • Continuing focus on LCL domestic freight growth – particularly “every day” freight

  • Stronger sales focus on FMCG freight verticals; exiting transactional/project business

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Page 13

The Americas

  • Air & Ocean

  • Revenue growth subdued as air freight declines; prior year included pre‐tariff volumes

  • Tariffs on China trade having an effect

  • Air freight initiatives to boost growth

  • Warehousing

  • Utilisation improved with new customer gains

    • LA, Newark and Dallas at capacity

  • New sites opened: Seattle Jul‐19; Californian Inland Empire Oct‐19

  • Demand increasing for our improved sites and services

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Page 14

The Americas

  • CaroTrans

  • EBITDA contribution much improved

    • Gross margin improvements

    • Container utilization

    • Repositioning cost management

  • Disappointing revenue levels

    • 2 lost customers (FCL and LCL)

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Page 15

Asia

Revenue: US$36m (10.8)% EBITDA: US$3m (11.9)%

  • USA import tariffs – volume moved has reduced by 30%

  • Prior year included large pre‐tariff airfreight shipments, not available this year

  • Overhead costs up with new branches in Japan & Malaysia

  • Increased sales team numbers

  • Hong Kong riots disrupting outbound air freight

  • Strong emphasis on Europe trade lane growth

  • South Korea opportunity early 2020

  • Development of Southeast Asia capability to meet shifting supply chain demand from China

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Page 16

Europe

Revenue: €194m 6.3% EBITDA: €14m 33.6%

  • Strong revenue and EBITDA contribution from Transport and Warehousing divisions

  • Transport

  • Improving gross margins from

    • Cross‐dock efficiencies

    • Improved PUD and line‐haul truck utilization

  • Improving quality and transit schedules

  • Second NL cross‐dock opened in Tilburg, Sep‐19

  • Some downtrading by established customers offset by new customer gains

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Page 17

Europe

 Warehousing

  • Customer implementations completed in new warehouses of Born and Zaltbommel (NL)

  • Margin improvements through utilisation and labour efficiencies across network

  • Casual labour replaced with full time team members for quality and efficiency gains

 Air & Ocean

  • Decrease in air freight volume / revenue

  • Sea imports are increasing

  • Gross margin improvements assisting

  • Expect to open Barcelona (Spain) Jan‐20

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Page 18

Land & Buildin Develo ment U date g p p

NZ$ MILLION Half Year Est. Full Year
Total Land & Buildings expenditure
72.44
122.00
Of note:

Australia
South Dandenong (land purchase)
$33.7 million
Adelaide (land purchase)
$8.1 million
Epping (warehouse) land + construction
$12.6 million

New Zealand
Mt Maunganui/Mangatawa (transport facility)
$10.0 million
Smaller branch extensions: Whangarei/Levin
$4 million

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Page 19

Grou Outlook p

  • Satisfying contributions continuing from Europe and Americas

  • America’s sales growth must improve

  • Asia unlikely to beat full prior year result

  • New Zealand and Australia pre‐Christmas volumes on the increase

  • Network expansion to include South Korea and Spain

  • Expectation of ongoing improvement through to financial year end

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Page 20

Financial Calendar F20/21

DATE F20 – 12 months ended 31 March 2020 27 May 2020 Annual Meeting of Shareholders 30 July 2020 Planning for Investor Day – Mt Maunganui 14 October 2020 F21 – 6 months ended 30 September 2020 11 November 2020

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Page 21

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“Excellence is the gradual result of always striving to do better”

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Page 22

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