HALFYR: MFT: Mainfreight Half Year Financial Results 30 September 2019 08:32a.m. 
13/11/2019 08:32  
REL: 0832 HRS Mainfreight Limited  
HALFYR: MFT: Mainfreight Half Year Financial Results 30 September 2019  
Financial result for the six months ended 30 September 2019 (Unaudited)  
Mainfreight is pleased to announce our half year financial results to 30  
September 2019; a satisfactory improvement on the prior period.  
These financial results are our first presented under the new IFRS 16 Leases  
standard, which took effect for our accounting periods commencing from 1  
April 2019. For the purpose of providing clarity when comparing current  
financial performance to the first six months of the prior year, we have  
provided figures for the current period with and without applying IFRS 16, in  
our financial statements and in this commentary.  
Without IFRS 16 ("apples with apples")  
Revenue $1.500 billion Up $69.47 million or 4.9%  
EBITDA* $119.11 million Up $10.77 million or 9.9%  
Net profit $62.21 million Up $6.51 million or 11.7%  
Adjusted for foreign exchange impact, revenue is up 4.3%, EBITDA up 9.7%, and  
net profit (before abnormals) is up 10.8%. There are no abnormal costs  
included in this half year's result.  
Under IFRS 16 ("apples with oranges")  
Revenue $1.500 billion Up $69.47 million or 4.9%  
EBITDA $176.46 million Up $68.11 million or 62.9%  
Net profit $59.13 million Up $3.43 million or 6.2%  
IFRS 16 introduces a single lessee accounting model, requiring Mainfreight as  
a lessee to recognise assets and liabilities for all leases with a term of  
more than 12 months. As a lessee, we are required to recognise a  
right-of-use asset representing our right to use the underlying leased asset,  
and a lease liability representing our obligation to make lease payments.  
The impact on profit before tax for the half year is a decrease of $4.32  
million (net profit decrease of $3.08 million), but an increase in EBITDA of  
$57.34 million. Total assets increased by $587.59 million to $2.203 billion.  
This is a satisfactory result, reflecting our global presence. Continuing  
profit improvement from Europe and the Americas has assisted overall  
performance, as we continue to improve margins and services in both regions.  
Our New Zealand and Australian operations have both had to contend with  
slowing economic conditions and increased overhead costs. In Asia, our  
freight revenues decreased as a result of the trade tariffs on the Asia/USA  
trade lanes and the disruptions being experienced in Hong Kong, while our  
overhead costs increased with our network expansion to Japan and Malaysia.  
Divisional Performance (EBITDA shown pre-IFRS 16; figures in local  
New Zealand (NZ$)  
Revenue $362.57 million Up $19.45 million or 5.7%  
EBITDA $46.78 million Up $1.35 million or 3.0%  
Whilst overall results remain strong in New Zealand when compared to the  
prior year, we have experienced a slowing in economic conditions particularly  
affecting domestic Transport growth. Nevertheless we continue to increase  
market share across all three products (Transport, Warehousing and Air &  
In our Transport business, the lower levels of sales growth and higher  
overhead costs (increased salaries for those at the lower end of our pay  
range), have kept profit growth below our expectations.  
Our Warehousing business continues to attract new customers, with  
satisfactory revenue and profit growth in the half year.  
Air & Ocean operations achieved revenue and profit growth across both imports  
and exports, and likewise in both sea and air freight modes.  
Strong pre-Christmas freight volumes are evident across the business heading  
into the second half, and our expectations are for improving results through  
to year end.  
Australia (AU$)  
Revenue AU$360.42 million Up AU$18.72 million or 5.5%  
EBITDA AU$22.62 million Up AU$0.11 million or 0.5%  
A disappointing profit result from our Australian business, primarily in our  
domestic Transport operations. Our Warehousing and Air & Ocean businesses  
both achieved satisfactory revenue and profit growth.  
In our Transport business, revenue growth stalled at 2% as slowing economic  
conditions saw reduced tonnage from our established customers. Whilst new  
business continues to be won, it has not offset this down-trading during the  
first half. Increases in our overhead cost structure, primarily labour  
costs, saw EBITDA decline on the prior period.  
In our Warehousing business, new customer gains lifted warehouse utilisation  
with satisfactory profit improvements. Construction has commenced on our  
second warehouse site in Epping, Melbourne.  
Our Air & Ocean operations achieved better gross margins and saw export  
volumes in both sea and air freight improve. Continuing momentum in the  
growth of perishable air freight assisted.  
While it has been a disappointing first half for our Australian business,  
pre-Christmas volumes have seen weekly results further improve into the  
second half. We celebrated our 30th year in Australia earlier this month.  
Asia (US$)  
Revenue US$35.99 million Down US$(4.34) million or (10.8)%  
EBITDA US$2.79 million Down US$(0.38) million or (11.9)%  
The Asian operations have seen freight volumes decrease across our major  
trading lane, China to USA, with import tariffs having a greater effect than  
in the same period last year (tariffs took effect early July 2018), but also  
as a result of the Hong Kong riots particularly affecting confidence for air  
freight services.  
In response, our team has focused on developing a greater diversity of  
markets, to offset USA trade. This includes more intra-Asia trade and, of  
course, increasing market share to and from our European locations.  
Our entry into the Japanese and Malaysian markets has been satisfactory to  
date. We expect to open our first branch in South Korea before 31 March  
Europe (Euro EUR)  
Revenue EUEUR193.77 million Up EUEUR11.44 million or 6.3%  
EBITDA EUEUR13.90 million Up EUEUR3.49 million or 33.6%  
A healthier result from our European operations, as we continue to gain  
market share and improve business margins.  
Whilst our Transport business has seen some down-trading from established  
customers, market share gains have offset this, and much-improved  
efficiencies have assisted gross margin increases.  
Our Warehousing operations have absorbed the costs of two new warehouses in  
The Netherlands (Zaltbommel and Born), improving revenue growth and  
profitability. Significant effort is being applied to reducing casual labour  
costs and increasing dedicated full-time team members, providing stability  
and improved quality and efficiencies.  
The Air & Ocean division has seen a decrease in air freight volume, similar  
to most of our international divisions, but has seen gross margins improve as  
our focus on developing LCL freight consolidations provides better returns.  
It is our intention to expand our European Air & Ocean network into Spain,  
with our Barcelona branch expected to open in January 2020.  
We have an additional 30 team members who have taken on sales  
responsibilities in these past six months and expect to see increased revenue  
contributions accordingly.  
Post this half year result, revenue and profit performance from our Europe  
business has continued at similar levels, and our expectations are for  
ongoing improvement.  
The Americas (US$)  
Revenue US$244.04 million Up US$6.89 million or 2.9%  
EBITDA US$13.44 million Up US$2.45 million or 22.3%  
An improved performance from our American businesses; sales revenue growth  
occurred across all three Mainfreight divisions, with just CaroTrans (our  
NVOCC wholesale sea freight business) seeing a reduction in export-related  
freight volume.  
In our Transport operations, both sales revenues and profitability improved.  
Better freight management has seen gross margins increase with better  
utilisation of dedicated Mainfreight road line-haul.  
While Air & Ocean has seen increases in margin and revenue, this has been  
dampened by reduced volumes as imports from China declined under tariff  
restrictions, and with a general downturn in world air freight volumes.  
Our Warehousing operations continue to see good demand for high quality  
warehousing services and facilities, necessitating the opening of two new  
warehouses in California, and better utilisation of our sites in the other  
four States where we are located.  
In CaroTrans, whilst revenues declined on the back of reduced LCL and FCL  
freight shipments, gross margins improved resulting in increased EBITDA in  
the half year.  
While these results are pleasing, our freight volumes within the USA still  
require considerable growth, particularly in customer verticals that  
contribute better every day volumes.  
Group Operating Cash Flows  
Operating cash flows were $73.96 million, up from $71.00 million in the prior  
year, reflecting increased profitability and acceptable cash collection.  
Net debt is $187.73 million, up from $130.48 million at 31 March 2019, an  
increase of $57.25 million.  
Gearing ratios increased from 13.5% at 31 March 2019 to 17.5%  
During the half year, net capital expenditure totalled $90.53 million, with  
expenditure for land and buildings accounting for $72.44 million, plant and  
equipment of $10.98 million, and information technology of $7.11 million.  
Our expectations are for capital expenditure for the full financial year  
ending 31 March 2020 to be in the range of $170 million, with a further $190  
million estimated for capital expenditure in the 2021 financial year.  
Land and building projects across the New Zealand and Australian networks are  
progressing, albeit more slowly than our original expectations. Construction  
schedules in Tauranga and Melbourne are on target, however other large  
projects in both countries are taking longer than anticipated.  
The Directors have approved an interim dividend of 25.0 cents per share fully  
imputed at the 28% company tax rate, with the books closing on 6 December  
2019; payment will be made on 13 December 2019. This is a 13.6% increase on  
the prior year's interim dividend.  
A satisfactory half year result as a consequence of our global presence  
providing growth and increased profitability across various markets, all with  
differing economic climates and market share opportunities.  
Our Asian business is not likely to finish the current year better than the  
year prior, as we both expand our network in the region and deal with market  
volatility brought about by national unrest (Hong Kong), US tariff disputes,  
and a slowing China economy.  
It is our expectation that we will see increasing profitability and growth in  
our European and American markets. Our traditional markets of New Zealand  
and Australia, whilst flat by our standards in these first six months, are  
expected to improve further through to year end, culminating in improved  
returns over the year prior.  
While our core Australasian region is experiencing slowing economic  
conditions, other parts of the network continue to find growth and increased  
profitability. This period to 30 September 2019 has demonstrated the benefits  
of our global network strategy, and we expect an improved full year result  
Mainfreight will release its full year results for the 2020 financial year to  
the market on 27 May 2020.  
For further information, please contact Don Braid, Group Managing Director,  
telephone +64 9 259 5503, +64 274 961 637 or email  
End CA:00344208 For:MFT Type:HALFYR Time:2019-11-13 08:32:02  

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