Announcement
HALFYR: MFT: Mainfreight Half Year Financial Results 30 September 2019
08:32am
MFT
13/11/2019 08:32
HALFYR
PRICE SENSITIVE
REL: 0832 HRS Mainfreight Limited
HALFYR: MFT: Mainfreight Half Year Financial Results 30 September 2019
MAINFREIGHT LIMITED
Financial result for the six months ended 30 September 2019 (Unaudited)
Commentary
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 $2.203 billion.
This is a satisfactory result, reflecting our global presence. Continuing
profit improvement from Europe and the Americas has assisted overall
performance, as we continue to improve margins and services in both regions.
Our New Zealand and Australian operations have both had to contend with
slowing economic conditions and increased overhead costs. In Asia, our
freight revenues decreased as a result of the trade tariffs on the Asia/USA
trade lanes and the disruptions being experienced in Hong Kong, while our
overhead costs increased with our network expansion to Japan and Malaysia.
Divisional Performance (EBITDA shown pre-IFRS 16; figures in local
currencies)
New Zealand (NZ$)
Revenue $362.57 million Up $19.45 million or 5.7%
EBITDA $46.78 million Up $1.35 million or 3.0%
Whilst overall results remain strong in New Zealand when compared to the
prior year, we have experienced a slowing in economic conditions particularly
affecting domestic Transport growth. Nevertheless we continue to increase
market share across all three products (Transport, Warehousing and Air &
Ocean).
In our Transport business, the lower levels of sales growth and higher
overhead costs (increased salaries for those at the lower end of our pay
range), have kept profit growth below our expectations.
Our Warehousing business continues to attract new customers, with
satisfactory revenue and profit growth in the half year.
Air & Ocean operations achieved revenue and profit growth across both imports
and exports, and likewise in both sea and air freight modes.
Strong pre-Christmas freight volumes are evident across the business heading
into the second half, and our expectations are for improving results through
to year end.
Australia (AU$)
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
2020.
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.
Dividend
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.
Outlook
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
accordingly.
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 don@mainfreight.com.
End CA:00344208 For:MFT Type:HALFYR Time:2019-11-13 08:32:02
Click here
to view related attachments.
