MFT
10/11/2015 08:30
HALFYR
PRICE SENSITIVE
REL: 0830 HRS Mainfreight Limited
HALFYR: MFT: Mainfreight Results for Six Months Ended September 2015
MAINFREIGHT LIMITED
Financial result for the six months ended 30 September 2015 (Unaudited)
Commentary
Mainfreight is pleased to report our six monthly results to 30 September
2015. In this result, total revenue (sales) increased 12.9% to $1.114
billion, a record for our half year reporting. (Excluding foreign exchange
effects the increase is 5.6%).
EBITDA improved 3.3% to $71.58 million (excluding foreign exchange effects,
down 2.1%).
Net profit (before abnormals) has declined slightly, down 1.5% to $33.14
million. This is less disappointing than it appears at first sight, as it is
largely a result of increased costs that have been incurred to assist our
growth development across the business, albeit with effects of softer trading
in the domestic Australian and United States markets.
EBITDA performance improved for our Asia and Europe operations, however
declined in Australia, New Zealand and the Americas as overhead cost
increases exceeded gross margin increases.
Trading in the month of September improved across all five regional
divisions, and weekly pre Christmas volumes have been stronger through
October and now into November.
Divisional Performance (figures in local currencies)
New Zealand (NZ$)
All New Zealand operations improved revenues and maintained gross margins,
however increased costs associated with labour and new facilities eroded
these gains.
Total revenue for the New Zealand division increased 5.9% to $270.96 million,
while EBITDA declined 3.0% to $28.99 million compared to the same period last
year.
Domestic Transport freight volumes exceeded those of the prior year, and
continue this increase as we enter the pre-Christmas peak period. However
the additional costs associated with the new Transport and Logistics
facilities in Auckland, Hamilton and Christchurch, together with an increase
in labour costs, has seen our half-year results fall behind those of the
prior year. As volumes rise, it is not expected that overhead structures and
team numbers will increase further.
New Zealand Air & Ocean lifted revenue and volumes during the period, with a
slight improvement in gross margin.
Australia (AU$)
Whilst we have been able to maintain momentum and achieve some revenue
increase, EBITDA performance for Australia has disappointed. Sales revenues
were up 5.2% to AU$248.58 million, assisted by better performance in our Air
& Ocean operations, but hindered by the lowest levels of revenue growth for
some time in our Domestic operations. EBITDA was down 14.4% to AU$13.18
million.
Domestic Transport performance was well below our expectations, contributing
to the less than satisfactory EBITDA performance, declining 25.8% through the
first half. Overhead cost increases, a declining gross margin and poor sales
growth were all factors affecting the result.
Our Logistics operations are at full capacity in most locations, and we
expect efficiencies to improve profitability through the second half of the
year.
Our Air & Ocean operations performed much better, showing increases on the
prior year at both EBITDA and revenue levels, as new customers commenced
trading.
We have seen improvement in performance for Domestic Transport and Logistics
through September and October, and we expect this to accelerate through to
Christmas.
Asia (US$)
Our Asian operations continue to report strong performance. Whilst revenue
appears flat, this is affected by inter-company trading, reflecting the
benefits of the growing trade between our networked regions.
Sales revenues, including inter-company adjustments, decreased 0.4% to
US$21.65 million. When we remove inter-company trading effects, we see sales
at 36.7% over the same period in the prior year, to US$48.92 million.
EBITDA was up 58.4% to US$3.55 million compared to the same period last year.
Strong airfreight performance from our Hong Kong branch, and satisfactory
seafreight performance from our China branches all contributed to these
increases.
Trading has been satisfactory through October, although costs associated with
a new warehouse project in Hong Kong has seen performance decline slightly
into November. As with developing warehouse projects in other regions, it is
expected that costs will be absorbed as the financial year progresses, with
new customer growth.
The Americas (US$)
Mainfreight USA: Total sales revenue improved 16.2% to US$155.40 million,
while EBITDA declined 13.1% to US$4.96 million.
It is a tale of two business units. In our Air & Ocean operation we have
seen good revenue and EBITDA growth, up 32.0% and 27.1% respectively.
However, a disappointing performance from our Domestic operation sees our
overall result fall below the same period in the year prior.
In our Air & Ocean operation, sales revenues were lifted by new customer
gains and the benefit of the inter-company revenue splits from our Asian
division, with EBITDA improved as a consequence.
For our Domestic business, revenue growth was more subdued, up just 2.9% as
some of our larger customers traded down, and sales growth was less than
satisfactory. EBITDA also declined (37.0%) impacted by line-haul route
expansion and costs associated with new Logistics warehouse facilities in Los
Angeles, Dallas and New Jersey.
CaroTrans (our NVOCC wholesale business) has had a small recovery from a poor
result in the prior year. Sales revenue levels remained flat, but margin
improvement sees EBITDA up 2.4% on the same period last year.
Looking past the half-year, our total USA division has seen significant gains
from Mainfreight Air & Ocean through October and November, while Mainfreight
Domestic operations also show some improvement. The expectation of new
Domestic customer gains is positive news, and we expect these to contribute
to better results through to the year end. CaroTrans is expected to continue
its gradual improvement.
Europe (Euro EUR)
We continue to see better results in our European operations.
Sales revenues improved slightly, up 0.7% over the same period last year to
EUR130.77 million (outside of inter-company revenue splits), and EBITDA
totalled EUR5.90 million, up 13.6%.
All divisions in Europe found improvement, albeit at varying levels. Better
performance from our European Forwarding and Transport operations was
pleasing, with our Belgian business turnaround assisting the result. The
Logistics operations continue to show progress, and good momentum has been
found in Air & Ocean, particularly as we strengthen the trade lanes between
Europe with the Americas and Asia.
We expect these trends to continue through the balance of this financial year
and onward.
Senior management changes will also take effect in the new year. Our current
European Manager, Mark Newman, will return to New Zealand. Ben Fitts will
replace Mark in this role. Ben has been with Mainfreight for eight years
(plus 4+ years, earlier as a graduate) and his current responsibilities are
for our New Zealand Air & Ocean operations. He is well-placed to carry on
the improvement Mark has found for us and will continue to foster our
culture, disciplines and expectations for the European region.
Group Operating Cash Flows
Operating cash flows were NZ$45.93 million compared to the prior year's half
year figure of NZ$35.34 million.
During the half year, net capital expenditure totalled NZ$58.50 million, of
which NZ$40.64 million related to property development.
On 30 October 2015, bank facilities were extended by a year to 4 April 2020,
at slightly reduced margins.
Dividend
The Directors of Mainfreight have approved an interim dividend of 14.0 cents
per share. This is unchanged from last year's interim dividend level.
This dividend will be fully imputed and will be paid on 18 December 2015,
with books closing on 11 December 2015. A supplementary dividend will be
paid to non-resident shareholders.
Outlook
The half-year result has disappointed the business, where acceptable revenue
and margin gains have been eroded by increased overhead cost structures.
However, the majority of these costs have been incurred as we prepare the
business for further growth. New and larger facilities have been built with
improved (but more expensive) equipment, and labour costs have increased as
we develop our operations for a significant period of growth globally.
Primarily cost increases have occurred within our Domestic businesses, where
labour, facilities and infrastructure are a significant part of our
day-to-day operations.
Our Air & Ocean businesses in all regions have seen significant growth in
revenue and profitability. As we work with these new customers to develop
additional services through our full supply chain activity in multiple
regions, we anticipate a positive impact on our warehousing and domestic
transport operations.
Our expectations are for ongoing improvement in revenue and margin
performance through the second half, together with better cost controls, to
achieve an improved year-end result over the last financial year.
Mainfreight will release its financial results for the full 2016 financial
year to the market on 26 May 2016.
For further information, please contact Don Braid, Group Managing Director,
telephone +64 9 259 5503, +64 274 961 637 or email [email protected].
End CA:00273082 For:MFT Type:HALFYR Time:2015-11-10 08:30:58
