Ann: ADDRESS: MFT: Mainfreight Annual Shareholder

• Release Date: 31/07/13 18:00
• Summary: ADDRESS: MFT: Mainfreight Annual Shareholder Meeting Speeches
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MFT
31/07/2013 16:00
ADDRESS

REL: 1600 HRS Mainfreight Limited

ADDRESS: MFT: Mainfreight Annual Shareholder Meeting Speeches

MAINFREIGHT LIMITED

SCRIPTED ADDRESSES BY THE CHAIRMAN AND MANAGING DIRECTOR

18th Annual Meeting
4.00 pm, Wednesday 31 July 2013

CHAIRMAN'S ADDRESS

Ladies and Gentlemen, we are a little less than satisfied with our financial
performance during the second half of the past financial year, and continuing
into the first quarter of this current year.

The good news is that we do have an acute understanding of where our
performance has not been good enough, and we have a very good understanding
of how to improve that performance.  We also have the people, the resources
and the determination to implement the necessary improvements.

Our European problems are mostly a result of the depressed state of Europe
and aggressive sales activity will counter that.

In Australia we were too slow in reacting to our 20% growth per annum for
several years, which found us operating from facilities which were too small.

New facilities in the main cities of Australia are underway, or soon will be,
and our operational performance will improve significantly, as they come on
line.

The measure of our success will be how long it takes to make the necessary
improvements.  There is little doubt that the year ended March 2014 will
involve some tough rounds, but we will win most of them.

It is important for you as shareholders to understand our confidence in the
future, and to see the progress made in the year just past.

In New Zealand we have opened brand new state-of-the-art, rail and road
serviced facilities in Palmerston North and Invercargill.  We have built a
2,000 square metre new facility in Kaitaia, with the aim of giving the Far
North better service than it ever expected.

In Europe, our new branches in Finland, Romania, Poland, Ukraine and Russia
are growing rapidly in size and profit, and revelling in their new freedom
and opportunities of operating as global players.

New branches in Mexico City and Toronto, Canada share the excitement of
developing freight domestically and worldwide through the Mainfreight
network.

In the last few months, we commenced a separate Mainfreight air operation out
of Paris, supplementing our existing operations in Brussels and Amsterdam.
We also now do customs clearances into Russia.

A short time ago we opened Mainfreight Taipei in Taiwan, and in recent weeks
our branch in Singapore has become profitable.

If you count the flags outside our depot in George Bolt Drive, you will see
that we are now operating in 18 countries.

In August of this year we will be releasing a book "Ready, Fire, Aim" - a
history of Mainfreight's first thirty-five years.  To those of us who have
been involved in the company, it reads like a Dan Brown thriller.  For those
of you interested in a small piece of New Zealand's transport history, you
will be able to purchase a book after this meeting.

This year is likely to produce its share of challenges, but be assured that
we are putting huge energy into remedying our temporary problems, while at
the same time continuing to look for opportunities to increase our global
development.

Fellow shareholders, I would now like to ask the Group Managing Director, Don
Braid, to present his report.

Group Managing Director's Report

Ladies and Gentlemen
Thank you for this opportunity to share with you our performance over the
past year and our thoughts for the future.

These past twelve months have been an interesting period for our Company.  A
time where we have consolidated our position in the world's global supply
chain, developing the intensity and coverage of our network and improving our
capability for our many customers.

However, we have been unable, by our own high standards, to produce
satisfactory financial returns that adequately reflect the level of
commitment and quality we demand within our business.

In part, this has been brought about by a less than satisfactory performance
in our European operations.  In all other geographical segments we were able
to exceed the revenue and EBITDA levels of the previous year.

Gross sales across all countries now exceed $1.88 billion.  This is an
improvement of 4% over the prior year. EBITDA was slightly down on the year
prior (by half a per cent), finishing at $137.45 million.  Our net surplus
before abnormal items improved to $67.98 million.

The European financial performance saw revenues remain stable. This reflects
the efforts our teams have made to gain new business, replacing the lost
business endured at the outset of our acquisition, and the down-trading of
remaining customers as a result of European economic conditions.

Unfortunately, margins are not what they were, resulting in a much reduced
EBITDA of $14.9 million.

We have taken the opportunity to improve the structure of the business, with
stronger financial disciplines, improving quality and a more effective
regional management structure.

While this financial performance disappoints us, we continue to be happy with
our European footprint, and our strategic positioning in the region remains
part of our global aspirations.

With respect to the dispute we have with the previous owner of the European
business, encouraging progress is being made towards an amicable settlement.

Elsewhere in the world, we remain comfortable with performance.
Again, measured against our own high standards, at times this performance
does not necessarily reach our expectations; nevertheless we are producing
satisfying financial returns and sales growth.

One of those areas that has concerned us has been our Australian domestic
operations, where our exceptional growth of the past five years has placed
pressure on aging and increasingly inadequate operating facilities.

Further, the amount of parcel traffic that we have attracted from the
poorer-performing competition, and our own desire to support our customers,
has contributed to a reduction in our overall freight service quality. This
parcel component has also reduced our margins with increased labour and owner
driver costs.

Our response has been to exit this parcel freight from our network, ensuring
we return to providing our freight customers with the very best of "delivered
in full and on time" service levels.  In doing so, we have worked with a
dedicated parcel provider to ensure our customers are supplied with the best
solution.

In an effort to improve our facilities in Australia, we have committed major
investment for new builds in Brisbane and Melbourne.  We expect the Brisbane
facility to be ready mid 2014, and Melbourne a year later in
mid-2015.

Our Adelaide facility upgrade will be complete by December this year.

In our leased facilities in Sydney, an extension is underway which will
provide added space for our domestic transport business there and another
warehouse on adjacent land.
This, together with planned and signalled facility upgrades and changes in
New Zealand, will see over $100 million of capital spend in the next two
years.

We remain very focused on improving our level of sales penetration across our
network, particularly in our strong growth areas of Asia, the Americas and
Europe.

It is our intention to trade strongly within our own international network,
retaining revenue and profit for the Group rather than sharing with agents.

Network development remains high on our priority list, and wherever we
establish good competitive advantage and trade lane competency, we will open
new branches as a means of extending our global capabilities.

We understand the focus the market has on geographical performance and the
likelihood of increased scrutiny on our poor performing regions like Europe
but we are pleased to see astute observers are beginning to understand our
strategy and achievements.

It will be the sum of all our locations that makes us a successful global
logistics operator, not one geographical region on its own.

We are often approached with acquisition opportunities; almost on a weekly
basis. Where they appear to "fit our jigsaw", we delve deeper.  More often
than not, they fail to measure up under closer scrutiny.  Opportunities that
offer scale and the ability to assist our global aspirations remain elusive.

Trading in these past four months has reflected our commentary at year end;
conditions remain difficult with profitability exhibiting similar trends to
the year prior.  Some weeks are strong, some are poor. Nevertheless we
remain positive for the year ahead and have a number of initiatives in place
to ensure costs are well-managed and sales growth continues.

Trading to the end of May sees EBITDA
2.5 per cent behind the same time last year.  However, in Australia through
to July, our trading has deteriorated as we position the business away from
parcels and refocus ourselves on our core business of moving freight.

New Zealand is trading slightly ahead of the prior year, and in the Americas
our combined operations have produced an EBITDA figure in line with last
year.  Further improvement is needed in this market as we progress through
the year.

Our half year result will be released to the market on Thursday, November the
12th.
Our vision is focused on the long-term success of Mainfreight, growing its
global business and developing products and services to support our customers
everywhere they need us.

As tough as this past year has been, we are confident of our direction and
our ever-growing global capability.

We have much to do to deliver on our aspirations and, we are sure, on yours
too.

We look forward to doing so.

Thank you

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:00239166 For:MFT    Type:ADDRESS    Time:2013-07-31 16:00:08