Mainfreight sees lift in profit, moves to half-year reports

BUSINESSDESK: High-performing New Zealand-based global freight business Mainfreight will move to half-yearly reporting as it seeks to shrug off market focus on quarterly earnings, influenced by the performance of particular markets.

At its annual meeting in Auckland yesterday, chairman Bruce Plested complained that some market analysts fail to understand the importance of the company's global reach.

"Our growth strategy has been to have strong businesses in other countries," he said. "These businesses then operate between themselves.

"This gives us real competitive advantage against opposition companies who are reliant on agents to follow up sales leads, or perform services.

"It is disappointing that some commentators regard it as a negative that we are 'in Europe' or 'in the USA' or 'wherever'," he said. "The very fact that we are in those places assists in the activity and profits of all the other countries in which we operate."

The company last year bought Dutch-based freight forwarder Wim Bosman to gain a foothold in Europe, but the company has under-performed to date, hit particularly by the loss of three customers.

While two had been expected, the third and largest was a surprise, managing director Don Braid said.

"The European contribution, with an EBITDA return of €16.5 million did disappoint us. However, we were able to offset this by not reaching the trigger point for payment of an agreed earn-out of €10 million to the vendor."

Three significant logistics accounts and numerous smaller transport customers had been won, the group's operations had been expanded in Europe, and a large European client had this week chosen Mainfreight as its distributor in Australia, said Braid.

In earnings guidance ahead of the August 9 release of first quarter performance, the last quarterly release before shifting to six monthly reporting, Mr Braid said the "we will see an improved performance from the group, excluding the European contribution", which would be "less than our high expectations but nonetheless is better than the year prior".

"The European operations will achieve a result similar to fourth quarter performance, which is below the year prior by a considerable amount as we work to implement our new warehousing accounts."

Trading would continue improving from July onwards, although "the full benefit of those new customers will not be seen until September when the seasonal low of European holidays is past".

Mr Braid said the move to half-yearly reporting would "better reflect trading patterns of a global organization" and "eliminate the inconsistencies that have been a focus of quarter on quarter comparisons".

Mainfreight shares closed today unchanged at $9.45 apiece.