Financial Result for the Six Months Ended September 2006 (Unaudited)
The Mainfreight Group is pleased to report a net profit after taxation and before abnormals of $14.75 million for the first six months of the 2007 financial year. This represents a $4.42 million or 42.8% increase when compared to the same period last year. A further $17.60 million is added to our net surplus with the gain on sale of Mainfreight’s interest in Hirepool and the previously disclosed abnormals of WorkCover refunds in Australia.
This brings the total net surplus, including abnormal gains for the period, to $32.35 million.
Consolidated revenues (sales) increased to $486.54 million. Excluding foreign exchange, this is an increase of 4.7%.
The six-month results continue to reflect our ongoing strong offshore performance and an improved result from our New Zealand operations despite the current domestic economic conditions. The offshore contributions now provide in excess of 51% of total EBIT.
Performance during the month of September was much improved over the previous year, and this has continued as we move into our third quarter.
The Directors of Mainfreight have approved an increase in the interim dividend from 5.0 cents per share to 7.0 cents per share.
In addition, the Directors have approved a further special dividend of 28.0 cents per share as a result of funds received from the divestment of our interests in Hirepool.
Both dividends will be fully imputed and be paid on 15 December 2006, with books closing on 8 December 2006. A supplementary dividend will be paid to non resident shareholders.
Satisfactory cash flow performance and a favourable re-negotiation of funding arrangements have provided the Directors with this opportunity. The Board commissioned a ‘capital structure review’ which was carried out by the Corporate Finance division of Westpac Institutional Bank and independently reviewed.
The Board has decided to adopt a number of the recommendations of the review. In particular, the Board has agreed that the financial structure of the group will be managed to broadly comply with the Bank’s equivalent of an investment grade rating. As a result of this review, and as a consequence of the Company expanding its revenue and asset base outside of New Zealand, the Company has negotiated significant improvements to the structure and the terms and conditions of its core debt facilities. These improvements will give the Company greater scope to pursue and fund its planned expansion programme.
New Zealand Domestic
Revenue and EBIT performance improved over the previous year; EBIT excluding abnormals improved from $9.50 million to $10.45 million, an increase of 10.0%. Revenue improved 2.4% to $136.02 million.
Trading remains steady as the third quarter progresses.
During September Mainfreight Auckland took possession of the new Otahuhu Super-Site, our latest freight and warehousing facility. It is expected that this facility will assist ongoing logistics growth in the Auckland region.
New Zealand International
EBIT excluding abnormals improved to $1.40 million, an increase of 11.9%, with revenues improving 3.1%. Abnormals were disclosed in the first quarter’s announcement. Mainfreight Owens International and Lep continue to achieve improved results into the third quarter and are expected to maintain this momentum for the remainder of the financial year.
EBIT excluding abnormals maintained their satisfactory improvement to $4.37 million, an increase of 356.8% over the previous year. Revenues excluding foreign exchange improved 16.3% to $63.48 million.
Trading remains strong into the third quarter and it is expected that contributions for the full year will continue at similar growth levels.
Branch profitability is improving in all States with growth levels challenging current property infrastructure. Purchase of land to develop larger facilities will be a feature of capital expenditure over the next five years.
Industry consolidation is providing many opportunities where customers continue to search for the best service alternatives.
EBIT improved to $5.37 million, an increase of 14.5% despite fluctuating activity in the Projects division of Pan Orient Pty Ltd. Revenues and trading in Mainfreight Owens International and Lep remain positive and ahead of the previous year as the third quarter progresses.
EBIT improved to $2.79 million, an increase of 134.2% from the prior year. Revenues also improved to $58.26 million, an increase of 19.8% (excluding foreign exchange).
Acquisition research continues to identify suitable opportunities. It is expected that a number of these will be pursued early in 2007.
Our share of earnings from our Asian associates increased by 44.6% to $0.61 million
Earnings from the Rakino investment (Hirepool) ceased from 31 July 2006. Contributions up to this date were $0.50 million.
Subsequent to the half-year close we have been successful in disposing of our interests in the United Kingdom joint venture Mogal International Limited. Proceeds from this sale were NZ$0.11 million. Our interests will be better served through a new agency arrangement negotiated with the largest freight forwarder to New Zealand and Australia.
Group Operating Cash Flow
Operating cash flows were $18.06 million compared with $13.26 million last year. This reflected the increased profitability of the Group.
Net capital expenditure in the half year was $22.01 million. Property development costs contributed $18.21 million to this amount.
Our share of sale proceeds from the Hirepool sale is expected to total $27.00 million. As at the end of September we had received $13.94 million and have subsequently received a further $8.70 million. The balance is due in May 2007.
This very satisfactory half-year result reflects the strength of Mainfreight Group’s activities and continuing international expansion.
We expect this performance to continue through the remainder of the financial year.
For further information, please contact:
Group Managing Director