Financial Result for the Twelve Months Ended March 2007 (Unaudited)
The Mainfreight Group is pleased to report another record net surplus after taxation before abnormals of $36.4 million for the twelve months of the 2007 financial year. This represents a $7.4 million, or 25% increase when compared to the same period last year.
A further $19.2 million of abnormal gains is added to our net surplus as previously discussed, bringing total net surplus for the year to $55.6 million.
Consolidated revenues (sales) increased to $968 million from $887 million; an increase of $81 million. Excluding foreign exchange this is an increase of 5.5%.
This is a very satisfactory performance, where all divisions in all countries contributed positively to the result.
Our global interests have performed exceptionally well, particularly Australia and the United States. In both markets this performance will continue to strengthen as we develop market share across the supply chain.
While trading conditions in New Zealand were challenging, we have been able to improve on our last year's performance and are confident of continuing to do so.
In this past year we have been able to achieve good organic growth as well as divesting our interests in four businesses, three subsequent to balance date, which has allowed us to considerably strengthen our balance sheet, pay increased dividends to shareholders, and position ourselves for substantial future growth, assisted in the short-term by acquisition.
Net surplus earnings before abnormals from outside of New Zealand now exceed 54% of our group total, and will continue to grow in significance.
Trading conditions in the New Zealand economy were certainly more difficult in the past six months, where domestic freight volumes were markedly decreased and export volumes diminished on the back of the New Zealand currency appreciation.
Our Domestic contributions are satisfactory in light of trading conditions, where EBIT improved 5% on static revenue growth.
The benefits of the Owens and Mainfreight International merger and increased improvement in LEP performance saw EBIT improve 43% to $3.8 million on revenue growth of 3%. Post year end "Owens" has been removed from the brand.
In our domestic operations we continue to build our range of service offerings utilizing the intensity of our network and warehousing capability. These will provide further opportunities for us to grow our business, increasing the range of services for our customers across the supply chain.
With our International business, our focus continues on growth in our import products and airfreight capability. This directly reflects the changing New Zealand trade patterns. Our regional presence has been strengthened and we expect to open two new branches in Hamilton and Dunedin.
During the year we significantly increased our airfreight growth in both perishable and dry products further enhancing our number one IATA ranking.
Our growth and presence in Australia continues to rise. Domestically our operations maintained their momentum of the past year, with EBIT improving in excess of 137% to $9.9 million, on a revenue increase of 25%.
In our international divisions our overall result was dampened by the lumpy performance of the projects division, Pan Orient. However EBIT still improved to $13.9 million, up 8% on a revenue increase of 11% to $309 million.
Of greater significance was the performance of Mainfreight International where EBIT improved 34% to $6.1 million and revenues increased 11% to $140 million.
Domestically, our high quality, next day transport services in the express freight market continue to attract customers. We have established a very good network in all state capital cities and continue to expand into the smaller regional centres. While some of these branches are yet to be profitable, in Mainfreight fashion we see this as further opportunity for growth. As we intensify our network we are poised to expand our current small niche market position to offer a greater range of services. This is likely to include a dangerous goods delivery product to complement our warehouse operations which have already expanded into this arena.
Our Logistics business is expanding at the fastest rate we have seen, with demand for warehousing operations unprecedented in our history. We continue to focus on small to medium-sized customers offering a finely tuned combination of quality, technology-based warehousing services.
In our international sector, we have expanded our service offering to include bulk liquids in the food and chemical sectors and further enhanced the perishable supply chain. Airfreight growth remains a high priority and we have now established licensed airfreight bond stores in each state. We are expecting our airfreight revenues to grow exponentially and likely to match seafreight revenues within three years.
With a relatively small market share in all three sectors, our opportunities remain strong to grow these businesses in the near term.
We continue to increase market share and improve margins and returns in the USA. Our EBIT improved 50% to $6 million, on revenue growth of 25% to $111 million.
During the year two new branches were opened in San Francisco and Boston and, while yet to be profitable, they remain key to our overall strategy of establishing stronger networks throughout each country where we have a presence.
Our ability to load direct containers from each branch to worldwide destinations rather than via gateway branches has improved margins and assisted trade-lane growth.
Just satisfactory returns were received from our associated businesses in Asia contributing $1.1 million, an increase of $0.1 million or 10% from the previous year. The potential from these markets remains unfulfilled and we are focused on increasing our shareholding in current activities and expanding our presence in the greater Asian area through acquisition.
The Hirepool investment, divested in July 2006, contributed $0.5 million in the four months of trading.
Group Operating Cash Flows
Operating cash flows were at similar levels to last year; $47.9 million compared with $47.4 million. Higher tax payments and slightly reduced cash collection performance impacted this area.
During the year net capital expenditure totalled $34.3 million. Property development accounted for $27.3 million of this.
Hirepool funds of $22.7 million were received with a further $4.7 million expected subsequent to balance date. These proceeds were distributed to shareholders by way of special dividend in December 2006.
Net debt increased to $67.4 million from $61.7 million.
The Directors have approved a final dividend of 8 cents per share fully imputed with the books closing on 13 July 2007; payment will be made on 20 July 2007. This takes the full dividend for the year to 15 cents per share plus the special dividend of 28 cents per share paid in December 2006. Last year's total dividend was 12 cents per share.
We are pleased with the momentum achieved in our current search for suitable companies to acquire in the USA and Asia.
A number of opportunities in the USA have been explored, and negotiations are underway with three target businesses.
Post year-end, and as previously advised, LEP Australasia and Pan Orient were divested to LEP's agent and minority shareholder Agility. It is expected that this sale will be unconditional by 31 May 2007.
This past year has been significant in its achievements and performance. Trading during the first two months of this year continues to see improvement by our offshore interests. In New Zealand the environment remains challenging in what is traditionally a quarter of low activity for us. We remain confident about our growth potential in the near term. Acquisition activity is very positive, divestment funds will further strengthen our balance sheet and we remain committed to taking Mainfreight to the world.