Annual Report 2013 - Mainfreight

Group Managing
Director's
report
As trade barriers continue
to be lifted and our
customers have more
freedom to trade, we are
well-positioned to take
advantage of the growth
that is available.
The past twelve months have been an
interesting period for our Company. A time
where we have consolidated our position
as a contributor to the world’s global
supply chain; developing the intensity of
our network, improving our capability and
building strong customer relationships during
the year, however being unable to produce,
by our standards, satisfactory financial
returns that adequately reflect the level of
commitment and quality we have within our
business.
We have never felt more inspired by what we
have created over the past 35 years than we
do now, and we are confident of our ability
to find continued growth and development,
throughout our divisions including our latest
acquisition in Europe.
The business we're in
The sector we operate in provides an
essential service, distributing products
between the world’s major trading nations,
between suppliers, producers, manufacturers
and customers. We are no longer a
New Zealand-centric business, and as trade
barriers continue to be lifted and the trading
environment for our customers becomes the
global marketplace, we are well-positioned to
take advantage of the almost limitless growth
that is available.
Our financial results see gross sales
revenues exceed $1.88 billion, with EBITDA
performance slightly down on the year
prior at $137.45 million. Net surplus before
abnormal items is improved to $67.98 million,
up from $65.75 million in the prior year.
In all geographical segments, excluding
Europe, we have exceeded the revenue
and EBITDA levels of the previous year.
Unfortunately, in our most challenging area
– our European business – revenues are
stable, but EBITDA has declined by 42.7%
to €9.46 million.
This is a reflection of the tough trading
conditions within Europe coupled with the
position we have found ourselves in postacquisition,
with the loss of key trading
accounts within the first twelve months of
ownership.
Our strategy for europe
Our actions and strategy to deal with these
losses has seen far better structuring of the
business with stronger financial disciplines,
improved quality and a more effective
regional management structure. New
customer gains have slowly replaced the
valuable revenues lost, and only the tighter
economic conditions experienced in the
region have limited our ability to improve
over the previous year.
While the financial performance in Europe
disappoints us, our strategic position in this
region is the key to our global aspirations.
Regardless of trading conditions within
Europe, our customer base there includes
strong multi-national companies and we have
been heartened by the opportunities these
customers are presenting us throughout the
rest of the world.
Elsewhere we remain comfortable with
performance; while at times not necessarily
meeting our growth expectations or our
high quality standards, nevertheless we are
producing satisfying financial returns and
sales growth.
Our Air & Ocean operations have
concentrated on developing trade within
our own family of businesses, not only
allowing us to add value for our customers
at every intervention along the supply chain,
but importantly keeping the added revenue
and margin within the Group rather than
benefiting external agents. It is air and ocean
trade that then grows our warehousing
and domestic operations, providing the
opportunity to close the loop of the required
logistics services for our customers.
As world trade continues to diversify its
manufacturing, assembly and delivery
requirements, Mainfreight is now ideally
placed to take advantage and invigorate
our customer relationships to meet these
expectations.
Abnormal items
In this result there are abnormal items
after tax of $2.07 million, which principally
relate to brand name protection costs in
Europe and Singapore. (The gain in the year
prior came from the write-back of the Wim
Bosman acquisition earn-out of €10 million
(NZ$17.06 million). This was partially offset
by abnormal costs of $2.36 million.)
Refer Note 30.
10 Mainfreight | Annual Report 2013