UPDATE: Mainfreight shares surge near record
UPDATE: Mainfreight shares surge near record after annual profit climbs 36%
(Adds share price, broker comment and presentation slides)
By Paul McBeth
May 28 (BusinessDesk) - Shares of Mainfreight surged back toward record levels after the transport and logistics group boosted annual profit 36 percent, helped by a settlement with the former owners of its Wim Bosman unit in Europe, and said it's focused on growing its global footprint on the way to becoming "a substantially bigger and better business."
The stock climbed 8.4 percent to $14, just short of the $14.08 peak on May 9, making it the biggest gainer on the bourse today.
The Auckland-based company lifted net profit to $86.6 million, or 90.27 cents per share, in the 12 months ended March 31, from $65.9 million, or 66.45 cents, a year earlier. Stripping out the $12.1 million gain from its Wim Bosman settlement and restructuring costs in Europe, earnings rose 14 percent to $77.5 million on a 2.1 percent gain in sales to $1.92 billion.
"The result was ahead of market expectations and there's also some encouragement in the comments regarding the underperforming European operation," said Grant Williamson, a director at Hamilton Hindin Greene in Christchurch. "All in all, the business is back on the growth path, and investors are looking to buy into the stock."
Mainfreight recognised the $12.7 million Bosman settlement in the first half, following a dispute with the former owners after the European business lost several key trading accounts.
"The aches and pains of establishing our footprint in Europe through our 2011 acquisition are behind us, and the potential for growth can be clearly seen in Australia, Asia and the Americas," the company said. "We are focused on developing all our offshore operations into significant profit and revenue contributors for our group."
The company dropped parcel-freight from its Australian transport unit in the year, closed an unprofitable Belgian operation and is putting more resource into building long-term customer relationships in the US domestic market.
"We are confident of bettering our financial performance again," the company said. "More importantly, we will maintain the momentum we have, growing Mainfreight into a substantially bigger and better business."
Mainfreight indicated it will be looking at making acquisitions which will probably be offshore to support its growth plans, according to presentation slides at today's analyst briefing.
The board declared a final dividend of 19 cents per share, payable on July 18, taking the annual return to 32 cents.
Mainfreight's New Zealand unit boosted sales 6.6 percent to $505.2 million and earnings before interest, tax, depreciation and amortisation rose 12 percent to $67.4 million. The Australian business increased revenue 5.8 percent to A$458.5 million, and lifted Ebitda 16 percent to A$35.2 million, and its contribution to group earnings is expected to eclipse New Zealand's "in the not too distant future."
The company's American unit increased sales 1.7 percent to US$363.6 million and Ebitda rose 11 percent to US$18.9 million, and is expected to grow at a faster pace than than the rest of the company in the near term as market opportunities are exploited.
The European business increased sales 2.4 percent to 250.7 million euros, although Ebitda declined 5.7 percent to 8.92 million euros.
"We are cautiously optimistic that the worst of our European business's disappointing performance is now behind us, and is well-positioned to provide more growth and profitability into the future," the company said.
Mainfreight's Asian unit boosted sales 26 percent to US$37.7 million, and Ebitda climbed 36 percent to US$3.52 million, largely through trade to and from the US.
The company increased operating cash flow to $120.4 million from $83.2 million, holding cash and equivalents of $54.5 million as at March 31. Mainfreight held bank debt of $258.4 million at the end of the financial year, down from $277.3 million a year earlier.