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Forsyth Barr

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Mainfreight</h2>
Trading Update
Mainfreight’s (MFT) trading update highlights current top-line challenges across the group but the business remains profitable. Revenue growth for the first week of April was down -12% (constant currency -7%) with activity mixed by geography, albeit the company cautions that April trading will likely deteriorate. Cost measures have been implemented, but are not particularly radical relative to measures being employed by other corporates, reflecting its confidence that supply chains will resume back to some resemblance of normality relatively quickly. MFT’s balance sheet has plenty of capacity and it is deferring uncommitted capex.
In summary, Australia’s performance has been very good, otherwise nothing that is overly surprising here. &nbsp;
Revenue
March trading was positive (higher than last year) in all regions except New Zealand where the lock-down from 25 March had a material impact.
Trading through the first week of April has deteriorated with global revenues down -7% (constant currency -12%) but still profitable. NZ was down -40%, Australia +9%, Asia flat, Europe -8%, and the US -8% (including a -20% reduction in transport volumes).
Costs
Cost measures have been implemented&nbsp;and&nbsp;are&nbsp;sensible but&nbsp;not radical:
(1) usual annual wage and salary review has been deferred, and a hiring freeze is in place. Elimination of the use of casual labour has also been implemented globally.
(2) Managing Director’s salary and other Directors’ fees reduction of 50% in effect for the foreseeable future.
(3) Government employment subsidies are under review with likely application in New Zealand and some European countries.
(4) All unnecessary discretionary expense reductions have also been actioned.
(5) Assistance to owner operators with both financial lease and government wage relief negotiations has been ongoing.
Balance sheet
MFT is well placed to ride the COVID-19 downturn with its relatively healthy balance sheet and modest exposure to operating leases given a wide degree of property ownership. Net debt is NZ$160m at March 2020. It has NZ$230m of undrawn debt facilities and is deferring capex with only NZ$78m committed in FY21.
Andy Bowley&nbsp; Head of Research Forsyth Barr Limited&nbsp;
M: +64 21 338 941 |P: +64 4 495 8246 | TF: 0800 367 227&nbsp; Level 22, NTT Tower, 157 Lambton Quay, Wellington

Mainfreight
Trading Update
Mainfreight’s (MFT) trading update highlights current top-line challenges across the group but the business remains profitable. Revenue growth for the first week of April was down -12% (constant currency -7%) with activity mixed by geography, albeit the company cautions that April trading will likely deteriorate. Cost measures have been implemented, but are not particularly radical relative to measures being employed by other corporates, reflecting its confidence that supply chains will resume back to some resemblance of normality relatively quickly. MFT’s balance sheet has plenty of capacity and it is deferring uncommitted capex.
In summary, Australia’s performance has been very good, otherwise nothing that is overly surprising here. &nbsp;
Revenue
March trading was positive (higher than last year) in all regions except New Zealand where the lock-down from 25 March had a material impact.
Trading through the first week of April has deteriorated with global revenues down -7% (constant currency -12%) but still profitable. NZ was down -40%, Australia +9%, Asia flat, Europe -8%, and the US -8% (including a -20% reduction in transport volumes).
Costs
Cost measures have been implemented&nbsp;and&nbsp;are&nbsp;sensible but&nbsp;not radical:
(1) usual annual wage and salary review has been deferred, and a hiring freeze is in place. Elimination of the use of casual labour has also been implemented globally.
(2) Managing Director’s salary and other Directors’ fees reduction of 50% in effect for the foreseeable future.
(3) Government employment subsidies are under review with likely application in New Zealand and some European countries.
(4) All unnecessary discretionary expense reductions have also been actioned.
(5) Assistance to owner operators with both financial lease and government wage relief negotiations has been ongoing.
Balance sheet
MFT is well placed to ride the COVID-19 downturn with its relatively healthy balance sheet and modest exposure to operating leases given a wide degree of property ownership. Net debt is NZ$160m at March 2020. It has NZ$230m of undrawn debt facilities and is deferring capex with only NZ$78m committed in FY21.
Andy Bowley&nbsp; Head of Research Forsyth Barr Limited&nbsp;
M: +64 21 338 941 |P: +64 4 495 8246 | TF: 0800 367 227&nbsp; Level 22, NTT Tower, 157 Lambton Quay, Wellington

Mainfreight Ltd

Mainfreight: Trading Update