Seeing the bright side of the road
Mainfreight boss isn’t buying into negativity, writes Andrea Fox
Mainfreight watchers know it can be a sunny day at the company’s big blue home in Otahuhu’s Railway Lane, while the rest of us see nothing but grey skies. The NZX-listed global transport logistics business tends to be relentlessly positive and unsurprisingly, managing director Don Braid is resisting the drag of negative business sentiment.
“We are positive,” he says. “We can understand why some business leaders are worried about the attitudes this Government is taking, however the environment for us is exciting still and positive. At least with the change of Government, there’s a different attitude to getting on and doing things and we’d encourage the Government in some of the initiatives they’re talking about — at least we’re not living in a question mark.
“We’re not going to get caught up in the grumpiness,” says Braid, as the $2.62 billion revenue company marks its 40th year with bold growth plans and a share price above $27.
Braid acknowledges that a global business with 257 branches, or “profit centres”, around the world looks outwards, not just at domestic policy.
“New Zealand’s our home and we love this place . . . [but] I suppose we take a more global approach to life.
“We would urge other business leaders to be more positive . . . I think the business environment is good right now. So let’s not allow our attitudes to turn that around.”
Braid, who has seen Government policies wax and wane in his 18 years in the top job at Mainfreight, and 24 years with the company, likes the “energy” of this Government about improving infrastructure, particularly as it relates to transport.
“There seems to be an amount of energy to want that sea change to be positive about the role of rail in the economy and to be positive about making changes to the issues we have in Auckland with transport.
“As long as that talk becomes reality and we get on with things and not have too many reviews or committees. I don’t mind that we have to find the right way, but let’s get on with it.”
Mainfreight certainly appears to be getting on with it.
It is spending about $105 million buying land and buildings this financial year, mostly for expansion in New Zealand and Australia; is poised to launch in Japan and Malaysia by the end of the year; and told shareholders at last month’s annual meeting that the first half of this financial year was tracking positively.
“We feel pretty good about where we sit currently,” says Braid, who will next report to the sharemarket in November.
“That’s remembering last year’s first six months, which was pretty soft. We should be better than this time last year.
“We love growth and it’s been a highlight of the last couple of years that we’ve been able to achieve good growth in all the markets we are in.
“We’re an impatient bunch . . . we are in big markets — America, Europe, China, Australia — and we are still small compared to other players in those markets, therefore we’re excited about what’s available to us.
“We’ve got ourselves settled in a good position in each region to find further growth. We will continue to expand this business around the world.”
In May, Mainfreight reported record full-year sales revenue of $2.6b — $2b of which was from overseas operations. Net profit for the year was $107.8m, compared to $101.5m the previous year.
Earnings before interest, tax, depreciation and amortisation (ebitda) were slightly ahead of market expectations. All up, “you’d be hard pressed to find an unhappy Mainfreight shareholder”, says Craigs Investment Partners’ head of private wealth research, Mark Lister, citing the company’s long history of consistent growth in earnings, dividends and shareholder returns.
The full-year dividend was 45c a share, up nearly 10 per cent on the previous year.
The company, which has 7532 staff worldwide — about 1850 of them in
New Zealand — rewarded its team with its highest-ever discretionary bonus payout of $20.7m, up 7.4 per cent on the previous year.
Asia, the region where earnings performance has disappointed, has new management and the difference has been notable, Braid says.
He mentions several times that if Mainfreight was to grow at 7 per cent a year over the next 10 years, it would double in size — then says 7 per cent is just to keep the maths simple.
In fact, Mainfreight needs to aim for 15-20 per cent annual growth “because the market is so big and we are so small”, he says.
New Zealand is still Mainfreight’s biggest earner, providing 48 per cent of ebitda. But it’s a small market in which it is already a big player.
Australia, where Mainfreight has been for many years and “where
We would urge other business leaders to be more positive . . . I think the business environment is good right now. So let’s not allow our attitudes to turn that around.
we’ve finally found our feet”, showed its best-ever performance last year, posting nearly NZ$50m ebitda.
“There’s no doubt in our minds that Australia will be a lot bigger than what we have here,” says Braid, noting that 76 per cent of revenue is now earned offshore and 52 per cent of profit.
Major expansion projects are underway throughout Australia, and in New Zealand operations are opening and being expanded in Levin, Tauranga, Whakatane and Auckland.
Market analysts like Lister refer to Mainfreight’s “consistency”.
What’s behind that? “Attitude”, says Braid.
“It’s the culture of the business. We have this philosophy of wanting to be around for 100 years. We are not just about the next quarter’s profit. We are about growing business for the long term, therefore we have to be consistent in what we do.
“A lot of the disciplines within the business that make up that culture are about being consistently better weekon-week-on-week. We report this business financially by the week, by profit centre. Each branch manager at each profit centre (257) around the world is charged with the responsibility of making more money than they did the year before and this is measured on a weekly basis.
“Therefore, there’s constant improvement in the business. I guess the market would see us as — and we don’t mind saying it — liking to underpromise and over-deliver.”
Braid says consistency runs throughout the business, from the board table to a global branch office. “It’s in the way we treat our people, the way we wish to be seen as a business with integrity and strong work ethic from everybody.
“It’s a very flat management structure — if we’re asking our people to go and make sales calls [around the world] then our directors are prepared to go and make sales calls too.
There’s also consistency in the shareholder profile, Braid says.
“We have a number of long-term investors, both institutional and retail. We love that, it’s consistent with our whole business approach and our long-term view of our business.”
New Zealand’s productivity rate is considered low, so does Mainfreight buck that accepted wisdom?
“We’re not sure about that,” says Braid. “We are constantly measuring ourselves and we worry about our productivity and challenge ourselves to be better at it. I think the secret is, if you keep challenging yourself to be productive then you have a chance . . . we also have to be careful to match that productivity with the satisfaction of our team.
“It’s easy to say you need less labour and more growth, but that doesn’t necessarily mean you treat your people the right way. It’s up to us to have the right systems and facilities in place so our people can be as productive as they can without being overworked.”
Braid says Mainfreight doesn’t want to be at “the bleeding edge” of technology. “We quite like to be second rather than first. I don’t think we want technology to dumb down our people. We want technology that assists our people. And the business we are in is quite physical.”
Braid sees Mainfreight’s projected growth as being organic, rather than boosted by acquisitions, which he says can be “long, hard journeys” requiring cultural adaptation and overcoming other issues.
He says Mainfreight, a small company from a small country, has captured big customers overseas, signing long-term contracts, because it is “different”.
“It’s not necessarily about price. It’s because we are different . . . the quality of our people and the way we do business. I think they like that. You don’t have to be the biggest to win customers. You need to have a strong customer service ethic and high quality logistics solutions. Quite often in large markets, you find lazy operators.”
What also makes Mainfreight different from many firms is the length of time that Braid has led the management team — 18 years. It doesn’t sound like the man who has been in freight logistics most of his life will be hitting the road anytime soon.
“I love what I do. I don’t see it as a job. It’s a passion and a whole lot of fun. But you’re only judged by the success of what you do. As long as the board of directors and the leadership team think I can continue to do a reasonable job, I’m happy to be here.”