Owens cleanup costly

By PAM GRAHAM

One plus one did not equal two for Mainfreight when it took control of rival Owens Group last year.

Yesterday it reported a 69 per cent plunge in its first-half profit to $1.14 million after absorbing a $3.38 million loss from Owens and $2.04 million of acquisitions costs.

Excluding Owens, the profit was up 78 per cent at $6.6 million.

"You'd have to say it has been an average acquisition but it was strategic," said one fund manager.

He said Mainfreight's domestic business was strong and its Australian business, which had long been a source of frustration, had performed better than analysts expected. Mainfreight shares rose 3c to $2.05.

Chief executive Don Braid said Mainfreight had moved quickly to turn around Owens, selling six business units, and was now left with a domestic transport business and international freight forwarding units in Australia and New Zealand.

"We had to clean up a lot of stuff from within those Owens businesses and that is where the abnormals are," Braid said.

Further abnormals were likely.

But Braid said the performance of the Owens businesses in October and November had been good.

Mainfreight's cashflow was a negative $4.3 million in the six-month period mostly because of costs with the sale of Owens businesses.

The company converted a bridging loan it had for the Owens purchase that was to expire on November 7 to core debt on better terms than the bridging finance.

Mainfreight has previously said it will not be raising new capital to pay for Owens.

When Mainfreight bid for Owens it was putting together two businesses that both had turnover of more than $400 million a year.

The Owens assets not divested produce revenue of more than $200 million a year.

Mainfreight took control of Owens to build a strong New Zealand logistics company to compete against Toll Holdings of Australia after it took control of Tranz Rail.

Toll stopped Mainfreight buying 100 per cent of Owens by buying 12 per cent from AMP Capital Investors and the relationship between the two companies has been strained since then.

Braid said Mainfreight would be a bigger user of rail if Toll delivered better service.