Owens takeover hurts Mainfreight

By PAM GRAHAM



Mainfreight will not ask its shareholders to fund last year's purchase of 80 per cent of rival Owens because asset sales will satisfy its bankers.

Mainfreight is adamant that putting two New Zealand logistics companies together to counter the challenge of Australia's Toll Holdings was the way to go even though it knocked a hole in this year's accounts.

Mainfreight yesterday reported a 33 per cent fall in profit to $5.97 million after booking $1.5 million of takeover costs and taking on $4.54 million of Owens' losses.

Minus Owens, Mainfreight increased profit by 33 per cent to $12 million.

"We don't regret buying Owens at all," said managing director Don Braid. "We've bought a disparate business and acted to get rid of loss makers."

The biggest loss maker, Owens International, would be profitable as part of Mainfreight's international business in Australia because the company had got rid of one set of costs and kept the revenue, said Braid.

Mainfreight's Australian international revenue rose 11 per cent to $160.8 million in the year to March 31 following the merger with Owens international in February. Earnings before interest and tax rose 15.5 per cent to $4.6 million.

More than $20 million is expected from asset sales in the next six to eight weeks. Owens businesses being sold include Container Services and Cooltainers divisions, Rural Livestock and Grain Cartage and Shipping Agencies.

Mainfreight used bank funding for the takeover and was to tap shareholders later.

"The board has come to the conclusion that a special capital raising programme in the near term is now unlikely," Braid said. Any future rights issue would fund growth, rather than reduce debt.

Mainfreight said it was not satisfied with the performance of the Owens businesses it was keeping but said they would improve.

The company made a $5.5 million loss on its domestic Australian business but it remained committed to the business.

"We'll never get out of Aussie. It is the key. We'll lose business in New Zealand if we can't offer an Australasian service," said Braid.

Mainfreight is paying a 3.5c-a-share dividend to its own shareholders but Toll gets no dividend as a minority shareholder in Owens, a stake it took to frustrate Mainfreight's full takeover.

Owens posted a March year net loss of $5.8 million against a previous year loss of $636,000.

Mainfreight said the cost of fuel was neutral to its business with increases passed on to customers and owner drivers in the form of surcharges.

During the year, property sales by Mainfreight totalled $7.8 million.

Mainfreight's New Zealand domestic revenues grew 14.7 per cent to $184.6 million, its New Zealand international revenues were steady and its United States international revenues improved 25 per cent.