Shareholders wear Mainfreight losses

Mainfreight could not have wished for a more understanding bunch of shareholders.

The transport operator reported a dismal drop in full-year profits last month. But yesterday, directors received mostly praise and encouragement at the company's annual meeting in Auckland.

Chairman Don Rowlands said though the past year had been financially disappointing - the company's profit dropped 73 per cent to $2.4 million - "this is not the time to turn back".

An expansion into Australia, through the $12 million acquisition of K&S Express (since renamed Mainfreight Distribution), turned into a nightmare for the company.

The subsidiary was the main contributor to Mainfreight's $10.6 million pre-tax, pre-amortisation loss on its overseas operations.

Mr Rowlands told shareholders the Mainfreight Distribution venture had allowed the company to establish itself on a much larger scale in Australia and the business was "a two- to three-year turnaround story".

"It is important to remember that we are acquirers of businesses, usually under-performing ones, and we have a track record since 1987 of turning losses to profits in one to three years."

Group managing director Bruce Plested said the company's pre-tax profit had grown 95 per cent over the past four years, and analysts pessimistic about the company had not recognised that it was in a significant international growth phase.

A shareholder asked why the company had been ready to pay more than $9 million in goodwill for the under-performing Australian operation. Mr Plested said Mainfreight knew K&S Express "was not in very good condition" but could not pass up the rare chance to acquire an established national distribution business.

Another shareholder commended the board on its efforts in a difficult year: "I detect a tone of down-troddenness. You've got broad shoulders but I think they're sagging a bit." Mr Rowlands assured him they were not.

The directors were also praised for the strength of the New Zealand operation, which made a pre-tax, pre-amortisation profit of $14.9 million.