Stripped-back transporters fire up

By Peter V O'Brien

Friday 18th June 2004

A decline in the number of companies involved in transport has been a feature of the change in stock exchange dynamics in recent years.

The remaining representatives and their share price performance over the past year are in the table.

They are admittedly a mixed group, comprising two road transport companies, with their ancillary activities, a rail operator and a passenger and freight airline.

Even the two road companies are effectively one, because Mainfreight owns 79.66% of Owens Group and consolidates the latter's results.

Toll New Zealand (formerly Tranz Rail) is a subsidiary of Australia's Toll Holdings. Its continuing stock exchange listing seems the result of stubbornness on the part of minority shareholders who held out against Toll's final offer and the offeror's refusal to lift the price.

A strange manifestation of sharemarket sentiment provided minority shareholders in Toll with good capital gains.

Toll's share price gave the minority shareholders a solid gain over the past year.

The stock is still traded, with total turnover in the week ended June 10 being 74, 000 shares.

There were interesting movements in Mainfreight's share price. It was $1.30 when The National Business Review considered the sector in June last year.

Mainfreight issued 12.62 million shares at $1.27 each, ex dividend, to "institutional and habitual investors" in December, when the market price was roughly the same, after accounting for it being cum dividend.

Proceeds of the issue were used to repay part of the bank debt raised to acquire the shareholding in Owens.

The stock sold at $1.75 last week, showing an increase of 37.8% on the December placement at $1.27.

Air New Zealand was the only transport company whose share price declined over the past year but attempting to compare the air operator with road and rail companies would be a fruitless exercise.

An air transport group's activities and problems or benefits attached to them are peculiar to that section of the transport industry.

The four companies shared organisational and operational shakeups in common since the last NBR discussion.

Such changes made them tighter businesses, a matter investors would have noticed when they set the current share prices.

Mainfreight took the sword to Owens, replacing the dagger which was already paring away some of the latter's apparently superfluous, or poorly stimulated, corporate flesh.

The companies' reports for the year ended March 31 were both issued on May 31.

Owens reported a net deficit of $5.79 million, compared with the previous year's loss of $636, 000.

Most of the deficit came from non-recurring items.

The company said there were asset writedowns of $11.85 million, "predominantly shared services computer systems write-off, goodwill, business closures, deferred project cost write-offs and due diligence cost write-offs total $4.07 million (sic)."

Legal expenses and tax writeoffs were $1.53 million and debtor writedowns, mainly in the Owens Australia International businesses, and inter-company writeoffs were $2.88 million.

Owens incurred $1.66 million of restructuring and redundancy costs during the review process.

A divestment programme of non-core or loss-making businesses was entered into and a formal sales process was under way in relation to assets of Owens' container services and container divisions, rural livestock and grain cartage and shipping agencies.

All that had an impact on Mainfreight's result.

The company had a net surplus of $12 million (excluding Owens), which was 33.2% ahead of the previous year.

Consolidation of Owens and the associated acquisition costs cut the Mainfreight net surplus to $5.97 million.

The basic Mainfreight result accounted for the share price rise.

Mainfreight/Owens started the current year with an effective clean sheet.

Reorganisation, consolidation of activities and disposal of fringe businesses should allow the company good growth and consequent increments in the share price.

Minority shareholders in the rail company will be looking for a similar outcome from Toll's reorganisation.

Air New Zealand should continue its recovery but only a comparatively few private shareholders would be interested in the outcome.

The rest of us have a stake through the government's holding.

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