Delivery firms say online shopping rush no goldmine, as Mainfreight repays subsidy

Wednesday, 27 May 2020

Mainfreight said it did not suffer as much of a revenue decline as expected.

Transport firm Mainfreight is paying back the $10.6 million it received in a wage subsidy from the Government, because trading conditions have been better than expected.

In the seven weeks to May 19, Mainfreight's sales revenues fell 16 per cent in New Zealand — although turnover improved as the country moved towards level 2 and deliveries started to flow again.

Some weeks in May had better profits than the same week a year earlier.

The company said it applied for the wage subsidy when it was uncertain how bad trading would get.

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'Pleasingly, our trading levels have improved through late April and into May, and our efforts to reduce overhead costs, defer capital expenditure, and gain new business in the period, have been relatively successful. Our offshore businesses have also traded better than expected for the most part. Cash flows remain positive, and our bank debt headroom has not been needed.

'Therefore we are in a better position than many, and while qualifying under the Government’s criteria, we felt it was appropriate to return the subsidy.'

Other courier and delivery firms have also claimed the subsidy — PBT claimed $3.6 million for 520 employees, Fastway Couriers New Zealand $133,562, New Zealand Couriers $844,656 and Freightways $337,420.

Mark Troughear, chief executive of Freightways, said his business' volumes dropped 65 per cent as the country went into level 4 lockdown, and recovered to be 50 per cent down in April as some businesses started to move essential products.

He said, while New Zealand Post had reported record volumes as the country shifted back to levels 2 and 3, that had not been the case for his firm.

It mostly deals with the business-to-business market and only about 20 per cent of its deliveries are to consumers.

There had been a couple of days that were like Christmas trading, he said, with 10 per cent more deliveries than normal, but the rest of May had been between 90 per cent and 100 per cent of a normal May month.

Troughear was expecting a tough operating environment for at least the next six months.

That meant it would not recover what was lost in April, he said. The wage subsidy had meant the business did not have to make anyone redundant.

A New Zealand Post spokesperson said international volumes were down more than 65 per cent in April, letter volumes down 35 per cent and the retail network was closed.

'This has impacted our overall revenue, and when we applied for the wage subsidy the revenue forecast anticipated an overall revenue reduction well in excess of the threshold.

'We’ve received the wage subsidy to help cover lost revenue and it enables us to cover part of our employees’ wages for 12 weeks so we can pay people fully for this period.

'If we find ourselves in a position where our overall revenues are materially better than were anticipated when we applied for the wage subsidy then we will certainly consider whether some of it should be repaid.

'While there has been a significant increase in domestic parcel volumes in level 3, this is just one part of our business and we are unsure for how long this will continue as we have never been in this situation before. '

NZ Post was also given $130m over three years in the Budget to support service delivery and the future of mail services, and up to $150m in shareholder equity.

Mainfreight has released its financial results for the year to March 31, which showed a 10.6 per cent lift in profit to $156.1 million.

It said it had taken a number of steps to lessen the impact of the Covid-19 outbreak on the business, including a hiring freeze, elimination of casual labour, a 50 per cent reduction in the managing director's salary and deferring spending.