Mainfreight AGM — Ready Fire Aim
Reading our previous ramblings, it would be of no surprise that we love founder led businesses.
Historical data will show that they often perform better, and it’s not hard to draw inferences as to why. Long-term perspective, greater commitment and dedication, more focus on sustainability and survival, less bureaucracy… it is often a source of significant a competitive advantage.
This brings us to Mainfreight.
Two weeks ago, I had the pleasure of traveling to Auckland for the company’s AGM.
For those of you who haven’t seen their blue trucks on the road, Mainfreight are a New Zealand based logistics business with operations across 331 branches in 26 countries. Its services included domestic transport (road and rail), warehousing, and air & ocean freighting — they offer a complete supply chain management solution summarised by “delivered 99% on time”.
The journey to the successful company we see today is hard to comprehend. With just $7,200, a borrowed forklift, and a friend’s help in securing space on the government owned freight ship, Bruce Plested founded Mainfreight in 1978. Price cartels, government regulations, economic pressures, earthquakes, large international competitors… Bruce and Mainfreight have dealt with them all. Now 82 years old, Bruce holds the role of chairman and has retained 16% of the company.
Getting to talk to Bruce, ask him questions, listen to his old business stories, and to see him interact with his family and Mainfreight’s loyal shareholders left a lasting impression. “Special company, special people” isn’t just a slogan.
Passion
The best entrepreneurs that we know are driven by more than larger pay-packets. Take Warren Buffett or Mark Leonard (Constellation Software). If they were driven by money, we dare say we would never have heard about them. They would have sailed off into the sunset once they reached a comfortable retirement.
These individuals have a deep seeded passion for what they do. I observed this in Bruce.
As he told us old business stories, his face lit up.
Bruce spoke fondly about working under Don Rowlands at Fisher & Paykel. He spoke of the joy he had when he got his first job in freight. “I just love order, and I couldn’t believe how every freighting branch ran different processes and systems. There was such an opportunity in just fixing simple things up,” (I’m paraphrasing here). Apparently, Bruce’s garage is a good endorsement for his love of order.
In Don’s CEO address, he shared that the board and senior management team had recently met with one of their largest US competitors (Old Dominion Freight Lines). This competitor gave them a tour of their biggest site in Chicago and showed them exactly how they do things. When Don said to them, “you do realise we are a competitor right?”, they replied “we shouldn’t worry about that because it’ll take 20 years before you compete with us.”
Don continued, “if you want to understand how much runway is in America, the 3rd biggest operator has just gone broke (Yellow Freight). The biggest operator has revenue of $34bn and they only move LTL domestic freight in the US… we have revenues of $5bn and we think we are doing pretty good… there is opportunity there for us.”
Talking with Bruce about this tour of Old Dominion after the AGM, you could just see in his eyes how excited he was. The challenge of attracting great people and building out their network and brand in the US energised him. He stressed that Old Dominon’s comment had zero ego attached to it, and that he was just so inspired and impressed by their operations, “we just have so much to learn from them.”
Bruce’s affection and commitment to continuing to find better for Mainfreight’s people, for Mainfreight’s customers, and for Mainfreight’s shareholders — it was infectious.
And if it was that impressionable on me for the brief few hours I had with him, I can only imagine what it is like to work for him.
Legacy
“There are two reasons companies behave well. Because they want to, and because they have to. Our preference is to invest in those that want to.” — Nick Sleep.
Bruce’s speech at the AGM was centered around water supply, and the importance of Mainfreight playing its role in preserving it.
These were not just words spoken to entertain those who have recently become ESG conscious. Bruce believes it. And he has put the company’s money where his mouth is for years.
“In recent years we have begun using water collected from our terminal roofs for truck washing. Our latest stunning new 10,000sqm freight facility due for completion in Hamilton in June 2003 goes a stage further. Rainwater is used in all toilets as well as for truck washing, and office heating is provided with an enclosed fire fueled by broken pallet wood.” — Bruce, 20yrs ago in the 2003 Annual Report.
After the AGM he spoke proudly about their new facility in Dandenong South that can run 87% off the grid when operating. We spoke about the challenges in getting supply of electric trucks. We spoke about how they can bring customers along with them.
My impression of Bruce was a man deeply aware of his legacy, and of Mainfreight’s role in society for the next 100 years.
Long-term vision but focused on today
Speaking of 100 years, that is exactly the compass that guides decision making. They invest for tomorrow but look no further than making this week better than last.
As CEO Don Braid displayed the trading update slide, my jaw dropped. Revenues down 19%, profits down 43%, US profits down 81%. It was ugly reading.
As the meeting concluded, the analysts in the room surrounded Don to express their concerns, especially around the profit falls in the US — they suggested Mainfreight close the US business and focus on their strong Aus and NZ businesses. Don said to us with a smirk, “they said all the same things about Australia 20-years ago”. Profits in Aus have gone from $2m to $159m since then.
He wasn’t shying away from the challenges they were facing and spoke of the lessons learnt. But the messaging was very much, “we’ve been through this before, we’ll keep investing, we’ll try take market share, we’ll build greater maturity in the customer base… all our people are now out there selling.” A recessionary environment was viewed very much as an opportunity to re-focus, double down on providing a great service and take market share.
“The last two years of growth have given us a taste of what’s available.”
As Bruce reiterated to us, Mainfreight doesn’t manage the company on the short-term movements of the share price. This is a man whose net wealth would fluctuate by the tens of millions of dollars every day, but I got the impression he doesn’t even look at the share price.
“Special People, Special Company”
When we look for quality business, it always starts with assessing those whose hands are on the wheel. It’s even more important with founder led businesses as their stories and behaviors remain imprinted on the culture.
Bruce, Don, and the rest of the Mainfreight people I met were just incredibly authentic, honest, warm, and open to answer my questions and help me understand the business of freight.
“Care and Quality are internal and external aspects of the same thing. A person who sees Quality and feels it as he works is a person who cares. A person who cares about what he sees and does is a person who’s bound to have some characteristic of quality.” — Robert M. Pirsig.
If you’d like to read more about Mainfreight, feel free to reach out for our long-form research note. Below is the video of the AGM addresses.
The information provided in this newsletter is for general information purposes only and does not take into account your personal circumstances. It is not intended to be a substitute for professional advice, so please seek the advice of a licensed financial advisor before making any investment decisions. The author and publisher of this newsletter may hold positions in the stocks mentioned. The author is a representative of Lugarno Partners Pty Ltd AFSL №508934.
