An interesting 15 mins or so with Don Braid that I initially missed. You can see him start to get annoyed by Corins move to the negative with his questions. Don is ALWAYS positive!! Enjoy. Don Braid says they are also trying to move to electric fork lifts and make greater use of solar power in their buildings.
Meanwhile, despite headline business confidence being weak in many surveys at the moment, Mr Braid says he's feeling optimistic about the economic outlook for New Zealand and he doesn't know why other businesses are grumpy.
Something this Mainfreight Ltd [MFT.NZ] shareholder has known for years - He is the best leader of a business in New Zealand. Well done herald for recognising this and congratulations Don.
Dogged determination, drive and eternal optimism - they're all qualities Don Braid exudes.
Mainfreight's straight-talking group managing director has an infectious zest for business.
Even Europe's ongoing economic turmoil fails to dampen Braid's optimism, despite the Kiwi logistics operator having spent more than $200 million buying a Netherlands-based freight firm earlier this year, giving it a European footprint for the first time in its more than three-decade history.
Since the acquisition of the Wim Bosman Group the eurozone has spiralled to the brink of economic disaster, but 52-year-old Braid says doing business on the debt-ravaged continent is nothing other than an "exciting" prospect.
He points out that 172 million people live within a 350 km radius of Wim Bosman's headquarters in's-Heerenberg, on the Dutch-German border.
"You can imagine what they need to eat, drink and use," says Braid in the boardroom of Mainfreight's building in Otahuhu. "That gives us an enormous amount of opportunity."
And he should know, having spent his entire working life in the freight industry.
After leaving Timaru Boys' High School Braid joined the New Zealand Shipping Corporation as a clerk in 1976. His father was a truck driver, but he says that didn't influence his career decisions.
"I probably wasn't qualified enough to go to university," Braid says. "I think I've always enjoyed business, from an early age, so to be involved like I am today has been great. I'm pleased I didn't do anything else."
Mainfreight shareholders would be similarly pleased.
In the decade Braid has spent at its helm, the company has become a global logistics player with operations on every populated continent apart from Africa.
In the 12 months to March 31, Mainfreight - which has been one of the top performing stocks on the NZX this year - posted record sales of $1.34 billion. The company is on track to go close to the $2 billion mark in its current financial year, Braid says, having already posted an almost $900 million revenue for the six months to September.
Bruce Plested, the firm's executive chairman who founded the company in 1978 with $7200 and a 1969 Bedford truck, recalls the day in 1994 when Braid - then a Freightways Group employee - had the job of pitching its Daily Freightways business to Mainfreight, which it acquired that year.
"Don gave this glowing account of [Daily Freightways] and I kept looking at him and thinking 'what a lot of bullshit'," Plested says.
"But I was fascinated that he could present this picture of a skeleton of a company ... and present it so brightly."
Braid, who joined Mainfreight through its purchase of Daily Freightways, says the company hasn't let the last few years of economic upheaval dull its ambitions.
"You need some energy and you need to be on the front foot," he says. "If you allow the recession to roll over the top of you there's a great chance it will."
While many of its NZX-50 peers have entered a period of stagnation, Mainfreight - it seems - thrives on hard times.
It has largely grown earnings and revenue since 2008 and tripled its share price between early 2009 and today.
"I think we're a better business because of adverse economic conditions, there's no doubt about that," he says.
Braid has been a beneficiary of the meteoric rise in Mainfreight's share price. He owns a 3 per cent stake in the firm, worth about $29 million.
The firm has earned a reputation within the market for being slickly-run.
New Zealand Shareholders' Association corporate liaison Des Hunt says Braid is one of the most effective listed company bosses in this country.
"He never talks about himself and always talks about long-term goals," Hunt says. "He never moans about the currency and is always positive."
Plested says that within a few months of the firm's acquisition of Daily Freightways, which became Daily Freight under Mainfreight ownership, he came to recognise Braid's strengths.
"He's sporting and tough and makes decisions quite fast," Plested says. "He implements things very well and you don't have to remind him about anything you're trying to achieve. He's got plenty of charm if he wants to have it ... and his leadership skills just stand out - people want to stand next to him."
Braid goes to great lengths to stress that the company's success is the result of the efforts of its entire, 5167-member "team" around the world.
"It's not about what I've done - it's about what we've done and what the business has done," he says.
Use of the word "staff" is banned within the company - one of a range of idiosyncrasies particular to the logistics firm.
Braid recalls with horror the memory of listening to a chief executive refer to her workers as "FTEs" - full-time equivalents - during a radio interview.
"I just think that's disgusting," he says.
Private parking spaces are also banned at Mainfreight - the group managing director has to find himself a spot in the carpark each morning after he drives through the front gate.
Offices are outlawed, even for Braid, whose desk is situated in the corner of a large, open-plan room occupied by the company's national team.
And analysts have been warned that they "won't get a second interview" if they make that mistake of calling Mainfreight a "trucking company".
Kiwis know the firm largely through its blue trucks that ply our highways, but the company also utilises sea, train and air freight to transport goods around the world.
"It's just a little rule that we've had because if they [analysts] keep calling us a trucking company they clearly haven't done their research."
Weekly operational reports are posted on the wall of the company cafeteria in Otahuhu, where all team members, including Braid, eat at a single, long table.
"There's no bureaucracy or hierarchy or superiority in the business. We're trying to break all that down."
Braid says the company strives to be de-centralised through giving responsibility to all individuals in the business and letting them make decisions.
Mainfreight people, he says, don't "live in question marks".
Like most Kiwi business leaders, Braid is self-effacing and doesn't fancy talking to journalists about his life outside the company.
"I don't think any of those things are really of interest to this," he says. "We need to try and paint the picture around Mainfreight here and what Mainfreight is, that to me is of more interest than whether I like rugby or cricket.
Why we chose Don Braid for top honour
Mainfreight's Don Braid rose above a solid field of finalists to be named New Zealand Herald Business Leader of Year.
His company has been a shining example of success amid tough global economic conditions.
Braid has earned a reputation within the market as a straight talker and one of the most effective NZX-50 bosses.
While many companies have been battening down the hatches this year, Mainfreight has been on the acquisition trail - purchasing a Netherlands-based freight business which operates in Belgium, France, Romania and Poland and Russia.
The company posted record earnings and revenue for its last full year and has continued to break records this financial year.
Braid said Mainfreight was on track to push close to the $2 billion sales mark by March next year.
The firm's shares have been one of the best performing stocks on the NZX, returning more than 20 per cent in the year to date.
Forsyth Barr analyst Rob Mercer said the market had confidence in Mainfreight after it managed to grow revenue and market share and outperform its peers during the global financial crisis.
Other finalists were: Briscoe Group managing director Rod Duke, NZX chief executive Mark Weldon, ex-Fonterra chief executive Andrew Ferrier, Xero founder Rod Drury, LanzaTech chief executive Jennifer Holmgren, Ngai Tahu Holdings Corp chief executive Greg Campbell, TZ1 founding chief executive and former Microsoft New Zealand chief executive Helen Robinson, Farmers/Whitcoulls owners David and Anne Norman and Ryman Healthcare chief executive Simon Challies.
Mainfreight Ltd [MFT.NZ] is a fledgling player in the global logistics business with an expanding footprint in the United States, Asia and an established presence in Australasia.
It has found the last year or so tough going 1, 2 , as other logistics companies also have, but has managed to keep a lid on their business costs by paring back on capital expenditure, freezing employee pay-packets and bonuses and paying very close attention to the day to day running of the business.
The company has a had a good history of expansion and profitability since it was founded with one truck by Bruce Plested in 1978 and as Don Braid has been on board since 1994 the company has grown considerably in revenue and profitability, has been listed publicly since 1996 and has found a foothold in Asia and the United States.
But what of the next 12 months and longer?
How will the business go under his leadership, will it continue its historically excellent financial results or will it flounder like so many other New Zealand companies have as it expands in the United States.
What new ideas does he have to take this company through the $1 billion revenue barrier and beyond and establish Mainfreight as a truly global logistics company
With this in mind I submitted some questions to Don via email and he kindly offered to answer them.
The Q & A
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Share Investor - Like other New Zealand companies 2008-2009 has been a tough year for Mainfreight. What have you learnt from the economic downturn in terms of the company’s strengths and weaknesses and has that made Mainfreight a stronger company?
Don Braid - We found an element of complacency and a lack of urgency, or even acknowledgment of a recession, amongst our people despite our disciplines and culture, which identified a need to encourage tougher, faster decision making and to seek out opportunities.
SI - What are your thoughts on the recession and recent (apparent) recovery - if you want to call it that - and what effect that will have on the company's overall strategy in all the markets that you operate?
DB - We continue to manage the business week to week focusing on margin and cost. Our sales campaigns are very active as we look to increase sales growth at every opportunity, attracting new customers with exceptional quality. We don’t wish to waste any of the opportunities provided by the recession.
SI - Have you responded to the recession in an appropriate way by cutting costs and easing back on business expansion when other companies have used this time as an opportunity to expand their businesses because of cheaper assets and lower credit costs?
DB - We identified our areas of weakness, tightened cost controls including freezing salaries and bonuses, and focused on the opportunities available. We have treated acquisition opportunities with caution; distressed businesses are not necessarily good investments.
SI - How is Mainfreight currently doing in its various markets of operation and how well are profit margins holding up?
DB - We can do better in each market, and are working hard to further improve returns.
SI - What are the biggest commercial threats to your businesses in terms of competition and is your reaction to this competition likely to be aggressive or reactive in nature?
DB - We have always operated in a competitive market and enjoy being on the front foot.
SI - Any business has inherent risks. How do you manage those risks in the normal business operating environment that changes due to economic cycles and other outside and inside influences?
DB - Mainfreight’s culture of weekly profit and loss reporting, branch management responsibility and flat management structure assists us in managing risk. We scrutinise performance at every turn and maintain a strong discipline of cash management.
SI - The subsidy of Toll Holdings trucking business by the New Zealand taxpayer has reared its ugly head again recently. Can you do anything about that in your position and if so what?
DB -We will compete as we always have. We will continue to bring pressure to bear on the Government to ensure KiwiRail deals with the issue commercially. We are also of the opinion that the Government should appoint a commercially capable board rather than the current culture of political appointees.
SI - What are your biggest challenges as the company expands and do you prefer organic expansion rather than the purchase of companies to pursue revenue and profit growth?
DB - Organic growth is always the preference; acquisitions when and only if they fit the profile and requirements of the Group. Great people remain our most valuable resource.
SI - The issue of capital raising by other companies this year has been in the business news headlines. Why have you been able to avoid this to date and do you see the issue of capital raising being an issue for Mainfreight at a later stage should the economic downturn last longer?
DB - There has been no need to raise capital. Our debt to equity ratio is satisfactory and our relationship with our banks remains important to managing our debt facilities. These facilities have just been renewed for a further three years with improved covenants.
SI - Mainfreight pays a relatively low dividend compared to other NZX listed companies. Is that a conscious decision to keep more capital in the business for its day to day operation or are there other reasons for this?
DB - On listing in 1996 we stated that a dividend payment ratio of 40% to 50% of net profit is prudent, and allowed for further capital reinvestment. While at times we have exceeded this ratio we do wish to continue to re-invest in our business. Growth remains a high priority.
SI - What is your opinion on bonuses paid with stock options and other incentive pay and how do you feel about executives of other NZX listed companies receiving incentives even though pre-determined targets have not been met?
DB - We are not in a position to comment on remuneration in other listed companies. Ours continues to be reviewed to ensure we remain competitive and fair.
SI - Given enough time and expansion in the United States, where will be your main hubs and will you continue to build and own them given the huge capital expense they must be?
DB - The US remains an important part of our growth strategy and we are excited about the potential evident in this market. Capital investment will be evaluated and tailored to the returns available.
SI - The US market has been brutal to a couple of NZX listed companies, with Pumpkin Patch and Michael Hill recently losing lot of shareholder money by expanding there. How has your company planned to ameliorate any possible losses there as you expand and do you have an exit strategy if business there doesn’t look good or are you confident that in the long term the Mainfreight’s business there will be a strong one?
DB - We remain confident that our US operations will become significant contributors and a beachhead for our ongoing global development.
SI - How do you retain the wonderful family friendly Mainfreight culture that has been fostered over the years and is so central to the success of the company as it has moved from a smaller company to the one that it is now and how will you hold on to it as you grow into a larger business and into different markets and cultures?
DB - Our culture and style of doing business remains very important to us. Every day we work hard to maintain and develop this culture. The actions of our leadership team are key. The elimination and rejection of bureaucracy and hierarchical attitudes and actions at every step are paramount. Our people’s freedom to take responsibility, ownership and to contribute no matter their role is pivotal to our success.
SI - Along the lines of the question above, how much input does every worker at Mainfreight have into the business, is it like the culture at Toyota, commonly known as the “Toyota Way” where if anyone has a good idea that will improve productivity or the business in some way then they are credited for that input and rewarded in some way?
DB - As above.
SI - Who came up with those quotes on the back of all your vehicles and why?
DB - Many people contribute to the quotations, however Bruce Plested initiated the original concept. We hope the quotations make people think about what’s important in life. They also allow our owner drivers to express themselves through their chosen quotations.
SI - You and Bruce Plested are both very strong leaders and characters, how do you balance those strong personalities when you make company decisions?
DB - We enjoy a great deal of debate, we have respect for each other and a passion for the business. What is right for the business is key – the individual’s agenda is not a consideration.
SI- Who are some of your business mentors/heroes and why?
DB - Mainfreight’s Board of Directors remain key mentors and confidants.
SI - Who is your favourite New Zealand business leader/s and why?
DB - We have a lot of respect for many New Zealand business leaders; more so those business leaders who are forthright in their opinions, and who are energetic in growing their businesses and their people. Those who reject mediocrity and bureaucracy, and who are prepared to get off their backsides and develop their businesses around the world.
SI - In relation to the two questions above are there any particular books or periodicals that you have read that you would recommend to Share Investor readers?
SI - In my investing experience I have found the level of business leadership in New Zealand wanting – with a few very notable exceptions - when it comes to making good long-term decisions based on sound business skills, the basic understanding of running a business and accountability when it comes to making mistakes and this is often reflected in businesses hiring from an overseas talent pool. What are your views on how we can get better shareholder representation in the boardroom?
DB - New Zealand business needs leaders around the board table who have a passion for the business, are energetic and prepared to get involved, are commercial in their thinking and are not just appointed as part of “the club”. Political appointments have no place in New Zealand’s business future.
SI - Is there enough long-term thinking and planning when it comes to making decisions in the boardroom that affect New Zealand companies?
DB - Infrastructure planning in this country is woeful. Three-year political appointments don’t help. Entities would be better served by boards who spend less time on plans and budgets, focusing instead on strategic and competitive advantage to drive businesses (and the country) forward.
SI - I have recently become a dad for the first time and am now aware of higher demands on my time. I am sure the life of managing director at Mainfreight is very busy. How have the demands of Mainfreight impacted on your family and what skills as a dad have you used in your business life and where and how do you find the balance between home and work? Is it just good time management?
DB - A passion for life helps to keep things in perspective. Always ask a busy person if you want to get things done!
SI - What do you see as the strongest and weakest quality of your leadership style?
DB - Am not qualified enough to answer.
SI - Where do you see yourself and the business you help run over the next five years?
DB - Mainfreight will be a bigger and better business than it is today. We have some lofty goals to achieve and we remain an ambitious bunch!
SI - Thanks for your time Don.
Don Braid's Bio - Supplied by Mainfreight
Don Braid, Group Managing Director of Mainfreight Limited, was educated at Timaru
Boys’ High School and has over 30 years’ experience in freight forwarding and logistics both New Zealand and internationally. He joined Daily Freightways in 1978, gaining a thorough grounding in all aspects of the business and eventually heading up that company.
In 1994 Mainfreight purchased the business, and Don went on to hold various senior management roles at Mainfreight prior to his appointment as Managing Director in 2000.
Don has led the Mainfreight team through a significant period of change and expansion to become the successful global supply chain logistics provider it is today, with businesses operating in over 160 branches throughout New Zealand, Australia, Asia and the United
States.
His efforts were recently recognised when he was selected as the 2008 Deloitte/Management magazine Executive of the Year. Don is a member of the Board of the Starship Foundation.
Mainfreight History- Supplied By Mainfreight
Mainfreight was founded by Bruce Plested, joined later by Neil Graham in 1978 with a 1969 Bedford JI Truck and $2,700 in paid up capital. Mainfreight entered a highly regulated market which required all freight travelling over 150km to be moved on rail, and which was dominated by a virtual cartel of giant transport companies.
When deregulation occurred in 1985 Mainfreight were hardened from this market environment, and was evolving a deep culture and a vision of what we could achieve. Having formed Mainfreight International in 1984, Mainfreight established a beachhead in Australia in 1989, with an operation in Sydney, followed the next years by depots in Melbourne and Brisbane.
Investment in Australia was driven by a vision to let our customers treat New Zealand and Australia as one market, with Mainfreight's spread of branches and services, along with the best technology and people providing a bridge across the water. Mainfreight was publicly listed in June 1996 on the NZ Stock exchange (code MFT) and now has interests in the USA and Asia.
From the Mainfreight Ltd [MFT.NZ] 2009 FY profit announcement today comes a management commentary piece about Government red tape and its associated cost.
Don Braid usually has a well placed go at Government bureaucracy when it comes to profit season and his target this time is "climate change" and carbon emissions and it is one of the largest pieces of commentary in the profit release on one subject:
Mainfreight has always attempted to reduce the environmental impact of its operations. Our sustainability initiatives have often resulted in reduced costs; so the bottom line and the environment are both winners.
Real or not, climate change is fast becoming a core strategic issue for businesses everywhere. For Mainfreight, it begins with accepting that our business is based on an activity that generates carbon emissions and then taking responsibility to reduce those emissions over time; without negatively impacting on our competitiveness.
Last year we commenced a programme of measuring the carbon emissions in our business in New Zealand with a view to extending this measurement to other countries where we have a presence, and to reducing our emissions per tonne of freight moved. We made this information available to the public through our annual report and other avenues.
This year however, we have been faced with significantly increased costs and bureaucracy from the Government departments which oversee carbon emissions, and while as a business we will continue our programme of measurement and reduction to support our long-held policies of environmental responsibility, we have chosen not to incur the substantial costs involved in the audit and certification processes that are now demanded. We believe that incurring these costs would not provide a measurable benefit and therefore would not be in the best interests of our shareholders.
Don Braid, Mainfreight Managing Director
It is good to see the middle finger being extended to the bureaucracy and cost associated with it but what is clear from Bruce's revelation is that the "climate change" zealots in our midst are costing businesses millions and this will be the same with any other business, be it a logistics company which would be heavily impacted by "climate change" red tape to a business such as Sky City Entertainment [SKC.NZ] while less severely impacted would be impacted nonetheless.
All because of a mythical theory that the planet is warming.
It would be interesting to get comments by management from other CEOs of listed New Zealand companies to see how much it is costing their businesses. I have yet to see such comment from anyone, which is odd considering the substantial tax on company profits.
I highly recommend reading Mainfreight's [MFT.NZ] latest annual report out recently.
Bruce Plested and Don Braid, as usual, have some very illuminating things to say about their business, the economy, New Zealand, its dopey politicians, from all sides of the house, and where they see themselves and their business in the future.
New Zealand can do much better,but future governments cannot just groan on, as in the past. They must innovate and provide an environment of challenge and opportunity.Bruce Plested, Exceutive Chairman, Mainfreight
I have talked about a lack of vision from our leaders in this country and it is folks like the leaders at Mainfreight that will make a difference; in business and in personal and social arenas.
The report is well worth a read.
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