AFR: Why this freight giant repaid (Kiwi) JobKeeper

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The Australian Financial Review reports:

It was Prime Minster Scott Morrison who first warned business that the way they acted in the COVID-19 crisis would reverberate for a long time to come.

“How you support your customers, suppliers and employees during the next six months will say more about your company, your corporate values and the integrity of your brand than anything else you could possibly do otherwise,” Morrison said at the AFR Business Summit way back on March 20.

There’s no question that the business community has largely stepped up and played its role in the Team Australia bargain.

But unfortunately, reporting season has highlighted one particularlcrack.

Companies, including furniture retailer Nick Scali, homewares chain Adairs and bulbar maker ARB received tens of millions of dollars in pandemic wage subsidies, mainly the Australian government’s JobKeeper scheme and the New Zealand government’s equivalent.

But their profit results in recent weeks have showed initial sales drops were followed by rebounds strong enough to let them either maintain pre-COVID-19 dividend payments or, in the case of Nick Scali and Adairs, increase them.

This has drawn sharp criticism from politicians and business commentators, who have questioned the optics of what is arguably a transfer of taxpayer dollars to shareholders.

But from across the Tasman comes an example of a very different approach.

Mainfreight is a 42-year-old transport and logistics business based in Auckland run by executive chairman and founder Bruce Plested and Don Braid.

Even a quick scan of the $4.2 billion group’s recent NZSX announcements tells you this company is a bit of an outlier – in the best possible way.

Lots of companies talk about culture, but very few live it as vividly as Mainfreight appears to.

Despite posting a record profit in the year to March 31, Plested’s address at the group’s recent annual general meeting spent exactly 77 words on financial results – before quickly moving on to weighty matters including climate change and the importance of social housing.

And every few months, Mainfreight publishes a report on the exchange written entirely by its team members, talking about the business and their roles. July’s document was 72 pages long.

All this might sound a little corny, but it clearly translates to strong performance. Mainfreight’s share price has more than trebled over the past five years.

So when Prime Minister Jacinda Ardern put the country in an aggressive lockdown in March as New Zealand tackled the pandemic, Mainfreight’s first thought was for its people.

Braid says he watched turnover sink between 40 per cent and 50 per cent in the initial weeks of the crisis, and the fear was that such conditions could continue.

With the New Zealand government supporting businesses through the lockdown with generous wage subsidies, Mainfreight hesitantly applied – but only after putting through wage cuts for senior staff, and stipulating only those earning less than $NZ200,000 ($182,000) would be able to tap the subsidies.

“It didn’t sit right, but we thought if this might save jobs, let’s take it,” Braid explains.

The money – some $NZ10.6 million for 1526 staff – arrived much faster than expected.

But Braid and Plested still weren’t comfortable, so they put it in a separate bank account and thought of it as a sort of emergency buffer.

Happily, the business started to turn around quickly as New Zealand adjusted to life under lockdown, and Mainfreight’s geographic spread across 26 countries provided welcome diversification.

Revenue in New Zealand and Europe was down across April and May, but it was stronger in Australia and stable in the US. Braid said in late May he was cautiously optimistic about the year ahead.

So Mainfreight decided to hand back the untouched wage subsidies.

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