Investors can optimize their exposure to the US$1.57 trillion North American logistics market, and its forecasted 4 percent compound annual growth rate until 2030, through companies that have fostered shareholder value by leveraging their essential industry’s dependable demand with rational management and profitable operational performance.
Alberta-based Mullen Group (TSX:MTL), as we shall see in this three-part series, has been consistently fitting this bill across its four business segments by building a multi-decade track record of having a strong balance sheet and using it to acquire strong brands, making them more efficient through effective deployment of capital, culture of leadership, safety and accountability, and allowing them to create value independently through a decentralized model concept.
These four segments – less-than-truckload (“LTL“), logistics and warehousing (“L&W“), U.S. and international logistics (“US 3PL“), and specialized and industrial services (“S&IS“) comprised of the 40 business units currently under the Mullen Group umbrella have contributed to put up impressive results over the parent company’s history, which dates back to 1949, affording a long-term investor ample room to hang their conviction on.
Highlight milestones include:
- Compound annual growth rate in terms of revenue of 11.7 percent since going public in 1993 through 2023, including 71.5 per cent growth from the pandemic low of C$1.16 billion in 2020 to C$1.99 billion in 2023, with $1.5 billion in revenue generated through the first three quarters of 2024.
- Consistently rising operating income before depreciation and amortization (OIBDA) from C$172 million in 2017 to C$328 million in 2023.
- Average annual free cash flow of more than C$107 million for the decade spanning 2014 to 2023.
- Positive net income over the past five years, almost doubling from C$72.24 million in 2019 to C$136.72 million in 2023, with more than C$93 million generated through the first three quarters of 2024.
- Cumulative dividend payouts to shareholders of C$1.47 billion as of 2023, with an expected annual payment of C$0.84 per share in 2024.
In addition to a well-positioned balance sheet and approximately C$400 million in reasonably priced debt to capitalize on strategic acquisitions, Mullen Group stock has given back approximately 45 percent over the last decade, through its dividend and normal course issued bid, positioning investors to benefit from a disciplined and focused long-tenured management team and its proven ability to identify companies with model cultures and untapped potential for shareholder value creation.
Mullen Group’s Less-than-Truckload Division
Strategic acquisitions are at the heart of Mullen Group’s LTL segment, in which 11 business units deliver more than 3.5 million shipments of consumer goods to 5,500 communities each year across Canada and the United States, representing the largest final-mile network in Western Canada and Ontario.
Backed by a diversified service suite, technology and customer base of well-known companies, the division has achieved robust revenue growth of 73.6 percent from C$443.8 million in 2020 to C$770.4 million in 2023 – reaching 39 percent of total revenue – supported by:
- OIBDA growth of 74.2 percent from C$75 million to C$130.7 million over the period.
- A healthy average operating margin of more than 17 percent.
The 3,800 employees behind the LTL’s efficient business units are a testament to Mullen Group’s acquisition strategy and culture, which has been perfected over the decades to identify best-in-class companies and empower their people.
Here are the LTL segment’s 11 best-in-class brands:
Gardewine, acquired in 2015, is Mullen Group’s largest business unit with more than 1,500 employees. Gardewine provides comprehensive transportation services across the manufacturing, construction, agriculture, retail, wholesale, grocery, mining, medical and pharmaceutical industries dating back more than 70 years, currently ranking as one of the largest carriers in Canada.
Hi-Way 9 Express, acquired in 2011, prides itself in supplying its 450 plus employees with the most advanced equipment and technology available in order to service their customers. Highway 9 Express offers same day service, overnight service, temperature control service along with flat decks and dry vans to over 300 communities, as well as warehousing, logistics, and specialized load services. Hi-Way 9 Express is proud to be “The Carrier That Cares” for its customers, its team and the communities it serves.
APPS Cartage, acquired in 2021, provides LTL, truckload, intermodal and warehousing services out of its 300,000-square-foot head office in Mississauga, Ontario. The company specializes in the food & beverage, retail and consumer sectors, moving millions of kilograms of freight across Canada each week, while offering next-business-day delivery to most of Ontario and second-day delivery to Quebec and the Atlantic provinces.
Jay’s Transportation Group, acquired in 2013, is a strong leader in the regional scheduled LTL transportation sector in Saskatchewan. Jay’s Transportation’s vast distribution network of full-service terminals and warehouses across the province makes it an important contributor to Mullen Group’s bottom line.
Grimshaw Trucking, acquired in 1995, is a regional scheduled LTL carrier with more than 75 years of experience servicing more than 300 northern communities in Alberta, British Columbia and the Northwest Territories. Grimshaw also provides project logistics services to meet the winter road demands of the northern diamond mine operators.
Additional business units adding value in Mullen Group’s less-than-truckload division include:
Mullen Group’s LTL segment has added to its value-accretive track record in 2024, posting revenue of C$561 million during the first three quarters, backed by OIBDA of C$104 million, contributing nearly half of Mullen Group’s positive net income, driven by management’s continual focus on refining internal processes, cost controls and leading-edge technologies such as trailer tracking, Connected Dock and automation.
The segment’s reliable cash flow, fortified by Mullen Group’s people-centric culture, accounts for almost 40 percent of total sales, and has afforded management the stable, diversified and resilient operations it needs to turn its attention to new acquisitions. Recent acquisitions, such as Chariot Express and Westman Courier & Freight, demonstrate a continued ability to deliver profitable growth despite tepid demand stemming from aggressive monetary policy and an ongoing economic slowdown.
While Mullen Group’s vast real estate network within its LTL segment protects it with a high barrier to entry along with management’s confidence in the segment’s ability to continue to perform, the company boasts three other segments that play meaningful roles in its success and enrich the picture of why MTL shares might deserve a long-term spot in your portfolio.
Stay tuned for articles on the remaining pieces of Mullen Group’s robust case for value over the coming weeks, including Part 2: Logistics and Warehousing and Part 3: Specialized and Industrial Services. We’ll update with links here when available.
Join the discussion: Find out what everybody’s saying about this logistics stock and its strong case for value on the Mullen Group Ltd. Bullboard and check out the rest of Stockhouse’s stock forums and message boards.
This is sponsored content issued on behalf of Mullen Group Ltd., please see full disclaimer here.
(Top photo of a Gardewine Truck)
