Another Record Full Year Result Caps Decade of Achievement For Freightways
Freightways (NZX:FRE) has delivered a record result for the year ended 30 June 2013, showing 6% improvement over the previous year in net profit after tax (NPAT), excluding $2.1 million of non-recurring income.
This result has led to a final dividend of 9.75 cents per share being declared, fully imputed at 28%, representing a payout of approximately $15 million, compared with $14.6 million for the prior comparative period (pcp) final dividend of 9.5 cents per share. This dividend will be paid on 1 October 2013. The record date for determination of entitlements to this dividend is 13 September 2013.
Freightways’ consolidated operating revenue of $406 million was another record, up 6% on the pcp. Excluding $2.1 million of non-recurring income, this revenue growth generated earnings before interest, tax, depreciation and amortisation of intangibles (EBITDA) of $77 million and earnings before interest tax and amortisation of intangibles (EBITA) of $65 million, 7% and 5% higher than the pcp, respectively.
Cash flows generated from operations were again strong at $77 million.
In the decade since listing on the NZX in September 2003, Freightways has seen its revenue and profits more than double and as at July 2013 had over this period delivered Total Gross Shareholder Returns of 387%.
EBITA and NPAT amounts used in calculating the movements between years exclude the following non-recurring income amounts:
- Full Year 2012 EBITA included $1.5 million and NPAT $1 million relating to Christchurch earthquake insurance claim proceeds recorded against corporate costs.
- Full Year 2013 EBITA and NPAT both include $2.1 million relating to the reversal of accrued acquisition earn out payments that are not expected to be paid.
The Directors believe that the non-recurring income amounts detailed above should not be included when assessing the underlying operating performance of the Company.
Managing Director Dean Bracewell reports that record results “have been achieved in both the express package & business mail division and the information management division.”
The express package & business mail division, which operates a multi-brand strategy in the domestic market through New Zealand Couriers, Post Haste, Castle Parcels, NOW Couriers, SUB60, Security Express, Kiwi Express, DX Mail and Dataprint, reported operating revenue of $308 million for the year, 6% higher than the pcp.
EBITDA of $55 million and EBITA of $49 million for the year (both excluding $1 million of non-recurring income) were 3% and 1% higher than the pcp, respectively. Mr Bracewell says that the express package business mix has continued to change as increasing numbers of consumers buy goods online, resulting in faster growth in Business-to-Consumer (B2C) volumes than Business-to-Business (B2B) volumes.
“This has required increased investment in customer support, IT development and establishing specialised services for this market,” he says. “These strategies have proven successful, as reflected in the growth we are achieving.”
The business mail division has also seen a change in its business mix with a decline in its traditional box-to-box letter volumes and general business mail through digital substitution. Freightways has implemented a number of strategies to address this natural decline, including acquiring Dataprint, a full service mailhouse, with physical and digital mail delivery capabilities.
The information management division, which generates 27% of Group earnings, reported operating revenue for the year of $100 million, up 8% on the pcp. This division has almost doubled its earnings in the last five years.
EBITDA of $23 million and EBITA of $19 million for the year (both excluding $1.1 million of non-recurring income), were both 13% higher than the pcp. Mr Bracewell says that the contribution to both revenue and earnings from this division has again been strong, with over half of this division’s revenue being generated in Australia, where Freightways now has a nationwide presence through its brands of DataBank, Archive Security, Filesaver and Shred-X. This division operates in New Zealand through the brands of Online Security Services, Archive Security, Document Destruction Services and Data Security Services.
All three internal service providers, Fieldair Holdings, Parceline Express and Freightways Information Services, continued to deliver outstanding service, underpinning the service offered by Freightways’ front line businesses.
Looking ahead, Mr Bracewell says Freightways “expects to be operating in a positive, but slow, growth environment for the foreseeable future.
In our express package business we expect overall incremental volume growth from existing customers, with B2C retail deliveries generated through online shopping again expected to grow more rapidly than B2B retail volumes. The information management division is again expected to deliver good year on year improvement underpinned by strong volume growth. In addition, Freightways will continue to seek out and develop growth opportunities, including acquisitions and alliances that complement its core capabilities.”
Capital expenditure for 2014 of approximately $14 million is earmarked to support the growth and development of both Freightways divisions, with cash flows expected to remain strong throughout the year.
Mr Bracewell says that based on Freightways’ current forecasting, Group profitability in 2014 is expected to demonstrate similar overall year on year improvement as was achieved in 2013.
Subject to business factors beyond its control, Freightways is well positioned to benefit from any further improvement in the markets in which it operates.
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