Another Record Result For Freightways
Freightways Limited (NZX:FRE) was still able to achieve record revenues and earnings for the year ended 30 June 2006, in spite of the anticipated lower growth in the express package market.
Consolidated operating revenue for the year (30 June) rose to $257 million, up 10% on the prior corresponding period, while earnings before interest, tax and amortisation (EBITA) of $53.4 million were 6% ahead of the previous year.
Cash generated from operations for the year before interest and tax was $53.3 million, while consolidated net profit after tax and before amortisation (NPATA) of $29.3 million, was 9% higher than the prior corresponding period.
As a result, Freightways has declared a final dividend of $11.2 million, delivering a full year payout in line with its dividend policy. The final dividend translates to 8.75 cents per share fully imputed, to be paid on 30 September 2006. The record date for determination of entitlements to the dividend is 15 September 2006. This brings the total payout in respect of the year to $22.1 million or 17.25 cents per share (fully imputed), 8% higher than the previous corresponding period.
According to Managing Director Dean Bracewell “during what was a very challenging year Freightways has again delivered a record result. This was achieved through a continuing focus on fundamental business disciplines by a very capable and highly-motivated team.”
He says that as expected and as advised to shareholders this time last year and again in its half-yearly report in February 2006, Freightways “has experienced lower growth from its existing customers in the express package market than in recent years.” This occurred as a result of a less buoyant domestic economy, coupled with exceptionally high fuel prices and the increased costs of doing business generally.
“Consequently express package organic growth has been modest, with the primary drivers of revenue growth being good gains in market share and increased pricing necessary to offset the escalating costs of fuel.”
DX Mail, a nationwide business mail competitor to NZ Post, increased its contribution to the Freightways result. Mr Bracewell reports that demand for its broad suite of alternative delivery services remains strong and DX Mail is seen as an emerging growth opportunity within Freightways’ portfolio of businesses.
In the area of Information Management, the businesses of Archive Security, Document Destruction Services and Data Security Services again increased their contribution to the Freightways result, with Archive Security, in particular, achieving significant growth from both existing and new customers. The report says this growth has brought forward plans to extend facilities in the main business centres across the country. Having recently completed an extension in Christchurch, plans are to extend the Auckland facility in the coming financial year and Wellington shortly thereafter.
The internal linehaul providers, Fieldair Holdings and Parceline Express continued to provide a seamless and efficient air and road linehaul service, respectively.
Looking forward Mr Bracewell expects the core express package business to perform soundly, “although growth in this market will be influenced by the performance of our domestic economy, which continues to show signs of slowing. We have seen evidence of this in our customer base for some time and have not seen any signs to suggest the business environment we operate in will be any less challenging in the near term.”
While growth in the Business Mail division may also be influenced by slowing business activity, he expects the Information Management division to continue to show “strong growth due to increased outsourcing and the ongoing organic growth that this industry is currently experiencing.”
He says the recent acquisition in Australia of DataBank, a business based in Sydney and Melbourne which services the information management market in the data storage niche, “was a well considered and obviously important step in the development and growth of Freightways. It diversifies our interest both geographically and deeper into the information management market where we have had proven success and in time will create the opportunity to develop further growth initiatives in Australasia.
In his report Mr Bracewell says “capital investment, expected to total around $9 million, will be spent during the next financial year in areas that support the growth of our core and emerging businesses and we will continue to explore acquisitions that complement our existing capabilities.” While in the short term he expects Freightways’ growth to be influenced by the performance of New Zealand’s domestic economy, “medium to long term, and subject to business factors beyond our control, Freightways is exceptionally well positioned in all aspects to continue to deliver positive performance to shareholders and all stakeholders.”
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