Freightways Delivers A Record Half Year Result
Freightways Limited (NZX: FRE) has announced a record consolidated result and interim dividend for the half year ended 31 December 2014, with all businesses across every region improving their performance.
Operating revenue of $242 million was 11% higher than the prior comparative period (pcp). Earnings (operating profit) before interest, tax, depreciation and amortisation (EBITDA) of $49 million and EBITA of $42 million were up 16% and 17%, respectively, over the pcp, while net profit after tax (NPAT) of $26 million and NPATA of $27 million were both 21% higher than the pcp.
Cash generated from operations was again strong at $50 million, up 25% on the pcp, while earnings per share (EPS) for the half year was 17 cents per share, an improvement of 21% over the pcp.
This result includes the benefit of three extra trading days compared to the pcp. Given the overall immateriality of this benefit to the half year figures, no additional analysis of the result excluding these three days is provided and the result is as reported.
Managing Director Dean Bracewell says “organic growth strategies were rewarded through continued support and increased activity from existing customers and greater demand for newly-introduced digital services. The half year saw the acquisition of further Australian-based information management businesses and solid performance from those businesses acquired in the previous financial year”.
Freightways’ Directors have been able to declare a record interim dividend of 12 cents per share, fully imputed at a tax rate of 28%. This represents a payout of approximately $18.5 million compared with $15.4 million for the pcp interim dividend of 10 cents per share, a 20% increase. The dividend will be paid on 7 April 2015. The record date for determination of entitlements to this dividend is 20 March 2015.
Freightways is a leading provider of express package & business mail services throughout New Zealand, with a strong presence in information management on both sides of the Tasman.
The operating revenue for the core express package & business mail division for the first six months of $185 million was 10% higher than the pcp. This division contributes around 75% of Freightways’ revenue and earnings through its domestic brands of New Zealand Couriers, Post Haste, Pass The Parcel, Castle Parcels, NOW Couriers, SUB60, Security Express, Kiwi Express, Stuck, DX Mail and Dataprint.
EBITDA of $36 million and EBITA of $33 million were 16% and 17% higher than the pcp, respectively.
Mr Bracewell says “a pleasing aspect was the strong growth with all businesses improving their year-on-year performance, having planned to cope with the peak volumes experienced in the weeks leading up to Christmas. These plans included the continued growth of internet shopping and the many new delivery points that would require servicing.”
Throughout the half year, activity from existing customers also increased progressively, while new customers were introduced across the division. The business mail operation, DX Mail, again grew its share of the postal services market, despite the overall decline in that sector due to electronic substitution.
The Dataprint business, with its full suite of both physical and digital mailhouse services, also had a strong first half.
Operating revenue for the information management division of $58 million was 12% above the pcp and this division now generates around 25% of Freightways’ revenue and earnings. Growth on both sides of the Tasman was equally strong, as demand from businesses for physical storage of documents and computer media continues to increase, while newly-introduced digital services have gained encouraging support from existing and new customers. EBITDA of $14 million and EBITA of $11 million were 15% and 18% higher than the pcp, respectively.
This division operates in New Zealand through the brands of Online Security Services, Archive Security, Document Destruction Services and Data Security Services, while in Australia it now has a foothold in every state and territory through the brands of TIMG (The Information Management Group), DataBank, Archive Security, Filesaver, LitSupport and Shred-X.
The document destruction businesses, particularly Shred-X in Australia, have seen increased demand for secure destruction services, improved prices for the sale of shredded paper and the benefits of recent acquisitions; all of which have contributed positively to performance.
Mr Bracewell says the businesses acquired in the previous financial year are performing well and, as previously announced, further information management businesses have recently been acquired in Australia. Investment during this period in future capacity and capability included the establishment of a new document shredding facility in Sydney and the relocation and consolidation of multiple operational sites in Queensland to a single facility.
The three internal service providers, Fieldair Holdings, Parceline Express and Freightways Information Services continue to deliver quality service, underpinning the service offered by the front-line businesses.
Looking forward, Mr Bracewell says “both the express package & business mail and information management markets remain positive and Freightways remains well-positioned to benefit from the opportunities that exist in these markets.
“We see the express package sector continuing to expand from the increasing activity amongst existing users and from the new volume created by online retailers. Similarly, growth is expected in business mail, driven by demand from businesses who still value overnight delivery of standard-priced mail or those seeking alternative or digital mailhouse services.
“We see more growth in the information management space due to the lower cost to businesses of outsourcing their document and computer media storage requirements. Privacy of business information will continue as a key driver of demand for secure document destruction services.”
Capital expenditure is expected to be approximately $17 million for the full year in support of Freightways’ continued growth and development. Cash flows are expected to remain strong throughout the 2015 financial year.
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