Freightways Delivers a Strong Half Year Result
Good performance on both sides of the Tasman has enabled Freightways Limited (NZX:FRE) to post a strong result for the half year ended 31 December 2011.
Group operating revenue of $192 million for the half year was 9% higher than the prior comparative period (pcp) with earnings before interest, tax, depreciation and amortisation (EBITDA) of $36 million, excluding non-recurring insurance proceeds of $1 million, up by 8% over the same period. EBITA of $31 million, excluding the non-recurring benefit, was 9% higher than the pcp.
Consolidated net profit after tax (NPAT), excluding the after-tax impact of the non-recurring benefit ($0.7 million), for the half year of $18.3 million was 16% higher than the pcp.
In his report, Managing Director Dean Bracewell says Freightways delivered a strong half year operating result that “is above the prior period in all respects, again demonstrating the resilience of the Group, the positive features of the market it operates in and the high quality of its subsidiary businesses.”
Freightways has declared an interim dividend of 8.5 cents per share, fully imputed at a tax rate of 30%. This represents a payout of approximately $13.1 million compared with $11.1 million for the pcp interim dividend of 7.25 cents per share. The dividend will be paid on 30 March 2012. The record date for determination of entitlements to the dividend is 16 March 2012.
Mr Bracewell says the highlights of the half year “include the very positive financial performance of the Group, the completion of two acquisitions, one in Australia and one in New Zealand, that add to the depth of our presence in the Australasian information management industry, and the continued successful execution of growth strategies across both the express package & business mail division and the information management division.”
In his review of operations, Mr Bracewell says the Freightways team in New Zealand and Australia “has again demonstrated its ability to deliver superior performance in a half year that has seen significant growth in both operating divisions. The benefit of the successful industry and geographical diversification strategy embarked upon in previous years is also evident in this result.”
The operating revenue for the core express package & business mail division of $149 million for the half year was 6% higher than the pcp. This division contributes around 80% of Freightways’ revenue and earnings through its brands of New Zealand Couriers, Post Haste, Castle Parcels, NOW Couriers, SUB60, Security Express, Kiwi Express and DX Mail.
EBITDA of $28 million for the half year was 8% higher than the pcp and EBITA of $26 million was up 9% on the pcp.
A particularly strong first quarter was followed by sound performance in the second quarter, with increased volumes from many existing customers and price increases underpinning the revenue growth.
The Christchurch earthquakes disrupted a number of Canterbury-based customers of a small international postal business Freightways acquired in November 2010, resulting in the revenue and earnings from that business only reaching around 80% of expectation. As a result, the performance hurdle for an earnout payment was not met and the reversal of this liability has provided a positive non-cash earnings benefit of $0.25 million to Freightways’ half year result.
During the half year the Hawkes Bay businesses relocated to new and larger premises while work also commenced on the redevelopment of the Post Haste Couriers and Castle Parcels depots at the main Auckland site. The Auckland works are to enable the future accommodation on site of NOW Couriers, currently operating from a separate location.
Operating revenue from the information management division of $44 million for the half year was 19% above the pcp. EBITDA of $9 million for the half year was 10% above the pcp, with EBITA of $7 million, 9% above the pcp.
In New Zealand this division operates through the brands of Online Security Services, Archive Security, Document Destruction Services and Data Security Services, while in Australia it operates through the DataBank, Archive Security and Shred-X brands.
During the half year Freightways acquired Iron Mountain’s New Zealand operations and the business and assets of Filesaver Pty Limited in Sydney. Financial performance from both entities is tracking to expectation. Strong growth experienced by this division has assisted in offsetting increased costs associated with leasing significant additional capacity in Australia and New Zealand.
Part of this growth has come from winning nationwide customers in Australia that would not have been achieved without this investment. New service lines have been added to Freightways’ suite of information management services, adding breadth to revenue and earnings. Mr Bracewell says the performance of the information management division and its ability to sustain high levels of growth has been outstanding.
Looking forward, Mr Bracewell says that “based on experiences in the first half of the 2012 financial year we expect to see continued gradual improvement in the market segments in which we operate.”
“Freightways has consistently demonstrated its ability to compete successfully in an openly competitive environment and it will continue to do so. Our express package brands are among the most recognised in New Zealand, our people have a depth of experience second to none and our service culture will continue to set us apart from our competitors.”
He says the information management division is transitioning successfully through a period of significant investment in capacity. It is expected to complete this transition while still delivering sound year-on-year earnings growth. This new capacity has already enabled the winning of customers with a nationwide presence and demand.
Capital expenditure for 2012 of around $20 million is expected, which includes the one-off $4 million depot refurbishment at the main Auckland site.
Mr Bracewell says Freightways will continue to seek out and develop growth opportunities both geographically and deeper into the information management market, while exploring other opportunities that complement its core capabilities.
For further information contact:
Ph: (09) 571 9670
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