Freightways Delivers Again With Record Full Year Result
Freightways Limited (NZX:FRE) has been able to shrug off a challenging domestic market to achieve record revenues and earnings for the year ended 30 June 2008.
Managing Director Dean Bracewell reports that the successful execution of Freightways’ growth strategy in the Australian market, a sound result from its core express package division in a challenging local market and outstanding performance from the information management division, all combined to help the company continue its run of consecutive record annual results since listing on the NZX in September 2003.
Consolidated operating revenue for the year (to 30 June) of $324 million – topping $300 million for the first time – was 14% up on the previous year, with earnings before interest, tax, depreciation and goodwill amortisation (EBITDA) of $68.5 million, 9% ahead of the previous year. Earnings before interest, tax and goodwill amortisation (EBITA) of $60.5 million for the year were up 7% on the previous year.
Cash generated from operations for the year before interest and tax was $67.5 million, 8% higher than the previous year, while consolidated net profit after tax (NPAT) of $32.3 million was 5% higher than the previous year.
Freightways has declared a final dividend of $11.9 million, delivering a full year payout in line with its dividend policy. This translates to 9.25 cents per share (fully imputed), to be paid on 30 September 2008. The record date for determination of entitlements to the dividend is 12 September 2008. This brings the total payout in respect of the year to $24.1 million or 18.75 cents per share (fully imputed), 4% higher than the previous year.
According to Mr Bracewell “despite a very challenging operating environment in New Zealand, including rising fuel costs and negative organic volume growth, Freightways has delivered another record result and better positioned itself for future growth.” He expects Freightways “to continue achieving positive performance for shareholders and other stakeholders, subject to business factors beyond its control.”
In the express package division, which continues to contribute the majority of Freightways’ revenue and earnings, Mr Bracewell acknowledged that “the increased cost of fuel has had a significant impact. Despite this and other cost pressures, including the Government’s surprise increase to Road User Charges, Freightways continues to make decisions for the long-term good of the business.” This division includes New Zealand Couriers, Post Haste Couriers, Castle Parcels, SUB60, Security Express, Kiwi Express and the recently acquired NOW Couriers that had delivered against initial expectations in its first 3 months under Freightways’ ownership.
Mr Bracewell says the express package division achieved earnings for the year slightly above what it achieved in the previous 12 months, “which is a credit to the strength and flexibility of the Freightways model and to the team who delivered this result.”
DX Mail, which operates in the domestic postal services market significantly grew its overall volume and revenue, but struggled with earnings in the second half of the year due to a changing business mix that affected margins. In addition, DX Mail had to invest in adjusting its operation to comply with the new pricing-in-proportion regime introduced to the market by NZ Post in March 2008.
Mr Bracewell says Freightways views the information management market as “an emerging growth opportunity, as evidenced by its recent acquisitions. The group’s information management businesses currently contribute around 15% of Freightways’ annual revenue and earnings and experiencing strong growth on both sides of the Tasman.”
In July 2007 Freightways acquired the document destruction businesses of Shred-X and DDPR in Queensland, both of which have delivered to expectation. This led to the recent purchase of Fine Paper Suppliers, a similar business in Victoria. Meanwhile, the DataBank business, which operates in NSW, Victoria, South Australia and Queensland, extended its National presence in Australia by purchasing National Records Managers (ACT) and Moorside Document Storage (Victoria).
The group’s internal services providers, Fieldair Holdings Limited, Parceline Express and Freightways Information Services all continued to deliver outstanding service and Mr Bracewell says each has the capacity to accommodate future growth.
“In recent years Freightways has successfully embarked on diversifying its activities both geographically and deeper into the informational management market,” notes Mr Bracewell. “We will continue to seek out and develop growth opportunities that complement our existing capabilities to support this strategy.”
Looking forward, Mr Bracewell expects Freightways’ core express package division to continue to perform soundly overall, although fluctuating month on month volume, such as is currently being experienced, makes it difficult to accurately forecast near term performance. While some cost increases are expected to moderate in the 2009 financial year, the cost of fuel is naturally very difficult to predict. Freightways’ business mail operation is expected to improve its year on year performance in 2009. Freightways’ information management businesses both in New Zealand and Australia are expected to continue their positive development.
Mr Bracewell expects Freightways’ performance to continue the trend shown in this and recent results announcements, albeit the performance of the New Zealand economy will influence this outcome. In the medium to long-term, Freightways is exceptionally well positioned to reap the benefits of any improvement in the New Zealand marketplace.
For further information contact:
Ph: (09) 571 9670
Fax: (09) 571 9671