Freightways Delivers Again With Record Result
Freightways Limited (NZX:FRE) has been able to demonstrate the resilience of its business model in a difficult market by posting a record result for the half year ended 31 December 2007.
Managing Director Dean Bracewell says the Freightways core express package businesses continued their solid performance and the emerging growth businesses in the business mail and information management markets delivered outstanding results. As a consequence he says the directors are pleased to declare an increased interim dividend.
Consolidated operating revenue of $162 million for the half year was 12% higher than for the corresponding period 12 months ago, with earnings before interest and tax (EBIT) of $31 million up by 6% over the same period.
Consolidated net profit after tax of $16.8 million for the half year was 2% higher than the prior corresponding period.
Mr Bracewell says that despite rising costs and the challenging operating environment “the half year result reflects another strong period for Freightways that has continued to deliver upon its strategy.” As a result, Freightways has declared a dividend of $12.2 million reflecting this sound half year performance which translates to 9.5 cents per share, which is 6% higher than the prior corresponding period and will be paid on 31 March 2008. The record date for determination of entitlements to the dividend is 14 March 2008.
He reports that “results over the last six months in this market were sound with revenue growth contributing to offset the higher cost of doing business. This performance clearly demonstrated the resilience of the Freightways business model and the value created by its strategic decisions.”
The core express package brands of New Zealand Couriers, Post Haste Couriers, Castle Parcels, SUB60, Security Express and Kiwi Express continue to contribute the majority of Freightways’ revenue and earnings, where the primary focus is to defend and grow the business. “A vast number of initiatives implemented by a very experienced and capable team of people helped to achieve this objective,” he says. In the current operating environment of low organic volume growth and rising costs, Freightways has continued its long-term investment in facilities, technology, customer service initiatives and the training and development of its people. “We are confident that the work we do in these areas today during the quieter times will determine our ability to reap the benefits from tomorrow’s growth,” he says.
The report says that while its contribution to Freightways’ earnings remains relatively small, the performance of the DX Mail business during this half year has been outstanding, and it is seen as an emerging growth business.
Freightways also views the information management market as an emerging growth opportunity, as evidenced by the recent acquisitions it has completed in New Zealand and Australia, with all businesses experiencing very strong growth. In New Zealand, Archive Security, Data Security Services and Document Destruction Services are based in five key locations that enable the provision of a national service. In Australia, the businesses of DataBank and Shred-X offer a national service and are concentrated in NSW, Victoria and Queensland, with a further Databank branch opened in South Australia in January 2008.
In July 2007, Freightways took over the document destruction businesses of Shred-X and Document Destruction & Paper Recyclers in Queensland. These acquisitions have delivered against Freightways’ expectations and also led to closer investigation of further growth opportunities in Australia.
The three internal service providers, Fieldair Holdings Limited, Parceline Express and Freightways Information Services also continued to deliver outstanding service. While corporate costs increased with the establishment of an office in Melbourne to support the Australian operations, Freightways re-negotiated its finance facilities in August 2007 for a further three years, with sufficient funding headroom to enable the execution of any near-term incremental acquisition opportunities.
Looking ahead, Mr Bracewell says while the core express package business is expected to perform soundly, growth in this market will again be influenced by the performance of the domestic economy. The emerging growth businesses in the business mail and information management markets are also expected to continue their positive growth and development. Costs increases are expected to moderate in the near term, although the price of fuel continues to be volatile and remains well above historic levels.
“In the near term, we expect Freightways’ performance to continue the trend shown in this and recent results announcements, continuing to grow positively,” he says. “In the medium to long-term, Freightways is exceptionally well positioned to reap the benefits of any improvement in the domestic marketplace.”
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