Freightways Delivers Record Half Year Result
Continued strong growth on both sides of the Tasman has enabled Freightways Limited (NZX: FRE) to post a record result for the half year ended 31 December 2012.
For the first time, the half year’s consolidated operating revenue has topped $200 million, reaching $207m, 8% higher than the prior comparative period (pcp). Excluding non-recurring items, earnings before interest, tax, depreciation and amortisation (EBITDA) were $40 million and EBITA was $34 million for the half year, up by 9% and 8%, respectively, over the pcp.
Excluding non-recurring items, consolidated net profit after tax (NPAT) of $20 million for the half year was 10% higher than the pcp. Cash flows generated from operations were again strong at $37 million.
A non-recurring benefit of $1 million ($1 million after tax) relating to the reversal of an accrued acquisition earnout payment no longer expected to be payable was recorded for the half year. The pcp earnings included a non-recurring $1 million benefit ($0.7 million after tax) relating to earthquake related insurance claim proceeds. These non-recurring items have been excluded from the EBITDA, EBITA and NPAT results referred to above.
Managing Director Dean Bracewell says highlights of the first six months were “sustaining the growth momentum in the express package businesses on the back of a very strong prior half year, the deployment of several customer-faced technology initiatives which added further value to the many services we provide, and good market share gains in Australia from some significant new nationwide customers.”
Freightways has declared an interim dividend of 9 cents per share, fully imputed at a tax rate of approximately 28%. This represents a payout of approximately $13.9 million compared with $13.1m for the pcp interim dividend of 8.5 cents per share. The dividend will be paid on 2 April 2013. The record date for determination of entitlements to this dividend is 15 March 2013.
In his review of operations, Mr Bracewell says strong results were again achieved in both the express package & business mail and information management divisions.
The operating revenue for the core express package & business mail division of $158 million for the half year was 6% higher than the pcp. This division contributes around 75% of Freightways’ revenue and earnings through its domestic brands of New Zealand Couriers, Post Haste, Castle Parcels, NOW Couriers, SUB60, Security Express, Kiwi Express, DX Mail and Dataprint.
EBITDA of $29 million for the half year was 4% higher than the pcp and EBITA of $26 million was up 2% on the pcp.
The sustained performance of this division in the first and second quarters, which again demonstrated steady year-on-year improvement was encouraging, particularly given the very strong performance achieved in the prior year. Underpinning this result was growth in volumes from existing customers, pricing improvement and some acquired revenue.
Operating revenue for the information management division of $50 million for the half year was 15% above the pcp and the division now generates around 25% of Freightways’ revenue and earnings. EBITDA of $11 million for the half year was 21% above the pcp, with EBITA of $9 million, 23% 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 now has a foothold in every state through the DataBank, Archive Security and Shred-X brands.
The record result for this division came from good growth in all locations across New Zealand and Australia. This growth helped offset the impact of the current low price received from the sale of recycled paper from the document destruction operations. With the recent gain of a significant nationwide customer, Shred-X has invested in resources to extend its paper collection network beyond the metro networks and into regional areas throughout the east coast of Australia.
The three internal service providers, Fieldair Holdings, Parceline Express and Freightways Information Services continued to deliver outstanding service, underpinning that offered by the frontline businesses.
Looking forward, Mr Bracewell says that “while we expect to be operating in a slow growth environment for the foreseeable future, we expect the positive momentum being achieved by our express package brands to continue at similar levels for the foreseeable future. Along with gradual growth in our traditional customer base, we are experiencing continued strong volume growth from businesses and consumers shopping online.”
The growth Freightways has been steadily recording in the information management division is expected to continue with strong market support for its services and the gaining of new nationwide customers following the recent investment in capacity and resources. While business mail operations are expected to face declining letter volumes, it is expected that much of this decline will be offset by an increase in market share.
Forecast capital expenditure for the year ending 30 June 2013 of around $14 million is expected to continue supporting the growth and development of both operating divisions. Cash flows are expected to remain strong throughout the 2013 financial year.
Mr Bracewell says Freightways is well positioned to reap the benefits of further improvement in the markets in which it operates. It will also 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.
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