Freightways Delivers Record Half Year Result
A widespread increase in activity has enabled Freightways Limited (NZX: FRE) to post a record result for the half year ended 31 December 2013.
Consolidated operating revenue of $218 million was 6% higher than the prior comparative period (pcp). Excluding a non-recurring item in the pcp, discussed below, earnings (operating profit) before interest, tax, depreciation and amortisation (EBITDA) of $42 million and EBITA of $36 million for the half year were up 6% and 7%, respectively, over the pcp, while consolidated net profit after tax (NPAT) of $22 million for the half year was 9% higher than the pcp.
Cash flows generated from operations were again strong at $40 million. Earnings per share (EPS) for the half year were 14.1 cents per share, an improvement of 8% over the pcp, excluding the non-recurring item.
In respect of the prior comparative period (pcp) for the half year ended 31 December 2012, a one-off $1 million non-taxable benefit to operating profit relating to the reversal of an acquired acquisition earnout payment, that was not payable, was recorded in the Income Statement as a non-recurring item. This non-recurring income amount has been excluded from the pcp numbers in this media release.
Managing Director Dean Bracewell says highlights of the first six months “include the strength of this result, which has delivered record performance in the express package and information management businesses, the successful execution of several acquisitions that have enhanced the positioning of the company, and our largest express package business, New Zealand Couriers, reaching the 50th year milestone.”
Freightways has declared an interim dividend of 10 cents per share, fully imputed at a tax rate of 28%. This represents a payout of approximately $15.4 million compared with $13.9 million for the pcp interim dividend of 9 cents per share. The dividend will be paid on 7 April 2014. The record date for determination of entitlements to this dividend is 21 March 2014.
The operating revenue for the core express package & business mail division of $168 million for the half year was 7% 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 $31 million for the half year was 6% higher than the pcp and EBITA of $28 million was up 7% on the pcp.
The express package brands are positioned to service different niches of the market, including urgent one hour delivery, premium through economy metropolitan, and overnight to two day nationwide deliveries. Our express package division includes the iconic New Zealand Couriers brand, or NZC as it is often labelled. NZC pioneered the country’s express package industry when it started door-to-door delivery in 1964. Demand grew quickly, as did the services it offered, and today it has a presence in every New Zealand town and city throughout the nation.
Mr Bracewell says the “growth and development of NZC has been characterised by constant operational and service innovation and, most importantly, a service culture which stands it apart as a market leader. I congratulate all those who have contributed to help NZC reach its 50th year milestone.”
Business mail operator, DX Mail, is successfully executing a range of growth strategies and while its half year performance was below the pcp, Mr Bracewell says the “traction it is achieving in the market is encouraging, particularly in regards to its physical postal delivery business and the digital communication services offered by its Dataprint mailhouse business.”
Operating revenue for the information management division of $51 million for the half year was 3% above the pcp and the division now generates around 25% of Freightways’ revenue and earnings. It recorded strong revenue growth in their respective currencies on both sides of the Tasman of 13% in New Zealand and 9% in Australia, ahead of the pcp. EBITDA of $12 million for the half year was 5% above the pcp, with EBITA of $10 million, 8% 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 and territory through the DataBank, Archive Security, Filesaver and Shred-X brands.
Growth in document and computer back-up tape storage, increased document destruction service activity and a growing take-up of digital services all contributed to the division’s strong performance.
Mr Bracewell says the four acquisitions completed during the latter stages of the half year, “add scale to our existing operations and significantly expand our customer base. All acquisitions have migrated successfully and are performing to expectation.”
The three internal service providers, Fieldair Holdings, Parceline Express and Freightways Information Services continue to deliver outstanding service, underpinning that offered by the front-line businesses.
Mr Bracewell says “we expect the positive growth evident in this half year result to continue in the foreseeable future. In the express package businesses we are particularly encouraged by the broad- based improvement evident in our half year result and expect this growth to continue both from Business to Business (B2B) and Business to Consumer (B2C) deliveries.
“The growth we are experiencing in our information management businesses is also expected to continue and will be enhanced by the benefits from the newly-acquired businesses. Revenue earned from the sale of recycled paper is expected to remain at similar levels to those achieved in this half year result.”
Capital expenditure for the half year was $9 million and is expected to be approximately $16 million for the full year to support Freightways’ continued growth and development. Cash flows are expected to remain strong throughout the 2014 financial year.
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