Strong Full Year Result For Freightways
Record revenue of $353 million for the year ended 30 June 2011, double-digit earnings growth in the second and fourth quarters in its core express package & business mail division and continuing outstanding performance in its information management division has enabled Freightways (NZX:FRE) to deliver 7% improvement in net profit after tax (NPAT), exclusive of non-recurring expenses.
Freightways’ consolidated operating revenue of $353 million for the full year was $24 million or 7% up on the prior comparative period (pcp). As a result, earnings before interest, tax, depreciation and goodwill amortisation (EBITDA) (excluding non-recurring expenses) was $66 million for the full year, 4% higher than the pcp and EBITA (excluding non-recurring expenses) of $57 million for the year, 5% higher than the pcp.
NPAT of $31 million for the full year was 7% higher than the pcp, excluding non-recurring expenses (and allowing for the abnormal tax charge of $5.7 million in the pcp).
Managing Director Dean Bracewell says that while several Freightways’ businesses were affected by the Christchurch earthquakes and the Queensland floods, no staff were seriously injured and disruption to customers was kept to a minimum, due to the tremendous service ethic and teamwork of the Freightways team. Reduced activity and revenue following the earthquake resulted in an estimated $1.5 million loss of operating earnings, as announced to the market during March. Considerable earthquake damage was sustained in the information management business. The cost of re-establishing the Christchurch operations of this division, exclusive of insurance proceeds already received was $1.1 million and in respect the express package & business mail division direct costs were incurred of $0.2 million. Accordingly, $1.3 million ($0.9 million after tax) has been recorded as a non-recurring expense.
A final dividend has been declared of 7.25 cents per share, fully imputed at a tax rate of 30%, representing a payout of approximately $11.2 million, compared with $11.1 million for the interim dividend. This brings the full year’s dividend payout in line with Freightways’ dividend policy of paying out 75% of annual NPAT before goodwill amortisation (NPATA). The dividend will be paid on 30 September 2011. The record date for determination of entitlements to the dividend is 16 September 2011. No Dividend Reinvestment Plan (DRP) will be offered in relation to this final dividend.
Mr Bracewell lists “the express package & business mail division returning double-digit earnings growth in the second and fourth quarters; the roll out of the information management division throughout Australia; the outstanding performance of the information management division, and the overall resilience shown by Freightways despite the challenges of nature and the economy,” as highlights for 2011.
The core express package & business mail division contributes almost 80% of group revenue and earnings from its brands (New Zealand Couriers, Post Haste Couriers, Castle Parcels, NOW Couriers, SUB60, Security Express, Kiwi Express and DX Mail). In his review of the division’s operations Mr Bracewell says “increasing volumes from many customers, positive market share gains and modest price increases underpinned very sound revenue growth in this division.”
Operating revenue from that division of $278 million for the full year was up $14 million or 5% on the pcp, with EBITDA for the full year of $50 million and EBITA of $45 million respectively higher by 2% and 4% than the pcp. “During the year a small postal service provider was acquired, parcel products were marketed for the first time through national retail chains, growth in newly-established international services outpaced domestic growth and the brands of ‘Pass the Parcel’ and ‘Stuck’, established in 2010, continued to gain increasing market support”.
The information management division, now firmly established on both sides of the Tasman, reported operating revenue of $76 million for the full year, up $10 million or 15% above the pcp, with EBITDA of $17 million up by 13% over the pcp. This division operates Online Security Services, Archive Security, Document Destruction Services and Data Security Services locally and DataBank, Archive Security and Shred-X across in Australia.
Mr Bracewell says this division contributes over 20% of Freightways’ total revenue and EBITA and its overall performance “this year has been outstanding. During 2011 we leased additional capacity in Auckland, Wellington, Sydney, Melbourne, Adelaide and Perth, and while this increased capacity has come with a stepped increase in lease costs, as this capacity is utilised margins are expected to return to previous levels. Such is the demand for our document management services that utilisation in each of these new facilities is already running ahead of initial expectations”.
During the year Shred-X launched operations in South Australia, New South Wales and West Australia, meaning the information management division now has total nationwide coverage in both Australia and New Zealand in all three of its primary service lines. Prospects for this division remain very positive.
All three internal service providers, Fieldair Holdings, Parceline Express and Freightways Information Services continued to deliver exceptional service for the front line brands.
Forecast capital expenditure for the next 12 months is $17 million, including a one-off $4 million depot refurbishment in Auckland to accommodate the relocation of NOW Couriers, currently based off-site. Cost savings resulting from this move are expected to be achieved in the 2013 financial year.
Post balance date, Freightways’ total banking facilities were renegotiated with improved pricing and a new structure, effective from 1 September 2011, subject to final documentation. The revised facilities of NZD110 million and AUD70 million are spread equally between 3- year, 4-year and 5-year maturity.
Looking ahead, Mr Bracewell said Freightways expects to see its market segments “continue to gradually improve throughout 2012.” In recent years Freightways has strengthened its earnings profile by diversifying its activities both geographically and deeper into the information management market. “We will continue to seek and develop growth opportunities to support this strategy and also explore other opportunities that complement our core capabilities,” he says.
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