An update on the unaudited trading performance of Freightways Limited (Freightways) for the three months ended 30 September 2009 is provided below. To ensure a like-for-like comparison, the prior comparative period has been normalised to remove 5 extra days that were accounted for in the comparative quarter.
For the three months ended 30 September 2009, Freightways revenue totalled $82 million, generating Net Profit After Tax (NPAT) of $7m, a 2% increase on the prior comparative period after normalisation. Lower debt levels as a result of recently executed capital management initiatives resulted in lower interest charges during this period, contributing to this positive NPAT result.
The impact of the current economic downturn remains evident in Freightways’ performance with a decline in revenue of 5% and in EBITDA and EBITA of 5% and 7.5%, respectively, compared to the prior comparative period after normalisation. This performance is consistent with Freightways’ outlook comments in its recent full year announcement. It is however a significant improvement upon the result for the June quarter of 2009 when compared to its prior comparative period.
Freightways’ express package & business mail division continues to experience lower overall volumes and revenue when compared to the prior year, although we have seen some recent signs of improving activity from some customers. Volumes have also been assisted by some significant new customer wins, including the Australia Post initiative that commenced in September. Freightways’ brand positioning, the experience of its people, the consistency of its service performance and its ability to innovate alongside its customers continues to be recognised with quality market share gains.
Freightways’ information management division continues to grow activity in all three service lines of document storage, data storage and document destruction. As expected, it is currently receiving lower revenue from recycled paper sales and the cost base has increased due to investment in increased capacity. This will accommodate growing demand for information management services.
This trading update again demonstrates the resilience of the Freightways business model. The importance of past strategic decision-making and the more recent capital management initiatives, combined with the success of increased service quality and cost reduction focus across all businesses, has contributed to this result. The update also provides evidence of an improved operating environment when compared to the previous quarter.
Results for the three (3) months ended 30 September (unaudited):
|Three months ended:||30 September 2009||30 September 2008||% increase|
NB: For comparative purposes, the 30 September 2008 numbers above have been normalised to remove 5 extra trading days from that period.
The graphs below demonstrate the strong historic performance of Freightways.
Freightways Operating Revenue
While it appears that an economic recovery is underway, the recovery in our view remains fragile and as a consequence volatility is ever present. Freightways’ recent performance is nevertheless encouraging. However, if this recent improvement cannot be sustained and augmented with positive organic volume growth, then the express package & business mail division’s near term performance will continue to track below the prior year. Organic growth initiatives are being accelerated wherever possible and costs are expected to decline in those businesses where revenue growth is not being achieved.
Near term performance in the information management division is also expected to continue to track behind last year, due to the increased cost of recent capacity investment and lower recycled paper sales revenue. This performance is expected to improve as the year progresses and spare capacity is utilised and also if we experience an improvement in paper revenues. Paper revenues are influenced by global demand and accordingly are expected to react positively to global economic improvement.
Forecast capital expenditure in 2010 of approximately $13 million is significantly lower than 2009 levels. Overall, cash flows are expected to continue to remain strong throughout the year.
Proceeds from capital management initiatives executed during 2009 have been used to reduce debt and strengthen Freightways’ balance sheet so that the company is more strongly positioned to navigate through the current economic cycle. The introduction of a fully underwritten DRP in respect of the 2009 final dividend has also assisted in this regard. Newly renegotiated finance facilities which provide funding certainty through until August 2012 were implemented during September. As a result of increased bank margins associated with these facilities, Freightways will experience higher future interest charges than is evident in its first quarter result.
In recent years, Freightways has strengthened its earnings profile by diversifying its activities both geographically and deeper into the information management market. Freightways will continue to seek and investigate growth opportunities to support this strategy and will also explore other opportunities that complement its core capabilities.
Freightways is very well positioned with quality capacity to benefit from an improving Australasian economy.
In a difficult operating environment, Freightways has delivered a satisfactory result and has again demonstrated its resilience. The express package & business mail and information management divisions have performed soundly, albeit below last year. The current economic cycle will clearly continue to impact on Freightways’ performance. Medium to longer term and subject to business factors beyond its control, Freightways expects to continue achieving positive performance for its shareholders and other stakeholders, and is very well positioned to benefit from an improving Australasian economy.
For further information contact:
Ph: (09) 571 9670
Fax: (09) 571 9671