Fliway cuts earnings guidance as capacity constraints squeeze margins

Fliway Group cut annual earnings guidance as growing capacity constraints squeeze the listed transport and logistics firm's margins, even as revenue grows with rising transport volumes.

Net profit is expected to be between $3.5 million and $3.8 million in the 12 months ending June 30, down from a previous forecast range of $4.2 million to $4.4 million, Fliway said in a statement. Earnings before interest, tax, depreciation and amortisation are projected to be between $8 million and $8.3 million and revenue will likely exceed $82.6 million.

"Fliway continues to experience transport volumes ahead of prior periods and with linehaul equipment availability remaining reduced, this has led to short-term fleet capacity constraints," chief financial officer Jim Sybertsma said. "As a result, Fliway is having to utilise higher cost external freight capacity to support increased volumes."

The Auckland-based company posted a 39 percent drop in first-half profit as the loss of a major customer was compounded by increased freight costs from the Kaikoura earthquake. Fliway had been expecting an improvement in the second half and tasked its team with growing sales.

The company today said it expected second-half revenue to be about 4.8 percent ahead of the $38.8 million in the same period a year earlier, implying sales of $40.7 million.

"Flyway revenue continues to grow, with a strong pipeline and high rates of conversion evidence throughout the second half of FY17, continuing the trend from 1H17," Sybertsma said. "Growth in revenue is critically important to developing the company's longer term earnings potential and delivering on our scale and efficiency objectives."

The transport group also said it expected a smaller earnings contribution from the UPS-Fliway joint venture as it sought to cut the cost of delivering packages across New Zealand.

"The import package volumes are lifting, but the growth is currently not enough to offset the changes made in the joint venture compensation model," Sybertsma said.

Fliway shares last traded at $1.05, down 1.9 percent so far this year.

(BusinessDesk)