Fliway profit falls 31% on lost customer, Kaikoura quake

Fliway Group's annual profit came in at the top end of guidance, sliding 31%, as an operational restructure in response to a major customer loss and mounting freight costs from last year's Kaikoura earthquake staunched the decline.

Net profit fell to $3.9 million, or 8.6c a share, in the 12 months ended June 30 from $5.6 million, or 12.4c a year earlier, the Auckland-based company said in a statement. Revenue edged up 3.4% to $85.4 million as the company attracted new customers in the second half. The result pipped Fliway's own guidance for profit to be between $3.5-3.9 million, and was ahead of Forsyth Barr analyst Andy Bowley's forecast for $3.7 million on revenue of $83.9 million.

"The 2017 financial year was a year of significant changes and challenges as Fliway restructured based on the customer loss, exited its sub-scale courier operation, changed management in the international business and got on with building the revenue line," managing director Duncan Hawkesby said. "The metrics and position of the business have altered over the past 12 months to make Fliway more robust and a stronger platform from which to build a larger business."

Last year Fliway signalled it was in for a tough ride when it lost a major customer, saying that would probably hit underlying earnings by 10%. That was made worse by the November earthquake in Kaikoura, which cut off the arterial freight route in the South Island, pushing up transport costs.

Mr Hawkesby said there are still areas where the business can improve and volatile revenue demands greater vigilance on the company's cost base, especially when volumes exceed its capacity.

"Management is focused on continuing to build the business, delivering on revenue improvements and building profitability," he said. "The goal is clear – to make this a more profitable business we must make it a bigger business."

The board declared a fully imputed final dividend of 4c a share, payable on September 15 with September 8 record date. That takes the annual return to 6c, down from 8.65c a year earlier. The shares last traded at $1.15 and have gained 7.5% so far this year, lagging behind the 12% gain on the S&P/NZX All Index over the same period.

Fliway boosted net capital spending to $3.5 million from $2.5 million a year earlier, largely reflecting increased investment in vehicles to deal with the capacity constraints in the transport sector, and the extension of its warehouse in Wiri, Auckland. Net debt was $7.8 million as at June 30, up from $5.8 million a year earlier.

(BusinessDesk)