Fliway shares gain 10%

Fliway Group's shares climbed 10 percent since announcing its first-half earnings beat prospectus forecasts, as the freight and logistics company contained costs in the face of falling revenue.

The shares rose 10c  to $1.06 in early trading, a three-month high for the stock that was sold at $1.20 in an initial public offering last year.

Auckland-based Fliway today announced that pro forma net profit was between $3.3 million and $3.5 million in the six months ended December 31, beating the forecast $2.9 million in Fliways' March prospectus. The better-than-expected earnings helped cashflow stay ahead of forecast, which will lead to net debt being 20-30% lower than the $8.9 million anticipated.

"Payback on significant capital expenditure invested ahead of the listing has been validated in the results via the lower operating cost base and strong capacity management," Fliway said. "We continue to experience softer revenues. This reflects lower fuel costs, lower international shipping rates and a challenging trading environment."

Forsyth Barr broker David Price said investors had re-rated the stock after the news, with the announcement more about the company tightening spending than increasing revenue to create wider margins.The share movement mirrored the increased profit forecast on a percentage basis, he said.

Fliway has exposure to a bad debt from retail chain Dick Smith, now in receivership, and could see a weaker second half, Mr Price said.

At its annual meeting in October, Fliway warned revenue would probably miss the prospectus forecast for a second time due to depressed import and export ocean freight rates as a result of overcapacity, and adverse fuel hedging.

The company transports and warehouses freight throughout New Zealand and co-ordinates freight movements internationally, including customs clearance. It has 400 staff, 170 vehicles in its fleet, and 15 sites nationwide. It also owns half of UPS-Fliway, a joint venture ithas had for the past 17 years with UPS, one of the world's largest package delivery companies.

(BusinessDesk)