Freightways posts 5.5% gain in first-half profit, sees challenges in second half

Freightways [NZX: FRE], the courier and logistics business, posted a 5.5% gain in first-half profit on strong earnings from its information management division in New Zealand and Australia but warned conditions will be challenging in the second half.

Net profit for the six months ended December 31 rose to $27.7 million, from $26.3 million a year earlier, the Auckland-based company said in a statement. Operating revenue rose 5% to $255 million, although the year-earlier period included four extra trading days.

Managing director Dean Bracewell said the benefit of the company's diversification into the information management industry, which provides document and data storage, as well as document destruction, is evident from the fact that it accounted for nearly one-third of operating revenue and earnings in the first half. That compares to 20% five years ago.

The company has declared a 12.75 cents per share interim dividend, up 6% on the prior period, with a record date of March 18 and payable on April 4.

Freightways doesn't give guidance on its full-year results but Mr Bracewell said he was cautious about the outlook for the balance of the financial year, given the current volatility in markets and the dairy downturn taking money out of the New Zealand economy and denting confidence.

"I'm not an economic forecaster but, when I look at our business, we're being cautious about growth in the near term though long-term it is there," he said.

The more cyclical express package and business mail division is expected to perform at similar levels to the previous year while the information management division is expected to continue improving and increasingly underpin the company's overall performance.

Information management boosted operating revenue by 20% while ebitda of $17 million was 22% higher. Freightways has set up a parent brand – The Information Management Group – for the division, now it has national presence on both sides of the Tasman.

LiftSupport, the Australian information management business acquired in December 2014 is now trading better since restructuring, although the previous owners have had to write back $5 million of the sales price after failing to meet the thresholds set in the earnout agreement.

The core business of express package and business mail, whose brands include New Zealand Couriers and Post Haste, lifted operating revenue by 1% to $187 million although ebidta dropped 1% due to the extra trading days in the prior period.

Overall activity was boosted by a rise in business-to-consumer sales, with more people shopping online. Some extra staffing costs were incurred over Christmas, its busiest period, with courier activity peaking later than expected in December.

Mr Bracewell said its Pass the Parcel brand, which has been available to Trade Me shoppers for the past five years, is now being expanded to all retail customers. The service makes it easier to order a courier online and he said it had proved popular with consumers.

Freightways is moving to a new fleet of leased Boeing 737-400 aircraft from its existing Convair aircraft fleet, with the first 737 becoming operational in December and the other two due to begin operations by May next year. The new planes can carry a payload of around 17 tonnes, compared to 6.5 tonnes for the existing planes.

The company has debt-to-equity ratio of 42% and Bracewell said it had capacity for new acquisitions with a number of options being considered, including expansion outside New Zealand and Australia.

Capital expenditure in the first half was $8 million and forecast to be $20 million for the year.

(BusinessDesk)