KEY POINTS:
Acquisitions have helped Freightways post a record result and the company is well placed to cope with turbulent market conditions, says managing director Dean Bracewell.
"If things got materially worse out there then sure we'll feel it like everybody. But we will have, I think, a greater ability
than some to deal with it because of the flexibility of the business model," Bracewell said. "If things ramp up and become positive then we're in position with capacity and we will get some really good positive performance from our business."
Net profit for the six months ending December 31 was up 2 per cent at $16.8 million on the back of a 12 per cent rise in revenue to $162 million.
Bracewell said the core express packaging business had performed well in a challenging market place, while emerging operations in business mail and information management had produced outstanding results.
Freightways owns New Zealand Couriers, Post Haste Couriers, Castle Parcels, SUB60, Security Express and Kiwi Express.
Express package volumes had flattened out, while acquisitions accounted for 5 per cent revenue growth, resulting in greater debt at a higher average interest rate.
"So we're not getting the positive leverage through the [profit and loss statement] of those operating earnings but [net profit] of 2 per cent increase is still positive and it is up on where we were for the trading update in October."
Full-year net profit was expected to be higher than last year. Freightways' shares closed down 4c yesterday at $3.15.
The core express package business was expected to perform soundly, with growth influenced by the domestic economy, Bracewell said.
"For the near term, I'm talking probably for the next half, we're not expecting any great lift, we're not expecting any great reversal in those volumes."
Near-term cost increases were expected to be moderate, although fuel prices were volatile and higher than historical levels.
The company was determined to make a decision for medium and longer term benefit, Bracewell said. "We know that we've been through quieter times before and we've got to invest in our capability so that we can get the benefits from tomorrow's growth when it comes back," he said.
Express packages and business mail accounted for 85 per cent of earnings before interest and tax, while the information management sector made up 15 per cent, compared to 9 per cent last year. The company said its recent acquisitions in the information management sector were all experiencing strong growth.
Document destruction businesses Shred-X and Document Destruction & Paper Recyclers in Queensland - both bought in July last year - had delivered against expectations.
"We've been busy in Australia over the last 18 months and we expect to be able to continue to build upon a platform that we have established over there," Bracewell said.
Freightways would continue to explore complementary acquisitions and alliances.
"Our activity in recent times has certainly been information management and it's probably more like in the near term to continue there."
The company had finance facilities in place through to 2010 and would not be shy about asking the market for support, he said. Interest rates would change the merger and acquisition market but not Freightways' strategy, Bracewell said.
"There might not be such heated competition for assets at the top end because debt is more expensive than what it used to be."
A fully imputed dividend of 9.5c per share was declared, compared to 9c the previous year.
"That reflects the board of directors' confidence in the business and also management's confidence in what they are doing and how they see the near term."
