Freightways dividend soars over forecasts

By PAM GRAHAM

The 7000 mostly New Zealand shareholders who bought into Freightways last year are getting a bigger-than-forecast first dividend payment.

The express freight company, which debuted on the NZX last September, yesterday reported a $8.5 million interim profit and will pay out $7.25 million, or 5.85c a share, as an interim dividend.

That exceeds the $6.75 million dividend forecast in the prospectus and implies a 10.9 per cent yield on the $1.60 a share float price. The dividend yield is closer to 7 per cent at yesterday's share price of $2.39.

Freightways is casting aside the image of being a mature business as the power of its national network and 39.5 per cent share of the express package market, which delivers 90 per cent of its profits, becomes more apparent to investors.

New Zealand Post has about 43 per cent of the market.

Chief executive Dean Bracewell said the market share figures did not suggest a cosy duopoly with NZ Post, arguing Freightways had not put up its prices as much as NZ Post last year and had picked up a 1 per cent market share increase.

"They [NZ Post] are more focused on returns than market share," he said. "One of Freightways' core strategies, and it remains today, is to keep our prices as low as possible so that we make it easier for the market to come to us."

While the around-town courier market has low barriers to entry, anyone wanting to deliver parcels nationally overnight needed an air network and large contracted courier fleet.

Freightways has 1000 couriers across its New Zealand Courier, Castle Parcel and Poste Haste brands and will tonight load about 26 tonnes of airfreight in Auckland and 12 tonnes in Palmerston North onto dedicated aircraft.

It is not signalling foreign expansion, but wonders if Toll Holdings, which is in parcel delivery in Australia, will expand in that market here.

Freightways' 20 per cent shareholder, ABN Amro Capital, must hold its shares for a year and it had no comment yesterday on what it would do after that.

Bracewell said private equity companies did not hold shareholdings long term. "I think they'll enjoy the dividend in the meantime," he said.

Freightways is eyeing the business mail market where it operates the DX Mail brand.

NZ Post is putting its standard letter rate up 5c to 45c in April but Bracewell said his company had to be careful in that market because the cost of sorting and handling standard mail was high.

"We have 2 per cent of the $600 million postal market, there has got to be opportunities there.

"DX Mail will visit customers, will put together a solution for business mail and New Zealand Couriers will pick it up and deliver it first thing in the morning.

"That is the niche we are working."

The company has announced the purchase of Archive Security for $7.5 million to improve its position in the record management market where it competes with international players.

Freightways reported revenue of $106 million in the six months to December 31, up 7 per cent on last year.

It earned $20 million before interest tax and writeoffs, up 21 per cent on last year.

The company signalled a bottom-line annual profit of $12.8 million in its prospectus.

Freightways

Six months to December 31 2003

Revenue $106.9m

Pretax profit $14m

Unusual items ($36,000)

Tax ($5.5m)

Net profit $8.5m

Earnings/share 6.95c

*Dividend 5.85c (*Payable March 31)

Figures for previous year not reported.