Courier firm Freightways expects its purchase of Databank Technologies in Australia will offset forecast lower growth from its existing customers by boosting earnings for it data storage sector.
The company announced yesterday the $18 million purchase of Databank - which holds the No 2 position for offsite data storage servicesin Australia.
"Data security is becoming increasingly important and this purchase further diversifies our earnings, and offsets the express package market which is hotly contested," said Freightways managing director Dean Bracewell.
In February he said that Freightways expected to see lower growth from existing customers and the business environment would remain challenging.
Bracewell denied speculation in the market that Freightways could be the subject of a takeover. "We just deal with facts," he said.
Shares in Freightways closed at $4.00 last night after trading between $3.10 and $3.80 over the past 12 months.
Bracewell said the purchase would immediately boost its earnings because performance incentives for Databank had been tied in with the deal.
Earnings before interest, tax and amortisation in the first year of ownership of Databank was forecast to be A$2.7 million.
A payment of $6 million would be made to Databank after the financial result for the year to June 30, 2007 and 2008 but only if annual earnings performance had been achieved.
"It is a bit of a unique buyout scheme, in that it gives vendors some opportunity to improve what they are paid on the future performance of the business," said Bracewell.
Express package services - New Zealand Couriers, Post Haste Couriers, Castle Parcels, SUB60, and Security Express - make up the majority of Freightways' revenue and earnings.
The company's earnings before interest, tax, depreciation and amortisation was $55 million in the 2004/05 financial year.
Freightways operated in the express package, information management and business mail markets.
Big buy
* Freightways bought Databank Technologies for $18m
* Databank Technologies is a data storage company in Australia
