Freightways profits up 7pc to $34.6m

Photo / Glenn Jeffrey

Freightways reported a 7 per cent rise in full year net profit to $34.6 million, even as the earnings performance of the core express package business dropped below the prior year.

Revenue from ordinary activities for the 12 months to the end of June was up 5 per cent to $339.5m, while earnings before interest, tax, depreciation and goodwill amortisation (ebitda) rose 3 per cent to $70.5m.

Included in the ebitda numbers was a one-off profit of $4m - a $3.9m gain in the net profit - from the sale and lease-back of a property in Wellington, Freightways said today.

The company is to pay a final dividend of 8.5c per share, compared with 9.25c last year.

Freightways also said it was introducing a dividend reinvestment plan in light of the current, exceptionally uncertain operating environment.

The plan would provide all eligible existing shareholders with the opportunity to increase their equity stake in Freightways, should they choose to do so.

It would also serve to further strengthen Freightways' balance sheet by introducing new equity and by enabling the company to maintain its current level of cash reserves.

The core express package business contributes most of Freightways' revenue and earnings. The company operates the brands New Zealand Couriers, Post Haste Couriers, Castle Parcels, NOW Couriers, SUB60, Security Express and Kiwi Express.

The economic downturn led to lower express package volumes from some of Freightways' existing customers, Freightways said.

Volumes were continuing to fluctuate week to week creating difficulties in financial forecasting and when planning near term operational capacity.

"Overall, the full year earnings performance of Freightways' express package business is below the prior year," the company said.

"The just completed fourth quarter has been particularly quiet when compared to the same period in the prior year."

Until a sustained economic recovery was under way, the performance of the express package and business mail division was expected to continue to track behind the prior year.

In the information management division, full year earnings performance was well ahead of the prior corresponding period, Freightways said.

The economic downturn had not had any noticeable effect on either the data or document storage service lines.

Demand for those services was expected to continue to grow due to businesses seeking to free up expensive office space , needing to manage a growing volume of business information, and needing to meet growing compliance requirements.

In the document destruction service, revenue was earned firstly through the collection and secure destruction of paper and secondly through the sale of the related paper for recycling.

A reduced global demand for recycled paper had led to lower prices for the paper sold by Freightways to recyclers, particularly in the second half of this financial year, the company said.

Margins in the information management division contracted in the fourth quarter due to those lower paper prices and also due to recent investment in increased capacity.

In the near term performance in the information management division was expected to initially track behind last year, due to the recent capacity investment and lower paper sales revenue.

The position was expected to improve during the year as spare capacity was used and also if paper prices improved.

Overall, Freightways' cash flows were expected to remain strong throughout the year.

Freightways said proceeds from capital management initiatives had been used to reduce net bank debt in order to strengthen the company's balance sheet.

Along with the sale, for $8.3m, and lease-back of the Wellington property, those initiatives included the raising of $49m of new equity through an institutional placement and subsequent retail share purchase plan.

Due to an increased level of doubtful and bad debts, particularly in the latter half of 2009, year end provisioning had risen to $1.3m from $700,000 a year earlier.

In late morning trading, Freightways shares were down 15c to $3.25, having recovered from a year-low of $2.64 in April. The year-high was $3.65 last September.

- NZPA