Fliway warns revenue likely to miss prospectus forecast for second time

Friday 23rd October 2015

Fliway, the listed transport and logistics group that listed in April, has reaffirmed prospectus earnings guidance but warned it’s likely to undershoot on revenue for the second time.

At today’s annual general meeting in Auckland, chief executive Duncan Hawkesby, said revenue was likely to be softer than the forecast $85.6 million for calendar 2015, mainly because of depressed import and export ocean freight rates as a result of overcapacity, and adverse fuel hedging. Fliway works to a June 30 balance date but also gave calendar year forecasts in its prospectus.

“We will look to offset that with a better cost performance as we have been doing throughout FY15,” Hawkesby said.

The company affirmed its forecast for net profit of $4.5 million for calendar 2015. Profit was 33 percent above its prospectus forecast at $2.19 million in the 12 months ended June 30, while revenue of $84.1 million was 1.3 percent below forecast. It indicated that calendar 2015 revenue would undershoot its forecast by a similar amount.

The company transports and warehouses freight throughout New Zealand and co-ordinates freight movements internationally, including customs clearance. It has 400 staff, 170 vehicles in its fleet, and 15 sites nationwide. It also owns half of UPS-Fliway, a joint venture its had for the past 17 years with UPS, one of the world’s largest package delivery companies.

Duncan and Gretchen Hawkesby, the daughter of New Zealand’s richest man Graeme Hart, bought Fliway in 2006. The pair retained a 54 percent stake, held by the D&G Hawkesby Trust, after the IPO.

The trust has made an unusual one-off bonus to three senior executives who have all been with the company for many years - chief financial officer Jim Sybertsma, general manager of its international division Gavin Satchell, and Cameron Mckeown who is general manager of its domestic division.

Hawkesby said the incentive arrangement, for an undisclosed amount, was agreed to in the tail end of the listing process after the prospectus had already been tabled. Fliway is not involved in the cash payment which was conditional on the company’s financial performance for the period to Dec. 31 2015 exceeding prospectus figures.

“These three guys have really delivered on the investment for the trust from day one and we wanted their incentives to be aligned with that of the trust,” Hawkesby said. “We just wanted to say thank you for their hard work.”

Hawkesby said Fliway was focused on growth and actively looking for acquisitions in New Zealand which its balance sheet had plenty of capacity for.

Fliway’s net debt position of $8.2 million as at June 30 is less than one times ebitda. Hawkesby said it was under the $10.7 million in the prospectus forecast due to several factors, including a favourable working capital position, lower offer costs, and a better-than-expected ebitda in 2015. Its bank facility also allows up to $18 million in debt subject to covenants being met.

The company wants either a bolt-on addition that fit with its existing capability of a step-change business that would help it enter a new sector, Hawkesby said.

“It has to be a business of scale, have a dominant market position in the vertical it operates, and that it is a niche business with potential barriers to entry and an ability to deliver higher returns,” he said.

Pre-listing, Hawkesby said the new sectors it was looking to build or acquire into included dangerous goods, refrigerated transport, or bulk liquid haulage but he wouldn’t be drawn if those were still areas of focus.

Fliway chairman Craig Stobo said the company was in the process of appointing a third independent director and shareholders re-elected current director Alan Isaac.

The shares last traded at $1.01, down from its $1.20 listing price.

BusinessDesk.co.nz

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