Freightways lifts first-half profit 6%

Monday 25th February 2019

Freightways lifted first-half profit 6 percent through strong revenue and volume growth coupled with greater productivity in the express package division. Organic expansion and acquisitions bolstered information management revenue.

Net profit for the six months ended December rose to $33.4 million from $31.4 million in the same six months a year earlier.

The latest result includes a $1.4 million profit because its insurance proceeds exceeded the written down value of racking damaged at its Porirua document storage facility during the Kaikoura earthquake in November 2016.

The express package and business mail division lifted revenue 7.8 percent to $233.5 million, accounting for about 74 percent of total group revenue. Earnings before interest, tax and amortisation (ebita) rose 6.1 percent to $38.6 million.

Freightways operates under the New Zealand Couriers, Post Haste, Castle Parcels and other brands.

Arch competitor New Zealand Post, which reported its first-half results last week, didn’t provide individual results for its parcel operations but for the first time since 2015, increasing revenue from parcels delivery was more than enough to offset continuing falls in mail volumes.

NZ Post’s parcel volumes rose to 40.7 million in the six months ended December from 39 million in the year-earlier six months.

Chief executive David Walsh said parcel delivery targets are met between 95-98 percent of the time and he says that’s 3-5 percent better than the next best competitor.

Freightways chief executive Mark Troughear, who took the helm in January last year after joining the company in 1996, refuted that.

“If we were only at 96 percent, we would have customers kicking our arse from breakfast to dinnertime,” Troughear told analysts on a conference call.

“Our’s would average 98 percent ….. there’s a whole lot of 98s and 97s – there’s not many below 96.”

Troughear said about a third each of the revenue increase for the parcels business came from organic growth, price rises and surcharges.

Freightways' information management division, whose Shred-X document destruction business branched out into medical waste disposal with the September 2017 acquisition of Med-X, lifted operating revenue 7.6 percent to $82.2 million while ebita rose just 0.5 percent to $14.7 million.

Partly that reflected the costs of three bolt-on acquisitions that are still being integrated.

The company is upbeat about the outlook for the second half, although it isn’t putting numbers on it, just saying that it is “once again targeting year-on-year earnings growth for the full year."

Freightways will pay a fully tax paid first-half dividend of 15 cents per share, up from 14.5 cents last year.

The shares are trading at $7.85, up 4 cents from Friday. They have gained about 5 percent in the past 12 months.

(BusinessDesk)

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