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Fliway first-half profit falls 39% as lost customer, Kaikoura quake hits earnings

Wednesday 8th February 2017

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Fliway Group first-half profit dropped 39 percent as the impact of a major customer's exit and higher freight costs caused by last November's Kaikoura earthquake weighed on the transport and logistics group. 

Net profit fell to $2.2 million, or 4.8 cents per share, in the six months ended Dec. 31, from $3.6 million, or 7.9 cents a year earlier, the Auckland-based company said in a statement. Revenue slipped 1.4 percent to $43.2 million as a new customer won in December and upgrades to existing clients bolstered sales in the final month of the period. Profit fell short of Forsyth Barr analyst Andy Bowley's forecast of $3.1 million, although revenue exceeded his expectation for sales of $40.5 million.

Fliway had previously signalled the lost customer would hit underlying earnings by about 10 percent and embarked on a cost-cutting exercise last year to offset the impact. While personnel costs fell 4 percent to $14.5 million, disbursement costs were up 3.4 percent to $12.1 million and freight costs jumped 33 percent to $2.4 million. 

"Issues additionally impacting the business have been capacity constraints in the transport business unit as a result of internal linehaul equipment availability and the Kaikoura earthquake, which transferred significant rail freight volumes on to road, thereby consuming capacity overflow options over a peak trading period," Fliway said today. "Customer volumes, particularly in the second quarter, exceeded the network capacity in transport." 

Fliway's board declared an interim dividend of 2 cents per share, payable on April 20 with a March 31 record date, down from 3.3 cents a year earlier. 

"The balance sheet and declared dividend remain conservative to ensure capacity exists in whatever form required to convert the strong sales pipeline into improved earnings," it said. 

The transport group expects its second-half performance will be an improvement on the prior year, with sales growth a priority as it "looks to sell to capacity in its network and increase relationships with existing customer and business partners." 

Revenue from Fliway's domestic business edged down to $29 million in the period from a year earlier, while earnings before interest, tax, depreciation and amortisation dropped 27 percent to $4.3 million and the international segment's sales slipped 2.7 percent to $14.2 million for a 0.8 percent dip in ebitda to $2 million. 

Its joint venture with UPS boosted the volume of import packages by 13 percent in the half, although earnings from the unit fell to $458,000 from $613,000, which Fliway said was part of a strategy to "improve the cost of delivering a package in New Zealand in order to drive continued import package growth." 

The shares last traded at $1.17 and have gained 22 percent over the past 12 months.

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