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Freightways cautiously optimistic about coming year after modest profit gain

Monday 13th August 2018

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Courier and information management company Freightways lifted annual profit and is targeting further earnings growth in the current financial year despite an "apparent" decline in national business confidence. 

Freightways, which delivers some 50 million items annually through brands including New Zealand Couriers and Post Haste Couriers, reported a 2.1 percent lift in net profit to $62.2 million in the year to June 30. Basic earnings per share, before non-recurring items, lifted to 38.4 cents per share versus 36.5 cents per share in the prior period. Revenue rose 6.5 percent to $580.9 million.

Looking ahead, Auckland-based Freightways said the markets in both New Zealand and Australia "remain positive, albeit the company is cautious, noting, as recently reported, an apparent decline in business confidence in New Zealand."

Business confidence has become a political hot potato with surveys such as the ANZ business outlook reporting confidence at a 10-year low in July and even the Treasury saying “weaker confidence, in conjunction with other data, highlight the risk that growth over the coming fiscal year may be weaker-than-forecast,” in its latest monthly update.

So far, however, listed companies reporting earnings remain relatively upbeat, and Freightways hasn't been deterred from pursuing growth, including going down the mergers and acquisitions path. 

Organic and acquisition growth opportunities exist in both New Zealand and Australia and "subject to factors beyond its control, Freightways is once again targeting year-on-year earnings growth in the 2019 year," it said.

Since the June 30 balance date, Freightways bought the business and assets of Formfile Records Management and Specialised Security Shredding for $7 million. Both are small information management (IM) businesses based in Australia and are expected to lift annual earnings before interest, tax, depreciation and amortisation by $1.2 million once they're fully integrated, it said. 

The company will pay a final dividend of 15.25 cents per share versus 14.75 cents in the prior year. The record date is Sept. 14 while the payment date is Oct. 2. That takes the annual payout to 29.25 cents per share, representing a dividend yield of 3.8 percent. The shares slipped 0.5 percent to $7.76. 

Regarding its specific divisions, Freightways said its express package and business mail division "delivered a sound full-year result" with operating revenue 6.5 percent higher on the year. It continues to see faster growth in business to consumer volumes rather than business to business and said a recent review of residential fleets of contractors across all brands will increase the productivity and earning capacity of these courier runs. 

Operating revenue in the information management division was up 6.6 percent on the year and it said all businesses within the division improved. The company's Med-X unit was established in the first half of the prior financial year, with the acquisition of Australian State Waste Services.

Secure Destruction revenues increased across the suite of paper sold, as well as revenue for eDestruction and Medical Waste services, it said. It noted that Australian IM earnings were at the same level as the New Zealand’s earnings for 2018. "However, given the larger scale of the Australian market, and the broader range of opportunities, including in the Medical Waste industry, it is expected that Australia will surpass New Zealand’s earnings going forward," it said.

Overall capital expenditure for the 2019 financial year is expected to be in the range of $20-$22 million. Operating cash flows are expected to remain strong throughout 2019.


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