Loyalty NZ full-year sales climb 6.6% on demand for Fly Buys, costs erode profit

Wednesday 2nd September 2015

Loyalty New Zealand, which operates the Fly Buys loyalty programme used by companies including Air New Zealand, Z Energy and Contact Energy, posted a 6.6 percent gain in full-year sales, while profit was reduced by investment to drive growth.

Profit was $830,000 in the year ended March 31, from a record $2.7 million a year earlier, according to the Wellington-based company's annual report. Revenue rose to $91 million from $85.4 million.

Loyalty NZ is a quarter owned by each of Z Energy, BNZ, insurer IAG New Zealand and Foodstuffs Ventures (NZ), part of the cooperative that operates the New World and Pak'nSave supermarkets. In the latest year, members of the Fly Buys scheme claimed rewards worth $90 million, up from $82 million a year earlier. Operating expenses rose 10 percent to $89.8 million, including a 33 percent gain in employee costs to $11.7 million.

"We’ve invested heavily in the last year in the elements that will position Loyalty for future growth: people, branding and marketing, products, channels and technology," chief executive Stephen England-Hall said in emailed comments. "Issuance, redemption and revenue figures continue to climb year on year, reflecting the growing demand for Fly Buys points and the attraction of our retail offering."

The latest year included a record $11.3 million of rewards, based on the retail value of the products, redeemed in December, with more than 52 million points used for products and services. The number of products customers can buy with Fly Buys points has about doubled in the past two years, it said.

The 2015 accounts also show an 18 percent gain to $13.8 million for 'participant-based revenue', which includes non-rewards revenue from the firms that use the Fly Buys programme, fees for marketing campaigns and sales from its Lab360 unit.

Lab360 is Loyalty's full-service data and analytics business, which uses consumer spending data to "help businesses learn more about their customers and their markets," according to the company's website.

"We are developing our rewards offering and e-commerce channels and see improvement in these areas as a constant work in progress," England-Hall said.

Fly Buys has become a potential sticking point in Z Energy’s acquisition of the rival Caltex and Challenge! service station chains, with rival fuel company Mobil Oil New Zealand saying in a submission to the Commerce Commission that it would give Z Energy too much concentration of loyalty schemes. If the deal goes ahead, Z would have agreements with three of the four loyalty programmes - Countdown fuel discounts, Fly Buys and AA Smartfuel – giving the merged entity an unfair advantage over rivals, Mobil said

Loyalty New Zealand began the Fly Buys programme in 1996. It charges participating partner companies for the points they issue to Fly Buys members taking a margin after the cost of rewards is deducted.

BusinessDesk.co.nz

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