Trading Update
An update on the unaudited trading performance of Freightways Limited (Freightways) for the three months ended 30 September 2012 is provided below.
Consolidated result
Freightways’ revenue totalled $101 million, an 8% increase on the prior comparative period (pcp). Earnings before interest, tax, depreciation and amortisation (EBITDA) of $18.7 million was 12% above the pcp and earnings before interest, tax and amortisation (EBITA) of $15.7 million was 11% above the pcp. Net profit after tax (NPAT) of $9.2 million was 14% above the pcp.
Freightways’ results for the three months ended 30 September (unaudited):
| Three months ended: | 30 September 2012 |
30 September 2011 | Percentage variance |
|---|---|---|---|
| $000 | $000 | % | |
| Revenue | 100,908 | 93,317 | 8% |
| EBITDA | 18,653 | 16,648 | 12% |
| EBITA | 15,680 | 14,187 | 11% |
| NPAT | 9,185 | 8,037 | 14% |
Our first quarter performance, achieved in a low growth environment, demonstrates the overall resilience of Freightways and the success of its strategic development. Past decisions to diversify operations geographically and by industry to increase the company’s growth opportunities are evident in this earnings result, as is Freightways’ ability to better withstand the inevitable performance cycles of the broader economy and our specific markets.
Express Package and Business Mail division
Our express package & business mail division’s revenue of $76 million was 4% above the pcp. EBITDA of $13 million and EBITA of $12 million were 5% and 2% ahead of the pcp, respectively.
Overall, express package volumes in the quarter were positive, which is a sound outcome given the very strong performance achieved in the pcp. Letter volumes in our smaller DX Mail business declined during this period. Modest price increases across the entire division have been implemented to help offset cost increases, particularly relating to road user charges and insurance. Additionally, the higher cost of servicing a more disparate customer base in Christchurch, along with increased turnover of our team in that region, has added to the cost pressures we currently face in this division. The full benefit of these price increases will not be seen until the second quarter. Quality market share gains also contributed to our revenue growth.
Information Management division
Our information management division has again performed strongly, with revenue of $25 million being 23% above the pcp. EBITDA of $6 million and EBITA of $5 million were 36% and 38% ahead of the pcp, respectively.
Increased utilisation at all our sites throughout New Zealand and Australia was achieved through market share gains and organic growth. The strong performance of our document and data storage operations contributed towards offsetting the impact of significantly lower prices that we are currently receiving for the sale of paper from our document destruction operations, compared to the pcp. Additionally, the positive performances from our recently acquired businesses also contributed to this outstanding result.
Corporate
The cost of bank funding for this period was lower than the pcp following the renegotiation of the overall finance facilities in September 2011.
Recent acquisition activity
As previously announced, Freightways acquired Iron Mountain’s New Zealand operations, effective from 1 October 2011. The business of Filesaver was acquired in Sydney during December 2011. These acquisitions complemented our existing capabilities and also brought with them new service lines which we have since introduced to our wider business.
Effective 1 July 2012, Freightways acquired the business and assets of DataPrint Limited. DataPrint is an Auckland-based full service mailhouse that provides its customers with both a physical and an electronic service for transactional mail. DataPrint is working alongside DX Mail. Customers of both these businesses and the wider Freightways group will be offered a broader suite of services as a result of this acquisition, including the ability to send electronic invoices to their respective customers who can then pay these invoices online.
All 3 of these acquisitions are performing to expectation under Freightways’ ownership.
Outlook
We expect to be operating in a slow growth environment for the foreseeable future. We are however mindful that any further deterioration in the global economy will inevitably influence the markets that we operate in.
Within this environment, we expect our express package volumes to remain sound, with growth in these volumes being primarily determined by the performance of our existing customers. Letters volume in our DX Mail business will remain under pressure. Our competitor, NZ Post, remains the owner and operator of New Zealand’s wholesale postal delivery network. Freightways is dependent on access to this network for parts of its mail service and has challenged the pricing model of our access for some time. It is expected that the future terms of access to the NZ Post network, for those letters that we don’t deliver ourselves, will be resolved in the near future. This will enable increased certainty for the growth and development of this business. Price increases across the express package & business mail division implemented during the first quarter will take full effect in the second quarter and contribute to offsetting recent cost increases. Quality market share gains will continue to be actively developed and new products will be introduced to the market where demand exists.
The information management division is expected to continue to deliver good year-on-year earnings growth, despite lower paper prices and the additional cost of increased capacity. The strong growth in storage volumes we are experiencing throughout New Zealand and Australia is expected to be sustained.
Capital expenditure for the full financial year is expected to be $14 million. Overall, cash flows are expected to remain strong throughout the financial year.
In recent years, Freightways has strengthened its earnings profile by diversifying its activities both geographically and deeper into the information management market. Freightways will continue to seek and develop growth opportunities to support this strategy and will also explore other opportunities that complement its core capabilities.
Subject to business factors beyond its control, Freightways is well positioned to reap the benefits of further improvement in the markets in which it operates.
For further information contact:
DEAN BRACEWELL
Managing Director
Freightways Limited
Ph: (09) 571 9670
Fax: (09) 571 9671
