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Record Result for Freightways, Dividend for Shareholders

Record Result for Freightways, Record Dividend for Shareholders

Auckland, 18 August 2014 - Following a good first half, even stronger second half growth has enabled Freightways (NZX:FRE) to deliver a record Full Year result. The result for the year ended 30 June 2014 is a 12% improvement over the previous year in net profit after tax (NPAT), exclusive of non-recurring items.

This result has enabled the Directors to declare a record final dividend of $17.4 million compared with $15 million for the pcp. This represents a 15% increase in the final dividend, fully imputed at a tax rate of 28%, to 11.25 cents per share, compared to 9.75 cents in the pcp. This dividend will be paid on 6 October 2014. The record date for determination of entitlements to this dividend is 19 September 2014.

Freightways’ operating revenue of $432 million was up 6% on the prior comparative period (pcp), with earnings before interest, tax, depreciation and amortisation (EBITDA) of $84 million, and earnings before interest, tax and amortisation (EBITA) of $72 million, 9% and 11% higher respectively than the pcp, when excluding non-recurring items. Net profit after tax (NPAT) of $43 million and NPAT before amortisation (NPATA) of $44 million were 12% and 14% higher, when excluding non-recurring items.

Earnings per share (EPS) for the year of 27.9 cents per share showed an improvement of 12% over the pcp, when excluding non-recurring items, while cash flows generated from operations were again strong at $85 million.

EBITDA, EBITA, NPAT and NPATA amounts used in calculating the movements between years discussed above exclude the following non-recurring items, which the Directors believe should not be included when assessing the underlying operating performance of Freightways:
Full Year 2013 - a one-off benefit of $2.1 million ($1 million in the express package & business mail division and $1.1 million in the information management division) relating to the reversal of accrued acquisition earnout payments that were not expected to be paid; and
Full Year 2014 - a one-off expense of $1.2 million in the information management division that relates to the expected final earnout payment for the Filesaver business acquired in December 2011.

Managing Director Dean Bracewell says the “widespread strength of this result was a particular highlight, with good first half year earnings growth followed by even better growth in the second half year. Combined with well executed organic growth strategies and the successful integration of recent acquisitions, all Freightways’ businesses contributed to this record result, enabling a record dividend to shareholders.”

Both the express package & business mail division and the information management division posted record earnings performance.

The express package & business mail division, which operates a multi-brand strategy in the domestic market through New Zealand Couriers, Post Haste, Castle Parcels, NOW Couriers, SUB60, Security Express, Kiwi Express, Stuck, Pass The Parcel, DX Mail and Dataprint, reported operating revenue of $332 million for the year, 8% higher than the pcp.

EBITDA of $61 million and EBITA of $54 million for the year were 11% and 12% higher than the pcp, respectively, excluding $1 million of non-recurring income in 2013. Mr Bracewell says the long-established business to business (B2B) activity increased during the year, reflecting a growing domestic marketplace which remains positive. But there was also “increased volume again in the business to consumer (B2C) and consumer to consumer (C2C) space.”

He says the new B2C volume means “we are often delivering to new addresses and a wide range of B2C specific strategies have been implemented to ensure the expectations of both the sender and receiver of the items are satisfied. We have also increased our network of agents to provide collection points in local neighbourhoods and introduced applications so communication can be easily conducted from mobile phones or tablets. This B2C and C2C volume growth is an exciting and challenging aspect of our industry that we expect will continue to grow as consumers increasingly buy online.”

The business mail operator, DX Mail, has been successful in growing its share of the postal services market despite the sector’s overall decline as increasingly more people communicate electronically. To satisfy the demand from those businesses, Dataprint, a mailhouse acquired two years ago, has successfully grown its customer base across a variety of industry sectors.

The information management division, which generates 27% of Group earnings, reported operating revenue for the year of $103 million, up 3% on the pcp. This division has almost doubled its earnings in the last five years.
Excluding non-recurring items, EBITDA of $24 million and EBITA of $20 million for the year were respectively 5% and 8% higher than the pcp.

Mr Bracewell points out that while overall revenue only increased by 3%, the strength of the New Zealand dollar against the Australian dollar during 2014 had a large impact on that result. A comparison of the division’s performance using the 2013 average exchange rate shows revenue growth of 11%, EBITDA growth of 18% and EBITA up 14% compared to the pcp. Growth in the business was strong on both sides of the Tasman, with two acquisitions in New Zealand and three in Australia, all delivering to expectations.

This division operates in New Zealand through the brands of Online Security Services, Archive Security, Document Destruction Services and Data Security Services and in Australia through Databank, Archive Security, Filesaver and Shred-X.

All three internal service providers, Fieldair Holdings, Parceline Express and Freightways Information Services, continued to deliver outstanding service, underpinning the service offered by Freightways’ front line businesses.

Looking ahead, Mr Bracewell says, “subject to business factors beyond its control, Freightways believes the positive performance evident in this full year result will continue, enabling the achievement of year-on-year earnings growth again in 2015.

“We are particularly encouraged by the increased activity across our existing customer base in the express package division and anticipate this growth will continue from both B2B and B2C deliveries. While it operates in a challenging market, our smaller DX Mail business should continue attracting customer demand, particularly for its overnight street delivery service. Demand for Dataprint’s physical, and particularly its digital, mailhouse services should also continue to increase.”

Freightways also expects the growth in the information management businesses to continue, with revenue earned from the sale of recycled paper expected to remain at a similar level to that achieved in the last 12 months.

Capital expenditure for 2015 of approximately $17 million is earmarked to support the growth and development of both Freightways divisions, with cash flows forecast to remain strong throughout the year.

Freightways will also continue to seek out and develop strategic growth opportunities, including acquisitions and alliances, which complement its core capabilities.


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