Freightways 1st-qtr profit gains 9.9% on flourishing economy

Thursday 27th October 2016

Courier and information management company Freightways, seen as a bellwether for the New Zealand economy, has reported an upbeat start to the 2017 financial year.

In a first quarter update at the company’s annual meeting in Auckland today, Freightways reported a 5.6 percent rise in operating revenue to $133 million for the three months ended Sept. 30, while net profit rose 9.9 percent to $14.8 million.

Freightways has been a solid performer since listing on the NZX in 2003, having only once reported reduced earnings in the year following the global financial crisis.

Managing director Dean Bracewell said the first quarter results represent a “sound start to the financial year” and show the New Zealand economy is doing well with a definite pick-up in the regions following a downturn last year due to lower dairy prices.

“When our customers are busier, we’re busier. We’ve also gained some good quality market share as well,” he said.

The express package and business mail division, which handles more than 200,000 items daily and contributes about 70 percent of revenue and earnings for the group, had a better-than-expected start to the year, Bracewell said.

A 6.5 percent boost in that division’s revenue followed strong volume growth from new and existing customers though operating costs were higher than normal as it transitions from its previous freighter aircraft to new Boeing 737-400 aircraft. The full benefit of the changeover won’t be felt until the 2018 financial year when the company starts operating from a new facility being built at Christchurch Airport.

The information management division in New Zealand and Australia, aimed at reducing the company’s reliance on the domestic economy, reported revenue growth of 2.2 percent in the quarter.

Bracewell said it was a sound outcome when allowing for the stronger NZD/AUD exchange rate than in the previous corresponding period, and that the business was less affected by the economic conditions in Australia than the courier business is in New Zealand.

The unit faced higher operating costs due to the merging of three facilities into one in Sydney. In July the company acquired LexData, a small litigation support business which was merged with its LitSupport business.

Freightway’s investment in additional capacity in both divisions will see capital expenditure for the full year of some $23 million, as expected. Overall cash flows are likely to remain strong through this financial year.

Bracewell said volumes and activity in the first quarter support its expectations of again improving year-on-year performance though the company never provides a guidance number.

Chairman Sue Sheldon told shareholders that the average age of tenure for the Freightways executive team was around 16 years per executive. Bracewell initially joined the company in 1978 and has held the managing director role since 1999.

When asked if he had any plans for a change Bracewell said he’d be “turning up for work on Monday giving my all for the company I choose to spend my time with.”

Sheldon said while the executive team’s depth of experience was a strength for Freightways, it also understood the need to introduce new thinking. During the year Matt Cocker was appointed chief information officer and Ruth Adin appointed development and support manager within the IT team to “support Freightways’ strategy to be a technology leader in the industries it operates in”, she said.

Freightways shares rose 0.3 percent to $6.38.

BusinessDesk.co.nz

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