10:00am, 27 Oct 2011 | QUARTER
An update on the unaudited trading performance of Freightways Limited (Freightways) for the three months ended 30 September 2011 is provided below.
Freightways’ revenue totalled $93 million, a 9% increase on the prior comparative period (pcp). Earnings before interest, tax, depreciation and goodwill amortisation (EBITDA) of $16.6 million was 8% above the pcp and earnings before interest, tax and goodwill amortisation (EBITA) of $14.2 million was 9% above the pcp. Net profit after tax (NPAT) of $8 million is 19% above the pcp and the highest ever first quarter result recorded by Freightways since its IPO in 2003.
A one-off $900,000 EBITA benefit ($648,000 net of tax) from insurance proceeds relating to an earthquake insurance claim made in the prior year has not been included in this trading update result and will be reported as a positive non-recurring item in the half and full year accounts.
Freightways’ express package & business mail division has again delivered good revenue growth of 7%, double digit EBITDA growth of 10% and EBITA growth of 11%, compared to the prior comparative period. This strong performance is evidence of the strength of the Freightways business model and its market leading brands, the successful execution of a wide range of customer retention and growth strategies and the dedication and excellence of its team of people throughout New Zealand.
Freightways’ information management division has also again performed strongly, with revenue growth of 14%, EBITDA growth of 5% and EBITA growth of 3%, compared to the prior comparative period. This is despite the increased cost of previously announced additional capacity and the expensing of $250,000 of relocation costs in Western Australia. Revenue growth in this division continues to be outstanding and as our new capacity is utilised we also expect to see improving margins. The growth in this division demonstrates:
- the successful establishment of operations throughout Australia to complement the established New Zealand operations;
- the benefit of market share gains as customers have reacted positively to our differentiated service offer;
- the increased outsourcing by business to ensure the professional management of its critical information;
- the increasing demand for the secure destruction and recycling of that information which has ended its lifecycle, and
- a highly motivated team successfully executing its strategy in a positive growth market.
Recent acquisition activity
As previously announced, Freightways acquired Iron Mountain New Zealand, effective from 1 October 2011. The purchase price was US$10 million (or approximately NZ$12.7 million). It is expected that this acquisition will deliver $12 million of revenue in its first 12 months under Freightways’ ownership and generate $1.5 million of EBITA, before the benefit of synergies. It is currently being merged into our existing information management division and we are actively pursuing operational synergies. This includes relocating its Wellington operations into our purpose-built Porirua facility. Strategically, this acquisition is a very good fit with our existing information management businesses and it is immediately Earnings Per Share positive.
Freightways’ results for the three (3) months ended 30 September (unaudited):
2011* $000; 2010 $000; % variance
Revenue 93,317; 85,381; 9%
EBITDA 16,648; 15,409; 8%
EBITA 14,187; 13,013; 9%
NPAT 8,037; 6,746; 19%
* Excludes a one-off $900,000 benefit ($648,000 net of tax) from insurance proceeds relating to an earthquake insurance claim made in the prior year. This benefit will be reported as a positive non-recurring item in the half and full year accounts.
In August of this year, Freightways’ total finance facilities were renegotiated with improved pricing and a new structure, effective from 1 September 2011. Total facilities of NZ$110 million and AU$70 million, spread equally between 3-year, 4-year and 5-year maturity dates, were approved by Freightways’ banking syndicate. This new multi-currency facility, with an evenly spread maturity profile, demonstrates the support of Freightways’ banking syndicate and provides important diversity of duration and funding certainty for the company.
Based on our experiences from the last financial year and what we have experienced in the first quarter of the 2012 financial year, we expect to see continued gradual improvement in the market segments we operate in. While Freightways expects it will benefit from this improvement, it will also complement any natural growth by continuing to actively manage its cost base, by striving to further improve its service quality and by continuing to execute growth initiatives wherever possible.
The express package & business mail division remains reliant on growth amongst its existing customer base to sustain its year-on-year performance improvement, albeit the market share gains and pricing improvement achieved during 2011 and pricing initiatives implemented to date in 2012 will contribute positively to its overall performance. Freightways has consistently demonstrated its ability to compete successfully in an openly competitive environment and it will continue to do so. Our express package brands are among the most recognised in New Zealand, our people have a depth of experience second to none and our service culture that was so clearly demonstrated during the tough times last financial year in Christchurch and Queensland will continue to stand us apart from our competitors.
The information management division is transitioning successfully through a period of significant investment in capacity. It is expected to complete this transition while still delivering sound year-on-year earnings growth, albeit margins will be lower this financial year than they were in 2011. Already however, our new facilities are filling faster than we had expected. Some property rationalisation associated with the recent acquisition of Iron Mountain New Zealand will also see improved utilisation of facilities and assist the realisation of synergies as that business is merged into ours.
Capital expenditure for 2012 is expected to be $18 million and includes a one-off $4 million depot refurbishment at our main Auckland site to accommodate the relocation of NOW Couriers, who are currently based off-site. Cost savings as a result of this project are expected to be achieved in the 2013 financial year. 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 please contact:
Phone: (09) 571 9672