Express growth drives record full-year performance for Freightways

New Zealand transport and delivery group Freightways has delivered a record full-yearperformance thanks to strong growth in its core express parcels businesses in the 12 months to 30

Following a good first half, even stronger growth in the second half enabled Freightways todeliver a 12% improvement in net profit after tax, excluding non-recurring items. Operating revenueof NZ$432 million (€273 million) was up 6% on the prior comparative period (pcp), with earningsbefore interest, tax, depreciation and amortisation (Ebitda) increasing 9% to $84 million, andearnings before interest, tax and amortisation (Ebita) rising 11% to $72 million, excludingnon-recurring items.

Net profit after tax of $43 million and Npat before amortisation of $44 million were 12% and 14%higher, excluding non-recurring items.

Both the Express package & business mail division and the Information management divisionposted record earnings performance.

The Express package & business mail division, which operates a multi-brand strategy in thedomestic 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 operatingrevenue 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 thepcp, respectively, excluding $1 million of non-recurring income in 2013.

Managing director Dean Bracewell said the group’s long-established business to business (B2B)activity – its largest express focus – increased during the year, “reflecting a growing domesticmarketplace which remains positive”. But there was also increased volume again in the business toconsumer (B2C) and C2C space.

He said the new B2C volume meant the company was “often delivering to new addresses and a widerange of B2C-specific strategies have been implemented to ensure the expectations of both thesender and receiver of the items are satisfied”. These strategies have included an expanded suiteof online services to enable consumers to manage the delivery of their own items either to theirown preferred secure drop-zone or to arrange re-delivery options when they are not at home toreceive an item, possibly to an alternative address.

He said the company had also increased its network of agents to provide collection points inlocal neighbourhoods and introduced applications so that communication can be easily conducted frommobile phones or tablets.

“This B2C and C2C volume growth is an exciting and challenging aspect of our industry that weexpect will continue to grow as consumers increasingly buy online,” Bracewell said. He said B2C andC2C volume could be challenging, “particularly during peak buying periods such as in the lead-up toChristmas. Capacity planning within our linehaul and delivery fleets well in advance of these peakscontributes to our ability to provide a quality service at these times.”

He said the group’s business mail operator, DX Mail, had been successful in growing its share ofthe postal services market despite the sector’s overall decline as increasingly more peoplecommunicate electronically. To satisfy the demand from those businesses, Dataprint, a mailhouseacquired two years ago, had successfully grown its customer base across a variety of industrysectors.

The information management division, which generates 27% of Group earnings, reported operatingrevenue for the year of $103 million, up 3% on the pcp.

Bracewell said a particular highlight for him was the “widespread strength of this result, withgood 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 recentacquisitions, all Freightways’ businesses contributed to this record result, enabling a recorddividend to shareholders.”

Capital expenditure of $19 million was invested during the full year, primarily to providecapacity for growth, including expenditure on facilities and related equipment, IT infrastructureand airfreight capability.

This capital expenditure also included $3 million to acquire two properties adjacent to thecompany’s main Auckland site. “These properties will assist in ensuring that we have sufficientphysical capacity to accommodate future growth in our express package businesses,” Freightwayssaid.

Looking ahead, Bracewell said that, subject to business factors beyond its control, “Freightwaysbelieves the positive performance evident in this full year result will continue, enabling theachievement of year-on-year earnings growth again in 2015.” He continued: “We are particularlyencouraged by the increased activity across our existing customer base in the express packagedivision 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 continueattracting customer demand, particularly for its overnight street delivery service.”

He said Freightways would also continue to seek out and develop strategic growth opportunities,including acquisitions and alliances, which complement its core capabilities. Capital expenditurefor 2015 of approximately $17 million is earmarked to support the growth and development of bothFreightways divisions, with cash flows forecast to remain strong throughout the year.