New Zealand’s leading express company, Freightways Limited, improved its profits and revenuesstrongly in the half-year ending December 31, 2010, despite a difficult trading market.
The successful execution of a range of strategies focused on service quality, cost managementand growth, along with a return to improving volumes from many existing customers combined toimprove results, the company announced recently.
Freightways increased half-year consolidated operating revenue by 7% to NZ$176 million (€98.3million). After a moderate 4% rise in the July-September first quarter, revenues picked up with a9% increase between October and December.
Earnings before interest, tax, depreciation and goodwill amortisation (EBITDA) grew 6% to NZ$34million (€19 million) for the half year. Q2 EBITDA was 9% higher than the previous year, while Q1profits had improved only 2%. Half-year net profits were 9% higher at NZ$16 million (€9million).
Managing Director Dean Bracewell said the result “demonstrates sound progress and is above theprior year in all respects, proving the resilience of the group, the positive features of themarkets it operates in and the high quality of its subsidiary businesses and teams of people”.
The core Express Package & Business Mail division, which contributes 80% of total earningsand revenues, gained momentum as the half-year progressed. The division improved operating revenueby 5% to $140 million (€78.2 million) and EBITA by the same figure to $23 million (€12.8 million).Q2 EBITA was 10% higher after stagnation in the first quarter.
The improvement was assisted by modest price increases, some market share gains and a return toincreasing volumes from many existing customers. Agreements have also recently been finalised totrial the retailing of parcel products via nationwide retail chains, with the objective ofproviding customers greater access to a range of express package services.
In November, the acquisition of a small NZ domiciled international postal provider was finalisedand merged with DX Mail, at a total cost of up to $3 million, if certain performance hurdles aremet. An immediate incremental annual earnings benefit of $0.7 million is expected to result fromthe acquisition.
The Information Management division continued to grow positively on both sides of the Tasman Seaand had an excellent six months, the company said. Operating revenue of $37 million for the firsthalf was 14% higher, while EBITDA and EBITA were up 21% and 22% respectively for the half year.
Looking ahead, Bracewell said that although the half year performance was encouraging,Freightways has not yet experienced increased volumes across all sectors of its customer base. Hecautioned that “it is also too early to suggest the growth we have experienced, particularly in thesecond quarter, is sustainable.”
The Express Package & Business Mail division, while reliant on continuing growth amongst itsexisting customer base to sustain its year-on-year performance improvement, has again shown itsability in the second quarter to return double digit EBITA growth. The recent level of revenuegrowth will need to be maintained for similar levels of earnings growth to be achieved in thefuture, the company noted.
In recent years Freightways has strengthened its earnings profile by diversifying its activitiesboth geographically and deeper into the information management market. The company said it willalso continue to seek out and develop new opportunities to support this strategy and also exploreother opportunities that complement its core capabilities.
