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Freightways' shares rise on hopes the worst is over

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Aug 16 NZPA - Freightways' share price rose 1.9 percent to $2.73 today after the express parcel company reported it performed better in its second half.

The operator of New Zealand Couriers, Post Haste Couriers and Castle Parcels reported a 33 percent fall in full-year net profit to $23.16 million, although when a $5.7 million abnormal tax charge was excluded the result was down just 2 percent from the previous year at $28.9 million.

Second-half normalised underlying earnings rose 5 percent on last year, whereas the first half was down 8 percent.

The company cut its final dividend to seven cents a share from 8.5 cents last year but a capital raising had increased the number of shares.

"We are seeing a recovery, albeit a gradual one. We are optimistic about that improving trend," said managing director Dean Bracewell.

The company will indicate in a trading update at its annual meeting in October whether current tends are locked in or not. Trading since balance date has been consistent with the improved performance in the second half.

"People are comfortable with the fact that the company has probably now seen the worst," said Marcus Curley, an analyst at Goldman Sachs JBWere.

"The pace of the recovery is relatively modest but it is reassuring that it is heading up," he said.

Mr Bracewell said trading has continued in same slightly positive vein since February but there had not been a material change.

Revenue for the year to June 30 was down 3 percent to $328.47m, although 2 percent down when the previous year result was normalised.

Freightways has been diversifying via acquisition and by developing new products like a service for users of auction website TradeMe. Its information management business is expanding and it has seen off an attempt by NZ Post to reduce a discount its DX Mail unit gets.

Express freight provided 80 percent of Freightways' revenue, down from 95 percent five years ago.

Mr Bracewell noted the company had yet to see a sustained, across-the-board improvement in all its businesses, indicating continuing market uncertainty and suggesting the impact on Freightways of an improving economy would continue to be gradual.

The tax charge was related to the Government's budget, which cut the corporate tax rate and removed tax deductibility on depreciation for buildings with a life of 50 years or more.

The changes resulted in the need for an increase in the deferred tax liability, so an abnormal charge to tax expense for the year ended June 2010 was needed, Freightways said.

Earnings before interest, tax, depreciation and amortisation (ebitda) at $63.7m were 2 percent lower than normalised prior comparative period.

Overall lower express package volumes from existing customers had meant lower revenue for the division than a year earlier, Freightways said.

The company's trans-Tasman information management businesses had continued to show great resilience to the economic cycle, Freightways said.

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