SUMMARY OF PRELIMINARY FULL YEAR ANNOUNCEMENT
Name of Listed Issuer: Freightways Limited
Reporting Period: 12 months to 30 June 2016
The abridged financial statements attached to this report have been audited
and are not subject to a qualification. A copy of the audit report applicable
to the full financial statements is attached to this announcement.
CONSOLIDATED INCOME STATEMENT
Current Full Year NZ$''000: Up(Down)%: Previous Corresponding Full Year
NZ$''000
OPERATING REVENUE:
505,360; 5%; 479,458
PROFIT BEFORE INCOME TAX
68,621; 14%; 60,200
INCOME TAX
18,847; 15%; 16,360
NET PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS
49,774; 14%; 43,840
Earnings per share
32.2; 28.4
Final Dividend (fully imputed)
14.50; 12.50
Record Date: 16 September 2016
Payment Date: 3 October 2016
Appendix 7 is attached.
Detailed information: The preliminary Full Year Announcement and presentation
are attached and can also be located in the Investor Relations section of
Freightways'' website (www.freightways.co.nz).
FULL YEAR REVIEW
From the Chairman and Managing Director
The Directors are pleased to present the consolidated financial result of
Freightways Limited (Freightways) for the year ended 30 June 2016. This
report discusses the result, reviews the operations of each division and
provides an outlook for the financial year ahead.
Operating performance
The below table (refer attachments) presents the reported 2016 result
compared to the prior comparative period (pcp), both before and after the
inclusion of non-recurring items:
$ million - 2016 Result; 2015 Result; Increase %
Revenue: 505.4; 479.5; 5.4%
EBITA, before non-recurring items(i): 87.7; 82.8; 5.9%
Non-recurring items: (6.3); (9.0)
EBITA(ii): 81.4; 73.8; 10.2%
NPAT, before non-recurring items(iii): 54.4; 50.3; 8.0%
Non-recurring items after tax: (4.6); (6.5)
NPAT(iv): 49.8; 43.8; 13.5%
EPS (cents): 32.2; 28.4; 13.4%
Notes:
i. Operating profit before interest, tax and amortisation, before
non-recurring items.
ii. Operating profit before interest, tax, and amortisation.
iii. Net profit after tax (NPAT), before non-recurring items.
iv. Profit for the year attributable to shareholders.
Freightways'' first quarter Trading Update released in October 2015 provided a
breakdown of the impact of five fewer trading days in that quarter compared
to the pcp, being $7 million of operating revenue, $2 million of EBITDA &
EBITA and $1.4 million of NPATA & NPAT. This 2016 full year result also does
not include the benefit of those additional trading days recorded in the pcp.
The results discussed throughout this commentary exclude the impact of the
following non-recurring items that the Directors believe should not be
included when assessing underlying trading results:
o 2016: A total non-recurring charge of $6.3 million ($4.6 million after tax)
that comprised a one-off expense relating to the write-down of the carrying
value of the Convair fleet of aircraft, that will be retired during August
2016, and related spare parts. As a non-cash item, this write-down will not
impact on Freightways'' dividend payments to its shareholders.
o 2015: A total non-recurring charge of $9 million ($6.5 million after tax)
that comprised one-off expenses relating to the initial write-down of the
carrying value of aircraft, related fleet transition costs and property
relocation costs.
Dividend
The Directors have declared a final dividend of 14.5 cents per share, fully
imputed at a tax rate of 28%, being a 16% increase above the pcp dividend of
12.5 cents per share. This represents a payout of approximately $22.5 million
compared with $19.3 million for the pcp dividend. The dividend will be paid
on 3 October 2016. The record date for determination of entitlements to the
dividend is 16 September 2016.
The Dividend Reinvestment Plan (DRP) will not be offered in relation to this
dividend. As a capital management tool, the application of the DRP will be
reviewed for each future dividend.
REVIEW OF OPERATIONS
Divisional results for the year ended 30 June 2016 are provided below for the
express package & business mail division and the information management
division.
Express Package & Business Mail
Operating revenue of $370 million was 2.9% higher than the pcp. EBITA of $62
million was consistent with the pcp, although allowing for the 5 extra
trading days in the pcp, this result would have been ahead of the pcp.
The express package & business mail division operates a multi-brand strategy
in the domestic market through New Zealand Couriers, Post Haste, Castle
Parcels, NOW Couriers, SUB60, Security Express, Kiwi Express, Stuck, Pass The
Parcel, DX Mail and Dataprint.
In addition to the many initiatives implemented during the year to further
enhance the overall service provided to customers, Freightways also made a
number of key investment decisions. These included:
o Upgrading the Convair aircraft fleet, as announced, by forming a joint
venture company with an established aviation operator to lease and operate
three Boeing 737-400s. The scheduled arrivals of the 2nd and 3rd aircraft
were delayed due to the conversion programme from passenger to freighter
configuration undertaken in the USA taking longer than anticipated. All three
Boeing 737-400 aircraft will now be operating in the early part of the 2017
financial year;
o Leasing a new purpose-built and fully-automated facility in Christchurch to
enable the consolidation of operations from three separate facilities into
one that will have airside access to the Boeing 737-400 aircraft fleet.
Capital expenditure relating to this project is tracking in line with the
budgeted cost of $11 million. This new facility is expected to be fully
operational by the end of the 2017 financial year. A positive return above
Freightways'' cost of capital for this project is expected to be achieved
through efficiency and quality enhancements. Other property initiatives
during 2016 included relocating to larger facilities in Dunedin and Tauranga
to create more capacity to accommodate current and expected future volume
growth; and
o Increased resourcing of our team of IT professionals and the appointment of
a Chief Information Officer to assist in the positioning of Freightways as a
technology leader in the markets it operates in.
Freightways'' business mail operator, DX Mail, expanded its postie network and
is servicing most urban locations throughout New Zealand. Despite the decline
of the overall physical letter market, the demand for DX Mail''s suite of
services, that includes overnight delivery for standard-priced letters 5-days
per week, is increasing. Dataprint, which provides physical and digital
transactional mailhouse services, also increased market share in all of its
service lines, both physical and digital.
Increased activity from some existing customers and the winning of additional
new business contributed positively to revenue growth and the achievement of
sound operating earnings margins in this division.
Information Management
Compared to the pcp, which also included the benefit of the 5 extra trading
days in the New Zealand operations, operating revenue of $137 million was
12.5% higher, while EBITA of $28 million was 18% higher.
Key decisions made during the year that will contribute to the long-term
performance of this division included:
o The established information management brands on both sides of the Tasman,
with the exception of Shred-X, to operate as The Information Management Group
(TIMG) in the future. Shred-X, due to its unique positioning, particularly
strong brand presence and existing market leadership position in Australia,
will continue to operate under its own name; and
o Approximately $2.5 million to be invested during 2017 in completing the
relocation of three Sydney-based information management facilities into a
single purpose-built facility. Operating from a single site will deliver
operating efficiencies that will contribute to a positive return on this
investment.
Performance in this division has been strong throughout 2016. Increased
utilisation of existing facilities, the successful integration of a number of
small acquisitions, improved performance from the recently-acquired
LitSupport, and a particularly strong result from Shred-X, that benefited
from some large one-off destruction volumes, all contributed to this result.
In addition to growth in the physical services provided by TIMG, demand for
its digital information management services also continues to increase.
Internal service providers
Fieldair Holdings provides airfreight linehaul services to the express
package & business mail division along with general engineering and
contracting services to the general aviation market. Parceline Express
provides road linehaul to our front line businesses. As volumes have grown,
the services provided by these businesses have adapted to ensure the
provision of quality long-term capacity.
Freightways Information Services provides IT development and support to the
express package & business mail division. This team was expanded during the
year to address increasing demand for technology-based innovation and to
assist in achieving Freightways'' strategic objective of being a technology
leader in the markets it operates in. This team reports to the newly-created
role of Freightways Chief Information Officer, a role which will oversee IT
across the entire Freightways group.
Corporate
The maturity dates for all existing bank facilities were extended during the
year by a further two years at a slightly reduced cost. Overall, net bank
debt has reduced from $163 million in the pcp to $152 million.
Corporate overhead costs continue to be well-contained at a similar level to
the prior year. Acquisitions during the year have been funded from operating
cash flows.
Capital expenditure of $17 million was invested during the year, primarily to
provide capacity for growth, including expenditure on facilities and related
equipment, IT infrastructure and airfreight capability.
OUTLOOK
Freightways will continue to adapt and position itself to realise the growth
opportunities that exist in the markets it operates in.
Subject to factors beyond its control, Freightways expects to again improve
its overall year-on-year performance, albeit results from the express package
& business mail division will partly be offset by investment in increased
capacity in the information management division, specifically:
o The express package & business mail division is expected to benefit from
increasing volumes and improve its performance compared to the prior year.
The full benefit of the consolidation of existing facilities at Christchurch
airport will start to be realised from the end of the 2017 financial year.
o The information management division is currently expected to perform
slightly below the pcp due to the strong year just completed, that included
some large one-off project work, and also due to one-off costs to be incurred
in 2017 in respect of the Sydney premises relocation. These factors will
offset the otherwise positive trading performance expected of the division.
The benefits relating to this property consolidation initiative will start
being realised in the latter stages of the 2017 financial year.
Strategic growth opportunities, including acquisitions and alliances that
complement existing capabilities, will be executed where they make commercial
sense.
Capital expenditure for the year ahead is expected to be approximately $23
million to support the growth and development of both Freightways operating
divisions. Overall cash flows are expected to remain strong throughout the
2017 financial year.
CONCLUSION
The positive features of the markets Freightways operates in, the resilience
of its businesses to accommodate growth and adapt to change and the
successful execution of its growth strategies by an experienced team of
people are again evidenced in this full year result.
The Directors acknowledge the outstanding work and ongoing dedication of the
Freightways team of people throughout New Zealand and Australia.
End CA:00287224 For:FRE Type:FLLYR Time:2016-08-15 09:51:22