Freightways profit up
But margin pressure weighs on share price
Freightways shares fell by just under 2 per cent on concerns of mounting pressure on earnings margins for the courier and information management company, despite a lift in annual profit on the strength of volume growth and margin in the express package and business mail division and an upbeat outlook for the current financial year.
The shares weakened on the back of the result, ending 15 cents down at $7.95.
While net profit was largely in line with expectations, underlying earnings were slightly softer on the back of increased margin pressure, said Bryon Burke, head of equities at Craigs Investment Partners.
“It's nothing disastrous but it's just coming off a bit on light volume,” he said.
Burke noted the stock had pushed higher ahead of the result, gaining 3.2 per cent in the past month.
Freightways, which delivers about 50 million items annually through brands such as NZ Couriers and Post Haste Couriers, reported a 22 per cent lift in net profit to $60.9 million in the year to June 30, while underlying profit before one-off items rose 4.1 per cent to $56.6m.
Basic earnings per share, before non-recurring items, lifted to 36.5 cents per share versus 35.1 cents per share in the prior period. Revenue rose 7.9 per cent to $545.3m.
Directors declared a fully-imputed final dividend of 14.75 cents per share, a 2 per cent increase on the previous corresponding period of 14.5 cents per share. This represents a payout of about $22.9m, compared with $22.5m in the prior period. The dividend has a record date of September 15 and will be paid on October 2.
“This result has been achieved in a year that has included the challenges of a significant natural disaster, the completion of a number of major capacity-related projects and at a time of strong growth in volumes and related activity,” said managing director Dean Bracewell in the annual results presentation.
He said the express package and business mail division lifted operating revenue 8.7 per cent to $402.6m.
The company said volume growth was “consistently strong”, particularly so in the peak month of December.”
Bracewell said the package and mail division, which made up the bulk of the business, was being shored up by package delivery as more people turned to online shopping, but the mail business was
still solid.
Freightways’ business mail operator, DX Mail, again expanded its postal delivery network in several New Zealand locations to satisfy increasing demand for its overnight and five-day per week delivery of standard-priced letters.
Volumes and activity levels experienced throughout 2017 were expected to increase during 2018, the company said.