Economy boosts earnings

A strong economy has helped Freightways to a record profit and the courier company remains confident despite an expected economic slowdown.

Freightways has reported a net profit of $41.7 million for the year ended June 30, up 3 per cent on last year’s result of $40.3m.

Freightways operates New Zealand Couriers, Post Haste, Sub 60, Kiwi Express and business mail services, including DX Mail.

Its profit was affected by a oneoff expense of $1.2m for an earnout payment for its Filesaver business acquired in 2011.

Its consolidated operating revenue of $432.3m for the year was 6 per cent higher than the previous year, while its operating profit was up 9 per cent to $83.9m compared to the prior corresponding period.

Craigs Investment Partners research analyst Dennis Lee said Freightways was ‘‘ticking along’’ and the result was in line with expectations.

‘‘It’s a reflection of the strong second half, which you would expect because the economy has been running quite strongly,’’ he said.

‘‘The challenge going ahead is that the general consensus is the economy is going to slow down this year, so how is that going to affect Freightways? Freightways is a GDP-driven business.’’

Looking ahead, Lee said the ability of Freightways to grow its information business would be crucial to increasing its overall profit, especially if the economy slows as expected.

‘‘The question is, should the freight business soften, will information pick up for that?’’

But Freightways managing director Dean Bracewell said the company was confident of continued profit growth next year, despite forecasts the ‘‘rock star’’ economy may start to slow.

‘‘The economy has done its thing but it’s up to us as management teams to improve year-onyear performance and we will.’’

Bracewell said Freightways would look to grow its business organically but would also be on the lookout for acquisitions.

‘‘Our recent acquisitions have been primarily debt-funded and we’ve got headroom to be able to do that, because our gearing ratios are relatively conservative.’’

A big acquisition would probably require a combination of debt and equity funding, he said.

Freightways has announced a final dividend of 11.25 cents per share, up 15 per cent from last year’s final dividend of 9.75c per share.

About three-quarters of its revenue comes from its express package and business mail services, with the remaining 24 per cent from its information management business.

Operating revenue for express package and business mail was $332m for the full year, up 8 per cent on the previous year, while operating profit in the division was up 11 per cent to $61m.

‘‘The widespread improved performance evident in our first-half year result continued and gathered further momentum through the second-half year,’’ the company said of this division.

The information management service achieved operating revenue of $103m for the full year, up 3 per cent, while operating profit was up 5 per cent to $24m.

However, the translation of this division’s results from its Australian operations into New Zealand dollars was affected by the high exchange rate.