Freightways 1H profit up 11% to record, but slow growth ahead likely

Courier and data management company Freightways posted an 11 percent gain in first-half profit to a record, meeting estimates, and says the outlook is for a slow pace of growth.

Profit rose to $21 million in the six months ended December 31, from $18.97 million a year earlier, the Auckland-based company says in a statement. Sales rose 8 percent to $206.7 million.

The biggest contribution to revenue growth in the latest period came from acquisitions, which lifted sales by 2.9 percent, including the full-service mailhouse acquired in July last year, while pricing and volume increases both contributed 2.3 percent.

The earnings margin on its express package and business mail unit, which accounts for about 75 percent of the business, held steady at 17 percent, while the earnings before interest, tax and amortisation margin for information management rose 1 percentage point to 18 percent.

Shares of Freightways were unchanged at $4.50 and have climbed by 25 percent in the past 12 months. The shares are rated 'hold' based on the consensus of six analyst recommendations compiled by Reuters, with a median price target of $4.39.

Freightways will pay an interim dividend of 9 cents a share, up from 8.5 cents a year earlier, on April 2, with a record date of March 15.

Operating revenue from express package and business mail rose 6 percent to $158 million and EBITA gained 2 percent to $26 million.

"The positive momentum that we have been achieving in our express package businesses is expected to continue at similar levels for the foreseeable future," the company says. Letter volumes within business mail will continue to decline, though that will be offset by market share gains.

Information management sales climbed 15 percent to $50 million and EBITA jumped 23 percent to $9 million.

Freightways says growth in that unit will continue apart from in its recycled paper business, where prices were lower than a year earlier.

The results include a one-time pretax gain of $1 million for the reversal of an earnout on the company's acquisition in November 2010 of Universal Mail, a New Zealand-based international postal service provider, because it did not meet agreed targets.

Managing director Dean Bracewell says Universal Mail has been affected by the Christchurch earthquakes and disruptions to large tourist outlets in the city, though the business is "going well".

"We remain optimistic about the future," he said on a conference call.


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