Gains for Freightways from flourishing economy

Courier and information management company Freightways, seen as a bellwether for the New Zealand economy, has reported an upbeat start to the 2017 financial year.

In a first quarter update at its annual meeting, Freightways reported a 5.6% rise in operating revenue to $133 million for the three months ended September 30, while net profit rose 9.9% to $14.8 million.

Freightways has been a solid performer since listing on the NZX in 2003, having only once reported reduced earnings in the year following the global financial crisis.

Managing director Dean Bracewell says the first quarter results represent a "sound start to the financial year" and show the New Zealand economy is doing well with a definite pick-up in the regions following a downturn last year due to lower dairy prices.

"When our customers are busier, we're busier. We've also gained some good quality market share as well," he says.

The express package and business mail division, which handles more than 200,000 items daily and contributes about 70% of revenue and earnings for the group, had a better than expected start to the year, Mr Bracewell says.

A 6.5% boost in that division's revenue followed strong volume growth from new and existing customers although operating costs were higher than normal as it transitions from its previous freighter aircraft to new Boeing 737-400 aircraft.

The full benefit of the changeover won't be felt until the 2018 financial year when the company starts operating from a new facility under construction at Christchurch Airport.

The information management division in New Zealand and Australia, aimed at reducing the company's reliance on the domestic economy, reported revenue growth of 2.2% in the quarter.

Mr Bracewell says it was a sound outcome when allowing for the stronger NZD/AUD exchange rate than in the previous corresponding period, and the business is less affected by the economic conditions in Australia than the courier business is in New Zealand.

The unit faced higher operating costs due to the merging of three facilities into one in Sydney. In July the company acquired LexData, a small litigation support business which was merged with its LitSupport business.

Freightway's investment in additional capacity in both divisions will result in capital expenditure for the full year of $23 million. Overall cash flows are likely to remain strong through the financial year.

Mr Bracewell says volumes and activity in the first quarter support its expectations of again improving year-on-year performance although the company never provides a guidance number.

Chairman Sue Sheldon told shareholders the average age of tenure for the Freightways executive team is about 16 years per executive. Mr Bracewell joined the company in 1978 and has held the managing director role since 1999.

When asked if he had any plans for a change, Mr Bracewell says he'd be "turning up for work on Monday giving my all for the company I choose to spend my time with."

Ms Sheldon says while the executive team's depth of experience was a strength for Freightways, it also understood the need to introduce new thinking.

During the year Matt Cocker was appointed chief information officer and Ruth Adin appointed development and support manager within the IT team to "support Freightways' strategy to be a technology leader in the industries it operates in", she says.

Freightways shares rose 0.3% to $6.38.

(BusinessDesk)