Freightways 10% first-half profit rise tempered by lower margins

Freightways yesterday posted a $20 million, 10% increase in profit, as expected by the market, but with the whittling of margins in some areas.

Group revenue was up 7.6% to $206.7 million, while earnings before interest, tax, depreciation and amortisation were up 9% at $39.6 million, for the first half, to December 2012.

While an after-tax profit of $21 million was booked, that included $1 million of an earn-out payment not required to be paid, resulting in an after-tax profit of $20 million, which was 10% higher than in the same period last year.

Craigs Investment Partners broker Peter McIntyre said the results were in line with expectations, the consensus of analysts being for an after-tax profit of $20.6 million.

''Freightways is gaining traction from reasonable operating leverage generated by the extra revenue growth,'' he said of the courier and data management company.

While the company was confident momentum would continue during the second half of trading, its key concern was ''macro uncertainty'' based on the global economic outlook, he said.

Forsyth Barr broker Peter Young said the revenue growth was driven by in-house and acquisition growth, volumes having risen 2.3% and pricing contributing 2.3% and acquisitions 2.9%.

''Net debt remains healthy at $174 million, with the capacity for further merger and acquisitions,'' he said.

Shares in Freightways, which announced a 9c interim dividend, were down 0.4% at $4.48 after the announcement.

Mr McIntyre said margins were affected and were ''down 100 basis points from the second half of 2012, because of weak recycled paper prices''.

Similarly, Mr Young said ''key negatives'' of the report included margin contraction in Express Mail, down 20 basis points, and recycled paper margins being lower than expected.

The $1 million reversal of the earn-out on the company's acquisition in November 2010 of Universal Mail, a New Zealand-based international postal service provider, was because it did not meet agreed targets.

Managing director Dean Bracewell said Universal Mail had been affected by the Christchurch earthquakes and disruptions to large tourist outlets in the city, although the business was ''going well''.

''We remain optimistic about the future,'' BusinessDesk reported Mr Bracewell as saying.


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