Freightways outlook positive

Damian Foster
Damian Foster
Bellwether freight company Freightways is expected to report 5% growth for its full-year result today with after-tax profit boosted beyond 20% to more than $60 million.

The global company’s sales revenue is picked by Forsyth Barr broker Damian Foster to have risen 7% to an estimated $538.8 million with earnings before interest, tax and depreciation (ebitda)  up 4% at $102.6million and reported after-tax profit up 23% to $61.1 million.

"Freightways is a well-managed company operating with a strong position in an attractive duopoly domestic courier market structure," Mr Foster said.

For its first-half trading, reported in February, revenue was up 7% and underlying after-tax profit above 6%, painting a positive outlook for its full-year result.

In the six months to December, Freightways’ underlying revenue rose 7% to $272.8 million, ebitda rose 1.2% to $58.8million and after-tax profit was 6.2%, from last year’s $29.5 million, to $34 million.

Freightways’ commentary at the time said the volumes and activity for the first half supported expectations of it again improving its overall year-on-year performance.

Mr Foster said Freightways had been able to achieve above average earnings growth historically through a combination of organic and acquisition means.

"Industry feedback suggests a robust parcel volume backdrop, which is supported by above trend growth evident in NZ Transport Authority’s heavy vehicle traffic data," Mr Foster said.

That should translate into sustained, strong revenue growth within Freightways’ express package division, Mr Foster said.

Within its information management division, there had been strong growth at Shred-X and TIMG New Zealand during first half trading, but that was more than offset by poor margin performance at LitSupport in Australia, he said.

"Subsequent restructuring should have lowered the cost base, and therefore we expect more positive LitSupport commentary regarding its second half performance," Mr Foster said.

He said site consolidation investments in both Christchurch and Sydney would provide cost benefits heading into full year 2018, noting Freightways would benefit from lapping the additional operating expenditure costs in Sydney of $2.5 million within full-year 2017 results.

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