Freightways reports 12.4% revenue growth in HY24 despite challenges

SYDNEY, AUSTRALIA: Freightways, a leading express package and business mail operator in New Zealand and Australia, announced its half-year results for the period ended 31 December 2023, showing a 12.4% increase in revenue and a stable dividend policy.

The company’s revenue rose to $421.5 million, driven by growth across both its express package and business mail (EPBM) and information management (IM) divisions. EPBM revenue grew by 14.8% to $329.9 million, while IM revenue increased by 2% to $91.6 million.

Freightways attributed the revenue growth to solid performances from its subsidiaries, such as Allied Express, Network Couriers and Information Management, in both the New Zealand and Australian markets, which have remained stable in the three months since its first-quarter update.

However, the company’s earnings before interest, tax and amortisation (EBITA) were flat on the prior corresponding period (pcp) at $63.7 million, while its net profit after tax (NPAT) decreased by 5.6% to $32.1 million. The company said the lower earnings were mainly due to increased amortisation of $6.4 million and interest expense of $17.2 million, as well as some challenges faced by its businesses.

Freightways said its Shred-X business was impacted by lower paper prices and the delayed consenting of its medical waste license in Victoria, while its Big Chill business experienced lower same-customer volumes due to the economic cycle. The company also said it faced higher labour costs due to the tight labour markets, which have eased slightly over the quarter.

Despite these challenges, Freightways maintained its dividend policy, which is aligned with its capital management policy. The company declared an interim dividend of 16 cents per share, the same as the pcp, which represents a payout ratio of 79.6% of its NPATA adjusted for significant one-offs. The company said the dividend policy balances several objectives, such as maintaining a sustainable dividend level, reducing debt when it is high, and paying 75% to 80% of its NPATA adjusted for significant one-offs.

Looking ahead, Freightways said it expects volumes to remain stable in Australia and New Zealand and to be subject to the economic environment in both countries. The company said it will focus on restoring margins for both divisions in FY25 and FY26 as labour rates normalise and modest organic growth occurs.

The company also said it expects to see some benefits from its recent investments, such as its new Ruakura facility in New Zealand, which opened in October and has been growing its utilisation, and its Victorian Med-X facility, which is expected to be operational from the fourth quarter. The company said it expects to be breakeven at the Ruakura facility by the first quarter of FY25 and generate positive returns in FY25 onward.

Freightways also said it expects its full-year capital expenditure to be $35 million, including the second automated sortation system at Allied in Victoria. The company said it continues to take a disciplined approach to mergers and acquisitions and is leveraging its strong platform in Australia to assess acquisition opportunities.