Freightways Ltd: 2010 Half Year profit commentary

The half year profit to December 31 2010 that came out this morning from Freightways Ltd [FRE.NZ] is a clear indication that life is not only tough for the company but it also shows that the economy as a whole is still in the doldrums and shows little sign of positivity.

Revenue was down by 7% to NZ $164.9 million and net profit after tax down by 15% to just over $14.45 million.

A healthy dividend of 7c is to be paid compared with last years half of 8c, so little attention has been made to keeping cash within the business. Very important at this time in my not so humble opinion.

Financing costs for a sizable company debt have also been considerable but a capital raising from earlier last year has been used to pay down some bank debt so this cost was lessened for this period.

In comments about capital management, nothing was said about the sizable dividend being paid when profit was down. The company is borrowing heavily to fund this dividend and it should have been cut by more than it has. Other companies have done this during 2009 and will again in 2010 and for Freightway's management not to address this is poor considering economic constraints surrounding listed company spending.

The courier businesses have been hit the hardest, while the company's purchase of document management businesses over the last several years continues to pay off as these are achieving growth even when other parts of the the company have slowed.

Naturally management are cagey about company prospects for the coming year given economic uncertainty but I would have to say that business operations and therefore revenue will probably remain down over the rest of 2010 and into 2011. Profit levels will depend on cost savings until the New Zealand economy bounces back and real growth for the company can return.

Overall, the half year 2010 result has been a good indicator of a patchy 2009 and an indicator that there is more patchiness to come for Freightways. The same can also be said about the New Zealand economy as a whole.



Investors have reacted by marking down shares by 11c to $3.10 this morning at time of writing.

7.5 out of ten.


Disc I own FRE shares in the Share Investor Portfolio



Freightways @ Share Investor

Long Term View: Freightways Ltd
Freightways Ltd: 2010 Half Year profit commentary
Freightways Ltd: 2009 Full Year profit commentary
Freightway's Capital Raising more of the same crap for small shareholders
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c Share Investor 2010

Freightways keeps delivering during recession

Given the bleak economic conditions over the last year, one could forgive Dean Bracewell, Managing Director, and his team for underachieving in their management of Freightways Ltd [FRE.NZ] , the New Zealand courier and document management company, but they have managed the business to a good profit result to 30 June 2008 out today.

A 5% increase in Full Year profit to just over NZ$32 million, on gross revenue of $324 million, up 14%, shows that operating costs have had an impact on the bottom line.

As canvassed before on Share Investor, Freightway's movement to diversify income streams in terms of new business areas, other than their courier businesses, has paid off-in New Zealand and Australia.

Freightways entry into document management has proven a good move for the company:
"The information management business currently contributes approximately 15% of Freightways' revenue and earnings. The performance of this business has been outstanding".
From operating result , 18 Aug 2008.

This sector is a more prominent area of business in North America and Europe. Freightway's experience in their well managed document storage and destruction business in New Zealand and Australia will provide a good base for them to grow revenue and profit in the future.

According to some business analysts, a transport related business like Freightways can be looked at as a wider barometer of how the economy is going as a whole. I would argue though that careful cost management and forward planning has helped the company avoid the pitfalls of an economy in a steep decline and that isn't as easy to do as it sounds when faced with macro economic pressures that one cannot control.

Petrol, surprise government road user charges and labour increases will continue to crimp the bottom line profit in the coming 2009 year.

The company characteristically have a subdued outlook for the following year and it is a sign of good management that they do this. Many a company, especially in hard economic times don't give a true picture of their businesses as they look forward, only to disappoint come reporting time.

Over the last several months, the share price has been affected badly. From a high of nearly 5 bucks in 2007, and a low just recently of just under NZ$2.90, nervous markets have struggled to determine a realistic price for this company-so what else is new.

At a net return of just over 6% on today's share price, it is a healthy return for a well run company with good future prospects and falling interest rates for other investments. Freightways is worth a look when considering a long term investment.

Excellent management, an easy to understand business and a good dividend delivers the goods for me.

Disclosure I own FRE shares

Freightways @ Share Investor

Long VS Short: Freightways Ltd
Freightway's keeps delivering
Why did you but that stock: Freightways Ltd
Freightway's delivers
Freightway's packages up a good result

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Dean Bracewell, Freightways MD

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Investor Relations -Freightways.co.nz
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c Share Investor 2008