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
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

Discuss FRE @ Share Investor Forum

Download FRE company Reports


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c Share Investor 2010

Freightways Ltd: 2009 Full Year profit commentary

OK, I am back to the wilderness of New Zealand from being ensconced in a hotel room and the back of taxi cabs in Bangkok for two weeks and the NZ stockmarket is smack in the middle of reporting season.

One company's results caught my fancy and I thought I would give you my thoughts on those results.

The full year profit to June 30 2009 that came out last week from Freightways Ltd [FRE.NZ] was a case of steady as she goes, at least at first glance

Revenue was up by 5% to NZ $340 million and net profit after tax up by 7% to just over $34 million. If you exclude the one-off $4 million profit on the sale and leaseback of a property then profit is down by over 12%. Not bad considering economic conditions but considering that revenue is up slightly it is clear that management have let business costs get out of control.

Having said that a large amount of that cost has been attributed to capital expenditure to allow for future growth and management say that this expense will achieve results in the coming year -10s of millions have been spent on many acquisitions over the last few years, which have been purchased with borrowed money.

Financing costs for a sizable company debt have also been considerable but a capital raising from earlier this year has been used to pay down some bank debt so this cost should be lessened for full year 2010.

Interesting that 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 for Freightway's management not to address this is very poor to say the least.

The courier businesses have been hit the hardest, while the company's purchase of document management businesses over the last several years seems to be paying 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 even if business operations and therefore revenue remain stagnant, the fact that a multitude of costs have been ameliorated in the current year will mean next years full year profit after tax should be substantially better than full year 2009.

The only worry and out clause about that statement is that management have flagged looking at buying businesses this year more than a few times and unless any prospective business is the "bargain of the century" and a great business to boot then such purchases would be folly given the still high company debt and issues surrounding the health of the global economy.

Overall, the full year 2009 result has been unexciting if not a little boring and disappointing from a shareholders point of view because opportunities to pay down more debt have been lost and the hiding of the fact that ordinary profit was actually down a reasonable amount, rather than the headline of a profit up 7% was disappointing management let down.

6.5 out of ten.

Disclosure: I own FRE shares in the Share Investor Portfolio


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c Share Investor 2009

Market Watch: Sky City Entertainment/Freightways Ltd

Interesting that both Sky City Entertainment Group [SKC.NZ] and Freightways Ltd [FRE.NZ] respective share prices are both approaching the price at which their recent capital raisings were issued at.

Lets have a wee look at Sky City first.

Today the stock closed at NZ$2.62 (see 2 month SKC chart below) just 1c above the $2.61 Share Purchase Plan (SPP) price, a purchase plan that I participated in just a month ago.

At the time I moaned and bitched that my current Sky City shareholding was going to be diluted, only getting just shy of 2000 shares in the offer. I had a feeling that the share price was going to take a dip because of economic circumstances (gee I am a genius), so I am going to take the opportunity to grab a few more thousand shares to top up my holding to 40000 or more .

Naturally I am very pleased about this turn of events in the market.

Likewise Freightways. I got gypped there too, and will be looking for at least another 1000 more shares to top up my holding to 10000. The current share price is $2.84 as of market close today so there is still another 40c to go before it will trigger a buy at the SPP of $2.44 but if you look at the Freightway's 2 month chart below you will see, like Sky City, the share price trajectory is in a downwards direction, so is possible that my buy price will be reached.



Time to put some cashflow to good use.


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c Share Investor 2009

Freightway's Capital Raising more of the same crap for small shareholders

I have been moaning, bitching and hitting my head against a brick wall recently because of how totally unconscionable a number of NZX listed companies have been towards their shareholders when it comes to the flurry of capital raisings that have happened over the last few months.

Scant little care and only lip service has been given to small shareholders like you and me.

The three capital raisings that I have participated in so far : Sky City Entertainment [SKC.NZX] , Fletcher Building Ltd [FBU.NZX] and Freightways Ltd [FRE.NZX] have all favoured the larger shareholders or in fact recent interlopers who haven't been shareholders at all. They received concrete shareholdings at a definite price, without having to stump up "lost cash" that stays in someone else's bank account until credited back to the recipient with their meagre allotment of shares.

Small shareholders have had to stump up the maximum amount of cash to get a scaled down number of shares at a price they are unsure of until after the offer is closed.

The latest stinker has been the Freightway's share offer that wanted NZ$5,000,000.00 from small shareholders but was over subscribed by 1040%!

As Kelvin Hartnall points out institutions got a great deal:

The total amount provided by small investors was $57 million, which is more than the total capital raising combined. This shows that it was completely unnecessary to dilute the share-holdings by giving institutions such a great deal. Essentially the institutional investors have received a great bargain at the expense of small investors.

I sent in the maximum $12500 and will get less than 500 shares. I needed around 1200 to avoid dilution. Here, from Kelvin Hartnall again is an approximate breakdown of what Freightway's shareholders can expect to get some time next week:

Aggregate pool	$5,000,000
Number of share-holders	6,423
Pool available per share-holder	$778.45
Issue price	$2.44
Shares available per share-holder	319

This favouritism to the big boys is more of the same we small guys have expected and we have little protection from securities law, the NZX or any independent body. Bruce Sheppard from the Share Holders Association has been vocal as usual but has been met with the typical stoney silence or bullshit from company management along the lines of "well that is the best we can do in this economic environment".

Clearly that is wrong. Share offers for every good company that has made one so far have been wildly over-subscribed, so the moola is out there.

Other companies have at least made an attempt to even the financial playing field in their capital raisings by using rights issues to raise money. As rights issues are structured, a non -renouncable rights issue is one where shareholders are given the right to purchase new shares according to the number of shares they hold or they can forgo those rights if they wish. On the other hand a renouncable rights issue would allow shareholders to trade those rights to others should they not want to take up the rights offer.

In my opinion a renouncable share offer is the fairest way of raising capital because you get to buy in proportion to the shareholding you have and if new shareholders wish to participate in the capital raising they can buy the rights off you.

After that if there is a capital shortfall then and only then should institutions get a crack at stumping up some cash and the incentive to offer them a better deal, at the back end, would not only be appropriate but more than warranted.

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Share Price Alert: Freightways Ltd 2
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c Share Investor 2009

More Moola Please!

Back on the agenda for this week is the capital raising that is sweeping NZX listed companies.

Apart from the fact that they have been carried out without the permission of shareholders and the NZX has granted them waivers to allow management to do so, there seems to be a pattern forming.

The latest capital raising to be announced was Sky City Entertainment [SKC.NZ] who came out today with an underwritten offering of 71 million shares to institutions and a further NZ$50 million or around 20 million shares in an offer to smaller shareholders like me.

The company really doesn't need the extra funding because its current debt servicing doesn't have to be re-negotiated for a number of years.

This is much like the deal offered from Fletcher Building [FBU.NZ] and Freightways Ltd [FRE.NZ] for extra capital over the last couple of weeks.

Just doing very rough figures in my head the dilutionary effect for shareholders for these 3 companies is around 15%.

What that means to me is the followng to avoid dilution of my shareholdings:

1. Fletcher Building - additional 150 shares

2. Freightways Ltd - additional 1230 shares

3. Sky City Entertainment - additional 5250 shares

What I have decided to do is the following:

1. Fletcher Building - additional 500 shares @ 5.35 per share approx

2. Freightways Ltd - additional 1800 shares @ 2.44 per share approx

3. Sky City Entertainment - maximum of 6000 shares @ 2.52 per share approx


An additional $NZ 22,000 approx that I must find. Not a problem for me and I don't have a big issue with stumping up the cash because as part owner of these businesses sometimes you extract money from them and sometimes you have to put it back in.

As I mentioned above what I do have a big issue with is the lack of consultation with shareholders like me and the NZX's collusion with company management to allow them to bypass owners rights and give institutions preferences that smaller shareholders dont get. I would have said yes to company requests (sans the institutional favouritism) for more capital but I nevertheless should be asked in the first place.

I own part of these companies after all !

It has sent me into a kind of Bruce Sheppard mode on speed but there is very little I can do except make it known here that I am an unhappy camper.

As I said back in early January capital raising is set to become popular this year and it has by no means finished yet.

Nuplex Group [NPX.NZ], Fisher & Paykel Appliances [FPA.NZ], Kiwi Income Property Trust [KIP.NZ] and a whole host of other companies have already had out the begging bowl and I fully expect to have to fork out more myself although the bulk of my extra capital allocations have already revealed themselves.

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c Share Investor 2009

Long VS Short: Freightways Ltd

In this sixth installment of the Long vs Short series I am once again going to take look at the chart comparisons for a stock from the Share Investor Portfolio and compare the 10 year return (above chart) to the turmoil of the last year with a 1 year return chart (large chart at bottom of post).

In this series I want to show the merits of investing, using charts, for the long-term vs short term gains or losses. I will use the longest available data to me for the long-term view (10 years )and will make a comparison against the NZX50.

In this segment of Long vs Short I will take a look at Freightways Ltd [FRE.NZ]

I currently hold 8200 Freightway's shares after buying them in July 2006 (see small chart below for detail)

The company has been a good performer over its history and has lifted profit slightly over the last year.

Symbol	Price	Value	Earned
FRE.NZ	$2.85	$23370	$164
You own 8200 [FRE.NZ] shares purchased at $2.83 [$23206]

In my 3 years of owning this share my return has been a meagre NZ$164. (see small chart on left)This includes dividends and tax credits. Still I have to say this isn't bad considering the market rorting we have been having.

If I had bought this share just a year ago (see large chart at bottom) my return would have been minus 30%, proving once again short term investing can be very volatile.

Now for the real point of this comparison lets look at the

return for Freightway's shareholders who have held the stock for 10 years. (see large chart above)

From a high of a 570% return in 2007 a 10 year return is still around 220%.

I am looking for a long term loser after six installments of long VS short but Freightways ain't one of them.




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c Share Investor 2009

Why Did you buy that stock? [Freightways Ltd]

Transport is a sector of New Zealand business that has done well ever since this country's inception.

Two narrow, mountainous main islands divided by a small body of water, with a sparse population make New Zealand's economy even more reliant on road transport of goods than any other country in the world.

We will always need good competitive transport companies to keep the economy moving.


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I chose to invest in Freightways Ltd [FRE.NZ] principally because of this, although there are a raft of other key reasons as well. The fact that this industry is so essential to the economy means that it will always be around in some form or another. The certainty of that makes the criteria for investing a strong one for me.

The transport of goods around New Zealand is simple and easy to understand-for the operator and the investor. To operate such a business therefore is also simple and this has obvious advantages over the complexities of say the communications, computer and health sectors, which all require constant and costly updates to technology and the expense of training staff to keep up with that.

A truck, van, plane or boat pretty much stays the same, save for small changes over years.

What can I say, I am a simple kind of investor, and I like to understand the businesses that I invest in.

Unfortunately the simplicity of the transport industry, in this case Freightways, makes the barriers to entry for competition into its main operating areas: express package, business mail delivery, quite low.

It requires excellent management to keep competitors at bay and fortunately Freightways Managing Director Dean Bracewell and his board have provided a consistent approach to the day to day running of the company, in addition to a well researched approach to organic and acquistional growth.

The massive increases in business costs over the last several years; labour,energy, leasing and others, has been countered by cost savings in other areas while investment for future growth has been consistently rolled out where growth areas can be identified. All this and the company has still increased profit.

Tough economic times call for good management to get a company through the other side. The boys and girls at Freightways have proven their skills in this aspect.

As my readers will know, strong decisive management is important to the smooth, efficient running of a business and the team at Freightways have so far delivered for me.

Another good reason for me to buy this stock.

Freightways have a large stable of courier brands across New Zealand, from discount to the premium urgent delivery services, and the branding of these different services has been kept distinctly seperate. This keeps the brands uppermost in consumers minds and allows these respective services to target their consumers easily and keep them distinct from the myriad of competition from outside the company.

Branding is important to me and Freightway's strong courier brands, across a wide variety of income groups in the same industry make Freightway's courier business second to none.

I do like companies that specialize in one type of business, that way management are not easily distracted from their main core of operation and expertise-it is harder to get things wrong.

Freightways have expanded outside their core operations of delivery of packages and business mail but they are in related industries; document management and destruction companies based in New Zealand and Australia. A good compliment to their core operations but in tandem spreading the base of revenue across another business sector.

I paid $3.63 pr share in July 2006 and own the stock now for a cost of approx $3.10 after generous gross dividend payouts. The high dividend return is another reason I purchased this stock.

The last test in the latest Why did you buy that stock? series is whether I would still buy shares in Freightways today. Given the ability to get my hands on additional funds and a lower price than $3.10 per share the answer is a definite yes.

Disclosure I no longer own shares in FRE.

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c Share Investor 2008

August reporting season will give investors a true barometer of company health

The Kiwi stockmarket is down markedly off its highs last year but the real test or indicator of company health and capital value lies in real results and an indication of the future prosperity or otherwise of the company that you have invested your hard earned dollars in.

Gather 'round investors! Reporting season is the moment of truth.

The New Zealand reporting season kicks off in August and regardless of the Credit Crunch and its fallout, record high energy prices, a bursting housing bubble and high food costs for consumers, financial results and future indication of direction are still the main indicators of company health and a company's possible day to day market value.

The slowing economy and its fallout is expected to vary widely impact wise on Kiwi companies. Of our top 30 stocks reporting, 10 were indicative of their respective fields: Auckland International Airport [AIA ] Briscoe Group [BGR] Telecom [TEL] Freightways [FRE] Fletcher Building [FBU] Goodman Fielder [GFF] Contact Energy[CEN] Tourism Holdings[THL] PGG Wrightson[PGG] and The Warehouse[WHS].

Both Briscoe Group and The Warehouse have warned of lower profits over the last week

Many companies have already indicated profit warnings, Hallenstein Glassons[HLG] and Postie Plus(PPG) have come to the table, while many companies have indicated flat earnings, The Warehouse, Telecom, Contact Energy, Sky City Entertainment[SKC] Pumpkin Patch(PPL) and Freightways have all indicated pressure on margins over the past year.

The pressure has come mainly from government intervention, with some of the obvious fuel, interest and food cost increases not helping. Increased labour costs through a higher minimum wage, 1 week extra holiday and paid maternity leave have all pressured businesses and margins. The recent increases of diesel and road user taxes by government have pushed the cost envelope to bursting. Clearly those companies with very high staff numbers will be affected by this, retailers especially.

In addition to the above, more Government associated paperwork for administration staff has lead to lower productivity.

More Government pressure from reckless spending has led to higher interest rates, for consumers and lending for business, and the increases in energy costs, due to Government dictated taxes on petrol and electricity have made 2008 a bad year and are due to get considerably worse in 2009, even under a new government.

There maybe some surprises on the upside during the current reporting season.

Sky City is likely to be one of the better performers this reporting season as economic downturns don't usually affect gaming businesses as much as retailers or infrastructure companies, like Contact Energy. Sky's Cinema business is going to have an awful result though.

Mainfreight[MFT] looks like a good bet to increase profit and Restaurant Brands[RBD], the often talked about whipping boy here should show an increase from a very low comparison this time last year.

This reporting season seems like a turning point for investors to me.

They must make up their minds whether they want to hold their investments during a coming hard year or run crying for the hills with their share proceeds in their hands.

Fortune will favour those who hang on to good companies and if you are buying shares for the first time or adding to your portfolio, look for good management first before anything else, for it is good managers with a track record that will be able to ride out the inevitable tough times.

I'm ready to face the coming months, good or bad, and reporting season is definitely going to give investors a clearer indication of exactly where their companies and therefore investments are going.

There is too much panic at the moment and decisions to sell by some who already want to should be put off after they hear company announcements this coming August.

Disclosure I own WHS, PPL, PPG, FBU, FRE, SKC, HLG, GFF and AIA shares

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c Share Investor 2008

NOW Couriers look likely to deliver for Freightways

New acquisition NOW Couriers should help Freightways
continue to dominate the growing Auckland delivery market.


News yesterday that the New Zealand courier and document information management company Freightways [FRE] is to buy the small Auckland courier company Now Couriers for around NZ$11 million should be welcome news for shareholders.

Not only that, the faith Freightway's management have in the long-term future of their business with this purchase, during the current economic downturn and associated credit crunch is a positive move, when every other business in New Zealand seems to be talking gloom and doom.

Freightways as a whole, has managed to ride out the economic slowdown and increased business costs very well. It has still managed to grow revenue and profit slightly over the last year.

Their core courier business seems to be one of the most resilient divisions and Auckland especially seems reasonably bullish.

NOW has 40 contracted owner drivers servicing greater Auckland, and is at the budget end of the market, so it compliments Freightways other brands: Sub 60, Castle Parcels, New Zealand Couriers, Post Haste and several other brands.

Management want to keep the latest acquisition separate from the others as it wants to differentiate it from its other nationally focused brands.

I like the way management have had a partnership with NOW for several years, got to know the company well and then bought control. Too many companies rush into these sorts of acquisitions and that is where things can go horribly wrong. Freightway's management clearly have a good understanding of this business and that way the price they paid for it is more likely to be relevant to its earnings, prospects , and its long term future.

Their track record on "bolt-on" acquisitions is extremely good.

CEO Dean Bracewell has been a diligent head and the tough outlook for the New Zealand economy looks to be something he looks forward to with relish.

The future outlook by Bracewell is tempered by comments of influences from the local economy and that they are well positioned to grow when economic conditions are rosier.

He expects the core package delivery businesses to perform "soundly" and its fast growing documents division to be strong over the coming year.


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c Share Investor 2008

Freightways packages up a good result

Freightways business diversification
should keep them in good stead for
the future.


The announcement today of Freightways Ltd(FRE) and that its profit is up by 2% should be welcome news to shareholders.

The local economy has been stagnant for some time now and severe pressure from increased business costs has had a clear impact on the bottom line, considering revenue was up 12% on last year.

Labour, fuel, electricity and other state imposed business taxes and costs have dragged the results down and will continue to do so until company taxes are slashed and the emphasis on new taxes, like carbon related "green" taxes have been removed from the lexicon of daily life.

The future will be tough but an effort a few years back to diversify revenue streams and invest in a broader range of businesses that Freightways owns has seemed to have paid off.

Document management business in Australia and New Zealand has offset the less rapidly growing traditional areas of delivery services throughout NZ.

Mr Market today didn't like what it heard and pushed the share price down 1.25% to NZ$3.15 but in my humble opinion, the market should be well pleased that the company managed to deliver a solid, but not spectacular result, considering the economic stress kiwi citizens are clearly under.

Management deserve a good 8.5 out of 10 for this last half year.

Disclosure I own FRE shares

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c Share Investor 2008

Freightway's Delivers

Freightways Ltd [FRE.NZ] , the domestic courier and Australasian document manager, delivered a small increase in profit for the 2007 year at the beginning of this week. Profit was just a tick over $NZ25 million, 3% up on 2006.


Freightways should be able to weather the
coming economic downturn.

Management put that down to a "softening" economy and increasing business costs. Something all New Zealand businesses have had to cope with since the Labour Government have been in power.

An interesting paragraph comes at the end of managements announcement to the market and this is where I want to focus this article on:

Freightways' performance will in the near term be influenced by a challenging New Zealand marketplace. Medium to longer term and subject to business factors beyond its control, Freightways is exceptionally well positioned in all aspects of its business to continue to achieve positive performance for its shareholders and all other stakeholders.

Just how Freightways' Management have positioned themselves for the future is an interesting point to follow.

The strategy seems to have them move away from their core courier and postal services and towards information/document management and that has seen Freightways head West towards expansion in Australia.

Now I have nothing against expansion and growth or Australia but and it is a very big but we all know that across the Tasman lie the graves of many aborted attempts at Kiwi companies "spreading the risk" by shooting the ditch. The Warehouse (WHS) Telecom(TEL) Hallenstein Glasson (HLG) and Sky City Entertainment(SKC) have tough there to varying degrees.

What worries me about Freightways push there is that if they have underestimated how tough competition is and the differences in business culture, then the company is going to struggle like the aforementioned ones. Freightway's management have a good track record but as we all know history cant always be the judge of what business leaders do going forward.

Another niggle I have is that Freightways core business has been the courier postal arena and moving away from a companies main area of expertise can be a dangerous thing if it is not done right. History is littered with the corpses of companies who have moved from the area of their expertise just to "diversify" company earnings. There is nothing wrong with sticking to what you know.

Now I'm not saying this is going to lead to Freightways going belly up but I have seen too many companies from New Zealand "diversify" (I hate that word but it is the one that is used to describe multifaceted earnings streams) because our market is small and management want to soften the economic cycles a specialist company faces. It can often work the opposite way if done wrong. Its like Coke making tyres for goodness sake!

Having said that, If management have been on the ball with their diversification then they will reap the rewards of good stewardship. When the next upwards swing happens after the current downwards cycle dissipates, then we will start to see Freightways grow as it has in the past, strengthen its dominant position in its courier and postal divisions and perhaps look again to Australia for growth from its document management acquisitions.

The courier and postal business in New Zealand is ripe for acquisitions from overseas companies and within. NZ Posts' business is looking to grow further and there are global logistics companies that would be interested in acquisitions or a local "partner" here.

Long term Freightways looks to be a solid deliverer.

Disclosure I own FRE shares

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