Ann: FORECAST: FRE: Trading Update

• Release Date: 25/10/12 12:32
• Summary: FORECAST: FRE: Trading Update
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FRE
25/10/2012 10:32
FORECAST

REL: 1032 HRS Freightways Limited

FORECAST: FRE: Trading Update

An update on the unaudited trading performance of Freightways Limited
(Freightways) for the three months ended 30 September 2012 is provided below.

Consolidated result:

Freightways' revenue totalled $101 million, an 8% increase on the prior
comparative period (pcp). Earnings before interest, tax, depreciation and
amortisation (EBITDA) of $18.7 million was 12% above the pcp and earnings
before interest, tax and amortisation (EBITA) of $15.7 million was 11% above
the pcp. Net profit after tax (NPAT) of $9.2 million was 14% above the pcp.

Freightways' results for the three (3) months ended 30 September (unaudited):

2012 $000; 2011 $000; % variance

Revenue 100,908; 93,317; 8%

EBITDA 18,653; 16,648; 12%

EBITA 15,680; 14,187; 11%

NPAT 9,185; 8,037; 14%

Our first quarter performance, achieved in a low growth environment,
demonstrates the overall resilience of Freightways and the success of its
strategic development. Past decisions to diversify operations geographically
and by industry to increase the company's growth opportunities are evident in
this earnings result, as is Freightways' ability to better withstand the
inevitable performance cycles of the broader economy and our specific
markets.

Express Package & Business Mail division:

Our express package & business mail division's revenue of $76 million was 4%
above the pcp. EBITDA of $13 million and EBITA of $12 million were 5% and 2%
ahead of the pcp, respectively.

Overall, express package volumes in the quarter were positive, which is a
sound outcome given the very strong performance achieved in the pcp. Letter
volumes in our smaller DX Mail business declined during this period. Modest
price increases across the entire division have been implemented to help
offset cost increases, particularly relating to road user charges and
insurance. Additionally, the higher cost of servicing a more disparate
customer base in Christchurch, along with increased turnover of our team in
that region, has added to the cost pressures we currently face in this
division. The full benefit of these price increases will not be seen until
the second quarter. Quality market share gains also contributed to our
revenue growth.

Information Management division:

Our information management division has again performed strongly, with
revenue of $25 million being 23% above the pcp. EBITDA of $6 million and
EBITA of $5 million were 36% and 38% ahead of the pcp, respectively.

Increased utilisation at all our sites throughout New Zealand and Australia
was achieved through market share gains and organic growth. The strong
performance of our document and data storage operations contributed towards
offsetting the impact of significantly lower prices that we are currently
receiving for the sale of paper from our document destruction operations,
compared to the pcp. Additionally, the positive performances from our
recently acquired businesses also contributed to this outstanding result.

Corporate:

The cost of bank funding for this period was lower than the pcp following the
renegotiation of the overall finance facilities in September 2011.

Recent acquisition activity:

As previously announced, Freightways acquired Iron Mountain's New Zealand
operations, effective from 1 October 2011. The business of Filesaver was
acquired in Sydney during December 2011. These acquisitions complemented our
existing capabilities and also brought with them new service lines which we
have since introduced to our wider business.

Effective 1 July 2012, Freightways acquired the business and assets of
DataPrint Limited. DataPrint is an Auckland-based full service mailhouse that
provides its customers with both a physical and an electronic service for
transactional mail. DataPrint is working alongside DX Mail. Customers of both
these businesses and the wider Freightways group will be offered a broader
suite of services as a result of this acquisition, including the ability to
send electronic invoices to their respective customers who can then pay these
invoices online.
All 3 of these acquisitions are performing to expectation under Freightways'
ownership.

Outlook:

We expect to be operating in a slow growth environment for the foreseeable
future. We are however mindful that any further deterioration in the global
economy will inevitably influence the markets that we operate in.

Within this environment, we expect our express package volumes to remain
sound, with growth in these volumes being primarily determined by the
performance of our existing customers. Letters volume in our DX Mail
business will remain under pressure. Our competitor, NZ Post, remains the
owner and operator of New Zealand's wholesale postal delivery network.
Freightways is dependent on access to this network for parts of its mail
service and has challenged the pricing model of our access for some time. It
is expected that the future terms of access to the NZ Post network, for those
letters that we don't deliver ourselves, will be resolved in the near future.
This will enable increased certainty for the growth and development of this
business. Price increases across the express package & business mail division
implemented during the first quarter will take full effect in the second
quarter and contribute to offsetting recent cost increases. Quality market
share gains will continue to be actively developed and new products will be
introduced to the market where demand exists.

The information management division is expected to continue to deliver good
year-on-year earnings growth, despite lower paper prices and the additional
cost of increased capacity.  The strong growth in storage volumes we are
experiencing throughout New Zealand and Australia is expected to be
sustained.

Capital expenditure for the full financial year is expected to be $14
million. Overall, cash flows are expected to remain strong throughout the
financial year.

In recent years, Freightways has strengthened its earnings profile by
diversifying its activities both geographically and deeper into the
information management market. Freightways will continue to seek and develop
growth opportunities to support this strategy and will also explore other
opportunities that complement its core capabilities.

Subject to business factors beyond its control, Freightways is well
positioned to reap the benefits of further improvement in the markets in
which it operates.

For further information contact:
DEAN BRACEWELL
Managing Director
Freightways Limited
Ph: (09) 571 9670
Fax: (09) 571 9671
End CA:00228851 For:FRE    Type:FORECAST   Time:2012-10-25 10:32:17