Ann: HALFYR: FRE: Half Year Results to 31 Dec 201

• Release Date: 13/02/12 12:00
• Summary: HALFYR: FRE: Half Year Results to 31 Dec 2011 and Interim Dividend
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FRE
13/02/2012 10:00
HALFYR

REL: 1000 HRS Freightways Limited

HALFYR: FRE: Half Year Results to 31 Dec 2011 and Interim Dividend

SUMMARY OF PRELIMINARY HALF YEAR ANNOUNCEMENT

Name of Listed Issuer: Freightways Limited

Reporting Period: 6 months to 31 December 2011.

This report has been prepared in a manner which complies with generally
accepted accounting practice and fairly presents the matters to which the
report relates and is based on unaudited financial statements. These
financial statements have been subject to an independent review by our
auditors, PricewaterhouseCoopers.

CONSOLIDATED INCOME STATEMENT

Current Half Year NZ$'000: Up(Down)%; Previous Corresponding Half Year
NZ$'000

OPERATING REVENUE:
192,183; 9%; 176,166

PROFIT BEFORE INTEREST AND INCOME TAX
32,273; 13%; 28,681

Net interest and finance costs
6,971; (11%); 7,795

PROFIT BEFORE INCOME TAX
25,302; 21%; 20,886

Income tax
6,333; 24%; 5,090

NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS
18,969; 20%; 15,796

Earnings per share:
12.3; 19%; 10.3

Interim Dividend (fully imputed)
8.5cps; 7.25cps
Record date: 16 March 2012
Payment date: 30 March 2012
Appendix 7 is attached.

Detailed information: The Half Year Report December 2011 and the presentation
are attached and can also be located in the Investor Relations section of
Freightways' website (www.freightways.co.nz).

HALF YEAR REVIEW
From the Chairman and Managing Director

The Directors are pleased to present the financial result of Freightways
Limited (Freightways) for the half year ended 31 December 2011. Highlights of
the half year include the positive financial performance of the group that is
above the prior year in all respects, the completion of two acquisitions (one
in New Zealand and one in Australia) that add to the depth of Freightways'
presence in the Australasian information management industry, the benefit of
reduced funding costs following the renegotiation of Freightways' finance
facilities in September 2011 and the continued successful execution of growth
strategies across both the express package & business mail division and the
information management division.

Operating performance

Consolidated operating revenue of $192 million for the half year was 9%
higher than the prior comparative period (pcp).

EBITDA of $36 million (excluding non-recurring items) for the half year was
8% higher than the pcp and EBITA of $31 million (excluding non-recurring
items) for the half year was 9% higher than the pcp.

Consolidated NPAT of $18.3 million (excluding non-recurring items) for the
half year was 16% higher than the pcp.

Cash flows generated from operations were again strong at $36 million.

A one-off $1 million EBITA benefit ($0.7 million after tax) relating to
proceeds from a Christchurch earthquake insurance claim made in the prior
year has not been included in the above revenue and earnings numbers. This
amount is recorded as a positive non-recurring item in the half year
accounts.

Dividend

The Directors have declared an interim dividend of 8.5 cents per share, fully
imputed at a tax rate of 30%. This represents a pay out of approximately
$13.1 million compared with $11.1 million for the pcp interim dividend of
7.25 cents per share. The interim dividend will be paid on 30 March 2012. The
record date for determination of entitlements to the final dividend is 16
March 2012.

The Dividend Reinvestment Plan (DRP) will not be offered in relation to this
interim dividend. As a capital management tool, the application of the DRP
will be reviewed for each future dividend.

REVIEW OF OPERATIONS

The Freightways team of people throughout New Zealand and Australia have
again demonstrated their ability to deliver superior performance in a half
year that has seen significant growth in both operating divisions. The
benefit of the successful industry and geographical diversification strategy
embarked upon by Freightways in previous years is also evident in this
result.

Express Package & Business Mail

The core express package & business mail division currently contributes
approximately 80% of Freightways' revenue and earnings through its brands of
New Zealand Couriers, Post Haste, Castle Parcels, NOW Couriers, SUB60,
Security Express, Kiwi Express and DX Mail.

Operating revenue of $149 million for the half year was 6% higher than the
pcp.

EBITDA of $28 million for the half year was 8% higher than the pcp and EBITA
of $26 million for the half year was 9% higher than the pcp.

A particularly strong first quarter was followed by good sound performance
throughout the division in the second quarter. Increasing volumes from many
existing customers and price increases underpinned the revenue growth in this
division. Revenue from fuel surcharges used to offset the impact of higher
fuel prices is also included in this result.

A consequence of the Christchurch earthquakes has been a decline in revenue
and earnings from the Canterbury region for a small acquisition Freightways
completed in November 2010 that services the international postal market.
Customers in Christchurch who utilise this service were severely disrupted in
the February 2011 earthquake and consequently activity levels in this
business have been running at around 80% of our initial expectations since
then. While we expect activity levels to recover in time, this initial
decline in earnings has meant that the performance hurdle that would have
triggered an earnout payment to the vendor of the acquired business was not
achieved. Accounting rules dictate that this earnout payment, previously
recorded as an amount payable by Freightways, be written back to earnings. As
such a positive non-cash earnings benefit of $0.25 million is included in
this half year result.

During the half year, our Hawkes Bay businesses relocated to new larger
premises. Work also commenced on the redevelopment of the Post Haste and
Castle Parcels depots at our main Auckland site to enable the future
accommodation of NOW Couriers that currently operates from a separate
Auckland location.

Overall, Freightways' express package & business mail division has been able
to once again demonstrate its resilience and its growth attributes to deliver
a very good half year result.

Information Management

The information management division is established in New Zealand through the
brands of Online Security Services, Archive Security, Document Destruction
Services and Data Security Services and in Australia through the brands of
DataBank, Archive Security and Shred-X.

Operating revenue of $44 million for the half year was 19% above the pcp.

EBITDA of $9 million for the half year was 10% above the pcp and EBITA of $7
million for the half year was 9% above the pcp.

During the half year, Freightways acquired Iron Mountain's New Zealand
operations and the business and assets of Filesaver Pty Limited in Sydney.
Financial performance relating to these entities is tracking to expectation.
Restructuring costs relating to both these acquisitions and the relocation of
our Perth operations, totalling approximately $0.5 million have been expensed
during the half year. The synergy benefits relating to these costs will start
flowing during the second half of the financial year.

The very strong growth experienced in this division has assisted in
offsetting the increased costs associated with leasing significant additional
capacity in both Australia and New Zealand. Part of this growth has come from
winning nationwide customers in Australia that would not have been achieved
without this investment. In our document destruction operations the demand
for recycled paper on the global market has again decreased and accordingly
the price we receive for the sale of this product has declined. The
implementation of a range of contingencies to offset the impact of these
reduced prices has been successfully completed; meaning the impact on our
margins is at this stage immaterial.

New service lines have been added to Freightways' suite of information
management services, adding breadth to our revenue and earnings growth.
Strategic growth opportunities continue to be explored and executed where
they make commercial sense.

Overall, the performance of the information management division and its
demonstrated ability to sustain high levels of growth has been outstanding.

Internal service providers

Fieldair Holdings provides airfreight linehaul services, Parceline Express
provides road linehaul services and Freightways Information Services provides
IT support to the express package & business mail division. All three
internal service providers have continued to deliver exceptional service that
underpins the service offered by our front line businesses.

Finance facilities

Newly negotiated finance facilities came into effect on 1 September 2011.
These include facilities of NZD110 million and AUD70 million, spread equally
between 3-year, 4-year and 5-year maturity dates. This multi-currency
facility, with an evenly spread maturity profile, demonstrates the support of
Freightways' banking syndicate and provides important diversity of duration
and funding certainty for the company. The reduced cost of these facilities
is clearly evidenced in the decreased interest charge to the company for the
half year.

Corporate

Corporate overhead costs continue to be well contained. Bank borrowings have
increased to fund the recent acquisitions.

OUTLOOK

Based on our experiences in the first half of the 2012 financial year, we
expect to see continued gradual improvement in the market segments we operate
in. While Freightways expects it will benefit from this improvement, it will
also complement any natural growth by continuing to actively manage its cost
base, by striving to further improve its service quality and by continuing to
execute growth initiatives wherever possible.

The express package & business mail division remains reliant on growth within
its existing customer base to sustain its year-on-year performance
improvement, albeit the market share gains and pricing improvement achieved
during 2011 and pricing initiatives implemented to date in 2012 will
contribute positively to its overall performance. Freightways has
consistently demonstrated its ability to compete successfully in an openly
competitive environment and it will continue to do so. Our express package
brands are among the most recognised in New Zealand, our people have a depth
of experience second to none and our service culture will continue to set us
apart from our competitors.

The information management division is transitioning successfully through a
period of significant investment in capacity. It is expected to complete this
transition while still delivering sound year-on-year earnings growth. This
new capacity has already enabled the winning of customers who have a
nationwide presence and demand. The restructuring and relocation costs
expensed in the first half of the year are expected to drive synergy value
from the second half of the year. Although some further restructuring costs
are expected they will not be of the same magnitude as those expensed during
the first half of the year.

Capital expenditure for 2012 is expected to be $20 million and includes a
one-off $4 million depot refurbishment at our main Auckland site to
accommodate the relocation of NOW Couriers, that is currently based off-site,
and costs associated with the integration of the recently acquired
businesses. Overall, cash flows are expected to remain strong throughout the
remainder of 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.

CONCLUSION

Freightways has delivered a very strong half year result that is above the
prior period in all respects, again demonstrating the resilience of the
Group, the positive features of the markets it operates in and the high
quality of its subsidiary businesses and teams of people. Accordingly, the
Directors have been able to declare a fully imputed 8.5 cents per share
interim dividend.

The Directors acknowledge the outstanding work and ongoing dedication of the
Freightways team of people throughout New Zealand and Australia.
End CA:00219445 For:FRE    Type:HALFYR     Time:2012-02-13 10:00:44