Ann: HALFYR: FRE: Half Year Results to 31 Dec 2015 and Interim...

• Release Date: 22/02/16 09:48
• Summary: HALFYR: FRE: Half Year Results to 31 Dec 2015 and Interim Dividend
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					FRE
22/02/2016 09:48
HALFYR
PRICE SENSITIVE
REL: 0948 HRS Freightways Limited

HALFYR: FRE: Half Year Results to 31 Dec 2015 and Interim Dividend

SUMMARY OF PRELIMINARY HALF YEAR ANNOUNCEMENT

Name of Listed Issuer: Freightways Limited

Reporting Period: 6 months to 31 December 2015.

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:
254,898; 5%; 241,760

PROFIT BEFORE INTEREST AND INCOME TAX
44,036; 5%; 41,802

Net interest and finance costs
5,741; (1%); 5,826

PROFIT BEFORE INCOME TAX
38,295; 6%; 35,976

Income tax
10,547; 9%; 9,669

NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS
27,748; 5%; 26,307

Earnings per share:
17.9; 5%; 17.0

Interim Dividend (fully imputed)
12.75cps; 12.0cps
Record date: 18 March 2016
Payment date: 4 April 2016
Appendix 7 is attached.

Detailed information: The Half Year Report December 2015 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 consolidated financial result of
Freightways Limited (Freightways) for the half year ended 31 December 2015.
This report discusses the result, reviews the operations of each division and
provides an outlook for the balance of the financial year.

Operating performance

Compared to the prior corresponding period (pcp) which included 4 extra
trading days:
- Operating revenue increased by 5% to $255 million;
- Earnings (operating profit) before Interest, Tax, Depreciation and
Amortisation (EBITDA) increased by 5% to $51 million;
- Earnings (operating profit) before Interest, Tax and Amortisation (EBITA)
increased by 6% to $45 million;
- Net Profit after Tax (NPAT) increased by 5% to $28 million;
- Net Profit after Tax and before Amortisation (NPATA) increased by 7% to $29
million; and
- Earnings Per Share (EPS) increased by 5% to 18 cents per share.

The benefit of Freightways' diversification into the Information Management
industry is evident in this result, with both the New Zealand and Australian
operations of the information management division recording results well
above the pcp. Approximately 30% of Freightways' operating revenue and
earnings for the half year was generated by this division. The express
package & business mail division contributed a result above the pcp, when
allowing for the four extra trading days in the pcp.

Dividend

The Directors have declared an interim dividend of 12.75 cents per share,
fully imputed at a tax rate of 28%, being a 6% increase above the pcp
dividend of 12 cents per share. This represents a payout of approximately
$19.7 million compared with $18.5 million for the pcp dividend. The dividend
will be paid on 4 April 2016. The record date for determination of
entitlements to the dividend is 18 March 2016.

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

REVIEW OF OPERATIONS

Divisional results for the half year ended 31 December 2015 are provided
below for the express package & business mail division and the information
management division.

Express Package & Business Mail

Operating revenue of $187 million was 1% higher than the pcp. EBITDA of $35
million and EBITA of $32 million were both 1% lower than the pcp. Allowing
for four extra trading days in the pcp, this result would have been ahead of
the pcp.

The express package & business mail division operates a multi-brand strategy
in the domestic market through New Zealand Couriers, Post Haste, Castle
Parcels, NOW Couriers, SUB60, Security Express, Kiwi Express, Stuck, Pass The
Parcel, DX Mail and Dataprint.

Overall activity within the express package & business mail division was
above the prior year, albeit the timing of the end of year peak volumes
occurred later this year than the prior year. This resulted in some pressure
on capacity and some additional operating costs being required to ensure
service quality was not compromised.

An aircraft fleet upgrade was recently announced that will see a transition
from the existing Convair freighter aircraft to Boeing 737-400s. The project
to manage this transition is running to schedule with the first Boeing
737-400 arriving in the country in mid-December and being put to work in
assisting with peak Christmas volumes. Two further Boeing 737-400 aircraft
are scheduled to arrive in coming months and to be fully operational by May
2016.

Negotiations have been completed with Christchurch International Airport
Limited to lease a new purpose-built facility to enable the consolidation of
operations from three separate facilities into one that will have airside
access to the Boeing 737-400 aircraft fleet. This new facility will be fully
automated, enabling a reduction in the manual handling and sorting of
freight. Capital expenditure of approximately $11 million related to this
project will be invested progressively throughout the next 14 months. This
new facility is expected to be fully operational early in the second half of
the 2017 financial year. A positive return above our cost of capital for this
project is expected to be achieved through efficiency and quality
enhancements.

During the half year, branch relocations to larger premises occurred in
Dunedin and Tauranga to create more capacity to accommodate our current and
expected future volume growth.

Freightways' business mail operator, DX Mail, continued to expand its postie
network and is now offering 5 days a week delivery in an increasing number of
urban locations throughout New Zealand. While the overall physical letters
market continues to decline, the demand for DX Mail's service is increasing.
Dataprint, which provides physical and digital transactional mailhouse
services, also increased market share in all of its service lines, both
physical and digital.

Information Management

Compared to the pcp, which also included the benefit of 4 extra trading days
in the New Zealand operations, operating revenue of $69 million was 20%
higher, while EBITDA of $17 million and EBITA of $14 million were 22% and 25%
higher, respectively.

Our established information management brands on both sides of the Tasman,
with the exception of Shred-X, now operate as The Information Management
Group (TIMG). Shred-X, due to its unique positioning and particularly strong
brand presence throughout Australia, will continue to operate under its own
name.

Increased utilisation of existing facilities, as a result of increased box
and data storage volumes from existing and new customers, the successful
integration of recent acquisitions in New Plymouth, Sydney and Brisbane and
improved performance from the recently-acquired LitSupport, all contributed
to this solid result. LitSupport has however not achieved its initial
12-month performance target and the vendors will accordingly repay
Freightways approximately A$5 million of the initial purchase price.
Nonetheless, the LitSupport team has, in the latter stages of the half year,
increased sales momentum and completed a restructure to reduce overhead
costs, both of which position the business well for the future. Demand for
the digital information management services offered throughout TIMG continues
to increase.

Internal service providers

Fieldair Holdings provides airfreight linehaul and Parceline Express provides
road linehaul to our front line businesses. As express package volumes have
grown, the services provided by the operations of these businesses have
quickly adapted, while maintaining service excellence. Freightways
Information Services provides IT development and support to the express
package & business mail division. This team has been expanded to address the
increasing demand for technology-based innovation and to assist in achieving
Freightways' strategic objective of being a technology leader in the markets
it operates in.

Corporate

The maturity dates for all existing bank facilities were extended during the
half year by a further two years at a slightly reduced cost.

Corporate overhead costs continue to be well-contained. Acquisitions during
the half year have been funded from a combination of operating cash flows and
borrowings from existing finance facilities.

Capital expenditure of $8 million was invested during the half year,
primarily to provide capacity for growth, including expenditure on facilities
and related equipment, IT infrastructure and airfreight capability.

OUTLOOK

Freightways is positioned in markets that are expected to deliver long-term
growth. In the near-term, however, and at least for the balance of the 2016
financial year, given the current volatility in markets around the world,
Freightways is cautious in its outlook.

The express package & business mail division is expected to perform at
similar levels to the prior year. Performance within this division is largely
dependent on domestic economic activity that will be reflected in existing
customer activity.

The information management division is expected to continue to improve its
year-on-year performance.

Strategic growth opportunities, including acquisitions and alliances that
complement existing capabilities, will be executed where they make commercial
sense.

Capital expenditure for the full year is expected to be approximately $20
million to support the growth and development of both Freightways operating
divisions. Overall cash flows are expected to remain strong throughout the
2016 financial year.

CONCLUSION

Freightways has recorded a sound half year result above the prior comparative
period. Accordingly, the Directors have been able to declare a fully imputed,
12.75 cents per share interim dividend.  The benefits of diversification into
the information management industry, where continued forecast growth is
expected, will increasingly underpin the company's performance as the more
cyclical express package & business mail industry enters a period where
achieving year-on-year growth may be more challenging.

The Directors acknowledge the outstanding work and ongoing dedication of the
Freightways team of people throughout New Zealand and Australia.
End CA:00278054 For:FRE    Type:HALFYR     Time:2016-02-22 09:48:16