KEY POINTS:
Courier company Freightways announced an increase in revenues today, but admitted growth prospects in its industry sector were virtually nil.
The company reported another record annual profit -- a 3 per cent increase in profit to $25.09 million on a 10 per cent increase in revenue.
But only 1 per cent of the revenue growth was organic. Organic growth is the rate of business expansion through increasing output and sales as opposed to mergers, acquisitions and take-overs.
Managing director Dean Bracewell said there was no consistent theme across the company's brands New Zealand Couriers, Post Haste Couriers, Castle Parcels, SUB60, Security Express and Kiwi Express. It was patchy.
"On balance it is pretty flat," said Mr Bracewell.
"We are thinking it is going to be pretty flat for the next six months in the core business in New Zealand," he said.
The company's shares fell 15c to $3.70 in afternoon trading in a market experiencing a wholesale selloff.
Stephen Wright of ASB Securities said only an extraordinary growth story was going to buck the market trend on the day.
The company's profit had exceeded the market consensus but it was still directly tied to the New Zealand economy.
Freightways' share price is more than double the $1.60 shares were sold at in the 2003 float and some investors may have been taking profits.
The good news for investors was that a fully imputed dividend of 9c a share was declared, up from 8.75c last year. The company has strong cash flows, the highest margins in the courier industry anywhere, a big market share and still doesn't expect any new competitors in the national market.
Freightways also does not expect companies offering services to Trade Me customers, like a startup backed by businessman Mike Pero, to materially impact its business and doubts their business model.
Freightways has acquired four companies in Australia since July 2006 and is continuing to explore acquisitions. Acquisitions provided 5 per cent of the revenue growth.
Freightways is not pushing into the national courier market in Australia where Toll Holdings, two businesses owned by Qantas and Australia Post and TNT operate, believing margins to be lower than in New Zealand. Though it is saying never say never.
As in New Zealand, the need for a network including air freight is a significant barrier to entry into the national courier market.
"It has been an eventful year for Freightways in which it has performed soundly in New Zealand, established its presence in Australia and delivered a record result," the company said in a statement to the stock exchange.
Earnings before interest, tax and amortisation increased 6 per cent to $56.5m.
Earnings per share of 19.5c was up from 19.1c last year.
- NZPA
