Shares of Freightways have fallen today after the biggest courier company on the NZX announced an underwritten dividend reinvestment plan as part of plan to preserve cash and strengthen its balance sheet.
Its share price has fallen 7.3 per cent to $3.15 the lowest in almost two weeks, after the announcement, which coincided with Freightways' full-year results. Profit gained 7 per cent to NZ$34.6 million, or 26 cents a share, it said in a statement.
The wider sharemarket is having a down day, with the benchmark NZX-50 index falling 1.5 per cent, down 48 points to 3102.
The result included a one-time gain of NZ$3.9 million from the sale and lease back of a Wellington property. Freightways said it signed an underwriting agreement for the dividend re-investment plan (DRP) with Forsyth Barr, offering the same 2.5 per cent discount as shareholders will get to calculate the shares to be issued.
The DRP was being introduced "in light of the current, exceptionally uncertain operating environment" and will strengthen the balance sheet "by introducing new equity" and preserving cash which otherwise would be paid out in dividends, the company said.
The capital management initiative "makes you question what the board is seeing that means they need to raise more equity," said Paul Harrison, who helps manage NZ$150 million at BT Funds Management. The move "will not be well received," he said. The company's results "seemed to be in line" with expectations, he added.
Managing director Dean Bracewell wasn't immediately available to provide more details about how the DRP and underwrite will work.
The company raised about NZ$50 million in April-May from a fully underwritten share placement to institutions at a discount and a share purchase plan for small investors. The placement, underwritten by Goldman Sachs JBWere, and the SPP pare Freightways' debt to NZ$171.3 million, or 57 per cent of book equity, from 72 per cent.
Freightways gets the bulk of its revenue from its core express package businesses New Zealand Couriers, Poste Haste Couriers, Castle Parcels, NOW Couriers, SUB60, Security Express and Kiwi Express.
The company didn't make a specific forecast for 2010 other than to predict capital spending of about NZ$13 million, "significantly lower" than in 2009, when it spent NZ$21 million.
"The current economic downturn has translated into lower express package volumes from some of Freightways' existing customers," chairman Wayne Boyd and managing director Bracewell said in the statement.
Pending a recovery in the domestic economy, "performance of the express package and business mail division is expected to continue to track behind the prior year." Freightways cut its final dividend to 8.5 cents a share from 9.25 cents a year earlier.
Earnings from express packages was below the year earlier period in the latest 12 months, with the fourth quarter "particularly quiet" versus the same period of 2008. Its DX Mail business, which competes directly with NZ Post, had earnings "well down" on a year earlier.
The company's information management unit, which operates in Australia and New Zealand, hasn't been dented by the economic downturn, posting an earnings gain from the previous year, Freightways said.
-BUSINESSWIRE
Freightways shares drop on dividend reinvestment plan
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