18 Aug 2015

Freightways to get paid for underperforming company

4:10 pm on 18 August 2015

Freightways says it's likely to receive up to $5 million back from the former owners of the Australian firm, LitSupport, as the company has failed to deliver on earnings expectations, so far this year.

The courier and information management company bought LitSupport, which provides electronic and written document services to the legal industry, late last year.

Freightways made an initial payment of A$17 million, with potential further payments of up to about A$13 million, based on the earnings to the year ending 2017.

Freightways managing director Dean Bracewell said LitSupport has failed to meet those earnings targets and will have to refund some of the initial purchase price to Freightways.

He said Freightways noted the potential for weaker-than-expected earnings growth when it made the offer to purchase.

However, he said Freightways remains confident in LitSupport's business, which complements its other information services in Australia.

Mr Bracewell said the former owners of LitSupport are still active in the business and are highly motivated to claw back some of the purchase price, which will depend on whether the company hits its earnings targets through to the end of 2017.

Freightways information management business accounts for 25 percent of its total revenue, with 60 percent of that revenue from its New Zealand business and 40 percent from Australia.