Freightways has lifted its full-year profit as well as announcing a major deal to buy Australian express package business Allied Express.
Net profit for the year to June 30 was up 4.3% to $73.9 million excluding the impact of the last payment due for the 2020 acquisition of Big Chill Distribution. Overall, FY22 revenue was up 9% year-on-year to $873.1 million for the freight, courier and information management firm. A final dividend of 19 cents per share brings the full year dividend to 37cps, up 3.5cps compared to last year.
Alongside its FY22 results, the NZX-listed company announced a $178m (A$160m) transaction for 100% of the shares in Allied Express which is one of Australia’s largest independently owned courier and express freight providers. The transaction is expected to be complete by September 30 this year.
Allied specialises in the delivery of items over 22kg in weight. The sector has higher barriers to entry because of the complexity associated with moving larger courier items. It has a team of around 1150 people including 700 contractors and 450 staff, with clients ranging from large corporates to SMEs operating across a wide range of industries including online retailing, automotive, trade supplies and manufacturing.
Freightways chief executive Mark Troughear says the purchase sets a platform for future growth and marks a significant entry point to the Australian market.
“This transaction gives us a successful model for enhancing our offering on both sides of the Tasman, leveraging Freightways’ core capabilities in express pick up, processing and delivery while creating a niche in oversized freight at the same time,” Troughear says.
Meanwhile, the company’s FY22 result came amid challenges with frontline workforce numbers, supply chain and the labour market due to COVID-19. However, this brought surges in demand and spikes in new customers following lockdowns and saw an increase in the company’s market share overall.
“As with many other businesses, our frontline workforce was heavily impacted by Omicron and labour shortages with our teams affected by up to 30 per cent absenteeism through contracting the virus at times. Our customers were also affected, and it resulted in softer volumes in the second half of the year.
“This impact was offset to a large extent by market share gains, surges in volume when restrictions lifted and tailwinds from businesses in our network including Big Chill Distribution and Med-X which continue to be standout performers,” Troughear says.
Sustainability goals
The company will be releasing its third Sustainability Report this year, having developed a science-based target for emissions reduction to target a 50% drop in scope 1, 2 and 3 emissions by 2035.
Over 95% of its emissions come from the fuel across its vehicle fleet and aircraft. It has a 2030 target of 35% reduction in CO2 emissions and a 2035 target of 50% reduction in C02 emissions (both for scope 1, 2 and 3).
Progress is being made in emerging technologies starting with 25% of company cars being PHEV by 2025 and 100% either PHEV, EV or hydrogen by 2030.
It expects that contractors’ light vehicles will begin to transition to EVs from 2028 enabled by rates of remuneration, with a goal to having the entire light vehicle fleet made up of low emission vehicles by 2035.
Freightways anticipates its heavy transport fleet will start using alternative fuels from 2030, and by 2035 expects that half of these vehicles will have transitioned.
It expects its aircraft fleet will modernise at the end of the current decade.
“Having said this, the landscape is changing rapidly and we will be flexible in our approach as the emerging technologies are proven, including continuing to closely monitor and assess the availability of alternate low emissions fuels through this period,” the company says.
Outlook FY23
The first six weeks of FY23 have seen a slight 1% decline in express package items consigned compared to the prior comparative period (pcp). Existing customers are trading 5% lower than in the pcp offset largely by a net 4% market share gain. Business-to-business (B2B) is down 5% and business to consumer (B2C) up 11% reflecting market share gains over the past year.
The company says comparing COVID impacted periods is challenging (for example there are far less COVID related personal protective equipment (PPE) and PCR tests traveling through the network compared to the previous year) a comparison to 2019 pre COVID levels reveals total item growth of 12%.
It believes the current impact on customer trade is driven by a range of factors including a chronic shortage of labour which is restricting businesses from reaching their optimal output, continued disrupted supply chains and some slowing of economic activity.
The company expects operational labour costs to increase by around 11% on the pcp reflecting a tight market and the need to secure quality people, as well as higher sick leave and costs related to filling those gaps. Fuel prices have had their first material fall in the last year and if this trend is maintained the company expects that the fuel lag will allow it to “recoup some of the losses” experienced in FY22.
“Despite the present challenges in NZ and Australia for the businesses we operate – primarily the scarcity and increased cost of labour and some signs of an economic slowdown impacting consumption – we remain confident in our ability to manage the impact of these conditions on each part of our business,” it says.
