Freightways - FRE

[minimoke]

Here's a share with no love.

But in todays announcment:
Revenue up
Profit before tax up
Net profit up
Final Dividend up

Share price down on opening

[macduffy]

Here, at least, is some good news.

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12148567

[minimoke]

Here, at least, is some good news.

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12148567
This si what is killing me. More good news. But still down over 1% today! The market is just mental at times.

[MauroNZ]

Is there anyone following this company? I wonder if this news are a concern.

http://www.sharechat.co.nz/article/a6a9625b/freightways-says-express-package-growth-slowed-in-2h-may-flow-into-fy2020.html

[percy]

Is there anyone following this company? I wonder if this news are a concern.

http://www.sharechat.co.nz/article/a6a9625b/freightways-says-express-package-growth-slowed-in-2h-may-flow-into-fy2020.html

Yes it is very much a concern.
When FRE state things have slowed down, we know the whole economy has slowed.
For FRE it means margins and growth are under pressure,together with pressure from their biggest customer.
Not a lot of wriggle room for FRE as they were priced for perfection.
Although the sp has fallen,perhaps it will fall further.

[MauroNZ]

Yes it is very much a concern.
When FRE state things have slowed down, we know the whole economy has slowed.
For FRE it means margins and growth are under pressure,together with pressure from their biggest customer.
Not a lot of wriggle room for FRE as they were priced for perfection.
Although the sp has fallen,perhaps it will fall further.

Thanks Percy, I think I read a couple of years from you about FRE but I wasn't sure.

[percy]

Yes years ago I recommend a friend buy in at IPO.Not much interest in the float so he got a fair few.Think everyone wanted Feltex.!
He has since died and his family trust retained ownership of his shares.
I am a trustee of his trust.
On Friday and yesterday we sold two thirds of the trust's FRE shares.
I think the IPO price was $1.60,but it was so long ago I may have that wrong.

[MauroNZ]

Yes years ago I recommend a friend buy in at IPO.Not much interest in the float so he got a fair few.Think everyone wanted Feltex.!
He has since died and his family trust retained ownership of his shares.
I am a trustee of his trust.
On Friday and yesterday we sold two thirds of the trust's FRE shares.
I think the IPO price was $1.60,but it was so long ago I may have that wrong.

Thanks Percy, I always learn something from your posts. I guess then not worth it at the moment to research.

[minimoke]

I bought in at IPO and they sit in my "set and forget" portfolio. $1.60 rings a bell. Its been a slow but steady growth stock with useful divvies along the way. Its a reliable enough company I'm not worried about its recent plunge. Its till well above the 12 month low. Will keep holding until retirement - at which point all shares get the spotlight cast on them.

[lissica]

I bought in at IPO and they sit in my "set and forget" portfolio. $1.60 rings a bell. Its been a slow but steady growth stock with useful divvies along the way. Its a reliable enough company I'm not worried about its recent plunge. Its till well above the 12 month low. Will keep holding until retirement - at which point all shares get the spotlight cast on them.

IPO price was $1.60. We've held since IPO- the first share I've owned and still own. Stepdad worked for them at the time.

Not too worried about their outlook. Freightways have always had a pessimistic statement- can't recall them saying anything but conditions being challenging.

I prefer that they under promise.

[Jonboyz]

Tis a tight market looking for good value at the moment. FRE sp has been down this year with economy slowing, but maintains a good hold on the courier market and an okay dividend. Long-term, its business model looks pretty stable for continued growth.
Looks to be a reasonable investment - any thoughts?

[Not a holder but watching]

[Stumpynuts]

FRE acquiring Big Chill Distribution

https://www.nzx.com/announcements/343468

[macduffy]

As one would expect, the presentation reads well. Does anyone know Big Chill's position and reputation in the industry? Who are the competition?

Disc: Holding FRE

[jg8512]

As one would expect, the presentation reads well. Does anyone know Big Chill's position and reputation in the industry? Who are the competition?

Disc: Holding FRE

acquisition looks good, Freightways' performance in its core business not so good.

[percy]

As one would expect, the presentation reads well. Does anyone know Big Chill's position and reputation in the industry? Who are the competition?

Disc: Holding FRE

Big Chill have 200 trucks while Halls have 250.

[kiwi_crusader]

Big chill reputation in the industry is terrible, they’ve been getting a lot of work due to undercutting and looks like it’s come back to bite them in the backside with the increased transport costs.
They won the big Fonterra contract, then found out they under costed on many runs and tried to pick and choose but fonterra held then to their full contractual obligations. Their fleet is mostly leased and full of Indian employees with work visa’s running out and have high turnover in staff.

[percy]

Just posting to have this thread visible.
Yesterday's announcement read to me as they face a few challenges.

[percy]

Thanks Percy. Sorry I created new thread yesterday as I could not find one. How do I delete the unneeded duplicate thread? Any guidance appreciated.

Poor half year result from a company that has been a good long term performer over years. Information Management result very poor, express package weak growth.

Disc. Long term holder

Would not worry about it.Just send Vince a PM asking him to delete it.We have all done it.!.lol.

[macduffy]

Announcement of settlement for Big Chill and trading update. Sensibly, no stab at profit guidance offered.

:)

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/FRE/351077/320120.pdf

[Marilyn Munroe]

I use their DX mail product as it was superior to Cullen Post until the current crisis.

My local DX mail drop off in the lobby of a solicitors office is now closed. Their help line directed me to a public post box which does not exist.

Cullen Post is my mail solution for now.

Boop boop de do
Marilyn

[DarkHorse]

Can anyone connected with the industry shed any light on their current prospects?

[King1212]

Business is booming ....saw on the news FRE won an air contract.....no doubts few companies that will do well now

https://i.stuff.co.nz/business/121450380/coronavirus-courier-company-facing-5-day-backlog-wants-anyone-with-a-car-to-deliver

[King1212]

Evidence that freight companies made a killing....

My tenant is a courier driver. .own his franchise...said....4 times workload since level 4 lockdown...

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12330744

https://i.stuff.co.nz/business/prosper/your-stories/121456676/customers-receive-inedible-meat-as-couriers-struggle-with-flood-of-online-orders

[King1212]

Made a killing...like I said

https://i.stuff.co.nz/national/121480181/coronavirus-nz-post-receiving-200-parcels-per-minute-fiveday-delivery-delays

[macduffy]

Made a killing...like I said

https://i.stuff.co.nz/national/121480181/coronavirus-nz-post-receiving-200-parcels-per-minute-fiveday-delivery-delays

Yes, a lot of parcels but profitability will be affected by the restrictions on processing. To what extent?

[macduffy]

Yes, a lot of parcels but profitability will be affected by the restrictions on processing. To what extent?

A good, positive article. But we'll have to wait to see how profitable this period has been for FRE.

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12330812

[King1212]

With fuel record low....as that is the highest expenses....I can see they are winning

[kiora]

With fuel record low....as that is the highest expenses....I can see they are winning

Expense for the drivers or the company?

[King1212]

Some are owners...bought franchise...some drive the company fleet. ...

But all the trucks from big Chill n other trucks would benefit the company in such a low petrol price

If u look at Zel announcement of fuel consumption.... foodstuffs truck fuel....u can see how much fuel the foodstuffs used up every week.

[Southern Lad]

I presume most owner driver contracts pass the fuel price risk back to the freight company. Owner drivers are in no position to manage this risk or enter into hedging products.

[Timesurfer]

I presume most owner driver contracts pass the fuel price risk back to the freight company. Owner drivers are in no position to manage this risk or enter into hedging products.

The smart ones have a ratcheting up clause if there is significant inflation. I am not aware of ratcheting down ones (because fuel never significantly drops!) but when contracts are renegotiated they will get a haircut.

[King1212]

What..before the lock down....91 fuel was almost $1.80.

Now ....$1.60....that is .20c ..drop. what do u mean not significant drop...

[Sideshow Bob]

The smart ones have a ratcheting up clause if there is significant inflation. I am not aware of ratcheting down ones (because fuel never significantly drops!) but when contracts are renegotiated they will get a haircut.

With any of the carriers or refrigerated carriers we use for work at least, there is a 'FAF' which think is a "Fuel Adjustment Factor" which carries on any of our freight. Some of these are using owner-drivers.

Issue is, last time I looked at a notice from a major nzx-listed carrier, I could buy diesel cheaper than the lowest FAF rate or price band! :confused:

[Stumpynuts]

Can anyone connected with the industry shed any light on their current prospects?

I'm a direct employee of one of the wider FRE companies.

Courier drivers - The majority are owner operated contractor drivers - They bear all the cost of the fuel purchases themselves. It's up to them as independant operators to correctly claim for their fuel as part of their operating expenses - One would assume they've got proper tax advisors to do their yearly returns.

The fuel adjustment factors are generally factored into product price increases across all FRE products in order to keep paying the courier drivers - ie. The cost of fuel goes up which the courier has to pay for directly, the consumer product must also increase in order for each of FRE's individual companies to pay their contractors directly.
The same thing happens with Supermarket linehaul truck contractors - Costs are passed onto Foodstuffs/Countdown, they in turn pass the cost increase onto price of the bread & milk that you pay for at the checkout.

For those that aren't aware of how the courier industry works - Courier drivers are paid for each individual item of courier successfully delivered only.
They're generally not paid a guaranteed base or whatever, although in some cases some companies will offer that at the start of a new courier franchise in order to get them up and running.

[King1212]

A bit of korero from the Jarden

Great time ahead....

Qantas Cargo, Air New Zealand Cargo, Mainfreight, Til Logistics, K&S and several other logistics companies have all either upgraded or maintained their earnings guidance since the Covid-19 lockdowns, so we would expect this information is already priced into their shares. While Freightways, Lindsay and CTI Logistics may also have benefited from higher demand for home deliveries, lower fuel costs and less traffic congestion, these companies have stayed quiet about their earnings. If these factors have not been fully priced into their shares, these companies could surprise on the day of their result

[King1212]

Lockdown is good for freight companies! Will see more delivery...

[percy]

.................................................. ...
Changed my mind.

[King1212]

Monday is reporting day. So far no news....so...let see e koro Jarden is right or not... whether freightway can maintain thier earning or upgrade.

So far...HLG and a lot of retailers reported significant increase of online sales. Together with online food delivery.

Spoke to one of the drivers....he is flat out! 6 days full delivery

[bull....]

no dividend yuk wonder if it get smashed because of this?

[JohnnyTheHorse]

no dividend yuk wonder if it get smashed because of this?

Thanks for that heads up. Went short on open.

[King1212]

Business is strong... revenue up...this is a hold

[winner69]

Business is strong... revenue up...this is a hold

...and I wouldn’t short it either

[sb9]

Thanks for that heads up. Went short on open.

Yeah, price looks vulnerable may test low $6s in the short term.

[JohnnyTheHorse]

...and I wouldn’t short it either

Just a quicky. Covered at 685.

[peat]

interesting to read logistics companies reports as a barometer of the much wider economy. FRE confirming the situation that recovery is moderately strong, but not ecstatic, and seen as bounceback

[dreamcatcher]

10 days ago was $6.75 with no div expecting low $6 otherwise not interested.

Happy with decision to sell 2 years ago $6.80 as SP hasn't moved.

[tango]

I was expecting better things. All the other courier companies had a massive surge in volume as people shopped online. FRE had increased revenue not converted to profit. I have to dig in to the accounts further to work out where the extra costs came from.

It's a hold from me but I will review it over the next month...

[King1212]

It is a hold and accumulate when SP is week. Glad they keep the dividend as the chance of raising capital is gone... great company to hold....

[peat]

Glad they keep the dividend

oh i see you mean they keep the dividend in the retained earnings - which means they cut the dividend.

[King1212]

Breaking $8 soon...brokers are bullish with FRE because of increase of online shopping and NZ covid under control now. Extended airfreight contract.

[King1212]

Hopefully will break $8 this week.

[King1212]

Uncle Jarden right again....man....they made me rich...

[CamNZ]

Breaking $8 soon...brokers are bullish with FRE because of increase of online shopping and NZ covid under control now. Extended airfreight contract.
Nearly there, pushing up to $7.94 today. The Auckland Lvl 1 announcement giving a boost?

[forest]

Director retirement
7/10/2020, 9:09 am ADMIN
Malcolm Grimmond has decided not to stand for election at the Freightways’ ASM on 29 October 2020, citing personal reasons. Mr Grimmond had joined the Board of Freightways on 14 September 2020. The Board acknowledged Mr Grimmond’s decision and wished him the very best for the future.

[King1212]

update is next week, 29th OCt....would FRE follows MFT?? Big chill is well positioned, extra freight contracts from government. SP is currently at the same level before they bought Big chill. so will be interesting to see the update next week.

[BlackPeter]

update is next week, 29th OCt....would FRE follows MFT?? Big chill is well positioned, extra freight contracts from government. SP is currently at the same level before they bought Big chill. so will be interesting to see the update next week.

Yep, I sort of wondered as well why FRE is performing that pathetic compared to Mainfreight ... they are in the same industry and line of business - right?

Just compare how the market valued them the last 5 years ... just to remove any doubt - MFT is the blue line, Freightwise is orange :p;

12033

Freightwise gained over the last 5 years roughly 40%. Not bad, however Mainfreight gained throughout the same period of time 260%. Now - this is how a successful company with great management compares in a booming market with its poor cousin with average random management.

Have a look through Freightways books - they are indebted with debts (70% of their assets) reaching up to the nostril, their NTA is a material negative number (-$1.10 / share) and many of its enterprises are just loss leaders without any promise to bring in paying customers. Who in their right mind would start in a rapidly shrinking market a competing letter mail business (Dx-mail)?

Just to compare: Mainfreights liabilities are 58% of assets and their NTA is a positive $5.09 per share.

I think one of the other big differences is - Mainfreight considers themselves as a transport enterprise with the customer needs in the centre, while Freightways sees themselves more as an investment fund for whatever activity may or may not bring money in the transport business ...

Sure - they say every dog has its day, and at the moment it may or may not be Freightways, but I certainly would not bet too much money on that :):

discl: hold MFT, don't hold FRE;

[King1212]

To answer that..simple....

MFT has expanded overseas..thier sp reflected to thier business

FrE only Australia n nz...and slowly expanding thier business

Saying that...sp never disappointing.. slowly up

[winner69]

Firing on all cylinders ...busy as

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/FRE/362190/333781.pdf

[King1212]

V8 cylinders!!!

[King1212]

$9 ish coming soon...big chill performed well! All other parts are well run n busy...

[King1212]

Bloody good update...very resilience business not depand on overseas demand n supply. All concentrate on Nz and Oz. Happy holder here.

[Ferg]

Bloody good update...very resilience business not depand on overseas demand n supply. All concentrate on Nz and Oz. Happy holder here.

It's a GDP story that is independent of the tourism industry. Once they crystallise some of the synergies with BCD, and the interest rate swaps roll off over time, we should see improved profitability irrespective of other acquisitions & efficiency improvements. I got in post-lockdown after it caught my eye as one that might reinstate dividends. Very happy with the performance and the returns, and I'm more than happy to hold for now. The only thing that worries me is the lack of tangible assets relative to debt but I can overlook that for now.

[King1212]

Revenue up 35% on first quarter compare with last year first quarter. What not to like....

Yes... lacking of tangible assests...u need to understand FRE businesses are providing services.... freight services.

No need a lot of Assests to back it so long the businesses are well managed n run...all sweet as. FrE has a good track record...just like MFT.

The only thing is FRE only concentrates in NZ and OZ.

[Ferg]

The only thing is FRE only concentrates in NZ and OZ.
I don't see that as a bad thing. I would prefer managed growth than growth for growth sake - we have seen plenty of that over the years with some disastrous forays into overseas markets. I get there is a lack of assets where you have a lot of subcontractors in a freight business, plus owning the fleet would add multiple layers of costs hence the reason I'm ok with overlooking that for now.

The 35% lift was partly due to the extra week in the reporting period as well as the inclusion of Big Chill Distribution (BCD). Taking these two factors out I reckon same business YoY growth using the same time period for last year shows organic annual growth of around 10%. This is after deducting $12m for the different accounting period and around $25-$30m for BCD for Q1. Still a good business - no complaints from me.

[King1212]

This stock is a keeper... resilience business. Well managed n capable management..... happy to hold n add more

[CamNZ]

This stock is a keeper... resilience business. Well managed n capable management..... happy to hold n add more

I couldn't agree more!

[King1212]

Dang...will get hit tomorrow.vaccine news is out....will be back to normal soon ... revenue will be hit

[BlackPeter]

Dang...will get hit tomorrow.vaccine news is out....will be back to normal soon ... revenue will be hit

They say they do need specialist cool transports to spread the vaccine around the globe. Not sure Freightways qualifies (vaccine needs to be kept below minus 70 degrees all the way), but there is clearly plenty of business for a freight company which knows what they are doing ...

[CamNZ]

Dang...will get hit tomorrow.vaccine news is out....will be back to normal soon ... revenue will be hit

Not necessarily... I remember they said that commercial deliveries are more profitable due to the higher costs delivering to residential locations.
Also a fair share of revenue from their other operations in secure document and information services may return?

[CamNZ]

They say they do need specialist cool transports to spread the vaccine around the globe. Not sure Freightways qualifies (vaccine needs to be kept below minus 70 degrees all the way), but there is clearly plenty of business for a freight company which knows what they are doing ...

Good point! Plus didn't they just acquire Big Chill Distribution? Perfect timing of sorts?

[Sideshow Bob]

Good point! Plus didn't they just acquire Big Chill Distribution? Perfect timing of sorts?

Yes, they bought Big Chill. Good acquisition.

[CamNZ]

Hitting ATH $10.00!!!

[DiffTheEnder]

Anyone have any idea what's causing the latest run up?

[Benny1]

Anyone have any idea what's causing the latest run up?
Leading up to half year results on the 22nd Feb. think they said at the AGM they were up something like 30% on the PCP for the first few months of the FY if my memory serves me correctly.Also said they were re-instating the divi for this period.
MFT still rocketing along so perhaps benefiting a little from that as well?

[James108]

Anyone else like the result? Tempered by big chill earnout (for being too profitable). I had wanted to own freight ways shares for a while and glad I took the opportunity to buy some last year.

[Filthy]

Anyone else like the result? Tempered by big chill earnout (for being too profitable). I had wanted to own freight ways shares for a while and glad I took the opportunity to buy some last year.

It was good, just nowhere near as good as I thought it was going to be....

[Benny1]

Solid result, the Big Chill earn out has taken a fair swipe out of it, however this should add plenty of value in the long run...
15.5c p/s divi is nice...not quite sure if the result warrants the re-rating upwards we have seen in the share price over the last few months?
However any dip in share price going forward may lead to some welcome buying opportunities...
Don't expect too many comments on here...generally seems to be quite an unloved stock on this site..

[macduffy]

Solid result, the Big Chill earn out has taken a fair swipe out of it, however this should add plenty of value in the long run...
15.5c p/s divi is nice...not quite sure if the result warrants the re-rating upwards we have seen in the share price over the last few months?
However any dip in share price going forward may lead to some welcome buying opportunities...
Don't expect too many comments on here...generally seems to be quite an unloved stock on this site..

Well-loved by this longtime shareholder! I agree that the Big Chill earnout augurs well for future profitability growth.

:)

[traineeinvestor]

A solid result but possibly the market was expecting a little more. As others have said, the Big Chill earnout bodes well for the future as does the increasing utilisation of storage facilities.

A long term holder who's happy to continue holding.

[alokdhir]

MFT and FRE had over shot their current valuations in the exuberance of strong bounce of the economy ....now slowly they will come back to more real levels .

Economy is not that great what it seemed to look after very bad period ...but now its starting showing signs of fatigue . Truckometer ...as called which is a forward looking indicator is showing signs of slowing as per Cameron Bargie in his latest interview !!!

[Filthy]

MFT and FRE had over shot their current valuations in the exuberance of strong bounce of the economy ....now slowly they will come back to more real levels

Hmm the question is where will it settle? What is a reasonable PE to pay? MFT has a strong record of year-on-year growth, across different markets. FRE has had much lower growth, locally, over the same time and a track record which is a bit more ho-hum.... so kind of the poor cousin. Used to always give a safe 4-5% divi though. I think FRE has usually traded on high-teens, early 20s? vs MFT on high 20s early-to-mid 30s? (perhaps someone with better historical knowledge than I can confirm past vs now...)
More parcels & packages flying around from strong online retail sales over the last few months, but this might abate soon (as & when life returns?) and then things will stagnate a bit? So MFT on a higher PE seems safer than FRE on a higher PE. As MFT will catch up with itself, but FRE might not. But I guess PEs probably don't count anymore in this market anyway eh... so why bother

[Ferg]

Whilst reported headline NPAT of $22m is down $7.2m on the PCP, the current period includes a pre-tax adjustment for the Big Chill Distribution (BCD) acquisition of $19.2m. As winner says, whilst the adjustment hurts the result, it is a good portend for future earnings from BCD.

Some stats and numbers:

Revenue

$410m for H1 is +29% or +$91.4m vs last year
BCD annual revenues in 2020 were circa $100m, so at least +$50m came from the BCD acquisition (BCD was not in last years numbers)
The other $41m came from over-performance of BCD plus the chairman notes Express Package (EP) volumes were up 11% and we know Info Mgmt was up +$2.6m. Assuming EP volume ~ revenues, this gives a rough split of +$26m for extra EP volumes and an extra +$12m for BCD over their 2020 numbers (+24%?) for total BCD revenues of ~$62m for H1.
My forecast revenues for the full year are $805-$810m based on:

slight improvements in H2 revenues for Info Mgmt as COVID disruptions abate
slightly lower revenues for EP & Business Mail based on H1 historically being higher than H2
slight improvements for BCD especially 3PL in H2.



Gross Margin

Using "Transport and Logistics" costs to be COGS, the GM% for H2 was 60.5% which was slightly down on the PCP of 60.9%
The latest GM% of 60.5% is not too far off prior years where 2018 was 60.4% and 2019 was 60.7%


Overhead & Other Costs

Occupancy, Staff & Admin costs were up +$25.4m vs last year (+20.6%). A lot of this will have come from the BCD acquisition. So long as the growth in these costs is less than the growth in revenues, then a higher profit should be the result.
Depreciation and Amort were up $10.3m - again likely due to BCD and the mixed model of owned vehicles versus owner operators.
My estimate of the BCD overheads in 2021 (based on the 2020 numbers) is 100m - 40m COGS = 60m GM - 12m EBIT - $10m D&A = $38m.

Given overhead costs went up by $25m (and not $38m) this implies FRE are already making synergy savings and/or have cut overhead costs elsewhere based on the COVID experience - or BCD have higher operating costs, with a lower GM% and lower overheads.


Interest costs should reduce in H2 off the back of reduced debts and low floating interest rates, although I note the cash flow hedge reserve loss has increased. This is likely off the back of USD movements on pre-existing FX options and exchange contracts. And the FX translation reserve loss has also increased. Maybe there is some pain to come with some FX transactions? Total debit balances included in Equity are $10.2m.


NPAT & EPS

As noted above, reported NPAT of $22m is down -$7.2m on the PCP
However, the current period includes a pre-tax adjustment for the BCD acquisition of $19.2m, being an increase in the earn-out liability based on over-performance (this is a good thing). Assuming the tax effect of the adjustment is 28%, then the post tax impact is circa $13.8m putting adjusted/normalised NPAT at $35.8m.
I'm curious why this extra cost is not added to goodwill being a change to the purchase price? Maybe an IFRS expert can explain.
Adjusted NPAT of $35.8m is +$2.4m or +7% vs last year
Adjusted EPS is 22c per share for H1
I am forecasting H2 EBITDA of $34m for a total adjusted NPAT of ~$70m or 42c per share for 2021.

Adjusted NPAT of $70m in 2021 would be +$22m vs 2020 (Note 2018 NPAT was $62m and 2019 was 63m).


Based on todays share price of $10.63, this implies a forward looking P/E ratio for 2021 of 25 using normalised NPAT.


Dividends

FRE have announced the resumption of dividends with a fully imputed interim dividend of 15.5c per share payable 1 Apr 2021 (ex date being 12 Mar 2021). The previous interim dividend was 15c per share.
I'm assuming the final dividend will be 15.5c, assuming there are no more COVID interruptions, and with imputation this puts the annual gross dividend at 43c per share.
Note this is slightly higher than the post tax EPS of 42c (pre tax is 58c per share) but FRE generated FCF of 31c per share in H1 and I am forecasting 61c FCF per share for the full year based on capex of $13m for H2.
Forecast dividend yield based on todays SP of $10.63 is 4.1%.
Before the dip in dividends from 2011 to 2013, the compound annual growth rate (CAGR) in dividends based on the 2010 dividend is 7.5% per annum.
Jumping to the period after the dip in dividends 2011-2013, the CAGR in dividends from 2014 to 2021 is 5.5%.
Using the dividend valuation formula D/(r-g) where D is the forecast annual dividend, r is the required rate of return and g is the annual growth rate, the current SP of $4.63 implies an r-g value of around 4%. Given a recent growth rate of 5.5% this implies an r value of 9.5%.


Growth

Compound Annual Growth Rates for the past 20 years (FY2000 to FY2020):

Revenues +7.0%
NPAT +8.9%


CAGR for the past 10 years (FY2010 to FY2020):



Revenues +6.7%
NPAT +7.1%


Balance Sheet

No surprises or concerns there other than the debit balances in the IFRS reserves in equity of $10m, as noted above
NTA is still negative but improving
Debt repayments in H1 of $41m. I am forecasting (i.e. guessing) another $30m in H2.


Disclaimer

This is not financial advice and I am not advocating you take or change in any position in FRE
It is merely my personal opinion and observations



Disclosure: I am holding. I like this stock.

[Stumpynuts]

I'm an employee within FRE group of companies.
I'll be getting my employee shareplan dividend payment in April.

[Ferg]

New ATH today of $11.46. Based on normalised (i.e. excl. BCD earn out top up) forecast earnings of 42c puts the current SP of $11.36 on a PE ratio of 27. Dividend yield based on 43c gross is 3.8% p.a. Is anyone aware of anything causing the recent SP increase?

[ThaiJohn]

Question for you. MOV or FRE. I'm looking to lock away some dollars for 24 months. Obviously seeking the best return, overall.

[BlackPeter]

Question for you. MOV or FRE. I'm looking to lock away some dollars for 24 months. Obviously seeking the best return, overall.

In normal times I would say go for MFT ... but hey - freight companies had already (as predicted) a huge increase - and trade now all on an amazing premium. Maybe not the best time to buy and forget - certainly not with that time horizon.

In general you need to ask yourself how happy you are if you are not getting all of your money back in 24 months (risk tolerance) and how long you think the Covid induced shot in the arm for all moving companies got will stay around. Another 2 years? I doubt it, but sure - impossible to say. I would think however there is as well a material chance that both shares are in 24 months lower than they are today ... at least I would expect them to grow over the next 2 years slower than the index.

Whatever you do - have a plan B in case freight company shares (or the whole market) drop during your time frame. Have a look at the share price of any company you want to invest in between 2007 and 2009. If you are happy to take a similar dip with whatever money you invest today, than go for it - otherwise ... there are lower risk (but admittedly as well lower opportunity) investments around ....

All the best ...

[Beat the Bank]

Thanks BlackPeter for your considered answer.
I would love it if you could share your thoughts for lower risk investments as the market does seem really pumped at the moment. I have many higher risk shares and am looking to diversify down risk a bit. Long term investor timeline. I already have lots of retail and retirement shares.

[STr]

I'm in the same boat BtB - this forum has been a fantastic learning experience for someone who has avoided the sharemarket for years as everyone has said "it is overheated and about to pop" - it still hasnt but every day feels a little closer. In the meantime - I lost out on some huge opportunities and just fed the banks. I am now thinking of UK investments (not sure how yet) - they seem to be getting on with life and business where we are still facing huge potential and real business constraints that I dont see going away in our near future.

[BlackPeter]

Thanks BlackPeter for your considered answer.
I would love it if you could share your thoughts for lower risk investments as the market does seem really pumped at the moment. I have many higher risk shares and am looking to diversify down risk a bit. Long term investor timeline. I already have lots of retail and retirement shares.

My crystal ball is as cloudy as anybody else's.

What used to work in the past for risk minimisation was diversification.

Ben Grahams "The intelligent investor" is stone old and in parts somewhat US specific (talking about their retirement funds and tax rules), but the principles are I think still applicable.

I'd consider at this stage a balanced portfolio with some real estate companies (listed funds) including retirement villages, some agricultural stocks, some solid blue chips (I hold some NZ as well as some European manufacturers and some banking stocks), some exposure to gold (always good when the next crash comes around) and some solid bonds (though I am reducing these at the moment - I think there is a real risk of bonds going down with increasing interest rates) as a reasonable balance between risk and rewards.

Key is in my view to make sure you spread your eggs across enough unconnected baskets as well as having always enough cash reserve to stand through the worst of any potential crisis without the need to sell during the trough ...;

If all this diversification talk sounds too complicated - if you have a time horizon of more than a decade, than in the past index investments used to deliver quite healthy and reliable returns. Long term average is something like 8% pa ... however short time (months to years) fluctuations can be brutal (60% down short time used to happen during GFC) - i.e. do not rely on that money at a certain point in time.

Hope this helps ... if not - feel free to ask, though there are probably better threads to discuss this subject ...

[ThaiJohn]

Thanks BP. I shall take all of that on board and do some more homework.

[Sideshow Bob]

Full Year Results to 30 June 2021 and Final Dividend - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/377715)

$800m turnover (+27%), Profit $49.6m (+4.8%)



Full Year Results to 30 June 2021 and Final Dividend

23/8/2021, 9:03 amFLLYRFULL YEAR REVIEW

From the Chairman and Chief Executive Officer

If last year was about resolving the many and varied challenges posed by COVID-19, this year focused on moving forward. There were still lockdowns and other issues to deal with, but overall, our teams continued to bring a problem-solving attitude to day-to-day operations that saw us manage these issues and focus on implementing our strategy.

By further advancing Pricing For Effort for our courier brands; seeking efficiency opportunities in information management; integrating innovation into our workstreams and growing our waste renewal business, we demonstrated that Freightways has a powerful ability to profitably pick-up, process and deliver for customers at the same time as it develops new services.

An updated purpose – We move you to a better place - articulates our approach. As a group of businesses, we are motivated by progress. Whether we are shifting physical and digital items for our customers, helping our people further their careers, increasing returns for our investors or moving the dial for communities, our focus is firmly on what’s ahead.

This year, we continued to set new expectations for our customers; lift income and boost career aspirations for our people; deliver healthy returns for our investors and made plans to further reduce our emissions. In FY21 we reduced the number injuries across a workforce that grew by around 350 people through the acquisition of Big Chill. We did all of that by encouraging everyone who works here to take individual responsibility for making things better and rewarding them for that, by doing deals that make sense, by thinking commercially, and by working as a family that cares for each other and supports safety, security and wellbeing within our businesses.

We marked a year of owning Big Chill, and we are very happy with their progress. They are a clear example of a strongly positioned business which is focussed on meeting the needs of their customers, exploring new ways to generate value and improve earnings. At acquisition, Big Chill were a quality, temperature-controlled, express business. Since then, they have broadened activities to include coolstore-3PL capabilities and we have plans for this to continue as they add new value-adding services in the years ahead.

Big Chill’s progress is echoed across the Group. Our Express Package brands such as New Zealand Couriers and Post Haste have evolved from being leading business-to-business couriers, to brands that now include profitable business-to-consumer deliveries. Our Med-X business is shifting from document destruction to waste renewal by taking on high-value recycling opportunities. Messenger Services are moving from a pure-play point to point service to one that builds deeper relationships through dedicated services.

We move you to a better place reflects an entrepreneurial mindset that builds on our relationships and keeps providing existing and new customers with complementary services. This year, it’s seen us achieve important market share gains in our courier and waste businesses. Coupled with service standards that we believe are superior to those of any of our competitors, our businesses have enjoyed both organic growth and market share gains.

That positive mindset has also been at play in other parts of the business. Our information management business in Australia has achieved a solid turnaround, despite ongoing lockdowns. They have improved profitability by focusing on greater efficiencies.
The growth in medical waste in Australia is a great example of growth through innovation. When we bought into medical waste 4 years ago, it had $3 million in turnover. It now generates $16 million in revenue. There are success stories like this right across Freightways.

Looking ahead, we see opportunities for growth across our courier businesses as ecommerce continues to grow. The emergence of new consumer trends, such as people wanting more direct access to fresh food, are a part of this.

There’s plenty of upside too in waste renewal. Beyond document destruction and medical waste, we’re already making good gains in collecting materials to divert them from landfill. SaveBoard is a great example of how waste materials can be transformed with the right technology, coupled with our ability to pick up and deliver the feedstock through our customer reach.
A radical shift pays off for everyone

Our Pricing for Effort (PFE) initiative continues to build value for our contractors by better remunerating them for the effort required in completing residential deliveries. Last year we achieved a PFE rate of 73c per item. This year we lifted that to $1.32 per item. Couple that gain with increases in volumes and PFE has made a noticeable difference for our people. This year, average remuneration for our couriers improved by 8%. In particular, our residential contractors have experienced a healthy increase in earnings.

Just as importantly, we’ve seen a 10% reduction in turnover in our courier fleet. By retaining more experienced couriers it means better experiences for our customers. We have an increased number of applicants applying to join our fleets and our people feel more valued, so they are more productive and more commercially minded. As a result, we’ve come through a challenging time with a growing team and increased business.

Our goal now is to continue tackling PFE opportunities to keep improving contractor and company earnings. Residential deliveries are just one of a range of categories that have not been priced properly. There’s no doubt in our minds, for example, that local pricing also needs to move to a better place.

Customers are in essence paying the same rate for local delivery that they were paying 25 years ago. In that time, our cities have become much more congested and difficult to move around in. Our efforts to help resolve this have so far been absorbed by our brands. We’ve had to invest in satellite depots, for example, to try and keep inefficiencies for our couriers to a minimum. At some point, we need to step up, challenge the industry again and update pricing to reflect the true effort now required.
Future-proofing our business

Last year we released our first ever Sustainability Report. This year we have developed a science-based target for emissions reduction which will see us targeting a 50% drop in emissions by 2035, by maintaining a modern fleet and transitioning to EVs and alternative fuels as they and the networks that support them become available. We have also actively pursued plastic recycling to reduce waste from our own operations and we are targeting a 70% reduction in the use of plastic packaging in the coming year.
In 2020, we established an innovation hub, The Startery, to help us commercialise ideas generated alongside our business-as-usual activities. The 30 ideas generated so far are an encouraging sign of the Group’s ability to recognise and act on initiatives that could shape our future.

Business unit performances

Our businesses continued to tackle and adapt to different challenges throughout the year. Here are some of the highlights:
Express Package
• Growth was healthy overall, with important gains in market share as a result of customer acquisition and new customers coming into the market. Growth was also experienced across both B2B and B2C deliveries – in fact, volumes through most of the year were consistently higher than the previous year.
• Big Chill revenues were up 14% aided by the opening of a new temperature-controlled third-party logistics warehouse and market share gains. This delivered improved utilisation and therefore stronger margins, a healthy improvement that backs up our confidence in the company’s potential.
• NOW Couriers volumes continued to increase on the back of their same-day guaranteed Auckland delivery promise.
• Our international air freight service to NSW and Victoria, Australia finished in November 2020 and earned us $8.8 million in revenue.

The year ahead
• We will continue to aim for increased penetration into attractive market niches.
• We will implement further rollout of our customer facing technology.
• The success of Big Chill’s 3PL initiatives has given us confidence that there is ample potential for expansion for this part of their business. We will continue to grow this capability.
• The Startery is exploring a range of future opportunities for our Express Package business.
Business Mail
• Volumes recovered post-lockdowns to the point where they were similar to the previous year. This was particularly pleasing in the face of the market declining around 15% overall.
• We are continuing to refine our DX Mail network to make it as efficient as possible.
The year ahead
• Dataprint will roll out their digital services.
• DXMail will continue to explore further efficiency initiatives. We remain confident that New Zealanders are looking for a business mail delivery service with high levels of reliability and quality and we will continue to look for ways to deliver that proposition.
Information Management in Australia
• Understandably there was not a lot of growth this year because of lockdowns. However, by finding new ways of working and taking cost out of the Australian business – as well as seeking new revenue opportunities, we were able to improve profitability.
• We continue to see opportunities to optimise the cost base for this business.
The year ahead
• We are pursuing opportunities to use our storage facilities for complementary services.
• The Startery has identified a number of opportunities that could expand our IM offering which are getting closer to being released to the market.
Waste Renewal (previously described as Secure Destruction)
• A bounce back in New Zealand after lockdowns saw our volumes return to 2019 levels.
• In Australia business was still impacted by lockdowns in Sydney and Melbourne, but elsewhere returned to levels experienced in 2019.
• Medical waste in Victoria continued to grow in terms of both volume and revenue.
• Volumes of other high-value recyclables such as electronic destruction (computers, hard drives) have increased.
• We are dealing with higher volumes of other recyclable commodities including coffee cups.
The year ahead
• We expect collection and processing of medical waste to continue growing.
• We have invested in the SaveBoard business and we look forward to seeing this launch and expand in 2022.
• We are increasingly involved with collecting other higher value commodities, such as textiles and plastics.
Balance sheet strength
This year we developed a new policy to guide our capital management and give investors improved guidance on what to expect from us. We are committed to maintaining a strong credit profile that supports our growth strategy. Following the acquisition of Big Chill, and the additional debt raised to fund it, we have used healthy cash flow generation to return our balance sheet to a stronger position.

As part of the policy, we have set our key metric for capital management at 2x to 3x Debt/EBITDA. If we make a significant investment, investors should expect the business to focus on cashflow generation to reduce debt. That has been the case this year. With the metric restored, the business will resume looking for acquisitive opportunities.

The current dividend policy of 75% to 80% of NPATA, adjusted for significant one-offs, is well understood and is set at a level that the Board expects to be sustainable in the medium term. This will be managed in line with our ambition to maintain a strong investment grade profile.

Last year, the Board chose not to declare a final dividend for FY20 given the uncertainty in both the New Zealand and Australian markets. This year, the Board has agreed a return to the payment of a full year dividend. We are pleased to declare a full year dividend of 18 cents per share.

Outlook
We have had a record year in terms of earnings and performances across the business mirror the huge efforts put in by our teams of people. What we have seen over the last year however is that even the best laid plans can be influenced by economic conditions and lockdowns. On that basis, we are not resting on our laurels.

We will continue to focus on improving our margins, particularly in Australia, and continue to build momentum and profitability in our New Zealand brands. The macro factors we are conscious of are: the tight labour market which is pushing labour costs higher; a heavily constrained supply chain which could hamper the flow of products coming into the country for our couriers to deliver; and any future lockdowns in Australia or NZ.

In keeping with our undertaking from last year, we will react decisively to any change in volumes while maintaining the service, safety and environmental standards that our customers, investors and other stakeholders expect. That means we will adjust our cost base to protect our margins. We will also prioritise the best strategies to deliver value to shareholders over the long term.
Last week, New Zealand entered an alert level 4 lockdown. As a result, we have immediately implemented our well-established processes to ensure that all staff and contractors can operate safely. Under alert level 4, activity levels are significantly impacted across all the New Zealand businesses. However, experience from the lockdowns of last year suggests that as soon as alert levels are lowered from alert level 4 to alert level 3 or below, the express package businesses should recover quickly and tend to experience higher volumes than previously expected. Should the level 4 lockdown continue for an extended period we will continue to evaluate our cost base and other options available to us.

In 2021 we welcomed Mark Cairns and Fiona Oliver to the Board and bid farewell to Andrea Staines. Our thanks to Andrea for her time with us, and to all directors for their expertise and guidance this year. We would again like to acknowledge the efforts of all our teams and to thank our shareholders for sharing this journey with us and for your continuing support.

[BlackPeter]

Hmm - I guess Freight companies doing well in times like these, but it is not all gold what shines :) :

Good revenue growth (and more than analyst forecasts);
Low earnings growth and no EPS growth at all (and earnings overall nearly 8% below analysts forecasts);
NTA per share dropped from $1.01 to 83 cents;
RoE - while not bad at 14.5% - lower than the year before (14.9%);

... and hey - total liabilities to assets, while slightly down still above 67%.

Interest rates better don't go up this year - or, do they?

[Ferg]

Highlights and lowlights from the latest FRE annual report.

Summary
The gist is that the numbers are heading in the right direction, they continue to focus on growth and they are delivering on their promises. FRE need to focus on a) continued growth, b) managing staff costs and c) continued debt reduction. COVID is having a positive impact (via volume increases on residential deliveries) and a negative impact (higher staff costs and lower revenues in some other business segments). The increase in the BCD earn out liability bodes well for that acquisition.

Growth


Topline Revenue Growth +26.9% ($800m) - mainly due to a full year of Big Chill Distribution (BCD)
EBITDA Growth +21.8% ($165m)
*Adjusted EBITDA Growth +29.7% ($188m with the one-off increase in BCD earn out liability removed & removed prior year non-recurring item)
NPAT Growth +4.8% ($50m)
*Adjusted NPAT Growth +27.6% ($73m adjusted as noted above, there is no tax on this per FRE investor presentation)


*FRE booked an increase in the BCD earn out liability of $23m. In the long run this is a good thing given this means BCD is earning at a higher rate than originally forecast at the time of the acquisition.

Segment Revenue Growth

Express Package & Refrigeration $573m +35.8% (due primarily to the acquisition of BCD which is not separately disclosed)
Destruction $71m +14.7%
Storage & Handling $61m +0.7%
Postal $48m -1.3%
Others $48m +25.8%


The good news is the largest segment is growing the most. I'm curious to see "Others" grow in future off the back of their "Startery" programme.

Cost Growth Relative to Revenue Growth of 26.9%

Transport & Logistics $309m +22%
Staff Costs $227m +34.9% - see comments below
General & Admin $70m +17.1%
Occupancy Costs $7m +37.3% - additional satellite sites to improve DIFOT?
Total Overhead Growth (excl. T&L) +30.4%


A concern is the increase in staff costs. I'm assuming increased courier contractor payouts are not part of this cost. Some of the increase may be due to the inclusion of COVID subsidies received in the previous year. In addition, I expect lockdowns on both sides of the Tasman are impacting negatively upon staff costs and we may see a return to normality if and when lockdowns cease.
The good news is that transport & logistics costs increased by 22% but their revenues increased by 36%.

P&L KPIs & EPS

Gross Profit as a % of Sales increased from 36.9% to 37.9% - using Transport & Logistics costs as a proxy for COGS
EBITDA as a % of Sales reduced from 21.4% to 20.6%
Adjusted EBITDA as a % of Sales increased from 22.9% to 23.4% - see above re adjustments re BCD earn out adjustment
NPAT as a % of Sales reduced from 7.5% to 6.2%
Adjusted NPAT as a % of Sales increased slightly from 9.0% to 9.1%
EPS of 30c per share, gives a backward looking PE ratio on a SP of $13.00 of 43
Adjusted EPS of 44c per share gives a backward looking PE ratio on a SP of $13.00 of 30
EPS of 30c increased from last years 28.6c
Adjusted EPS of 43.9c increased from last years 34.4c


The adjusted indicators are heading in the right direction. Without looking deeper into the numbers it appears things are not rosy, but a deeper dive reveals there is some nuance to the numbers.

Balance Sheet

Equity increased +$24m from $317m to $341m
Net Tangible Assets* increased from -$42m to -$4m (calc. below)
External debt reduced by $58m
Earn out liability for BCD increased $23m
Raw Debt / Equity has reduced from 2.3 to 2.1 - note this at BV and includes leased asset liability junk
External Interest Bearing Debt to Total Assets excl. Lease Assets reduced from 29% to 21%
External Interest Bearing Debt to Tangible Assets at BV** reduced from 81% to 60%
Negative reserves of $8m are a concern but possibly not material & are IFRS-related
Net Debt / Unadjusted EBITDA has reduced from 1.52x to 0.87x
NTA* per share increased from -26c per share to -2c per share


*Net Tangible Assets calculation removes all IFRS junk & intangibles and is calculated as follows: cash + debtors (excl. prepayments)+ inventory + tangible fixed assets + land & building revaluation not booked of $59m + software + investments - payables & provisions - tax - loans - other liabilities. IFRS junk excluded is right of use assets & liabilities, deferred tax, intangibles, prepayments & revenue in advance.

**Tangible Assets at BV excludes the $59m property revaluation not recognised.

Dividend

Final dividend of 18c per share has been reinstated
FRE has full imputation credits
Full year yield based on $13/share is 3.6%, being (($0.155+$0.180)/0.72) / $13.00


Cash Flows

No concerns here, although debt repayments may slow in future with the resumption of dividends
FCF is $0.53c per share
Dividends as a % of FCF is 64%


Disclosure:
This was over 50% of my portfolio when I acquired FRE after the 2020 lockdown. I have now got this down to about 20%. I'm happy to be overweight in the long run given my average cost gives a fantastic dividend yield.

[Ferg]

Something I didn't comment on was the relatively high PE ratio of 30 (using adjusted EPS).

FRE is priced as a growth company.

Compound Annual Growth Rates for FRE from 2000 to 2021:

Revenues +7.9% p.a
EBITDA +9.3% p.a.
Unadjusted NPAT +9.6% p.a.

Dividend graph from 2008 to 2021


12872

[Pocket_Eights]

Something I didn't comment on was the relatively high PE ratio of 30 (using adjusted EPS).

FRE is priced as a growth company.

Compound Annual Growth Rates for FRE from 2000 to 2021:

Revenues +7.9% p.a
EBITDA +9.3% p.a.
Unadjusted NPAT +9.6% p.a.

Dividend graph from 2008 to 2021


12872

Thanks for the deep analysis Ferg, I have been looking at them for a while now (post lockdown 2020) but have never pulled the trigger. With the current lockdowns and looking like it will be on for a while, with the increase in residential deliveries but offset by business activity, do you think it will pick up again like it did last year? Also what percentage of the business operations is Australia? I couldn't find that in their presentation...

[Ferg]

You're welcome and good questions.

I hadn't looked at the NZ/Oz split but found it on the bottom of page 99 of the annual report.

NZ revenues grew $158m or 31% off the back of the BCD acquisition. Oz revenues grew $11m or 9.5%.

NZ was 81% of revenues in 2020 and 84% in 2021. Oz was 19% in 2020 and 16% in 2021. Again the change in mix is due to BCD in NZ.

I won't give advice on buying or selling. Keep in mind they are priced for growth and they have had a history of delivering growth. It's a shame you didn't pull the trigger when they were around $7 but hindsight is 20/20.

This forum tends to favour MFT and FRE is viewed as the poor cousin. As they say "God is with the big battalions".

Will FRE grow off the back of the latest lockdowns? Interesting question. They had some one off revenue last year of $8.8m for an air freight service between NZ and NSW. That won't be there this year which puts them behind the starting line. But given the increase in the BCD earn out liability, that implies revenues are running ahead of expectation for that business unit. In short it's hard to say the amount of growth but I do not see them going backwards. FRE is generally a domestic activity play.

Are they worth it? Only time will tell and you should probably compare the risk for FRE versus the risk of other options.

I still hold and am happy to do so.

[nztx]

S&P Dow Jones Indices Announces September 2021
Quarterly Rebalance of the S&P/NZX Indices

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/NZXO/378565/354014.pdf


S&P/NZX 20 Index – Effective Prior to the Open on September 20, 2021

Hello FRE

Goodbye ZEL

[Ferg]

I missed the recent press release from FRE (too busy with other things and this share is in the bottom drawer). Interesting to see the Chairman reiterated the positive points I made earlier about the increase in the BCD earn out liability.

From here (http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/FRE/381692/357883.pdf): "When Big Chill was acquired in April 2020, its value was estimated at $145m, and 80% [$116m] was paid upfront. The final 20% will be paid in August 2022, based on the performance of Big Chill in FY21 and FY22. Because this performance has been so much better than initially expected, we have had to revise upward what the final payment will be, and we now expect it to be roughly $51m. This means we need to accrue $23m more than we already had and to recognise this as a cost this year in our P&L. But I want to stress that this only shows how well Big Chill is doing, and was a non-cash cost in FY21- a positive issue to have."

Also interesting to hear that acquisition has been relatively seamless. IMO that speaks volumes about the quality of Management.

I see from here (https://www.nzx.com/announcements/381189) that FRE have acquired ProducePronto. Quick financials:

Cost $10m
Revenues $16m
EBITDA $1.6m
Price/EBITDA = 6.25
a relatively small acquisition at a PE lower than the SP and EPS accretive to FRE, a very typical acquisition which should integrate well into BCD


It is encouraging to see the ESG initiatives per their presentation are good for the company, employees, shareholders and environment being:

reduction in injuries
career advancement opportunities
new business services to grow revenues
plastic waste reduction
emission reduction targets that are not onerous, that also acknowledge the challenges


And the Q1 trading update, which after adjusting for the extra week in the previous financial year, shows FRE have returned a similar top line and EBITDA to last year despite the lockdown disruptions. We may not see much NPAT growth in H1 depending on COVID disruptions. I'm expecting to see a better H2 versus last year.

Disclosure: holding and I see no reason to change my position

[Maxtrade]

A few quite large sells down today and not many buyers. Haven't been following FRE for a while when the SP has been up at a premium. Those that have been- what's the driving factor on Share Price decline this week? Been patiently waiting for SP to head back sub $10 before adding back into portfolio. Was a more active stock not that log ago when it was sitting around $8.50. Overbought since then on it's rally up to $12. Sold for some good profits and now waiting for another realistic entry point. Thanks

[Ferg]

Based on there being no formal announcements or news and volumes that are nothing to write home about, I see this as part of the ebbs and flows of the market combined with a lack of buyers. It could be something like a reaction to the opening up of NZ under the traffic light system leading to relatively fewer online purchases and therefore deliveries. But it's not as if that is a surprise. FRE is priced for growth and has a history of delivering but as interest rates start to rise, maybe some are seeing better places for their money right now. Still holding. Not concerned.

[tango]

I've been holding since 2008. It hasn't grown as much as MFT but I am impressed with the management and the expansion into related areas without being silly. So many companies expand too soon. This has very solid management that expand or acquire to vertically or horizontally align with existing businesses. I'm amazed they manage so many brands so successfully.

The market as a whole seems to be on a pause. Nothing to see here

[Sideshow Bob]

NPAT up 7.4%

Half Year Results to 31 December 2021 and Interim Dividend - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/387560)

Freightways’ business model again demonstrated its resilience as both NZ and Australia operated in various states of lockdown or restrictions for much of the first half of FY22. Throughout level 4 lockdown in NZ and in particular during the extended lockdown of Auckland, we continued to see express package and information management activity decrease materially as businesses were forced to remain closed. Those express package volumes then rebounded strongly as online shopping was permitted and NZ began to slowly re-open for business-to-business freight. Australia also experienced material lockdowns, initially in Victoria, but then eventually across all states in some form. While this hindered core information management activity, it provided an opportunity for our burgeoning medical waste business which benefitted from extremely strong customer demand.

Our “half of two quarters” has delivered pleasing top-line revenue growth of 7.7%, EBITA growth of 5.6% and NPAT growth of 7.4% (before changes in the fair value of contingent consideration for the Big Chill earn out). We are also pleased that this was achieved whilst remaining focused on the health and safety of our people in what has been a particularly challenging period to operate in.

While the first quarter of the year was challenging with revenue and EBITA down by 4.1% and 9.2% respectively primarily due to the financial impact of lockdowns, the second quarter generated revenue growth of 20.3% and EBITA growth of 20%, as the network benefitted from a surge in volumes for express courier items and perishables carried through our Big Chill network; a material increase in the amount of medical waste which required collection and processing in Australia; and an increase in Business Process Outsourcing activity within information management. Revenue growth in these three areas was driven by a combination of organic growth, market share gains and improved pricing versus the same period last year.

During the half year, we also announced the acquisition of ProducePronto which complements Big Chill with its same-day temperature-controlled delivery and 4PL capabilities. We also announced a $2.7 million investment in SaveBoard: a building product made from packaging waste such as courier satchels and TetraPak cartons. The plant has produced over 13,000m2 of board for a building sector that welcomed the introduction of 100% recycled building products.

Freightways is well positioned to take advantage of the opportunities that are in front of us with loyal customers, high-performing businesses, a strong balance sheet as well as experienced and adaptable customer-focused teams.

The Board has announced an interim dividend of 18 cents for the first half of the year, based on the strong performance of the businesses.

Divisional performance

Each division’s key features are listed below for HY22.

Express Package & Business Mail
• Strong volume growth from new and existing customers after the level 4 lockdown. The express package & business mail division was successful in winning market share and helping new-to-market customers with their logistics needs. This resulted in 7.2% improvement in revenue over the same period last year.
• B2C deliveries also contributed positively to revenue and contractor incomes, without weighing on margins. B2C deliveries increased by 16% over the pcp with peaks during level 2 and 3 lockdowns establishing a sustainable higher base volume for 2022.
• Pricing For Effort (PFE) peaked at $1.41 per item by December, which has assisted courier income to grow by an average of 8.4% on the pcp.
• Volumes placed pressure on existing facilities at the very end of 2021 and, as a result, the EP brands will add further capacity in South Auckland and Christchurch in 2022.
• Big Chill 3PL utilisation approached 95% for the Auckland facility. We have committed to a new 16,000 pallet facility in Tainui’s Ruakura logistics hub which should be ready for completion by July 2023.
• DX Mail volumes were up 3% on the pcp despite the impact of lockdowns.
• Labour costs are forecast to increase in 2022 as the labour market further tightens and the new minimum wage pushes up the overall base rates for labour. We expect to recover these costs in the pricing strategies we will execute over the coming year, to ensure we have the right level of resource and capability so our customers to continue to receive the levels of service they have come to expect.
Information Management & Waste Renewal
• The first half year was characterised by solid revenue and strong earnings gains for the division, off the back of digitisation wins and extremely strong medical waste volumes at premium rates.
• We achieved incremental gains in storage volume through the half year even though the main metro markets are still challenged by Covid-related disruption to their businesses.
• There were a number of contracts signed for digitalisation revenue for FY22 and FY23 on both sides of the Tasman representing $10 million and $21 million respectively.
• Our litigation support services –print and eDiscovery – operated at lower levels for most of the HY due to customers predominantly working from home over that period.
• Document destruction volumes were steady at slightly higher levels of paper pricing during the HY.
• Medical waste revenue increased by 67% on the pcp as Covid required many more sites to be serviced. While we expect some of that pricing to moderate over the second half of the year revenue for FY22 should exceed $20 million for the first time for the full year which would represent a 7x fold increase on the small business we acquired in 2018.

Balance sheet strength

Capital expenditure for FY22 is forecast to be in a range of $24-26 million and invested in a number of IT development projects, medical waste plant, replacement of vehicles and freight handling equipment. Thanks to strong cash flow generation, our gearing has continued to reduce as expected following the Big Chill acquisition. We remain committed to a solid investment-grade credit profile.

Director Movements

After over 11 years on the Board, Mark Verbiest, the current Chair of the Board of Directors, has announced that he will be retiring from the Board with effect from 31 March 2022. Mark joined Freightways Limited as an independent director in 2010 and has been Board Chair since June 2018.

Mark’s strong commercial acumen, knowledge of Freightways and broad experience as a listed company chair, have supported Freightways’ development in particular over the past 3 years. Mark has been a key figure in the expansion of Freightways’ interests into temperature-controlled freight and waste renewal as well as a steady hand as the company navigated the challenges of Covid-19.

The Board has unanimously resolved to appoint Mark Cairns to replace Mark Verbiest upon his retirement. Mark joined the Board of Freightways as an independent director in April 2021. He has been Chief Executive of Port of Tauranga, New Zealand’s largest and most successful port, since 2005, retiring in June 2021 to pursue a full-time governance career.

The Board has also appointed David Gibson to the Board of Freightways, effective on 1 April 2022. David will stand for election at the Annual Shareholders Meeting currently scheduled to be held on 27 October 2022. David is a professional director and investor. His current directorships include the NZX listed companies Trustpower, Goodman (NZ) Limited and NZME Limited. His background is in finance with a 20-year career in investment banking having held senior positions and governance roles with Deutsche Bank and Deutsche Craigs, in New Zealand. He holds a Bachelor of Laws (Honours) and Bachelor of Commerce from the University of Canterbury. He is actively involved with several New Zealand growth companies.

Outlook

Whilst the economic climate remains uncertain, we are encouraged by the strong trade in express package and the resilience of our information management businesses, as demonstrated in our results in HY22. The second quarter delivered strong volume growth after the lockdowns of August and September. Much of this growth was from profitable delivery of B2C and this higher level of volume will be supported by further investment in facilities in Auckland and Christchurch.

We do however expect that the impact of Covid-19 will continue in this financial year through:

• Higher volumes of home delivery (B2C) during periods of higher in-home isolation;
• Potential restrictions to either our customer's businesses or our own networks as Omicron forces; workers into isolating, all in the context of a very tight labour market.
We will continue to target revenue and earnings growth in FY22 and we have plans in place to adapt to:
• A tight labour market putting upward pressure on labour costs,
• The impact of Omicron in AU & NZ;
• A constrained supply chain which could continue to disrupt the flow of goods coming in NZ and ultimately impact the volumes we receive from our customers.
We will continue to review the portfolio of services we provide with a view to delivering superior long-term value to shareholders through short, medium and long-term initiatives.
The company will continue to consider acquisition opportunities that are complementary to our existing operations and capabilities.
The Freightways directors would again like to acknowledge the efforts of every one of our team across Australasia during what have been and remain highly challenging times.

[Bjauck]

"We do however expect that the impact of Covid-19 will continue in this financial year through:

• Higher volumes of home delivery (B2C) during periods of higher in-home isolation;"

Certainly I will continue to use home delivery for a lot more items.

[James108]

• Medical waste revenue increased by 67% on the pcp as Covid required many more sites to be serviced. While we expect some of that pricing to moderate over the second half of the year revenue for FY22 should exceed $20 million for the first time for the full year which would represent a 7x fold increase on the small business we acquired in 2018.

Love to see acquisitions working out well. Very impressed.

[tango]

Very happy shareholder.

I always find their ASM to be well presented and their strategies clear. I am impressed they successfully manage so many different brands and are able to differentiate themselves in the market with those offerings

[bull....]

another company where the chart is starting to break down from a nearly year long topping pattern.

[winner69]

another company where the chart is starting to break down from a nearly year long topping pattern.

Update says omicron cost them 5m/7m but back to full speed now and price rise July 1 will recover most of the increases

Market taken news in its stride

[bull....]

Update says omicron cost them 5m/7m but back to full speed now and price rise July 1 will recover most of the increases

Market taken news in its stride

but what happens in time when business all starts slowing eg retail etc less demand for freightways services

[bull....]

targets announcement about trucking costs was interesting , wonder if that will impact this stock in time. trucking stocks in the US got hammered after the target release

[Sideshow Bob]

targets announcement about trucking costs was interesting , wonder if that will impact this stock in time. trucking stocks in the US got hammered after the target release

Freight companies passing higher fuel costs on through FAF - was about 6-7% but now around 23-25%.

Good time to keep an eye on the truckometer - ANZ Truckometer | NZ economic indicator | ANZ (https://www.anz.co.nz/about-us/economic-markets-research/truckometer/)

ANZ-Truckometer-20220510.pdf (file:///C:/Users/Karl/Downloads/ANZ-Truckometer-20220510.pdf)

[bull....]

Freight companies passing higher fuel costs on through FAF - was about 6-7% but now around 23-25%.

Good time to keep an eye on the truckometer - ANZ Truckometer | NZ economic indicator | ANZ (https://www.anz.co.nz/about-us/economic-markets-research/truckometer/)

ANZ-Truckometer-20220510.pdf (file:///C:/Users/Karl/Downloads/ANZ-Truckometer-20220510.pdf)

think thats part of the problem if you keep jacking prices up it will eventually cut your demand , thats what happening in US

[Sideshow Bob]

think thats part of the problem if you keep jacking prices up it will eventually cut your demand , thats what happening in US

Yes, definitely - can imagine will start to bite and impact on freight volumes.

One of our company's freight providers had a general lift of 7.9% + FAF of about 18% so up over 25%+. Makes you think twice - some absorbed (for the moment), some passed on to customers.

Interesting to see as a barameter for the NZ economy.....

[nztx]

Yes, definitely - can imagine will start to bite and impact on freight volumes.

One of our company's freight providers had a general lift of 7.9% + FAF of about 18% so up over 25%+. Makes you think twice - some absorbed (for the moment), some passed on to customers.

Interesting to see as a barameter for the NZ economy.....


Interesting to see these rises - when contrasted with end user rises - eg Supermarkets, but will flow into most all goods.

[winner69]

Something no company wants to happen

Sympathies to all involved

https://www.stuff.co.nz/national/129014228/seven-people-dead-after-truck-and-vehicle-crash-in-marlborough-near-picton

[Sideshow Bob]

Full Year Results to 30 June 2022 and Final Dividend - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/397313)

SEEING PROGRESS, LOOKING AHEAD

The energy and focus of our teams continues to see us strongly advance our businesses across different horizons. The challenges of the year were balanced by clear evidence that we have exciting opportunities to explore in the years ahead. In a year marked by further COVID-19 disruptions and a changing economic background, we have increased our revenue by 9% from last year and our profit by 4% (if we exclude the impact of the increased accrual for the final payment related to the acquisition of Big Chill Distribution).

COVID-19 variants maintained their grip on our workforce this year, at times reducing our frontline numbers by as much as 30%, and impacting not just our customers’ businesses but also our branches which form a key part of our distribution network. The resulting staff absences, combined with lower consumer confidence in the later part of the year over inflation, rising costs and labour constraints, moderated the volume growth - and ultimately the full year result.

Overall, volumes were similar to last year’s, with periods of particularly high activity pre-Xmas offset by lower volume during lockdowns and the impact of the Omicron variant on New Zealand businesses. The second half was characterised by a very tight and expensive labour market, ongoing supply chain issues globally and possibly the first signs of a flattening of the NZ economy. Despite this, there were some significant spikes in demand, particularly at the end of calendar year 2021, when the team emerged from lockdowns to cope with a sudden surge in volumes. It was a massive effort from staff and contractors and we also thank those who also swapped their office roles to help sort and deliver freight through these tough times. The quality of our services allowed us to increase our overall market share, with new customers offsetting declines in existing business. Our contractors also stayed with us through the ups and downs and that stability absolutely contributed to continuing high levels of service.

Not all businesses were negatively impacted by the pandemic. Our Big Chill business, for example, continued its strong growth and was largely unaffected by changes in volumes, although did feel the impacts of a tight labour market. Our Med-X business in Australia also continued to build its market presence and revenue at an accelerated rate.

Building through horizons

Last year’s report spoke to how our purpose of “moving you to a better place” drives us to grow our revenue and earnings from our existing businesses via organic growth, margin management and efficiency gains. At the same time, we keep finding ways to improve - we look for new ways to pick up, process and deliver that add value. This year, we escalated that “three horizons” approach to four key areas of activity: Express Package & Business Mail; Temperature Controlled Logistics; Information Management; and Waste Renewal.

In our application of the 3 horizons model, we aim to:

- Extend and defend our first horizon revenue streams (i.e. business-to-business (B2B) deliveries, temperature-controlled transport, archive storage and document destruction);
- Nurture and grow our horizon 2 services (business-to-consumer (B2C) deliveries, temperature-controlled 3PL, digitisation and medical waste); and
- Generate genuinely new opportunities in horizon 3 (oversize express courier, same day temperature-controlled deliveries, high-value recycling, eCommerce 3PL).

Our first horizon services are the backbone of our business often built up over decades of operating and they provide the infrastructure and national network capability on which we establish our second horizon opportunities.

Second horizon revenue streams will typically have faster growth prospects and utilise the fixed cost base established in horizon one. In Express Package our B2C growth leverages the digital platforms, teams of people and physical infrastructure developed over years of B2B deliveries. Enhanced by our unique Pricing for Effort initiative, this service has developed strongly on the back of a sizeable lift in market demand, delivering strong revenue growth for the Group and fairer earnings for our contractors. Similarly, our Medical Waste operation in Australia has been built upon our national network established from Document Destruction and the capabilities that allow us to collect bins from customers and process them in a safe, secure and efficient manner.

Finally, there are our third horizon opportunities. Here, we use our innovation hub The Startery to identify emerging niches that have the potential to deliver tangible long-term revenue streams. In the case of the Express Package businesses, that’s enabled us to identify the “Oversize parcels” market as a niche driven by proven need. These parcels include items like bikes, prams and flat pack furniture. They’re generally between 25kg and 50kg in weight, too big for the traditional courier network but generally too small to suit heavy freight transport operators. Right now, oversized parcels make up about 5% of our delivered items. Our goal now is to use our Kiwi Express Oversize brand to develop this into a national express delivery service. Repriced to reflect the effort required, this new service will give customers simpler ways to move goods and pay our drivers a fair delivery fee for doing so.
We’re seeing the same value progression in our Waste Renewal business. That business began by centring on document destruction. From there, we evolved into medical waste. Now, as a third horizon, we’re adding a high-value recycling proposition covering everything from coffee cups to textiles to e-waste and our 100% recycled building product, SaveBoard. The most powerful aspect of all this is that the underlying infrastructure is the same across all three horizons. Our Waste Renewal business uses the same staff, trucks, facilities, shredders, and systems across everything it does to generate increased revenue and returns.
Our 3 horizons approach is attractive because it identifies complementary markets that are under-served, where we have proven capability and generally requires less capital by leveraging existing assets. Evolving our businesses from first horizon to third makes the most of our capabilities (Act like an entrepreneur, Strive for efficiency, Deliver reliably and Love our customers) and assists us in achieving sustainable growth.

A major acquisition in Australia

Of course, having an horizons approach does not preclude us from accelerating the process to acquire a business that has already got there. At year end, we put the finishing touches to an acquisition that has built a successful “Oversize parcels" courier business.

Allied Express is one of the largest, independently owned, specialised express freight operators in Australia, with a national presence which enables it to deliver 98% of their volume utilising their own infrastructure and the balance through a network of 48 agents. They offer both point to point same day metro delivery services and interstate delivery across Australia.

Allied differentiates themselves from the mainstream players by being market leaders in the delivery of items over 22kg in weight.

The acquisition:
• Provides us with a scale entry point into the Australian express package market and a platform to grow from;
• Complements our core capabilities in express pick up, processing and delivery; and
• Provides a backbone network that we can leverage for growth from existing and new customers as well as the potential for service extension.

Allied has a team of around 1,150 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. The sector also has higher barriers to entry because of the complexity associated with moving larger courier items.

We have looked for many years for an Express Package opportunity in Australia before choosing Allied and are excited by this acquisition. This deal has fast-tracked our horizons agenda in Australia exponentially and, of course, progressed our third horizon strategy in our Express Package business overall.

On track in terms of our sustainability goals

This year we will release our third Sustainability Report, having developed a science-based target for emissions reduction last year that will see us targeting a 50% drop in scope 1, 2 and 3 emissions by 2035. We have been Toitu certified since 2014.

Well over 95% of our emissions come from the fuel we use across our vehicles and aircraft. Our 2030 target of 35% reduction in CO2e and our 2035 target of 50% reduction in C02e (both for scope 1, 2 and 3) align with what society needs to achieve globally to keep global warming to within 2 degrees Celsius.

We continue to keep close to the progress being made in emerging technologies that are aimed to reduce carbon emissions. Based on current progress, our current strategy will commence with company owned vehicles - starting with 25% of company cars being PHEV by 2025 and 100% either PHEV, EV or hydrogen by 2030. We expect that our contractors’ light vehicles will begin to meaningfully transition to EVs from 2028 enabled by the rates of remuneration we provide, with a goal to having our entire light vehicle fleet made up of low emission vehicles by 2035. We anticipate that our heavy transport fleet will commence using alternative fuels from 2030, and by 2035 we expect that half of these vehicles will have transitioned. We expect our 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.

We have already significantly reduced our use of plastics by adopting recycled satchels and fabric freight bags and developed solutions to enable our customers to recycle their soft plastics as well as diverting tens of thousands of tonnes of paper away from landfill and increasing our SaveBoard capability.

As part of our ongoing reporting, we will also refresh our Sustainable Development Goals (SDG) materiality over the next year to ensure that our SDGs continue to align with the interests of our stakeholders.

Full year review
Business unit performances
Financial performance
Express Package and Business Mail

Lockdowns and peak season surges resulted in overall revenue growth of 8.8% for FY22 with volume moderating as the Omicron variant hit and the economy began to flatten toward the end of the financial year. Operating costs were significantly higher in the second half – primarily due to the cost of labour to cover for COVID related absences, increased sick leave payments and the tighter labour market. Profit was largely flat because of these costs and the ongoing lag effect of higher fuel prices, where we give our customers the benefit of a 2-month lag before our FAF (variable fuel adjustment factor) reflects prevailing fuel rates.

Information Management

Strong growth in digitisation and medical waste drove divisional revenue growth of 9.6% for FY22 despite periods of lockdown in both NZ and Australia which restricted archive related activity and eDiscovery services. This strong revenue growth delivered a 14.3% increase in EBITA over the period.

Capex and Dividend

Total capital expenditure for the year was $24.7m. In line with our Capital Management Policy, the Board declared a final dividend of 19cps, bringing the full year dividend to 37cps, 3.5cps higher than last year.

Outlook FY23

We complete the year feeling confident that we have a successful platform for growth and profitability, both now and in the future. Over the year, we will continue to look after the first horizon of each business activity, further scale our second horizon initiatives and work with The Startery to foster those future third horizons. The successful integration of Allied Express, and the growth opportunities this will generate both in Australia and New Zealand, will be a key focus.

The first 6 weeks of FY23 have been characterised by a slight 1% decline in Express Package items consigned, on the prior comparative period (pcp). Existing customers are trading 5% lower than in the pcp offset largely by a net 4% market share gain. B2B is down 5% and B2C up 11% reflecting the nature of those market share gains over the past year. While 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%.

We believe the current impact on customer trade we are seeing 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. While same customer trade is slightly lower, we have seen no adverse change to our debtors profile.
We expect 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 we expect that the fuel lag will allow us to recoup some of the losses we experienced in FY22.

Our General Rate Increase for most lines of business was implemented in July and is expected to largely offset the increased costs of operating.

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.

Our people remain our greatest asset. We have a highly experienced and committed team, many of whom have been with us for decades. Our team got us through the challenges of the last two years and they will continue to be our greatest strength regardless of the economic climate. As we enter a new year their safety and well-being remains foremost in our minds.

We have implemented new pricing from July to offset the impact of a higher cost base. One critical advantage we have is that our cost base is highly variable, and this gives us the ability to profitably adjust to a deteriorating economic environment. As always, we will react decisively to any change in volumes while maintaining the service, safety and environmental standards that our customers, investors and other stakeholders expect. We will also prioritise the best strategies to deliver value to shareholders over the long term.

Finally, our thanks to all our teams for everything you’ve done this past year and to our shareholders and customers for sharing this journey with us and for your continuing support.

[winner69]

In case anybody is interested FRE profits still on rise and they have Allied contribution to come for rest of year

Consolidated Trading Performance - Q1 Unaudited and includes lease accounting
- The 1st quarter of FY23 saw revenue up 17%, EBITDA up 9% and EBITA up 8% on the pcp

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/FRE/401216/381983.pdf

[Rawz]

FRE always been a bit expensive whenever i look at it. like MFT is cheaper on a trailing P/E basis. And MFT latest update way better than FRE

Whats up with that?

[Southern Lad]

I see the PE owned Australian company Scott’s Refrigerated Logistics has gone into receivership today. See https://www.afr.com/street-talk/anchorage-s-scott-s-refrigerated-logistics-calls-in-administrators-20230227-p5cnz9

Evidently it’s large in supermarket deliveries for Cole’s, IGA and ALDI. At the time of the PE purchase Scott’s had 1,800 trucks or trailers, 450 refrigerated rail containers and 21 cold storage facilities.

I wonder if FRE are sniffing around? Certainly some large Australian logistics companies that will be taking a look.

[kiora]

Doing away with pilots
https://businessdesk.co.nz/article/markets/freightways-and-merlin-labs-trial-autonomous-courier-delivery-planes-in-northland?utm_source=7am+Headlines+from+BusinessDe sk&utm_campaign=e1f708195e-7am+Headlines&utm_medium=email&utm_term=0_617c2ef34a-e1f708195e-446239310

[Valuegrowth]

IMO weak demand, most significantly, excess capacity in the shipping industry(oversupply)can lead to lower freight and shipping rates. We are going to see consolidation in the industry next. IIRC Maritime analysts are bearish on the outlook for liner shipping.

https://www.hellenicshippingnews.com/when-not-all-freight-rates-have-normalised/

[Valuegrowth]

https://www.agcs.allianz.com/news-and-insights/expert-risk-articles/shipping-safety-23-economic-outlook.html

Following the post-pandemic boom in container shipping, economic and geopolitical uncertainty and falling demand has hit freight rates. The cost of shipping a container between Asia and the US or Europe in April 2023 was more than 80% lower [1] than a year earlier. while some routes are now at pre-pandemic levels.

[winner69]

Anybody hold Freightways …or interested

Share price still trending down from high of 13 bucks

Long term Chart looks much the same shape as MFT one.

Maybe still see as too ‘expensive’ but that’s how sector seems to be valued

[X-men]

Used to hold it..sold before the market crashed...

Been looking at it...with inflation n high operation costs...it would eat up the margin profit...

They started to expand to Australia....

[Sideshow Bob]

https://www.nzx.com/announcements/416649

Revenue up 29%, net profit after tax up 7%.

Going for a dual listing on the ASX

[Filthy]

https://www.nzx.com/announcements/416649

Revenue up 29%, net profit after tax up 7%.

Solid result.

[Sideshow Bob]

Starts to trade on the ASX from next Thursday

https://www.nzx.com/announcements/417926

[X-men]

ASX is a shorter and trader paradise. SP could go up high and severely punished if financial forecast is not meet.

Ruthless....

[winner69]

I think outlook says in Q1 things are a bit tougher (more so than we expected) …….revenues up quite a bit on pcp but profit about the same

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/FRW/420554/405772.pdf

Another thing outfit where Directors want a pay rise ….+12.5%

[Muse]

"Whilst we will be trying to minimise its impact and adjust our cost base in a sustainable way, we now see a risk that EBITA will beat or below the level of last year."

Consensus doesn't show EBITA but up until today did expect a c.7.6% lift in NPAT. That'll be well off the cards now.

Just looked at market depth. Just one buyer. Whoo hoo go NZX!

[bull....]

that outlook statement was pretty bad ... please the RBNZ though

pe high compared to similar :scared: only buyer 1 share at $6 lol depth is amazing hahahaa

[Sideshow Bob]

https://www.nzx.com/announcements/426370

HALF YEAR REVIEW

From the Chairman and Chief Executive Officer

It is more of the same in this half year, as conditions remained relatively consistent with those experienced before the Q1 trading update provided at the Annual Shareholders Meeting in October.

The half year result reflected the general state of the economies of both NZ and Australia (AU), with volumes marginally up on the prior comparative period (pcp) in Express Package (EP), with positive market share gains offset by continued lower same-customer volumes. Information Management (IM) provided a small improvement on the pcp with a number of profit improvement initiatives in Waste Renewal gaining traction and good performances in digitalisation and AU storage utilisation.

Top-line revenue growth for the half year of 12.4% was mainly driven by Allied Express (AEX) in Australia. Flat earnings before interest, tax and amortisation (EBITA) reflected the flow through of higher labour costs, Big Chill’s rent (Ruakura) and a slow-down of some of our customers, especially in temperature-controlled transport in the half. The decline in net profit after tax (NPAT) of 9.5% was a result of higher interest costs of $4m and higher amortisation, following the recent acquisition of AEX.

NZ network couriers delivered a steady result against the pcp, with volumes up 1.8% on the pcp, aided by a contribution (of around 3% of total volumes) from international inbound eCommerce. Same-customer volumes continued at a similar rate to Q1 with an approximate 5% decline on the pcp whilst market share gains provided the growth.

AEX have grown their revenue, again as a result of market share gains. The New South Wales automated sortation system was successfully commissioned, helping to deliver a smooth performance over the peak November / December months.

The Information Management and Waste Renewal division slightly improved profitability in the half with a number of price and cost saving initiatives beginning to gain traction. Paper prices stabilised and then showed a small recovery in Q2. The Medical Waste facility in Victoria is now expected to be operational in Q4 after a number of frustrating consenting delays.

We expect that FY24 will reflect the tail of much higher-than-average labour cost increases, as a result of very tight labour markets in both NZ and Australia, as well as of a muted organic growth profile in most areas in which we pick up, process and deliver.

Freightways is well positioned to take advantage of the opportunities that are in front of us with loyal customers, high-performing businesses, disciplined balance sheet management as well as experienced and adaptable customer-focused teams. Our focus will be on restoring margins in FY25 and FY26 with labour markets appearing to return to normal levels and Temperature Controlled Logistics and Waste Renewal both well-resourced for growth.

The Directors have declared an interim dividend of 18 cents per share, fully imputed in New Zealand at a tax rate of 28%, in line with the pcp interim dividend. This represents a payout of approximately $32 million, also in line with the pcp. The dividend will be paid on 2 April 2024. The record date for determination of entitlements to the dividend is 8 March 2024.
 
Divisional performance

Each division’s key features are listed below.

Express Package (EP) & Business Mail
• Revenue for the EP division grew by 15% compared to the pcp thanks to the contribution of AEX to the business division.
• EBITA was flat on the pcp, a solid performance from AEX and NZ network couriers was offset by lower margins at Big Chill as they take on the rent cost for Ruakura and same-customer volumes were down by 6%.
• Average daily volume for NZ network couriers was 1.8% above the pcp.
• The proportion of Business to Customer (B2C) deliveries in NZ was 21% for the half with Pricing For Effort (PFE) averaging $1.62 per item over the period.
• AEX contributed c. NZ$137m in revenue over the period. Their volumes remained robust through the peak period and we observe that the trading environment in Australia for our sector seems more resilient than in NZ.
• Big Chill’s transport revenue declined by 6% over the period. Utilisation in the new 3PL facility at Ruakura was 48% at the end of the half year and is forecast to increase to 70% by the end of the full year.
• EBITA margin impacted by AEX operating at a lower margin than the NZ EP businesses and the lower profitability of Big Chill.
• DX Mail revenue was up 5% on the pcp, largely reflecting pricing improvements in the half year.
• Labour costs are now moderating from the double-digit growth we had experienced in the previous year and we expect FY25 to return to normal levels of increase to retain and attract talent.

Information Management & Waste Renewal

• Information Management revenue grew by 2% with digitalisation revenue growing by 22% over the pcp.
• Stronger destruction revenues in both NZ and AU reflecting our strong positioning in both geographies.
• Paper prices appear at this stage to have stabilised – we expect the full year impact of lower pricing will be negative $2.7m (with 75% of that within H1).
• LitSupport revenues are now consistent and finished the half up 4% on pcp.
• The Victorian facility for Med-X has been through public notification and is expected to commence operations by Q4 FY24.
• EBITA improved by $1m with most gains made in Australia.

Disciplined Balance Sheet management

Capital expenditure for FY24 is forecast to be lower than initially budgeted at $35m for the year. We remain committed to a solid investment-grade credit profile and will continue to manage our balance sheet accordingly. Our gearing is expected to remain in the top half of our target range by the end of the year.
 
Outlook

Whilst the economic climate will be a tougher one to operate in in the near term, we remain positive about the resilience of our business model, given its diversification across a number of segments and geographies.

• Volumes have remained stable in Australia and New Zealand but will continue to be subject to the economic environment in both countries
• Labour markets have eased, particularly in NZ and we expect labour rate increases to normalise in FY25
• Our Victorian Med-X facility is expected to be operational from Q4
• We expect to continue to grow utilisation at the Ruakura facility through FY24 such that we are breakeven by Q1 FY25 and generate positive returns from then on
• Paper pricing has stabilised and has recovered slightly from the lows seen in Q1
• Full year capital expenditure is expected to be $35m including the second automated sortation system at AEX in Victoria
• Our focus will be on restoring margins for both divisions in FY25 and FY26 as labour rates ease and modest organic growth occurs
• The Group will continue to consider acquisition opportunities that are complementary to our existing operations and capabilities and are considered accretive to our shareholders.

The Freightways Directors would again like to acknowledge the efforts of every one of our team across Australasia.