Market Releases


19th February 2018

Half Year Review

From the Chairman and Chief Executive Officer

Freightways Limited (Freightways) is pleased to present its consolidated financial result for the half year ended 31 December 2017. This report discusses the result, reviews the operations of each division and provides an outlook for the financial year ending 30 June 2018.

Highlights of the result include:

  • the volume and revenue growth achieved in the express package & business mail division and related earnings margins, that have more than offset the cost impact of significant recent investment in capacity;
  • the overall revenue and earnings growth of the information management division compared to the prior comparative period (pcp) following the completion of a significant premises relocation project in New South Wales; and
  • Freightways' further diversification through its entry into the Medical Waste industry.
Operating performance

The below table presents the latest half year result compared to the pcp, both before and after the inclusion of non-recurring items that were reported in the pcp:

  Note Dec-17
Revenue   292.1 272.8 7.1%
EBITA, before non-recurring items
i. 49.2 46.1 6.9%
Non-recurring items   - 4.0  
EBITA ii. 49.2 50.1 (1.7%)
NPAT, before non-recurring items
iii. 31.4 29.5 6.5%
Non-recurring items after tax   - 4.5  
NPAT iv. 31.4 34.0 (7.6%)
Basic EPS (cents), before non-recurring items   20.3 19.0  

i. Operating profit before interest, tax and amortisation, before non-recurring items.
ii. Operating profit before interest, tax and amortisation.
iii. Net profit after tax (NPAT), before non-recurring items.
iv. Profit for the half year attributable to shareholders.

The results discussed throughout this commentary exclude the impact in the pcp of a non-recurring benefit before tax of $5.6 million (no tax applicable) relating to previously accrued final acquisition payables that were no longer expected to be required and a non-recurring cost before tax of $1.6 million ($1.1 million after tax) relating to the relocation of the TIMG business in Sydney.


The Directors have declared an interim dividend of 14.5 cents per share, fully imputed at a tax rate of 28%, being a 12% increase above the pcp interim dividend of 13 cents per share. This represents a payout of approximately $22.5 million compared with $20.1 million for the pcp. The dividend will be paid on 3 April 2018. The record date for determination of entitlements to the dividend is 16 March 2018. The Dividend Reinvestment Plan (DRP) will not be offered in relation to this dividend. As a capital management tool, the application of the DRP will be reviewed for each future dividend.


Review of Operations

Divisional results for the half year ended 31 December 2017 are provided below for the express package & business mail division and the information management division.

Express Package and Business Mail

Operating revenue of $216.7 million was 7% higher than the pcp. EBITA of $36.4 million was 4.6% higher than the pcp.

The express package & business mail division operates a multi-brand strategy in the domestic market through New Zealand Couriers, Post Haste, Castle Parcels, NOW Couriers, SUB60, Security Express, Kiwi Express, Stuck, Pass The Parcel, DX Mail and Dataprint.

Recent investment in aircraft, premises and IT has been essential to accommodate and appropriately service the volume growth from existing and new customers throughout this half year. While this investment results in higher operating costs it means that quality capacity exists to support the division’s current and expected future growth. Overall earnings margins remain sound, particularly when allowing for the additional cost of this capacity and expenses incurred in relation to the relocation of our Christchurch businesses during the half year. Key matters:

  • The recently introduced Boeing 737-400 aircraft are performing well. The introduction of a fourth aircraft will continue to be considered. In the meantime, the current operating model using 3 Boeings and the charter of a Convair, as required, is providing sufficient airfreight capacity.
  • The relocation of the Christchurch express package businesses from four independent sites to one purpose-built airside facility at Christchurch Airport was completed during the half year.
  • Good progress was made by Freightways’ IT team in addressing the many initiatives planned in support of Freightways’ strategic intent to be a technology leader in the markets it operates in.
  • New Zealand Couriers relocated to significantly larger premises on Auckland’s North Shore during October 2017, with Post Haste and Castle Parcels to follow in July 2018. This site will enable the operation of a twin-Auckland city operation to accommodate the current and expected growth in volume from the North Harbour and West Auckland areas for many years to come. These new premises complement, and effectively extend the life of, the existing Penrose site, south of the city.
  • Overall volume mix within the customer base continues to evolve as consumers increasingly shop online, resulting in Business to Consumer (B2C) deliveries growing faster than Business to Business (B2B) deliveries. A number of wide-ranging initiatives are being developed to ensure these B2C deliveries are completed as efficiently as possible and to the satisfaction of customers. Ensuring integrity in pricing is also important to properly enable the support required to service this volume.
  • Freightways' business mail operators, DX Mail and Dataprint, while small, continue to perform profitably. Both revenue and earnings have remained on par with the pcp. The organic decline in physical mail volumes has been offset by market share gains and an increase in the contribution from Dataprint’s digital mail offering.
Information Management

Operating revenue of $76.3 million was 7.3% higher than the pcp. EBITA of $14.6 million was 9.2% higher than the pcp.

This division operates under the brands of The Information Management Group (TIMG), Shred-X and, following the recent acquisition in the medical waste industry, Med-X.

Positive results were achieved in all businesses within this division, while investment occurred in resources to support the growing suite of digital information management services. Key matters:

  • Within TIMG Australia, the performance of the LitSupport business improved, albeit the project nature of this business means that revenue does fluctuate from month to month. This requires careful management attention to appropriately align resources with activity.
  • The new consolidated Sydney site is providing important quality capacity to accommodate current and expected volume growth.
  • Demand for the broad suite of digital services offered by TIMG in New Zealand and Australia, and the e-destruction services offered by Shred-X, continues to gain momentum. Accordingly, further investment has been made in resources to support these growing revenue streams.
  • A project is underway to replace all racking in TIMG’s Porirua document storage facility that was damaged in the North Canterbury earthquake. Freightways carries comprehensive insurance for events such as this. The $1.4 million write-off of the written down book value of the structurally-compromised racking in the division’s half year result has been offset by the recognition of insurance proceeds received during the half year. Importantly, this project is being managed in a way that ensures no service disruption to customers.
Internal Service Providers

Fieldair Holdings, through its subsidiary of Air Freight NZ, operates a joint venture company that leases and operates the Boeing 737-400 aircraft fleet that provides Freightways' overnight airfreight linehaul service. Fieldair also provides specialist engineering and contracting services to the general aviation market. Parceline Express provides Freightways' road linehaul service. The service provided by both these businesses throughout the half year, but particularly during the peak December volume month, was outstanding. Freightways Information Services provides IT development and support to both operating divisions. Good progress is being made by this team in support of our front line businesses’ technology-related strategic objectives.


Corporate costs decreased compared to the pcp, primarily due to higher one-off costs in the pcp which included expensing insurance deductibles in respect of the November 2016 earthquake.

Net debt increased by approximately $7 million to $165 million during the half year, driven mostly by the acquisition of a small medical waste business in Australia for an initial payment of $5 million. Investment in operating capacity has been funded from operating cash flows.



The markets in which Freightways operates in both New Zealand and Australia remain positive. In particular, the growth in express package volume and activity levels throughout this half year supports Freightways in targeting the delivery of year-on-year earnings growth again for the 2018 financial year.

Within the express package & business mail division, investment will continue to be made in IT development and new initiatives to service projected B2B and B2C volume growth. As a significant employer of around 2,300 team members and while working alongside 1,200 business partners in New Zealand, Freightways will continue to carefully monitor any further proposed changes to workplace legislation. The recently announced minimum wage increases are not expected to have a material impact on Freightways’ overall cost base, given that its employees are all paid above the minimum wage. Freightways will continue to consider pricing annually to mitigate necessary cost increases, including the projected impact of ensuring its workforce remains above the minimum wage as it progressively steps-up. Within the information management division, increased utilisation of existing capacity will support improving margins, while also enabling continued investment in digital information management services.

Overall capital expenditure for the 2018 financial year is expected to be approximately $16 million. Operating cash flows are expected to remain strong throughout the balance of the 2018 financial year.

Strategic growth opportunities, including acquisitions and alliances that complement existing capabilities, will be executed where they make commercial sense.



The strength of Freightways' business models, the expertise of its people and the positive features of the markets it operates in are once again evident in this half year result. This result has benefited from recent capacity investment decisions, which have been important in providing capacity for current volumes and also to ensure sufficient quality capacity is available to enable servicing of future expected growth.

The Board and Chief Executive Officer acknowledge the outstanding work and ongoing dedication of the Freightways team of people throughout New Zealand and Australia.

Chief Executive Officer

Freightways Limited Consolidated Income Statement

For the half year ended 31 December 2017 (unaudited)
  6 months ended
31 Dec 2017
6 months ended
31 Dec 2016
  $000 $000 %
Operating Revenue 292,133 272,782 7%
Other income 2,913 - -
Transport and logistics expenses (115,158) (107,862) 7%
Employee benefits expenses (79,233) (75,157) 5%
Occupancy expenses (13,124) (12,082) 9%
General and administrative expenses (28,490) (25,920) 10%
Other expenses (2,913) - -
Non-recurring items - 4,031 -
Operating profit before interest, income tax, depreciation and software amortisation and amortisation of intangibles 56,128 55,792 1%
Depreciation and software amortisation (6,895) (5,690) 21%
Operating profit before interest, income tax and amortisation of intangibles 49,233 50,102 (2%)
Amortisation of intangibles (979) (806) 21%
Operating profit before interest and income tax 48,254 49,296 (2%)
Net interest and finance costs (5,127) (4,711) 9%
Profit before income tax 43,127 44,585 (3%)
Income tax (11,718) (10,598) 11%
Profit for the period attributable to shareholders 31,409 33,987 (8%)

Freightways Ltd Consolidated Balance Sheet

As at 31 December 2017 (unaudited)
  As at
31 Dec 2017
As at
31 Dec 2016
  $000 $000
Current Assets    
Cash and cash equivalents 10,450 10,690
Trade and other receivables 89,234 77,483
Inventories 4,848 6,190
Income tax receivable 657 222
  105,189 94,585
Assets held for sale - 750
Total Current Assets 105,189 95,335
Non-Current Assets    
Trade receivables and other non-current assets 2,158 1,950
Property, plant & equipment 103,002 91,946
Intangible assets 357,817 342,504
Total Non-Current Assets 462,977 436,400
Total Assets 568,166 531,735
Current Liabilities    
Trade and other payables 71,878 64,460
Finance lease liabilities 118 70
Income tax payable 1,791 1,690
Provisions 795 1,101
Derivative financial instruments 1,343 871
Unearned income 15,633 16,044
Total Current Liabilities 91,558 84,236
Non-Current Liabilities    
Trade and other payables 4,887 3,034
Borrowings (secured) 175,778 169,196
Deferred tax liability 36,168 35,250
Provisions 4,268 3,323
Finance lease liabilities 142 -
Derivative financial instruments 6,308 7,555
Total Non-Current Liabilities 227,551 218,358
Total Liabilities 319,109 302,594
NET ASSETS 249,057 229,141
Contributed equity 125,110 124,304
Retained earnings 132,601 117,345
Cash flow hedge reserve (5,484) (6,097)
Foreign currency translation reserve (3,170) (6,411)
TOTAL EQUITY 249,057 229,141

Freightways Ltd Consolidated Statement of Cash Flows

For the half year ended 31 December 2017 (unaudited)
  6 months ended
31 Dec 2017
6 months ended
31 Dec 2016
  $000 $000
  Inflows Inflows
  (Outflows) (Outflows)
Cash flows from operating activities    
Receipts from customers 284,333 264,165
Payments to suppliers and employees (230,720) (214,918)
Cash generated from operations 53,613 49,247
Interest received 41 43
Interest and other costs of finance paid (5,002) (4,957)
Income taxes paid (13,831) (15,829)
Net cash inflows from operating activities 34,821 28,504
Cash flows from investing activities    
Payments for property, plant & equipment (7,402) (8,098)
Payments for software (2,953) (1,865)
Proceeds from disposal of property, plant & equipment 33 23
Payments for businesses acquired (net of cash acquired) (5,374) (1,991)
Payments to associate - (1,667)
Payments for other investing activities (203) (231)
Net cash outflows from investing activities (15,899) (13,829)
Cash flows from financing activities    
Dividends paid (22,880) (22,466)
Increase in bank borrowings 5,594 11,143
Proceeds from issue of ordinary shares 330 338
Finance lease liabilities repaid (93) (38)
Net cash outflows from financing activities (17,049) (11,023)
Net increase in cash and cash equivalents 1,873 3,652
Cash and cash equivalents at the beginning of the period 8,423 7,065
Exchange rate adjustments 154 (27)
Cash and cash equivalents at end of the period 10,450 10,690

The graphs below demonstrate the strong historic performance of Freightways.

Freightways Operating Revenue
Freightways EBITA