Freightways lifts annual profit 7.3% on Australian expansion

Courier company Freightways lifted annual profit 7.3% as it benefited from Australian expansion, and flagged plans to list on the ASX.

Freightways profit increased to $75.3m in the year to the end of June, from $70.2m the previous year. Revenue rose 29% to $1.12 billion with New Zealand up 6% to $775.8m and Australia up 143% to $345.8m.

The freight company is growing through expansion, and has its eyes on the bigger market of Australia. It paid $215m for Australian firm Allied Express in October last year, which elevated its Australian business to 31% of group revenue from 16% the previous year.

“Growth in the Australian economy in FY23 helped deliver solid financial performance from our Allied Express business, which lifted the overall group result,” chairperson Mark Cairns and chief executive Mark Troughear said in a joint statement.

“The New Zealand economy, by contrast, was sluggish as businesses grappled with the challenges of a tight labour market, high labour costs, inflationary pressures and, of course, destructive weather.”

The duo said the Allied Express business had a “very good” first year, leveraging its footprint across five states.

The business contributed revenue of $187.2m and profit of $13.2m. Had it been owned for the full year, the revenue would have been $249.2m and profit $18.2m, the company said.

Freightways is investing in automation and a sales team in Australia to grow the business further, and is also “actively looking” for synergistic merger or acquisition opportunities to complement the investment in the years ahead, they said.

The company has had a presence in Australia since its 2007 acquisition of Databank and has steadily grown its footprint through the acquisition and growth of its information management, secure destruction and waste management businesses.

It said it would apply for admission to the Australian Securities Exchange (ASX) and expected to become listed across the Tasman next month. Its primary listing will remain on New Zealand’s NZX.

“With the addition of Allied Express to the group, Australia has become a more substantial portion of our business and it is likely that this portion of our revenue and earnings will continue to grow at a greater rate in the near term,” Troughear said.

Freightways has also expanded in New Zealand in recent times, buying refrigerated transport operator Big Chill Distribution in 2020 for $128m, and same-day fresh and frozen delivery operation ProducePronto in 2021 for an initial $12.1m and an estimated future earn-out payment of $3.7m.

The company plans to increase capacity in New Zealand by opening two new temperature-controlled facilities later this year as well as upgrade a portion of its temperature-controlled fleet and lease its first 737-800 freighter to build resilience for its NZ Express Package business.

The extra investment resulted in the company’s bank borrowings increasing to $297.2m from $176.2m, and its bank interest costs jump 89% to $15.8m.

“We will assess the tools available to us to reduce debt while continuing to focus on investments and acquisitions that drive value to our shareholders,” Troughear said.

Freightways said the economic climate had presented challenges over the past six months, and this was expected to continue through the current year.

In New Zealand, while same-customer volume was lower than last year, the company had secured new customers who were mitigating the impact.

“The tight labour markets in both NZ and Australia are beginning to ease. In the short term, we are cautious about the impact of the economy, particularly in NZ.

”Notwithstanding the current economic environment, we are excited about the potential to grow our revenue and profitability on both sides of the Tasman in the longer term.”

Freightways will pay a final dividend of 19 cents, taking the annual dividend to 37c, unchanged from the previous year.

The company’s shares added 0.1% to $8.29, and have dropped 13% so far this year.