Freightways - FRE

[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.

[winner69]

From Market Close -

Courier and information management firm Freightways, often seen as a bellwether for the economy, fell 1.4% to $7.72.

Close today $7.72 long way from $13 a couple of years

Suppose they are a bellwether after all

[Valuegrowth]

https://www.reuters.com/markets/euro...ls-2024-03-14/

{The global container shipping market faces overcapacity in the coming years and the rates paid by customers have fallen to an unsustainable level, Maersk (MAERSKb.CO)

, opens new tab CEO Vincent Clerc told the group's annual meeting of shareholders on Thursday.

Maersk last month warned that container shipping overcapacity would hit profits this year, in contrast to the record earnings achieved in the wake of the pandemic.

"Freight rates have fallen significantly since the good years of 2021 and 2022, and have fallen actually to an unsustainable level," Clerc said."

[Baa_Baa]

From Market Close -

Courier and information management firm Freightways, often seen as a bellwether for the economy, fell 1.4% to $7.72.

Close today $7.72 long way from $13 a couple of years

Suppose they are a bellwether after all

I think it's a quality company, successful, no doubt, consistent dividend income, but when the market has halved the Cap and continues to fall, there's no rush to get some, or more. Patience, it'll come right. When it does, that's the time to make move.

[Baa_Baa]

SP has reverted from the post covid lows and subsequent highs, back to the 2017 - 2020 median (approx). No reason why it won't over-shoot to the downside, that's what we're looking for. But over the long term, the market has discounted any growth and saying, this is just an earner, capital gains well yeah nah unless you're trading the momentum. But even that opportunity, trading momentum, has gone away since mid-late 2021.

[Rawz]

Looks expensive and too much debt.