Full Year Results to 30 June 2021 and Final Dividend
Results for announcement to the market
Name of issuer FREIGHTWAYS LIMITED
Reporting Period 12 months to 30 June 2021
Previous Reporting Period 12 months to 30 June 2020
Currency New Zealand dollars
Amount (000s) Percentage change
Revenue from continuing
operations
$800,533 27%
Total Revenue $800,533 27%
Net profit/(loss) from
continuing operations
$49,633 4.8%
Total net profit/(loss) $49,633 4.8%
Final Dividend
Amount per Quoted Equity
Security
$ 0.25000000
Imputed amount per
Quoted Equity Security
$0.07000000
Record Date 17 September 2021
Dividend Payment Date 1 October 2021
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$(0.83) $(1.01)
A brief explanation of any
of the figures above
necessary to enable the
figures to be understood
Refer to the section “Full Year Review” for commentary.
Authority for this announcement
Name of person
authorised
to make this announcement
Stephan Deschamps
Contact person for this
announcement
Stephan Deschamps
Contact phone number +64 27 562 5666
Contact email address stephan.deschamps@freightways.co.nz
Date of release through MAP
23 August 2021
Audited financial statements accompany this announcement.
1
FREIGHTWAYS LIMITED
FINANCIAL SUMMARY
FOR THE YEAR ENDED 30 JUNE 2021
Note
2021
2020 Increase
$000 $000
Operating revenue
800,533 630,940 26.9%
EBITA (i) 107,543 88,197 21.9%
NPAT (ii) 49,633 47,375 4.8%
EBITA, excluding other income & expenses
130,589 97,795 33.5%
NPAT, excluding other income & expenses, net of tax
72,679 56,036 29.7%
Other income and expenses:
- Impairment of intangible assets - software
- (608)
- Write-off of obsolete software
(iii)
- (2,739)
- Impairment of goodwill
- (5,194)
- Impairment of brand names
- (1,581)
- Acquisition advisory fee
- (981)
- Change in fair value of contingent consideration – Big
Chill Distribution Limited
(23,046) -
- Reversal of accrued earn-out payables
- 1,505
Total (23,046) (9,598)
Tax benefit applicable to other income and expenses - 937
Other income and expenses, net of tax (23,046) (8,661)
Note:
(i) Operating profit before interest, income tax and amortisation of intangibles
(ii) Profit for the year attributable to the shareholders
(iii) Software totalling $1.6 million has been written off during the current financial year. This is considered
immaterial and has been included within general and administration expenses in the Income Statement rather
than be separately disclosed in other expenses.
The Directors believe that the other income and expenses detailed above should not be included when assessing
the underlying trading performance of the Group.
2
FULL 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.
3
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:
4
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.
5
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.
6
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.
Mark Verbiest Mark Troughear
Chairman Chief Executive Officer
23 August 2021
7
FREIGHTWAYS LIMITED
INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2021
Group
2021
$000
2020
$000
Operating revenue
800,533 630,940
Transport and logistics expenses (309,318) (253,443)
Employee benefits expenses
(226,669) (168,017)
Occupancy expenses
(7,063) (5,143)
General and administration expenses
(69,859) (59,666)
Change in fair value of contingent consideration
– Big Chill Distribution Limited
(23,046) -
Depreciation and software amortisation (57,035) (46,876)
Amortisation of intangibles (7,652) (3,477)
Other income and expenses - (9,598)
Operating profit before interest and income
tax
99,891 84,720
Net interest and finance costs
(22,667) (18,420)
Profit before income tax 77,224 66,300
Income tax
- Tax applicable to profit before income tax (27,591) (20,355)
- Tax benefits as a result of tax law change - 1,430
Total income tax (27,591) (18,925)
Profit for the year 49,633 47,375
Profit for the year is attributable to:
Owners of the parent 49,555 47,332
Non-controlling interests 78 43
49,633 47,375
8
FREIGHTWAYS LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2021
Group
2021
$000
2020
$000
Profit for the year (NPAT) 49,633 47,375
Other comprehensive income
Items that may be reclassified subsequently to profit
or loss:
Exchange differences on translation of foreign
operations
(2,310) 1,475
Cash flow hedges taken directly to equity, net of tax
880 1,826
Total other comprehensive income after income
tax
(1,430) 3,301
Total comprehensive income for the year 48,203 50,676
Total comprehensive income for the year is
attributable to:
Owners of the parent 48,125 50,633
Non-controlling interests 78 43
48,203 50,676
9
FREIGHTWAYS LIMITED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2021
GROUP
Contributed
equity
Retained
earnings
Cash flow
hedge
reserve
Foreign
currency
translation
reserve
Non-
controlling
interests
Total equity
$000 $000 $000 $000 $000 $000
Balance at 1 July 2019
126,440
142,817
(3,901)
(6,110)
124
259,370
Profit for the year
-
47,332
-
-
43
47,375
Exchange differences on translation of foreign operations
-
-
-
1,475
-
1,475
Cash flow hedges taken directly to e
quity, net of tax
-
-
1,826
-
-
1,826
Total Comprehensive Income
-
47,332
1,826
1,475
43
50,676
Dividend payments
-
(47,403)
-
-
(53)
(47,456)
Shares issued
54,190
-
-
-
-
54,190
Balance at 30 June 2020
180,630
142,746
(2,075)
(4,635)
114
316,780
Profit for the year
-
49,555
-
-
78
49,633
Exchange differences on translation of foreign operations
-
-
-
(2,310)
-
(2,310)
Cash flow hedges taken directly to
equity, net of tax
-
-
880
-
-
880
Total Comprehensive Income
- 49,555 880 (2,310)
78 48,203
Dividend payments
-
(25,658)
-
-
(44)
(25,702)
Shares issued
1,941
-
-
-
-
1,941
Balance at 30 June 2021
182,571
166,643
(1,195)
(6,945)
148
341,222
10
FREIGHTWAYS LIMITED
BALANCE SHEET
AS AT 30 JUNE 2021
Group
2021
$000
2020
$000
Current assets
Cash and cash equivalents 19,940 16,686
Trade and other receivables 103,947 100,381
Income tax receivable - 384
Inventories 7,438 6,019
Total current assets 131,325 123,470
Non-current assets
Trade receivables and other non-current assets 6,825 7,348
Property, plant and equipment 128,338 134,649
Right-of-use assets 275,849 278,142
Intangible assets 494,503 498,966
Investment in associates 7,510 7,842
Total non-current assets 913,025 926,947
Total assets 1,044,350 1,050,417
Current liabilities
Trade and other payables 102,944 87,656
Borrowings (secured) - 5,210
Lease liabilities 31,078 30,641
Income tax payable 11,982 18,824
Provisions 1,562 1,225
Derivative financial instruments 1,082 750
Contract liability 14,593 15,142
Total current liabilities 163,241 159,448
Non-current liabilities
Trade and other payables 51,352 27,386
Borrowings (secured) 163,696 216,484
Deferred tax liability 36,726 41,425
Provisions 6,979 6,331
Lease liabilities 280,557 280,431
Derivative financial instruments 577 2,132
Total non-current liabilities 539,887 574,189
Total liabilities 703,128 733,637
NET ASSETS 341,222 316,780
EQUITY
Contributed equity 182,571 180,630
Retained earnings 166,643 142,746
Cash flow hedge reserve (1,195) (2,075)
Foreign currency translation reserve (6,945) (4,635)
341,074 316,666
Non-controlling interests 148 114
TOTAL EQUITY 341,222 316,780
Net Tangible Assets (Liabilities) per Security ($0.83) ($1.01)
11
FREIGHTWAYS LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2021
Group
2021
$000
2020
$000
Inflows
(Outflows)
Inflows
(Outflows)
Cash flows from operating activities
Receipts from customers
792,279 634,749
Payments to suppliers and employees
(594,705) (474,653)
Cash generated from operations
197,574 160,096
Interest received 22 48
Interest and other costs of finance paid
(22,748) (19,380)
Income taxes paid
(39,835) (13,599)
Net cash inflows from operating activities
135,013 127,165
Cash flows from investing activities
Payments for property, plant and equipment
(12,360) (18,318)
Payments for software
(5,645) (5,313)
Proceeds from disposal of property, plant and equipment
399 849
Payments for businesses acquired (net of cash acquired)
- (94,973)
Payments for investment in associates - (7,468)
Receipts from joint venture and associate 3,354 1,202
Cash flows from other investing activities
(213) (226)
Net cash outflows from investing activities (14,465) (124,247)
Cash flows from financing activities
Dividends paid
(25,702) (47,456)
Increase (decrease) in bank borrowings
(58,985) 45,802
Proceeds from issue of ordinary shares
799 24,126
Principal elements of lease payments
(33,319) (24,954)
Net cash outflows from financing activities
(117,207) (2,482)
Net increase in cash and cash equivalents 3,341 436
Cash and cash equivalents at beginning of year
16,686 15,986
Exchange rate adjustments (87) 264
Cash and cash equivalents at end of year 19,940 16,686
12
ACCOUNTING TREATMENT OF CLOUD COMPUTING ARRANGEMENTS
The Group has capitalised costs incurred in configuring or customising certain suppliers’ application software
in certain cloud computing arrangements as intangible assets (30 June 2021 - $0.8 million; 30 June 2020 - $0.6
million; 1 July 2019 - $1.2 million), as the Group considered that it would benefit from those costs to implement
the cloud-based software over the expected terms of the cloud computing arrangements. Following the IFRS IC
agenda decision on Configuration or Customisation Costs in a Cloud Computing Arrangement in March 2021
(ratified by the International Accounting Standards Board (IASB) in April 2021), the Group has commenced a
review of these capitalised costs to determine whether they would need to be expensed or reclassified as
prepayments. The IFRS IC concluded that costs incurred in configuring or customising software in a cloud
computing arrangement can be recognised as intangible assets only if the activities create an intangible asset
that the entity controls and the intangible asset meets the recognition criteria. Costs that do not result in intangible
assets are expensed as incurred, unless they are paid to the suppliers of the cloud-based software to significantly
customise the cloud-based software for the Group, in which case the costs paid upfront are recorded as
prepayments for services and amortised over the expected terms of the cloud computing arrangements.
At the time of finalising the 30 June 2021 financial statements, the review process is still in progress, due to the
short timeframe between the release of the agenda decision and the Group’s financial year end, the Group has
not had sufficient time to fully assess the potential impact of the agenda decision. A detailed review of large
projects previously capitalised as intangible assets, and project costs recognised as work-in-progress as at 30
June 2021, needs to be carried out at a transactional level to ensure correct treatment. The Group expects to
implement the updated accounting policy in the next financial period.
SEGMENT REPORTING
A segment is a component of the Group that can be distinguished from other components of the Group by the
products or services it sells, the primary market it operates in and the risks and returns applicable to it. Operating
segments are reported upon in a manner consistent with the internal reporting used by the Chief Executive
Officer, as the chief operating decision maker, and the Board for allocating resources, assessing performance
and strategic decision making.
The Group is organised into the following reportable operating segments:
Express package & business mail
Comprises network (hub & spoke) courier, refrigerated transport, point-to-point courier and postal services.
Information management
Comprises secure paper-based and electronic business information management services.
Corporate and other
Comprises corporate, financing and property management services.
The Group has no individual customer that represents more than 4% of external sales revenue.
13
As at and for the year ended 30 June 2021:
Express
Package &
Business Mail
Information
Management
Corporate Inter-
Segment
Elimination
Consolidated
Operations
$000 $000 $000 $000 $000
Income statement
Sales to external customers
629,760 170,770 3 - 800,533
Inter-segment sales
3,254 (104) 4,795 (7,945) -
Total revenue
633,014 170,666 4,798 (7,945) 800,533
Operating profit (loss) before
change in fair value of contingent
consideration, interest, income tax,
depreciation and software
amortisation and amortisation of
intangibles
142,817
50,849
(6,042)
-
187,624
Change in fair value of contingent
consideration – Big Chill
Distribution Limited
- - (23,046) - (23,046)
Operating profit (loss) before
interest, income tax, depreciation
and software amortisation and
amortisation of intangibles
142,817
50,849
(29,088)
-
164,578
Depreciation and software
amortisation
(33,323) (21,876) (1,836) - (57,035)
Operating profit (loss) before
interest, income tax and
amortisation of intangibles
109,494
28,973
(30,924)
-
107,543
Amortisation of intangibles (5,280) (2,372) - - (7,652)
Profit (loss) before interest and
income tax
104,214 26,601 (30,924) - 99,891
Net interest and finance costs (6,290) (4,881) (11,496) - (22,667)
Profit (loss) before income tax
97,924 21,720 (42,420) - 77,224
Income tax (27,208) (6,509) 6,126 - (27,591)
Profit (loss) for the year attributable
to the shareholders
70,716 15,211 (36,294) - 49,633
Balance sheet
Segment assets 641,580 360,217 42,553 - 1,044,350
Segment liabilities 257,853 171,871 273,406 - 703,130
14
As at and for the year ended 30 June 2020:
Express
Package &
Business Mail
Information
Management
Corporate Inter-
Segment
Elimination
Consolidated
Operations
$000 $000 $000 $000 $000
Income statement
Sales to external customers
472,151 158,783 6 - 630,940
Inter-segment sales
2,272 (58) 4,900 (7,114) -
Total revenue
474,423 158,725 4,906 (7,114) 630,940
Operating profit (loss) before other
income and expense, interest,
income tax, depreciation and
software amortisation and
amortisation of intangibles
101,690
47,055
(4,074)
-
144,671
Other income and expenses (3,347) (5,270) (981) - (9,598)
Operating profit (loss) before
interest, income tax, depreciation
and software amortisation and
amortisation of intangibles
98,343
41,785
(5,055)
-
135,073
Depreciation and software
amortisation
(23,929) (21,215) (1,732) - (46,876)
Operating profit (loss) before
interest, income tax and
amortisation of intangibles
74,414
20,570
(6,787)
-
88,197
Amortisation of intangibles (1,168) (2,309) - - (3,477)
Profit (loss) before interest and
income tax
73,246 18,261 (6,787) - 84,720
Net interest and finance costs (3,810) (5,188) (9,422) - (18,420)
Profit (loss) before income tax
69,436 13,073 (16,209) - 66,300
Income tax (18,815) (5,492) 5,382 - (18,925)
Profit (loss) for the year attributable
to the shareholders
50,621 7,581 (10,827) - 47,375
Balance sheet
Segment assets 646,991 360,582 42,844 - 1,050,417
Segment liabilities 259,016 162,098 312,523 - 733,637
Segment assets and liabilities are disclosed net of inter-company balances.
For the year ended 30 June 2021, external revenue from customers in the Group's New Zealand and Australian
operations was $672.1 million and $128.4 million, respectively (2020: $513.6 million and $117.3 million,
respectively). As at 30 June 2021, non-current assets in respect of the New Zealand and Australian operations
(excluding deferred tax assets and financial assets) were $457.8 million and $172.5 million, respectively (2020:
$468.5 million and $173.0 million, respectively).
15
REVENUE FROM CONTRACTS WITH CUSTOMERS
The Group derives revenue from the transfer of goods and services over time and at a point in time in the
following major product lines:
Express
Package &
Refrigerated
Transport
Postal
Storage &
Handling
Destruction
Activities
Other Total
2021 $000 $000 $000 $000 $000 $000
Revenue from external
customers
572,623 48,475 60,694 70,616 48,125 800,533
Timing of revenue
recognition:
At a point in time - 2,706 - 20,492 11,009 34,207
Over time 572,623 45,769 60,694 50,124 37,116 766,326
572,623 48,475 60,694 70,616 48,125 800,533
2020
Revenue from external
customers
421,668 49,122 60,295 61,592 38,263 630,940
Timing of revenue
recognition:
At a point in time - 3,191 - 18,307 10,176 31,674
Over time 421,668 45,931 60,295 43,285 28,087 599,266
421,668 49,122 60,295 61,592 38,263 630,940
16
INCOME AND EXPENSES
Profit before income tax includes the following specific income and expenses:
(i) The estimated discounted future final payment for BCD has been increased from $27.2 million as at 30
June 2020 to $51.3 million as at 30 June 2021. This increase of $23 million (net of impact of unwinding
of discount on acquisition earn-out liability of $1 million) reflects the strong performance of BCD,
which will determine the final payment for the acquisition of the company, to be made in August 2022.
(ii) Impairment loss in respect of (a) the carrying value of goodwill and brand names recognised upon the
acquisition of the LitSupport print & copy bureau ($5.8 million), and (b) an amount of the goodwill
originally recognised upon the acquisition of the NSW-based State Waste Services (SWS) business ($1
million) with $1.5 million earn-out payable for SWS reversed in 2020, refer (v) below.
(iii) Write-off of internally-developed software considered obsolete as a result of the accelerated introduction
of new software applications and systems in response to business and market demands.
(iv) Advisory fee paid for assistance with the successful acquisition of Big Chill Distribution Limited.
(v) Reversal of previously-accrued earn-out payables no longer expected to be paid related to the acquisition
of SWS.
IMPACT OF COVID-19
The on-going COVID-19 global pandemic has accelerated a number of trends that were already evident before
the start of the pandemic. Amongst them is a faster adoption of online shopping that positively impacts volume
for Freightways’ express package businesses. At the same time, with a number of information management’s
customers having employees working from home and using less paper, some of the information management
activities continue to recover at a slower pace. This slower recovery is partially mitigated by continuing to
develop new service lines and managing costs. The risk of a resurgence of COVID-19 in New Zealand or
Australia creates a continued level of uncertainty, although Freightways’ businesses are now well prepared to
operate efficiently in different levels of lockdown. During the year, $0.8 million was received from the
Australian government in relation to the JobKeeper subsidy.
Group
Note
2021
$000
2020
$000
Change in fair value of contingent consideration – Big
Chill Distribution Limited (BCD)
(i) 23,046 -
Other income and expenses:
- Impairment of goodwill (ii) - 5,194
- Impairment of brand names (ii) - 1,581
- Impairment of intangible assets - software (iii) - 608
- Write-off of obsolete software (iii) - 2,739
Acquisition advisory fee (iv) - 981
Reversal of accrued earn-out payables (v) - (1,505)
17
LEASES
The following tables show the movements and analysis in relation to the right-of-use (ROU) assets and lease
liabilities under NZ IFRS 16.
The balance sheet shows the following amounts relating to leases:
Right-of-use assets:
Group
2021 2020
$000 $000
Opening net book value 278,142 -
Recognised on transition - 200,068
Lease additions, modifications and terminations 32,671 104,550
Depreciation for the yea
r (35,148) (28,409)
Exchange rate movement 184 1,933
Closing net book value 275,849 278,142
Cost 393,757 367,280
Accumulated depreciation (117,908) (89,138)
Closing net book value 275,849 278,142
Lease liabilities:
Group
2021 2020
$000 $000
Operating lease commitments discounted using the Group's
incremental borrowing rate
-
112,229
Adjustments as a result of different treatment of extension and
termination options
- 111,084
Opening lease liabilities 311,072 223,313
Lease additions, modifications and terminations 32,929 109,787
Interest for the year 11,111 8,752
Lease repayments (43,725) (33,706)
Other lease liabilities - 668
Exchange rate movement 248 2,258
Closing lease liabilities 311,635 311,072
Right-of-use assets
2021
$000
2020
$000
Buildings
257,385 259,023
Equipment
3,647 6,823
Motor vehicles 14,817 12,296
275,849 278,142
Group
Lease liabilities
2021
$000
2020
$000
Current 31,078 30,641
Non-current 280,557 280,431
311,635 311,072
18
Lease liabilities maturity analysis:
Group
2021
Minimum lease
payments
Interest
Present value
$000 $000 $000
Within one yea
r 41,674 10,599 31,075
One to five years 137,308 33,456 103,852
Beyond five years 210,064 33,356 176,708
Total 389,046 77,411 311,635
Group
2020
Minimum lease
payments
Interest
Present value
$000 $000 $000
Within one yea
r 41,449 10,808 30,641
One to five years 127,506 34,835 92,671
Beyond five years 227,222 39,462 187,760
Total 396,177 85,105 311,072
Lease related expenses included in the income statement:
Total cash outflow in relation to leases is $43.7 million (2020: $33.7 million).
INTANGIBLE ASSETS
(i) Goodwill
Goodwill represents the excess of the consideration transferred in an acquisition over the fair value of the
Group’s share of the net identifiable assets of the acquired business at the date of acquisition. Goodwill is
not amortised, but is tested for impairment annually or whenever events or changes in circumstances
indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Goodwill is
allocated to cash-generating units for the purpose of impairment testing.
(ii) Brand names
Acquired brand names are recognised at cost, being their fair value at the date of acquisition if acquired in
a business combination. Brand names with indefinite useful lives are not subject to amortisation, but are
tested for impairment annually or whenever events or changes in circumstances indicate that they might be
impaired, and are carried at cost less amortisation and impairment losses. The useful lives and amortisation
methods are reviewed and adjusted, if appropriate, at each balance sheet date.
Brand names are allocated to cash-generating units for the purpose of impairment testing. The allocation is
made to those cash-generating units or groups of cash-generating units that are expected to benefit from the
brand names.
Group
Depreciation charge for right-of-use assets
2021
$000
2020
$000
Buildings
26,244 22,099
Motor vehicles 6,502 3,432
Equipment 2,402 2,878
35,148 28,409
Interest on leases 11,111 8,752
19
(iii) Computer software
External software costs, together with payroll and related costs for employees directly associated with the
development of software, are capitalised. Costs associated with upgrades and enhancements are capitalised
to the extent they result in additional functionality. Amortisation is charged on a straight-line basis over the
estimated useful life of the software which ranges between 3 and 10 years. Included in the cost of software
is work in progress of $1.4 million (2020: $2.8 million) for which amortisation has not commenced.
Software under development not yet available for use is tested annually for impairment.
(iv) Customer relationships
Contractual
An intangible asset is recorded at fair value in respect of the amount of any contractual termination fees
payable by customers of businesses acquired in respect of their document holdings. As it is not known when
permanent retrieval fees may arise, this asset is only amortised upon the actual retrieval fee being charged
to the respective customer.
Other
Non-contractual customer relationships acquired in a business combination are recognised at fair value at
the acquisition date. These customer relationships have an estimated finite useful life and are carried at cost
less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected
useful life of the customer relationship which ranges between 10 and 20 years.
Group Goodwill
Brand
names
Software
Customer
relationships
Other Total
2021 $000 $000 $000 $000 $000 $000
Opening net book value
301,283 118,307 15,762 58,683 4,931 498,966
Additions - - 5,562 - 68 5,630
Acquisition through business
combinations
(6,120) 8,500 - 61 - 2,441
Transferred from property,
plant and equipmen
t
- - 1,115 - - 1,115
Amortisation expense
- - (4,887) (6,214) (1,438) (12,539)
Written-off - - (1,565) - - (1,565)
Exchange rate movement
342 62 6 38 7 455
Closing net book value 295,505 126,869 15,993 52,568 3,568 494,503
As at end of year
Cost
314,167 126,869 38,296 70,605 7,103 557,040
Accumulated amortisation
and impairmen
t
(18,662) - (22,303) (18,037) (3,535) (62,537)
Net book value 295,505 126,869 15,993 52,568 3,568 494,503
COVID-19 has resulted in the accelerated development and deployment of various new IT initiatives and strategies,
leading to the need to write-off certain previously capitalised software that is now considered obsolete.
20
Group Goodwill
Brand
names
Software
Customer
relationships
Other Total
2020 $000 $000 $000 $000 $000 $000
Opening net book value
212,737 113,932 17,797 17,477 3,209 365,152
Additions - - 4,937 - 173 5,110
Acquisition through business
combinations
91,475 5,500 37 44,009 1,900 142,921
Amortisation expense - - (3,705) (3,069) (408) (7,182)
Impairment loss (5,194) (1,581) (608) - - (7,383)
Written-off - - (2,739) - - (2,739)
Exchange rate movement
2,265 456 43 266 57 3,087
Closing net book value 301,283 118,307 15,762 58,683 4,931 498,966
As at end of year
Cost
319,945 118,307 35,419 70,480 7,024 551,175
Accumulated amortisation
and impairmen
t
(18,662) - (19,657) (11,797) (2,093) (52,209)
Net book value 301,283 118,307 15,762 58,683 4,931 498,966
Impairment tests for indefinite life intangible assets
Goodwill and brand names are allocated to those cash-generating units (CGU) or groups of CGU that are
expected to benefit from them. The carrying amount of intangible assets allocated by CGU or group of CGU is
outlined below:
Goodwill Brand names
2021
$000
2020
$000
2021
$000
2020
$000
Big Chill 77,635 83,755 14,000 5,500
Messenger Services
8,766 8,766 5,100 5,100
New Zealand Couriers 47,752 47,752 58,500 58,500
New Zealand Document Exchange 10,967 10,967 5,900 5,900
Dataprint 4,125 4,125 1,310 1,310
Post Haste, Castle Parcels and NOW Couriers 27,159 27,159 18,395 18,395
Total Express Package & Business Mail 176,404 182,524 103,205 94,705
The Information Management Group (New Zealand) 17,577 17,577 4,400 4,400
The Information Management Group (Australia)* 56,798 56,615 15,945 15,894
Shred-X* 44,727 44,567 3,319 3,308
Total Information Management 119,102 118,759 23,664 23,602
Total
295,506 301,283 126,869 118,307
* The increases in goodwill and brand names in The Information Management Group (Australia) and Shred-X
are due to foreign currency translation.
21
(i) Key assumptions used for value-in-use calculations
On an annual basis, the recoverable amount of goodwill and brand names is determined based on the greater of
value-in-use and fair value less costs of disposal calculations specific to the CGU associated with both goodwill
and brand names.
The value-in-use calculations use post-tax cash flow projections based on financial budgets prepared by
management and approved by the Board for the year ended 30 June 2022. Cash flows beyond June 2022 have
been extrapolated using growth rates which take into consideration current and forecast economic conditions
for the relevant products and industries. A probabilistic approach was also adopted where a number of different
growth scenarios were considered and weighted by likelihood of achievement. In addition, the sensitivity of the
main financial variables was tested and considered in the final estimation. No adjustments have been made to
forecast cash flows for the unknown impacts of future legislative changes in relation to climate change.
A 1% (2020: 1%) revenue growth rate, a consistent EBITDA margin assuming costs increase in line with
revenue and 1% (2020: 1%) terminal growth rate have been applied to the express package & business mail
businesses in the value-in-use calculation.
A 2% (2020: 2%) revenue growth rate, a consistent EBITDA margin assuming costs increase in line with
revenue and 2% (2020: 2%) terminal growth rate, reflecting both historical and expected growth, have been
applied to the value-in-use calculation for the information management segment with the same scenarios and
sensitivities applied as described in the Significant estimate – sensitivity to changes in assumptions section
below.
Post-tax discount rates, reflecting the current environment in financial markets and the countries each CGU
operates in, have been used. The CGU specific post-tax discount rates applied are:
Post-tax discount rate
2021 2020*
Big Chill 7.0% 6.6%
Messenger Services 7.5% 7.5%
New Zealand Couriers 7.5% 7.5%
New Zealand Document Exchange 11.4% 10.6%
Dataprint 11.4% 10.6%
Post Haste, Castle Parcels and NOW Couriers 7.5% 7.5%
The Information Management Group (New Zealand) 7.5% 7.5%
The Information Management Group (Australia) 6.9% 6.6%
Shred-X 6.9% 6.6%
* In the current financial year, the Group has moved from a Group post-tax discount rate to CGU specific post-
tax discount rates. The prior year disclosure has been updated for comparative purposes (the 2020 Group post-
tax discount rate disclosed was 7.5%). The change to prior period CGU specific rates did not result in an
impairment in the prior year.
(ii) Significant estimate - Sensitivity to changes in assumptions
From the value-in-use assessment for all CGU’s, other than TIMG AU, management believes that no reasonably
possible change in any of the above key assumptions would cause the carrying values of goodwill and brand
names to exceed their respective recoverable amounts.
22
The value-in-use analysis prepared for TIMG AU is based on the following key assumptions:
- 100% achievement of FY22 budgeted revenue;
- 2% Revenue growth per year (with a range of scenarios from -4% to 4% p.a considered);
- 2% terminal EBITA growth rate; and
- post-tax discount rate of 6.9%
The recoverable amount of TIMG AU would equal its carrying amount if any of the key assumptions were to
change as follows:
2021
From To
Achievement of FY22 budgeted revenue 100% 84%
Revenue growth per year 2% -3.1%
Terminal EBITA growth rate 2% 0.8%
Post-tax discount rate 6.9% 7.9%
In the prior year, the value-in-use analysis prepared for New Zealand Document Exchange (NZDX) was
sensitive to changes in key assumptions. For comparative purposes, the current year NZDX value-in-use
analysis shows the recoverable amounts of goodwill and brand names significantly exceed their carrying values.
The NZDX value-in-use analysis has been prepared based on the following key assumptions:
- 100% achievement of FY22 budgeted revenue;
- 1% Revenue growth per year (with a range of scenarios from -4% to 4% p.a considered);
- 1% terminal EBITA growth rate; and
- post-tax discount rate of 11.4%
The recoverable amount of NZDX would equal its carrying amount if any of the key assumptions were to change
as follows:
2021
From To
Achievement of FY22 budgeted revenue 100% 73%
Revenue growth per year 1% -9.1%
Terminal EBITA growth rate 1% -6.1%
Post-tax discount rate 11.4% 15.6%
23
BORROWINGS
(a) Secured borrowings
The bank borrowings security was changed to a negative pledge deed in March 2021 when the Group negotiated
an extension of its syndicated bank facilities. The negative pledge includes a provision restricting the Group
from granting security interests and a cross-guarantee of all relevant indebtedness by majority of the Company’s
subsidiaries (2020: secured by a charge over the assets of the majority of the Company’s New Zealand
subsidiaries in favour of its primary lenders and guarantees from the Company’s primary Australian
subsidiaries).
(b) Finance facilities
The following finance facilities existed at the reporting date:
Facilities denominated in Facilities denominated in
New Zealand Dollars Australian Dollars
2021 2020 2021 2020
$000 $000 $000 $000
Bank overdraft
- total bank overdraft facilities available 8,000 8,000 - -
- amount of overdraft facilities unused
8,000 8,000 - -
Loan facilities
- total loan facilities available 170,000 229,500 130,000 120,423
- maturing 30 April 2021 - 6,000 - -
- maturing 14 November 2021 - 20,000 - -
- maturing 14 May 2022 - 30,000 - -
- maturing 1 September 2022 - 37,000 - 21,173
- maturing 1 September 2023 - 56,500 - 49,250
- maturing 23 December 2023 - 70,000 - -
- maturing 15 March 2024 120,000 - - -
- maturing 23 December 2024 - - - 20,000
- maturing 15 March 2025 30,000 - 80,000 -
- maturing 11 July 2025 - - 20,000 20,000
- maturing 15 December 2026 10,000 10,000 10,000 10,000
- maturing 19 March 2028 10,000 - 20,000 -
- amount of loan facilities used 71,000 114,710 85,500 99,923
- amount of loan facilities unused 99,000 114,790 44,500 20,500
Effective interest rate at 30 June as amended
for interest rate hedges
5.37%
5.44%
4.41%
4.55%
The fair values of borrowings are not materially different to their carrying amount, since the interest payable on
those borrowings is either close to market rate or the borrowings are of a short-term nature.
During March 2021, the Group negotiated an extension of its syndicated bank facilities. Multiple tranches of
New Zealand dollars (NZD) facilities totalling $213.5 million were merged into two facilities at reduced limits
of NZ$120 million maturing on 15 March 2024 and NZ$30 million maturing on 15 March 2025. The lower
limits reflect the expected needs of the Group and the fact that temporary facilities that had been set up at the
onset of the COVID-19 pandemic were no longer required. The three tranches of Australian dollars (AUD)
facilities totalling A$90.4 million were combined into one facility at a reduced limit of A$80 million maturing
on 15 March 2025. The refinancing resulted in the recognition of a modification loss of $0.9 million in the
income statement. In determining the modification loss to be recognised, the Group considered both qualitative
and quantitative factors in determining whether the refinancing represented a modification or extinguishment of
the previous facilities.
24
In March 2021, the Group entered into a new US$160 million uncommitted finance facility with a US-based
lender on the same terms as the syndicated bank facilities negotiated during March 2021. Of this facility, the
US dollar equivalent of NZ$20 million and A$50 million was drawn as at 30 June 2021. The drawn amounts
mature in July 2025, December 2026 and March 2028, as detailed in the maturity table above.
(c) Big Chill Distribution Limited CreditPlus Facility
The fleet financing facility with a $6 million limit operated by Big Chill Distribution Limited was repaid
progressively by March 2021 and was then cancelled.
Compliance with banking covenants
The Group was in compliance with all of its banking covenants throughout the year ended 30 June 2021. The
Group’s banking covenants forecast indicates that the Group will remain compliant with all of its banking
covenants in the next twelve months. The forecast includes a sensitivity analysis of a 20% decline in forecast
earnings before interest, income tax, depreciation and amortisation.
EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share is calculated by dividing the profit for the year attributable to shareholders by the
weighted average number of ordinary shares outstanding during the year:
Group
2021 2020
Profit for the year attributable to shareholders ($000) 49,633 47,332
Weighted average number of ordinary shares (‘000) 165,502 157,952
Basic earnings per share (cents) 30.0 30.0
Diluted earnings per share
Diluted earnings per share is calculated by dividing the profit for the year attributable to shareholders by the
weighted average number of ordinary shares outstanding during the year, adjusted to include all dilutive
potential ordinary shares (for example, partly-paid shares on issue) as if they had been converted to ordinary
shares at the beginning of the year:
Group
2021 2020
Profit for the year attributable to shareholders ($000) 49,633 47,332
Weighted average number of ordinary shares (‘000) 165,502 157,952
Effect of dilution (‘000) 509 264
Diluted weighted average number of ordinary shares (‘000) 166,011 158,216
Diluted earnings per share (cents) 29.9 29.9
Basic and diluted earnings per share calculated on the profit for the year attributable to shareholders, excluding
change in fair value of contingent consideration (Big Chill Distribution Limited) and other income and expenses,
net of tax, are 43.9 and 43.8 cents, respectively (2020: 35.5 and 35.4 cents, respectively).
NET TANGIBLE ASSETS PER SECURITY
Net tangible assets (liabilities) per security at 30 June 2021 was ($0.83) (2020: ($1.01)).
25
BUSINESS COMBINATIONS
Prior year acquisitions:
Big Chill Distribution Limited (“BCD”)
Effective 1 April 2020, the Group acquired 100% of BCD, a company operating in the New Zealand
temperature-controlled transport and facilities market, for an initial consideration of approximately $114.6
million and a future earn-out representing 20% of BCD Enterprise Value as at 30 June 2022. This acquired
subsidiary operates within the Group’s express package & business mail division.
Given the size of the transaction and proximity to the end of financial year, the Group had not yet finalised the
fair value assessment of the assets acquired, liabilities assumed and goodwill as at 30 June 2020. The Group
finalised its assessment during the year ended 30 June 2021 and revised the fair value of the assets acquired and
liabilities assumed.
The following table summarises the revised amounts determined for purchase consideration and the fair value
of assets acquired and liabilities assumed:
1 Apr 2020 &
30 Jun 2020
31 Dec 2020
Preliminary Adjustments Revised
Purchase consideration $000 $000 $000
Cash paid during the period 84,553 - 84,553
Issue of Freightways shares 30,000 - 30,000
Fair value of future earn-out paymen
t 27,193 - 27,193
Total purchase consideration 141,746 - 141,746
Fair value of assets and liabilities arising from the acquisition
Cash and cash equivalents 5,715 - 5,715
Trade and other receivables 11,706 - 11,706
Plant and equipmen
t 24,256 - 24,256
Righ
t-of-use assets 91,292 - 91,292
Net investment in sublease 4,506 - 4,506
Brand name 5,500 8,500 14,000
Customer relationships 40,900 - 40,900
Non-compete agreemen
t 1,900 - 1,900
Goodwill 83,755 (6,120) 77,635
Trade and other payables (12,802) - (12,802)
Borrowings (6,023) - (6,023)
Deferred tax liability (12,724) (2,380) (15,104)
Lease liabilities (96,235) - (96,235)
141,746 - 141,746
The fair value of the trade and other receivables acquired as part of the business combination amounted to $11.7
million. The gross contractual amount is $12.1 million, with a loss allowance of $0.4 million recognised on
acquisition.
The goodwill of $77.6 million arising upon this acquisition is attributable to the business know how and
premium paid for strategic reasons, including acquiring an entry point into the temperature-controlled transport
and facilities industry. None of the goodwill recognised is deductible for income tax purposes.
(a) Big Chill brand name
The fair value for the Big Chill brand name was provisional as at 30 June 2020, which has since been finalised
during the year ended 30 June 2021.
26
(b) Fair value of future final payment – 30 June 2020
The estimated discounted future final payment of $27.2 million payable in August 2022 was accrued for in the
financial statements but was contingent upon certain financial performance hurdles being achieved for the years
ended 30 June 2021 and 2022. The potential undiscounted amount of the future final payment that the Group
expected was between nil and $30 million. The Group forecasted several scenarios and probability-weighted
each to determine a fair value for this contingent payment arrangement.
(c) Fair value of future final payment – 30 June 2021
As at 30 June 2021 the estimated discounted future final payment was increased to $51.3 million ($52.6m
undiscounted), representing an increase of $23 million (net of impact of unwinding of discount on acquisition
earn-out liability of $1 million) which has been recognised in the income statement. The Group has forecast
several scenarios and probability-weighted each to determine an updated fair value for this contingent payment
arrangement. The liability is presented within trade and other payables in the balance sheet.
State Waste Services (SWS)
Effective 1 September 2017, the Group acquired the business and assets of SWS, an Australian-based medical
waste collection and destruction business, for an initial payment of approximately $6.5 million (A$5.9 million)
and a future maximum earn-out of up to $4.5 million (A$4.1 million). SWS was branded as Med-X and
integrated into the Group’s Shred-X business within the information management division.
As at 30 June 2021, based on the actual performance of the acquired business, management has confirmed that
no future earn-out payment will be due in September 2021 (2020: no accrual for this earn-out).
SIGNIFICANT EVENTS AFTER BALANCE DATE
Dividend declared
On 23 August 2021, the Directors declared a fully imputed final dividend of 18 cents per share (approximately
$29.8 million) in respect of the year ended 30 June 2021. The dividend will be paid on 1 October 2021. The
record date for determination of entitlements to the dividend is 17 September 2021.
COVID-19
Post year end, parts of Australia have seen increased restrictions because of a resumption of COVID-19 cases.
To date this has not had a material impact on the Group’s business activities.
On 18 August 2021, New Zealand entered an alert level 4 lockdown. Freightways is deemed to provide essential
services in New Zealand and have well established protocols to ensure that all staff and contractors can operate
safely under all alert levels; however, under alert level 4, activity levels are significantly impacted across all the
New Zealand businesses. Experience from the previous move from alert level 4 to alert level 3 showed that the
express package businesses should recover quickly and tend to experience a significant increase in volumes
stronger than expected under level 3.
Should the level 4 lockdown continue for an extended period we will continue to evaluate our cost base and
whether there is a need to apply for the government wage subsidy.
At the date of this report, there have been no other significant events subsequent to the reporting date.
---
Section 1: Issuer information
Name of issuer Freightways Limited
Financial product name/description Fully Paid Ordinary Shares
NZX ticker code FRE
ISIN (If unknown, check on NZX
website)
NZFREE0001S0
Type of distribution
(Please mark with an X in the
relevant box/es)
Full Year X Quarterly
Half Year Special
DRP applies
Record date 17 September 2021
Ex-Date (one business day before the
Record Date)
16 September 2021
Payment date (and allotment date for
DRP)
1 October 2021
Total monies associated with the
distribution
1
$29,797,000
Source of distribution (for example,
retained earnings)
Current earnings for the year ending 30 June 2021
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution
2
$0.25000000
Gross taxable amount
3
$0.25000000
Total cash distribution
4
$0.18000000
Excluded amount (applicable to listed
PIEs)
$-
Supplementary distribution amount $0.03176471
Section 3: Imputation credits and Resident Withholding Tax
5
Is the distribution imputed Fully imputed
If fully or partially imputed, please
state imputation rate as % applied
6
28%
Imputation tax credits per financial
product
$0.07000000
1
Continuous issuers should indicate that this is based on the number of units on issue at the date of the form
2
“Gross distribution” is the total cash distribution plus the amount of imputation credits, per financial product, before the deduction of
Resident Withholding Tax (RWT).
3
“Gross taxable amount” is the gross distribution minus any excluded income.
4
“Total cash distribution” is the cash distribution excluding imputation credits, per financial product, before the deduction of RWT.
This should include any excluded amounts, where applicable to listed PIEs.
5
The imputation credits plus the RWT amount is 33% of the gross taxable amount for the purposes of this form. If the distribution is
fully imputed the imputation credits will be 28% of the gross taxable amount with remaining 5% being RWT. This does not constitute
advice as to whether or not RWT needs to be withheld.
6
Calculated as (imputation credits/gross taxable amount) x 100. Fully imputed dividends will be 28% as a % rate applied.
Resident Withholding Tax per
financial product
$0.01250000
Section 4: Distribution re-investment plan (if applicable)
DRP % discount (if any)
N/A
Start date and end date for
determining market price for DRP
N/A N/A
Date strike price to be announced (if
not available at this time)
N/A
Specify source of financial products to
be issued under DRP programme
(new issue or to be bought on market)
N/A
DRP strike price per financial product
N/A
Last date to submit a participation
notice for this distribution in
accordance with DRP participation
terms
N/A
Section 5: Authority for this announcement
Name of person
authorised to make
this announcement
Stephan Deschamps
Contact person for this
announcement
Stephan Deschamps
Contact phone number
+64 27 562 5666
Contact email address
stephan.deschamps@freightways.co.nz
Date of release through MAP
23 August 2021
---
FY21 RESULTS
PRESENTATION
FOR THE YEAR ENDED 30 JUNE 2021
23 AUGUST 2021
Mark Troughear | Chief Executive Officer
Stephan Deschamps| Chief Financial Officer
2
Mark Troughear
Chief Executive Officer
Stephan Deschamps
Chief Financial Officer
Neil Wilson
General Manager of
Freightways
Scott Hedgman
General Manager of Sales
Express Package
Steve Wells
General Manager of
Express Package
Mike Roberts
Chief Executive of
Big Chill Distribution
AGENDA
PRESENTERS
Introduction & HighlightsFinancial ResultsExpress PackageBig ChillInformation ManagementWaste RenewalThe Startery & Outlook
3
HIGHLIGHTS
OVERALL
Revenue growth of 27%
GAAP EBITA growth of 21.9% and NPAT growth of 4.6%
Adjusting for the accrual of the final Big Chill payment;
EBITA growth before other expenses of 33% (
i)
NPAT growth before other expenses of 30% (i)
EXPRESS PACKAGE
Growth in courier revenue of 16%
PFE reached $1.32 per item by
June, which delivered
improved B2C margin
Contractor earnings up 8%
for the year v the pcp
Growth in Big Chill transport and 3PL revenue of 14% (over their pcp) with pleasi
ng utilisation of facilities
and network resources
BUSINESS MAIL
Despite the overall market decline mail volumes within the DX network continue to grow
with an 11% increase since
2019
INFORMATION MANAGEMENT
Improved margins in AU after suffering a decline in activity levels due to Covid
Print and copy margins have improved steadily over the year
20% growth in Business Process Outsourcing (BPO) v pcp
WASTE RENEWAL
Secure Destruction has rebounded in NZ and is improving slowly in AU
Medical Waste achieved $16m in revenue in the year, up 57% on the pcp
Growth in other product renew
al represented $7.5m over
the year
NOTES
i.
Excluding $23m accrued for the final payment related to the acquisition of Big
Chill
4
FINANCIAL SUMMARY
FOR THE YEAR ENDED 30 JUNE 2021
Note
FY21
$m
FY20
$m
Change
%
Revenue
800.5
630.9
26.9
EBITA, before change in fair value of contingent consideration – Big Chill Distribution Limited (BCD) and ot
her income & expenses (non-GAAP)
i.
130.5
97.8
33.4
Change in fair value of contingent consideration – BCD
(23.0)
-
Other income & expenses
-(9.6)
EBITA
ii.
107.5
88.2
21.9
NPAT, before change in fair value of contingent consideration – BCD and other income & expenses (non-GAAP)
iii.
72.7
56.0
29.8
Change in fair value of contingent consideration – BCD
(23.0)
-
Other income & expenses, net of tax
-(8.6)
NPAT - GAAP
iv.
49.6
47.4
4.6
Basic EPS (cents) (before change in fair value of contingent consideration – BCD and other income & expenses)
43.9
35.5
23.7
NOTESi.
Operating profit before interest, tax
and amortisation, before change in fair val
ue of contingent cons
ideration – BCD and othe
r income & expenses.
ii.
Operating profit before interest, tax and amortisation.
iii.
Net profit after tax (NPAT), before change in fair value
of contingent consi
deration – BCD and other income & expenses.
iv.
Profit for the half year attributable to shareholders.
v.
GAAP – Generally Accepted Accounti
ng Principles (IFRS-compliant)
5
INCREASED ACCRUAL FOR THE FINAL PAYMENT
FOR BIG CHILL
CHANGE IN FAIR VALUE OF CONTINGENT CONSIDERATION
2021
The final payment for BCD, due in August 2022, will bebased on a multiple of the BCD FY22 EBITA;
A stronger than expected performance for the yearended 30 June 2021, combined with the expectationthat this performance will be maintained, hassubstantially increased th
e estimated discounted future
final payment from $27.2 million to $51.3 million;
This led to the recognition of a one-off expense of $23million (no tax applicable) in respect of a change in fairvalue of contingent consideration;
Generally Accepted Accounting Practice (GAAP)requires that this increase in final payment accrual beincluded in the income statement rather than adjustedagainst goodwill.
2020Other (income) expenses:
$000
Impairment of goodwill
5,194
Impairment of brand names
1,581
Impairment of intangible assets - software
608
Write-off of obsolete software
2,739
Acquisition advisory fee
981
Reversal of earn-out payables
(1,505)
Total net expense
9,598
6
FY21
$m
FY20
$m
Change
%
Express package & refrigerated transport
572.6
421.6
35.8
Postal
48.5
49.1
(1.3)
Storage & handling
60.7
60.3
0.7
Destruction activities
70.6
61.6
14.7
Other (i)
48.1
38.3
25.8
Total revenue
800.5
630.9
26.9
NOTESi.
Other includes Digital Services, Print & Copy and Cold Storage revenue
REVENUE SEGMENTATION
FOR THE YEAR ENDED 30 JUNE 2021
7
FY21
$m
FY20
$m
Change
%
Operating Revenue
633.0
474.4
33.4
EBITDA
142.8
101.7*
40.4
EBITA
109.5
77.8*
40.8
EBITA Margin
17.3%
16.4%*
FY21
$m
FY20
$m
Change
%
Operating Revenue
170.7
158.7
7.5
EBITDA
50.8
47.1
8.1
EBITA
29.0
25.8
12.1
EBITA Margin
17.0%
16.3%
EXPRESS PACKAGE & BUSINESS MAIL
for the year ended 30 June 2021
INFORMATION MANAGEMENT
for the year ended 30 June 2021
NOTES
* EP&BM FY20 EBITDA, EBITA
and EBITA margin represent the oper
ating results of the division,
exclusive of other income and expense that are one-off in nat
ure. Refer to the
appendix for reconciliation to results that are in a
ccordance with Generally A
ccepted Accounting Practice.
8
BALANCE SHEET
CASHFLOW
KEY POINTS
Total assets has remained at similar levels to FY20.
Total liabilities decreased from FY20 by $31m, including:
‒
$58m decrease in borrowing as a result of repayments frompositive cash flows from operations
‒
$23m increase in payables in respect of change in fair valueof contingent consideration (increasing accrual for estimatedfuture Big Chill (BCD) final settlement payment)
Gearing as at 30 June 2021 is 30% (
excluding lease liabilities
related to NZ IFRS16) and 57% (including lease liabilitiesrelated to NZ IFRS16).
KEY POINTS
Cash generated from operations of $198m was $37m above the PCPdue to strong results compared to PCP and the inclusion of Big Chill(acquired on 1 April 2020).
Net cash inflows from operating activities (i.e. after deducting interestand tax payments) were $8m above the PCP. Income tax paid inFY21 is $26m higher than FY20 due to provisional tax funded throughtax financing in FY20 being paid in FY21.
Interest paid increased reflecting h
igher average debt level during this
year, following the BCD acquisition, compared to the PCP.
Cashflows from investing activities were down $110m on the PCP withno acquisitions made during the period.
The $115m increase in cash outflows from financing activitiescompared to the PCP reflects:
‒
repayment of $59m of debt compared to drawdown of $46m in thePCP
‒
$8m increase in lease payments, partly due to inclusion of BigChill
‒
$23m decrease in proceeds from shares issued. Shares wereissued to partly fund the BCD acquisition in FY20 with nocorresponding share issue this year
Partially offset by
:
‒
$22m decrease in dividend paid this year as no dividend was paidin October 2020
9
CAPITAL MANAGEMENT POLICY
Debt/EBITA
•ROIC Positive Investments•Higher Dividends•Capital Returns
LOW DEBT
•ROIC Positive Investments•Dividend of 75-80% of NPATA
PREFERED
GEARING RANGE
•Reduce Cash Dividend •Capex reduced to essential
capex
•Limited Investment•Capital Raise
HIGH DEBT
2%3%
CAPITAL MANAGEMENT PRINCIPLESTargeting solid Investment Grade credit profile, at a levelthat minimises the cost of capital. Range of Net Debt /EBITDA between 2x and 3x.
DIVIDEND POLICYDividend Policy aligned with Capital Management Policy, balancing a number of objectives:
The setting of the dividend is subordinated to the overall capital structure of FRE. When debt is considered high, the cash dividend will be reduced to allow for fast debt reduction;The dividend is set at a level that the Board expects to be sustainable in the medium termSubject to the first two principles, the Board will aim to pay 75% to 80% of the NPATA adjusted for significant one-offs
10
2021
Full Year Actual
$M
2022
Full Year Forecast
$M
Capital Expenditure
18
24 - 26
Depreciation and software amortisation
(including impact of NZ IFRS 16)
57
60
Depreciation and software amortisation
(excluding impact of NZ IFRS 16)
22
23
CAPITAL EXPENDITURE
FOR THE YEAR ENDED 30 JUNE 2021
11
DIVIDEND
18 CPS
FINAL DIVIDEND
7.00 CPS (FULLY IMPUTED AT 28% TAX RATE)
IMPUTATION CREDITS
3.1765 CPS
SUPPLEMENTARY DIVIDEND
17 SEPTEMBER 2021
RECORD DATE
1 OCTOBER 2021
PAYMENT DATE
NOTESI.
The DRP will not be offered for this dividend.
12
A FAMILY OF BRANDSOur market leading brands combine density & shared infrastructure with specialist knowledge in each niche.We work across a range of activities, achieving high levels of quality and efficiency,We focus on adding value to how we pick-up, process and deliver. Our culture and commitment unifies our people. We draw on all of that to continue to evolve our businesses to meet the changing needs of our customers.
STRATEGY
13
STRATEGY
WHY WE DO THISBetter outcomes don’t just happen. It takes a conscious effort from our teamto move things forward for our customers, our team, our shareholders andour communities. Our “why” is
we move you to a better place
.
HOW WE WORKThree principles guide how our teams and our partners deliver;
We take ownership and re
sponsibility at every le
vel for what we do and
what we can improve.
We think commercially about the deals we make so that they makesense for our customers, our contractors, our business and ourshareholders.
We work as a family by supporting people, by prioritising their securitysafety and wellbeing and by doing everything we can to ensure they gethome safe each day.
We depend on our capabilities to deliver
what our customers
, investors and
communities expect. We’re efficient
. This critical capability enables us to
move around 100,000,000 items through our various networks every year.We are reliable - targeting flawless execution to shift items through multipletouchpoints in our networks every day. We act like an entrepreneur - werecognise and execute on high-value opportunities.WHAT WE DOFreightways is a business that is always on the move. We pick up andprocess physical and digital items reliability and efficiently for ourcustomers. We look to progress develop our people through careeropportunities. We increase returns for our investors. And we look to movethe dial for communities through the causes we support; and by reducingour emissions and employing or contracting local people.
14
23 AUGUST 2021
Scott Hedgman | Steve Wells
Express Package
EXPRESS PACKAGE
15
EXPRESS PACKAGE
B2C NETWORK ITEM GROWTH: FY21 V FY19
38%
52%
49%
36%
34%
38%
48%
25%
25%
37%
25%
28%
0%
10%20%30%40%50%60%
JUL
AUG
SEP
OCT
NOV
DEC
JAN
FEB
MAR
APR
MAY
JUN
16
EXPRESS PACKAGE
B2C PROPORTION OF TOTAL ITEMS – NETWORK COURIERS
14
%
20
%
17
%
PRE-LOCKDOWN
DURING LOCKDOWNS
NEW “NORMAL”
17
EXPRESS PACKAGE
PRICING FOR EFFORT – B2C PRICING PER ITEM
$0.71
$1.04
$1.32
JULY ‘20
JANUARY ‘21
JUNE ‘21
18
EXPRESS PACKAGE STRATEGY
PRICING FOR EFFORT – B2C
Pricing For Effort will be used to target those areas of ourbusiness where the price does not yet fully reflect the true costof performing the service.
Stage III of PFE for residential deliveries was launchedeffective February 2021 at an additional 50c per delivery to takeus to $1.32 by June.
We expect incremental improvement as we work throughindividual exceptions.
PRICING FOR EFFORT - LOCAL
Stage I of PFE for local deliveries was launched effective July2021 at an additional 25c per delivery.
Stage II of PFE for local deliveries is ongoing throughout FY22with a focus on lifting local rates further for those customers withhigher discounts.
PRICING FOR EFFORT – LARGER FREIGHT
PFE for larger courier items is in discovery phase and due forimplementation in July 2022.
19
ECOMMERCE
Our eCommerce proposition is founded on delivery performance, delivery choice and visibility for our clients and their customers
The key market focus for FY22 is SME eCommerce businesses. These customers are less price sensitive, deliver a higher yield, are loyal, have a good regional spread and have potential to grow with us
Plug in integrations for popular eCommerce platforms are being developed that will enable our SME customers to offer a streamlined checkout experience, delivery choices and visibility of items shipped from their web store
New customer facing systems are being launched to EP customers to improve customer experience by providing better visibility and improved freight management tools
EXPRESS PACKAGE STRATEGY
NOTES*
Freightways commissioned re
search – Kantar March 2021
Delivers your parcels when and how they say they will Doesn’t damage the parcels in transit Parcels are not lost or misdirected Free shipping Leaves the parcel where you request it be leftOffers accurate, up-to-date parcel status and tracking Live tracking of your delivery
The most important aspects
of parcel delivery are:
delivering as expected,
on time and undamaged. Cost and tracki
ng are also of high importance
.
2/3
Of consumers say they know which company deliveredtheir last item
44
%
Of consumers believe parcel delivery companies in New Zealand are different
35
%
Of consumers say that having the choice of deliverycompany is important to them
20
SERVICE
Independent transit testing will be conducted over the next 6 months to benchmark our service v our key competitors. Our latest transit testing and internal measurement have set positive benchmarks for FY22
New BI tools have been launched that allow us to measure performance at a micro and macro level. This information is provided in real time and allows us to shift focus quickly to areas where more support or resource is required to mitigate possible service degradation
Increasing courier contractor remuneration has materially improved courier retention - which has fed into service quality
EXPRESS PACKAGE STRATEGY
98
%
NEW ZEALAND COURIERS DELIVERED UNDER PRESSURE AT THE BUSIEST TIME OF THE YEAR; On time deliveryQuery-free deliveries Claim-free deliveries
98
.5%
99
.4%
99
.99%
21
CONTRACTOR STATUS
A Tripartite Working Group is considering options to better protect contractors. The group is due to report to the Minister at the end of 2021.
FRE have submitted the following recommendations;
Clear and transparent contracts,
Access to legal / accounting advice prior to signing,
Access to affordable mediation in the event of a dispute.
FRE courier incomes grew on average by 8% this year.
Increasing courier contractor remuneration continues to be a key focus for our business in FY22. Our Pricing For Effort strategy will underpin our ability to raise our courier earnings which in turn has a positive impact on the service we provide to our customers. We aim to increase courier earnings by 5-10% across the various brands this coming year.
The other benefits of being a contractor with FRE are;
The flexibility to take time off as they wish
The opportunity to use their asset to earn income
Tax deductibility of running your own business
A higher level of autonomy than being an employee
EXPRESS PACKAGE STRATEGY
EXAMPLE
AVERAGE NZC DRIVER
Average Gross Earnings
$120,000.00
Average Costs*
-$28,800.00
Average Net Pre Tax Earnings
$91,200.00
Weeks Per Year
52
Days Per Week
5.2
Hours Per Day
11
Hours Per Year
2974.4
Average Net Pay Per Hour
$30.66
Living Wage ( /Hr)
$22.75 (1/9/2021 effective date)
Premium To NZ Living Wage
34.8%
Minimum Wage
$20.00 (1/4/2021 effective date)
Premium To Minimum Wage
53.3%
*
includes
6
weeks
relief
driver
@
$23/hr and
all
costs
of
operating
an
average
NZC
run
22
EXPRESS PACKAGE
NETWORK COURIER REVENUE – 6 WEEKS TRADING
4.2
%
3.0
%
1.1
%
1.5
%
9.8
%
TRADING
REVENUE
PFE B2C
INCREASES
FY22 PRICE
INCREASES
SURCHARGES
PRE
‐
COVID19
LEVEL
4
LOCKDOWN
18
AUGUST
2021
23
23 AUGUST 2021
Mike Roberts | Big Chill
BIG CHILL
DISTRIBUTION
24
CURRENT STATE
BCD operate in the NZ temperature-controlled transport and storage market providing;
‒
Express Parcel delivery to: Foodservice providers, Supermarkets, Hospitality and Quick Service Restaurants
‒
3PL services for a range of clients in Auckland
‒
Full Truck Load services for a number of larger customers
We estimate the market for temperature-controlled delivery and storage is worth over $1billion;
‒
BCD has around 11% of this market (across the 3 niches)
‒
Market has a high level of fragmentation
‒
Some customers (e.g. Foodstuffs) run their own network
BCD has achieved averaged growth of 10% per annum over the last 6 years. In FY21;
‒
A new 3PL site provided 100+% growth
‒
Transport revenue grew by 11%
BCD made additional investments in the network in FY21 by;
‒
Expanding the Wellington facility by 100%
‒
Expanding the Hastings depot by 25%
BACKGROUND
25
BCD STRATEGY
GOALTo maintain and grow our position as the supplier of choice for fresh and frozen food distribution across NZ.NETWORK• We will expand our facilities in Christchurch and Waikato/BOP
region to be able to cope with expected demand.
• Assess bolt-on acquisitions at the right time and the right price.3PL (2nd Horizon of Growth)• With the existing Auckland 3PL facility at 87% utilisation we will
assess the options for another purpose built facility to cater to express parcel distribution which can feed the BCD transport network.
• Such a facility would not come online until mid-2023.INTEGRATED EXPRESS PACKAGE DELIVERY (3RD Horizon of Growth)• We will continue to explore the opportunities for delivery in T/C
vans through the Express Package network for last mile and SME delivery points as a way of providing quicker and more cost efficient fulfilment.
26
INFORMATION
MANAGEMENT
23 AUGUST 2021
Neil Wilson | General Manager
27
INFORMATION MANAGEMENT STRATEGY
POSITIONING FOR DIGITAL GROWTH
A new 3PL service offering being trialled in NZ. A number of cornerstone customers already se
cured to assist scaling the new
business model.
The Startery has assisted by focu
ssing on customers with high unmet
needs targeting the growth E Commerce sector.
Over $15 million of BPO contracts already signed for roll out in FY22and FY23. Full pipeline of BPO opportunities :
‒
Demand accelerated by Covid in some instances e.g. work fromhome solutions, NZ vaccination processing
‒
Freightways IT infrastructure
is a competitive advantage with
meeting Cyber security requirements
=17
%
DIGITAL REVENUE
of Total TIMG Revenue
+20
%
GROWTH ON PRIOR YEAR
28
KEY STRATEGIES
Media and archive activity levels have been impacted by Covid, particularly in Australia. Pricing improvement has been implemented to protect margins.
Sales resources focused on new business in areas with warehouse capacity e.g. Auckland, Sydney and Perth.
Aiming to grow TIMG NZ revenues by introducing new recycling services to complement existing paper collections.
Continuing to focus on streamlining costs through efficiency and productivity gains in Australia.
TIMG AU Overhead Labour
As a % of revenue:
INFORMATION MANAGEMENT STRATEGY
29
WASTE RENEWAL
23 AUGUST 2021
Neil Wilson | Freightways
30
WASTE SECTOR GROWTH
POSITIONING FOR A SUSTAINABLE FUTURE
Medical
Waste
Paper
e-waste
Product
Destruction
Liquid
PaperBoard
Soft
Plastics
Food
Waste
Textiles
Current State
Future Strategy
INTEGRATED LOGISTICS COLLECTION SERVICE
AUTOMATED CUSTOMER REPORTING – TONNES DIVERTED, CO2, RENEWAL, PRODUCTS PROCESSED
RECYLING/ PRODUCT RENEWAL
31
•Fonterra•Frucor•Skycity•Freightways•Goodman Fielder•Nestle
FEED STOCK
SUPPLIERS
•Heat and pressure
PROCESSING
PLANT
TE RAPA
•Interior wall & ceiling•Rigid air Barrier•Exposed interior•Roofing substrate
LOW CARBON
BUILDING
MATERIAL
SAVEBOARD BUSINESS MODEL
SAVEBOARD PROGRESS TO DATE
Expected to be operational late 2021, first production line will divert 4,000 tonnes of waste from landfill.
New Zealand building code compliance achieved
Customer demand is high and Is supported by supply issues in building sector (over 50 pre-registered customers who will use).
Business model delivers strong commercial returns based on dual charging model.
Awarded a A$1.8m NSW Government grant and $1m set up funding from packaging suppliers
32
PURPOSE
To build meaningful new lines of business for FRE over a 5-year timeline.
Provides FRE businesses a structured process to test and incubate new ideas
Focus on Horizon 2 and 3 growth leveraging existing business capability
Incremental lean funding to manage risk and start-up complexity
Team of 8 covering Product Management, UX, Development, and Marketing
PIPELINE
32 ideas have been submitted to The Startery to date
18 have pitched for resource and funding
9 were accepted for investment
7 are currently being worked on
2 have progressed to revenue generating lines of business
MYCHECKS• Suite of privacy compliant background checks for employers and individuals• Leverages TIMG expertise delivering digital solutions to MoJ and NZ Govt• Launched Oct ’20, currently generating $16k/month in revenue• The product has a number of adjacent revenue opportunities across ANZ
33
OUTLOOK
23 AUGUST 2021
Mark Troughear | Chief Executive Officer
Stephan Deschamps | Chief Financial Officer
34
We were encouraged by revenue growth in ExpressPackage in the first 6 weeks of FY22.
Last week, New Zealand entered an alert level 4 lockdown,after similar decision in a number of Australian states. As aresult, we have immediately implemented our well-established processes to ensure that all staff andcontractors can operate safely.
Under alert level 4, activity leve
ls are significantly impacted
across all the New Zealand businesses. However,experience from the lockdowns
of last year suggests that:
As alert levels are lowered from 4 to 3 or below, theexpress package businesses should recover quicklyand tend to experience higher volumes thanpreviously expected,
IM will experience lower levels of activity until wereturn to level 2.
Should the level 4 lockdown continue for an extendedperiod we will continue to evaluate our cost base and otheroptions available to us.
OUTLOOK (1/2)
35
Whilst we are targeting revenue and earnings growth inFY22 from all of our business units we remain consciousthat even the best laid plans can be influenced by macrofactors that we are less able to control:
A tight labour market putting upward pressure onlabour costs,
Current and potential lockdowns in AU & NZ,
A constrained supply chain which could continue todisrupt the flow of goods coming in NZ andultimately impact the volumes we receive from ourcustomers.
We will continue to review the portfolio of services weprovide with a view to delivering superior long-term valueto shareholders through short, medium and long-terminitiatives.
The company will continue to consider acquisitionopportunities that are compl
ementary to our existing
operations and capabilities.
OUTLOOK (2/2)
36
CONCLUSION
FY21 was a record year for Freightways in terms of earnings, the contribution of acquisitions, the exploration of new services and growth of contractor incomes.
We are excited by the opportunities in front of all of our businesses in FY22 to continue to develop and where appropriate build a 2nd or 3rd horizon of growth over our core capabilities.
The Freightways Directors and Management team would like to thank all of our people across New Zealand and Australia for their contribution over the past year.
37
APPENDICES
23 AUGUST 2021
Mark Troughear | Chief Executive Officer
Stephan Deschamps | Chief Financial Officer
38
FREIGHTWAYS GROUP
FY21
$m
FY20
$m
Change
%
Operating Revenue
800.5
630.9
26.9
EBITDA (GAAP)
164.6
135.1
21.8
A
dd: Change in fair value of contingent consideration – Big Chill
Distribution Limited (BCD)
23.0
-
A
dd: Other expenses
-
9.6
EBITDA (before change in fair value of contingent consideration and other expenses)
187.6
144.7
29.6
Less: NZ IFRS16 adjustment
(42.2)
(33.7)
25.2
EBITDA (before NZ IFRS16, change in fair value of contingent consideration and other expenses) – non-GAAP
145.4
111.0
31.0
EBITA (GAAP)
107.5
88.2
21.9
A
dd: change in fair value of contingent consideration – BCD
23.0
-
A
dd: Other expenses
-
9.6
EBITA (before change in fair value of contingent consideration and other expenses)
130.6
97.8
33.5
Less: NZ IFRS16 adjustment
(7.0)
(5.3)
32.1
EBITA (before NZ IFRS16, change in fair value of contingent consideration and other expenses) – non-GAAP
123.6
92.5
33.6
NOTESGAAP – Generally Accepted Accounti
ng Principles (IFRS-compliant)
APPENDIX: RECONCILIATION OF GAAP TO PRE-NZ IFRS16 AND OTHER EXPENSES
for the year ended 30 June 2021
39
EXPRESS PACKAGE & BUSINESS MAIL
FY21
$m
FY20
$m
Change
%
Operating Revenue
633.0
474.4
33.4
EBITDA (GAAP)
142.8
98.3
45.3
A
dd: Other expenses
-
3.3
100
EBITDA (before other expenses)
142.8
101.6
40.6
Less: NZ IFRS16 adjustment
(24.6)
(16.1)
52.8
EBITDA (before NZ IFRS16 and other expenses) – non-GAAP
118.2
85.5
38.2
EBITA (GAAP)
109.5
74.4
47.2
A
dd: Other expenses
-
3.3
100
EBITA (before other expenses)
109.5
77.7
40.9
Less: NZ IFRS16 adjustment
(3.4)
(1.8)
88.9
EBITA (before NZ IFRS16 and other expenses) – non-GAAP
106.1
75.9
39.8
NOTESGAAP – Generally Accepted Accounti
ng Principles (IFRS-compliant)
APPENDIX: RECONCILIATION OF GAAP TO PRE-NZ IFRS16 AND OTHER EXPENSES
for the year ended 30 June 2021
40
NOTESGAAP – Generally Accepted Accounti
ng Principles (IFRS-compliant)
APPENDIX: RECONCILIATION OF GAAP TO PRE-NZ IFRS16 AND OTHER EXPENSES
for the year ended 30 June 2021
INFORMATION MANAGEMENT
FY21
$m
FY20
$m
Change
%
Operating Revenue
170.7
158.7
7.6
EBITDA (GAAP)
50.8
41.8
21.5
A
dd: Other expenses
-
5.3
100
EBITDA (before other expenses)
50.8
47.1
7.9
Less: NZ IFRS16 adjustment
(17.4)
(17.5)
(0.6)
EBITDA (before NZ IFRS16 and other expenses) – non-GAAP
33.4
29.6
12.8
EBITA (GAAP)
29.0
20.6
40.8
A
dd: Other expenses
-
5.3
100
EBITA (before other expenses)
29.0
25.9
12.0
Less: NZ IFRS16 adjustment
(3.6)
(3.4)
5.9
EBITA (before NZ IFRS16 and other expenses) – non-GAAP
25.4
22.5
12.9
41
DISCLAIMER
This presentation has been prepared by Freightwa
ys Limited ("Freightways") for information
purposes only. This presentation is not a product disclosure statement, prospectus orinvestment statement. Nothing in this presentation constitutes an invitation to subscribe forshares, securities or financial products in
Freightways. Nothing in this presentation
constitutes legal, accounting, financial or taxation advice or any other advice of anykind. Any investor should consult their own professional advisors and conduct their ownindependent investigation of Freightways and the information contained in this presentation,including any statements relating to the future performance of Freightways. The informationin this presentation is given in good faith and has been obtained from sources believed tobe reliable and accurate at the date of this presentation.Certain items of financial information included in this presentation are "non-GAAP" financialmeasures. These non-GAAP financial measures do not have a standardised meaningprescribed by New Zealand Accounting Standards and therefore may not be comparable tosimilarly named measures presented by other entities and should not be construed as analternative to other financial measures determined in accordance with New ZealandAccounting Standards. Freightways believes that these non-GAAP financial measuresprovide useful information in measuring the financial position and performance of theFreightways business.
However, undue reliance should not be placed on non-GAAP
financial measures included in this presentation.This presentation may include forward
-
looking statements regarding future events and the
future financial performance of Freightways. Such forward
-
looking statements are based on
current expectations and involve risks and uncertainties. Freightways cautions investors notto place undue reliance on these forward-looking statements, which reflect Freightways'views only as of the date of this presentation. Actual results may be materially differentfrom those stated in any forward
-
looking statements. Nothing contained in this document is
or should be relied on as a promise as to the future performance or condition of Freightwaysor as to any other future events. Except as required by law or the NZX Listing Rules,Freightways undertakes no obligation to update any forward
-
looking statements, whether as
a result of new information, future events or otherwise or to report against anyforward
-
looking statements. None of Freightways, their affiliates, or
their respective
advisers or representatives, give any warranty or representation as to the accuracy orcompleteness of the information contained in this presentation, and exclude their liability tothe maximum extent permitted by law.
42
43
---
Moving you
to a better place
ANNUAL REPORT
FINANCIAL YEAR ENDED 30 JUNE 2021
Freightways Limited and its subsidiaries
1
Freightways Limited and its subsidiaries |
Introduction
An eye on
our horizons
Our vision for Freightways sets
out three bold intentions for our
company. We’ll continue to look for
new ways to move and transform
things. We’ll keep finding ways
to improve. And our business
decisions will be governed by the
extent to which we believe they
can achieve the end goals our
stakeholders expect of us.
Freightways has always been an
entrepreneurial company. We’ve never been
afraid to be first to market and to step outside
traditional boundaries to do so.
We draw on our amazing teams to grow our
revenue and earnings from existing businesses
via organic growth, margin management and
efficiency gains. We invest in businesses where
our core capability to pick up, process and
deliver adds value. Our primary investments
are typically in synergistic and complementary
businesses with smaller cash injections for
embryonic opportunities.
Having a goal for everything we do and every
relationship we invest in adds purpose and
focus to how we do business. There’s always a
better place to move towards.
Annual Report | Financial Year ended 30 June 2021
3
Freightways Limited and its subsidiaries | Annual Report | Financial Year ended 30 June 2021
2
04 Highlights
06 Freightways' Growth Strategy
08 The Freightways' Family
10 Chairman and CEO’s Report
18 Spotlight on our Capabilities
34 Our People
36 Responsibility Framework
48 Community
50 TCFD
68 Board and Leadership
70 Directors’ Report
81 Financials and Notes
Contents
The topline of FY21. HighlightsOur organisational structure
0406
Living our purpose every dayPeople are at the heart of everything we do at Freightways
Non-financial criteria are front of mind in our decision making
and reporting
Supporting the communities in which we work
The leaders of our businessThe full financial story for an eventful year
36
18
68
48
34
81
Annual Report | Financial Year ended 30 June 2021
4 5
Freightways Limited and its subsidiaries |
Highlights
Parcel volumes,
courier incomes and
lines of business grew
The topline of FY 21
Financial
33.5
c
/ SHARE
Revenue grew
27
%
EBITA grew
33.5
%*
NPAT grew
29.7
%*
We were able to demonstrate the resilience of our business this year as
we dealt with the impact of COVID-19 and also explored new horizons.
Our courier businesses attracted more volume, and our information
management brands took the opportunity to introduce efficiencies that
increased their profitability. Our waste renewal business was affected
by lockdowns, particularly in Melbourne, but we still found inventive
ways to grow that part of the business.
8
%
Operational
Big Chill marks first anniversary
since acquisition in April 2020
Invested in SaveBoard as part
of exploring new horizons for
pick up, process and delivery of
high-value recyclables
Average remuneration for our
couriers improved by
Improved Net Promoter Scores
across our business
Developed a science-based target
for carbon reduction of 50% by 2035
70
%
Named one of the top 10 carbon
reducers by Toitū Environcare
On target to reduce fossil-based
virgin plastic use by
Reduced injuries from
despite a larger workforce
Total dividends paid this year:Volumes for B2B and B2C Express
Package deliveries were up
32
ideas assessed through
The Startery, our product
development hub
Pricing for Effort (PFE) finished the
year at
up from
$0.71
last year
$
1.32
* Before change in fair value of contingent consideration for Big Chill and other income and expenses
252
→
240
Environmental
Take
ownership
Think
commercially
Work as
a family
Strive for
efficiency
Deliver
reliably
Love our
customers
Act like an
entrepreneur
Express
Package
Business
Mail
Information
Management
Waste
Renewal
“We move you
to a better place”
Pick up, Process and Deliver
What we do
Our capabilities
Our principles
Our vision
Annual Report | Financial Year ended 30 June 2021
6 7
Freightways Limited and its subsidiaries |
The Freightways
strategy
Our purpose:
What we do
Freightways is a business that is always on the move. Across
the Group, we pick up and process physical and digital items
with a view to delivering them reliably and efficiently for our
customers. We look to develop our people through career
opportunities. We seek appropriate and sustainable returns
for our investors. And we look to move the dial for communities
through the causes we support; by reducing our emissions and
employing or contracting local people.
Our principles & capabilities:
How we work
Three principles guide how our teams and our partners deliver.
• We take ownership and responsibility at every level for
what we do and what we can improve.
• We think commercially about the deals we make so that
they make sense for our customers, our contractors, our
business and our shareholders.
• We work as a family by supporting people, by prioritising
their safety and wellbeing and by doing everything we can
to ensure they get home safe each day.
We depend on our capabilities to deliver what our customers,
investors and communities expect. We’re efficient. This critical
capability enables us to move around 100,000,000 items
through our various businesses every year. We are reliable. We
target flawless execution which enables us to shift multiple
items through multiple touchpoints in our network, across two
nations, every day. We act like entrepreneurs. We recognise and
execute on high-value opportunities. We always look forward
and up.
Our strategy on a page
Freightways Growth Strategy
Stakeholders:
Our customers
Our team
Our shareholders
Our communities
Our vision:
Why we do this
Better outcomes won’t just happen. It takes a conscious effort
from our team to move things forward for our customers, our
team, our shareholders and our communities. Our “why” is to
move you to a better place.
P
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a
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e
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e
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a
s
t
e
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e
n
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w
a
l
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s
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a
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e
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Annual Report | Financial Year ended 30 June 2021
8 9
Freightways Limited and its subsidiaries |
A family
of brands
Our organisational diagram
Our market-leading brands
combine shared infrastructure
with specialist knowledge in each
niche. We work across a range of
business sectors, achieving high
levels of quality and efficiency,
through our focus on adding value
to how we pick-up, process and
deliver. Our strong culture and
commitment unifies our people
and feeds our deep team spirit.
We draw on all of that to continue
to evolve our businesses to meet
the changing needs of
our customers.
Express Package
Our multi-brand strategy in the New Zealand courier market
caters to a range of customer needs and delivery timeframes.
All share branch networks, air and road linehaul, and IT. These
brands include New Zealand Couriers, Post Haste, Castle
Parcels, NOW Couriers, SUB60, Security Express, Kiwi Express,
Stuck, Pass the Parcel and Big Chill Distribution. We also
offer airfreight capability for our overnight Express Package
delivery service through our joint venture airline, Parcelair,
and our linehaul partner, Parceline. This year we continued to
implement our Pricing For Effort approach.
Business Mail
DX Mail is New Zealand’s only dedicated Business Mail
specialist; offering time-sensitive physical postal services
from both door-to-door and box-to-box.
Dataprint offers mailhouse-print services and digital mail
presentation platforms across New Zealand. Our technology
and solutions transform data into effective communications
for customers.
Information Management
The Information Management Group (TIMG) helps businesses
protect and add value to the data they entrust us with. It offers
physical storage and information management services, as well
as digital information processing services such as digitalisation,
business process outsourcing, online back-up and eDiscovery
services. This year we increased the utilisation of our storage
facilities by leasing out spaces for 3PL and other uses.
Waste Renewal
Shred-X offers document destruction, eDestruction and product
destruction services. We also provide medical waste collection
and processing services under the Med-X brand. This year we
continued to find new ways to transform what would once have
been waste into new products.
Freightways Family
$
16m
Med-X turnover in 2021,
up from $3m in 2017
Annual Report | Financial Year ended 30 June 2021
10 11
Freightways Limited and its subsidiaries |
Full year review
"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
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, and to lift income and drive levels of career
aspirations for our people. We delivered healthy returns
for our investors, and made plans to continue to reduce our
emissions. In FY21, we worked hard to further reduce the
number of 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 its 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 Shred-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
A focus on
progress
Chairman & CEO's Report
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. It has 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 Med-X four
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.
Mark Troughear
Chief Executive Officer
Mark Verbiest
Chairman
13
Freightways Limited and its subsidiaries | Annual Report | Financial Year ended 30 June 2021
12
Full year review
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 73 cents 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 are yet to be
priced properly. There’s no doubt in our
minds, for example, that local pricing
also needs to move to a better place.
Customers are essentially 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. We will maintain a modern fleet
and transition 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 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.
Chairman & CEO's Report
"We've come through
a challenging time
with a more engaged
team and increased
business."
Mark Verbiest
Chairman
10
%
reduction in turnover in our
courier team in FY21 v FY20
$
1.32
per item via our
FY21 PFE initiative
Targeting a
50
%
drop in carbon
emissions by 2035
8
%
increase in earnings for
contractors in FY21 v FY20
Key figures:
Annual Report | Financial Year ended 30 June 2021
14 15
Freightways Limited and its subsidiaries |
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 (3PL) 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.
Full year review
Business unit
performances
Chairman & CEO's Report
• 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 its 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.
• DX Mail 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 due to 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 Information Management offering
which are getting closer to being
released to the market.
Waste Renewal
(previously called 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.
Annual Report | Financial Year ended 30 June 2021
16 17
Freightways Limited and its subsidiaries |
Full year review
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.
Chairman & CEO's Report
"With the metric of 2x to 3x
Debt/ EBITDA restored, the
business will resume looking
for acquisitive opportunities."
Outlook
FY
22
We've had a record year in terms of earnings
and performances across the business,
which mirrors the huge effort 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. We are conscious of the following macro
factors: 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 New Zealand.
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.
$
24 –
$
26M
capital expenditure
forecast for FY22
75-80
%
of NPATA
Our dividend policy:
Mark Verbiest
Chairman
Mark Troughear
Chief Executive Officer
19
Freightways Limited and its subsidiaries | Annual Report | Financial Year ended 30 June 2021
18
Act like an
entrepreneur
Capability 1
Spotlight on our Capabilities
Having the foresight to seize
opportunities others haven’t seen
yet has always been a hallmark of
the Freightways mindset. Recently,
the Group has started applying
that thinking to an area that we call
Horizon Three opportunities.
Taking an ambitious approach
to new product lines has seen
us establish our own product
development hub – The Startery –
and push further into applying our
three-horizons model to see where
business ideas could go.
SaveBoard
SaveBoard is an example of a product
created from what would once have
been considered waste. The technology,
which already operates in the United
States, takes Tetra Pak packaging
(liquid paperboard) and applies heat and
pressure to transform it into a building
product. The raw material was once
something that would simply have been
thrown away.
Now we are investing in processing it
into a value-added product, through a
new venture that is very much aligned
with the circular and sustainable
economies. We are also exploring
the much bigger Australian market.
We have real confidence that this will
be a profitable business, given the
demand we have already seen due to
the shortage of building products and
a need for sustainable options in the
construction industry.
Of course, Tetra Pak is not the only
product that Freightways collects.
We also collect coffee cups, grounds,
textiles, electronic waste and other
complementary waste streams. So if
SaveBoard goes as we expect, that
will raise possibilities for us to adapt
the many other waste streams we work
with and look at building processing
capability around them.
Not Wasted
The Startery has produced its own
successes. Not Wasted is a service
that lets people sort their own waste
in less time than it takes to make a
coffee. The business, which offers
secure document destruction and
recycling and cardboard recycling,
left The Startery a year ago and is now
run by The Information Management
Group (TIMG).
My Checks
Another company still inside
The Startery is My Checks. It was
launched in March 2020 and since
October has steadily grown and
exceeded expectations. My Checks
operates in the privacy space, offering
background checking for recruitment
companies so that they can check
potential clients without having to
import and store sensitive data. My
Checks has already passed three formal
rounds of funding, and will remain in
The Startery for a few more months.
In this case, we used our knowledge of
picking up, processing and delivering
data to develop a privacy solution to help
companies establish who they hire.
Shred-X
Another example of a company that has
profited directly from an entrepreneurial
approach is Shred-X. It’s a living example
of our three horizons approach, having
begun life as a pure paper recycling
company before developing a medical
waste business. Now Shred-X is a leading
light for waste renewal in Australia.
Extracting Value
We believe the key to successfully acting
as an entrepreneur is not only seeing
the potential underserved needs in the
market. It's also being able to extract
new value and new products from
processes and services that would
otherwise have a single or limited use.
Our people are highly skilled at what they
do. An entrepreneurial approach builds
on that, but also extends it, encouraging
them to recognise shortages and
pinch points, and then find and define
opportunities to solve those issues that
we can then go on to apply elsewhere.
Annual Report | Financial Year ended 30 June 2021
20 21
Freightways Limited and its subsidiaries |
Start anew
Act like an entrepreneur case study
The Startery came about because
we recognised two things. That our
business must continue to evolve
and that we must make best use of
the opportunities we generate. And
that starting new business ventures
is difficult, especially when
everyone is busy with the work
they already have.
The Startery has at its core the idea of building meaningful
businesses over a 10-year timeframe: Create – where we
establish $1 million product lines within a two-year timeframe;
Scale – where we scale those ideas to $10 million over the next
three years; and Build – where we expand those businesses out
to substantial enterprises over another five years.
The Startery helps our companies get new ideas off the ground
without impacting existing operations. It works with them in
that initial Create stage to test and scale new ideas through
access to funding and specific skills in product development,
technology, design and marketing.
The key to doing this effectively is having a repeatable process
to test ideas for scale and profitability, and a lean approach to
funding where we look at a large number of smaller projects
quickly rather than a handful of large ventures. Alongside these
ideas, we are developing skills across the Group to ensure all
projects are robustly supported. The goal is to ensure that we
are committing resources into projects that are the most likely
to contribute to our overall profitability.
A key focus of The Startery is finding the right balance between
investment and risk. We’ve specifically developed the business
creation process at The Startery to help ensure that the more
we invest into a venture, the lower the business risk we are
carrying. To ensure that happens, every project goes through
seven stages and four broad developments in its time in
The Startery.
Each project starts as an idea, where the problem is defined,
a solution identified, the market opportunity quantified and a
pitch deck prepared. This is the conceptual stage where we
focus on the problem that we’re solving and the potential size
of the prize.
From there, the idea enters desirability testing, where it is tested
with customers, prototypes are developed and financial modelling
enables us to evaluate things like the path to profitability.
Product testing takes place over two stages, where a minimum
viable product is built and tested through two iterations. From
this we look to establish a clear scaling strategy and a sales and
marketing programme.
The final two stages focus on scale and revenue, with product
development, scaling implementation and a plan for integration
with the current business.
So far, we have generated more than 30 ideas – 18 of which
made it to the point where they were ready for pitch. Nine of
those have since been accepted for investment. Of those nine,
seven are currently under development within The Startery: five
are in desirability testing, one is in product testing, and two have
been stood up as a business.
We look forward to introducing new ideas into The Startery
over the next year and progressing those projects that have
passed muster. Part of acting like an entrepreneur is generating
opportunities that enable us to have choices – and striking
the right balance between those areas where we are already
established, as well as new opportunities that emerge from
what we currently do.
Spotlight on our Capabilities
Our three-horizon strategy,
built into a 10-year timeframe:
Create
We establish $1 million
revenue lines within a
2-year timeframe
Scale
We scale those businesses
to $10 million per annum
over the next 3 years
Build
Expand the businesses out
to substantial enterprises
over another 5 years
23
Freightways Limited and its subsidiaries | Annual Report | Financial Year ended 30 June 2021
22
Strive for
efficiency
Capability 2
Spotlight on our Capabilities
Freightways operates in a number of sectors where the rapid movement
of high volumes of items requires an acute focus on efficiency as well
as accuracy.
To overcome this, we consistently
examine our processes to see how,
where and when we could make changes
to what we do to become more efficient.
Sometimes that’s about setting new
expectations for how we do business;
sometimes it’s about redesigning
our processes to reduce handling or
duplication of effort.
Parceline is our internal linehaul
business. It moves consolidated
containers (TCPs) of freight between
cities and to and from airports. It has
the goal of operating not only accurately
and to a schedule – which can often be
challenged by weather and traffic events
beyond its control – but also efficiently to
give our retail courier brands the most
competitive backbone from which to cost
their activities.
Over the past year, Parceline has
developed and deployed a unique
utilisation app that allows us to measure
exactly how our trucks are being used
on every route. It gives us a detailed
understanding of on-time performance,
what’s being loaded onto our trucks and
utilisation levels of each vehicle. The app
also enables us to see those routes that
are being most used and those that are
not, so that we can target customers
to make better use of journeys that are
available. We’ve done this in analogue
for years, but we can now be much more
confident about available routes, costs
to run a truck, costs per kg and per item
and so much more.
Utilisation on back loads has been an
efficiency issue for a long time. The app
gives the business visibility of where
we have back load space available and
when, so that we can find a customer to
suit that availability.
In Australia, TIMG have large warehouses
that are used to store document
archives. The challenge in this industry is
to reach high levels of warehouse
utilisation to generate returns on the
investment made in setting up and
leasing these warehouses.
Unused space creates an opportunity
for us to work with 3PL companies
to literally fill that gap. In Sydney, this
strategy is delivering us an immediate
yield on what would otherwise just be
empty warehouse space. We charge for
monthly storage and activity.
In New Zealand, we’ve also turned our
attention to how we could use spare
warehousing resources to fuel our
core business in specific sectors like
eCommerce. Smaller on and off-shore
companies that don’t have their own
storage facilities and yet want to be able
to economically fulfil in the New Zealand
market can use TIMG as a dropship
storage facility to do just that.
Annual Report | Financial Year ended 30 June 2021
24 25
Freightways Limited and its subsidiaries |
Spotlight on our Capabilities
Once binned,
now board
Strive for efficiency case study
SaveBoard is a new venture backed
by Freightways, Tetra Pak and
circular economy organisation,
Closed Loop, that will see the
houses of the future made from
building materials upcycled from
waste such as beverage cartons,
soft plastics and coffee cups.
Right now, around 250,000 tonnes of plastic and packaging
waste is sent to landfill every year in New Zealand. The new
partnership will create a stable domestic market for products
such as food packaging, coffee cups, fast food wrappers, used
beverage cartons, soft plastics and coffee cups; and through the
process, efficiently limit the volume of waste going to landfill.
SaveBoard will turn these materials into an impact-resistant
board with similar performance to plywood, OSB and
particleboard; so that it can be used for interior and exterior
applications. The board can be manufactured to look like
traditional building board products or, in the true spirit of the
circular economy, it can feature colourful patterns created
from the packaging designs. Already used in the US for roofing,
mainly in the hurricane and cyclone belts, SaveBoard is a true
substitute to wallboard for lining houses because of its better
permeability rating (retains heat and reduces noise) and the
fact that it’s 100% recyclable.
For us, SaveBoard is an opportunity to efficiently use our
resources and our network to fully realise a commitment to
circular waste solutions with minimal carbon kilometres all
while providing a new strategic growth category. This is an
end-product solution that stems from our expertise in pick-up,
process and delivery, so it fits well with our core capabilities.
By striving for efficiencies in processing what we collect, and
combining our capabilities with those of a food processing and
packaging solutions company and a circular economy pioneer,
we will soon be able to provide a brand-new sustainable product
to one of New Zealand’s largest industries.
The product is made with zero water, zero glues, zero chemicals
and zero VOC emissions or formaldehydes, meaning it meets
all obligations under 14G of the Building Act. Not only does
SaveBoard reduce waste, it’s also made with ~80% reduction
in embodied carbon compared to plywood, and ~90% reduction
compared to plasterboard and fibre cement. Recovering and
remanufacturing the offcuts and end-of-life boards can mean
a zero waste to landfill solution.
The benefits extend even beyond the real impact on climate
change. This innovative but proven technology has the potential
to decrease the cost of housing and also create healthy homes.
Those benefits in themselves are big wins at a time where home
affordability remains an issue for many.
SaveBoard is scheduled for its first production run in late 2021.
The plant will serve the New Zealand market and save up to
4,000 tonnes of packaging waste from landfill every year.
From there, we will explore setting up a plant in Australia where
there is a ban on exporting waste from next year.
SaveBoard
will save up to:
4,000
TONNES
of packaging waste
from New Zealand
landfills every year
27
Freightways Limited and its subsidiaries | Annual Report | Financial Year ended 30 June 2021
26
Deliver
reliably
Capability 3
Spotlight on our Capabilities
Delivery is a make-or-break for us.
As we remind ourselves constantly,
we’re only as good as our last
pick up, delivery or experience.
Building brands that people trust
and know they can rely on requires
having clear measures in place to
ensure we are meeting people’s
expectations.
Net Promoter Score
All our businesses use Net Promoter Scores (NPS) as a
measure because our ultimate measure of success is customer
satisfaction. Our NPS measures the loyalty that exists between
our brand and the customer. Our NPS scores continue to
improve across all our brands.
DIFOT
Our other key metric is DIFOT (delivery in full on time). Our
goal is to ensure that each customer receives exactly what they
were expecting when they expect it, regardless of whether it’s
a package, a letter, a critical file or the collection of a document
destruction or medical waste bin. To test our reliability, we
independently run a network-wide pressure test against our
competition. Results for our network are consistently higher –
usually in the vicinity of 97-99% DIFOT.
We issue DIFOT reports daily to key customers in time-critical
industry niches, such as medical and parts supplies, where
delivery in full, on time is critical.
While DIFOT is a clear match for our courier brands, we
have also applied the ethos to our other businesses with
considerable success.
97-99
%
is consistently better
than other networks
Our DIFOT rates:
29
Freightways Limited and its subsidiaries | Annual Report | Financial Year ended 30 June 2021
28
Taking on the rain
Deliver reliably case study
Spotlight on our Capabilities
Delivering reliability is all about
having a can-do attitude and not
saying “no”.
At Parceline, it’s about doing all we
can to keep the freight moving when
even nature stacks the odds against
us. Our contractors understand
the importance of getting freight
delivered and do an amazing job of
overcoming daunting obstacles.
On Saturday 29 May 2021, heavy rain began falling in South
Canterbury. By Sunday evening the road closures had started.
Two of our Dunedin drivers and one of our Cromwell drivers
were stranded in Christchurch which prevented any of our
southbound linehaul from moving.
Monday brought further complications as we attempted to
launch a Cromwell truck and a Timaru truck, but we had to
recall them after a couple of hours. Later, we managed to get
both Dunedin and Invercargill trucks away and home via an
opening between Hororata and Charing Cross. Two experienced
drivers also departed Dunedin in tandem and successfully
made their way to Christchurch and back with two full loads
of freight.
On Tuesday, the Ashburton Bridge was closed due to slumping.
A group of our contractors responded by scouring the area
in 4WDs to locate suitable detours. After encountering
countless washed out and damaged roads, we found a safe
detour out of Ashburton which we were able to use to restart
freight movements.
In this rapidly evolving situation, we needed to assess five
critical factors alongside the weather and road conditions, our
drivers’ hours, their health and safety, finding the best routes,
the wear and tear on expensive trucks, and moving the most,
urgent items first.
A huge thank you to all contractors and drivers who made
this happen.
Annual Report | Financial Year ended 30 June 2021
30 31
Freightways Limited and its subsidiaries |
Love our
customers
Capability 4
Spotlight on our Capabilities
It’s one thing to say we love our customers and put them first. It’s another
to show that we are doing that. Most companies naturally look to measure
what they do. Increasingly, we measure all aspects of our relationships
with customers – because that, we believe, forms the basis for long-lasting,
loyal relationships.
The duration of our customer relationships is exceptional. Many
of these partnerships date back several decades, and in many
cases, the same courier has serviced these customers over the
same time period.
We allocate significant resources to managing customers
and ensuring we have people there to respond to their needs;
regardless of whether that is due to unforeseen demand from
their customers, supply chain issues that have stressed the
need for urgent delivery, or responses to weather events that
could cause delays.
Med-X
Last year, as lockdowns affected CBDs in Australia,
our paper-based Shred-X business took a big hit. Our Med-X
business quickly grew though as aged care homes in particular
sought to dispose of contaminated material. By the second
lockdown in Victoria, that business had increased 10-fold
and turnover had climbed to $1.4m per month in Victoria alone.
To meet the need, we moved resources from our Shred-X
business and increased our capacity in medical waste. These
decisions have enabled us to successfully help our medical
waste customers continue doing business.
BI+
Access to rich customer data through tools like BI+ is another
initiative to create a centralised data warehouse that will enable
us to have greater insights into all areas of our customer activity.
We use this platform to see how we perform in real time: day to
day, month to month, year to year across our business, residential
and rural deliveries and how our couriers are delivering so we
can address issues. By analysing this data we can achieve new
levels of efficiency and better understand what we need to do to
further improve our customer service. Already, the information
our sales and operations people have at their fingertips is having
a direct and measurable impact on EBIT.
"We use this platform to
see how we perform in
real time. By analysing
this data we can achieve
new levels of efficiency
and better understand
what we need to do to
further improve our
customer service."
$
16m
in FY21
Med-X turnover:
Annual Report | Financial Year ended 30 June 2021
32 33
Freightways Limited and its subsidiaries |
Ashford HandicraftsBrands Co
Loving our customers case study
An API tailor-made for spinners
Founded in 1934 by Walter Ashford, Ashford Handicrafts
manufacture and distribute craft and textile goods and are
now the biggest suppliers of spinning wheels in the world.
They have been working with Post Haste for more than 10
years, sending wheels, looms and carders to customers
around the country from their base in Ashburton.
Ashford were first attracted to Post Haste because the brand’s
cost point suited their business. Since then, the partnership has
flourished and today Ashford are using our API integration sets
to increase efficiencies in their despatch area.
For Ashford, integrating with Post Haste’s APIs makes sense
on three levels. It cuts the time per send by 10 – 20 seconds per
item. That may not sound like a lot, but with the volumes that
Ashford deal with over the course of a year, that adds up to a
substantial saving. Secondly, despatch is now all in one system,
which reduces the opportunities for errors. Finally, the API itself
gives the company greater visibility over their distribution and
enables Ashford to directly account for costs.
“They’re good people to work with,” says director James
Ashford. “We’ve worked with them for many years and, perhaps
because of that, they made the integration itself really easy for
us. For example, they took our feedback onboard and made
changes to the system to fit the way we do things. We feel like
they do stuff specifically for us. That’s meant we’ve been able to
keep our workflow integrity rather than being constrained by a
system or needing to change our core processes. For us it was
all about increasing efficiencies in our despatch area, and that’s
exactly what has happened.”
Helping Brands Co to connect
with their customers
Originally known as The Brand Outlet, this company was born in
Hawkes Bay in 2013 to offer Kiwis great deals on fragrance and
beauty products. For a time, they operated pop-up stores across
New Zealand, but in 2016 decided the time had come to shift the
business online. Now known as brands.co.nz (Brands Co), the
business is now a full e-commerce operation, employing many
Hawkes Bay locals to source relevant products from far and wide.
Brands Co has been working with New Zealand Couriers for
a number of years due to the company offering a solution that
met their needs at a competitive price. “Ecommerce customers
depend on us to meet our delivery promise and therefore we
depend on New Zealand Couriers, says owner Damien Green.
”Every day New Zealand Couriers helps us fulfil this promise
and delight our customers. The service is highly reliable. This
directly impacts how our customers feel about us and gives us
a competitive advantage.”
Spotlight on our Capabilities
Recently, Brands Co decided to add API access to New Zealand
Couriers. This gave their IT team the opportunity to add to their
great customer experience by providing them with order
status updates, delivery options and dynamic shipping rates
at checkout.
“We operate in a very busy and competitive environment,” says
Damien. “Through our API with New Zealand Couriers, our
customers know where their order is at, how it can be delivered
and what the latest costs are, so there are no surprises. That’s
good for them and for us. It means we’ve been able to steadily
grow our business and the loyalty of our customers, and offer
more Kiwis better access to more brands that they enjoy.”
Annual Report | Financial Year ended 30 June 2021
34 35
Freightways Limited and its subsidiaries |
Helping our
people progress
Our People
Our expectation is that each person
who works here will be treated,
and will treat others, with respect.
The number and cost of injuries
both reduced this year, by 5% and
39% respectively, despite a larger
workforce with the addition of the
Big Chill team.
Changing pricing,
changing livelihoods
Our insistence on Pricing For Effort
has made a massive difference for
our courier teams. Our payment
systems incentivise our contractors
to act as entrepreneurs with no cap
arrangements that see their incomes
increase in direct alignment with their
volumes. As a result, their earnings have
continued to rise, with pay for our lowest
quartile of couriers rising by around 10%
this year.
Improving productivity
Overall, the number of couriers across
the Group hasn’t grown substantially this
year. What has changed are the volumes
of work we have been able to accomplish
with largely the same sized fleets. Those
productivity gains have come through
concentrating on how we utilise the
various brands in our stable. It leads to
better productivity and lower emissions.
Greater emphasis on
safety and wellbeing
This year we appointed a General
Manager for Health & Safety across the
Group. This new role for the business
was part of a deliberate shift to move
the business from very high levels of
compliance to being more visionary and
strategic in how we handled the safety
and wellbeing of our people.
Training programmes which are
customised to our teams in our
environment are a critical part of shifting
to a proactive culture around safety. Over
700 staff in freight sorting roles took
part in our Health and Safety Manual
Handling module this year. We have
designed a new management training
programme for our leaders, who will all
work through the module in FY22.
We are also implementing new
technology to allow our people to report
incidents or hazards on the run. Because
this system is accessible to everyone
and easy to report, we will see key ‘lead
indicators’ in real time. There is a new
app for auditing critical risks and control
factors. Any senior manager visiting
a site can log on to the business/site
they are visiting and see and comment
on a critical risk. This is a simple and
practical way for our leaders to check
what’s happening at site level and to
ensure that everything they expect to be
in place has been implemented and is
working as expected.
In the past, we may have waited for
people to raise issues with us. Now,
our management teams are taking it
upon themselves to monitor individual
and collective safety and wellbeing,
and to take the initiative where they
perceive an action is required. Over 200
leaders were trained in mental health
awareness last year.
Simpler career planning
Our Diversity & Inclusion Survey revealed
that some people didn’t understand
how they could plan their career with
us. Many said they were excited by the
opportunities that Freightways offered,
but they needed to better understand
how to make the most of what was
available. Since then, we’ve been taking
steps to make sure everyone is aware of
the training, learning and development
that is available to them. This year, 276
people undertook training, learning
and development to advance their
careers with us. 126 of our team also
took part in leadership training through
our Freightways Fundamentals and
Management Concepts programmes.
Our new Diversity & Inclusion goal is
to use these programmes to promote
the opportunities for underrepresented
groups in our workforce. Specifically,
we are targeting our executive teams
to have at least 40% representation of
female, non-European ethnicity and
young managers (42 years of age or
younger) by 2030.
Our People
Given the range of businesses we operate across,
securing a diverse and committed workforce is,
and has always been, crucial to our success.
Fiona Tagipo
Role: Production Manager, Dataprint
Fiona: “The relationship is the key
bit isn’t it? Building trust with your
customers so that they feel listened
to. I also think being yourself works
in the customer space – bringing
a little bit of who you are to your
work and your conversations makes
people feel like they are more than
a number.
“I’d call my approach relaxed,
proactive and professional. I like to
work hard for the people we work
with – give them options, solve more
problems for them, show them what
we can do.
“When I first started in our
warehouse department, things were
inefficient. Not enough systems
or processes. It made sense to
me what should be done. In fact
it was the first thing I tackled –
implementing a system that would
work for everyone.”
Doing their best work.
Sound bites from some
of our people.
Dillon Lazarus
Role: Branch Manager, Post Haste
Dillon: “There is this weird
infectiousness about the freight
industry. The market is always
changing. We are always trying to
do more in the same or less amount
of time. People are a big part of
the business, which is why treating
everyone uniquely works. Everyone
has potential but they also have their
own way to unlock that.
“I was fortunate enough to be on
the team that launched Kiwi Drive.
We started everything from scratch
– created the service, opened up the
market. You can get opportunities
like that every day here.
Our relationship with customers is
like a partnership. I’m always asking
myself: how can we partner with
them to add value to their business?
And then how can we go the extra
mile to not let them down?”
Leela Tarrant
Role: Client Service Manager,
Facilities DX Mail
Leela: “Loving our customers
is a big part of my existing role.
Helping customers by adding
value to their business, often in
small ways that have big impacts
on stuff like productivity or
margin. I like to try and be there
for our customers, help them to
move forward, innovate so that it
works for us and for them.
“Reliability is an absolute.
Customers rely on us. It’s the
backbone of our business. Another
key focus is efficiency. Inefficiency
usually means margin loss.
“You have to take ownership.
When I came here, the facilities
management billing was
inefficient and manual. The risk
of errors was high. I took it upon
myself to learn the process and
then develop a new billing sheet/
process that saved time and
reduced the potential for errors.”
Stakeholder importance
Impact on business
7.07.27.47.67.88.08.28.48.68.89.0
SDG 8
SDG 9
SDG 3
SDG 16
SDG 13
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Materiality
curve
To meet growing demand
by stakeholders for broader
information about our activities, we
continue to incorporate non-financial
criteria into our decision-making and
public reporting.
Three years ago we conducted an
assessment to determine the issues
most material to our business and
public reporting via the Sustainable
Development Goals (SDG)
framework.
37
Freightways Limited and its subsidiaries | Annual Report | Financial Year ended 30 June 2021
36
Our Sustainable Development Goals
Setting strong
non-financial
goals
Responsibility Framework
Figure 1 – Stakeholder Materiality Assessment
•Product and process innovation
•Customer experience
•Data security
•New business opportunities
(e.g. medical waste management)
SDG
#
9
Industry, innovation and
infrastructure
•Health and safety in employment – injury reduction
•Non-GHG emissions (e.g. particulate, NOx)
•Road safety
•Employee wellness programme
•GHG emissions
•Ethics and integrity
•Transparency
SDG
#
3
Good health and wellbeing
•Profitability leading to sustainable employment
•Professional development and management/
leadership
•Rewarding contractors for their efforts
SDG
#
8
Decent work and economic
growth
SDG
#
13
Climate action
SDG
#
16
Peace, justice and strong
institutions
Annual Report | Financial Year ended 30 June 2021
38 39
Freightways Limited and its subsidiaries |
SDG
#
3
Good health
and wellbeing
We believe that everyone has a part to play, every day, in keeping
others safe. We’ve devoted a lot of energy this year to getting
that message across in ways that people will take onboard and
act on. As part of that, we appointed a new GM responsible for
Health & Safety for the Group.
Over the last six months we have developed a culture
programme called Delivering Safety Culture to ensure our
leaders and managers understand what they must be doing to
best look after their people.
Forklifts represent one of our critical risk areas. We’ve just
invested in a virtual reality programme for our drivers that will
allow us to simulate our workplace environments and identify
potential accidents so that drivers can see where dangers
may lie.
Engagement around health and wellbeing is increasing within
the business as more and more people come to understand the
importance of being and staying well. Every brand now has a
champion for Health and Wellbeing. That champion helps build
capability and awareness, and normalises conversations so that
they are part of how we care and look out for each other.
The Movement is our employee wellness programme. It takes
the form of an online portal where our people can find advice
on a wide range of wellbeing issues – from help with sleep to
information on ear and eye tests. Each company in the Group
has its own version that caters to the needs of its teams.
Recognising that everyone has times of difficulty, we’ve also
been promoting our Employee Assistance Programme (EAP),
which offers all employees access to an external professional
for counselling, guidance or advice via a helpline, regardless of
whether the cause of that difficulty is within their professional
or private lives.
We undertook a range of campaigns this year to foster
understanding and promote tolerance, diversity and interest
in, and respect for, our full range of people and cultures.
Responsibility Framework
Our areas of focus:
• Health and safety in employment
– injury reduction
• Non-GHG emissions (e.g.
particulate, NOx)
• Road safety
• Employee wellness programme
4.8
%
reduction in injuries from
252 to 240 during FY21
39
%
this year
Cost of injuries down
41
Freightways Limited and its subsidiaries | Annual Report | Financial Year ended 30 June 2021
40
SDG
#
8
Our areas of focus:
• Profitability leading to
sustainable employment
• Professional development
and management/leadership
• Rewarding contractors for
their efforts
Decent work and
economic growth
Our courier brands have all done well this year. Volumes were
up and our networks flexed quickly to cope with new volumes.
Having 100% control of our air and linehaul network has also
been a godsend through lockdowns and changing alert levels.
It’s meant we’ve employed more people through our businesses
as we’ve grown.
While much of our planned training was halted in 2020 due to
COVID-19 and lockdowns, we have made a concerted effort in late
2020 and 2021 to catch up and to keep our promises to our people
in terms of accessing their professional development. Again,
many of our people have seized opportunities to improve their
skills, knowledge and understanding of business management.
Contractors have benefited from network optimisation,
improved density and PFE. That lift in earnings has made
it easier for couriers to reinvest in modern, fuel-efficient
vehicles. Contractor turnover also reduced by 10% year on
year and the number of applicants wanting to be a contractor
for us increased.
PFE for our couriers has made them more invested and
commercially minded – for example, they are now increasing
capacity to meet seasonal demand. Our intention going forward
is continued year on year growth for our fleet, staying well
ahead of inflation, and an improved work/life balance.
Training programmes that
were halted during 2020
lockdowns, resumed in the
second half of the year
Courier pay increased
thanks to Pricing
For Effort (PFE)
Responsibility Framework
Our areas of focus:
• Product and process innovation
• Customer experience
• Data security
• New business opportunities
Annual Report | Financial Year ended 30 June 2021
42 43
Freightways Limited and its subsidiaries |
SDG
#
9
Industry, innovation
and infrastructure
One of the key outcomes from COVID-19 has been the
development of a much stronger direct-to-consumer emphasis
for our courier businesses. Previously, we concentrated on
deliveries between businesses, but recent changes have made
the direct to consumer (B2C) market more attractive and more
financially viable.
This year, we have focused on giving both the sellers and
receivers of transactions greater choice, control and visibility.
Designing for both audiences is critical to developing an end-to-
end transaction where receivers have full control over how and
when packages are delivered, and senders have the visibility
throughout that they need to retain control of the process.
Purchase and post-purchase experiences are a make-or-break
for merchants today, so we need to play our part in ensuring the
businesses we deliver for are offering amazing experiences that
customers agree are worth paying for.
Historically, we’ve offered stand-alone digital tools for sending
and tracking items. System integration however was costly
and complex, and for that reason, was really only available to
our larger customers. To resolve this, we’ve invested
significantly this year in the development of smart APIs
(application programme interfaces) to our delivery mainframe,
that make automation easily, cost effectively and quickly
available to most customers.
Our APIs are already relatively sophisticated and continue to
evolve and offer more features. We’ve already identified exciting
areas for improvement, including enhancing our address
validation tools and providing better integration with popular
ecommerce platforms. The other behaviour we are looking to
change is the tendency for our customers to call first. As much
as possible, we want them to be able to resolve everything online.
NOW Couriers has become a go-to innovation hub for our
courier businesses. Because it is small and locally-focused
on just one city (Auckland), this makes it easier for us to have
conversations around innovation with those specific customers.
Access to NOW Couriers enables us to offer features and
processes that can then be quickly changed to better suit what
customers require. It’s meant we’ve been able to really focus
on things like customer experience and to ensure our interfaces
are easy and intuitive to use. Those innovations are tested in
a development environment and informed by feedback from
users and customers before we roll them out more broadly.
Working this way will make us a nimbler organisation and
ensure we only introduce and implement ideas across the
whole of our Group courier network that have been proven
to work.
Other areas where we are looking to make improvements
across the Group include how we improve automated freight
sorting through better consignment visibility before items are
picked up.
Eighteen months ago we launched The Startery, our direct
response to developing new services to market. We adopted
a start-up model/entrepreneurial approach to innovation,
creating an incubator system that Freightways could continue
to replicate. Today, the Startery functions as a fast moving,
exploratory think-tank where leaders can come together to
critique, fund and empower teams in a lean style.
The Startery team itself is made up of product managers
(dubbed ‘entrepreneurs’), product marketers, product
developers and UX designers. Their role is to provide the skills,
resources and funding to get business ideas off the ground
without impacting the day-to-day operations and running of
the rest of the business. Projects have two years to go from
exploration to testing to delivery and making money.
.
Responsibility Framework
NOW Couriers acts as
our innovation hub
More emphasis on
experience innovation
Our areas of focus:
• Product and process innovation
• Customer experience
• Data security
• New business opportunities
45
Freightways Limited and its subsidiaries | Annual Report | Financial Year ended 30 June 2021
44
SDG
#
13
Our areas of focus:
• GHG emissions
• Reducing plastic usage and waste
Climate
Action
Our baseline carbon footprint in 2020 was 50,625 tonnes CO2e.
This includes all our New Zealand business units and
brands, other than the recently acquired Big Chill business.
(Big Chill and our Australian business units will be included in
future measurements.)
Our 2030 target of 33,170 tonnes CO2e (35% reduction)
and our 2035 target of 25,313 tonne CO2e (50% reduction)
are both science-based, aligning with what society needs
to achieve globally to keep global warming to within 2°C.
Our 2020 emissions now include those from Big Chill, the
emissions generated from our Trans-Tasman airfreight
initiative and also our Australian fleets and networks.
Well over 95% of our emissions come from the combustion of
transport fuel. This is the fuel we use across our vehicles and
aircraft. We are committed to reducing our emissions to levels
that support New Zealand’s commitment to the Paris Accord.
Much of our footprint sits in our supply chain, namely the
contractors we partner with. We are actively engaging with our
contractors and other suppliers on ways we can work together
to bring emissions across the supply chain down. Our primary
reduction strategies focus on:
• driving greater efficiencies through the network;
• maintaining modern fleets – both vans and trucks;
• moving away from fossil fuel consumption through the
electrification of our road fleet over time; and
• a more fuel-efficient air fleet in the future.
As a participant in the transport sector we know it’s important
that we lead by example in being transparent and accountable
around our climate actions. As certified participants in
TOITŪ’s carbon reduce programme our carbon footprint is
disclosed annually on the TOITŪ website. We also disclose
our footprint and targets in our Annual and Sustainability
Reports. In 2020, TOITŪ Envirocare named us as one of the top
10 carbon reducers.
We are also members of The Climate Leaders Coalition
which aims to help New Zealand transition to a low emissions
economy and, in doing so, create a positive future for New
Zealanders, business, and the economy. Organisations from
all sectors of the economy are represented in the Coalition
and together the signatories make up 60% of New Zealand's
gross emissions.
Plastic is the other big area of focus for us. Freight satchels are
essential for protecting our customers’ products in our Express
Package businesses. Historically, these satchels have been
made from fossil-based virgin plastics. In recent years, we’ve
reduced the amount of plastic required by 30% and offered
customers sustainable packaging alternatives. Now we are in
the process of switching to reusable freight bags that we can
use hundreds of times, and single use bags that will contain
80% recycled plastic. By 2022 we aim to have cut our annual
fossil-based virgin plastic usage by more than 70%, or 100
tonnes.
Responsibility Framework
On target to reduce fossil-based
virgin plastic use by 2022
TOP
10
carbon reducer by
TOITŪ Envirocare in 2020
Named
70
%
+
Annual Report | Financial Year ended 30 June 2021
46 47
Freightways Limited and its subsidiaries |
Peace, justice and
strong institutions
Increasingly, companies are under pressure to reveal not
only what they are achieving but also how they are working
internally. Consumers have increasing expectations of
transparency, and ethical considerations are important to them.
They want to feel they are buying products and services from
companies that behave well and they are therefore comfortable
to support. That same expectation is present in business-to-
business interactions. Increasingly organisations partner with
other companies that reflect or complement their sustainability
stances and values.
At Freightways, we’ve always prided ourselves on being straight
up, leading by example and doing the right thing. We are
committed to being a good corporate citizen. We pay taxes in the
countries we operate in and abide by all laws and regulations.
We pay our suppliers on time, every time. We ensure we only
enter into responsible partnerships.
Our history is one of standing up for the things we believe in and
making calls where we believe they need making. Our Annual
Reports continue to evolve to offer a higher level of disclosure
as part of sharing our stories and intentions with regulators,
investors, customers, communities and other stakeholders.
We’ve also offered investors and analysts unfettered access to
our senior executives. This year, we’ve included TCFD filings one
year earlier than required. In Australia, we have recently filed a
Modern Slavery Statement for our businesses.
We continue to report transparently and with increasing
detail about things like our ESG initiatives so that everyone
can see how our actions align with our intentions. Last year,
we introduced our first Sustainability Report. Quantifying our
progress in areas such as waste reduction, plastics and of
course carbon, aligns with where we think disclosure is heading
generally. It’s also part of our commitment to ensuring we
remain open and honest about the success of all our initiatives –
including those that are challenging and for which there are no
easy or immediate answers.
Key programs and initiatives
Our range of policies and processes includes:
•Charters for our Board and each of our sub-committees
•Code of Ethics
•Disclosure & Communication Policy
•Diversity & Inclusion Policy
•Insider Trading Policy
•Protected Disclosure (Whistleblower) Policy
•Remuneration Policy
•Risk Management Policy
Our website includes detailed information about:
•Our Board of Directors
•Our Leadership team
•Our brands
•Our results
•Our dividends – including our dividend history, reinvestment
plan and policy
We report on our actions through:
•Disclosures to the NZX and ASX
•Climate Leaders Coalition Annual Questionnaire
SDG
#
16
Our areas of focus:
• Integrity and ethics
• Transparency
Zero
legal actions brought
against us FY21
Zero
environmental or safety
prosecutions in FY21
Responsibility Framework
49
Freightways Limited and its subsidiaries | Annual Report | Financial Year ended 30 June 2021
48
Our community
Key community initiatives:
→
Kidsline (part of Lifeline)
→
Keep New Zealand Beautiful
→
The Hearing House
(Loud Shirt Day)
→
Beanies for Babies
→
Cancer Society
→
Auckland Kidney Society
→
McGrath Foundation
→
Clontarf Foundation
→
Child Cancer Foundation
→
KidsCan
→
Duffy Books in Homes
→
New Zealand Breast
Cancer Foundation
→
Rotary St Johns
Moving with our
communities
Community
KidsCan
KidsCan is New Zealand’s leading charity dedicated to helping
Kiwi kids affected by poverty. They partner with low-decile
schools and early childhood centres across the country to
provide kids in hardship with essentials such as food, jackets,
shoes and health products.
As an associate partner, we provide them with direct financial
support. We also provide supplier support through NOW
Couriers and New Zealand Couriers by providing discounted
services and bulk warehousing.
Child Cancer Foundation
Our New Zealand Couriers team has enjoyed a wonderful
relationship with Child Cancer Foundation for more than 20
years. We provide free mail collection, reduced and free courier
rates throughout the year, regular donations and support with
Christmas gifting for families.
This year, we were an Event Partner for their inaugural
Go for Gold Gala Dinner and Quiz Fundraiser, a fun evening
of camaraderie and friendly competition with a delicious
three-course meal by Urban Gourmet, drinks, a live auction
and more. The event raised funds which will go directly towards
providing essential support for Kiwi children with cancer and
their whānau.
Beanies for Babies
This great charity bands together more than 1600 knitters and
people who sew to make beanies, hats, shoes and toys for
newborns – all for free. We then distribute them to hospitals,
Plunket and other charities.
940 Blankets
1424
3532
Beanies
Beanies for Babies have
knitted the following for
newborns to date:
Pairs of
Booties
Annual Report | Financial Year ended 30 June 2021
50 51
Freightways Limited and its subsidiaries |
Task Force
on Climate-
related
Financial
Disclosures
Background
Climate change is one of the most
significant challenges we face as a society
and will raise many business risks across
the economy.
Governments and businesses alike are
taking steps to face these challenges
in several ways: enacting legislation to
foster a low-carbon economy; defining
decarbonisation pathways and deadlines
to achieve carbon neutrality; making the
disclosure of Greenhouse Gas (‘GHG’)
emissions inventories and reduction
targets mandatory; and industry-led
initiatives such as the Climate Leader’s
Coalition, with Freightways joining in 2019.
The transport sector is responsible for
19.7% of New Zealand’s total greenhouse
gas emissions.
1
The New Zealand Climate
Change Commission estimates that a
50% reduction in transport emissions
is required by 2035 to achieve net zero
emissions by 2050.
2
As one of New Zealand’s major transport
services provider, the bulk of our
GHGs are generated from consuming
transport fuels. We have a number of
businesses in New Zealand and Australia,
covering express package and other
complementary services in information
management, business mail and chilled
transport. Freightways has grown
organically and by acquisitions and has
representation in every major town in
New Zealand.
Our core business of collecting,
consolidating, processing and delivering
enables us to move thousands of items
per day in a resource and emissions-
efficient way. Our investments in
technology to drive continuous
improvement of fuel efficiency aligns
with the objective of reducing our
GHG emissions.
This is our first Task Force on Climate-
Related Financial Disclosures (TCFD)
report and describes our current
governance and management approach
to assessing and managing climate
change risks and opportunities to our
businesses. As part of this disclosure we
have also strengthened our emissions
reporting – see page 66.
Climate risk disclosures prepared in
response to the recommendations.
1. Governance
1
Ministry of Transport report: Transport Emissions: Pathways to Net Zero
by 2050. May 2021.
2
New Zealand Climate Change Commission Draft Advice. March 2021.
TCFD
Freightways' position on climate change:
Freightways recognises that our core business
of providing transportation services for our
customers is currently emissions intensive.
We have an important role to play, both in
building resilience to climate change impacts
and in the transition to a low-carbon economy.
We intend to make direct contributions to
climate adaptation and mitigation efforts within
our sector and the markets we operate in.
We will also work to be a strategic partner for
our customers, supporting and enabling their
responses to the climate change challenge.
Board oversight
Freightways’ Board of Directors
are responsible for overseeing the
management of risk, including those
related to climate change.
The Charter of the Board’s Audit &
Risk Committee requires that an annual
review of key risks and mitigation is
performed by each of Freightways'
controlled businesses, and is consolidated
at a corporate level. Risks are assessed
according to their likelihood and
potential impact.
Each business is responsible for
identifying events that could impact
their ability to deliver on its strategy or
reduce profitability. Exposure to climate-
related risks and carbon prices has been
considered when assessing potential
business acquisitions.
Freightways’ Board is also taking on
a longer-term focus, which will be
reflected in an updated risk assessment
methodology and the prioritisation of
climate-related risks.
Management's role
Freightways’ Chief Executive Officer (CEO)
and Chief Financial Officer (CFO) take
responsibility for assessing and managing
climate-related risks and opportunities at
a corporate level. As part of this role, the
CEO and CFO are engaged in structuring
Freightways’ approach to these climate-
related risks and opportunities.
Freightways’ business GMs and executive
teams are responsible for identifying
and assessing risks at an operational
level, including climate-related risks, and
providing those to Freightways’ executive
leadership team on a quarterly basis for
board Audit & Risk Committee review.
Stakeholder importance
Impact on business
7.07.27.47.67.88.08.28.48.68.89.0
SDG 8
SDG 9
SDG 3
SDG 16
SDG 13
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Materiality
curve
1
Ministry of Transport report: Transport Emissions: Pathways to
Net Zero by 2050. May 2021.
3
https://www.climateleaderscoalition.org.nz/who/signatories/
signatories/freightways
4
https://www.un.org/sustainabledevelopment/climate-change/
Annual Report | Financial Year ended 30 June 2021
52 53
Freightways Limited and its subsidiaries |
2. Risk Management
Climate-related risks are
identified through multiple
sources including:
Internal sources:
•Our disaster recovery and business
continuity plans following acute
impact events.
•Regular reviews of the critical risks
facing our businesses.
External sources:
•Our involvement in the Climate
Leaders Coalition
3
and other industry
groups focused on addressing
climate change.
•Briefings and advice from climate
change specialists.
•Reports produced by government
agencies and the United Nations.
Freightways’ commitment to
incorporating non-financial criteria
into our broader risk assessment and
decision making led us to conduct a
materiality assessment in 2017.
This assessment helped us to
understand and incorporate into our
strategy the views of key stakeholders.
The results of this process, shown
in Figure 1, clearly indicated the
importance of Climate Action –
Sustainable Development Goal 13
(SDG13).
4
Collective action
Part of the process of identifying climate risks is
working with other industry participants on opportunities
for collective action.
That’s why Freightways joined the Climate Leaders Coalition at
its inception and has undertaken work with the Science-Based
Targets Initiative to align its actions with the collective ambition
of that group.
4
Physical climate impacts
Physical climate impacts arise from extreme weather events
(e.g. storm, flood, drought) or from the longer-term shifts in
climate patterns (e.g. increasing temperatures). These changes
may result in financial risks or opportunities due the direct and
indirect impacts they can have on business operations, assets,
markets or to supply chains.
Transitional climate impacts
Transitional climate impacts refer to risks and opportunities
resulting from the policy, legal, technology and market changes
occurring in the transition to a low carbon economy. Depending
on the nature, speed, and focus of these changes, transitional
impacts may pose varying levels of financial and reputational
risk or opportunity.
TCFD
We currently address identified
climate-related risks on an ad-hoc basis
A more structured approach is being established and
progressively implemented to maximise the benefits of acting
in line with our carbon reduction target – see the Metrics and
Targets’ section below on page 66.
The impact of policy changes on our
business model
Another aspect of identifying climate risks is understanding
how policy changes align or could impact our business model.
For example, the New Zealand Ministry of Transport’s May 2021
Transport Emissions Pathways document sets out themes
to phase out emissions across our transport system. Table 1
below shows Freightways’ actions in line with Themes 2 and 3.
Some of the initiatives we have undertaken or have planned,
in order to manage the climate risks and opportunities
identified, include:
•Lease/purchase more fuel-efficient vehicles.
•Collaborate on airfreight movements using more
fuel-efficient airplanes.
•More efficient use of our network and an increase of run
density, leading to improved fuel efficiency.
•Employing a contractor model which incentivises efficient
fuel use in their own vehicle through factors such as
the routes taken, maintenance and minimising total
kilometres travelled.
•Collaboration between our separate courier business
to gain further efficiencies.
•Offering a carbon neutral service through the Kiwi
Express brand.
•Reducing use of virgin fossil-fuel based materials
for packaging.
•Implementation of plastic courier satchels, that contain
80% recycled content, for customers use.
•Investing in our circular economy recycling business
aiming to reduce waste to landfill.
•LED lighting and solar based energy in warehouses.
Table 1:
Pathways to Zero Carbon by 2050 – Initiatives by theme
Transport sector emission reduction themes
5
Freightways initiatives
Theme
#2
Phasing out the importation of Internal Combustion
Engine (ICE) light vehicles by 2035; banning the use
of all ICE light vehicles in 2050; adoption of biofuels
in light vehicles and buses and electrifying the
Public Transport bus fleet by 2035.
Our plan for EV uptake starts in 2024 and ramps up as
availability of alternatives allow. With early action, our entire
fleet can be made up of low emission vehicles by 2035.
Theme
#3
Energy saving and logistic improvements (such as
freight routes optimisation; freight consolidation
and improved last mile efficiency); mode-shift from
road freight to rail and to coastal shipping; adoption
of biofuels for road freight and accelerating uptake
of electric medium trucks.
Freightways have systems in place to enable optimisation,
such as freight consolidation and last mile efficiency
and driver training. As a consolidation business, we
understand the economic and environmental benefit of
being resource efficient.
Figure 1 – Stakeholder materiality assessment
Annual Report | Financial Year ended 30 June 2021
54 55
Freightways Limited and its subsidiaries |
Likelihood and impact
Our overall risk management process takes into account
two variables: likelihood and impact (Figure 2 and 3).
The ratings reflect our short, medium and long-term
timeframes and the financial impact on the company.
The combination of the ratings results in the ratings matrix,
as seen in Figure 4.
Risk register
Each business unit is required to maintain a risk register
which also considers mitigation and risk trends.
During the course of our initial climate risk assessment,
we identified that climate risks will typically peak in their
impact beyond the upper 10-year limit of our risk assessment
framework. Therefore, it is possible that these risks may not be
rated sufficiently using our current risk framework. Given the
uncertainty of future impacts of these risks on the company’s
earnings, over the next annual risk and strategy sessions with
the Board, we will:
•Review an updated brief on the material risks currently
identified and any new risks identified in the preceding year.
•Review our risk rating thresholds to assess whether our
enterprise risk framework could better reflect the nature of
climate risks.
•Decide whether to assign a higher risk rating to our material
climate risks to ensure a response proportionate to their
potential impact on the business.
Figure 2:
Freightways' risk likelihood ratings
LikelihoodDefinitionCould happen
within...
Very unlikelyOnly expected to
happen in exceptional
circumstances
10 years
UnlikelyHas been known to
occur, including in
other organisations
3 – 5 years
PossibleHas happened before
within the company
or industry
1 – 2 years
LikelyRegular occurrence
within the company
or industry
1 year
Very likelyHappens with high
frequency
1 month
Figure 3:
Freightways' risk likelihood impacts
ImpactCould reduce EBITA by...
Minor <1%
Moderate<5%
Significant<10%
Major<33%
Catastrophic33%+
Figure 4 – Risk Rating Matrix
54321
Likelihood: probability of occurance
Very
likely
MediumMediumHighVery highVery highA
LikelyLowMediumHighHighVery highB
PossibleLowMediumMediumHighHighC
UnlikelyLowLowMediumMediumHighD
Very
unlikely
LowLowLowMediumHighE
MinorModerateSignificantMajorCatastrophic
Impact when occurs (EBITA reduction)
2. Risk Management
TCFD
Table 2:
Climate risk and opportunity scenarios relevant to the transportation sector
Scenario The path to 2100 in a
High emissions scenario
The path to 2100 in a
Low emissions scenario
Physical impactEmissions continue to rise
Average global temperature rise of 3.2°C
– 5.4°C by 2100
Global emissions decline from the short-term
Average global temperature rise of 0.9°C
– 2.3°C by 2100
Policy
Little / ineffectual policy action on climate change
The Paris Agreement fails as major
economies withdraw
Australia continues its current climate
and energy policy, e.g. no pricing on
carbon emissions
Consistent with the International EA Sustainable
Development Scenario and NZ Climate Change
Commission advice, which shows a carbon price of
around US$80/tCO2e (NZD$110-120) by 2030 and
NZD$160 by 2035
Strict regulatory requirements e.g. carbon budgets,
fuel emission restrictions, increased monitoring and
reporting obligations
Technology
Advancements in low-carbon technologies
such as alternative transport fuels and
energy mainly driven by market supply and
demand mechanisms
The NZ Climate Change Commission’s advice to the
Government is for 100% of new light vehicles and 10%
of heavy trucks be electric by 2035
Globally, IEA modelling projects EVs to reach 12.25%
of global vehicle fleet, and 28.8% of sales by 2030
MarketConsumer and business purchasing behaviour
is driven by quality/price ratio irrespective of
the carbon footprint of the product or service
High demand for low-carbon products or services to
reduce emissions, this could provide a competitive
advantage/disadvantage depending on whether the
business can meet the market demand
StakeholderLittle to no expectations from stakeholders
to act on climate change
High stakeholder expectations concerning climate
mitigation efforts and resilient investments
3. Strategy
Considering both a low and high emissions
scenario, and their impacts
Freightways’ climate-related risks and opportunities
were qualitatively assessed considering a low and high
emissions scenario, and their physical, policy, technology,
markets and stakeholder impacts.
These scenarios, outlined in Table 2 below, are informed by
Intergovernmental Panel on Climate Change (IPCC) reports and
the International Energy Agency (IEA) energy scenarios.
For our key transition risk – exposure to an increasing carbon
cost – we conducted a quantitative assessment of the cost of
fuel under the New Zealand Climate Change Commission’s
‘Headwinds’ and ‘Tailwinds’ scenarios in combination with our
in-house assessment of our fleet’s transition to low emission
vehicles (see page 63).
Due to the qualitative nature of this assessment, the results
do not speak to the impact on earnings and only assess the
likelihood based on our enterprise risk management framework
(see page 54). Understanding the full risk assessment rating will
require quantitative modelling of the financial impact of each
risk in the future.
The tables that follow describe the physical risks
(Table 3), transition risks (Table 4) and climate-related
opportunities (Table 5) that were identified, and their expected
impacts on the business.
Annual Report | Financial Year ended 30 June 2021
56 57
Freightways Limited and its subsidiaries |
Physical climate risks
Table 3:
Material physical climate risks
Risk to FreightwaysClimatic DriversTCFD Risk TypeOperational ImpactType of Risk AssessmentRisk Assessment and timeframeInitial risk treatment actions
Extreme weather events and sea
level rise cause prolonged/sustained
disruptions to the transport network.
Extreme weather
Sea level rise
Increased
temperature
Acute/ChronicTemporary disruption to certain
transport routes
Delays in service delivery
Higher costs for transportation
Significant alteration to network design,
routes and transport method.
Qualitative2035 Likelihood ratings
Low emission scenario: Unlikely
High emission scenario: Possible
Review our established processes for
dealing with weather related events
preparing alternate operational plans
Review the capability of our experienced
team who are involved in the decision
making process to prepare for
future events
2050 Likelihood ratings
Low emission scenario: Unlikely
High emission scenario: Very likely
Higher temperatures and extreme
weather impair operating assets and
disrupt utility services.
Extreme weather
Sea level rise
Increased
temperature
Heat Stress
Acute/ChronicTemporary disruption to processing
activities at select buildings
Increased delivery times for customers
Higher insurance costs for
certain buildings
Certain buildings are no longer usable
Qualitative2035 Likelihood ratings
Low emission scenario: Unlikely
High emission scenario: Possible
Further analyse our assets and
associated utility services for their
vulnerability to physical climate impacts
2050 Likelihood ratings
Low emission scenario: Unlikely
High emission scenario: Likely
Freightways’ business
model relies on a network
of transportation assets
and logistics infrastructure
to move goods for our
customers.
Physical risk description –
Disrupted transport network
The impacts of climate change –
including more prevalent extreme
weather events, sea level rise, increased
average temperatures and high winds
– all threaten to damage and disrupt
the roads, airports and shipping ports
that keep our customers’ goods moving
around the country and the world.
Extreme weather events, such as storms
combined with king tides, are likely to
increase temporary disruption to the
transport network, especially coastal
roads in New Zealand and Australia.
This will lead to longer delivery times for
customers and higher transport costs as
freight is diverted on alternative routes.
In the second half of the century, sea
level rise and increased temperatures
are expected to lead to long term or
permanent damage to assets such as
Auckland Airport or the Cook Strait ferry
crossing and further amplify the impacts
of extreme weather events (e.g. storm
surges, surface flooding).
This could cause cost increases
and impacts on the resilience of our
operations. Our planning of alternate
routes or alternate runways is helping to
address this risk.
Freightways understands this risk is
greater under a high emissions scenario
where physical climate impacts are
more prevalent. According to the New
Zealand National Climate Change Risk
Assessment, the exposure to physical
climate hazards experienced by New
Zealand roads, airports and ports varies.
6
Ports are currently considered to have
limited exposure to climate hazards;
however, this increases to a moderate
exposure in 2050. Roads and airports, on
the other hand, are already considered
to have a major exposure to climate
hazards through to 2050. Under a low
emissions scenario, this risk is expected
to be significantly lower.
We are currently in the beginning
stages of understanding this risk to our
business. Previous disruptions to the
3. Strategy
transportation network, most notably
the 2016 Kaikoura Earthquake, has
provided us with experience in managing
disruption successfully.
Physical risk description –
Asset damage and utility
services disruption
A core part of our business is the
processing of items we deliver for our
customers. To achieve this, we rely on
a wide range fixed assets and utilities
services (e.g. fuel, electricity) across
our network. Physical climate change
impacts such as more prevalent
extreme weather, sea level rise and heat
stress threaten to damage and disrupt
operations at our buildings or the utilities
that support these buildings. This may
limit our ability to process and deliver
goods for our customers on time.
Due to the expansive nature of our
network, our buildings are likely to
experience different physical climate
impacts depending on their location.
For buildings in Australia and the north
of New Zealand, building failure due to
heat will become an issue, making it
difficult for buildings' electrical systems
to operate and hazardous for the health
and safety of our staff during high
temperature days.
For operational assets in low lying and
coastal areas, damage from continued
flooding caused by sea level rise and
storm events may eventually render
the buildings unusable or uninsurable
from mid-century. These kinds of
disruption could have a longer-term
impact on our network while a suitable
replacement building is found. At a
country wide level, extreme weather
events may lead to damage of electricity
infrastructure that could impact several
of our sites simultaneously.
Under a high emissions scenario,
the physical risk posed to buildings
is expected to be greater than under
a low emissions scenario. According
to the National Climate Change Risk
Assessment, the exposure of
New Zealand’s buildings to climate
hazards is already considered major
and is expected to grow to an extreme
exposure by 2050.
8
As with the risk of damage and
disruption to the transportation network,
we are currently still in the early stages
of understanding this risk to our
business. Going forward, we will need
to assess the climate-related risks at
a site level. This information will allow
us to proactively manage our assets as
climate change impacts materialise.
6&8
https://environment.govt.nz/publications/national-climate-change-risk-assessment-for-new-zealand-main-report/
TCFD
Annual Report | Financial Year ended 30 June 2021
58 59
Freightways Limited and its subsidiaries |
3. Strategy
TCFD
Transitional climate risks
Table 4:
Material transitional risk
Risk to FreightwaysTransition DriversTCFD Risk TypeOperational ImpactType of Risk AssessmentRisk Assessment and timeframeRisk Treatment
Increasing cost of fuel
as a result of higher
carbon costs
Reduced availability of
New Zealand Units (NZUs)
Reducing carbon allowance under
national carbon budgets
Higher costs of operating
ICE vehicles
Technology
Policy and Legal
Higher operational costs
Increased costs for customers
Loss of competitive advantages
over other freight companies
that have lower carbon
footprints
Exacerbation of the cost
of inefficiencies across the
delivery network
Quantitative (2035 assessment)2035
Low emission scenario: Medium
High emission scenario: High
Achieve reductions in line with our
science-based targets
Currently planning to transition the fleet
to low emissions vehicles in line with
targets set using the Science Based
Targets Initiative
9
Continue ongoing optimisation and
utilisation improvements to our routes
and service offerings
Frequent upgrading of linehaul units to
lower emitting vehicles
In the past year, we have managed to
decrease our fleet by 4% while increasing
the number of items sent through
our networks
10
Qualitative (2050 assessment)2050 Likelihood rating
Low emission scenario: Unlikely
High emission scenario: Possible
Climate compliance
requirements raise
barriers for new drivers,
hindering business growth
Restrictions on import and use
of internal combustion engine
vehicles
Increasing fuel costs (due to cost
of carbon)
High upfront cost of low
emissions vehicles
Technology
Reputation
Inability to retain or attract
drivers or higher cost to contract
drivers due to their need for EVs
Delays and a loss of reliability for
our services
Reputational damage
Qualitative2035
Low emission scenario: Possible
High emission scenario: Very Unlikely
Designing of contracts to incentivise
efficient driving, route choices and proper
vehicle maintenance
Providing early signals to contractors
about when replacement vehicles must
be low emission
Reviewing and adapting contractor
renumeration rates to support them into
low emission vehicle
2050 Likelihood rating
Low emission scenario: Likely
High emission scenario: Possible
Lessons from Kaikoura:
In the early hours of 14 November 2016, a magnitude
7.8 earthquake struck 15km northeast of Culverden,
North Canterbury, essentially "unzipping" an
approximately 180km length of the northeast coast of
the South Island.
7
This included land slips and upheaval that put the
main trunk highway and railway lines out of action for
months. Alternative routes, modes, providers and other
supporting infrastructure were needed to keep
goods moving.
While climatic forces are not causing earthquakes,
we understand that it is becoming increasingly
likely that they will drive similar disruptions to the
transportation network. We need to further investigate
the areas of our network most at risk and use our
experience in managing disruptions to develop
strategies to mitigate this risk in the future.
→ This and other events make it clear that
our most important strategic asset for
building resilience to climate driven impacts
is the wellbeing, dedication and ingenuity
of our team.
7
https://www.geonet.org.nz/earthquake/story/2016p858000
9
https://sciencebasedtargets.org/
7
https://www.geonet.org.nz/earthquake/story/2016p858000
10
Freightways 2020 Sustainability Report
202120222023202420252026202720282029203020312032203320342035
200.00
150.00
100.00
50.00
0%
202120222023202420252026202720282029203020312032203320342035
50%
40%
30%
20%
10%
0%
202120222023202420252026202720282029203020312032203320342035
100%
80%
60%
40%
20%
0%
Annual Report | Financial Year ended 30 June 2021
60 61
Freightways Limited and its subsidiaries |
3. Strategy
TCFD
Transitional risk description –
Increasing fuel costs as a result of higher cost of carbon
Our business model is reliant on efficient utilisation of various
vehicles and assets to process and transport our customers’
items at each step in our logistics network. Fuel costs at
Freightways are largely paid by our independent contractor
drivers as a cost of operating their vehicles.
We believe that this model promotes efficient fuel usage,
reducing the amount of transport fuel used by our business.
However, regardless of how our fuel costs are paid, we
understand that our business has significant financial
exposure to changes in transport fuel prices.
With the cost of carbon expected to rise in New Zealand,
increases in the carbon price will impact Freightways’ fuel
costs. This, together with offering an adequate return to our
contractor drivers, is helping to drive our adoption of low-
emission alternatives in order to avoid the increasing costs of
fossil fuel.
We undertook quantitative modelling to better understand the
approximate financial impact that higher carbon prices would
have on our fuel costs by 2035.
Assessment methodology
We have assessed the net present value (NPV) of our financial
exposure to increasing fuel costs as a result of an increasing cost
of carbon under two different scenarios.
These scenarios took into consideration our estimated rates of
low-emission vehicle uptake within our fleet, our Science Based
Targets work and the “Headwinds” and “Tailwinds” scenarios
released as part of the draft advice from the New Zealand
Climate Change Commission in February 2021.
These scenarios both assume that 100% of the carbon price is
passed through in the cost of fuel.
Tailwinds
•The most optimistic emissions reductions scenario is a
steady and clear reduction to net zero emissions by 2050.
•Presents a future where there is are fewer barriers to the
uptake of new vehicle technology and widespread behaviour
change amongst the population.
•Freightways is able to follow its planned transition to low
emissions vehicles, beginning in 2024.
Headwinds
•The least optimistic emissions reductions scenario is a much
more sudden and aggressive reduction to net zero emissions
by 2050.
•Presents a future where there is delayed uptake of new
vehicle technology and slow behaviour change amongst
the population.
•Freightways’ planned transition to low emissions vehicles
is delayed by five years, beginning in 2029.
Due to uncertainties surrounding the adoption of low
emissions technologies for heavy vehicles and aircraft, the
2050 assessment of this risk is qualitative. Due to Australia not
having a carbon price at this time, this modelling was limited
to our New Zealand operations.
As a reference point, Freightways estimated exposure to the
cost of carbon based on 2019 emissions was $1,266,000.
NZ Climate Change Commission Scenarios
used for modelling the impact of carbon
price changes on fuel costs.
Low emission vehicle adoption rates
Freightways’ adoption of low emissions vehicles varies
between the Headwinds and Tailwinds scenarios.
This reflects the differing rate of change between the two
scenarios. Under a Tailwinds scenario, Freightways acts
early to reduce emissions, while a Headwinds scenario
sees us delay our emissions response.
Carbon price
The annual carbon price in the Climate Change
Commission’s analysis was consistent across both the
Headwinds and Tailwinds scenarios. They are a yearly
prediction of what the price of carbon could be to create
economic incentives to meet emission reduction targets,
as can be seen below:
$
1.26m
estimated based
on 2019 emissions
Cost of carbon exposure:
Low emissions vehicles as a
proportion of total fleet (Headwinds)
Low emissions vehicles as a
proportion of total fleet (Tailwinds)
Year
Proportion
Year
Proportion
Estimated Carbon Price (2021-2035)
Year
Price per tonne of CO2 (NZD)
Financial impacts of carbon content in transport fuels (2022 – 2035)
201920222023202420252026202720282029203020312032203320342035
$14m
$12m
$10m
$8m
$6m
$4m
$2m
$0
Tailwinds scenarioHeadwinds scenario
Annual Report | Financial Year ended 30 June 2021
62 63
Freightways Limited and its subsidiaries |
Assessment findings
Under a “Tailwinds” scenario, by 2035 all vehicles in the
motorbike, passenger vehicle and van fleets are expected to
be fully electric. The NPV of our financial exposure to the cost
of carbon in transport fuels over the 2022 and 2035 period is
approximately NZD $39.9m with a peak financial exposure of
approximately $5.6m in 2029, then this risk subsides as the
proportion of EVs in the fleet increases steadily. Despite this,
continued growth in aviation fuel use means the cost of carbon
in 2035 is 40% higher than 2022 levels. By 2050, it is expected
that all land-based light transport fleets will be fully electric
(or similar low emissions technology), which will considerably
reduce Freightways’ exposure to this risk. While we have not
made any commitments at this time to invest in low-emission
aviation fuels or propulsion types, we anticipate more of these
options becoming available from 2030 onwards.
Under a “Headwinds” scenario, none of our vehicle fleets
becomes fully electric by 2035. The NPV of our financial
exposure to the cost of carbon in transport fuels between 2022
and 2035 is approximately $48,739,000 with a peak financial
exposure of approximately $7,677,000 in 2031, when the
reduction in fuel use from the introduction of PHEVs in the
passenger vehicle fleet (from 2029) begins to counteract the
rising cost of carbon. Combined with the growth in aviation fuel
use, the cost of carbon in 2035 remains at 175% of 2022 levels.
By 2050, this risk is expected to have reduced from 2035 levels.
However, the delay in adoption of low emission heavy vehicles
and the continued use of hydrocarbons in the aircraft fleet mean
that Freightways may have exposure to the risk posed by the
increasing cost of carbon in transport fuels.
3. Strategy
TCFD
Our transition initiatives
To help reduce this risk over time, we have several initiatives
underway. Firstly, we have annual measurement and third-party
assurance of our emissions, which allows us to understand
the trajectory of our carbon exposure year on year. Secondly,
Freightways is developing its emissions reduction plan using
the Science Based Targets Initiative. This work includes
planning our transition towards low emissions vehicles.
Lastly, Freightways is constantly exploring ways to improve the
efficiency and utilisation of our routes and service offerings.
For example, over the past year, we have managed to decrease
our fleet by 4% while still increasing the number of items sent
through our networks.
Figure 5, to the right, shows the projected financial exposure
that Freightways has to a rising cost of carbon in transport
fuels. The dollar cost amount represents only the carbon cost
component of the cost of fuel. The remaining components
embedded in the price per litre, such as other taxes and the cost
of the fuel itself, are in addition to the amount show.
Figure 5. Additional cost of fuel due to carbon prices 2022 – 2035 (NZ only)
4.0
%
whilst increasing
the number
of items
sent through
our network
Reduced our fleet by: 'Tailwinds' scenario:
By 2035, all vehicles
in the motorbike,
passenger
vehicle and van
fleets are
expected to be
fully electric
Annual Report | Financial Year ended 30 June 2021
64 65
Freightways Limited and its subsidiaries |
Transitional risk description – climate compliance
requirements impact pool of contractor drivers
Freightways recognises the essential role that our contractor
drivers play in the success of our business. To ensure we attract
and retain the best people in the freight and logistics sector,
we work to offer a competitive package for our contractors.
A transition to a low carbon economy has the potential to
undermine this competitiveness if we do not factor in costs
that a transition could bring. In particular, we understand that a
low carbon economy will likely lead to higher upfront costs for
contractors as they transition to low emissions vehicles.
Conversely, the projected carbon prices in New Zealand will
increase fuel costs for those who continue to use fossil fuel
vehicles, which may raise barriers to attracting new contractor
drivers. This would limit many of our core business activities,
causing delays in our services and causing reputational damage
amongst our customers.
To help mitigate this risk in the future, Freightways is leveraging
several initiatives. Firstly, we have designed the agreements
with our contractors to incentivise fuel-efficient driving, route
choice and vehicle maintenance. This helps to reduce the
emission intensity of our operations and improves margins for
our contractors. As part of our Science Based Targets initiative,
we can signal to our contractors when we will require any
new replacement vehicles to be low emissions. This allows
our current and future contractors to factor in the potential
extra up-front cost of this transition early on in their financial
planning. Finally, to support the upcoming changes to our fleet,
we have been improving the remuneration rates for contractors
to help them meet any higher upfront costs of transitioning to
low emissions vehicles when the time comes.
3. Strategy
TCFD
Table 5:
Climate-related opportunities
Opportunity
for Freightways
Opportunity
Drivers
TCFD Opportunity
Ty p e
Potential
Benefits
Type of Opportunity
Assessment
Opportunity materialisation
timeframe
New markets and efficiencies
spring up as part of the
economic transition to net zero
Increased investment and
expansion of renewable, low
emission, zero waste and
social equity activities
throughout the economy
Markets
Products and
Services
Market growth
Market share
Improved fleet utilisation
Greater breadth of revenue streams
Qualitative5 to 10 years
New offerings enhance
customer relationships
Freightways being a partner
in its customers’ emission
reduction
Customer demand for greater
emissions transparency
Improved emissions measuring
and reporting tools
Resource Efficiency
Products and
Services
Additional/ enhanced service
offerings for customers
Lower prices for freight services
for customers
Improved company reputation
Qualitative5 to 10 years
Climate resilient transport
network provides
Freightways a strategic
advantage
Impact of physical climate risks
Customer demand for a reliable
freight delivery network
Investment in the resilience
and adaptability of Freightways’
network
ResilienceImproved reputation amongst both
current and potential customers
Overall business resilience against
climate change
Qualitative20 to 30 years
New markets and efficiencies
The drivers of climate change are known to extend beyond
simply emissions from transport. As the world continues to
invest in sustainability activities that reduce carbon emissions,
we believe that there will be new markets and customers
that our business can serve. For example, the rise of product
stewardship and producer responsibility is increasing the need
for reverse logistics. Not only will this develop new business
opportunities for Freightways, but it will also support improved
fleet utilisation and optimisation through a reduction in ‘empty
kilometres’ vehicles travel.
Customer growth and improved relationships
Our customers are becoming increasingly aware of not just their
own direct carbon emissions but the often much larger amount
of indirect emissions of their suppliers and business partners.
Leveraging our technology to provide customers with accurate
data on the emissions embedded in their transported goods is a
transition action we are already fielding requests for.
As low emissions vehicles enter the fleet over the coming
decade, customers will also able to report on the reduction in
indirect transportation emissions. Additionally, transitioning our
fleet to low emissions, low cost-to-run vehicles could yield cost
savings to our drivers and our business.
Improved competitive advantage
As physical climate risks become more material, the importance
of a resilient transport network will grow. Through investing in
our network over the coming decade, including assessing and
responding to our network’s vulnerabilities to physical climate
change impacts, we can improve our network resilience and
flexibility. This has the potential to give Freightways an advantage
amongst others in our sector who do not attempt to invest
in their network’s resiliency. The result would likely see new
customers leverage our network as they seek our reliability in
the face of increase physical climate impacts.
Lessons from COVID-19
In March 2020, all of New Zealand was sent into
a “Level 4” lockdown in an attempt to control the
spread of the novel coronavirus, SARS-COV-2. The
subsequent months of the COVID-19 pandemic saw
unexpected changes to everyday life and the habits
of businesses and consumers. These changes had a
major impact on Freightways as we sought to handle
the significant increase in use of delivery services
across our portfolio of businesses.
The COVID-19 pandemic has shown us how rare
but significant global events can shift the societal
norms which underpin our business. Our experience
from COVID-19 shows the benefits of having a
resilient business.
→ We understand that
preparing our business
to take advantage of
the climate-related
opportunities that we have
highlighted in this report,
will put us in a good position
as the impacts of climate
change materialise over the
coming decades.
Annual Report | Financial Year ended 30 June 2021
66 67
Freightways Limited and its subsidiaries |
Our key transition activities are the rate of
uptake of low emission vehicles within our
fleet and other steps to reduce emissions
per tonne kilometre. We expect these
activities will be reflected in how quickly we
are able to reduce our emissions.
To understand and report transparently against our emissions
reduction goals, we are committed to managing and reducing
our carbon footprint and have been measuring Scope 1, 2 and
3 GHG emissions since 2014 for our New Zealand operations,
meeting the requirements of Toitū Carbonreduce
TM
certification
and ISO 14064-1:2006.
Scope 1, Scope 2, and 3 emissions
Freightways’ emissions for FY20 were 50,624.57 tCO2e,
shown in Figure 6. In the seventh year of reporting under the
Toitū Carbonreduce, an absolute reduction in Scope 1 and 2
emissions of 14,748.30 tCO2e has been achieved against the
2013-14 base year.
11
The total includes all New Zealand business units and brands,
other than the recently acquired Big Chill business.
Over 95% of our emissions come from the fuel we use in our
fleet cars, our contracted courier vans and trucks, and the
aircrafts we use.
We are currently performing an internal Science Based
Targets Initiative
12
to update our GHG emissions inventory and
targets, including business acquisitions and emissions from
our Australian operations. This work will be concluded by
November 2021.
While the results of that work have not yet been audited, we are
working toward a 2030 target of 30% reduced emissions and
a 2035 target of 50% reduction in CO2e, from a 2019 baseline.
These targets are science-based, aligning with what society
needs to achieve globally to keep global warming to within 2°C.
4. Metrics & Targets
Figure 6:
Freightways' FY20 Emissions
Scope tC02e
Scope 13,67 9.8 8
Scope 2825.95
Scope 3 Mandatory18 ,16 5 .11
Scope 3 Additional27,953.63
Scope 3 One Time0.00
Total Gross Emissions50,624.57
TCFD
11
https://www.toitu.co.nz/what-we-offer/carbon-management
12
https://sciencebasedtargets.org/
69
Freightways Limited and its subsidiaries | Annual Report | Financial Year ended 30 June 2021
68
Our Board
Kim Ellis
BE (Hons), BCA (Hons)
Mark Verbiest
Chairman | LLB, CF Inst D
Fiona Oliver
Fiona Oliver joined the Board in FY22.
LLB, BA, CF Inst D
Peter Kean
PMD Harvard
Mark Cairns
BE (Hons), BBS, MMGT, FIPENZ
Mark Rushworth
BE(Hons), MEM
Our Leadership Team
Mark Troughear
Chief Executive Officer
BMS, University of Waikato
Stephen Deschamps
Company Secretary & Chief Financial Officer
B Poli Sci, M Fin, (Institut d’Etudes Politiques, Paris) MBA,
Master in Finance
Nicola Silke
General Counsel and Company Secretary
LLB (Hons), BA: University of Canterbury
Matthew Cocker
Chief Information Officer
PhD, Georgetown University
Steve Wells
General Manager
Express Package Division
Neil Wilson
General Manager
Freightways
Abby Foote
LLB (Hons), BCA, CF Inst D, INFINZ (Cert)
Annual Report | Financial Year ended 30 June 2021
70 71
Freightways Limited and its subsidiaries |
Directors’ Report
Directors
The names of the Directors of the Company in office at the date of this report are:
The Directors of Freightways Limited (Freightways) resolved to submit the following report with respect to the financial position of the Group
as at 30 June 2021 and its financial performance and cash flows for the year ended on that date.
Mark Verbiest | LLB, CF Inst D.
Mark was appointed a Director in February 2010 and Chairman
in October 2018. He is a professional Director with a strong
working knowledge of technology and technology-related
businesses, as well as having extensive capital markets
experience. A lawyer by training, with widespread corporate
legal experience in private practice, he spent over 7 years on
the senior executive team of Telecom NZ through until mid-2008,
where among other things he had executive accountability for
two business units. Mark is currently Chairman of Meridian
Energy Ltd and Summerset Group Holdings Limited. He is also
a Director of ANZ Bank New Zealand Limited.
Mark Cairns | BE(Hons), BBS, MMGT, FIPENZ
Mark was appointed a Director in April 2021. He was Chief Executive
of Port of Tauranga, New Zealand’s largest and most successful
port, from 2005 until his retirement in June 2021 to pursue a
full-time governance career. Mark was previously Chief Executive
of Toll Owens Limited and Owens Cargo Company Limited. Mark
has extensive experience in logistics, infrastructure, contracting
and significant exposure to capital markets. Mark is also a Director
of Meridian Energy Limited and Sanford Limited. In 2019, Mark
received the prestigious Caldwell Partners Leadership Award from
the Institute of Finance Professionals and the Deloitte/Management
Magazine Executive of the Year Award in 2012.
Kim Ellis | BE (Hons), BCA (Hons)
Kim was appointed a Director in August 2009. He spent 28 years
in chief executive roles in a number of sectors, including 13 years
as Managing Director of Waste Management NZ Limited until
its sale in 2006 to Transpacific Industries Pty Limited, and has
developed businesses in both New Zealand and Australia. Kim is
now a professional Director working with both private and listed
companies. Kim is currently a Director and the Chairman of NZ
Social Infrastructure Fund Limited and Green Cross Health Limited.
He is also a Director of Port of Tauranga Limited, FSF Management
Company Limited and Ballance Agri-Nutrients Limited and an
advisor to Envirowaste Services Limited and Ultimate Care Group.
Abby Foote | LLB (Hons), BCA, CF Inst D, INFINZ (cert)
Abby was appointed a Director in June 2018. She is a professional
Director with over 13 years’ governance experience, with
qualifications in both law and accounting. Abby has experience in
a range of senior management, finance and legal roles, with
a focus on corporate finance and commercial transactions. Abby
is currently the Chair of Z Energy Limited and a Director of
Sanford Limited.
Peter Kean | PMD Harvard
Peter was appointed a Director in July 2016. He brings to
Freightways many years of senior executive experience with the
Lion group of companies in both New Zealand and Australia.
Peter's last executive roles were as Managing Director of Lion
Nathan New Zealand and Managing Director of Lion Dairy and
Drinks, based in Melbourne. Peter retired from Lion in 2014 and has
since developed his career in governance. Peter is also a Director of
Sanford Limited and is involved in a number of private companies
both in New Zealand and in Australia.
Fiona Oliver | LLB, BA, CF Inst D
Fiona was appointed a Director in July 2021. She is a professional
Director, holding governance roles across a range of business
sectors including renewable energy, natural gas, technology,
and financial services. She is a Director (and Audit Committee
Chair) of Gentrack Group Limited, the First Gas Group, BNZ Life
Insurance Limited and BNZ Insurance Services Limited and
Wynyard Group Limited (in liquidation). Fiona’s Executive career
was in the financial services sector in New Zealand and overseas.
In New Zealand, her roles included Chief Operating Officer of
Westpac’s investment arm, BT Funds Management, and General
Manager of AMP NZ’s Wealth Management division. In Sydney
and London, Fiona managed the Risk and Operations function
for AMP’s private capital division. Prior to this, Fiona was a senior
corporate and commercial solicitor in New Zealand and overseas,
specialising in mergers and acquisitions.
Mark Rushworth | BE(Hons), MEM
Mark was appointed a Director in September 2015. He has
extensive experience in the technology sector, with a decade’s
governance experience, predominantly in the high tech and
innovation space. An electrical engineer by training, with
widespread operations and marketing experience, he spent 4 years
on the senior executive team of Vodafone NZ, where among other
things he had executive accountability for the fixed line business
and as Director of Marketing. Mark previously served as chief
executive of Pacific Fibre, ihug and financial services company,
Paymark Limited. Mark is currently Chief Executive Officer of
private equity owned UP Education and a Director of a number of
private companies.
The Board has determined for the purposes of the NZX Listing
Rules that, as at 30 June 2021, Mark Verbiest, Mark Cairns, Kim
Ellis, Abby Foote, Peter Kean and Mark Rushworth are independent
Directors. Fiona Oliver was appointed a Director on 5 July 2021 and
the Board has determined that she is an independent Director as at
5 July 2021.
Deep Expertise (NED)
Mark
Verbiest
Mark
Cairns
Kim
Ellis
Abby
Foote
Peter
Kean
Fiona
Oliver
Mark
Rushworth
Governance
NZ Listed Market
Audit and Risk
Business Operations at Scale
International Transport, Logistics,
Sector Aligned Expertise
Marketing/Brand/Sales
IT Platforms and Digital Innovation
Australian Market
Health & Safety
Entrepreneurial
Directors’ Report
Board skill matrix
The Board focuses on governance, strategy and the oversight of the performance of the different Freightways businesses and brands. The
Directors bring both proven experience in governance and a strong background in business to their decision making. Together, they provide
the wide-ranging skills needed to ensure the Board has the expertise to set and approve strategic direction, make senior management
appointments, monitor performance, manage risk and oversee our many stakeholder relationships. The Board Skill Matrix below sets out
the skills of each Director against the range of expertise Freightways requires to succeed.
Principal activities
The principal activities of the Group during the year ended 30 June 2021 were the operation of express package & business mail services and
information management services.
Annual Report | Financial Year ended 30 June 2021
72 73
Freightways Limited and its subsidiaries |
Group Fees (per annum)
PositionNote
2021
$
2020
$
Board of DirectorsChair(i)165,000165,000
Member – NZ93,00093,000
Member – NZ93,00093,000
Member – AU(ii)98,90098,900
Audit & Risk CommitteeChair(i)104,000104,000
People & Remuneration CommitteeChair(i)100,000100,000
Committee work pool (if required)42,14542,145
Total annual fee pool limit(iii)696,045696,045
Notes:
(i) Inclusive of Board member fee
(ii) Based on A$93,000 (2020: A$93,000)
(iii) Approved by shareholders at Annual Shareholders Meeting in October
Approved remuneration of directors (effective 1 November)
Directors holding office during the year were:
Parent:
Mark Verbiest (Chairman)
Mark Cairns (Appointed 1 April 2021)
Kim Ellis
Abby Foote
Peter Kean
Mark Rushworth
Andrea Staines (Resigned 29 October 2020)
Subsidiaries:
Mark Troughear
Stephan Deschamps
Mark Royle (Australian subsidiaries only – resigned 1 March 2021)
Stephen Micallef (Australian subsidiaries only – since 1 March 2021)
Colin Neal (Big Chill Distribution Limited only)
Mark Shapland (Big Chill Distribution Limited only)
Note: Fiona Oliver was appointed a Director of Freightways Limited on 5 July 2021.
2021
$000
2020
$000
Operating revenue800,533630,940
Operating profit before interest and income tax99,89184,720
Net interest and finance costs
(22,667)(18,420)
Profit before income tax77,22466,300
Income tax(27,591)(18,925)
Profit for the year attributable to the shareholders49,63347,375
Consolidated result for the year
Directors’ Report
2021
$
2020
$
Directors of Freightways (Parent company)
Mark Verbiest165,000155,083
Mark Cairns (Appointed 1 April 2021)23,250-
Kim Ellis100,00092,500
Abby Foote104,00097,467
Peter Kean93,00085,683
Mark Rushworth93,00085,683
Andrea Staines (Resigned 29 October 2020)33,59590,568
Total non-executive Directors611,845606,984
In the last quarter of the prior financial year, Directors took a 20% reduction in fees to mitigate the impact of COVID-19.
Directors of the Company’s subsidiaries do not receive any remuneration or other benefits in their capacity as a director of those
companies, except indemnity and insurance referred to in the Directors’ and Officers’ Liability Insurance section on page 79.
Remuneration received by directors
2021
$
2020
$
CEO – Mark Troughear
Salary
692,000630,000
Benefits37,00037,000
Subtotal729,000667,000
Pay for Performance:
STI241,000176,000
LT I--
Subtotal241,000176,000
Total remuneration970,000843,000
Chief Executive's remuneration
Directors’ Report
Fixed
0
400
600
200
800
1,000
1,200
1,400
1,600
Base Salary & BenefitsAnnual VariableLTI Granted (vesting 2024)
On-planMaximum
250
200
150
100
50
0
01.07.201801.10.201801.01.201901.04.201901.07.201901.10.201901.01.202001.04.202001.07.202001.10.202001.01.202101.04.202101.07.2021
75th PercentileFreightways Limited50th PercentileS&P NZX 50 Index
%
Annual Report | Financial Year ended 30 June 2021
74 75
Freightways Limited and its subsidiaries |
Chief Financial Officer's remuneration
Remuneration of the CFO comprises a fixed remuneration
package representing 75% of total remuneration, an ‘at risk’
portion representing 25% payable on achievement of short-term
financial objectives and 1% of earnings before interest, tax and
amortisation (EBITA) over a Board approved EBITA target. The CFO
also participates in the Freightways Senior Executive Performance
Share Plans described in Note 23 of the Financial Statements by
way of an annual allocation of performance share rights (PSRs)
equivalent to 25% of fixed remuneration, but otherwise on the same
terms and conditions as other Freightways executives. The PSRs
have a 3-year vesting period and are subject to the achievement of
financial hurdles, as described in Note 23.
Chief Executive's remuneration performance pay for FY21
$000
Directors’ Report
Financial
Year
CEO / MDTotal remuneration
($000)
% STI against
maximum
% vested LTI
against maximum
Span of LTI
performance period
2021Mark Troughear97088-N/A
2020Mark Troughear84372-N/A
2019Mark Troughear873100-N/A
2018Mark Troughear
(appointed
1 Jan 2018)342100-FY14-FY19
2018Dean Bracewell
(resigned
31 Dec 2017)85010087FY13-FY18
2017Dean Bracewell 1,37010092FY12-FY17
The remuneration of the CEO in the remuneration tables above includes the STI and LTI incentive payments made during the year ended
30 June 2021 in respect of the two previous six-month performance periods (1 January to 30 June 2020 and 1 July to 31 December
2020). No amount is included above in respect of incentive payments for the period 1 January to 30 June 2021, as these were paid in
August 2021.
DescriptionPerformance measuresAchieved (%)
STI30% of total remuneration. Based on a
combination of financial and non-financial
performance measures.
50% weighting on achievement of Board
approved earnings before interest, tax and
amortisation (EBITA).
88
50% weighting on individual performance
comprising strategy development & delivery, health
& safety and improving contractors’ earnings.
89
LT IConditional awards of shares prior to July
2019 under long-term incentive scheme.
50% weighting on a minimum 3-year annual
compound growth rate in Earnings Per Share
(EPS).
-
50% weighting on Total Shareholder Return
(TSR) performance against NZX50 index median,
pro-rated up to 100% for achieving the 75th
quartile of the index constituents.
-
LT IConditional awards of shares under long-
term incentive scheme. Introduced in July
2019 with a vesting period of 3 years ending
30 June 2022.
Relative TSR (rTSR) – Based on Freightways’
TSR compared to that of the constituents of the
NZX50 Index over the vesting period. 50% of the
rTSR Share Rights eligible for vesting will vest
if Freightways outperforms the NZX50 Index
median, pro-rated up to 100% for achieving the
75th quartile of the Index constituents.
N/A – investing in FY22
Absolute TSR (aTSR) – Up to 50% of Share Rights
will vest based on exceeding a cost of capital
hurdle over the vesting period.
N/A – investing in FY22
Five-year summary: Chief Executive's remuneration
Breakdown of Chief Executive's pay for performance (FY21)
Remuneration of other officers
Fixed remuneration of other officers, not being directors, representing a range from 76% to 78% of their total remuneration, is benchmarked
to market and consists of base salary and matched KiwiSaver contributions up to a maximum of 3%. The officers participate in an at-risk
short-term incentive (STI) scheme, representing a range from 22% to 24% of their total remuneration, that reflects the achievement of
predetermined company profit levels and individual performance objectives aligned to business strategy and goals. In addition, the officers
receive 2% of earnings before interest, tax and amortisation (EBITA) over a Board approved EBITA target. The officers also participate in the
Freightways Senior Executive Performance Share Plan (the ‘Plan’) described in Note 23 of the Financial Statements by way of an annual
allocation of PSRs. The PSRs have a 3-year vesting period and are subject to the achievement of financial hurdles, as described in Note 23.
Both the STI scheme and Senior Executive Performance Share Plan are variable, performance-based incentives and are only awarded if
specific financial and non-financial performance hurdles are met, and at the discretion of the Board.
The Company’s Remuneration Policy can be found at https://www.freightways.co.nz/about/corporate-governance/.
Directors’ Report
Three-year summary: TSR performance
Financial Quarter
TSR %
Annual Report | Financial Year ended 30 June 2021
76 77
Freightways Limited and its subsidiaries |
Group
20212020
$100,000 – $109,9995544
$110,000 – $119,9995053
$120,000 – $129,9994131
$130,000 – $139,9992924
$140,000 – $149,9991617
$150,000 – $159,9992310
$160,000 – $169,999913
$170,000 – $179,9991413
$180,000 – $189,999109
$190,000 – $199,99996
$200,000 – $209,9991112
$210,000 – $219,99972
$220,000 – $229,99966
$230,000 – $239,99944
$240,000 – $249,99953
$250,000 – $259,99914
$260,000 – $269,99922
$270,000 – $279,99961
$290,000 – $299,99911
$300,000 – $309,99924
$310,000 – $319,9993-
$320,000 – $329,999-1
$330,000 – $339,99911
$350,000 – $359,99911
$370,000 – $379,99911
$420,000 – $429,99912
$430,000 – $439,9991-
$440,000 – $449,9991-
$550,000 – $559,999-1
Remuneration of employees
The number of employees, not being directors of Group subsidiaries, within the Group receiving annual remuneration and benefits above
$100,000 are as indicated in the following table:
Directors’ Report
Entries in the register of Directors’ interests
The Register of Directors’ Interests records that the following Directors of Freightways Limited have an equity interest in the Company.
Fully-paid ordinary shares
BeneficiallyNon-beneficially
Director
Mark Verbiest10,000-
Mark Cairns-10,000
Kim Ellis-50,000
Abby Foote-14,363
Peter Kean51,500-
Mark Rushworth-18,000
The following table shows transactions recorded in respect of securities acquired or disposed of by Directors of Freightways Limited during
the year ended 30 June 2021:
Freightways Limited shares
At balance date Directors of Freightways Limited held the following number of equity securities in the Company:
Number$000
(Disposed)
(Sale)
Mark Cairns
Non-beneficial ownership in ordinary shares acquired on
3 April 2021 and 4 April 2021
10,000112
CostAcquired
Directors’ Report
Annual Report | Financial Year ended 30 June 2021
78 79
Freightways Limited and its subsidiaries |
NameName of company / entityNature of interest
Abby FooteSanford LimitedDirector
Television New Zealand LimitedDirector**
Z Energy LimitedDirector & Chair
Kim EllisBallance Agri-Nutrients LimitedDirector
Envirowaste Services LimitedAdvisor
FSF Management Company LimitedDirector
Green Cross Health LimitedDirector & Chair
New Zealand Social Infrastructure Fund LimitedDirector & Chair
Port of Tauranga LimitedDirector
The Ultimate Care Group LimitedAdvisor*
Mark CairnsCoda GP LimitedDirector*/**
Meridian Energy LimitedDirector*
Northport LimitedDirector*/**
Quality Marshalling LimitedDirector & Chair*/**
Mark RushworthUP EducationGroup Chief Executive
Mark VerbiestANZ Bank New Zealand LimitedDirector
Meridian Energy LimitedDirector & Chair
Property Income Fund LimitedAdvisor
Peter KeanNew Zealand Rugby UnionDirector**
Sanford LimitedDirector
Southfuels LimitedDirector
Trojan Holdings LimitedDirector
* Entry added by notice given by the director during the year.
** Entry removed by notice given by the director during the year.
Other interests
Listed below are details of the entries made in the Interests Register of the Company during the year, together with the existing entries as at
30 June 2021.
Directors’ Report
Directors’ and officers’ liability insurance
Deeds of indemnity have been granted by the Company in favour of the Directors of the Company and its subsidiaries, to the fullest extent
permitted by the Companies Act 1993. In accordance with the deeds of indemnity, the Company has insured all its Directors and the Directors
of its subsidiaries against liabilities to other parties (except the Company or a related party of the Company) that may arise from their
positions as Directors. Freightways’ liability insurance also covers Officers of the Group. The insurance does not cover liabilities arising from
criminal actions.
For and on behalf of the Board this 23
rd
day of August 2021.
Mark Verbiest
Chairman
Abigail Foote
Director and Chair of the Audit & Risk Committee
81
Freightways Limited and its subsidiaries | Annual Report | Financial Year ended 30 June 2021
80
82 Independent Auditor's Report
Financial Statements
88 Financial Summary
89 Income Statement
90 Statement of Comprehensive Income
91 Statement of Changes in Equity
92 Balance Sheet
93 Statement of Cash Flows
94 Notes to the Financial Statements
145 Shareholder Information
147 Corporate Governance Statement
152 Directory
153 Company Particulars
Financial
Statements
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Independent auditor’s report
To the shareholders of Freightways Limited
Our opinion
In our opinion, the accompanying financial statements of Freightways Limited (the Company),
including its subsidiaries (the Group), present fairly, in all material respects, the financial position of
the Group as at 30 June 2021, its financial performance and its cash flows for the year then ended in
accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS)
and International Financial Reporting Standards (IFRS).
What we have audited
The Group's financial statements comprise:
● the balance sheet as at 30 June 2021;
● the income statement for the year then ended;
● the statement of comprehensive income for the year then ended;
● the statement of changes in equity for the year then ended;
● the statement of cash flows for the year then ended; and
● the notes to the financial statements, which include significant accounting policies and other
explanatory information.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the financial statements section of our
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Independence
We are independent of the Group in accordance with Professional and Ethical Standard 1
International Code of Ethics for Assurance Practitioners (including International Independence
Standards) (New Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards
Board and the International Code of Ethics for Professional Accountants (including International
Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA
Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of agreed upon procedures over
resolutions at the Annual Shareholders Meeting and Executive's remuneration benchmarking. The
provision of these other services has not impaired our independence as auditor of the Group.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial statements of the current year. These matters were addressed in the context
of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Independent auditor’s report
To the shareholders of Freightways Limited
We have audited the financial statements which comprise:
●the balance sheet as at 30 June 2020;
●the income statement for the year then ended;
●the statement of comprehensive income for the year then ended;
●the statement of changes in equity for the year then ended;
●the statement of cash flows for the year then ended; and
●the notes to the financial statements, which include a summary of significant accounting
policies.
Our opinion
In our opinion, the accompanying financial statements of Freightways Limited (the Company),
including its subsidiaries (the Group), present fairly, in all material respects, the financial position of
the Group as at 30 June 2020, its financial performance and its cash flows for the year then ended in
accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS)
and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the financial statements section of
our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standard) (New
Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the
International Code of Ethics for Professional Accountants (including International Independence
Standards) issues by the International Ethics Standards Board for Accountants (IESBA Code), and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of agreed upon procedures over the poll
for the shareholder resolutions at the Annual General Meeting and Executives’ remuneration
benchmarking. The provision of these other services has not impaired our independence as auditor of
the Group.
PwC
Description of the key audit matter How our audit addressed the key audit matter
Revenue recognition
The Group’s revenue of $800.5 million for
the current year primarily consisted of
express package & business mail –
courier, refrigerated transport and postal
services, and information management –
storage, destruction & digitisation
revenue, as disclosed in note 4 of the
financial statements.
The Group has deferred revenue of $14.6
million for service obligations not yet
performed as at 30 June 2021, reported
as a contract liability in note 20.
Revenue recognition under NZ IFRS 15 is
a key audit matter due to the complexity of
the standard and the number of revenue
streams and information systems used to
record revenue. Management judgement
is also required to estimate the contract
liability for deferred revenue based upon
historical usage patterns as disclosed in
note 1(a)(ii).
We obtained an understanding and evaluated the
Group’s processes and controls relating to revenue
recognition for each material revenue stream and
recognition of a contract liability for deferred revenue.
Our audit procedures in relation to revenue recognition
for each material revenue stream under NZ IFRS 15
included:
● challenging judgements made by management in
applying the standard, including assessing a
sample of individual contracts against the
requirements of NZ IFRS 15, particularly the
determination of performance obligations;
● testing a sample of revenue transactions to
assess the completion of performance obligations;
● testing a sample of revenue transactions to
assess the accuracy of pricing to supporting
documentation;
● for a sample of transactions within accounts
receivable at balance date we obtained either
confirmation of the amount owing from the
customer, or evidence of the amount owing from
alternative procedures including testing of
subsequent receipts or shipping documentation;
and
● assessing the disclosures made against the
requirements of the accounting standards.
Our audit procedures in relation to the contract liability
for deferred revenue included:
● testing the system reports from which the data
used in the contract liability calculation is derived
● assessing and evaluating the models used by
management utilising substantive analytical
procedures over the release to revenue for
estimated unredeemed tickets based upon
historical usage patterns.
PwC
Impairment assessment of goodwill
and indefinite lived brands
As disclosed in note 16, the Group has
intangible assets which include goodwill of
$295.5 million and indefinite lived brand
names of $126.9 million as at 30 June
2021.
Goodwill and brand names are allocated
to cash-generating units (CGUs) for the
purpose of impairment testing.
Management performed an annual
impairment assessment using value in
use (VIU) models to determine whether
the carrying value of assets held by each
CGU is recoverable.
Our audit focussed on this area as it
involves estimation and judgement about
future business performance which
includes certain key assumptions such as
revenue growth, EBITDA margin, terminal
year growth rate and the discount rate.
For each CGU, the recoverable amount
based on the value in use was higher than
the carrying value of the CGU and as a
result, no impairment charge was
recognised. However, as disclosed in note
16 the value in use model for The
Information Management Group
(Australia) and New Zealand Document
Exchange would result in impairment if a
reasonably possible change in key
assumptions was to occur.
In addressing the estimation and judgements used in
the value in use models, our audit procedures
included:
● gaining an understanding of the business process
applied by management in preparing the
impairment assessments;
● considering the appropriate determination of each
CGU and recalculating the carrying amounts of
the CGU assets;
● evaluating whether corporate costs had been
allocated appropriately and included in the cash
flows for each CGU;
● testing the mathematical accuracy of the models
used to determine the VIU of each CGU;
● reviewing historical years actual revenue and
EBITDA against the original budgeted
performance to determine the reliability of the
budgeting process and considering the impact on
forecast performance;
● obtaining an understanding of the current and
forecast outlook for the business and
management’s basis for determining the key
assumptions in preparing the forecast cash flows;
● agreeing forecast future performance included in
the impairment assessments to the budgets
approved by the Board of Directors;
● with the assistance of our auditor’s valuation
expert, assessing the appropriateness of the
terminal growth and discount rates as well as
considering industry trends and external market
forecasts for the industry; and
● performing a sensitivity analysis over key
assumptions to determine whether reasonably
possible changes would result in impairment of
goodwill.
These audit procedures were varied to reflect the level
headroom and sensitivity to impairment for each CGU.
We also reviewed the financial statements for
appropriate identification and disclosure of key
assumptions.
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Independent auditor’s report
To the shareholders of Freightways Limited
We have audited the financial statements which comprise:
●the balance sheet as at 30 June 2020;
●the income statement for the year then ended;
●the statement of comprehensive income for the year then ended;
●the statement of changes in equity for the year then ended;
●the statement of cash flows for the year then ended; and
●the notes to the financial statements, which include a summary of significant accounting
policies.
Our opinion
In our opinion, the accompanying financial statements of Freightways Limited (the Company),
including its subsidiaries (the Group), present fairly, in all material respects, the financial position of
the Group as at 30 June 2020, its financial performance and its cash flows for the year then ended in
accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS)
and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the financial statements section of
our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standard) (New
Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the
International Code of Ethics for Professional Accountants (including International Independence
Standards) issues by the International Ethics Standards Board for Accountants (IESBA Code), and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of agreed upon procedures over the poll
for the shareholder resolutions at the Annual General Meeting and Executives’ remuneration
benchmarking. The provision of these other services has not impaired our independence as auditor of
the Group.
Annual Report | Financial Year ended 30 June 2021
82 83
Freightways Limited and its subsidiaries |
Independent Auditor's Report
To the shareholders of Freightways Limited
Independent Auditor's Report
To the shareholders of Freightways Limited
PwC
Impairment assessment of goodwill
and indefinite lived brands
As disclosed in note 16, the Group has
intangible assets which include goodwill of
$295.5 million and indefinite lived brand
names of $126.9 million as at 30 June
2021.
Goodwill and brand names are allocated
to cash-generating units (CGUs) for the
purpose of impairment testing.
Management performed an annual
impairment assessment using value in
use (VIU) models to determine whether
the carrying value of assets held by each
CGU is recoverable.
Our audit focussed on this area as it
involves estimation and judgement about
future business performance which
includes certain key assumptions such as
revenue growth, EBITDA margin, terminal
year growth rate and the discount rate.
For each CGU, the recoverable amount
based on the value in use was higher than
the carrying value of the CGU and as a
result, no impairment charge was
recognised. However, as disclosed in note
16 the value in use model for The
Information Management Group
(Australia) and New Zealand Document
Exchange would result in impairment if a
reasonably possible change in key
assumptions was to occur.
In addressing the estimation and judgements used in
the value in use models, our audit procedures
included:
● gaining an understanding of the business process
applied by management in preparing the
impairment assessments;
● considering the appropriate determination of each
CGU and recalculating the carrying amounts of
the CGU assets;
● evaluating whether corporate costs had been
allocated appropriately and included in the cash
flows for each CGU;
● testing the mathematical accuracy of the models
used to determine the VIU of each CGU;
● reviewing historical years actual revenue and
EBITDA against the original budgeted
performance to determine the reliability of the
budgeting process and considering the impact on
forecast performance;
● obtaining an understanding of the current and
forecast outlook for the business and
management’s basis for determining the key
assumptions in preparing the forecast cash flows;
● agreeing forecast future performance included in
the impairment assessments to the budgets
approved by the Board of Directors;
● with the assistance of our auditor’s valuation
expert, assessing the appropriateness of the
terminal growth and discount rates as well as
considering industry trends and external market
forecasts for the industry; and
● performing a sensitivity analysis over key
assumptions to determine whether reasonably
possible changes would result in impairment of
goodwill.
These audit procedures were varied to reflect the level
headroom and sensitivity to impairment for each CGU.
We also reviewed the financial statements for
appropriate identification and disclosure of key
assumptions.
PwC
Impairment assessment of goodwill
and indefinite lived brands
As disclosed in note 16, the Group has
intangible assets which include goodwill of
$295.5 million and indefinite lived brand
names of $126.9 million as at 30 June
2021.
Goodwill and brand names are allocated
to cash-generating units (CGUs) for the
purpose of impairment testing.
Management performed an annual
impairment assessment using value in
use (VIU) models to determine whether
the carrying value of assets held by each
CGU is recoverable.
Our audit focussed on this area as it
involves estimation and judgement about
future business performance which
includes certain key assumptions such as
revenue growth, EBITDA margin, terminal
year growth rate and the discount rate.
For each CGU, the recoverable amount
based on the value in use was higher than
the carrying value of the CGU and as a
result, no impairment charge was
recognised. However, as disclosed in note
16 the value in use model for The
Information Management Group
(Australia) and New Zealand Document
Exchange would result in impairment if a
reasonably possible change in key
assumptions was to occur.
In addressing the estimation and judgements used in
the value in use models, our audit procedures
included:
● gaining an understanding of the business process
applied by management in preparing the
impairment assessments;
● considering the appropriate determination of each
CGU and recalculating the carrying amounts of
the CGU assets;
● evaluating whether corporate costs had been
allocated appropriately and included in the cash
flows for each CGU;
● testing the mathematical accuracy of the models
used to determine the VIU of each CGU;
● reviewing historical years actual revenue and
EBITDA against the original budgeted
performance to determine the reliability of the
budgeting process and considering the impact on
forecast performance;
● obtaining an understanding of the current and
forecast outlook for the business and
management’s basis for determining the key
assumptions in preparing the forecast cash flows;
● agreeing forecast future performance included in
the impairment assessments to the budgets
approved by the Board of Directors;
● with the assistance of our auditor’s valuation
expert, assessing the appropriateness of the
terminal growth and discount rates as well as
considering industry trends and external market
forecasts for the industry; and
● performing a sensitivity analysis over key
assumptions to determine whether reasonably
possible changes would result in impairment of
goodwill.
These audit procedures were varied to reflect the level
headroom and sensitivity to impairment for each CGU.
We also reviewed the financial statements for
appropriate identification and disclosure of key
assumptions.
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Independent auditor’s report
To the shareholders of Freightways Limited
We have audited the financial statements which comprise:
●the balance sheet as at 30 June 2020;
●the income statement for the year then ended;
●the statement of comprehensive income for the year then ended;
●the statement of changes in equity for the year then ended;
●the statement of cash flows for the year then ended; and
●the notes to the financial statements, which include a summary of significant accounting
policies.
Our opinion
In our opinion, the accompanying financial statements of Freightways Limited (the Company),
including its subsidiaries (the Group), present fairly, in all material respects, the financial position of
the Group as at 30 June 2020, its financial performance and its cash flows for the year then ended in
accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS)
and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the financial statements section of
our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standard) (New
Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the
International Code of Ethics for Professional Accountants (including International Independence
Standards) issues by the International Ethics Standards Board for Accountants (IESBA Code), and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of agreed upon procedures over the poll
for the shareholder resolutions at the Annual General Meeting and Executives’ remuneration
benchmarking. The provision of these other services has not impaired our independence as auditor of
the Group.
PwC
Our audit approach
Overview
Overall group materiality: $5.0 million, which represents approximately 5% of
profit before tax from continuing operations excluding the one off and non-
operating impact of the increase in the fair value of contingent consideration
recognised in relation to the acquisition of Big Chill Distribution Limited.
We chose profit before tax from continuing operations as the benchmark
because, in our view, it is the benchmark against which the performance of the
Group is most commonly measured by users, and is a generally accepted
benchmark.
We chose to adjust profit before tax as described above because, in our view,
it provides a more stable measure of the Group’s performance.
Following our assessment of the risk of material misstatement:
● Full scope audits were performed for four components of the Group
based on their financial significance;
● Specified audit and analytical review procedures were performed on
the remaining 18 entities.
As reported above, we have two key audit matters, being:
● Revenue recognition
● Impairment assessment of goodwill and indefinite lived brands
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the financial statements. In particular, we considered where management made
subjective judgements; for example, in respect of significant accounting estimates that involved
making assumptions and considering future events that are inherently uncertain. As in all of our audits,
we also addressed the risk of management override of internal controls, including among other
matters, consideration of whether there was evidence of bias that represented a risk of material
misstatement due to fraud.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
Misstatements may arise due to fraud or error. They are considered material if, individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the financial statements as a whole as set out above. These,
together with qualitative considerations, helped us to determine the scope of our audit, the nature,
timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually
and in aggregate, on the financial statements as a whole.
How we tailored our group audit scope
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the financial statements as a whole, taking into account the structure of the Group, the
accounting processes and controls, and the industry in which the Group operates.
PwC
Impairment assessment of goodwill
and indefinite lived brands
As disclosed in note 16, the Group has
intangible assets which include goodwill of
$295.5 million and indefinite lived brand
names of $126.9 million as at 30 June
2021.
Goodwill and brand names are allocated
to cash-generating units (CGUs) for the
purpose of impairment testing.
Management performed an annual
impairment assessment using value in
use (VIU) models to determine whether
the carrying value of assets held by each
CGU is recoverable.
Our audit focussed on this area as it
involves estimation and judgement about
future business performance which
includes certain key assumptions such as
revenue growth, EBITDA margin, terminal
year growth rate and the discount rate.
For each CGU, the recoverable amount
based on the value in use was higher than
the carrying value of the CGU and as a
result, no impairment charge was
recognised. However, as disclosed in note
16 the value in use model for The
Information Management Group
(Australia) and New Zealand Document
Exchange would result in impairment if a
reasonably possible change in key
assumptions was to occur.
In addressing the estimation and judgements used in
the value in use models, our audit procedures
included:
● gaining an understanding of the business process
applied by management in preparing the
impairment assessments;
● considering the appropriate determination of each
CGU and recalculating the carrying amounts of
the CGU assets;
● evaluating whether corporate costs had been
allocated appropriately and included in the cash
flows for each CGU;
● testing the mathematical accuracy of the models
used to determine the VIU of each CGU;
● reviewing historical years actual revenue and
EBITDA against the original budgeted
performance to determine the reliability of the
budgeting process and considering the impact on
forecast performance;
● obtaining an understanding of the current and
forecast outlook for the business and
management’s basis for determining the key
assumptions in preparing the forecast cash flows;
● agreeing forecast future performance included in
the impairment assessments to the budgets
approved by the Board of Directors;
● with the assistance of our auditor’s valuation
expert, assessing the appropriateness of the
terminal growth and discount rates as well as
considering industry trends and external market
forecasts for the industry; and
● performing a sensitivity analysis over key
assumptions to determine whether reasonably
possible changes would result in impairment of
goodwill.
These audit procedures were varied to reflect the level
headroom and sensitivity to impairment for each CGU.
We also reviewed the financial statements for
appropriate identification and disclosure of key
assumptions.
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Independent auditor’s report
To the shareholders of Freightways Limited
We have audited the financial statements which comprise:
●the balance sheet as at 30 June 2020;
●the income statement for the year then ended;
●the statement of comprehensive income for the year then ended;
●the statement of changes in equity for the year then ended;
●the statement of cash flows for the year then ended; and
●the notes to the financial statements, which include a summary of significant accounting
policies.
Our opinion
In our opinion, the accompanying financial statements of Freightways Limited (the Company),
including its subsidiaries (the Group), present fairly, in all material respects, the financial position of
the Group as at 30 June 2020, its financial performance and its cash flows for the year then ended in
accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS)
and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the financial statements section of
our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standard) (New
Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the
International Code of Ethics for Professional Accountants (including International Independence
Standards) issues by the International Ethics Standards Board for Accountants (IESBA Code), and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of agreed upon procedures over the poll
for the shareholder resolutions at the Annual General Meeting and Executives’ remuneration
benchmarking. The provision of these other services has not impaired our independence as auditor of
the Group.
Annual Report | Financial Year ended 30 June 2021
84 85
Freightways Limited and its subsidiaries |
Independent Auditor's Report
To the shareholders of Freightways Limited
Independent Auditor's Report
To the shareholders of Freightways Limited
PwC
Other information
The Directors are responsible for the other information. The other information comprises the
information included in the Annual report, but does not include the financial statements and our
auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we do not express
any form of audit opinion or assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated. If, based on the work we have performed on the other information that we obtained prior to
the date of this auditor’s report, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the
Directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements, as a
whole, are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (NZ) and ISAs will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the
External Reporting Board’s website at:
https://www.xrb.govt.nz/assurance-standards/auditors-responsibilities/audit-report-1/
This description forms part of our auditor’s report.
PwC
Impairment assessment of goodwill
and indefinite lived brands
As disclosed in note 16, the Group has
intangible assets which include goodwill of
$295.5 million and indefinite lived brand
names of $126.9 million as at 30 June
2021.
Goodwill and brand names are allocated
to cash-generating units (CGUs) for the
purpose of impairment testing.
Management performed an annual
impairment assessment using value in
use (VIU) models to determine whether
the carrying value of assets held by each
CGU is recoverable.
Our audit focussed on this area as it
involves estimation and judgement about
future business performance which
includes certain key assumptions such as
revenue growth, EBITDA margin, terminal
year growth rate and the discount rate.
For each CGU, the recoverable amount
based on the value in use was higher than
the carrying value of the CGU and as a
result, no impairment charge was
recognised. However, as disclosed in note
16 the value in use model for The
Information Management Group
(Australia) and New Zealand Document
Exchange would result in impairment if a
reasonably possible change in key
assumptions was to occur.
In addressing the estimation and judgements used in
the value in use models, our audit procedures
included:
● gaining an understanding of the business process
applied by management in preparing the
impairment assessments;
● considering the appropriate determination of each
CGU and recalculating the carrying amounts of
the CGU assets;
● evaluating whether corporate costs had been
allocated appropriately and included in the cash
flows for each CGU;
● testing the mathematical accuracy of the models
used to determine the VIU of each CGU;
● reviewing historical years actual revenue and
EBITDA against the original budgeted
performance to determine the reliability of the
budgeting process and considering the impact on
forecast performance;
● obtaining an understanding of the current and
forecast outlook for the business and
management’s basis for determining the key
assumptions in preparing the forecast cash flows;
● agreeing forecast future performance included in
the impairment assessments to the budgets
approved by the Board of Directors;
● with the assistance of our auditor’s valuation
expert, assessing the appropriateness of the
terminal growth and discount rates as well as
considering industry trends and external market
forecasts for the industry; and
● performing a sensitivity analysis over key
assumptions to determine whether reasonably
possible changes would result in impairment of
goodwill.
These audit procedures were varied to reflect the level
headroom and sensitivity to impairment for each CGU.
We also reviewed the financial statements for
appropriate identification and disclosure of key
assumptions.
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Independent auditor’s report
To the shareholders of Freightways Limited
We have audited the financial statements which comprise:
●the balance sheet as at 30 June 2020;
●the income statement for the year then ended;
●the statement of comprehensive income for the year then ended;
●the statement of changes in equity for the year then ended;
●the statement of cash flows for the year then ended; and
●the notes to the financial statements, which include a summary of significant accounting
policies.
Our opinion
In our opinion, the accompanying financial statements of Freightways Limited (the Company),
including its subsidiaries (the Group), present fairly, in all material respects, the financial position of
the Group as at 30 June 2020, its financial performance and its cash flows for the year then ended in
accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS)
and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the financial statements section of
our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standard) (New
Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the
International Code of Ethics for Professional Accountants (including International Independence
Standards) issues by the International Ethics Standards Board for Accountants (IESBA Code), and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of agreed upon procedures over the poll
for the shareholder resolutions at the Annual General Meeting and Executives’ remuneration
benchmarking. The provision of these other services has not impaired our independence as auditor of
the Group.
PwC
Who we report to
This report is made solely to the Company’s shareholders, as a body. Our audit work has been
undertaken so that we might state those matters which we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our
audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Keren Blakey.
For and on behalf of:
Chartered Accountants
23 August 2021
Auckland
PwC
Impairment assessment of goodwill
and indefinite lived brands
As disclosed in note 16, the Group has
intangible assets which include goodwill of
$295.5 million and indefinite lived brand
names of $126.9 million as at 30 June
2021.
Goodwill and brand names are allocated
to cash-generating units (CGUs) for the
purpose of impairment testing.
Management performed an annual
impairment assessment using value in
use (VIU) models to determine whether
the carrying value of assets held by each
CGU is recoverable.
Our audit focussed on this area as it
involves estimation and judgement about
future business performance which
includes certain key assumptions such as
revenue growth, EBITDA margin, terminal
year growth rate and the discount rate.
For each CGU, the recoverable amount
based on the value in use was higher than
the carrying value of the CGU and as a
result, no impairment charge was
recognised. However, as disclosed in note
16 the value in use model for The
Information Management Group
(Australia) and New Zealand Document
Exchange would result in impairment if a
reasonably possible change in key
assumptions was to occur.
In addressing the estimation and judgements used in
the value in use models, our audit procedures
included:
● gaining an understanding of the business process
applied by management in preparing the
impairment assessments;
● considering the appropriate determination of each
CGU and recalculating the carrying amounts of
the CGU assets;
● evaluating whether corporate costs had been
allocated appropriately and included in the cash
flows for each CGU;
● testing the mathematical accuracy of the models
used to determine the VIU of each CGU;
● reviewing historical years actual revenue and
EBITDA against the original budgeted
performance to determine the reliability of the
budgeting process and considering the impact on
forecast performance;
● obtaining an understanding of the current and
forecast outlook for the business and
management’s basis for determining the key
assumptions in preparing the forecast cash flows;
● agreeing forecast future performance included in
the impairment assessments to the budgets
approved by the Board of Directors;
● with the assistance of our auditor’s valuation
expert, assessing the appropriateness of the
terminal growth and discount rates as well as
considering industry trends and external market
forecasts for the industry; and
● performing a sensitivity analysis over key
assumptions to determine whether reasonably
possible changes would result in impairment of
goodwill.
These audit procedures were varied to reflect the level
headroom and sensitivity to impairment for each CGU.
We also reviewed the financial statements for
appropriate identification and disclosure of key
assumptions.
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Independent auditor’s report
To the shareholders of Freightways Limited
We have audited the financial statements which comprise:
●the balance sheet as at 30 June 2020;
●the income statement for the year then ended;
●the statement of comprehensive income for the year then ended;
●the statement of changes in equity for the year then ended;
●the statement of cash flows for the year then ended; and
●the notes to the financial statements, which include a summary of significant accounting
policies.
Our opinion
In our opinion, the accompanying financial statements of Freightways Limited (the Company),
including its subsidiaries (the Group), present fairly, in all material respects, the financial position of
the Group as at 30 June 2020, its financial performance and its cash flows for the year then ended in
accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS)
and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the financial statements section of
our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standard) (New
Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the
International Code of Ethics for Professional Accountants (including International Independence
Standards) issues by the International Ethics Standards Board for Accountants (IESBA Code), and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of agreed upon procedures over the poll
for the shareholder resolutions at the Annual General Meeting and Executives’ remuneration
benchmarking. The provision of these other services has not impaired our independence as auditor of
the Group.
Annual Report | Financial Year ended 30 June 2021
86 87
Freightways Limited and its subsidiaries |
Independent Auditor's Report
To the shareholders of Freightways Limited
Independent Auditor's Report
To the shareholders of Freightways Limited
Annual Report | Financial Year ended 30 June 2021
88 89
Freightways Limited and its subsidiaries |
Group
Note
2021
$000
2020
$000
Operating revenue3 & 4
800,533630,940
Transport and logistics expenses
(309,318)(253,443)
Employee benefits expenses
(226,669)(168,017)
Occupancy expenses
(7,063)(5,143)
General and administration expenses
(69,859)(59,666)
Change in fair value of contingent consideration –
Big Chill Distribution Limited31(23,046)-
Depreciation and software amortisation5
(57,035)(46,876)
Amortisation of intangibles5
(7,652)(3,477)
Other income and expenses5
-(9,598)
Operating profit before interest and income tax99,89184,720
Net interest and finance costs5
(22,667)(18,420)
Profit before income tax
77,22466,300
Income tax:
Tax applicable to profit before income tax
(27,591)(20,355)
Tax benefits as result of tax law change
-1,430
Total income tax6
(27,591)(18,925)
Profit for the year
49,63347,375
Profit for the year is attributable to:
Owners of the parent
49,55547,332
Non-controlling interests
7843
49,63347,375
Earnings per share26
Basic earnings per share (cents)
30.030.0
Diluted earnings per share (cents)
29.929.9
NB: All revenue and earnings are from continuing operations.
The above Income Statement should be read in conjunction with the accompanying notes.
Income statement
For the year ended 30 June 2021
Financial Summary
For the year ended 30 June 2021
Note
2021
$000
2020
$000
Increase
%
Operating revenue
800,533630,94026.9
EBITA(i)
107,54388,19721.9
N PAT(ii)
49,63347,3754.8
EBITA (excluding other income & expenses)
130,58997,79533.5
NPAT (excluding other income & expenses, net of tax)
72,67956,03629.7
Other income and expenses:
Impairment of intangible assets – software
-(608)
Write-off of obsolete software(iii)
-(2,739)
Impairment of goodwill
-(5,194)
Impairment of brand names
-(1,581)
Acquisition advisory fee
-(981)
Change in fair value of contingent consideration – Big Chill
Distribution Limited(23,046)-
Reversal of accrued earn-out payables
-1,505
Total
(23,046)(9,598)
Tax benefit applicable to other income and expenses
-937
Other income and expenses, net of tax
(23,046)(8,661)
Notes:
(i) Operating profit before interest, income tax and amortisation of intangibles
(ii) Profit for the year attributable to the shareholders
(iii) Software totalling $1.6 million has been written off during the current financial year. This is considered immaterial
and has included within general and administration expenses in the Income Statement rather than be separately
disclosed in other expenses.
The Directors believe that the other income and expenses detailed above should not be included when assessing the
underlying trading performance of the Group.
Annual Report | Financial Year ended 30 June 2021
90 91
Freightways Limited and its subsidiaries |
Mark Verbiest
Chairman
Abigail Foote
Director
Group
Note
2021
$000
2020
$000
Profit for the year (NPAT)
49,63347,375
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations22
(2,310)1,475
Cash flow hedges taken directly to equity, net of tax22
8801,826
Total other comprehensive income after income tax
(1,430)3,301
Total comprehensive income for the year 48,20350,676
Total comprehensive income for the year is attributable to:
Owners of the parent
48,12550,633
Non-controlling interests
7843
48,20350,676
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
The Board of Directors of Freightways Limited authorised these financial statements for issue on the date below.
For and on behalf of the Board this 23
rd
day of August 2021.
Statement of changes in equity
For the year ended 30 June 2021
Statement of comprehensive income
For the year ended 30 June 2021
Group
Note
Contributed
equity
$000
Retained
earnings
$000
Cash flow
hedge
reserve
$000
Foreign
currency
translation
reserve
$000
Non-
controlling
interests
$000
Total
equity
$000
Balance at 1 July 2019126,440142,817(3,901)(6,110)124259,370
Profit for the year-47,332--4347,375
Exchange differences
on translation of foreign
operations---1,475-1,475
Cash flow hedges taken
directly to equity, net of tax--1,826--1,826
Total Comprehensive
Income-47,3321,8261,4754350,676
Dividend payments8-(47,403)--(53)(47,456)
Shares issued2254,190----54,190
Balance at 30 June 2020180,630142,746(2,075)(4,635)114316,780
Profit for the year-49,555--7849,633
Exchange differences
on translation of foreign
operations---(2,310)-(2,310)
Cash flow hedges taken
directly to equity, net of tax--880--880
Total Comprehensive
Income-49,555880(2,310)7848,203
Dividend payments8-(25,658)--(44)(25,702)
Shares issued221,941----1,941
Balance at 30 June 2021182,571166,643(1,195)(6,945)148341,222
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Annual Report | Financial Year ended 30 June 2021
92 93
Freightways Limited and its subsidiaries |
Group
Note2021
$000
2020
$000
Current assets
Cash and cash equivalents919,94016,686
Trade and other receivables10103,947100,381
Income tax receivable-384
Inventories117,4386,019
Total current assets131,325123,470
Non-current assets
Trade receivables and other non-current assets106,8257,348
Property, plant and equipment14128,338134,649
Right-of-use assets15275,849278,142
Intangible assets16494,503498,966
Investment in associates7,5107,842
Total non-current assets913,025926,947
Total assets1,044,3501,050,417
Current liabilities
Trade and other payables18
102,944 87,656
Borrowings (secured)21
-5,210
Lease liabilities1531,07830,641
Income tax payable11,98218,824
Provisions191,5621,225
Derivative financial instruments121,082750
Contract liability2014,59315,142
Total current liabilities163,241159,448
Non-current liabilities
Trade and other payables1851,35227,386
Borrowings (secured)21163,696216,484
Deferred tax liability1736,72641,425
Provisions196,9796,331
Lease liabilities15280,557280,431
Derivative financial instruments125772,132
Total non-current liabilities539,887574,189
Total liabilities703,128733,637
Net assets341,222316,780
Equity
Contributed equity22
182,571180,630
Retained earnings
166,643142,746
Cash flow hedge reserve12
(1,195)(2,075)
Foreign currency translation reserve
(6,945)(4,635)
22
341,074316,666
Non-controlling interests
148114
Total equity
341,222316,780
The above Balance Sheet should be read in conjunction with the accompanying notes.
Balance sheet
As at 30 June 2021
Group
Note
2021
$000
Inflows
(Outflows)
2020
$000
Inflows
(Outflows)
Cash flows from operating activities
Receipts from customers792,279634,749
Payments to suppliers and employees(594,705)(474,653)
Cash generated from operations197,574160,096
Interest received2248
Interest and other costs of finance paid
(22,748)(19,380)
Income taxes paid(39,835)(13,599)
Net cash inflows from operating activities24135,013127,165
Cash flows from investing activities
Payments for property, plant and equipment(12,360)(18,318)
Payments for software (5,645)(5,313)
Proceeds from disposal of property, plant and equipment399849
Payments for businesses acquired (net of cash acquired) 31-(94,973)
Payments for investment in associates-(7,468)
Receipts from joint venture and associate
3,3541,202
Cash flows from other investing activities(213)(226)
Net cash outflows from investing activities(14,465)(124,247)
Cash flows from financing activities
Dividends paid
(25,702)(47,456)
Increase (decrease) in bank borrowings
(58,985)45,802
Proceeds from issue of ordinary shares79924,126
Principal elements of lease payments(33,319)(24,954)
Net cash outflows from financing activities(117,207)(2,482)
Net increase in cash and cash equivalents3,341436
Cash and cash equivalents at beginning of year
16,68615,986
Exchange rate adjustments (87)264
Cash and cash equivalents at end of year919,94016,686
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
Statement of cash flows
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
94 95
Freightways Limited and its subsidiaries |
Notes to the financial statements
For the year ended 30 June 2021
Note 1. Summary of significant accounting policies
(a) Reporting entity and statutory base
Freightways Limited is a company registered under the Companies
Act 1993 and is an FMC reporting entity under Part 7 of the
Financial Markets Conduct Act 2013. The financial statements of
the Group have been prepared in accordance with the requirements
of Part 7 of the Financial Markets Conduct Act 2013 and the NZX
Main Board Listing Rules. In accordance with the Financial Markets
Conduct Act 2013, group financial statements are prepared and
presented for Freightways Limited and its subsidiaries. Accordingly,
separate financial statements for Freightways Limited are not
required to be prepared and presented.
The financial statements are stated in New Zealand dollars rounded
to the nearest thousand, unless otherwise indicated.
Basis of preparation
The financial statements of the Group have been prepared in
accordance with Generally Accepted Accounting Practice in New
Zealand (NZ GAAP).
The Group is a for-profit entity for the purposes of complying with
NZ GAAP. The financial statements comply with New Zealand
equivalents to International Financial Reporting Standards (NZ
IFRS), other New Zealand accounting standards and authoritative
notices that are applicable to entities that apply NZ IFRS. The
financial statements also comply with International Financial
Reporting Standards (IFRS).
Certain comparatives have been restated to align with the current
year presentation.
The financial statements have been prepared on a historical cost
basis, except for derivative financial instruments, acquisition
earn-out payables, right-of-use assets and lease liabilities, which
have been measured at fair value.
Critical accounting estimates and judgments
The preparation of financial statements in conformity with NZ IFRS
requires the use of certain critical accounting estimates, where
necessary, and may require management to exercise judgement in
the process of applying the Group’s accounting policies. There are
no judgements made that are considered to have a significant risk
of causing a material adjustment to the carrying value of assets
or liabilities. Specific areas of critical accounting estimates and
assumptions used are as follows:
(i) Carrying value of indefinite life intangible assets
Impairment assessments are performed by management,
annually or where there is an indicator of impairment, to assess
the carrying value of indefinite life intangible assets, including
goodwill and brand names. The recoverable amounts of
cash-generating units have been determined based on the
greater of value-in-use and fair value less cost of disposal
calculations. These calculations require the use of estimates.
Refer to Note 16.
(ii) Accounting for contract liability
A contract liability is recorded in the balance sheet reflecting
the future service obligation for courier and postal products
that have been sold in advance of their use. The balance
is supported by reference to historical customer prepaid
product usage patterns. Accordingly, the balance is sensitive to
movements in the future level of customer purchases and use
of prepaid products, which involves estimates. Management
regularly reviews the historical usage patterns to ensure an
appropriate contract liability is recognised.
(iii) Fair value of derivatives
The fair value of financial instruments that are not traded in
an active market is determined by using valuation techniques.
The Group uses its judgement to select a variety of valuation
methods and makes assumptions that are mainly based on
market conditions existing at the end of each reporting period.
(iv) Customer relationships
The estimation of the useful lives of customer relationships
has been based on historical experience. The useful lives are
reviewed at least once per year and adjustments to useful lives
are made when considered necessary.
(v) Acquisition earn-out amounts payable
The valuation of the Group’s acquisition earn-out amounts
payable are based on the post-acquisition performance of the
acquired businesses. These fair value measurements require,
among other things, significant estimation of post-acquisition
performance of the acquired business and judgement on time
value of money. Acquisition earn-out amounts payable shall be
remeasured at their fair value resulting from events or factors
that emerge after the acquisition date, with any resulting
gain or loss recognised in the income statement. Judgement
is applied to determine key assumptions (such as growth in
sales and margins) adopted in the estimate of post-acquisition
performance of the acquired business. Judgement is also
applied to determine the appropriate discount rate applied to
calculate the present value of the amount payable. Changes to
key assumptions may impact the future payable amount. Refer
to Note 31.
(vi) Purchase price allocation for acquisitions
During the financial year ended 30 June 2020, the Group
acquired 100% of the shares in Big Chill Distribution Limited.
This allocation was provisional in the 30 June 2020 financial
statements and has since been finalised (refer Note 31). All
identifiable assets and liabilities including intangible assets
were measured at fair value at acquisition date. In deriving a
fair value for identifiable intangibles, the Group used a variety
of valuations methods and key assumptions to reflect what a
typical market participant would apply if they were to buy or sell
each asset on an individual basis.
(b) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities that are controlled either directly
by the Company or where the substance of the relationship
between the Company and the entity indicates the Company
controls it. The results of businesses acquired or disposed of
during the year are included in the income statement from the
date of acquisition or up to the date of disposal.
The financial statements include the Company and its
subsidiaries accounted for using the acquisition method. The
cost of an acquisition is measured as the fair value of the assets
acquired, equity instruments issued and liabilities incurred or
assumed at the date of acquisition. Costs directly attributable
to the acquisition are expensed to the income statement.
Identifiable assets acquired, liabilities and contingent liabilities
assumed in a business combination are measured initially at
their fair values at acquisition date. The Group recognises any
non-controlling interest in an acquired entity on an acquisition-
by-acquisition basis either at fair value or as the non-controlling
interest’s proportionate share of the acquired entity’s net
identifiable assets. The excess of the consideration transferred
over the fair value of the Group’s share of the identifiable net
assets acquired is recorded as goodwill.
All material transactions between subsidiaries or between the
Company and subsidiaries are eliminated on consolidation.
Accounting policies of subsidiaries are consistent with those
adopted by the Group.
Any contingent consideration to be transferred by the Group
is recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is
deemed to be an asset or liability is recognised in accordance
with NZ IFRS 9 in the income statement. Contingent
consideration that is classified as equity is not remeasured, and
its subsequent settlement is accounted for within equity.
(ii) Joint arrangements and joint ventures
The Group applies NZ IFRS 11 to all joint arrangements. Under
NZ IFRS 11 investments in joint arrangements are classified
as either joint operations or joint ventures depending on
the contractual rights and obligations of each investor. The
Group has assessed the nature of its joint arrangements
and determined them to be joint ventures. Joint ventures are
accounted for using the equity method.
Under the equity method of accounting, interests in joint
ventures are initially recognised at cost and adjusted thereafter
to recognise the Group’s share of the post-acquisition profits or
losses and movements in other comprehensive income. When
the Group’s share of losses in a joint venture equals or exceeds
its interests in the joint venture (which includes any long-
term interests that, in substance, form part of the Group’s net
investment in the joint venture), the Group does not recognise
further losses, unless it has incurred obligations or made
payments on behalf of the joint venture.
Unrealised gains on transactions between the Group and
its joint ventures are eliminated to the extent of the Group’s
interest in the joint ventures. Unrealised losses are also
eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of joint
ventures are changed where necessary to ensure consistency
with the policies adopted by the Group.
(c) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each entity in the
Group are measured using the currency that best reflects the
primary economic environment in which the entity operates
(the “functional currency”). The financial statements are
presented in New Zealand Dollars, which is the Company’s
functional currency and the Group’s presentation currency.
(ii) Transactions and balances
Transactions in foreign currencies are translated into the
functional currency using the foreign exchange rate ruling at
the date of the transaction. Foreign exchange gains and losses
resulting from the settlement of such transactions and from
the translation at year-end exchange rates of monetary assets
and liabilities denominated in foreign currencies are recognised
in the income statement, except when deferred in equity as
qualifying cash flow hedges.
(iii) Foreign operations
The results and balance sheets of foreign operations (none of
which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
- assets and liabilities for the balance sheet presented
are translated at the closing rate at the date of the balance
sheet;
- income and expenses for the income statement are
translated at average exchange rates (unless this is not a
reasonable approximation of the cumulative effect of the
rates prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the
transactions); and
- all resulting exchange differences are recognised as
a separate component of equity.
Goodwill and fair value adjustments arising on the acquisition
of a foreign operation are treated as assets and liabilities of the
foreign operation and translated at the closing rate.
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
96 97
Freightways Limited and its subsidiaries |
(d) Impairment of non-financial assets
Assets that have an indefinite life are not subject to amortisation
and are tested annually for impairment. Assets that are subject to
amortisation or depreciation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised
for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an
asset’s fair value, less costs of disposal, and value-in-use. For
the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash flows
(cash-generating units).
(e) Financial assets
(i) Classification
The Group classifies its financial assets in the following
measurement categories:
- those to be measured subsequently at fair value either
through other comprehensive income or through the
income statement; and
- those to be measured at amortised cost.
The classification depends on the Group’s business model for
managing the financial assets and the contractual terms of the
cash flows. For assets measured at fair value, gains and losses
will either be recorded in the income statement or other
comprehensive income.
(ii) Recognition and derecognition
Regular purchases and sales of financial assets are recognised
on the trade date, i.e. the date on which the Group commits to
purchase or sell the asset. Financial assets are derecognised when
the rights to receive cash flows from the investments have expired
or the Group has transferred substantially all the risks and rewards
of ownership.
(iii) Measurement
At initial recognition, the Group measures a financial asset at its
fair value plus, in the case of a financial asset not at fair value
through the income statement, transaction costs that are directly
attributable to the acquisition of the financial asset. Transaction
costs of financial assets carried at fair value through the income
statement are expensed in the income statement.
(f) Fair value estimation
The fair value of financial assets and financial liabilities is estimated
for recognition and measurement or for disclosure purposes. The
fair value of financial instruments that are not traded in an active
market (for example, over the counter derivatives) are determined
using accepted treasury valuation techniques, such as estimated
discounted cash flows, by an external treasury management
system provider. The carrying value of trade receivables (less
provision for doubtful receivables) and payables approximate their
fair values.
(g) Goods and services tax (GST)
The income statement and statement of cash flows have been
prepared so that all components are stated exclusive of GST. All
items in the balance sheet are stated net of GST, with the exception
of trade receivables and payables, which include GST invoiced.
(h) Changes in accounting policies
The accounting policies and methods of computation are consistent
with those used in the year ended 30 June 2020.
Notes to the financial statements
For the year ended 30 June 2021
Note 2. Accounting treatment of cloud computing arrangements
The Group has capitalised costs incurred in configuring or customising certain suppliers’ application software in certain cloud computing
arrangements as intangible assets (30 June 2021 – $0.8 million; 30 June 2020 – $0.6 million; 1 July 2019 – $1.2 million), as the Group
considered that it would benefit from those costs to implement the cloud-based software over the expected terms of the cloud computing
arrangements. Following the IFRS IC agenda decision on Configuration or Customisation Costs in a Cloud Computing Arrangement in March
2021 (ratified by the International Accounting Standards Board (IASB) in April 2021), the Group has commenced a review of these capitalised
costs to determine whether they would need to be expensed or reclassified as prepayments. The IFRS IC concluded that costs incurred in
configuring or customising software in a cloud computing arrangement can be recognised as intangible assets only if the activities create an
intangible asset that the entity controls and the intangible asset meets the recognition criteria. Costs that do not result in intangible assets
are expensed as incurred, unless they are paid to the suppliers of the cloud-based software to significantly customise the cloud-based
software for the Group, in which case the costs paid upfront are recorded as prepayments for services and amortised over the expected
terms of the cloud computing arrangements.
At the time of finalising the 30 June 2021 financial statements, the review process is still in progress, due to the short timeframe between the
release of the agenda decision and the Group’s financial year end, the Group has not had sufficient time to fully assess the potential impact of
the agenda decision. A detailed review of large projects previously capitalised as intangible assets, and project costs recognised as work-in-
progress as at 30 June 2021, needs to be carried out at a transactional level to ensure correct treatment. The Group expects to implement
the updated accounting policy in the next financial period.
Note 3. Segment reporting
A segment is a component of the Group that can be distinguished from other components of the Group by the products or services it sells,
the primary market it operates in and the risks and returns applicable to it. Operating segments are reported upon in a manner consistent
with the internal reporting used by the Chief Executive Officer, as the chief operating decision maker, and the Board for allocating resources,
assessing performance and strategic decision making.
The Group is organised into the following reportable operating segments:
Express package & business mail
Comprises network (hub & spoke) courier, refrigerated transport, point-to-point courier and postal services.
Information management
Comprises secure paper-based and electronic business information management services.
Corporate and other
Comprises corporate, financing and property management services.
The Group has no individual customer that represents more than 4% of external sales revenue.
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
98 99
Freightways Limited and its subsidiaries |
Express
Package &
Business Mail
$000
Information
Management
$000
Corporate
$000
Inter-
segment
Elimination
$000
Consolidated
Operations
$000
Income statement
Sales to external customers629,760170,7703-800,533
Inter-segment sales3,254(104)4,795(7,945)-
Total revenue633,014170,6664,798(7,945)800,533
Operating profit (loss) before change in
fair value of contingent consideration,
interest, income tax, depreciation and
software amortisation and amortisation
of intangibles142,81750,849(6,042)-187,624
Change in fair value of contingent
consideration – Big Chill Distribution
Limited (Note 31)--(23,046)-(23,046)
Operating profit (loss) before
interest, income tax, depreciation and
software amortisation and amortisation
of intangibles142,81750,849(29,088)-164,578
Depreciation and software amortisation(33,323)(21,876)(1,836)-(57,035)
Operating profit (loss) before interest,
income tax and amortisation of
intangibles109,49428,973(30,924)-107,543
Amortisation of intangibles(5,280)(2,372)--(7,652)
Profit (loss) before interest and
income tax104,21426,601(30,924)-99,891
Net interest and finance costs(6,290)(4,881)(11,496)-(22,667)
Profit (loss) before income tax97,92421,720(42,420)-77,224
Income tax(27,208)(6,509)6,126-(27,591)
Profit (loss) for the year attributable
to the shareholders70,71615,211(36,294)-49,633
Balance sheet
Segment assets641,580360,21742,553-1,044,350
Segment liabilities257,853171,871273,406-703,130
As at and for the year ended 30 June 2021:
Express
Package &
Business Mail
$000
Information
Management
$000
Corporate
$000
Inter-
Segment
Elimination
$000
Consolidated
Operations
$000
Income statement
Sales to external customers472,151158,7836-630,940
Inter-segment sales2,272 (58)4,900 (7,114) -
Total revenue474,423158,7254,906(7,114) 630,940
Operating profit (loss) before
other income and expense,
interest, income tax, depreciation
and software amortisation and
amortisation of intangibles101,69047,055(4,074) -144,671
Other income and expenses(3,347)(5,270)(981)-(9,598)
Operating profit (loss) before interest,
income tax, depreciation and software
amortisation and amortisation of
intangibles98,343 41,785(5,055) -135,073
Depreciation and software amortisation(23,929) (21,215) (1,732) -(46,876)
Operating profit (loss) before interest,
income tax and amortisation of
intangibles74,41420,570 (6,787) -88,197
Amortisation of intangibles(1,168)(2,309)--(3,477)
Profit (loss) before interest and
income tax73,24618,261(6,787)-84,720
Net interest and finance costs(3,810)(5,188)(9,422)-(18,420)
Profit (loss) before income tax69,43613,073(16,209)-66,300
Income tax(18,815)(5,492)5,382-(18,925)
Profit (loss) for the year attributable
to the shareholders50,6217,581(10,827) -47,375
Balance sheet
Segment assets646,991360,58242,844-1,050,417
Segment liabilities259,016162,098312,523-733,637
Segment assets and liabilities are disclosed net of inter-company balances.
For the year ended 30 June 2021, external revenue from customers in the Group's New Zealand and Australian operations was $672.1
million and $128.4 million, respectively (2020: $513.6 million and $117.3 million, respectively). As at 30 June 2021, non-current assets
in respect of the New Zealand and Australian operations (excluding deferred tax assets and financial assets) were $457.8 million and
$172.5 million, respectively (2020: $468.5 million and $173.0 million, respectively).
As at and for the year ended 30 June 2020:
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
100 101
Freightways Limited and its subsidiaries |
The Group derives revenue from the transfer of goods and services over time and at a point in time in the following major product lines:
Express Package
& Refrigerated
Transport
PostalStorage &
Handling
Destruction
Activities
OtherTotal
2021
$000$000$000$000$000$000
Revenue from external
customers572,62348,47560,69470,61648,125800,533
Timing of revenue
recognition:
At a point in time
-2,706-20,49211,00934,207
Over time572,62345,76960,69450,12437,116766,326
572,62348,47560,69470,61648,125800,533
Express Package
& Refrigerated
Transport
PostalStorage &
Handling
Destruction
Activities
OtherTotal
2020
$000$000$000$000$000$000
Revenue from external
customers421,66849,12260,29561,59238,263630,940
Timing of revenue
recognition:
At a point in time
-3,191-18,30710,17631,674
Over time421,66845,93160,29543,28528,087599,266
421,66849,12260,29561,59238,263630,940
Note 4. Revenue from contracts with customers
Revenue recognition
The majority of contracts the Group entered into with its customers contain multiple performance obligations. The transaction price is
allocated to each performance obligation based on the stand-alone selling prices. As the stand-alone selling prices of all goods and services
provided are observable and there is no implicit discount offered, transaction prices allocated to individual performance obligations usually
match with respective stand-alone selling prices.
(i) Express package & business mail – courier, refrigerated transport & storage and postal services
The Group operates network (hub & spoke) courier, refrigerated transport and storage, point-to-point courier and postal services.
Revenue from these services is recognised over the time of delivery, being from the time of acceptance of the goods to delivery to the final
destination. Revenue from sale of postal products is recognised at the point the sale occurs. Income invoiced and received in advance of
a service being provided is recorded in the balance sheet as ‘Contract Liability’. This income is brought to account in the year in which the
service is provided. Revenue from refrigerated storage is recognised over time in the reporting period in which the service is provided.
(ii) Information management – storage and destruction revenue
The Group provides archive management services for documents and computer media, including storage, retrieval and destruction
services. The Group also provides secure handling, treatment and disposal of clinical waste and related services. Revenue from these
services is recognised over time in the reporting period in which the service is provided. Revenue from sale of archive boxes, computer
media and products generated from destruction activities is recognised when control of the products has transferred, being when the
products are delivered to the customer.
(iii) Information management – digital services
The Group provides digital information management services, including imaging and document capture (scanning), data extraction,
customised digital workflow solutions and application (app) development, under fixed-price and variable-price contracts. Revenue
from providing these digital information management services is recognised in the period in which the services are rendered. For
fixed-price contracts, revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of
the total service to be provided, because the service does not create an asset with an alternative use to the Group and the Group has an
enforceable right to payment for performance completed. This revenue is determined based on the efforts expended relative to the total
expected effort.
Estimates of revenues, costs or extent of progress towards completion are revised if circumstances change. Any resulting increases or
decreases in estimated revenues or costs are reflected in the income statement in the period in which the circumstances that give rise to
the revision become known by management.
In the case of fixed-price contracts, the customer pays the fixed amount based on a payment schedule. If the services rendered by
the Group exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is
recognised.
If the contract includes an hourly fee, revenue is recognised in the amount to which the Group has a right to invoice.
(iv) Financing components
The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the
customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction prices for
the time value of money.
(v) Interest income
Interest income is recognised on a time-proportionate basis using the effective interest method, which takes into account the effective
yield on the relevant financial asset.
(vi) Dividend income
Dividend income from investments is recognised when the shareholder’s right to receive payment is established.
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
102 103
Freightways Limited and its subsidiaries |
Group
Note
2021
$000
2020
$000
Income
Interest income2247
Operating expenses
Net loss on disposal of property, plant and equipment367951
Depreciation of property, plant and equipment1417,00014,762
Depreciation of right-of-use assets1535,14828,409
Amortisation of intangible assets167,6523,477
Amortisation of software164,8873,705
Auditor’s fees
Audit of annual financial statements and review of interim
financial statements622541
Annual Shareholders Meeting – agreed upon procedures
99
Executives’ remuneration benchmarking3130
Costs of offering credit
Impairment loss on trade receivables3291,024
Interest and finance costs
Interest on bank borrowings10,1109,715
Interest on leases11,1118,752
Derivative fair value movement1,468-
Other
Directors’ fees612607
Donations252296
Change in fair value of contingent consideration –
Big Chill Distribution Limited31 & (i)23,046-
Other income and expenses
– Impairment of goodwill(ii)-5,194
– Impairment of brand names(ii)-1,581
– Impairment of intangible assets – software(iii)-608
– Write-off of obsolete software(iii)-2,739
Acquisition advisory fee(iv)-981
Reversal of accrued earn-out payables(v)-(1,505)
Note 5. Income and expenses
Profit before income tax includes the following specific income and expenses:
(i) The estimated discounted future final payment for the BCD has been increased from $27.2 million as at 30 June 2020 to $51.3 million as
at 30 June 2021. This increase of $23 million (net of impact of unwinding of discount on acquisition earn-out liability of $1 million) reflects
the strong performance of BCD, which will determine the final payment for the acquisition of the company, to be made in August 2022.
Refer Note 31.
(ii) Impairment loss in respect of (a) the carrying value of goodwill and brand names recognised upon the acquisition of the LitSupport print
& copy bureau ($5.8 million), and (b) an amount of the goodwill originally recognised upon the acquisition of the NSW-based State Waste
Services (SWS) business ($1 million) with $1.5 million earn-out payable for SWS reversed in 2020, refer (v) below.
(iii) Write-off of internally-developed software considered obsolete as a result of the accelerated introduction of new software applications
and systems in response to business and market demands.
(iv) Advisory fee paid for assistance with the successful acquisition of Big Chill Distribution Limited.
(v) Reversal of previously-accrued earn-out payables no longer expected to be paid related to the acquisition of SWS.
Income and expenses classified as “non-recurring” in the 30 June 2020 financial statements have been reclassified as “other income and
expenses” in the current period to remove the presentation of non-NZ GAAP financial measures within the income statement.
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
104 105
Freightways Limited and its subsidiaries |
Group
2021
$000
2020
$000
Imputation credits account
Imputation credits available for use in subsequent reporting periods55,13135,196
The above amounts represent the balance of the imputation account as at the end of the reporting period, adjusted for:
(a) Imputation credits that will arise from the payment of the amount of the provision for income tax;
(b) Imputation debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
(c) Imputation credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
2021Before tax
$000
Tax (charge) /credit
$000
After tax
$000
Exchange difference on translation of foreign operations(2,310)-(2,310)
Cash flow hedges taken directly to equity 1,222(342)880
Other comprehensive income(1,088)(342)(1,430)
Current tax-
Deferred tax (342)
(342)
2020Before tax
$000
Tax (charge) /credit
$000
After tax
$000
Exchange difference on translation of foreign operations1,475-1,475
Cash flow hedges taken directly to equity 2,536(710)1,826
Other comprehensive income4,011(710)3,301
Current tax-
Deferred tax (710)
(710)
Group
2021
$000
2020
$000
Current tax
Current tax on profit for the year34,02222,964
Deferred tax (Note 17):
Reversal of temporary differences(6,431)(2,609)
Reversal arising from change in tax law-(1,430)
Total deferred tax(6,431)(4,039)
Income tax expense27,59118,925
Income tax applicable to the Group’s net profit before tax differs from the theoretical amount that would arise using the weighted
average tax rate applicable to the profits of the consolidated entities, as follows:
Profit before income tax77,22466,300
Income tax calculated at domestic tax rates applicable to the accounting
profits in the respective countries21,77318,525
Tax-effect of amounts which are treated differently when calculating
taxable income:
- Additional amounts non-deductible 5,7271,275
- Adjustment for change in tax law – deferred tax on re-introduction
of deductibility of building depreciation-(1,430)
- Other91555
Income tax expense27,59118,925
The Group has no tax losses (2020: Nil).
Note 6. Income tax expense
The income tax expense for the year is the tax payable on the current year’s taxable income based on the income tax rate for each jurisdiction
adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities
and their carrying amounts in the financial statements.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered
or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates
are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An
exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or
liability is recognised in relation to these temporary differences if they arose as a result of a transaction, other than a business combination,
that at the time of the transaction did not affect either accounting profit or taxable income. No deferred tax liability is recognised if it arises
from initial recognition of goodwill from a business combination.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses.
Current and deferred tax balances attributable to amounts that have been recognised in other comprehensive income or directly in equity,
are also taken to other comprehensive income or directly to equity, respectively.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the
same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
The Group is yet to assess the potential impact of the IFRIC agenda decision on cloud computing arrangements (refer Note 2). This change in
accounting treatment may give rise to temporary differences. Other than this, there are no unrecognised temporary differences (2020: Nil).
The tax (charge)/credit relating to components of other comprehensive income is as follows:
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
106 107
Freightways Limited and its subsidiaries |
Note 7. Impact of COVID-19
The on-going COVID-19 global pandemic has accelerated a number of trends that were already evident before the start of the pandemic.
Amongst them is a faster adoption of online shopping that positively impacts volume for Freightways’ express package businesses. At the
same time, with a number of information management’s customers having employees working from home and using less paper, some
of the information management activities continue to recover at a slower pace. This slower recovery is partially mitigated by continuing to
develop new service lines and managing costs. The risk of a resurgence of COVID-19 in New Zealand or Australia creates a continued level
of uncertainty, although Freightways’ businesses are now well prepared to operate efficiently in different levels of lockdown. During the year,
$0.8 million was received from the Australian government in relation to the JobKeeper subsidy.
Group
2021
$000
2020
$000
Recognised amounts
Fully imputed dividends declared and paid during the year:
No final dividend paid for 2020 (2019: 15.5 cents)-24,084
Interim dividend for 2021 at 15.5 cents per share (2020: 15.0 cents)25,65823,319
25,65847,403
Unrecognised amounts
Final dividend for 2021 at 18 cents per share (2020: nil)29,797-
Group
2021
$000
2020
$000
Cash at bank19,83316,578
Overnight deposits107108
Cash and cash equivalents in statement of cash flows19,94016,686
Note 8. Dividends
Note 9. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and overnight deposits. Bank overdrafts that are repayable on demand and form an
integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement
of cash flows. Bank overdrafts are shown within borrowings in the current liabilities on the balance sheet to the extent they exceed the legal
right of off-set against cash included in current assets.
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
108 109
Freightways Limited and its subsidiaries |
Group
2021
$000
2020
$000
Current
Trade receivables90,71188,923
Provision for doubtful receivables(3,014)(2,909)
87,69786,014
Accrued revenue7744,841
Other debtors and prepayments14,9638,994
Share plan loans receivable from employee513532
103,947100,381
Non-current
Share plan loans receivable from employees373325
Other non-current assets6,4527,023
6,8257,348
Trade receivables are non-interest bearing and are generally on 7-30 day terms.
Recoverability of trade and other receivables is reviewed on an ongoing basis. Amounts that are known to be uncollectible are written-
off when identified. The Group applies a simplified approach in calculating expected credit losses, which uses a lifetime expected loss
allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit
risk characteristics and the days past due. For other receivables, an allowance for doubtful receivables is raised when there is objective
evidence that the Group will not be able to collect all amounts due according to the original terms of the receivable.
The movements in the provision for doubtful receivables for the Group were as follows:
Group
2021
$000
2020
$000
Opening balance2,9091,500
Provision for doubtful receivables1761,152
Receivables written off during the year as uncollectible(73)(106)
Provisions added from acquired businesses-350
Exchange rate movement213
Closing balance (Note 29.1(b))3,0142,909
Note 10. Trade receivables and other non-current assets
Trade and other receivables are recognised at their fair value and subsequently measured at amortised cost using the effective interest
rate, less provision for impairment.
Group
2021
$000
2020
$000
Finished goods3,4912,576
Ticket stocks, uniforms and consumables3,9473,443
7,4386,019
Note 11. Inventories
Inventories are stated at the lower of cost, determined on a first-in-first-out basis, and net realisable value. Full provision is made for
obsolescence, where applicable. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated
costs of completion and the estimated costs necessary to make the sale. The cost of inventories recognised as an expense and included in
‘general and administration expenses’ amounted to $11.3 million (2020: $10.7 million).
Note 12. Derivative financial instruments
Derivative financial instruments, such as interest rate caps and collar contracts and interest rate swaps, are entered into from time to time
to manage interest rate exposure on borrowings. Forward exchange contracts are also entered into from time to time to manage foreign
exchange exposures. Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into
and are subsequently remeasured to their fair value at the reporting date. The method of recognising the resultant gain or loss depends on
whether the derivative financial instrument is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group
designates derivative financial instruments as either fair value hedges (hedges of the fair value of recognised assets or liabilities or a firm
commitment) or cash flow hedges (hedges of highly probable forecast transactions).
At the inception of the transaction, the Group documents the relationship between the hedging instrument and the hedged item, as well as
its risk management objective and strategy for undertaking the hedge transaction. The Group also documents its assessment, both at hedge
inception and on an ongoing basis, of whether the derivative financial instruments that are used in hedging transactions have been and will
continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.
(i) Cash flow hedges
The effective portion of changes in the fair value of derivative financial instruments that are designated and qualify as cash flow hedges
is recognised in equity in the cash flow hedge reserve. The gain or loss relating to any ineffective portion is recognised immediately in the
income statement.
Amounts taken to equity are transferred to the income statement when the hedged transaction affects profit or loss, such as when
hedged income or expenses are recognised or when a forecast sale or purchase occurs. When the hedged item is the cost of a non-
financial asset or liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability.
If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are immediately transferred to
the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its
designation as a hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction occurs. If the
related transaction is not expected to occur, the amount is taken immediately to the income statement.
(ii) Derivatives that do not qualify for hedge acounting
Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting or where hedge accounting has not
been adopted are recognised immediately in the income statement.
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
110 111
Freightways Limited and its subsidiaries |
Group
2021
$000
2020
$000
Asset (Liability)Asset (Liability)
Current
Interest rate swaps – cash flow hedge(1,039)(742)
Foreign currency options – cash flow hedge -(8)
Forward foreign exchange contracts – cash flow hedge(43)-
(1,082)(750)
Non-current
Interest rate swaps – cash flow hedge(791)(3,783)
Forward foreign exchange contracts – cash flow hedge2141,651
(577)(2,132)
Change in fair value of hedging instrument
recognised in OCI
8(1,481)2,6951,222
Less: Deferred tax
(2)415(755)(342)
Balance at 30 June 2021-123(1,318)(1,195)
Cash flow hedge reserve
Intrinsic
value of
options
$000
Spot
component
of currency
forwards
$000
Interest
rate swaps
$000
Total hedge
reserve
$000
Balance at 1 July 2019(267)458(4,092)(3,901)
Change in fair value of hedging instrument
recognised in Other Comprehensive Income (OCI)
3621,0151,1592,536
Less: Deferred tax
(101)(284)(325)(710)
Balance at 30 June 2020(6)1,189(3,258)(2,075)
The Group’s hedging reserves relate to the following hedging instruments:
NZDAUD
2021
$000
2020
$000
2021
$000
2020
$000
Interest rate swaps:
Notional amount42,00054,00020,00036,500
Maturity date05/22 – 05/2509/20 – 05/25 01/22 – 07/2309/20 – 07/23
Hedge ratio1:11:11:11:1
Change in fair value of outstanding
hedging instrument
1,6335221,061637
Change in value of hedge item used to
determine hedge effectiveness
(1,633)(522)(1,061)(637)
Weighted average strike rate for the year2.9%4.5%3.8%3.9%
Foreign currency options:
Notional amount-5,834--
Maturity date-07/20 – 05/21--
Hedge ratio-1:1--
Change in fair value of outstanding hedging
instrument
8362--
Change in value of hedge item used to
determine hedge effectiveness
(8)(362)--
Weighted average strike rate for the yearUSD0.68: NZD1USD0.66: NZD1--
Forward foreign exchange contracts:
Notional amount18,38118,381--
Maturity date07/21 – 06/2407/19 – 06/24--
Hedge ratio1:11:1--
Change in fair value of outstanding hedging
instrument
(1,481)1,014--
Change in value of hedge item used to
determine hedge effectiveness
1,481(1,014)--
Weighted average strike rate for the year----
There was no derivative movement recognised in the income statement during the year (2020: nil).
Effects of hedge accounting on the financial position and performance are:
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
112 113
Freightways Limited and its subsidiaries |
Hedge effectiveness
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to
ensure that an economic relationship exists between the hedged item and the hedging instrument.
For hedges of foreign currency purchases, the Group enters into hedge relationships where the critical terms of the hedging instrument
match exactly with the terms of the hedged item. The Group therefore performs a qualitative assessment of effectiveness. If changes in
circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the critical terms of the hedging
instrument, the Group uses the hypothetical derivative method to assess effectiveness.
In hedges of foreign currency purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what was originally
estimated, or if there are changes in the credit risk of the Group or the derivative counterparty.
The Group enters into interest rate swaps that have similar critical terms as the hedged item, such as reference rate, reset dates, payment
dates, maturities and notional amount. The Group does not hedge 100% of its loans, therefore the hedged item is identified as a proportion of
the outstanding loans up to the notional amount of the swaps. As all critical terms matched during the year, the economic relationship was
100% effective.
Hedge ineffectiveness for interest rate swaps is assessed using the same principles as for hedges of foreign currency purchases. It may
occur due to:
– The credit or debit value adjustment on the interest rate swaps not being matched by the loan; and
– Differences in critical terms between the interest rate swaps and loans.
Name of entityPrincipal activities
Country of
Incorporation
Air Freight NZ LimitedExpress package linehaulNew Zealand
Big Chill Distribution LimitedTemperature-controlled transport & facilitiesNew Zealand
Castle Parcels LimitedExpress package servicesNew Zealand
Fieldair Engineering LimitedGeneral & aviation engineering servicesNew Zealand
Fieldair Holdings LimitedAviation-related servicesNew Zealand
Freightways Finance LimitedGroup treasury managementNew Zealand
Freightways Information Services LimitedIT infrastructure support servicesNew Zealand
Freightways Properties LimitedProperty managementNew Zealand
Freightways Trustee Company LimitedTrustee of Freightways Employee Share PlanNew Zealand
Info Management Services Australia LPAustralian treasury servicesAustralia
LitSupport Pty LimitedInformation managementAustralia
Med-X Pty LimitedInformation managementAustralia
Messenger Services LimitedExpress package servicesNew Zealand
New Zealand Couriers LimitedExpress package servicesNew Zealand
New Zealand Document Exchange LimitedBusiness mailNew Zealand
NOW Couriers LimitedExpress package servicesNew Zealand
Parceline Express LimitedExpress package linehaulNew Zealand
Post Haste LimitedExpress package servicesNew Zealand
Shred-X Pty LimitedInformation managementAustralia
The Information Management Group (NZ) LimitedInformation managementNew Zealand
The Information Management Group Pty LimitedInformation managementAustralia
There has been no change in investments in subsidiaries during the year.
Note 13. Investments in subsidiaries
The Company’s investment in its only directly-owned subsidiary, Freightways Express Limited (FEL), comprises shares at cost. Listed below
are all the significant subsidiaries wholly-owned directly or indirectly by FEL. All subsidiaries have a balance date of 30 June.
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
114 115
Freightways Limited and its subsidiaries |
Land
$000
Buildings
$000
Leasehold
Alterations
$000
Motor
Vehicles
$000
Equipment
$000
Total
$000
Group
(restat-
ed) (restated)
2021
Opening net book value15,77119,00412,223 29,32758,324134,649
Additions-131,2634,0077,15112,434
Acquisitions through business
combinations (Note 31)
---11-11
Transferred to intangible assets
(Note 16)
----(1,115)(1,115)
Depreciation expense-(1,576)(1,826)(4,551)(9,047)(17,000)
Disposals--(66)(240)(459)(765)
Exchange rate movement11753467124
Closing net book value15,78217,44811,59928,58854,921128,338
As at end of year
Cost15,78239,84719,87345,013138,046258,561
Accumulated depreciation-(22,399)(8,274)(16,425) (83,125)(130,223)
Net book value15,78217,44811,59928,58854,921128,338
Note 14. Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment losses.
Historical cost includes all expenditure directly attributable to the acquisition or construction of the item, including interest.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that
future economic benefits associated will flow to the Group and the cost of the asset can be measured reliably. Such cost includes the cost of
replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. The carrying amount of the replaced part is
derecognised. All other repairs and maintenance costs are recognised in the income statement as incurred.
Depreciation is calculated on a straight-line basis on all tangible fixed assets, other than land and leasehold improvements, so as to expense
the cost of the assets to their estimated residual values over their estimated useful lives. Land is not depreciated. Leasehold improvements
are depreciated over the shorter of the unexpired period of the lease and the estimated useful life of the improvements. Estimated useful
lives are as follows:
Estimated useful life
Buildings 25 to 50 years
Leasehold alterations Shorter of the period of the lease or estimated useful life
Motor vehicles 5 to 10 years
Equipment 3 to 20 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date.
Interest and finance costs incurred for the construction of a qualifying asset are capitalised during the period of time that is required to
complete and prepare the asset for its intended use. Other interest and finance costs are expensed.
Land
$000
Buildings
$000
Leasehold
Alterations
$000
Motor
Vehicles
$000
Equipment
$000
Total
$000
Group(restated)(restated)
2020
Opening net book value13,615 20,250 3,903 10,80458,138106,710
Additions2,1203441,875 4,823 9,167 18,329
Acquisitions through
business combinations
--7,45717,14578225,384
Depreciation expense-(1,621) (932) (2,323) (9,886) (14,762)
Disposals--(125)(1,331) (343) (1,799)
Exchange rate movement36 31 45 209 466 787
Closing net book value15,771 19,004 12,223 29,32758,324134,649
As at end of year
Cost15,771 39,827 19,36342,167 134,799 251,927
Accumulated depreciation-(20,823) (7,140) (12,840) (76,475) (117,278)
Net book value15,771 19,004 12,22329,32758,324 134,649
Land totalling $0.1 million as at 30 June 2019 has been reclassified to leasehold alterations in the opening balance for the financial
year ended 30 June 2020 to accurately reflect the nature of the asset.
The cost of equipment in respect of assets under construction for which depreciation has not commenced as at 30 June 2021 is
$0.1 million (2020: $0.5 million).
The latest independent valuations of land and buildings (performed in June 2020) assess these assets to have a total fair value of
$88.4 million. The fair values have been derived using the direct capitalisation approach. The valuation technique uses significant
unobservable inputs, namely capitalisation rate and potential new market income of land and buildings. Therefore, these are considered
level 3 valuations, as defined in Note 29.1(d).
Note 15. Leases
This note provides information for leases where the Group is a lessee.
The Group’s leases predominantly relate to property, equipment and vehicles. Rental contracts are typically made for fixed periods of 3 to
12 years but may have extension options. Lease terms are negotiated on an individual basis and contains a wide range of different terms
and conditions. The lease agreements do not impose covenants other than the leased assets may not be used as security for borrowing
purposes. The right-of-use (ROU) asset is depreciated over the shorter of the asset’s useful life and the expected lease term on a straight-
line basis.
Lease liabilities have been measured at the present value of the remaining lease payments, discounted using a discount rate derived from
the incremental borrowing rate (IBR) when the interest rate implicit in the lease was not readily available. Factors taken into consideration
when calculating the IBR for each asset category included observable market rates, economic conditions and lease tenure. The incremental
borrowing rates applied to lease liabilities range between 1.69% to 4.39% (2020: 2.45% to 4.23%), with a weighted average rate of 3.69%
(2020: 3.61%).
Some property leases contain an extension option exercisable by the Group. At the commencement of a lease, the Group assesses whether
it is reasonably certain an extension option will be exercised. The assessment is reviewed if a significant event or a significant change in
circumstances occurs which affects this assessment and that is within the control of the Group. The extension options are only exercisable
by the Group and not the lessor. Where it is reasonably certain the extension will be exercised, that extension period and related costs are
recognised on the balance sheet.
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
116 117
Freightways Limited and its subsidiaries |
The balance sheet shows the following amounts relating to leases:
Group
2021
$000
2020
$000
Right-of-use assets
Opening net book value278,142-
Recognised on transition-200,068
Lease additions, modifications and terminations32,671104,550
Depreciation for the year(35,148)(28,409)
Exchange rate movement1841,933
Closing net book value275,849278,142
Cost393,757367,280
Accumulated depreciation(117,908)(89,138)
Closing net book value275,849278,142
Group
2021
$000
2020
$000
Right-of-use assets
Buildings257,385259,023
Equipment3,6476,823
Motor vehicles14,81712,296
275,849278,142
The following tables show the movements and analysis in relation to the ROU assets and lease liabilities created upon adoption of
NZ IFRS 16.
Group
2021
$000
2020
$000
Lease liabilities
Operating lease commitments discounted using the Group's incremental
borrowing rate -112,229
Adjustments as a result of different treatment of extension and termination options-111,084
Opening lease liabilities311,072223,313
Lease additions, modifications and terminations32,929109,787
Interest for the year11,1118,752
Lease repayments(43,725)(33,706)
Other lease liabilities-668
Exchange rate movement2482,258
Closing lease liabilities311,635311,072
Group
2021
$000
2020
$000
Lease liabilities
Current31,07830,641
Non-current280,557280,431
311,635311,072
Lease liabilities maturity analysis:
2021
Minimum lease
payments
$000
Interest
$000
Present value
$000
Within one year41,67410,59931,075
One to five years137,30833,456103,852
Beyond five years210,06433,356176,708
Total389,04677,411311,635
2020
Within one year41,44910,80830,641
One to five years127,50634,83592,671
Beyond five years227,22239,462187,760
Total396,17785,105311,072
Lease related expenses included in the income statement:
Group
2021
$000
2020
$000
Depreciation charge for right-of-use assets
Buildings26,24422,099
Motor vehicles6,5023,432
Equipment2,4022,878
35,14828,409
Interest on leases11,1118,752
Total cash outflow in relation to leases is $43.7 million (2020: $33.7 million).
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
118 119
Freightways Limited and its subsidiaries |
Note 16. Intangible assets
(i) Goodwill
Goodwill represents the excess of the consideration transferred in an acquisition over the fair value of the Group’s share of the net
identifiable assets of the acquired business at the date of acquisition. Goodwill is not amortised, but is tested for impairment annually
or whenever events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment
losses. Goodwill is allocated to cash-generating units for the purpose of impairment testing.
(ii) Brand Names
Acquired brand names are recognised at cost, being their fair value at the date of acquisition if acquired in a business combination. Brand
names with indefinite useful lives are not subject to amortisation, but are tested for impairment annually or whenever events or changes
in circumstances indicate that they might be impaired, and are carried at cost less amortisation and impairment losses. The useful lives
and amortisation methods are reviewed and adjusted, if appropriate, at each balance sheet date.
Brand names are allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-
generating units or groups of cash-generating units that are expected to benefit from the brand names.
An independent valuation of the brand names was conducted by Deloitte in August 2021. This independent report assessed the fair
market value of the brand names as at 30 June 2021 to be between $483 million and $530 million, using the value-in-use approach.
The valuation technique uses significant unobservable inputs, namely discount rate, growth rate and cash flow. Therefore, these are
considered level 3 valuations, as defined in Note 29.1(d).
(iii) Computer software
External software costs, together with payroll and related costs for employees directly associated with the development of software,
are capitalised. Costs associated with upgrades and enhancements are capitalised to the extent they result in additional functionality.
Amortisation is charged on a straight-line basis over the estimated useful life of the software which ranges between 3 and 10 years.
Included in the cost of software is work in progress of $1.4 million (2020: $2.8 million) for which amortisation has not commenced.
Software under development not yet available for use is tested annually for impairment.
(iv) Customer relationships
• Contractual
An intangible asset is recorded at fair value in respect of the amount of any contractual termination fees payable by customers of
businesses acquired in respect of their document holdings. As it is not known when permanent retrieval fees may arise, this asset
is only amortised upon the actual retrieval fee being charged to the respective customer.
• Other
Non-contractual customer relationships acquired in a business combination are recognised at fair value at the acquisition
date. These customer relationships have an estimated finite useful life and are carried at cost less accumulated amortisation.
Amortisation is calculated using the straight-line method over the expected useful life of the customer relationship which ranges
between 10 and 20 years.
Group
Goodwill
$000
Brand
names
$000
Software
$000
Customer
relationships
$000
Other
$000
Total
$000
2021
Opening net book value301,283118,30715,76258,6834,931498,966
Additions--5,562-685,630
Acquisition through business
combinations (Note 31)(6,120)8,500-61-2,441
Transferred from property, plant
and equipment (Note 14)--1,115--1,115
Amortisation expense--(4,887)(6,214)(1,438)(12,539)
Written-off--(1,565)--(1,565)
Exchange rate movement342626387455
Closing net book value295,505126,86915,99352,5683,568494,503
As at end of year
Cost314,167126,86938,29670,6057,103557,040
Accumulated amortisation
and impairment(18,662)-(22,303)(18,037)(3,535)(62,537)
Net book value295,505126,86915,99352,5683,568494,503
Group
Goodwill
$000
Brand
names
$000
Software
$000
Customer
relationships
$000
Other
$000
Total
$000
2020
Opening net book value212,737 113,932 17,79717,477 3,209 365,152
Additions--4,937 -173 5,110
Acquisition through business
combinations91,4755,5003744,009 1,900142,921
Amortisation expense--(3,705) (3,069) (408) (7,182)
Impairment loss(5,194)(1,581)(608)--(7,383)
Written-off--(2,739)--(2,739)
Exchange rate movement2,265 456 43 266 573,087
Closing net book value301,283118,307 15,76258,683 4,931 498,966
As at end of year
Cost319,945 118,307 35,41970,480 7,024 551,175
Accumulated amortisation
and impairment(18,662)-(19,657) (11,797) (2,093) (52,209)
Net book value301,283 118,307 15,76258,683 4,931498,966
COVID-19 has resulted in the accelerated development and deployment of various new IT initiatives and strategies, leading to the need to
write-off certain previously capitalised software that is now considered obsolete.
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
120 121
Freightways Limited and its subsidiaries |
Goodwill Brand names
2021
$000
2020
$000
2021
$000
2020
$000
Big Chill
77,63583,75514,0005,500
Messenger Services
8,7668,7665,1005,100
New Zealand Couriers47,75247,75258,50058,500
New Zealand Document Exchange10,96710,9675,9005,900
Dataprint
4,1254,1251,3101,310
Post Haste, Castle Parcels and NOW Couriers27,15927,15918,39518,395
Total Express Package & Business Mail176,404182,524103,20594,705
The Information Management Group (New Zealand)17,57717,5774,4004,400
The Information Management Group (Australia)*56,79856,61515,94515,894
Shred-X*44,72744,5673,3193,308
Total Information Management119,102118,75923,66423,602
Total295,506301,283126,869118,307
* The increases in goodwill and brand names in The Information Management Group (Australia) and Shred-X are due to foreign
currency translation.
(i) Key assumptions used for value-in-use calculations
On an annual basis, the recoverable amount of goodwill and brand names is determined based on the greater of value-in-use and fair
value less costs of disposal calculations specific to the CGU associated with both goodwill and brand names.
The value-in-use calculations use post-tax cash flow projections based on financial budgets prepared by management and approved
by the Board for the year ended 30 June 2022. Cash flows beyond June 2022 have been extrapolated using growth rates which take
into consideration current and forecast economic conditions for the relevant products and industries. A probabilistic approach was also
adopted where a number of different growth scenarios were considered and weighted by likelihood of achievement. In addition, the
sensitivity of the main financial variables was tested and considered in the final estimation. No adjustments have been made to forecast
cash flows for the unknown impacts of future legislative changes in relation to climate change.
A 1% (2020: 1%) revenue growth rate, a consistent EBITDA margin assuming costs increase in line with revenue and 1% (2020: 1%)
terminal growth rate have been applied to the express package & business mail businesses in the value-in-use calculation.
A 2% (2020: 2%) revenue growth rate, a consistent EBITDA margin assuming costs increase in line with revenue and 2% (2020:
2%) terminal growth rate, reflecting both historical and expected growth, have been applied to the value-in-use calculation for the
information management segment with the same scenarios and sensitivities applied as described in the Significant estimate – sensitivity
to changes in assumptions section below.
Impairment tests for indefinite life intangible assets
Goodwill and brand names are allocated to those cash-generating units (CGU) or groups of CGU that are expected to benefit from them.
The carrying amount of intangible assets allocated by CGU or group of CGU is outlined below:
Post-tax discount rate
2021
%
2020
%
Big Chill
7.06.6
Messenger Services
7.57.5
New Zealand Couriers7.57.5
New Zealand Document Exchange11.410.6
Dataprint
11.410.6
Post Haste, Castle Parcels and NOW Couriers7.57.5
The Information Management Group (New Zealand)7.57.5
The Information Management Group (Australia)6.96.6
Shred-X6.96.6
* In the current financial year, the Group has moved from a Group post-tax discount rate to CGU specific post-tax discount rates. The
prior year disclosure has been updated for comparative purposes (the 2020 Group post-tax discount rate disclosed was 7.5%). The
change to prior period CGU specific rates did not result in an impairment in the prior year.
Post-tax discount rates, reflecting the current environment in financial markets and the countries each CGU operates in, have been used.
The CGU specific post-tax discount rates applied are:
(ii) Significant estimate – Sensitivity to changes in assumptions
From the value-in-use assessment for all CGU’s, other than TIMG AU, management believes that no reasonably possible change in any of
the above key assumptions would cause the carrying values of goodwill and brand names to exceed their respective recoverable amounts.
The value-in-use analysis prepared for TIMG AU is based on the following key assumptions:
- 100% achievement of FY22 budgeted revenue;
- 2% Revenue growth per year (with a range of scenarios from – 4% to 4% p.a considered);
- 2% terminal EBITA growth rate; and
- post-tax discount rate of 6.9%
The recoverable amount of TIMG AU would equal its carrying amount if the key assumptions were to change as follows:
2021
From
%
To
%
Achievement of FY22 budgeted revenue
10084
Revenue growth per year
2-3.1
Terminal EBITA growth rate20.8
Post-tax discount rate6.97.9
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
122 123
Freightways Limited and its subsidiaries |
In the prior year, the value-in-use analysis prepared for New Zealand Document Exchange (NZDX) was sensitive to changes in key
assumptions. For comparative purposes, the current year NZDX value-in-use analysis shows the recoverable amounts of goodwill
and brand names significantly exceed their carrying values. The NZDX value-in-use analysis has been prepared based on the
following key assumptions:
- 100% achievement of FY22 budgeted revenue;
- 1% Revenue growth per year (with a range of scenarios from – 4% to 4% p.a considered);
- 1% terminal EBITA growth rate; and
- post-tax discount rate of 11.4%
The recoverable amount of NZDX would equal its carrying amount if any of the key assumptions were to change as follows:
Following are the significant estimate notes included in last year’s annual report carried forward to this year’s annual report for
comparative purposes:
Significant estimate – impairment loss – 30 June 2020
An impairment loss of $5.8 million (A$5.5 million) has been recognised in the CGU of The Information Management Group (Australia) (TIMG AU).
The LitSupport business acquired by Freightways in December 2014 and incorporated into the TIMG AU CGU has not performed to management’s
expectation. LitSupport was acquired for a potential total consideration of $32.2 million, made up of an initial payment of $18.3 million and potential
earn-out of $13.9 million. As a result of not meeting an initial financial hurdle for the 2015 calendar year, the vendors were required to refund $5.3 million
of the initial purchase price to Freightways. The financial performance hurdles for the potential earn-out of $13.9 million were also not met and none of
the earn-out was paid to the vendors. This resulted in the total purchase consideration for LitSupport being $13 million instead of the initial potential total
consideration of $32.2 million.
The performance of LitSupport has continued to deteriorate in the last 12 months, exacerbated by the impact of COVID-19, and is not expected to recover
to the extent that the recoverable amounts of goodwill and brand names will exceed their carrying values. The impairment modelling applied probability
sensitivities, including a number of different scenarios, an assessment of historical delivery against budget as well as the sensitivity to key financial
assumptions driving the valuation. In addition, the modelling used a series of balanced assumptions to the underlying cash flow forecasts to lower the
risk of over (or under)-stating the future performance of the CGU. The following scenarios and sensitivities were used in preparing the valuation model:
- 90% achievement of FY21 budgeted revenue
- only 2% Revenue growth per year (with a range of scenarios going from – 4% to 4% p.a considered);
- a consistent EBITDA margin assuming costs increase in line with revenue; and
- low 2% terminal EBITA growth rate
The value-in-use calculation described above resulted in impairment losses of $4.2 million (A$4 million) and $1.6 million (A$1.5 million) being
recognised in the 2020 financial year in respect of the TIMG AU CGU’s goodwill and brand names, respectively. The impairment losses have been
determined based on the greater of the recoverable amount from value-in-use and fair value less cost of disposal calculations. No other class of
asset in the TIMG AU CGU was considered impaired by management.
For all other CGU, with the exception of the ones mentioned above, the value-in-use and fair value less cost of disposal calculations indicate that the
recoverable amounts of goodwill and brand names of other CGU held by the Group exceed their carrying values and therefore there is no impairment
in the value of those intangible assets.
2021
From
%
To
%
Achievement of FY22 budgeted revenue
10073
Revenue growth per year
1-9.1
Terminal EBITA growth rate1-6.1
Post-tax discount rate11.415.6
Significant estimate – Sensitivity to changes in assumptions – 30 June 2020
With regard to the value-in-use assessment for all CGU’s, other than TIMG AU described above and New Zealand Document Exchange (NZDX)
discussed below, management believes that no reasonably possible change in any of the above assumptions would cause the carrying values of
goodwill and brand names to materially exceed their respective recoverable amounts.
The value-in-use analysis prepared for TIMG AU based on the key assumptions described above is most sensitive to a change in revenue growth,
terminal growth and post-tax discount rate. If the revenue growth and terminal growth rate used was reduced from 2% to 1%, the impairment loss
recognised against intangibles would have been $9 million and $17.1 million, respectively. Conversely, if the revenue growth and terminal growth rate
used was increased from 2% to 3%, the impairment loss recognised against intangibles would have been $2.8 million and nil, respectively, with the
latter showing the recoverable amount exceeding the carrying amount by $10.2 million.
If the post-tax discount rate used increased from 7.5% to 8.5%, the impairment loss recognised against intangibles would have been $19.4
million. Conversely, if the post-tax discount rate used was decreased from 7.5% to 6.5%, there would be no impairment loss, as the recoverable
amount would have exceeded the carrying amount by $13.5 million. The carrying value of the NZDX CGU has been assessed as at 30 June 2020 by
management as being on par with its recoverable amount (2019: recoverable amount exceeded carrying value by $22.5 million). The analysis was
performed by comparing the value-in-use of NZDX with its fair value less cost of disposal. The value-in-use analysis used the key assumptions
described above (revenue growth rate of 1%, a consistent EBITDA margin assuming costs increase in line with revenue, probability weighted
scenarios, post tax discount factor of 7.5%), with the value-in-use being sensitive to a change in the discount factor, although this would not materially
change the value-in-use. The analysis also recognised the ongoing decline in postal volumes in New Zealand and the direct impact COVID-19
has taken in accelerating the market’s already growing demand for digital communication solutions. NZDX has seen a recovery of its activity post
lockdown, but a further deterioration of the economic and competitive environment could reduce the estimated recoverable amount of the NZDX
CGU below the current carrying value of its intangible assets (2019: no reasonably possible change in any of the assumptions would cause the
carrying value to materially exceed recoverable amount).
Group
Property,
plant and
equipment
$000
Employee
entitlements
$000
Accruals and
provisions
$000
Derivative
financial
instruments
$000
Intangible
assets
$000
Leases
$000
Total
$000
2021
Balance at
beginning of year(8,553)4,9523,954806(50,011)7,427(41,425)
Prior period
adjustment-413158-(289)-282
Transfer to income
statement5732,592885-2,1569627,168
Amounts relating
to business
combinations
(Note 31)----(2,398)-(2,398)
Adjustment for cash
flow hedge reserve---(342)--(342)
Exchange rate
movement-74-(34)12(11)
Balance at end
of year(7,980)7,9645,001464(50,576)8,401(36,726)
Note 17. Deferred tax liability
The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the
same jurisdiction, is as follows:
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
124 125
Freightways Limited and its subsidiaries |
Group
Property,
plant and
equipment
$000
Employee
entitlements
$000
Accruals and
provisions
$000
Derivative
financial
instruments
$000
Intangible
assets
$000
Leases
$000
Total
$000
2020
Balance at
beginning of year(9,429)4,148 3,0501,516(37,047)-(37,762)
Adjustment on
adoption of
IFRS 16--(354)--6,7466,392
Restated balance
at beginning
of year(9,429)4,148 2,6961,516 (37,047)6,746(31,370)
Prior period
adjustment(530)17516-11-(328)
Transfer to income
statement
• re-introduction
of tax
deductibility
of building
depreciation 1,430-----1,430
• other(26)(75)899-1,7196113,128
Amounts relating
to business
combinations -654315-(14,469)-(13,500)
Adjustment for cash
flow hedge reserve---(710)--(710)
Exchange rate
movement25028-(225)70(75)
Balance at end
of year(8,553)4,952 3,954806 (50,011)7,427(41,425)
Note 19. Provisions
A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an
outflow of economic benefits will be required to settle the obligation and a reliable estimate of the obligation can be made. If the effect is
material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments
of the time value of money and, where appropriate, the risks specific to the liability. The increase in the provision due only to the passage of
time is recognised as an interest expense.
Explanation of provisions
Provision for customer claims relates to actual claims received from customers that are being considered for payment as at reporting date
and are expected to be resolved within the next two months.
Provision for long service leave relates to the potential leave obligation for employees who reach continuous employment milestones
required under Australian regulations. Consideration is given to expected future wage and salary levels, experience of employee departures
and periods of service.
Provision for lease obligations relates to estimated payments to reinstate leased buildings and equipment used to an appropriate condition
upon the expiry of the respective lease terms.
Group
2021
$000
2020
$000
Current
Trade creditors54,08444,556
Employee entitlements31,56121,138
Other creditors and accruals17,29921,962
102,94487,656
Non-current
Acquisition earn-out payables51,25127,386
Other non-current payables101-
51,35227,386
Note 18. Trade and other payables
Trade and other payables are recognised when the Group becomes obligated to make future payments resulting from the purchase of goods
or services. They are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method.
Acquisition earn-out payables have been measured at fair value. The amounts are unsecured.
Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months of the reporting
date are recognised in respect of employees' services rendered up to the reporting date. They are measured for recognition by assessing the
amounts expected to be paid when the liabilities are settled.
Liability for long service leave is recognised and measured as the present value of expected future payments to be made in respect of
services provided by the employee. Consideration is given to expected future wage and salary levels, experience of employee departures and
periods of service.
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
126 127
Freightways Limited and its subsidiaries |
Group
Customer
claims
$000
Long service
leave
$000
Lease
obligations
$000
Total
$000
2020
Balance at beginning of year6242,9372,0495,610
Current year provision 2106594591,328
Amounts relating to business combinations71202473746
Expenses incurred-(235) -(235)
Movement in exchange rate-76 31 107
Balance at end of year9053,6393,0127,556
2021
$000
2020
$000
Analysis of total provisions
Current1,5621,225
Non-current6,9796,331
Total8,5417,556
Note 20. Contract liability
A contract liability of $14.6 million (2020: $15.1 million) is recorded in the balance sheet reflecting the future service obligation for courier
and postal products that have been sold in advance of their use.
Revenue recognised during the year that was included in the contract liability balance at the beginning of the year was $12.9 million (2020:
$14.3 million).
There are no other significant financing components in the Group’s revenue arrangement.
Group
Customer
claims
$000
Long service
leave
$000
Lease
obligations
$000
Total
$000
2021
Balance at beginning of year9053,6393,0127,556
Current year provision 386064891,133
Expenses incurred-(149)(10)(159)
Movement in exchange rate(5)12411
Balance at end of year9384,1083,4958,541
Group
2021
$000
2020
$000
Bank borrowings
Current-5,210
Non-current163,696216,484
163,696221,694
(a) Secured borrowings
The bank borrowings security was changed to a negative pledge deed in March 2021 when the Group negotiated an extension of its syndicated
bank facilities (refer Note 21(b)). The negative pledge includes a provision restricting the Group from granting security interests and a cross-
guarantee of all relevant indebtedness by majority of the Company’s subsidiaries (2020: secured by a charge over the assets of the majority of
the Company’s New Zealand subsidiaries in favour of its primary lenders and guarantees from the Company’s primary Australian subsidiaries).
(b) Finance facilities
The following finance facilities existed at the reporting date:
Facilities denominated in
New Zealand Dollars
Facilities denominated in
Australian Dollars
2021
$000
2020
$000
2021
$000
2020
$000
Bank overdraft
Total bank overdraft facility available8,0008,000--
Amount of overdraft facility unused
8,0008,000-
-
Loan facilities
Total loan facilities available
170,000229,500130,000120,423
Maturing 30 April 2021
-6,000--
Maturing 14 November 2021
-20,000--
Maturing 14 May 2022
-30,000--
Maturing 1 September 2022
-37,000-21,173
Maturing 1 September 2023
-56,500-49,250
Maturing 23 December 2023-70,000--
Maturing 15 March 2024120,000---
Maturing 23 December 2024---20,000
Maturing 15 March 202530,000-80,000-
Maturing 11 July 2025--20,00020,000
Maturing 15 December 202610,00010,00010,00010,000
Maturing 19 March 202810,000-20,000-
Amount of loan facilities used71,000114,71085,50099,923
Amount of loan facilities unused99,000114,79044,50020,500
Effective interest rate at 30 June as amended
for interest rate hedges5.37%5.44%4.41%4.55%
Note 21. Borrowings
Interest-bearing bank loans and overdrafts are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest rate method. Costs incurred in establishing finance facilities are amortised to the income statement over the term of the respective facilities.
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
128 129
Freightways Limited and its subsidiaries |
Liabilities from financing activities
Group
Cash
$000
Leases
$000
Bank
borrowings
$000
Total
$000
Balance at 1 July 201915,986(223,569)(167,394)(374,977)
Cashflow43624,954(45,802)(20,412)
Lease additions, modifications and terminations-(110,199)-(110,199)
Acquisitions – borrowings--(6,023)(6,023)
Exchange rate movement
264 (2,258)(2,475)(4,469)
Balance at 30 June 202016,686(311,072) (221,694)(516,080)
Cashflow
3,34132,59458,87094,805
Lease additions, modifications and terminations
-(32,929)-(32,929)
Other non-cash movements--(861)(861)
Exchange rate movement
(87)(228)(11)(326)
Balance at 30 June 202119,940(311,635)(163,696)(455,391)
(c) Big Chill Distribution Limited CreditPlus Facility
The fleet financing facility with a $6 million limit operated by Big Chill Distribution Limited was repaid progressively by March 2021 and was
then cancelled.
Compliance with banking covenants
The Group was in compliance with all of its banking covenants throughout the year ended 30 June 2021. The Group’s banking covenants forecast
indicates that the Group will remain compliant with all of its banking covenants in the next twelve months. The forecast includes a sensitivity analysis
of a 20% decline in forecast earnings before interest, income tax, depreciation and amortisation.
Net debt reconciliation
An analysis of net debt and the movements in net debt is:
The fair values of borrowings are not materially different to their carrying amount, since the interest payable on those borrowings is either close to
market rate or the borrowings are of a short-term nature.
During March 2021, the Group negotiated an extension of its syndicated bank facilities. Multiple tranches of New Zealand dollars (NZD) facilities
totalling $213.5 million were merged into two facilities at reduced limits of NZ$120 million maturing on 15 March 2024 and NZ$30 million maturing
on 15 March 2025. The lower limits reflect the expected needs of the Group and the fact that temporary facilities that had been set up at the onset of
the COVID-19 pandemic were no longer required. The three tranches of Australian dollars (AUD) facilities totalling A$90.4 million were combined into
one facility at a reduced limit of A$80 million maturing on 15 March 2025. The refinancing resulted in the recognition of a modification loss of $0.9
million in the income statement. In determining the modification loss to be recognised, the Group considered both qualitative and quantitative factors
in determining whether the refinancing represented a modification or extinguishment of the previous facilities.
In March 2021, the Group entered into a new US$160 million uncommitted finance facility with a US-based lender on the same terms as the
syndicated bank facilities negotiated during March 2021. Of this facility, the US dollar equivalent of NZ$20 million and A$50 million was drawn as at 30
June 2021. The drawn amounts mature in July 2025, December 2026 and March 2028, as detailed in the maturity table above.
Note 22. Equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a reduction
in the amount of proceeds arising from the issue of shares.
Group
2021
Ordinary
shares
2020
Ordinary
shares
2021
$000
2020
$000
Balance at beginning of year165,405,051155,371,224180,630126,440
Share-based payment expenses--1,116142
Shares issued during the year:
- underwritten dividend reinvestment plan-4,368,075-23,461
- acquisition consideration-5,586,592-30,000
- employee share plan125,00080,000830579
(Increase) decrease in employee share plan
unallocated shares785(840)(5)8
Balance at end of year165,530,836165,405,051182,571180,630
Contributed equity
(i) Fully paid ordinary shares
As at 30 June 2021 there were 165,538,104 shares issued and fully paid (2020: 165,413,104). All fully paid ordinary shares have equal
voting rights and share equally in dividends and surplus on winding up.
(ii) Share rights
During the year, Freightways implemented a new executive Long Term Incentive (LTI) Scheme. This equity settled scheme replaces the
previous senior executive performance share plan. The new LTI Scheme offers share rights to senior executives, with vesting determined
at the end of a 3-year vesting period. Vesting is subject to the achievement of certain financial hurdles set by the Board and included in
the annual offer of participation to executives. Each share right converts to one Freightways fully paid ordinary share upon vesting.
Share rights of 141,916 and 166,352 were issued on 31 July 2020 and 19 October 2020 respectively to senior executives under the
Freightways LTI Scheme (2020: Nil). As at 30 June 2021, there were 308,268 share rights on issue (2020: Nil). Share rights do not carry
a dividend entitlement and are non-transferable.
(iii) Partly-paid ordinary shares
Partly-paid shares were issued to senior executives in prior years under the rules of the Freightways Senior Executive Performance
Share Plan (the ‘Plan’). The balance of the issue price per share may only be paid up upon the participants meeting agreed performance
hurdles and upon the expiry of the applicable three-year escrow period in accordance with the Plan rules (refer Note 23). During the year,
63,474 partly-paid shares were redeemed and cancelled (2020: 25,227). As at 30 June 2021 there were 200,342 partly-paid shares on
issue, paid up to one cent per share (2020: 263,816). Partly-paid shares have no voting rights and no rights to dividends and surplus
on winding up.
(iv) Partly-paid shares, fully paid up to ordinary shares
No partly-paid shares were fully paid-up during the year by Freightways senior executives under the Freightways Senior Executive
Performance Share Plan (2020: Nil).
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
130 131
Freightways Limited and its subsidiaries |
(v) Employee Share Plan
On 13 October 2020, the Company issued 125,000 fully paid ordinary shares at $6.64 each to Freightways Trustee Company Limited, as
Trustee for the Freightways Employee Share Plan (October 2019: 80,000 fully paid ordinary shares at $7.24 each). In total, participating
employees were provided with interest-free loans of $0.8 million to fund their purchase of the shares in the Share Plan (October 2019:
$0.6 million). The loans are repayable over three years and repayment commenced in October 2020.
As at 30 June 2021, the Trustee held 631,958 (2020: 593,936) fully paid ordinary shares (representing 0.4% (2020: 0.4%) of all issued
ordinary shares) of which 7,268 (2020: 8,053) were unallocated. These shares are held for allocation in the future.
The Employee Share Plan operates in accordance with section CW 26C of the New Zealand Income Tax Act 2007 and the Trustees are
appointed by the Freightways Limited Board of Directors.
Nature and purpose of reserves
(i) Cash flow hedge reserve
The cash flow hedge reserve is used to record gains or losses on a hedging instrument within a cash flow hedge. The amounts are
recognised in the income statement when the associated hedged transactions affect profit or loss, as described in Note 12(i).
(ii) Foreign currency translation reserve
The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the financial
statements of foreign operations into New Zealand dollars, as described in Note 1(c).
Note 23. Share-based payments
The Group operates equity-settled, share-based compensation arrangements for senior executives, under which the Group receives services
from employees as consideration for partly-paid ordinary shares and share rights in the Company. The fair value of the employee services
received in exchange for the partly-paid ordinary shares and share rights is recognised as an expense. The total amount to be expensed
is determined at grant date by reference to the fair value of the partly-paid ordinary shares and share rights allotted, taking into account
market vesting conditions (for example, total shareholder return measures such as outperforming the median of the NZX50 Index), but
excluding the impact of any non-market service and performance vesting conditions (for example, compound growth rates for earnings
per share, expected profit target against the capital employed and remaining an employee of the Group over a specified time period). Non-
market vesting conditions are included in assumptions about the number of partly-paid ordinary shares and share rights that are expected
to vest. The total amount expensed is recognised over the relevant vesting period, which is the period over which all of the specified vesting
conditions are to be satisfied. At each balance sheet date, the Group revises its estimates of the number of partly-paid ordinary shares
and share rights that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original
estimates, if any, in the income statement. At each balance sheet date, the Group records tax obligation in relation to partly-paid shares that
are expected to vest, with revisions to original estimates, if any, recognised in the income statement.
a) Description of share-based payment arrangements
At 30 June 2021, the Group had the following share-based payment arrangements.
(i) Freightways Senior Executive Performance Share Plan (the ‘Plan’)
In September 2008, the Board approved the introduction of a long-term incentive scheme for certain Freightways senior executives
using a performance share plan. The Plan aligns senior executives’ long-term objectives with the interests of Freightways Limited
shareholders.
Payment of any benefit is dependent upon the achievement of agreed performance targets. Partly-paid shares (paid up to one cent per
share) are issued at the discretion of the Board and are generally subject to a three-year escrow period. At the end of each escrow period
the Group will pay a bonus to the senior executives to the extent the performance targets have been achieved, sufficient for the shares to
be fully paid up. The total contractual life of partly-paid shares is 5 years.
The partly-paid shares vest if the participant remains employed by the Group for the duration of the vesting period and the following
performance hurdles are met over the assessment period. They vest in the following proportions:
- Total Shareholder’s Return (TSR) class of shares (50% of partly-paid shares)
This will vest over the assessment period on a progressive vesting scale based on the Group’s TSR relative to the TSR of other
constituents of the NZX50 Index.
- Earnings per Share (EPS) class of shares (50% of partly-paid shares)
This will vest based on achievement of TSR hurdle or EPS growth hurdle (derived from the budgets in respect of the escrow period)
over the assessment period.
In the event that the performance targets have not been achieved at the expiry of the escrow period, the partly-paid shares may be
redeemed by the Company. The Group settles the tax obligation in relation to the vesting of partly-paid shares on the date the shares
are fully paid-up.
(ii) Freightways Long-term Incentive Scheme (the ‘Scheme’)
In July 2020, the Board approved a new Scheme for the senior executives to replace the existing Plan. Under this Scheme, share rights
were issued at ‘Nil’ consideration which entitles participants to receive ordinary shares in Freightways within three years of vesting
period. The total contractual life of share rights is 3 years.
Share rights will vest if the participant remains employed by Freightways for the duration of the vesting period and the following
performance hurdles are met over the assessment period. They will vest in the following proportions:
- Total Shareholder’s Return (TSR) class of rights (50% of share rights)
This will vest over the assessment period on a progressive vesting scale based on the Group’s TSR relative to the TSR of other
constituents of the NZX50 Index.
- Cost of Capital class of rights (50% of share rights)
This will vest based on exceeding a cost of capital hurdle (determined by the Board) over the assessment period.
On vesting date, subject to meeting service and performance conditions, each share right can be exercised to receive one ordinary share.
The senior executives are liable for tax on the shares received at this point.
b) Reconciliation of outstanding partly-paid shares and share rights
Number of partly-paid sharesNumber of share rights
2021202020212020
Balance at beginning of year263,816289,043--
Issued during the year--308,268-
Cancelled during the year(63,474)(25,227)--
Fully paid-up or exercised during the year----
Expired during the year----
Balance at end of year200,342263,816308,268-
Exercisable at end of the year200,342---
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
132 133
Freightways Limited and its subsidiaries |
Partly-paid sharesShare rights
Grant date:12 Sept 201613 Sept 201726 Sept 201831 July 202019 Oct 2020
Fair value at grant date
$1.69 – TSR
class of shares
$3.78 – EPS
class of shares
(EPS option)
$0.80 – EPS
class of shares
(TSR option)
$1.73 – TSR
class of shares
$4.48 – EPS
class of shares
(EPS option)
$0.69 – EPS
class of shares
(TSR option)
$1.79 – TSR
class of shares
$4.28 – EPS
class of shares
(EPS option)
$0.93 – EPS
class of shares
(TSR option)
$1.56 – TSR
class of rights
$6.52 – NOPAT
class of rights
$4.14 – TSR
class of rights
$7.43 – NOPAT
class of rights
Exercise price$0.01$0.01$0.01NilNil
Share price at grant date$6.82$7.83$7.56$7.01$8.29
Expected dividends5.3%4.2%4.6%4%4%
Expected volatility 18%14%15%24.6%24.9%
Expected life 0.2 years0.2 years0.2 years1.9 years2.7 years
Risk free interest rate (based
on government bonds)2%2.3%1.9%0.35%0.10%
2021
$000
2020
$000
Total amount expensed during the year806438
Liability recognised at year end for estimated income tax applicable to
bonuses payable to facilitate the paying-up of vested partly-paid shares607911
c) Effect of share-based payment arrangements on profit or loss, financial position and equity
d) Fair value measurement of share-based payment arrangements
The fair value of partly-paid shares has been measured using both the binomial option pricing model and Monte Carlo simulation. The fair
value of share rights has been measured using Monte Carlo simulation. The fair value measurement also considers the terms and conditions
upon which partly-paid shares and share rights were issued. Service and non-market performance conditions attached to the arrangements
were not considered in measuring fair value.
The inputs used in the measurement of fair values at grant date of partly-paid shares and share rights were as follows:
Expected volatility has been based on an evaluation of the historical volatility of the Freightways’ share price, particularly over the historical
period commensurate with the expected term. The expected term of partly-paid shares and share rights have been based on historical
experience and general option holder behaviour.
Group
Note
2021
$000
2020
$000
Profit for the year49,63347,375
Add non-cash items:
Depreciation and amortisation5
64,68750,353
Movement in provision for doubtful debts329 1,024
Movement in deferred income tax(4,726)(4,149)
Net loss on disposal of property, plant and equipment 367951
Net foreign exchange (gain) loss(2,366)5
Change in fair value of contingent consideration –
Big Chill Distribution Limited23,046-
Other income and expenses-5,271
Impairment of non-current assets-608
Write-off of software1,5653,115
Share of profits of associates(1,318)(873)
Movement in working capital, net of effects of acquisitions of businesses:
Decrease (increase) in trade and other receivables(5,099)(11,741)
Decrease (increase) in inventories (1,414)(1,010)
Increase (decrease) in trade and other payables17,236 24,226
Increase (decrease) in income taxes payable(6,927)12,010
Net cash inflows from operating activities135,013127,165
Note 24. Reconciliation of profit for the year with cash flows from operating activities
Note 25. Capital commitments and contingent liabilities
The Group had made capital commitments to purchase or construct buildings and equipment for $8.4 million at 30 June 2021 (2020: $2.9
million), principally relating to the completion of operating facilities and purchase of replacement equipment throughout the Group.
As at 30 June 2021, the Group had outstanding letters of credit and bank guarantees issued by its lenders totalling approximately $5.2 million
(2020: $5 million). The letters of credit relate predominantly to support for regular payroll payments. The bank guarantees relate to security
given to various landlords in respect of leased operating facilities.
Group
20212020
Profit for the year attributable to shareholders ($000)49,63347,332
Weighted average number of ordinary shares (‘000)165,502157,952
Basic earnings per share (cents)30.030.0
Note 26. Earnings per share*
Basic earnings per share
Basic earnings per share is calculated by dividing the profit for the year attributable to shareholders by the weighted average number of
ordinary shares outstanding during the year:
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
134 135
Freightways Limited and its subsidiaries |
Note 27. Net tangible assets per security
Net tangible assets (liabilities) per security at 30 June 2021 was ($0.83) (2020: ($1.01)).
Group
2021
$000
2020
$000
Short term employee benefits 7,5086,218
Share-based payments (Note 23)806438
Note 28. Transactions with related parties
Trading with related parties
The Group has not entered into any material external related party transactions which require disclosure. The Group does trade, on normal
commercial terms, with certain companies in which there are common directorships. These counterparties include Z Energy Limited and
Sanford Limited.
Payments to joint venture
During the year, the Group paid Parcelair Limited $14.3 million (2020: $13.1 million) for the provision of airfreight linehaul services on normal
commercial terms. Parcelair Limited is incorporated in New Zealand and is half-owned by the Group.
Key management compensation
Compensation paid during the year (or payable as at year end in respect of the year) to key management, which includes senior executives of
the Group and non-executive independent directors, is as follows:
Group
20212020
Profit for the year attributable to shareholders ($000)49,63347,332
Weighted average number of ordinary shares (‘000)165,502157,952
Effect of dilution (‘000)509264
Diluted weighted average number of ordinary shares (‘000)166,011158,216
Diluted earnings per share (cents)29.929.9
Diluted earnings per share
Diluted earnings per share is calculated by dividing the profit for the year attributable to shareholders by the weighted average number of
ordinary shares outstanding during the year, adjusted to include all dilutive potential ordinary shares (for example, partly-paid shares on
issue) as if they had been converted to ordinary shares at the beginning of the year:
* Basic and diluted earnings per share calculated on the profit for the year attributable to shareholders, excluding change in fair value of
contingent consideration (Big Chill Distribution Limited) and other income and expenses, net of tax (refer Note 5), are 43.9 and 43.8 cents,
respectively (2020: 35.5 and 35.4 cents, respectively).
Note 29. Financial risk management
29.1 Financial risk factors
The Group’s activities expose it to various financial risks, including liquidity risk, credit risk and market risk (which includes currency risk and
cash flow interest rate risk). The Group’s overall risk management programme focuses on the uncertainty of financial markets and seeks to
minimise potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain
risk exposures.
Treasury activities are performed centrally by the Group’s corporate team, supplemented by external financial advice and the use of
derivative financial instruments is governed by a Group Treasury Policy approved by the Company’s Board of Directors.
The Group does not engage in speculative transactions or hold derivative financial instruments for trading purposes.
(a) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they fall due. The Group’s approach to
liquidity risk management includes maintaining sufficient cash reserves and ensuring adequate committed finance facilities are available.
In assessing its exposure to liquidity risk, the Group regularly monitors rolling 3, 6 and 12 months cash requirement forecasts.
Whilst the COVID-19 pandemic and its economic impact could potentially make access to funding more difficult than previously, Freightways
maintains strong relationship with lenders and has access to a range of funding sources that would mitigate that risk.
The table below analyses the Group’s financial liabilities into relevant maturity groupings, based on the remaining period from the reporting
date to the contractual maturity date.
The amounts disclosed below are contractual, undiscounted cash flows, except for lease liabilities and interest rate swaps.
Group
Less than
6 months
$000
6-12
months
$000
1-2
years
$000
2-5
years
$000
More than
5 years
$000
Total
$000
2021
Bank borrowings3,6743,8358,702129,02654,387199,624
Trade and other payables82,48227,81851,251-101161,652
Lease liabilities15,72115,35728,77075,083176,704311,635
Derivative financial instruments –
interest rate swaps856696359--1,911
2020
Bank borrowings3,395 8,777 7,456 192,93843,768256,334
Trade and other payables71,994 29,393 193 27,193 -128,773
Lease liabilities15,71314,928 26,884 65,787187,760311,072
Derivative financial instruments –
interest rate swaps1,2171,0451,636696-4,594
Lease liabilities have been measured at the present value of the remaining lease payments, discounted using a discount rate derived from
the incremental borrowing rate (IBR) when the interest rate implicit in the lease was not readily available. The amounts expected to be
payable in relation to the interest rate swaps have been estimated using forward interest rates applicable at the reporting date.
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
136 137
Freightways Limited and its subsidiaries |
Group
2021
$000
2020
$000
Cash and cash equivalents19,94016,686
Trade and other receivables92,73092,942
112,670109,628
Cash and cash equivalents are held with banks with Standard & Poor’s rating of AA-.
(b) Credit risk
Credit risk refers to the risk of a counterparty failing to discharge its obligation. Financial instruments which potentially subject the
Group to credit risk principally consist of bank balances, accounts receivable and derivative financial instruments.
The Group has credit policies that are used to manage the exposure to credit risk. As part of these policies, exposures with
counterparties are monitored on a regular basis. The Group performs credit evaluations on all customers requiring credit and generally
does not require collateral.
A default in a financial asset is when the counterparty fails to make contractual payments when debt recovery processes have
been exhausted and/or the counterparty is declared bankrupt or in the case of companies, placed in administration, receivership or
liquidation.
The Group’s Treasury Policy ensures due consideration is given to the financial standing of the counterparty banks with which the
Group holds cash reserves and transacts derivative financial instruments. A minimum Standard & Poor’s long-term credit rating of
A/A – is required to qualify as an approved counterparty, with the exception that a maximum of 1% of total debt exposure may be with
counterparty with BBB credit rating. The quantum of transactions entered into with the Group’s various financial lenders is also balanced
to mitigate exposure to concentrated counterparty credit risk with any one financial provider.
The Group does not have any significant concentrations of credit risk.
For counterparties to trade receivables that are neither past due nor impaired, payments have historically been received regularly and
on time.
The Group considers its maximum exposure to credit risk to be as follows:
20212020
Group
Gross
carrying
amount
$000
Expected
loss rate
%
Loss
allowance
$000
Gross
carrying
amount
$000
Expected
loss rate
%
Loss
allowance
$000
Current78,8981%87071,4260.5%357
31-60 days over standard terms7,7596%46612,7155%636
60-90 days over standard terms1,48726%3871,49725%374
91+ days over standard terms2,56750%1,2913,28547%1,542
90,7113,01488,9232,909
Trade receivables analysis
At 30 June aging analysis of trade receivables is as follows:
The Group has $8.8 million (2020: $14.6 million) of financial assets that are overdue and not impaired.
(c) Market risk
Foreign exchange risk
Exposure to foreign exchange risk arises when (i) a transaction is denominated in a foreign currency and any movement in foreign exchange
rates will affect the value of that transaction when translated into the functional currency of the Company or a subsidiary; and (ii) the value of
assets and liabilities of overseas subsidiaries are required to be translated into the Group’s reporting currency.
The Group’s Treasury Policy is used to assist in managing foreign exchange risk. In accordance with Treasury Policy guidelines, foreign
exchange hedging is used as soon as a defined exposure to foreign exchange risk arises and exceeds certain thresholds.
As disclosed in Note 21, at 30 June 2021 the Group had Australian dollar denominated bank borrowings of AUD85,500,000 (2020:
AUD99,923,000). Of these borrowings, AUD14,200,000 (2020: AUD14,200,000) were borrowed by a New Zealand subsidiary and have been
translated at the prevailing foreign currency rate as at balance date. The rest of the Australian dollar denominated bank borrowings have
been borrowed by an Australian subsidiary and are translated as part of the consolidation of the Group for reporting purposes. The Group has
no other outstanding foreign currency denominated monetary items.
The table on the following page details the Group’s sensitivity to the increase and decrease in the New Zealand dollar (NZD) against the
Australian dollar (AUD) in respect of the Australian dollar denominated bank borrowings, borrowed in New Zealand. The sensitivity analysis
only includes outstanding foreign currency denominated monetary items at the reporting date and adjusts their translation as at that date
for the change in foreign currency rates. A positive number indicates a decrease in liabilities (bank borrowings) where the NZD strengthens
against the AUD.
Interest rate risk
Exposure to cash flow interest rate risk arises in borrowings of the Group that are at the prevailing market interest rate current at the time of
drawdown and are re-priced at intervals not exceeding 180 days.
Interest rate risk is identified by forecasting short and long-term cash flow requirements.
The Group’s Treasury Policy is used to assist in managing interest rate risk. Treasury Policy requires projected annual core debt to be
effectively hedged within interest rate risk control limits against adverse fluctuations in market interest rates.
The following table demonstrates the sensitivity of the Group’s equity and profit after tax to a potential change in interest rates by plus or
minus 100 basis points, with all other variables held constant and in relation only to that portion of the Group’s borrowings that are subject to
floating interest rates.
Significant assumptions used in the interest rate sensitivity analysis include;
(i) reasonably possible movements in interest rates were determined based on the Group’s current mix of debt in New Zealand and
Australia, the level of debt that is expected to be renewed and a review of the last two year’s historical movements; and
(ii) price sensitivity of derivatives has been based on a reasonably possible movement of interest rates at balance dates by applying the
change as a parallel shift in the forward curve.
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
138 139
Freightways Limited and its subsidiaries |
Sensitivity analysis:
Interest rate
movement
NZD/AUD
movement
Impact on profit
Impact on other
components of equity
Impact on
liabilities & equity
Carrying
amounts
$000
+100
basis
points
$000
-100
basis
points
$000
+100
basis
points
$000
-100
basis
points
$000
+ or – 10% in
value of NZD
$000
2021
Financial assets
Cash and cash equivalents19,940144(144)144(144)-
Trade and other receivables98,507-----
Financial liabilities
Borrowings163,032(1,174)1,174(1,174)1,1741,387/(1,695)
Derivative financial instruments1,659410(410)983(998)-
2020
Financial assets
Cash and cash equivalents16,686120(120)120(120)-
Trade and other receivables100,025-----
Financial liabilities
Borrowings221,694(1,596) 1,596(1,596) 1,596 1,382/(1,689)
Derivative financial instruments2,882527(527)1,545(1,584) -
(d) Fair value estimation
The carrying value less impairment provision of trade receivables and payables is a reasonable approximation of their fair values due to the
short-term nature of trade receivables and payables. The fair value of financial liabilities for disclosure purposes is estimated by discounting
the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
The fair values of financial instruments are estimated using discounted cash flows. The fair value of interest rate swaps and foreign exchange
hedges are calculated as the present value of the estimated future cash flows.
Unless otherwise stated, all other carrying amounts are assumed to equal or approximate fair value.
The Group uses various methods in estimating the fair value of a financial instrument. The methods comprise:
Level 1 – Quoted prices (adjusted) in active markets for identical assets or liabilities at the reporting date. A market is regarded as active if
quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and
those prices represent actual and regularly occurring market transactions on an arm’s length basis.
Level 2 – Inputs that are observable for the asset or liability, either directly (i.e., as prices; other than quoted prices referred to in Level 1
above) or indirectly (i.e., derived from prices). The fair value of financial instruments that are not traded in an active market (for example,
over-the-counter derivatives and US Private Placement (USPP)) is determined by using valuation techniques. These valuation techniques
maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant
inputs required to fair value an instrument are observable, the fair value of an instrument is included in Level 2.
Level 3 – Inputs for the asset or liability that are not based on observable market data (i.e., unobservable inputs). In these cases, the fair
value of an instrument would be included in Level 3.
Level 1
$000
Level 2
$000
Level 3
$000
Total
$000
2021
Liabilities
Derivative financial instruments-1,659-1,659
USPP-82,130-82,130
Contingent consideration in a
business combination
--51,30551,305
Total liabilities-83,78951,305135,094
2020
Liabilities
Derivative financial instruments-2,882-2,882
USPP-49,469-49,469
Contingent consideration in a
business combination
--27,38627,386
Total liabilities-52,35127,38679,737
Specific valuation techniques used to value financial instruments include:
• In respect of interest rate swaps, the fair value is calculated as the present value of the estimated future cash flows based on observable
yield curves;
• In respect of forward foreign exchange contracts, the fair value is calculated using forward exchange rates at the balance sheet date, with
the resulting value discounted back to present value;
• In respect of USPP, the fair value is calculated on a discounted cash flow basis using the USD Bloomberg curve and applying discount
factors to the future USD interest payment and principal payment cash flows; and
• discounted cash flow analysis for other financial instruments.
Specific valuation techniques used to value contingent consideration in a business combination and estimated purchase price adjustments
include:
• fair value is calculated as the present value of the estimated future cash flows based on management’s assessment of future
performance; and
• management’s knowledge of the business and the industry it operates in.
The amounts below are for the derivative financial instruments, USPP and contingent consideration in a business combination. There were
no transfers between levels during the year.
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
140 141
Freightways Limited and its subsidiaries |
The following table shows the valuation technique used in measuring Level 3 contingent consideration in a business combination and
estimated purchase price adjustments:
DescriptionFair value as at
30 June 2021
Fair value as at
30 June 2020
Unobservable
Input
Range of inputs
2021
Range of inputs
2020
Relationship of
unobservable inputs to
fair value (sensitivity)
Contingent
Consideration
51,30527,386Achievement
of Annual
Budget
92.5% –
107.5%
95% – 110%A change in the
achievement of the
FY22 budget by 250
bps would increase/
decrease the FV of
the consideration by
$1.3m
Probability
weighted
average of
achieving
FY22 Budget
99%n/aA change in the
achievement of the
FY22 budget by 250
bps would increase/
decrease the FV of
the consideration by
$1.3m
Discount Rate2.6%2.6%A change in the
discount rate by 100
bps would increase/
decrease the FV of
the consideration by
$0.5m
The following table presents the changes in Level 3 instruments, which are carried at fair value through profit or loss.
Contingent consideration in a business combination
2021
$000
2020
$000
Opening balance27,3861,464
Acquisition of businesses-27,381
Settlement(139)-
Purchase price adjustment-(1,505)
Change in fair value of contingent consideration23,046-
Unwinding of discount on contingent consideration1,012-
Exchange rate adjustments-46
Closing balance51,30527,386
Total losses for the year included in the income statement for liabilities held at the end of the reporting period, under:
· Change in fair value of contingent consideration
– Big Chill Distribution Limited
23,046(1,505)
· Net interest and finance costs1,012-
24,058(1,505)
Contingent consideration in a business combination relates to an increase in the estimated future final payment for the acquisition of
Big Chill Distribution Limited (BCD) (2020: relates to acquisition of BCD). Refer Note 31 for details of the BCD acquisition.
29.2 Capital risk management
Group capital (Shareholders Funds) consists of share capital, other reserves and retained earnings. To maintain or alter the capital structure,
the Group has the ability to vary the level of dividends paid to shareholders, return capital to shareholders or issue new shares, reduce or
increase bank borrowings or sell assets. The Group does not have any externally imposed capital requirements.
The Group’s long term debt facilities impose a number of banking covenants. These covenants are calculated monthly and are reported to
the banks half-yearly on a rolling 12-months basis. The most significant covenant relating to capital management is a requirement for the
Group to maintain its operating leverage (net debt divided by profit before interest, tax, depreciation and amortisation) below a maximum
level. There have been no breaches of banking covenants or events of review during the current or prior year.
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
142 143
Freightways Limited and its subsidiaries |
Financial assets at
amortised cost
Derivatives used
for hedging
Total
2021
$000
2020
$000
2021
$000
2020
$000
2021
$000
2020
$000
Group
Trade and other receivables
(excluding prepayments)98,507100,025--98,507100,025
Cash and cash equivalents19,94016,686--19,94016,686
Total118,447116,711--118,447116,711
Derivatives used for
hedging
Other financial liabilities
at amortised cost
Other financial liabilities
held at fair value
Total
2021
$000
2020
$000
2021
$000
2020
$000
2021
$000
2020
$000
2021
$000
2020
$000
Group
Borrowings (excluding
lease liabilities)--163,696221,694--163,696221,694
Lease liabilities--311,636311,072--311,636311,072
Derivative financial
instruments
1,6592,882----1,6592,882
Trade and other payables --66,80260,09651,30527,386118,10787,482
Total1,6592,882542,134592,86251,30527,386595,098623,130
Note 30. Financial instruments by category
(a) Assets, as per balance sheet
(b) Liabilities, as per balance sheet
Note 31. Business combinations
Big Chill Distribution Limited (“BCD”)
Effective 1 April 2020, the Group acquired 100% of BCD, a company operating in the New Zealand temperature-controlled transport and
facilities market, for an initial consideration of approximately $114.6 million and a future earn-out representing 20% of BCD Enterprise Value
as at 30 June 2022. This acquired subsidiary operates within the Group’s express package & business mail division.
Given the size of the transaction and proximity to the end of financial year, the Group had not yet finalised the fair value assessment of the
assets acquired, liabilities assumed and goodwill as at 30 June 2020. The Group finalised its assessment during the year ended 30 June 2021
and revised the fair value of the assets acquired and liabilities assumed.
1 Apr 2020 &
30 June 2020
31 Dec 2020
Preliminary
$000
Adjustments
$000
Revised
$000
Purchase consideration:
Cash paid during the period84,553-84,553
Issue of Freightways shares30,000-30,000
Fair value of future earn-out payment27,193-27,193
Total purchase consideration141,746-141,746
The fair value of the trade and other receivables acquired as part of the business combination amounted to $11.7 million. The gross
contractual amount is $12.1 million, with a loss allowance of $0.4 million recognised on acquisition.
The goodwill of $77.6 million arising upon this acquisition is attributable to the business know how and premium paid for strategic reasons,
including acquiring an entry point into the temperature-controlled transport and facilities industry. None of the goodwill recognised is
deductible for income tax purposes.
Fair value of assets and liabilities arising from the acquisition:
Cash and cash equivalents5,715-5,715
Trade and other receivables11,706-11,706
Plant and equipment24,256-24,256
Right-of-use assets91,292-91,292
Net investment in sublease4,506-4,506
Brand name5,5008,50014,000
Customer relationships40,900-40,900
Non-compete agreement1,900-1,900
Goodwill83,755(6,120)77,635
Trade and other payables(12,802)-(12,802)
Borrowings(6,023)-(6,023)
Deferred tax liability(12,724)(2,380)(15,104)
Lease liabilities(96,235)-(96,235)
141,746-141,746
The following table summarises the revised amounts determined for purchase consideration and the fair value of assets acquired and
liabilities assumed:
Notes to the financial statements
For the year ended 30 June 2021
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
144 145
Freightways Limited and its subsidiaries |
Financial Statements
Stock exchange listing
The Company’s fully paid ordinary shares are listed on NZSX (the New Zealand Stock Exchange).
Distribution of shareholders and shareholdings as at 31 July 2021
Number
of holders
Number
of shares held
% of issued
capital
Size of shareholding
1 to 1,9993,8233,554,4042.15
2,000 to 4,9992,5937,803,0244.71
5,000 to 9,9991,2007,888,4084.77
10,000 to 49,99977313,059,2017.89
50,000 to 99,999372,266,5771.37
100,000 to 499,999285,080,4283.07
500,000 to 999,999107,240,4884.37
1,000,000 and over24118,645,57471.67
Total shareholders8,488165,538,104100.00
Geographic distribution
New Zealand8,313148,859,23989.92
Australia10916,402,9309.91
Other66275,9350.17
8,488165,538,104100.00
Substantial product holders as at 31 July 2021
Based upon notices received, the following persons are deemed to be substantial product holders in accordance with Section 293 of the
Financial Markets Conduct Act 2013:
Voting securities
Number%
ANZ New Zealand Investments Limited, ANZ Bank New Zealand Limited,
ANZ Custodial Services New Zealand Limited, ANZ New Zealand Investments
Nominees Limited and OnePath Funds Management Limited (Australia)
10,055,8676.07
The total number of issued voting securities of the Company as at 31 July 2021 was 165,538,104.
(a) Big Chill brand name
The fair value for the Big Chill brand name was provisional as at 30 June 2020, which has since been finalised during the year ended 30
June 2021.
(b) Fair value of future final payment – 30 June 2020
The estimated discounted future final payment of $27.2 million payable in August 2022 was accrued for in the financial
statements but was contingent upon certain financial performance hurdles being achieved for the years ended 30 June 2021 and 2022. The
potential undiscounted amount of the future final payment that the Group expected was between nil and $30 million. The Group forecasted
several scenarios and probability-weighted each to determine a fair value for this contingent payment arrangement.
(c) Fair value of future final payment – 30 June 2021
As at 30 June 2021 the estimated discounted future final payment was increased to $51.3 million ($52.6m undiscounted), representing an
increase of $23 million (net of impact of unwinding of discount on acquisition earn-out liability of $1 million) which has been recognised in
the income statement. The Group has forecast several scenarios and probability-weighted each to determine an updated fair value for this
contingent payment arrangement. The liability is presented within trade and other payables in the balance sheet.
State Waste Services (SWS)
Effective 1 September 2017, the Group acquired the business and assets of SWS, an Australian-based medical waste collection and
destruction business, for an initial payment of approximately $6.5 million (A$5.9 million) and a future maximum earn-out of up to $4.5 million
(A$4.1 million). SWS was branded as Med-X and integrated into the Group’s Shred-X business within the information management division.
As at 30 June 2021, based on the actual performance of the acquired business, management has confirmed that no future earn-out payment
will be due in September 2021 (2020: no accrual for this earn-out).
Note 32. Significant events after balance date
Dividend declared
On 23 August 2021, the Directors declared a fully imputed final dividend of 18 cents per share (approximately $29.8 million) in respect of the
year ended 30 June 2021. The dividend will be paid on 1 October 2021. The record date for determination of entitlements to the dividend is
17 September 2021.
COVID-19
Post year end, parts of Australia have seen increased restrictions because of a resumption of COVID-19 cases. To date this has not had a
material impact on the Group’s business activities.
On 18 August 2021, New Zealand entered an alert level 4 lockdown. Freightways is deemed to provide essential services in New Zealand and
have well established protocols to ensure that all staff and contractors can operate safely under all alert levels; however, under alert level 4,
activity levels are significantly impacted across all the New Zealand businesses. Experience from the previous move from alert level 4 to alert
level 3 showed that the express package businesses should recover quickly and tend to experience a significant increase in volumes stronger
than expected under level 3.
Should the level 4 lockdown continue for an extended period we will continue to evaluate our cost base and whether there is a need to apply
for the government wage subsidy.
At the date of this report, there have been no other significant events subsequent to the reporting date.
Shareholder Information
Notes to the financial statements
For the year ended 30 June 2021
Annual Report | Financial Year ended 30 June 2021
146 147
Freightways Limited and its subsidiaries |
Number of
Shares held
% of issued
capital
Custodial Services Limited <A/C 4>22,409,50513.54
Citibank Nominees (New Zealand) Limited <CNOM90> *11,258,8906.80
FNZ Custodians Limited 10,213,6166.17
HSBC Nominees (New Zealand) Limited <HKBN45> *6,807,2544.11
Forsyth Barr Custodians Limited <1-Custody>6,801,7274.11
Accident Compensation Corporation <ACCI40> *6,470,1603.91
ANZ Custodial Services New Zealand Limited <PBNK90> *6,113,0253.69
HSBC Nominees (New Zealand) Limited <HKBN90> *6,024,5983.64
TEA Custodians Limited <TEAC40> *5,562,4783.36
JPMorgan Chase Bank <CHAM24> *5,261,6813.18
BNP Paribas Nominees (NZ) Limited <BPSS40> *4,147,2412.51
National Nominees Limited <NNLZ90> *3,701,8782.24
JBWere (NZ) Nominees Limited <NZ Resident A/C>3,210,8961.94
PTJR Pty Limited3,054,0541.84
HSBC Nominees A/C NZ Superannuation Fund Nominees Limited <SUPR40> *2,894,6731.75
New Zealand Depository Nominee Limited <A/C 1 Cash Account>2,756,7781.67
ANZ Wholesale Australasian Share Fund <PNAS90> *2,728,2641.65
Dean John Bracewell & Phillipa Anne Bracewell & Bracewell Trustee Company Limited
<Bracewell Family A/C>
1,753,7331.06
BNP Paribas Nominees (NZ) Limited <COGN40>*1,647,4391.00
FNZ Custodians Limited <DTA Non Resident A/C> 1,319,2950.80
114,137,18568.97
*Held through NZ Central Securities Depository Limited
Top twenty registered shareholders of listed shares as at 31 July 2021
Shareholder InformationCorporate Governance Statement
This statement is an overview of the Group’s main corporate governance policies, practices and processes adopted or followed by the
Board of Directors. The Group’s corporate governance processes do not materially differ from the principles set out in the NZX Corporate
Governance Code.
The role of the Board of Directors
The Board of Directors of Freightways Limited (the Board) is committed to the highest standards of corporate governance and ethical
behaviour, both in form and substance, amongst its Directors and the people of the Company and its subsidiaries (Freightways).
Board responsibilities
The Board’s corporate governance responsibilities include overseeing the management of Freightways to ensure proper direction and
control of Freightways’ activities.
In particular, the Board will establish corporate objectives and monitor management’s implementation of strategies to achieve those
objectives. It will approve budgets and monitor performance against budget. The Board will ensure adequate risk management strategies
are in place and monitor the integrity of management information and the timeliness of reporting to shareholders and other stakeholder
groups.
The Board will follow the corporate governance rules established by the New Zealand Stock Exchange and Directors will act in accordance
with their fiduciary duties in the best interests of the Company.
A formal Board Charter, which can be found at https://www.freightways.co.nz/about/corporate-governance/, has been adopted by the Board
that elaborates on Directors’ responsibilities. The Board will internally evaluate its performance annually. Any recommendations flowing
from this review will be implemented promptly. The Board will review its Corporate Governance practice against current best practice and
continue to develop company policies and procedures, as deemed necessary.
Board composition, appointment and performance
In accordance with the Company’s constitution the Board will comprise not less than three directors. The Board will be comprised of a mix
of persons with complementary skills appropriate to the Company’s objectives and strategies. The Board must include not less than two
persons (or if there are eight or more directors, three persons or one third rounded down to the nearest whole number of directors) who are
deemed to be independent.
Freightways’ Board currently comprises six Directors (excluding Fiona Oliver who was appointed on 5 July 2021): the non-executive Chairman
and five non-executive directors. All Freightways’ Directors are independent. Key executives attend board meetings by invitation.
Each director must enter into a written agreement with the Company on appointment that outlines the terms of the director’s appointment.
The directors all undertake appropriate training to remain current on how to best perform their duties as directors of the Company.
Diversity & Inclusion
The Company has a formal diversity & inclusion policy which can be found at https://www.freightways.co.nz/about/corporate-governance/.
The Company is committed to encouraging diversity throughout all levels of its operations and by ensuring all employees have an equal
opportunity to realise their career ambitions within Freightways. As required to be reported by the NZX Listing Rules, the Company advises
that from a gender diversity perspective, as at 30 June 2021, the Board was comprised of 5 male and 1 female directors (2020: 4 male and
2 female directors), and all 5 officers of the Company, who are not directors of the Company, were male (2020: all 5 officers of the Company,
who were not directors of the Company, were male).
The Company has committed to promoting diversity and inclusion in the workplace through the development and advancement of under-
represented groups in the Group with career opportunities, professional development courses and training. The Executive team of the
businesses in the Group currently consists of 26% female with no measure of ethnic mix. The Company has set an objective of having 40% of
the Executive, Leadership Teams and Freightways Board to be composed of representatives of currently under-represented groups (women,
ethnic groups and employees under 43 years-old) by 2030.
Annual Report | Financial Year ended 30 June 2021
148 149
Freightways Limited and its subsidiaries |
Corporate Governance Statement
Meetings HeldMeetings Attended
Director
Mark Verbiest1111
Mark Cairns (Appointed 1 April 2021)22
Kim Ellis1110
Abby Foote1111
Peter Kean1111
Mark Rushworth1111
Andrea Staines (Resigned 29 October 2020)43
43
Meetings HeldMeetings Attended
Director
Abby Foote88
Mark Rushworth88
Mark Verbiest88
Board committees
Standing committees have been established to assist in the execution of the Board’s responsibilities. These committees utilise their
access to management and external advisors at a suitably detailed level, as deemed necessary and report back to the full Board. Each of
these committees has a charter outlining its composition, responsibilities and objectives. The committees are as follows:
Audit & Risk Committee: The Audit & Risk Committee is responsible for overseeing risk management, accounting and audit activities and
reviewing the adequacy and effectiveness of internal controls, meeting with and reviewing the performance of external auditors, reviewing
the Annual Report and Half Year Results Release and making recommendations on financial and accounting policies. The Company’s Audit &
Risk Committee Charter can be found at https://www.freightways.co.nz/about/corporate-governance/.
The Group has an established internal audit function for financial controls and also engages Ernst & Young to perform complementary
internal audits of non-financial control related areas of the Group. Ernst & Young utilise the expertise of their relevant Subject Matter
Professionals to execute an internal audit programme that effectively covers a broad spectrum of risks. Ernst & Young regularly reports on
their activities to the Audit & Risk Committee.
The members are Abby Foote (Chair), Mark Rushworth and Mark Verbiest. All members are independent non-executive Directors. Meetings
were held and attended, as follows:
Board meetings
The following table outlines the number of board meetings attended by Directors during the course of the 2021 financial year:
Meetings HeldMeetings Attended
Director
Kim Ellis66
Mark Cairns (Appointed 24 June 2021)11
Peter Kean66
Andrea Staines (Resigned 29 October 2020)22
Mark Verbiest 66
People & Remuneration Committee: The People & Remuneration Committee is responsible for overseeing the Freightways human
resource practices, reviewing the remuneration and benefits of the senior management, reviewing and recommending the remuneration
of Board members, and making recommendations to the Board in respect of succession planning. The Company’s People & Remuneration
Committee Charter and the Company’s Remuneration Policy can be found at https://www.freightways.co.nz/about/corporate-governance/.
The members of the People & Remuneration Committee are Kim Ellis (Chair), Peter Kean and Mark Verbiest. Meetings were held and
attended, as follows:
Nominations Committee: The Nominations Committee is responsible for ensuring the Board is composed of Directors who contribute to
the successful management of the Company, ensuring formal review of the performance of the Board, individual Directors and the Board’s
committees, ensuring effective induction programmes are in place for the Directors and confirming the status of Directors’ independence
for external reporting purposes. The Company’s Nominations Committee Charter can be found at https://www.freightways.co.nz/about/
corporate-governance/.
The members of the Nominations Committee are Mark Verbiest (Chair), Mark Cairns, Kim Ellis, Abby Foote, Peter Kean and Mark
Rushworth. Meetings were held and attended, as follows:
Meetings HeldMeetings Attended
Director
Mark Verbiest11
Mark Cairns (Appointed 1 April 2021)--
Kim Ellis11
Abby Foote1 1
Peter Kean 11
Mark Rushworth11
Andrea Staines (Resigned 29 October 2020)11
Code of ethics
Freightways expects its Directors and employees to maintain high ethical standards that are consistent with Freightways’ core values,
business objectives and legal and policy obligations. A formal Code of Ethics has been adopted by the Board and can be found at https://www.
freightways.co.nz/about/corporate-governance/. Freightways’ people are expected to continue to lead according to this Code. The Code deals
specifically with conflicts of interest, proper use of information, proper use of assets and property, conduct and compliance with applicable
laws, regulations, rules and policies.
Corporate Governance Statement
Annual Report | Financial Year ended 30 June 2021
150 151
Freightways Limited and its subsidiaries |
Protected disclosures (whistleblower)
The Company is committed to encouraging, supporting and respecting open and honest accountable work practices. The Company believes
all employees have a responsibility to eliminate serious wrongdoing in the workplace. The Company’s Protected Disclosure (Whistleblower)
Policy can be found at https://www.freightways.co.nz/about/corporate-governance/.
Delegation of authority
The Board delegates its authority where appropriate to the Chief Executive Officer for the day-to-day affairs of Freightways. Formal policies
and procedures exist that detail the parameters that the Chief Executive Officer and in turn his direct reports are able to operate within.
Share trading by directors and management
The Board has adopted a policy that ensures compliance with New Zealand’s insider trading laws. This policy requires prior consent by the
Chief Financial Officer in relation to any trading by executive management, and in the case of Directors of the Company and its subsidiaries,
prior consent by the Chairman of the Board. The Company’s Insider Trading Policy can be found at https://www.freightways.co.nz/about/
corporate-governance/.
Treasury policy
Exposure to foreign exchange and interest rate risks is managed in accordance with the Group’s Treasury Policy that sets limits of
management authority. Derivative financial instruments are used by the Group to manage its business risks; they are not used for speculative
purposes.
Reporting and disclosure
The Company is committed to promoting investor confidence by providing timely, accurate and full disclosure of information in accordance
with the NZX Listing Rules. The Company has appointed its Chief Financial Officer as its Disclosure Officer. The Disclosure Officer is
responsible for monitoring Freightways’ business to ensure it complies with its disclosure obligations. The Disclosure Officer has access to
all necessary information provided by the direct reports of Freightways’ Chief Executive Officer in respect of their areas of responsibility. The
Disclosure Officer will regularly request certification from the Chief Executive Officer’s direct reports that all reasonable enquiries have been
made to ensure all relevant material information has been disclosed to the Disclosure Officer. The Company’s Disclosure & Communications
Policy can be found at https://www.freightways.co.nz/about/corporate-governance/.
Risk management
The Company operates in an environment that contains a number of operational and strategic risks. It actively manages risk to ensure it
operates a safe workplace and is able to sustain the achievement of its business objectives. Risk management techniques and capability
assist managers to focus on uncertainties and vulnerabilities associated with the future, thereby improving the likelihood of meeting
business objectives.
The management of risk is a core management responsibility. All managers and employees are accountable to employ risk management
processes within their area of control to aid in the achievement of business objectives. A process to ensure risk has been adequately
identified, considered and can be managed, is evident in all key decision-making processes. The Chief Executive Officer, Chief Financial
Officer and subsidiary management ensure that risks to the business are identified and evaluated, that effective responses and control
activities are developed and that appropriate monitoring and timely re-evaluation is conducted.
The Board and its Audit & Risk Committee are responsible for setting policy, assessing and monitoring strategic risks and ensuring
management maintains an effective risk management framework.
Ernst & Young performs internal audit on areas assessed to be highest risk for the business and are reviewed on a regular basis, including IT
project management, payroll processing and managing business continuity.
The Company’s Risk Management Policy can be found at https://www.freightways.co.nz/about/corporate-governance/.
Corporate Governance Statement
Health & safety risks
Under the Board’s oversight, the Company’s management team and Health & Safety Committee are responsible for oversight of the
Company’s health & safety risks. The prevention of accidents and injuries is of vital importance and no task is regarded to be so important
that it may be done in an unsafe manner. The Company has developed and maintains a Health & Safety Manual that details the procedures
required of all managers, employees and contractors to maintain a healthy and safe working environment.
The Company is subject to internal and external audit and review, including external audit as part of the Accident Compensation
Corporation’s Accredited Employers Programme and also New Zealand’s Civil Aviation Authority audit of the Group’s Fieldair operations.
The Board monitors, supports and completes its own due diligence on the health & safety practices of the Company. Health & safety is a
standing Board agenda item that is discussed at all scheduled Board meetings.
Takeover response plan
The Board has adopted a Takeover Response Plan to assist the directors and management with the response to unexpected takeover activity.
The Plan summarises key aspects of takeover preparation, and sets out, governance, conflict and communications protocols for takeover
response. This Plan provides that in the event of a takeover offer, the Board would establish an Independent Takeover Response committee to
manage its takeover response obligations.
Corporate Governance Statement
153
Freightways Limited and its subsidiaries | Annual Report | Financial Year ended 30 June 2021
152
Directory
Freightways Limited and its subsidiaries
Messenger Services Limited
32 Botha Road
Penrose
DX EX10911
Auckland
Telephone: 09 526 3680
www.sub60.co.nz
www.kiwiexpress.co.nz
www.stuck.co.nz
www.securityexpress.co.nz
New Zealand Couriers Limited
32 Botha Road
Penrose
DX CX10119
Auckland
Telephone: 09 571 9600
www.nzcouriers.co.nz
Post Haste Limited
32 Botha Road
Penrose
DX EX10978
Auckland
Telephone: 09 579 5650
www.posthaste.co.nz
www.passtheparcel.co.nz
Castle Parcels Limited
163 Station Road
Penrose
DX CX10245
Auckland
Telephone: 09 525 5999
www.castleparcels.co.nz
NOW Couriers Limited
161 Station Road
Penrose
Auckland
Telephone: 09 526 9170
www.nowcouriers.co.nz
New Zealand Document
Exchange Limited
20 Fairfax Avenue
Penrose
DX CR59901
Auckland
Telephone: 09 526 3150
www.dxmail.co,nz
www.dataprint.co.nz
The Information Management
Group (NZ) Limited
33 Botha Road
Penrose
DX EX10975
Auckland
Telephone: 09 580 4360
www.timg.co.nz
Fieldair Holdings Limited
Palmerston North International Airport
Palmerston North
DX PX10029
Palmerston North
Telephone: 06 357 1149
www.fieldair.co.nz
Big Chill Distribution Limited
28 Pukekiwiriki Place
Highbrook
Auckland
Telephone: 09 272 7440
www.bigchill.co.nz
The Information Management
Group Pty Limited
PO Box 21
Enfield
New South Wales 2136
Australia
Telephone: +61 29 882 0600
www.timg.com
www.filesaver.com.au
www.litsupport.com.au
Shred-X Pty Limited
PO Box 1184
Oxenford
Queensland 4210
AUSTRALIA
Telephone: +61 1 300 747 339
www.shred-x.com.au
www.med-xsolutions.com.au
For inquiries in relation to Freightways’ services and products contact the offices listed
below or refer to Freightways’ website at www.freightways.co.nz.
Board of Directors
Mark Verbiest (Chairman)
Mark Cairns
Kim Ellis
Abby Foote
Peter Kean
Fiona Oliver
Mark Rushworth
Registered Office
32 Botha Road
Penrose
DX CX10120
Telephone: (09) 571 9670
Facsimile: (09) 571 9671
www.freightways.co.nz
Auditors
PricewaterhouseCoopers
15 Customs Street West
Auckland CBD
Auckland 1010
Share Registrar
Computershare Investor Services Limited
159 Hurstmere Road
Takapuna
North Shore City 0622
DX CX10247
Stock Exchange
The fully paid ordinary shares of
Freightways Limited are listed on
NZX Limited (the New Zealand
Stock Exchange).
Company Particulars
Freightways Limited
freightways.co.nz
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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