Freightways is seeking a dual NZX-ASX stock exchange listing by the middle of next month.
Freightways is seeking a dual NZX-ASX stock exchange listing by the middle of next month.
Freightways Group plans to tap a less pessimistic Australian economy for acquisition and expansion opportunities along with its intention to gain a dual NZX-ASX listing by the end of September, says chief executive Mark Troughear.
The performance of Australian company Allied Express, acquired a year ago, was a highlight ofthe group’s 2023 financial results, which along with an uptick in its information management business, helped lift overall operating revenue by just under 29 per cent to $1.1 billion and net profit after tax by 7.3 per cent to $75.2 million.
Troughear said the performance of Allied Express, acquired for $160m last August, was “slightly better than we expected”, helped by an Australian economy a bit more buoyant than New Zealand’s.
“[It’s] ticking along at better rate, certainly in terms of our businesses, than in New Zealand. There’s a little less pessimism. They raised interest rates a bit later than New Zealand and not to the same level.
”There’s a slightly more buoyant feel in Australia than in New Zealand, [though] it’s not running on all cylinders as is happening in most countries at the moment.”
The group announced earnings before interest, tax and amortisation (Ebita) of $145.2m for the year ending June 30, up 14.8 per cent on FY22. It will pay a final dividend of 26 cents per share.
Troughear said the group was looking for merger or acquisition opportunities on both sides of the Tasman.
“But it’s fair to say there are more opportunities in Australia at the moment. There are quite a number of businesses which do similar things to Allied Express [express packages], so that’s an area we can now explore ... In the near term, it’s probably more likely acquisitions will come out of Australia and be related to the express package business.”
Around 30 per cent of Freightways Group’s revenue now comes from its Australian businesses across five states. It has had a presence in Australia since 2007.
One prospect for Australia, which could start delivering material revenue in FY25, was replicating the New Zealand operation of subsidiary network Produce Pronto, which had recorded significant growth in recent months.
“We might leverage the Allied facility, which is big. It’s not hard to get some refrigeration equipment inside those big warehouses and operate a fleet similar to that in New Zealand.
“Produce Pronto customers also operate in Australia and really appreciate the [NZ] business. I wouldn’t think there would be any material revenue [from a start-up] this year, but hopefully in the year after.”
Freightways Group chief executive Mark Troughear.
On Monday’s application to the ASX for a listing, Troughear said the market had probably already put “two and two together”, with Freightways previously changing its name to include “group” and its NZX ticker from FRE to FRW.
“There are a number of Australian institutions who simply can’t invest in New Zealand businesses if they are not dual-listed. We talk to a lot of potential investors in Aussie who are really interested and like the Freightways story, but don’t have the mandate to invest. So that excludes us from a lot of potential shareholders.”
Other benefits of an ASX listing were giving Australian investors the opportunity to use franking credits similar to imputation credits in New Zealand, and extending to Australian employees the New Zealand share ownership scheme opportunity.
“It will expose us to a larger pool of capital at the point we want to expand,” Troughear said.
The information management business had bounced back, with people returning to CBDs in Sydney, Melbourne, Auckland and Wellington after a pandemic absence.
“We are doing a lot more digital work [within this business] than before - revenue there is up 50 per cent.”
Troughear said while earnings in the New Zealand courier businesses had slipped back in profit, he believed they had done “a great job in an economy that has probably been in recession for a good six to nine months”.
“We think we’ve held the line pretty well in terms of revenue. Maybe in six to nine months, we will get the benefit from that.”
Craigs Investment Partners investment director Mark Lister said the FY23 results for the economy “bellwether” business had been slightly softer than Craigs had expected.
The share price fell 14c to $8.14 in early afternoon trading.
“They’re not a world away - a little on the soft side, but well within the range of forecasting. But nothing to be too concerned about,” Lister said.
Investors had foreseen “a little risk around this result”.
“[Freightways] is typically a bellwether for the economy, and the economy’s in a shaky spot.”
The group had given no hoped-for specific guidance on FY24 earnings.
Lister said a positive note was the group was finding it easier to get staff, “which is consistent with what we are seeing more widely”.
In its FY24 outlook, Freightways said the economic climate had been challenging for six months, and it expected this to continue through the new financial year.
“Notwithstanding the current economic environment, we are excited about the potential to grow our revenue and profitability on both sides of the Tasman in the longer term.”
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the dairy industry, agribusiness, exporting and the logistics sector and supply chains.
