Aussie courier acquisition delivers for Freightways

Chief executive Mark Troughear. Photo / Supplied

Australian courier business Allied Express helped Freightways to a 3.5 per cent annual improvement in net profit after tax to $45.2 million, for the half year to December 2022.

It came from group revenues of $552m, up a quarter on the comparable period’s $441.9m.

The delivery services company will pay an interim dividend of 18 cents a share, unchanged from the prior year, payable to registered shareholders on Apr 3.

Freightways paid $216.2m for the courier business in September, which operates across all of Australia’s major urban areas and is aimed at the large delivery segment such as auto parts.

Almost half of the purchase price, $107.8m, was disclosed as ‘goodwill’. The group reported drawn-down borrowings of $110m and A$80.7m ($88.9m) from its New Zealand and Australian banking syndicates, respectively.

Earlier this month, the NZ stock exchange-listed (NZX) firm said it would also aim for a foreign-exempt listing on the Australian Securities Exchange (ASX) within about six months, reflecting its greater Australian footprint and intention to expand in that market.

Chief executive Mark Troughear said it was an obvious move given Freightways’ growing presence in Australia and because there were very few pure transport plays on the exchange.

Troughear said in the Australian context, Freightways was a small player in an express transport market valued at A$8 billion versus NZ’s $1.2b market, so there were “significant opportunities”.

The Allied Express business contributed net profit after tax (NPAT) of $4.9m for the three-month period from revenues of $68.1m. Freightways noted that if the acquisition had occurred at the beginning of the half year, the contribution would have been closer to $9.9m and $130.2m, respectively.

The group’s biggest division – express packaging and business mail – saw revenues up 28.2 per cent to $450.3m, from the prior half year’s 351.1m. NPAT was at $39.3m.

Troughear said it was considered a “steady result” in view of the exceptional pandemic-related pre-Christmas flurry in courier activity during the prior year.

The exception, he said, was in the medical waste business, which saw a 28.9 per cent drop in NPAT to $7.6m, down from $10.6m in the comparable period, despite revenues being up 15 per cent to $103.6m.

“We knew the volume would come off with covid normalising, meaning we wouldn’t do as many collections from vaccination centres and hospitals, but it came down more than we thought,” Troughear said.

The group also received a “double whammy” in Australia, as the cost of drivers has gone through the roof, he said. In the meantime, the group was investing in its own processing capability in Victoria, which, when up and running, will halve processing costs.

Troughear said the group was at the top end of its borrowings range – 2.8 times debt to income – and would work to bring that down over the coming year.

Pointing to a “full pipeline” of acquisition opportunities, particularly in the Australian transport sector, he said the group could look at a share issue to raise further equity.

He added that while the economic climate will be a tough one to call in the near term, the group was “keeping a close eye” on the shift in consumer spending, tightness in the labour market and increase in labour costs.

- BusinessDesk