Australia’s 'less pessimistic’ economy is the new hunting ground for growth-driven freight lines

Freightways Group plans to tap the less pessimistic Australian economy for acquisition and expansion opportunities with its aim to achieve a dual NZX-ASX listing by the end of September, chief executive Mark Truehair says.

The performance of Australian company Allied Express, which it bought a year ago, was a highlight of the group’s 2023 financial results, along with progress in its information management business, which helped lift overall operating income by just under 29 percent to $1.1 billion. Profit after tax rose 7.3 percent to $75.2 million.

Troughear said the performance of Allied Express, bought last August for $160m, was „a bit better than we expected”, helped by an Australian economy slightly stronger than New Zealand’s.

„[It’s] At a better rate than New Zealand, certainly based on our businesses. A little less pessimistic. They raised interest rates a bit later than New Zealand and not to the same level.

„There’s a slightly more moderate feel in Australia than in New Zealand. [though] It is not firing on all cylinders as is happening in most countries now.

The group reported earnings before interest, tax and debt (Ebita) of $145.2 million for the year ended June 30, up 14.8 percent over FY22. It will pay a final dividend of 26 cents per share.

Druher said the group was looking for merger or acquisition opportunities on both sides of the Tasman.

„But it’s fair to say there’s a lot of opportunity in Australia at the moment. There are a lot of businesses doing things like Allied Express [express packages]So that’s an area that we can explore now … In the near term, acquisitions coming out of Australia and maybe related to the express package business.

About 30 per cent of Freightways Group’s revenue now comes from its Australian businesses in five states. It has been in Australia since 2007.

One prospect for Australia, which will start delivering material revenue in FY25, mirrors the New Zealand operation of subsidiary network Produce Pronto, which has seen significant growth in recent months.

„We can take advantage of the Allies’ facility, which is huge. It’s not difficult to get some refrigeration equipment into those big warehouses and operate a fleet like the one in New Zealand.

“Manufacturing Pronto customers also operate in Australia and are very appreciative [NZ] Commercial. I don’t think there will be any material income [from a start-up] This year, but hopefully next year.

In an application to the ASX on Monday, Troughear said the market may have already put „two and two together”, with Freightways previously changing its name to „group” and its NZX ticker from FRE to FRW.

„There are many Australian companies that cannot invest in New Zealand businesses unless they are dual-listed. We are talking to a number of investors who are really interested in the Freightways story but don’t have the mandate to invest. So this excludes us from many potential partners.

Other benefits of ASX listing include the opportunity for Australian investors to use franking credits similar to imputation credits in New Zealand and the opportunity for Australian employees to have a New Zealand share ownership scheme.

„It exposes us to a lot of capital at a point where we want to expand,” Druhere said.

The information management business bounced back because of the lack of population congestion in the CBDs of Sydney, Melbourne, Auckland and Wellington.

“We are doing a lot of digital work [within this business] Revenue has increased by 50 percent over the previous year.

While revenues at New Zealand’s courier businesses have slipped back into profitability, he believes „they’ve done a great job in an economy that’s been in recession for six to nine months”.

„In terms of revenue, we think we’re holding the line very well. Maybe in six to nine months, we’ll get the benefit of that.

Craigs Investment Partners investment director Mark Lister said the FY23 results for the economic „bellwether” business were slightly softer than Craigs had expected.

Shares fell 14c to $8.14 in afternoon trading.

„They’re not worlds away — a little on the soft side, but within the forecast range. But not too much to worry about,” Lister said.

Investors expected „a little risk around this outcome.”

„[Freightways] It’s a bellwether for the economy in general, and the economy is in a shaky place.”

The group did not provide specific guidance on FY24 revenue expectations.

Lister said the group is finding it easier to get employees, „which is consistent with what we’re seeing more broadly.”

In its FY24 outlook, Freightways said the economic environment has been challenging for six months and expects this to continue in the new financial year.

„Regardless of the current economic environment, we are excited about the potential to grow our revenue and profitability on both sides of the Tasman over the long term.”

Joined by Andrea Fox Herald 2018 as a senior business journalist and specializes in writing about the dairy industry, agribusiness, export and logistics sector and supply chains.