What a $1.50 price lift meant for Freightways’ ‘breakout’ year

Freightways chief executive Mark Troughear says 2021 has been a “break-out” year for the transport company.

He says the first half result to December for the express package, refrigerated transport and document management firm showed that Covid-19 had boosted growth in deliveries.

The company’s half-year net profit came in at $21.9m, driven by a solid performance across all its business units, he said.

But what turned out to be the game-changer for Freightways – the company behind New Zealand Couriers, Post Haste and DX Mail – was a slight lift in its charges.

“There was a bit of a Covid effect – more business-to-consumer deliveries throughout and more and more people becoming comfortable shopping online,” Troughear told the Herald.

“But the key thing for us is that we are charging a little bit more for our deliveries to a residential address,” he said.

“It sounds stupid but it’s a really important thing.”

“It’s about $1.50 (extra) but what it means is that you can pay the courier more and you are not losing money on doing those deliveries.

“That extra $1.50 gives you a bit of margin and it boosts courier pay.”

The move, which applied to more than 10 million courier deliveries, had also lifted productivity for its 1000 or so contractors.

“Consumers pay a little bit more but it’s just $1.50 but that’s been good for us this year.

“It has worked well for the company.”

Global supply chains have been choked by Covid-19 disruption and the price of freight around the world.

Earlier this month the Freightos Baltic Index (FBX) reading for containers shipped from Asia to Northern Europe was 600 per cent higher than for the same week of last year.

Higher freight rates are feeding into increased prices for all goods imported and shipped around the country.

Freightways has been a prolific acquirer of businesses throughout its 50 year-history but the $150 million purchase in 2019 of Big Chill, which operates a fleet of more than 200 refrigerated trucks and trailers, was a significant step up.

“It moved Freightways from being just an express package company for ambient goods into its temperature-controlled express package market and it’s been a really good move for us,” he said.

Troughear said the company’s Australian business had been tracking pretty well, thanks to improved performance through digital technology.

Freightways medical waste collections in Australian had also “gone off the charts”.

The company’s courier business accounts for about half its business and Big Chill about 15 per cent. Information management services make up the balance.

Freightways shares last traded at $12.60 and has been one of the market’s better performers, having rallied by 78 per cent over the last 12 months.

The company’s annual result is due on August 23.

Market consensus is for a June 2021 net profit of $76.2m, which would compare with a $63.4m net profit in the previous corresponding period.

Brokers Forsyth Barr expects the result to contain positive outlook commentary with “upside risk” to 2022 consensus earnings from parcel pricing and volume growth.

Once privately owned by rich listers Trevor Farmer and Alan Gibbs, Freightways has tended to be one of the less visible NZX-listed stocks.

Even after listing in 2003, Freightways has maintained something of a low profile, a hangover from its days as a private entity.

“It’s taken us a little while to break out and say it’s okay to talk about the highs,” Troughear says.

Now, he says the company is trying to communicate better with analysts.

“We have been a bit private in the past,” he said.

Like many businesses, Covid-19 turned out to be a roller-coaster ride.

“Last year’s level four lockdown was terrible for us.

“Level two and three was okay for the courier business, but not so good for the archive and document destruction side.”

Freightways, with its heavy reliance on contractors, is keenly watching First Union’s group action before the Employment Court seeking to determine if New Zealand Post courier drivers are self-employed contractors or employees.

The union says contractors, courier drivers missed out on receiving the minimum wage, redundancy or holiday pay.

Troughear says the key thing for Freightways is that there is a waiting list for contractors wanting to sign up with the company.

“They know what the contract is and there is no ambiguity.

“They earn good money and they get a far better return than they would if they were an employee.”

On average NZ couriers contractors earn about $120,000 plus GST.

Expenses are usually in the order of $25,000 to $30,000 a year, which come out of that.

“They do a hell of a lot better than an employee working the same hours.

“We have a shortage of employees such as freight sorters and consumer service and waged drivers, there is a waiting list for contractors and a shortage of waged drivers,” he said.

“That kind of tells you something about it.”

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