Moving forward
Freightways Limited and its subsidiaries Annual Report Financial Year ended 30 June 2020 Introduction freightways.co.nz
This year we’ve successfully Right across our brands, expanded into new areas people stepped in to help We’ve never because we saw opportunities where help was needed. to add value across several Good things happened. sectors. We invested in Big Every day. Chill because we knew there been afraid to Like all businesses, we’ll was growth potential in the respond to the ebbs and food supply chain. We’ve flows of what has happened revamped and strengthened in ways that protect our be the first to do courier businesses like business and respect the NOW to continue delivering expectations of our investors. at the high service levels But entrepreneurship will our customers expect. something – remain our constant. We introduced a trans-Tasman We have always been, air freight service to help and will always be, a exporters deliver to their company that grows on if it’s the right Australian markets. And we the strengths of what we introduced Pricing For Effort accomplish together. (PFE) to ensure our drivers thing to do. take home the earnings they deserve, and the business improved its margin on residential deliveries. Of course the country’s response to the threat of COVID-19 affected us, just like it did all New Zealand businesses. But it also brought out the best in our culture.
2 3 Freightways Limited Annual Report Financial Year Contents freightways.co.nz and its subsidiaries ended 30 June 2020
Contents
06 Highlights 08 Growth strategy 10 Business impacts and actions - COVID 19 14 Chairman and CEO’s report 22 The Freightways family 24 The true cost to serve 12 22 Our people during lockdown: The Freighways family: 26 People Leaning into lockdown A warm welcome to Big Chill 28 International airfreight service 30 Sustainable Development Goals 38 Using data for customers 40 Community 42 KidsCan partnership 44 NOW Couriers 46 Our Board 47 Our leadership team 24 28 38 The true cost to serve: International airfreight service: Using data to re-think our 48 Directors’ report Pricing for effort Keeping the freight moving customer journeys 56 Independent auditor’s report 118 Shareholder information 120 Corporate governance
42 44 KidsCan partnership: NOW Couriers: Can do for KidsCan NOW changes the rules
4 5 Freightways Limited Annual Report Financial Year Highlights freightways.co.nz and its subsidiaries ended 30 June 2020
Lockdown challenged us. 2.7million Hosted 2.5TB of eDiscovery data Processed 2,700,000 kgs of But it also motivated us. every month non-paper destruction
Thinking laterally, understanding our capability deeply and acting quickly gave us the ability to pivot in lockdown and take advantage of opportunities that emerged. Lost Time Injury Frequency Rate Improved pricing by $0.73 per item for In COVID-19 Alert Level 3 the unprecedented freight of 10 (LTIFR) residential addressed parcels volumes that passed through the Express Package network - plus the commencement of our international scheduling for our 737 fleet - characterised lockdown for many of our people.
Provided 1.4 million kgs of An increase of 50% in residential international airfreight capacity volumes during level 3 lockdown
Facilitated 200 staff through leadership Delivered 87% of residential items within development training and 250 leaders through 1 day and 95% within 2 days during the level 3 Mental Health Awareness training online shopping boom
38 million 31.4 Total gross GHG emissions (tCO2e) mail items million kgs per million dollars of revenue
Our Business Mail division continues Airfreight volumes increased this year FY13/14 136.64 Year-on-year reduction to perform well despite current (30 million kgs domestically and 1.4 FY14/15 123.02 10.0% market and competitive dynamics. million kgs internationally) with the lift-off FY15/16 Nimbleness and a culture of of our daily trans-Tasman 737 freight 105.01 14.6% customer care keeps brands DX service. Excited by the ability to use our FY16/17 102.93 2.0% Mail and Dataprint in a good position aircraft assets around the clock, the FY17/18 95.57 7.2% leading into 2021. service enabled exporters to get product FY18/19 90.85 4.9% to Australian markets at a time when FY19/20 passenger aircraft freight capacity had 103.40 (13.8%) dropped dramatically. Toitū carbonreduce certified FY20 to be certified in November 2020
FY19/20 emissions excludes Big Chill emissions which will be included from FY21 onwards. FY19/20 total gross GHG emissions per million dollars of revenue increased due to international airfreight flown during the year (see page 28) and the impact of reduced revenue as a result of COVID-19 but with minimal reduction in network emissions to maintain the level of reach and service.
6 7 Freightways Limited Annual Report Financial Year Growth Strategy freightways.co.nz and its subsidiaries ended 30 June 2020
Express Package
Temperature Controlled Express Courier
Aviation
Medical P Waste r ic n e k o v - i i u t l B p c e u
u
D Digital s r
t Mailhouse i
n
s e
e
s
D
s
e Product M
r Destruction
a u
c i
l
e S
Mail Delivery Document & P eDestruction rocess
That spirit shone Online Document Media through this year Back-up & Storage Digital Information in the way our Processing people came together to help each other out Infor ent during lockdown mation Managem
Freightways’ market leading brands Express Package Mail Delivery The Information Management Group Our multi-brand strategy in the DX Mail is New Zealand’s only The Information Management Group New Zealand courier market caters dedicated Business Mail specialist; helps businesses protect and add- to a range of customer needs and offering time-sensitive, physical value to the data they entrust us with. delivery timeframes. All share branch postal services, from door-to-door It offers physical storage and networks, air and road linehaul, and to box-to-box. information management services, IT. These brands include New Zealand Our business model as well as digital information Couriers, Post Haste, Castle Parcels, Digital Mailhouse processing services such as NOW Couriers, SUB60, Security Dataprint offers mailhouse-print digitalisation, business process Express, Kiwi Express, Stuck, Pass services and digital mail presentation outsourcing, online back-up and the Parcel and most recently Big Chill is highly responsive platforms across New Zealand. eDiscovery services. Distribution. We also offer airfreight Our technology and solutions capability for our overnight Express transform data into effective Secure Destruction Package delivery service through our Our market leading brands combine density with specialist knowledge in each niche. communications for customers. joint venture airline, Parcelair. Shred-X offers document destruction, We work across a range of business sectors, achieving high levels of quality and efficiency, eDestruction and product destruction through our focus on adding value to how we pick-up, process and deliver. Our strong culture services. The business also provides medical waste services under the and commitment unifies our people and feeds our deep team spirit. That spirit shone through Med-X brand. this year in the way our people came together to help each other out during lockdown.
8 9 Freightways Limited Annual Report Financial Year Business impacts and actions freightways.co.nz and its subsidiaries ended 30 June 2020
COVID 19 Business impact and actions
IMPACTS By division ACTIONS
Information Management Revenue comparison year-on-year $54
Jul-Mar -0.7% million
Apr -19.6% Led the industry with contactless Range of onsite precautionary Of new equity through use of the deliveries measures Dividend Reinvestment Plan and partial May -18.7% payment of the Big Chill acquisition
Jun 2.8%
Express Package Note: For like for like comparison, $ the Express Package graph Revenue comparison year-on-year excludes contribution from Big Chill Streamlined overtime and use of casual labour Reduced hours worked Elimination of travel and through lockdown discretionary spending
Jul-Mar 2.4%
Apr -33.0%
May 4.8%
Jun 10.1% Reduced non-essential Heightened focus on capital expenditure cash collection Savings in salaries, wages and directors fees Network Courier Items by Delivery Point Note: For like for like comparison, the Express Package graph B2B, B2C Mix (in 2020) excludes contribution from Big Chill
Rural Business Mar Residential Apr
May
Jun Range of health and safety measures Jul 1,000 staff worked from home Extended and renegotiated lending facilities
10 11 Freightways Limited Annual Report Financial Year Our people during lockdown freightways.co.nz and its subsidiaries ended 30 June 2020
Our people during lockdown Leaning into lockdown
Lorna and Jillian’s stories
Some days were much better than It all happened so quickly, says “We had record new business Jillian Hedgman is Regional Sales others, they say, with average Lorna Fisher (National Sales numbers in these months due to Manager for Auckland, overseeing deliveries being around 80 items each, Manager - Business Development our team’s tenacity and customer- sales for North Harbour, West with a peak of around 160 items. centric attitude.” for New Zealand Couriers). Auckland, parts of Manukau, as “We were presented with hundreds “One minute we were working as One of the most humbling solutions well as Whangarei. and hundreds of items every day… normal and then overnight we were Lorna was involved with was for and just when we thought we had Auckland Council, who aligned During lockdown, many customers made progress another large load in COVID-19 level 4, faced with the themselves with Countdown, Spark shifted their focus from B2B (business would arrive.” technical challenges of enabling Arena and New Zealand Couriers to business) to B2C (business to our teams to efficiently look after to send out essential care packages consumer), she says. “Without any There were plenty of challenges, containing food and toiletries for hesitation we all mucked in to make with homes they couldn’t reach our customers while safely working families in need. Couriers picked sure that we were able to deliver for because of locked gates, residents away from the office.” up and delivered over 60,000 care New Zealand businesses, with a focus not willing to open their doors and There were upsides. Lorna said packages over COVID-19. on recovering cost to ensure our Leseia and Stacey’s story incorrect addresses. There were many working from home meant she was couriers were getting paid for the effort hair-raising moments too, particularly The contractors also soon understood able to do a 7km walk in the morning they put in.” with dogs that simply appeared out of the impact they were having on these and still be at work by 7:30 am. That nowhere. Both Stacey and Leseia had families from the feedback they were People stepped up in all sorts of ways. got her ready for the emotional times when they had to jump into their getting on delivery. They even managed Team members who didn’t need to challenges of the day ahead as cars to avoid potentially being bitten. to make a delivery to an address given look after dependants during lockdown customers tried to either get their as: “Man in the van in a parking lot”. were literally helping the operations freight on the essential service list, Leseia Fewtrell (National “We got to meet many team and courier drivers during the or had to change their business model Business Development Manager) “I have been with New week days. Others who did need to stay completely and set up new systems and Stacey Collis (Commercial lovely people,” the at home to look after family members and sales solutions. Zealand Couriers for Manager) normally work in the women say. “The spent their weeks working with customers over email/phone and other National Sales team at Post Haste “My core objective during COVID-19 13 years and I have highlight was seeing the was to intensify communication with online portals. Group head office. our managers to empower them to never been more proud pure joy and excitement “On the weekends we were all doing effectively lead their teams,” she During COVID-19 level 3, they swapped deliveries and assisting our couriers says. “We also proactively sought out of the company that I corporate attire for active wear, on the faces of the where they needed us the most.” their cars became courier vehicles potential customers to see if they work for or the people younger children when Jillian was one of many doing and their mobile phones transformed needed assistance. This approach I am privileged to call deliveries over the weekends and says into scanners. they received their proved to be really valuable for these customers - they commented that they colleagues and friends,” the experience gave her an incredible “Our primary focus was to deliver the school packs. The older could not believe how much we were insight into what couriers do each day. Ministry of Education packs direct to going out of our way to accommodate children were perhaps says Lorna. “Part of being inducted into the the homes of school children. The first their needs. business is to go out and do deliveries. part of our morning was spent sorting not as enthusiastic. Having been here 16 years, it was the school packs into streets, then good to see this again and how the building our runs to ensure we got as We felt the huge relief day in a courier van has changed. much density as possible.” from the parents too.” Our couriers worked so hard every day throughout lockdown.”
12 13 Freightways Limited Annual Report Financial Year Chairman and CEO’s report freightways.co.nz and its subsidiaries ended 30 June 2020
Chairman and CEO’s report Full year review
In the last quarter of this financial year, every one The response by our teams across Just days into level 4 lockdown in The current environment remains that some of our businesses accessed all businesses was outstanding. New Zealand the company also highly uncertain, with a resurgence of the government wage subsidy to of Freightways’ business units was called upon to We would like to acknowledge the completed the acquisition of Big Chill COVID-19 across the globe increasing ensure that we kept our people in provide essential services during the COVID-19 extraordinary efforts of all of our Distribution Limited (Big Chill) after the risk of further trading and travel work. For all of these reasons we staff and contractors in delivering for receiving approval from the Overseas restrictions. The board feels the feel not declaring a final dividend for lockdowns in New Zealand and Australia. our customers during the year, and Investment Office (OIO). The forced prudent course of action is to not FY20 is a one-off decision and is the particularly in the challenging last few timing of the transaction along with declare a final dividend for FY20 given right thing to do. At this point, we do The challenges were many and varied: from the months - where COVID-19 has changed the dramatic drop in volume in the the uncertainty in both the NZ and envisage a resumption of dividends delivery of food and personal protective equipment the shape of the environments in which initial week of level 4 lockdown Australian markets. While recent in the current financial year (FY21), we operate. There have been so many trading, resulted in us renegotiating trading has been strong in NZ, there subject to a continuation of our current (PPE), the retrieval of hospital files held in offsite heart-warming stories of the efforts the terms of the deal to partly settle has been a recent return to level 3 trading conditions. storage and the establishment of new trans-Tasman our people made to connect essential the transaction in shares, thus lockdown in Auckland and level 2 goods to their intended recipients, on preserving cash. nationally along with a continued Getting through the work severe lockdown in Victoria. The airfreight services to keep export markets open, to time and in full. The business has demonstrated strong consensus is the full economic impact COVID-19 drove changes in consumer resilience. Our financial results in FY20 the collection of medical waste from newly formed has yet to be felt in either country behaviour and, following the initial are naturally affected by the lockdowns at this stage. Notwithstanding our impact of lockdowns in NZ, the quarantine facilities. Freightways’ brands helped to in both New Zealand and Australia. current performance, this decision courier industry has seen a surge in Pleasingly, following the initial drop in pick-up, process and deliver over 20 million essential also better positions our balance the number of parcels. While some activity during lockdowns, our position sheet for an uncertain wider economic of our competitors struggled to cope items for our customers. has steadily improved through the lifting impact and preserves headroom with that flow, our people responded of restrictions, although the recovery in for potential growth opportunities to the change in volumes and got on Australia has now been affected by the which may emerge from the current with making it work. The teamwork situation in Victoria and New Zealand environment. It is also important to amongst the businesses was inspiring. has experienced another lockdown, acknowledge that many of our team, Our people volunteered for roles as albeit not to the extent of the level 4 including management and directors, freight sorters and couriers to get the Mark Verbiest lockdown which restricted our customer took pay cuts through the quarter and job done. Freightways Chairman activity to only essential services.
14 15 Freightways Limited Annual Report Financial Year Chairman and CEO’s report freightways.co.nz and its subsidiaries ended 30 June 2020
“Our financial results in FY20 are naturally affected by the lockdowns in both
Freightways CEO, New Zealand and Australia. Mark Troughear Pleasingly, following the initial drop in activity during 73c 1.4m kgs lockdowns, our position has An additional 73cents per item has been Of international trans-Tasman airfreight capacity as part achieved through Pricing For Effort (PFE) of the International Air Freight Capacity Scheme. steadily improved through for items delivered to residential addresses. the lifting of restrictions”
We had to react quickly and decisively In addition, Directors and senior Australia in response to the need to Business Unit performance • This has accelerated a trend that because level 4 lockdown had such executives took a 20% cut in fees and dispose of PPE, and a new premium was already expected before the Each line of business experienced a deep and immediate effect on us. fixed salaries in the quarter. same-day guaranteed delivery service epidemic, and for which we had a range of impacts through the year. Express Package volumes initially across Auckland with NOW Couriers. been preparing through our Pricing We applied for the New Zealand The highlights are listed below along dropped by 65% while Information For Effort (PFE) programme. B2C Government Wage Subsidy for those Secondly, we maintained our service with our strategic direction in the Management activity in New Zealand deliveries attract lower margins businesses that incurred a greater- levels through the spikes in B2C (home near term. ground to a halt, leaving us with just than B2B, but this situation is than-30% decline in revenue. This delivery) volumes which occurred storage revenue. In Australia, the improving and we expect to continue enabled us to continue to retain our during level 3 lockdown. decrease in Information Management Express Package to make progress in this area over staff in those businesses. A number activity was around 25% but while Finally, while we were in lockdown the coming years; of our businesses did not meet this • Steady increases in organic volume the impact has been shallower, it has (4 days in, in fact) we completed the threshold and either did not apply or up until March 25th (when level 4 • Pricing for Effort (PFE) of 73c per also been more prolonged than in acquisition of Big Chill, settling the promptly returned the subsidy when lockdown began in New Zealand) had item has thus helped considerably New Zealand and continues into FY21 transaction with a combination of cash contractors were able to draw on that became clear. generated encouraging revenue and through the heightened B2C volumes particularly in Victoria and NSW. and shares. the government wage subsidy if margin gains in that month; our brands have experienced since their income dropped by 30% in a We quickly adapted to this dramatic Our unfaltering entrepreneurial spirit • As New Zealand moved through level 3 lockdown; given month; reduction in activity, cutting our lockdown levels 4 to 2, we During this period of time, we managed • Residential productivity through the discretionary costs, reducing our wage experienced growth in the proportion • Volumes in June, July and August to do three things that perfectly capture lockdown period increased by 17%, and salary costs by rostering for lower of B2C freight from the combination to date have been stronger than the entrepreneurial spirit that makes assisted by less congested roads volumes, taking leave without pay and of supporting our customers who expected, which we attribute to Freightways successful. and a greater proportion of first-time through most of our team working market share gains and also were changing their models to deliveries because receivers were less hours to reduce our overall labour higher levels of organic trade We commenced new services and enable B2C for their essential items home to accept items; costs. In line with lower volumes, our quickly grew existing ones, such as as well as increasing charitable from many customers; businesses moved quickly to right trans-Tasman airfreight charters deliveries (performed at cost). • Courier pay was impacted by the size operations by removing linehaul through our aviation joint venture By June, this B2C proportion had COVID-19 lockdown period, being 2% runs, flights and other variable costs with Airwork, rapidly expanded medical moderated from around half of behind last year’s average of $103k to minimise the impact on profitability. waste collections through Med-X in all deliveries back to 24%, still 4% p.a. per contractor. Self-employed higher than pre- COVID-19;
16 17 Freightways Limited Annual Report Financial Year FinancialChairman Statements and CEO’s report freightways.co.nz and its subsidiaries ended 30 June 2020
“Express Package will continue to focus on building our market positions through providing superior levels of service and pricing our services appropriately. ”
• We remain wary as volumes are The year ahead Customers will be able to benefit from to lend support as volumes ramped Information Management • The digitalisation project that still sensitive to overall economic a fully outsourced storage, picking & up in the Express Package division. TIMG had geared up for late last Express Package will continue • Storage revenue was solid through conditions. At this stage, they seem labelling service that links seamlessly DX employees offered to assist year did eventually commence, to focus on building our market the year and particularly resilient to to be driven by a combination of into Big Chill’s national delivery the courier brands, helping us to but at lower levels of activity than positions through providing superior the impacts of COVID-19. However, pent up demand, stronger than network. There are a number of new maintain very high standard of expected because physical data levels of service and pricing our the number of new archives coming expected retail sales and sustained market opportunities for Big Chill, on-time delivery. was difficult to collect during COVID services appropriately. into facilities virtually halted as B2C volumes; some of which will leverage the ability restrictions. This project is expected lockdowns occurred in New Zealand This focus will include introducing a to provide a last-mile express delivery • Despite a 30% reduction in mail to be broken into stages and will • Big Chill initially suffered a 22% and Australia; further phase of our PFE strategy service to customers as well as volumes during the months of April take longer to process than initially decline in revenue through level 4 for B2C deliveries. It is critical that our improving their customer experience and May overall, DX Mail volumes • Collection and retrieval of archives anticipated. The combination of these and 15% through nationwide level 3. contractors are remunerated through by leveraging our suite of express for the full year grew by 4%. This and media tapes reduced by 90% various negative trends Despite this, the business was able item revenue (rather than company package technology. growth was achieved through market in New Zealand and by about 25% has led to our decision to partially to adjust quickly and reduce costs in subsidies) for the effort required share gains obtained on the basis in Australia in the last quarter of impair our litigation support response to lower demand. Business for residential deliveries. We will Business Mail of better and more frequent mail the year; business in Australia. conditions had improved by June, with implement additional customer-facing delivery services. the last month of the year delivering • The volume trajectory for Business • Our litigation support services – in The year ahead IT systems to make it even easier for revenue growth of 15% on the pcp; Mail followed a similar trend to that The year ahead particular print and copy services customers to deal with us and provide With a lower level of storage facility of Express Package. By the end of were also heavily impacted as • Through Q4 we provided 1.4m kgs them and their receivers with greater DX will expand its delivery network utilisation than we would have liked, June, volumes had recovered to be lawyers vacated their offices as of international trans-Tasman visibility. We will also continue to exploit in response to customer demand. we will assess a number of alternate marginally higher than the previous a result of COVID-19 and have airfreight capacity as part of the our multi-brand strategy through We expect demand to remain strong opportunities to generate revenue from year. This was particularly pleasing, remained working from home, in Government’s International Airfreight positioning our brands to meet the although with a lower margin than our warehousing footprint. There is an although we received slightly lower many cases reducing the demand Capacity Scheme. The profitability of needs of different customer segments. in previous years due to the ongoing encouraging pipeline of digitalisation revenue per item as a result of direct by up to 50% for printed material. this service depends heavily on the Our latest initiative sees us position impact of our competitor’s zonal opportunities in Australia, which price-based competition for mail degree of utilisation. This has varied, NOW Couriers as our guaranteed same- pricing programme. Our experience • There have been positive signs our team will look to capitalise on to being delivered to those areas that as the Australian States transition day Auckland service provider, giving is that many customers request and of recovery in New Zealand, but provide on-going revenue in FY21. DX Mail services; through various phases of lockdown customers peace of mind and surety. reward high levels of service and we Australia will take longer to recover We will also continue to review but is overall a positive contributor • Through lockdown, DX demonstrated will continue to focus on providing because staff in many organisations Big Chill’s expansion into 3PL in our range of services. In FY20, to performance. The agreement has the ability to flex its cost base to a a high delivery standard to those continue to work from home. CBD Auckland will be a focus as well we created a Product Development been extended through until the greater degree than larger fixed cost customers who require it. areas in particular are still devoid of as taking advantage of a larger team to look at ways we can grow end of August when it will again be operators. It was satisfying to see the many of their office staff; temperature-controlled Wellington hub. our existing services as well as reviewed by the Government. co-operation between businesses
18 19 Freightways Limited Annual Report Financial Year Chairman and CEO’s report freightways.co.nz and its subsidiaries ended 30 June 2020
“There is an encouraging pipeline of digitalisation opportunities in Australia, which our team will look to capitalise on to provide on-going revenue in FY21.”
look to systematically develop new • Revenue from high-value recyclables same week that OIO granted approval In Express Package, the current higher We expect that COVID-19 The Freightways directors would again revenue opportunities. The team (eWaste, coffee cups, packaging for the completion of the Big Chill level of volume, which includes a like to acknowledge the efforts of every has assessed 12 concepts to date with waste) had been growing well off transaction, did present an interesting slightly higher proportion of lower- will also continue to one of our team across Australasia 3 progressing to prototypes and early a very small base but also took a challenge, the company has managed margin B2C deliveries, will likely during these exceptional times. stage customer acquisition. hit during the close down of Quick its position well and is well placed for eventually track the level of macro- provide opportunities We also thank you, our shareholders, Service Restaurants in Australia. the opportunities ahead. economic activity and of business and that our teams can for your continuing support. Secure Destruction However, it remains an area of focus consumer confidence. In Information for the business as we develop our Capital expenditure for FY20 was Management, whilst storage revenues capitalise on, either for • In New Zealand, document $23m. In FY21 capital expenditure will destruction came to a complete networks and capabilities. are reasonably resilient, the activity- be carefully managed and targeted based revenue streams will be driven new services, market standstill in April but has recovered The year ahead toward projects that realise the by the number of people returning well since level 2 lockdown came greatest returns. Despite the addition share opportunities from into effect. In Australia, there was a Growing non-paper sources of waste to office environments and, in some of Big Chill to the group, capital 15% reduction in activity from March that can be diverted from landfill, cases, this will be lower than pre- customers valuing our expenditure is expected to be managed and, despite pockets of recovery, or treated to add value, will be a key COVID-19. strategy for Shred-X in FY21 as will to a range of $20-22m in FY21 and reliability or the potential the recent lockdown in Victoria In both divisions, we will react quickly taking advantage of newly acquired spent on a range of IT development has meant that it is likely to take to any reduction or growth in volumes for accretive acquisitions. medical waste processing capability projects, replacement of vehicles and longer to return to pre-COVID-19 to ensure we are providing services in New South Wales. freight handling equipment. levels. However, volumes of paper as efficiently as possible whilst collected by both businesses have While Freightways is not alone in maintaining the service standards been encouraging and paper pricing Outlook being cautious around the outlook for Balance sheet strength our customers expect. Using what we is stable; FY21 in a macro-economic sense, our We are encouraged by strong early learnt during the period of COVID-19 Freightways has always been stakeholders can be assured that our • The collection of medical waste trading results consistently achieved lockdowns, we will adjust our cost particularly disciplined around capital response to movements in volume will experienced two opposing impacts in the last few months, however the base to protect our margins. We will management, and capital expenditure be swift but will not compromise on with many hospitals and clinics economic backdrop to FY21 can best also assess the portfolio of services Mark Verbiest Mark Troughear and management of cash will remain service to customers and the safety of seeing fewer patients, but newly be described as uncertain for all we provide and make decisions on Chairman CEO a clear focus. While the initial 65% our people. established quarantine facilities drop in activity, which occurred the business units in Australia and the best strategies to deliver value to requiring brand new services; New Zealand. shareholders over the long term.
20 21 Freightways Limited Annual Report Financial Year The Freightways family freightways.co.nz and its subsidiaries ended 30 June 2020
The Freightways family Big Chill is a New Zealand market For example, Big Chill customers will leader in temperature-controlled be able to use our market-leading transport, specialising in fast moving track and trace systems to have end- consumer goods and time-critical to-end visibility of journeys and delivery parcel freight, both chilled and frozen. confirmation. We will also be able 200+ The company operates a fleet of over to explore opportunities for express 200 temperature-controlled trucks courier delivery off the back of The company operates A warm and trailers and last year delivered Big Chill linehaul for the last mile a fleet of over 200 more than 2 million shipments (residential delivery), and make temperature-controlled through its nationwide network. the most of the new temperature- trucks and trailers. controlled 3PL offering. welcome The Big Chill team are experienced and dedicated, with a culture that fits Temperature-controlled express Mike Roberts very well with Freightways. delivery is a logical extension to the General Manager Big Chill Distribution suite of express services that we The acquisition offers both currently offer. This has been a smart to Big Chill companies opportunities to explore buy for us, and we are excited by the how they can provide customers growth prospects the business has in with the best in technology, service front of it. Acquiring Big Chill will enable us quality, national reach and range of 2m service options. We will be able to to further expand our Express Package Last year delivered more than adapt our business intelligence tools delivery services into the fast-growing 2 million shipments through to provide data on consignments its nationwide network. and margins, and share sales and chilled and frozen goods sector as well marketing efforts across a wider as further diversifying Group earnings. customer base.
22 23 Freightways Limited Annual Report Financial Year The true cost to serve freightways.co.nz and its subsidiaries ended 30 June 2020
The true cost to serve Pricing For Effort
Pricing For Effort is another example of how Freightways is assuming leadership in the market.
Historically, our customer pricing Not all deliveries are the same one item. Issues surrounding structures have been calculated on delivery can also be more complex. The cost to serve a business address is a business to business (B2B) cost This results in customer support being generally lower than for a residential model. That’s because for many years more time consuming. address. This is because there are more B2B accounted for the majority of our items handled (pick-up or delivered) per deliveries. More recently, the mix of Correcting a market weakness stop at a business address than there business versus residential deliveries are for a residential address. 99% of Differentiating the price of a business has started to change as more and business deliveries are completed on delivery from a residential delivery is more clients adopt an e-commerce the first attempt so there is less need to important to avoid introducing cross channel. Many new customers want a return to the same address twice and subsidies and to ensure courier income significant proportion of their freight there is a much lower level of customer fairly represents the effort required delivered to residential addresses. inquiry. That means key factors that to deliver an item. So this year we That has important implications for add cost to a delivery - including introduced a new pricing strategy to The economics require Up until the start of the COVID-19 Pricing For Effort is a long-term how we cost what we do. We calculate redirections and collections from depots recover these extra costs called Pricing lockdown, we were extremely happy strategy to recognise the true our delivery prices based on a concept are limited for business deliveries. For Effort. It’s meant that since July seeing past the traditional with the growth in contractor earnings handling and delivery costs involved called “cost to serve”. This approach 2019 we’ve been charging appropriately which were ahead of the previous year at for a range of item types and to By contrast, the cost to serve a view of treating all freight considers all the elements that add for what it takes us to deliver a package that point. Inevitably, lockdown did slow ensure that our pricing properly residential address is generally higher cost and potential value to a delivery: to residential addresses. We were the deliveries the same - and growth, with overall contractor pays at reflects the effort required to deliver from the number of items that pay because couriers are typically delivering first business in the industry to do the end of the financial year being 1.8% on-time, every time. We will continue for the “stop” to any special only one item per stop, and delivery this - it’s simply the right thing to do - paying contractors the right behind the previous year. Nevertheless, to focus on improving the incomes of requirements for signatures, site points can be far less densely located. and it enables us to provide long term in the past year, we’ve paid our couriers our contractors through increased amount per stop. Unless over $3 million in PFE payments. access and potential rework. That means courier routes also change sustainable services. remuneration, and a continued focus day to day, depending on delivery residential deliveries are on achieving greater efficiency by Pricing For Effort is the first step in our A long-term strategy improving volume/delivery density. addresses, with 12-18 items delivered/ pricing strategy to generate sustainable priced for their true cost, picked up per hour. margins for residential deliveries and In the year ahead, we plan to further extend our residential delivery charge. It can also be challenging to reach improve earnings for our residential companies are subsiding From August 3 2020, residential people. For signature services, fleet of courier contractors. It’s been their deliveries elsewhere, charges will increase by a further receivers are often not at home good to see our customers being so 50c per delivery and this will bring us supportive of our approach. They have which effectively means on the first attempt, so the driver closer to fully recognising the costs been genuine in their understanding of cannot get a signature. A significant of a residential service. We are also the problem and our B2C market share B2B customers are helping proportion of first attempt deliveries are exploring other areas of our business has actually increased this year. We lost unsuccessful. This results in the courier pay for B2C deliveries. where our current pricing model very few clients and achieved both our having to leave a card, which means does not reflect the level of effort financial objectives for Freightways and increased manual handling by freight it takes to deliver. We will be for courier income. Pricing for Effort is office personnel at local branches. prioritising the review of these about offering a transparent cost This increases labour costs associated areas in the next financial year and to serve. with delivery and the cost to deliver, as implementing strategies that improve two delivery attempts are required for our margins responsibly.
24 25 Freightways Limited Annual Report Financial Year People freightways.co.nz and its subsidiaries ended 30 June 2020
Our culture proved itself this year
Diversity and commitment Managing mental health FY21 will introduce a number of new and wellbeing initiatives to help ensure our people go Freightways is made up of a range of home safely each day. businesses operating across many Another issue to emerge from the sectors. But that diversity is balanced survey was that people were dealing Every individual Freightways site has by a strong commitment to each other with a full range of pressures both its own Health and Safety committee and to the overall cultural and financial inside and outside work. Respondents which report to an over-arching health of the Group. We have a clear told us they wanted support with Freightways committee represented purpose and strong values. dealing with the things that were by the businesses within our group. Our expectation of everyone here is affecting them. Our response started The Freightways committee, in turn, that they will treat others with respect from the premise that the best people considers and implements initiatives and kindness, and that they will step to offer immediate support and through all group companies and up as needed to make things happen. empathy were leaders. With that in provides reporting through the CEO That certainly happened during mind, we put 250 leaders from across to the Board. lockdown. As the stories in this the business through a course to help Report attest, people from across them understand and recognise signs the organisation put up their hands of risk to mental health and wellbeing. to help wherever it was needed. Our goal is to ensure that everyone As a result, after the initial shock of receives the assistance they need, a huge drop in business, Freightways in the form they need it, within a rallied and we all worked together caring and compassionate work to ensure essential services were environment – and that they receive delivered on time and to the very best that assistance in a timely manner. of our abilities. Keeping our people safe throughout Putting people first has always served their working day this company well – and this year, we made good headway tackling a range Across the Group, our people work in of issues that affect our workforce. a range of dynamic environments. Those in our Information Management Access to opportunities businesses are often working at One of the key concerns to emerge height; a business like Big Chill has from our Diversity & Inclusion Survey dockways and coolstores where To ensure we continue 250 200 was that people didn’t understand serious accidents can occur if how they could plan their career with leaders attended Mental Health of our team went through procedures are not followed; and to improve, we recently us. Many said they were excited by Awareness training in FY20. leadership development training our DX Mail teams are subject to the the opportunities that Freightways appointed a new Head with a 50:50 gender mix. dangers of riding motorbikes through offered, but they needed to better busy streets. Our couriers are subject of Safety who will be understand how to make the most to similar road risks and being around of what was available. forklifts in the depot. Add in the heavy responsible for creating To help make that clearer, we’ve taken machinery at our Shred-X plants and and implementing a new steps to publicise the training and the ground handling risks of loading learning and development that we have our planes, it’s clear that our risks are vision for health and available; so that people can decide many and varied, requiring monitoring where they want to go in their time in different ways. safety across the Group. with us, and more easily gain access This year, we reported an LTIFR rate LTIFR to the skills and training they need to of 10 (triggered where injuries were make that happen. serious enough for people to be off Lost Time Injury Frequency We also progressed a further 200 of our work for a day). Our numbers are Rate of 10 team through leadership training which lower than many in the transport, comprised; Freightways Fundamentals, postal and logistics sector; but based Management Concepts and the on our commitment to safety we are Freightways LEAD programme. constantly striving to improve and in
26 27 Freightways Limited Annual Report Financial Year International airfreight service freightways.co.nz and its subsidiaries ended 30 June 2020
“When borders closed and commercial flights dwindled, it wasn’t just passengers who were affected. International freight capacity also reduced to a trickle, and that dramatic fall-off presented challenges for importers and New Zealand exporters looking to get their goods to market.”
A lot can happen in one week Maximising what we already had Setting up this new service in one What made the trans-Tasman services week was a staggering achievement both possible and profitable for us was given that we had to build this that we have been able to leverage the international service from scratch. experience of operating our existing We secured the aircraft we needed domestic fleet which fly between through a collaboration with Airwork, Auckland, Palmerston North and our joint venture partner and Parcelair, Christchurch during the night. then developed trans-Tasman services Trans-Tasman flights operate during International airfreight service and customer-focused schedules the day using the same aircraft type, using existing crew and resources. enabling the existing assets to be used Ground handling processes and more productively. agreements with partners were The call went out Freightways is now being recognised confirmed on both sides of the as a leading Australasian supply chain When the Ministry of Transport issued Tasman, unit load devices procured, an RFP for aviation businesses to specialist. Not only is our cost per kg specialist personnel developed, Keeping the provide solutions to deliver international more competitive because we use and operational processes finalised. airfreight capacity, we responded. Our freighter aircraft, but we have also Our finance team implemented solution leveraged our specialised been able to operate on any trans- systems and processes in both airfreight domestic network, our team Tasman route to meet the needs countries to support our customers of experienced and dedicated pilots, our of New Zealand exporters. We’ve freight moving and meet the Ministry’s requirements. knowledgeable sales professionals and been able to provide vital services to our many customer relationships. In fact, Meanwhile, our sales teams in perishable exporters from the South Freightways new international airfreight service has Freightways stepping up and providing Australia and New Zealand canvassed Island, and Christchurch, in particular. a solution was essential for NZ Inc as potential customers, including existing enabled us to use our assets around the clock to help it leveraged higher capacity specialist Freightways customers, to understand Looking ahead freighter aircraft on critical routes. pain points and identify key routes New Zealand businesses and open up new We’re keen to work with key exporters where exporters were struggling Our project team called on all their and freight forwarders to continue opportunities for Freightways. The new service has to find capacity. Our involvement experience to pull together numerous developing our trans-Tasman service. ensured exporters could access Freightways brands and partners Our goal is to ensure New Zealand enabled us to make use of an existing resource, more competitive international including Fieldair, Parceline, New exporters can position their products freight prices. The essential trans- expertise and assets during the day to operate the Zealand Couriers, DX Mail, Parcelair in the Australian market in ways and Airwork. We signed our contract Tasman link has also strengthened our that suit their customers, and at a Tasman, while continuing to service our overnight with the Ministry on May 1 and a week existing relationships with many competitive price. domestic express airfreight network. later Freightways were operating of our domestic customers who are services on the Tasman. also exporters.
28 29 Freightways Limited Annual Report Financial Year Sustainable Development Goals freightways.co.nz and its subsidiaries ended 30 June 2020
Building on our goals
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. Two years ago we conducted an assessment to determine the issues most material to our business and public reporting.
Materiality matrix
10.0 • SDG 3 Good health SDG 8 Decent work SDG 13 Climate action SDG 8 and well-being and economic growth • GHG emissions 9.0 Ma • Health and Safety in Employment – ter • Profitability ialit y cu injury reduction 8.0 rve • Organisational culture • Non-GHG emissions (e.g. • Growing the incomes of 7.0 SDG 9 particulate, NOx) our contractors • Road safety 6.0 SDG 3 • wEmployee wellness programme 5.0
4.0 SDG 16 Impact on business 3.0
2.0 SDG 13
1.0
0.0 SDG 9 Industry, innovation SDG 16 Peace, justice 7.0 7.2 7.4 7.6 7.8 8.0 8.2 8.4 8.6 8.8 9.0 and infrastructure and strong institutions
• Product and process innovation • Ethics, bribery and corruption Stakeholder importance • Customer experience (integrity) • Data security • Transparency • New business opportunities (e.g. medical waste management)
30 31 Freightways Limited Annual Report Financial Year Sustainable Development Goals freightways.co.nz and its subsidiaries ended 30 June 2020 Two countries Four business activities 15 brands One wellness platform 1. WELCOME 3. COMMERCIAL 5. MANAGEMENT TRAINEES CONCEPTS 1000+ 2. ON THE JOB 4. FUNDAMENTALS people TRAINING 6. LEAD Engaged with The Movement in the first 12 months
Looking after our people is A strong organisational culture is a key integral to our SDG3 efforts: part of our commitment to SDG8:
Good health and well-being through to losing weight or changing Health Week, for example, our Decent work and economic growth financials. Our Management As we continue to adapt to doing bad lifestyle habits. businesses offer activities and ideas Concepts is designed for people who business in a COVID-19 world, The well-being of our people is critical It’s part of our entrepreneurial that align with what the Mental Health are prepared to move into senior we’ve recognised that leadership is to the success of our culture and In order to make it as easy as possible mindset to encourage our people to Foundation suggests. In Australia, they leadership roles covering negotiation, fundamental to our ability to prepare our business. It is something we are for everyone in the business to progress their careers with us. will tag their programme to fit what’s commercial acumen, acquisition and for change. COVID-19 has accelerated strongly committed to, and an area access the assistance they needed, We want them to earn more by going on there. business strategy. change at an extraordinary rate. where we seek continual improvement. we established The Movement online moving up through the roles and Our Freightways LEAD programme We calculate that we have seen the portal. It’s where our people can find Some common themes have emerged developing their leadership skills. We take a holistic approach, is a customised leadership course to equivalent of three years change in everything from gym memberships, over the range of activities that are Our Freightways Development recognising our people and their grow emerging management talent almost every one of our businesses to information on ear and eye tests, to offered. We’re finding, for example, Programme is key to that. contributions individually at the same that takes place over three modules in a matter of weeks. From consumer advice on well-being and mindfulness. that The Movement works very well time as we promote a strong and and three months. deliveries to the decline in print/copy for team-based activities such as At Freightways, we look for a few deep team culture. That’s where The Movement works in different ways in Australia, things have changed walking challenges where people enjoy things in particular from our potential This year 200 people attended our The Movement comes in. across the business, with each company suddenly – and our leaders need the a combination of team support, peer leaders; people who treat others with various Freightways Development in the Group having its own version respect, live our values and act with skills and mindsets to make things The Movement is our employee pressure and competitiveness. programmes. Our focus on diversity that caters to the needs of its teams. happen decisively and effectively. wellness programme. It was integrity; and people who perform well and inclusion is also reflected in That means The Movement takes many In the first 12 months, 1000 of our In a people-focused business like established after we ran a survey in their current role, take ownership the mix of those who completed the forms, depending on demographics, people have engaged with The ours, we need leaders who will step that helped us understand the wider and demonstrate the capability to take programmes. For example, the mix of teams and geographies. Our IT team, Movement. That’s a high percentage in, get involved and guide and give challenges our people were facing in on more responsibility. male/female graduates through these for example might focus on different already, but our goal is to double that vision to our teams. Our Freightways their lives and lifestyles. The feedback programmes was 50:50. initiatives than those of our staff in Post participation in the year ahead. There are three programmes available Development Programme gives them showed that people were affected by Haste and our other courier companies, to develop leadership capability. One of the key reasons our leadership the skills, confidence and tools to do a whole range of factors, both in and because their day to day work is desk- Those entering our Fundamentals programmes are so successful is exactly that. outside of work, that influenced how focused, whereas our couriers are out programme, a training programme because they are largely run by our they felt about themselves and their and about. designed for those new to supervisory own people. Our leaders are trained by relationships with others. and management positions, other Freightways leaders, meaning The individual interpretations of They told us they were looking for a are normally nominated for the each person is trained by those who’ve The Movement mean that each programme that would help them programme by their manager. The walked the walk. That not only makes business on both sides of the Tasman improve their lives by providing advice programme itself covers a wide the programmes very relatable, it also can also tailor its campaigns and and motivation on a range of fronts – range of topics, including leadership, means that those in our programmes offers. In New Zealand, during Mental from how to handle family pressures coaching and development, can easily access and talk to the people performance management and running the programmes.
32 33 Freightways Limited Annual Report Financial Year Sustainable Development Goals freightways.co.nz and its subsidiaries ended 30 June 2020
50,000 tonnes of paper diverted from landfill each year
28% projected
reduction in landfill volumes We pursue product and for medical waste process innovation to help us meet the goals of SDG9:
Industry, innovation and infrastructure Continuing to pioneer One of these programmes is Detpak Helping Australia hit its Blunting the impact of medical sharps This should mean the clinical waste RecycleMe™ which has been endorsed by packaging targets segment represented by single- Starting in the document destruction and Shred-X pioneered IT asset management, The company has applied the same Planet Ark. Shred-X collect and process use sharps would be almost fully paper recycling industry in Queensland 20 destruction and recycling solutions when foundational goals of sustainability RecycleMeTM 100% recyclable coffee cups recoverable and diverted from landfill. years ago, Shred-X continues to expand Australian businesses were beginning By 2025, Australia has and innovation to the medical waste from cafes and restaurants throughout It is expected that this recovery system its landfill diversion - processing almost to become paperless. Today, it’s a leader industry through its Med-X Healthcare Australia. Once processed, these cups committed to National would reduce landfill volumes for 50,000 tonnes of paper per year for in removing the information stored on Solutions brand. Shred-X and Med-X can be recycled in the same manner as medical waste by over 28%. electronic and IT assets such as hard disc recycling. It also repurposes and recycles office paper. Shred-X has also invested in Packaging Targets have continued to invest in technology and solid-state drives, mobile phones and an array of products including used coffee new ways of processing millions of ‘non- and innovation that support the digital media. By partnering with selected ensuring 100% of cups, QSR waste, electronics (e-waste) recyclable’ coffee cups, partnering with reduction of landfill and promote and certified ethical electronic recyclers, and textiles. Closed Loop Environmental Solutions and packaging is either recycling, even during the peak of the we ensure the recycling of all electronic the Simply Cups programme to find COVID-19 pandemic. Shred-X has Secure Destruction facilities components of e-waste, including innovative solutions for recycling and reused, recycled or and operations in every state and precious metals, glass and plastic, as well In fact, Med-X operations ramped up repurposing used coffee cups and territory of Australia. These incorporate as repurposing assets once confidential repurposed. This is in during the pandemic, spotlighting the spent coffee grounds. the latest and most environmentally- information has been removed. line with the National company’s goal to invest in robotic sustainable shredding technologies Shred-X has also introduced a range of technology to encourage human One of the reasons the company has which have achieved the highest industry innovative Secure Destruction solutions Food Waste Strategy, contactless waste disposal and been able to expand so successfully is certifications. Through the company’s for textiles and uniforms, high-end recovery. Traditionally clinical and that Shred-X continues to explore further partnership with Australian recyclers, garments and accessories, seized goods, that is committing to sharps waste has been problematic opportunities with e-waste, textile and Shred-X recovers 98.5% of the material recalled items and liquids to ensure with landfill; however Med-X is now fibre recycling and repurposing partners, halving Australia’s collected and processed through ethical disposal and landfill diversion investigating the recovery of small promoting product stewardship and a its facilities. wherever possible. These disposal food waste by 2030. single-use containers by separating true circular economy. Recognised for its solutions include waste to energy and them at source and using automated collection and processing capabilities and recycling with various new technologies mechanical separation at its medical national infrastructure, the brand has been currently being explored. waste facilities. Single-use containers approached by various organisations to will be milled following treatment partner with on their disposable coffee cup, To support this strategy, we’ve partnered and sent to local plastic moulding Quick Service Restaurant (QSR) and food with an Australian sustainability company companies for reuse. packaging sustainability programmes. to participate in QSR waste trials set to commence in late 2020.
34 35 Freightways Limited Annual Report Financial Year Sustainable Development Goals freightways.co.nz and its subsidiaries ended 30 June 2020
• Increase the recycled content in our 2. Reusable Packaging - we are Right now we have various trials plastic packaging. converting our freight consolidation underway within the NZC network. bags (mother bags) to a recyclable, Once we have proven viability, these Getting more recycled material into reusable bag design. During our products will then be rolled out across the substrate and getting more use sorting process, we consolidate the Freightways Group. Our goals from the substrate we do use, 80% satchels going to the same town or are to replace all our single-use are our priorities. Recycled material of the plastic used is coming city to make shipping more efficient. plastics with recyclable, reusable and comes from industry waste more from packaging previously The freight consolidation bags are compostable plastics by 2025 and than domestic waste. So we want sent to landfill central to this process. These new to continue to reduce the amount of to make sure that where we do bags that we are trialling, will be virgin material we consume relative to use single-use plastics, the plastics able to be used again and again, revenue. We intend to have measures themselves are made from recycled avoiding a significant amount in place to report on our progress materials rather than virgin, of waste. within two years. fossil-fuel-based materials. 3. Bio-Based Plastic Packaging – Over the past 12 months we have been we have identified opportunities working hard to deliver on our four for bio-based plastic materials commitments with a range of projects made from natural resources across the Group: such as sugar cane. We are now 1. Recycled Content Satchels – investigating using two different we are progressively introducing forms of bio-based plastics: one locally made satchels where 80% is compostable at home or in 30% of the plastic used is coming from industrial facilities, and the other We have reduced the amount packaging previously sent to landfill. can be recycled along with standard of plastic required to make our We are currently developing and plastics. The technology doesn’t yet make these materials suitable courier satchels by more than 30% field-testing the new material to ensure our satchels are tough for all our customers, however, enough to cope with the wide range we are working to commercialise of products our customers ship. the new packaging.
Reducing the impact of single-use plastics is part of how we approach Transparency and integrity underpin SDG13: Climate Action our commitment to SDG16:
The majority of ‘single-use plastics’ transit. Most existing bio/compostable We have a Greenpac™ range made Peace, justice and strong institutions In recent years, we’ve evolved our that are either used or passed onto plastics either don’t have the from recycled paper and card. Annual Reports to offer a higher level Increasingly, companies are under customers by Freightways’ New performance we need or represent We are also partnering with Soft of disclosure as part of our sharing our pressure to reveal more of their Zealand businesses fall into 2 key risks in terms of contamination of the Plastic Recycling to increase recycling stories and intentions with regulators, internal workings than ever before. categories: i. Express Packs (courier ‘soft-plastics recycling process’. of soft plastics in New Zealand. That investors, customers, communities and Consumers want to feel they are satchels) – that are sold to customers At the same time, we are highly scheme currently ensures that over other stakeholders. We’ve also offered buying products and services from to carry and protect products aware of the environmental impacts 60% of Kiwis have access to soft plastic investors and analysts unfettered companies that behave well. That and documents for NZC, DX Mail, of single-use plastics. Reducing the recycling within 20km of their home. access to our senior executives. Castle Parcel, Post Haste and MSL amount of plastic we use offers three same expectation is also present in Looking ahead, we plan to introduce customers; ii. ‘Mother Bags’ (freight big business wins: we reduce the Looking forward, we are working to business-to-business interactions concrete measures around things like consolidation bags) – these are clear amount of plastic taken to landfill; we four principles: as organisations look to work with our ESG initiatives so that everyone plastic bags that are used to group reduce our overall emissions, and we other businesses that reflect their • Eliminate the plastics we don’t need; can see how our actions align with our satchels together for line haul freight reduce fossil fuel use. sustainability stances and values. intentions. Quantifying our progress in movement. Currently, Freightways • Reduce the amount of virgin plastic Eliminating single-use plastics At Freightways, we’ve always prided areas such as waste reduction, plastics New Zealand uses or passes on we use and ensuring any plastics we completely is a long-haul ambition, but ourselves on being straight up, leading and of course carbon not only aligns around 135,000 kgs of single-use do use are reusable, recyclable or we are making significant progress. by example and doing the right thing. with where we think disclosure is plastic – approximately 50,000 kgs compostable by 2025; We have reduced the amount of plastic Our history is one of standing up for the heading generally. It’s also part of our of which are ‘mother bags’. required to make our courier satchels • Circulate the plastic produced as things we believe in, and making calls commitment to ensuring we remain Right now we have no choice but to by more than 30% over recent years, much as possible, by significantly where we believe they need making. open and honest about the success of use plastic substrates. Our packaging and we offer a wide range of packaging increasing the amounts of plastics Our Pricing for Effort is an example all our initiatives – including those that needs to be tough enough to not choices so our customers can select we reuse or recycle and have made of how we chose to make a stand for are challenging and for which there are puncture or fall apart in use or in the right size to avoid waste. into new packaging or products; and our contractors. no easy or immediate answers.
36 37 Freightways Limited Annual Report Financial Year Using data for customers freightways.co.nz and its subsidiaries ended 30 June 2020
“Accurate item data, combined with information on cube/ weight and revenue per item, enables us to understand our margins by customer, route, service type and brand.”
Using data for customers Our Express Package Business Accurate item data, combined with Intelligence team combines data- information on cube/weight and crunchers and graphic designers. revenue per item, enables us to They work to understand the flow understand our margins by customer, of data we collect, and how to route, service type and brand. This data effectively communicate insights also gives valuable insights into our with simple, interactive dashboards changing business mix and provides Using data to re-think and infographics. predictive analytics to help our teams forecast demand on a monthly, weekly Leveraging our investment data lakes or daily basis. and the Microsoft PowerBI platform is our customer journeys all about delivering actionable insights to our sales and operations teams to improve business productivity and customer journeys. This investment Every footprint or scan on a package is in data has given us the ability to a data point we can use to understand a completely re-think the way we measure and improve our business parcel’s journey, and ultimately deliver for the future. better service to our customers.
38 39 Freightways Limited Annual Report Financial Year Community freightways.co.nz and its subsidiaries ended 30 June 2020
Standing with 13 Companywide Freightways supports 13 key community communities initiatives, across New Zealand and Australia.
Key community initiatives Supporting young Kiwis to hear during Loud Shirt Day, to hosting Kidsline (part of Lifeline) This year marks 15 years of partnership youngsters at our workplaces and Keep New Zealand Beautiful between New Zealand Couriers (NZC) and encouraging our branch staff to bring The Hearing House (Loud Shirt Day) The Hearing House. The Hearing House’s out their ‘Loudest Shirts’. Beanies for Babies amazing team of medical specialists To learn more, go to and committed volunteers are dedicated Cancer Society www.hearinghouse.co.nz to teaching children with hearing loss Auckland Kidney Society to listen and speak. Through cochlear Helping those affected by the bushfires McGrath Foundation implant and hearing technologies, along The Australian Bushfires in late 2019 Clontarf Foundation with appropriate support and therapy, raged on for over 200 days into the Child Cancer Foundation thousands of Kiwis have been able to early months of 2020. The crisis made KidsCan Shoes for Kids live independent lives and reach their international headlines with over 18 Duffy Books in Schools full potential, in ways that were simply million hectares of land destroyed New Zealand Breast Cancer impossible for other generations. – more than the size of some small Foundation The team at NZC contributes to helping countries – and more than 2000 homes Rotary St Johns young Kiwis hear and talk in a whole lost. The human cost included more than range of ways: from hands-on support 30 fatalities. More than a billion animals moving fundraising items nationwide are also thought to have perished. Australian and global support of donation which was shared equally The Clontarf Foundation exists to the disaster was immense. From between WIRES and Wildlife Victoria. improve the education, discipline, international celebrities, corporate self-esteem, life skills and employment In addition to the work around the philanthropists, listed companies and prospects of young Aboriginal men bushfires, Shred-X have supported a small businesses, to individual members and to equip them to participate more variety of community initiatives over of the public, $500 million was raised in meaningfully in society. As a corporate FY19/20, often through a combination support of the ‘Firies’, the Australian Red partner of the Foundation, we look to of company sponsorship and seeking Cross and Wildlife groups affected by the invest in the “capacity building” of young support from our employees through bushfire crisis. Aboriginal men, empowering them to their own fundraising activities and develop as individuals who will in turn, Shred-X began planning our bushfire time. Our team is genuinely invested in bring their positive energies and skills to fundraising campaigns at the start of supporting worthy and charitable causes their communities. 2020. After some research, we chose to and it is heartwarming to be part of this align our company fundraising efforts generous giving company culture. Other The current health pandemic has with two wildlife organisations in the fundraising and community initiatives we temporarily slowed efforts to implement areas that were most fire-affected - supported this year included: our mentorship programme at TIMG, one in Victoria (Wildlife Victoria) and but we continue to communicate with • NBCF (National Breast Cancer the other in NSW (WIRES). We ran a Clontarf on ways and means to articulate Foundation) marketing campaign as well as an our mutual commitment. internal/ staff fundraising initiative for • Jeans for Genes Last November, TIMG was invited to the wildlife requiring immediate veterinary • Movember Fox Sports Oz Tag Carnival in Sydney care and ongoing support as a direct as a corporate partner. There we joined result of their injuries. • Convoy For Kids the likes of Qantas Airways, Fox Sports The marketing sponsorship campaign • Special Children’s Christmas Party Australia, National Rugby League (NRL) focused on donating a percentage and QBE, meeting and spending time of our national Shred-X sales over a Encouraging the potential of young with Clontarf students on and off the $20k period of one month, while a concurrent field. Sport and communication were Aboriginal men raised by Shred X for the bushfire staff fundraising initiative included the the overriding themes for this highly At TIMG Australia, we celebrate the rich initiative via a share of national opportunity for Med-X and Shred-X successful event and TIMG will definitely cultural diversity of our workforce. By sales over a period of one month employees to make a personal be attending the next Carnival. contribution to the wildlife funds. partnering with the Clontarf Foundation, To learn more about Clontarf Foundation 2 we look to make our business even We are proud to have raised over $20,000 more inclusive and representative of the please visit: for the bushfire initiative, making a communities that we work and live in. www.clontarf.org.au
40 41 Freightways Limited Annual Report Financial Year freightways.co.nz and its subsidiaries ended 30 June 2020
KidsCan partnership Freightways is the lead partner for the When lockdown hit, children who would KidsCan ‘Shoes for Kids’ programme. usually have received a guaranteed meal “The partnership This programme is designed to help through their school were no longer disadvantaged Kiwi kids get to and getting this vital meal every day. KidsCan through the school gates safely. identified the need to reach these also provides families, and the Freightways team Shoes are not only considered a was on board to help. We mobilised sales required part of the school uniform but Can do for team members to pack food parcels without them many children are unable Freightways and utilised our network to deliver to participate fully in school activities the food parcels to homes across the and excursions. The ‘Shoes for Kids’ North Island. the opportunity KidsCan programme breaks down these barriers and enables children to become more With schools coming fully back to engaged in their learning. normal for term 3, our team at North Harbour provided KidsCan with to give back to The partnership also provides www.kidscan.org.nz warehousing space to store the required Freightways the opportunity to give food supplies in preparation for delivery back to communities in a variety communities in a out to schools nationwide. of ways. Our assistance also extends through to A week prior to level 4 lockdown, one of our key customers. Countdown is variety of ways.” we again sponsored the Rotary of St a partner for the KidsCan Early Childhood Johns annual Charity Golf Day. A great Programme, which is designed to help turnout saw us raise much-needed New Zealand’s most vulnerable kids get a funds for KidsCan. Thanks to all our great start to their education. Each week, customers and suppliers for their our contractors deliver Early Childhood support in making the day a success. Centres (ECE) a menu and ingredients for five fresh meals.
42 43 Freightways Limited Annual Report Financial Year NOW Couriers freightways.co.nz and its subsidiaries ended 30 June 2020
To achieve our Guaranteed Auckland “The NOW Same Day Same Day service, we partnered with CoreLogic, New Zealand’s leading address verification service provider. solution really kicked into Geo-coding our network is enabling us to set predetermined pickup times for deliveries within set Auckland gear during COVID-19 geographical boundaries, so that collections can be completed by a predetermined time. level 3 as a valuable The NOW Same Day solution really kicked into gear during COVID-19 level 3. It was a valuable option NOW Couriers option for customers for customers who needed to get perishable and urgent items across who needed to get Auckland from suppliers who were only able to trade online because their physical stores were shut. NOW is Freightways’ ‘sand-box brand’. It has a key role to play in introducing perishable and urgent The new NOW website will link NOW changes and testing customer innovations to a Parcel Management Portal before they are more broadly adopted for both senders and receivers, by the wider business. This reliable, items across Auckland.” giving customers at both ends of a urban delivery service is redefining transaction access to key functionality. customer expectations in a busy, The new website will mean customers the rules dispersed and time-sensitive market. have access to a simplified tracking experience and the option to use NOW’s commercial advantage lies in simple tracking IDs. We have every their ability to combine a guaranteed, NOW knows Auckland better than anyone. confidence it will transform our same-day service across much of quoting and sales enquiry process. This year we revamped the brand to reflect its Auckland at a highly competitive price modern, responsive character and to position point. In fact, the NOW offer bridges the More importantly, the new site will gap between two traditional offerings: support web integration across NOW as an innovator offering fast, local the more economical hub-and-spoke all the Express Package brands at arrangement, and the customised Freightways; because once it has services without point-to-point prices. point-to-point service. been developed, the new technology will be fully reusable by everyone. It’s another example of how innovation hub NOW is leading Freightways’ wider moves to achieve superior digital customer experiences.
44 45 Freightways Limited Annual Report Financial Year Our Board & leadership team freightways.co.nz and its subsidiaries ended 30 June 2020
Our Board Our leadership team
Mark Verbiest Mark Rushworth Mark Troughear Mark Royle Chairman LLB, CF Inst D BE (Hons), MEM Chief Executive Officer Company Secretary and Chief Financial BMS, Waikato University Officer to 20 April, 2020 B.BUS (Acc), CA
Kim Ellis Peter Kean Matthew Cocker Stephen Deschamps BE (Hons), BCA (Hons) PMD Harvard Chief Information Officer Company Secretary and Chief Financial from PhD, Georgetown University 20 April, 2020. B Poli Sci, M Fin, (Institut d’Etudes Politiques, Paris) MBA, Master in Finance
Andrea Staines OAM Abby Foote Neil Wilson Steve Wells BEcon, MBA (Michigan), AICD Fellow LLB (Hons), BCA, CF Inst D, INFINZ (Cert) General Manager General Manager Freightways Express Package Division Malcolm Grimmond joined the Board as a non-executive director in September 2020. Andrea Staines has announced that she will retire from the Board on 29 October 2020 at the conclusion of the Annual Shareholders Meeting.
46 47 Freightways Limited Annual Report Financial Year Financial Statements freightways.co.nz and its subsidiaries ended 30 June 2020
Directors’ report Board skill matrix
The Directors of Freightways Limited (Freightways) resolved to submit the following report with respect to the financial position The Board focuses on governance, strategy and the oversight of the performance of the different Freightways businesses and of the Group as at 30 June 2020 and its financial performance and cash flows for the year ended on that date. brands. The six 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.
Directors Deep Expertise (NED) Mark Mark Andrea Kim Ellis Abby Foote Peter Kean The names of the Directors of the Company in office at the date of this report are: Verbiest Rushworth Staines
Governance Mark Verbiest LLB, CF Inst D. Mark Rushworth BE(Hons), MEM NZ Listed Market Mark was appointed a Director in February 2010 and Mark was appointed a Director in September 2015. Chairman in October 2018. He is a professional director with He has extensive experience in the technology sector, Audit and Risk a strong working knowledge of technology and technology- with a decade’s governance experience, predominantly Business Operations at Scale related businesses, as well as having extensive capital in the high tech and innovation space. An electrical engineer markets experience. A lawyer by training, with widespread by training, with widespread operations and marketing International Transport, Logistics, corporate legal experience in private practice, he spent experience, he spent four years on the senior executive team Sector Aligned Expertise over seven years on the senior executive team of Telecom of Vodafone NZ, where among other things he had executive Marketing/Brand/Sales NZ through until mid-2008, where among other things he accountability for the fixed-line business and as Director had executive accountability for two business units. Mark of Marketing. Mark previously served as chief executive of IT Platforms and Digital Innovation is currently Chairman of Meridian Energy Ltd and Willis Pacific Fibre, ihug and financial services company, Paymark Australian Market Bond Capital Partners Ltd (retiring from that Board on 30 Limited. Mark is currently Chief Executive Officer of private September 2020), a director of ANZ Bank New Zealand equity-owned UP Education and a director of a number of Health & Safety Limited and a member of the Advisory Board of NZ Treasury. private companies. Entrepreneurial Kim Ellis B.CA, B.ENG Andrea Staines OAM, BEcon, MBA (Michigan), AICD Fellow Kim was appointed a Director in August 2009. He spent Andrea was appointed a Director in August 2018. Based in 28 years in chief executive roles in a number of sectors, Australia, she has 12 years’ governance experience with an Principal activities including 13 years as Managing Director of Waste undergraduate degree in Economics, and an MBA focused on The principal activities of the Group during the year ended 30 June 2020 were the operation of express package & business mail services Management NZ Limited until its sale in 2006 to Transpacific financial analysis and strategy. Andrea’s executive experience and information management services. Industries Pty Limited, and has developed businesses in was mostly in airlines, including American Airlines in both New Zealand and Australia. Kim is now a professional Dallas, and Qantas Group in Sydney. During her last five director working with both private and listed companies. years at Qantas, she co-launched international subsidiary, Kim is currently a director and the Chairman of NZ Social Australian Airlines (mark II), as Chief Commercial Officer, Infrastructure Fund Limited, Metlifecare Limited and becoming CEO soon after launch. Earlier roles at Qantas Green Cross Health Limited. He is also a director of Port included running Global Revenue Management. Andrea has Consolidated result for the year of Tauranga Limited, FSF Management Company Limited chaired multiple Board Committees, including Audit & Risk, 2020 2019 and Ballance Agri-Nutrients Limited and an advisor to Remuneration & Nomination, and temporary Committees $000 $000 Envirowaste Services Limited. with a business unit or project focus. Andrea is currently a Operating revenue 630,940 615,692 director of Australian entities SeaLink Travel, UnitingCare, Abby Foote LLB (Hons), BCA, CF Inst D, INFINZ (cert) Acumentis and Australia Post (where she is Deputy Chair). Abby was appointed a Director in June 2018. She is a The Board has determined for the purposes of the NZX Operating profit before interest, income tax and amortisation of intangibles 88,197 99,133 professional director with over 12 years’ governance Listing Rules that, as at 30 June 2020, Mark Verbiest, Kim Amortisation of intangibles (3,477) (2,071) experience, with qualifications in both law and accounting. Ellis, Abby Foote, Peter Kean, Mark Rushworth and Andrea Profit before interest and income tax 84,720 97,062 Abby has experience in a range of senior management, Staines are independent Directors. finance and legal roles, with a focus on corporate finance and Net interest and finance costs (18,420) (9,566) commercial transactions. Abby is currently the Chair of Z Profit before income tax 66,300 87,496 Energy Limited and a director of TVNZ and Sanford Limited. Income tax (18,925) (24,119) Peter Kean PMD Harvard Profit for the year attributable to the shareholders 47,375 63,377 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.
48 49 Freightways Limited Annual Report Financial Year Financial Statements freightways.co.nz and its subsidiaries ended 30 June 2020
Directors’ report Directors’ report
Directors holding office during the year were: Remuneration received by directors
Parent: Subsidiaries: 2020 2019 $ $ Mark Verbiest (Chairman) Mark Troughear (all Freightways subsidiaries) Kim Ellis Mark Royle (all Freightways subsidiaries) Directors of Freightways (Parent company) Abby Foote Stephan Deschamps (Parcelair Limited only since 25 May 2020) Mark Verbiest 155,083 140,000 Peter Kean Colin Neal (Big Chill Distribution Limited only) Kim Ellis 92,500 92,500 Mark Rushworth Mark Shapland (Big Chill Distribution Limited only) Abby Foote 97,467 95,139 Andrea Staines Peter Kean 85,683 85,000 Mark Royle handed the CFO role over to Stephan Deschamps, effective 20 April 2020, but remained a Director of all Freightways Mark Rushworth 85,683 85,000 Limited subsidiaries until 30 June 2020. Sue Sheldon (resigned 25 October 2018) - 50,753 Andrea Staines 90,568 77,735 Total non-executive Directors 606,984 626,127
Directors of Group subsidiaries only
Approved remuneration of directors (effective 1 November) Mark Troughear - Freightways Chief Executive Officer (CEO) 843,483 872,912 Group Mark Royle - Freightways Chief Financial Officer (CFO)* 550,673 582,585 Fees (per annum) Colin Neal** - - 2020 2019 Position Note $ $ Mark Shapland** - - Total Directors of Group subsidiaries 1,394,156 1,455,497 Board of Directors Chair (1) 165,000 160,000 Total Group 2,001,140 2,081,624 Member - NZ 93,000 85,000 * Mark Royle handed the CFO role over to Stephan Deschamps, effective 20 April 2020, but remained a Director of all Member - NZ 93,000 85,000 Freightways Limited subsidiaries until 30 June 2020. Member - AU (2) 98,900 93,400 ** Non-executive Director of Big Chill Distribution Limited only Audit & Risk Committee Chair (1) 104,000 100,000 People & Remuneration Committee Chair (1) 100,000 92,500 Committee work pool (if required) 42,145 47,000 The remuneration of the CEO and CFO includes the incentive payments made during the year ended 30 June 2020 in respect Total annual fee pool limit (3) 696,045 662,900 of the two previous six-month performance periods (1 January to 30 June 2019 and 1 July to 31 December 2019). No amount is included above in respect of incentive payments for the period 1 January to 30 June 2020, as these were paid in August Notes: 2020. Remuneration of the CEO and CFO comprises a fixed remuneration package representing 70% and 78% of their total (1) Inclusive of Board member fee remuneration, respectively, and an ‘at risk’ portion representing 30% and 22%, respectively, payable on achievement of short- (2) Based on A$93,000 (2019: A$85,000) term financial objectives. They also participate in the Freightways Senior Executive Performance Share Plans described in Note (3) Approved by shareholders at Annual Shareholders Meeting in October 25 of the Financial Statements by way of an annual allocation of performance share rights (PSRs) equivalent to 32% and 25%, respectively of their 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 25. The Company’s Remuneration Policy can be found at: https://www.freightways.co.nz/about/corporate-governance/.
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. The officers also participate in the Freightways Senior Executive Performance Share Plan (the ‘Plan’) described in Note 25 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 25. 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/.
50 51 Freightways Limited Annual Report Financial Year Financial Statements freightways.co.nz and its subsidiaries ended 30 June 2020
Directors’ report Directors’ report
Remuneration of employees Entries in the register of directors’ interests The number of employees, not being directors of Group subsidiaries, within the Group receiving annual remuneration and benefits The Register of Directors’ Interests records that the following directors of Freightways Limited have an equity interest in the Company. above $100,000 are as indicated in the following table:
Freightways Limited shares Group At balance date Directors of Freightways Limited held the following number of equity securities in the Company: 2020 2019 Fully-paid ordinary shares $100,000 – $109,999 44 45 Beneficially Non-beneficially $110,000 – $119,999 53 46 $120,000 – $129,999 31 29 Director $130,000 – $139,999 24 29 Mark Verbiest 10,000 - $140,000 – $149,999 17 10 Kim Ellis - 50,000 $150,000 – $159,999 10 18 $160,000 – $169,999 13 13 Abby Foote - 14,363 $170,000 – $179,999 13 10 Peter Kean 51,500 - $180,000 – $189,999 9 12 Mark Rushworth - 18,000 $190,000 – $199,999 6 7 Andrea Staines - - $200,000 – $209,999 12 6 $210,000 – $219,999 2 4 $220,000 – $229,999 6 4 $230,000 – $239,999 4 8 $240,000 – $249,999 3 2 $250,000 – $259,999 4 2 $260,000 – $269,999 2 3 $270,000 – $279,999 1 1 $280,000 – $289,999 - 1 $290,000 – $299,999 1 1 $300,000 – $309,999 4 2 $310,000 – $319,999 - 1 $320,000 – $329,999 1 2 $330,000 – $339,999 1 - $340,000 – $349,999 - 1 $350,000 – $359,999 1 - $370,000 – $379,999 1 3 $420,000 – $429,999 2 - $440,000 – $449,999 - 1 $450,000 – $459,999 - 1 $550,000 – $559,999 1 -
52 53 Freightways Limited Annual Report Financial Year Financial Statements freightways.co.nz and its subsidiaries ended 30 June 2020
Directors’ report
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 2020: Number $000 Financial Note Acquired Cost (Disposed) (Sale) statements Mark Rushworth Non-beneficial ownership in ordinary shares acquired on 6 March 2020 10,000 75 Abby Foote Non-beneficial ownership in ordinary shares acquired on 1 April 2020 (i) 363 2
Notes: Contents (i) Allocation of ordinary fully-paid shares under the Freightways Dividend Reinvestment Plan.
56 Independent auditor’s report The following table shows transactions recorded in respect of securities acquired or disposed of by Directors of Big Chill 62 Income statement Distribution Limited during the year ended 30 June 2020: Number $000 63 Statement of comprehensive income Note Acquired Cost 64 Statement of changes in equity (Disposed) (Sale) 65 Balance sheet Colin Neal Ordinary shares in Big Chill Distribution Limited held as trustee of the Colin 66 Statement of cash flows Neal Family Trust sold to Freightways Express Limited on 1 April 2020 (ii) (95,000) See note 67 Notes to the financial statements Mark Shapland Beneficial ownership of ordinary shares in Big Chill Distribution Limited 118 Shareholder information sold to Freightways Express Limited on 1 April 2020 (ii) (1,900) See note 120 Corporate governance statement Ordinary shares in Big Chill Distribution Limited held as trustee of the Shapland Family Trust sold to Freightways Express Limited on 1 April 2020 (ii) (93,100) See note
Notes: (ii) On 1 April 2020, Freightways Express Limited acquired all 198,000 ordinary shares in Big Chill Distribution Limited from the various shareholders in that company under a sale and purchase agreement dated 30 October 2019, for an aggregate consideration of $114,553,000 plus a deferred amount based on performance of Big Chill Distribution Limited. In respect of the initial amount of $114,553,000, 2,793,296 ordinary shares in Freightways Limited were issued to Colin Ashley Neal and Burley Attwood Trustees (No. 11) Limited and 2,793,296 ordinary shares in Freightways Limited were issued to Mark Shapland and YRW Trustees 2011 Limited, in each case at an issue price of $5.37 per share for an aggregate consideration of $29,999,999. The aggregate balance of $84,553,000 was paid to the vendors in cash.
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 24th day of August 2020.
Mark Verbiest Abigail Foote Chairman Director and Chair of the Audit & Risk Committee
54 55 Freightways Limited Annual Report Financial Year Financial Statements freightways.co.nz and its subsidiaries ended 30 June 2020
Independent auditor’s report Independent auditor’s report To the shareholders of Freightways Limited To the shareholders of Freightways Limited
Independent auditor’s report To the shareholders of Freightways Limited e audit atters s s s ss s s We have audited the financial statements which comprise: s s s s ss s s s ● the balance sheet as at 30 June 2020; s s s ● the income statement for the year then ended; ● the statement of comprehensive income for the year then ended; Key audit matter How our audit addressed the key audit matter ● the statement of changes in equity for the year then ended; pair ent assess ent of ood ill and s s s ● the statement of cash flows for the year then ended; and indefinite li ed brands in ludin the i pa t s s ● the notes to the financial statements, which include a summary of significant accounting of policies. s ● s s s s s ● s s Our opinion s s ss s In our opinion, the accompanying financial statements of Freightways Limited (the Company), ss ss s s including its subsidiaries (the Group), present fairly, in all material respects, the financial position of s and management’s basis for determining the key the Group as at 30 June 2020, its financial performance and its cash flows for the year then ended in s ss s ss s s s s accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) s s s and International Financial Reporting Standards (IFRS). ● conjunction with our auditor’s valuation expert, s ss s s ss ss ss ss s ss ss s Basis for opinion ss s We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs − assessed the reliability of management’s (NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are ss s ss ss s s further described in the Auditor’s responsibilities for the audit of the financial statements section of s s s s s our report. s s s s We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for − ss s s our opinion. s s We are independent of the Group in accordance with Professional and Ethical Standard 1 International s s s ss s s s s Code of Ethics for Assurance Practitioners (including International Independence Standard) (New ● s s Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the ss s s ● s s s s International Code of Ethics for Professional Accountants (including International Independence ss ss ss ss s Standards) issues by the International Ethics Standards Board for Accountants (IESBA Code), and we s s have fulfilled our other ethical responsibilities in accordance with these requirements. s ss s ss s s s s s s s Our firm carries out other services for the Group in the areas of agreed upon procedures over the poll ss ss s s for the shareholder resolutions at the Annual General Meeting and Executives’ remuneration s s benchmarking. The provision of these other services has not impaired our independence as auditor of s the Group.
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand PwC T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
56 57 Freightways Limited Annual Report Financial Year Financial Statements freightways.co.nz and its subsidiaries ended 30 June 2020
Independent auditor’s report Independent auditor’s report To the shareholders of Freightways Limited To the shareholders of Freightways Limited
Key audit matter How our audit addressed the key audit matter A ountin for i hill istribution e audited the accounting treatment of the ac uisition by ur audit approa h a uisition ● eviewing the ale and urchase greement to er ie he roup ac uired ig hill istribution on understand the key terms and conditions n audit is designed to o tain reasona le assuran e et er t e inan ial the pril as disclosed in ote e ● esting the value assigned to the reightways shares statements are ree rom material misstatement consider this ac uisition to be a key audit that were issued as part of the total consideration by matter due to the significance of the verall roup materialit : million i represents an average o comparing it to the market value of reightways shares ac uisition to the roup and the significance approximatel o pro it e ore tax over t e past t ree ears at the transaction date of the judgements involved e ose an average o pro it e ore tax over t e last t ree ears as t e ● aining an understanding of the valuation approach anagement applied judgement in en mar e ause in our vie pro it e ore tax is t e en mar and methodology undertaken by management to determining the fair value of the future earn against i t e per orman e o t e roup is most ommonl measured identify separately identifiable intangible assets and out payment which makes up million of users and is a generall a epted en mar e ose to use an value the assets and liabilities ac uired the total purchase consideration average o t e last t ree ears e ause o lo er sales in t e se ond al o ● onsidering whether identification and recognition of t e ear ended une related to t e pandemi and t e anagement has also applied significant intangible assets was consistent with the re uirements impact of this on the Group’s results. judgement in completing a provisional of the accounting standards assessment of the fair value of the assets and s indi ated a ove e ave determined t at t ere are t o e audit liabilities ac uired, including recognising the ● Engaging our auditor’s valuation expert to: matters: following separately identifiable intangible a evaluate management’s assumptions regarding ● mpairment assessment o good ill and rands in luding t e impa t assets the calculation of the deferred payment o ● rand of million b assess the valuation approach and methodology ● ounting or ig ill istri ution a uisition ● on compete agreement with the undertaken by management in relation to the founders directors of million brand, customer relationships, non compete aterialit agreement and the calculation of the deferred ● ustomer relationships of million e s ope o our audit as in luen ed our appli ation o materialit payment ased on our pro essional udgement e determined ertain uantitative t res olds or materialit c evaluate management’s assumptions regarding in luding t e overall roup materialit or t e inan ial statements as a ole as set out a ove ese the valuation of the brand, customer relationships toget er it ualitative onsiderations elped us to determine t e s ope o our audit t e nature and non compete agreement timing and extent o our audit pro edures and to evaluate t e e e t o misstatements ot ● onsidering whether the relevant disclosures were individuall and in aggregate on t e inan ial statements as a ole appropriately made Audit s ope e designed our audit assessing t e ris s o material misstatement in t e inan ial statements and our appli ation o materialit s in all o our audits e also addressed t e ris o management override o internal ontrols in luding among ot er matters onsideration o et er t ere as eviden e o ias t at represented a ris o material misstatement due to raud e tailored t e s ope o our audit in order to per orm su i ient or to ena le us to provide an opinion on t e inan ial statements as a ole ta ing into a ount t e stru ture o t e roup t e a ounting pro esses and ontrols and t e industries in i t e roup operates e ondu ted ull s ope audit or at our divisions i ma e up o external revenue and o pro it e ore tax in e ealand and ustralia e remaining divisions in t e roup ere not onsidered individuall signi i ant and depending on our ris assessment ere su e t to ot er audit pro edures su as anal ti al revie en uir testing e alan es or re on iliations
PwC PwC
58 59 Freightways Limited Annual Report Financial Year Financial Statements freightways.co.nz and its subsidiaries ended 30 June 2020
Independent auditor’s report Independent auditor’s report To the shareholders of Freightways Limited To the shareholders of Freightways Limited
Information other than the financial statements and auditor’s report he irectors are responsi le for the annual report. ur opinion on the financial statements oes not ho e report to co er the other information inclu e in the annual report an e o not an ill not e press an form This report is made solely to the Company’s shareholders, as a body. Our audit work has been of assurance conclusion on the other information. 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 n connection ith our au it of the financial statements our responsi ilit is to rea the other responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our information an in oin so consi er hether the other information is materiall inconsistent ith audit wor , for this report or for the opinions we ha e formed. the financial statements or our no le e o taine in the au it or other ise appears to e materiall misstate . The engagement partner on the audit resulting in this independent auditor’s report is eopino eo f ase on the or e ha e performe on the other information that e o taine prior to the ate of olia i. this auditor’s report, we conclude that there is a material misstatement of this other information e are re uire to report that fact. e ha e nothin to report in this re ar e cept that not all other or and on behalf of: information as a aila le to us at the ate of our si nin .