Freightways (NZX:FRE): How is the road ahead for the Company?

Highlights

• Freightways saw robust growth in FY21, but the results were impacted by the Level 4 lockdown in NZ.
• Freightways expects to achieve earnings growth in FY22.
• The Group remains wary of macro factors that can hamper its plans.

Freightways Limited (NXZ:FRE) is an NZX-listed express package, IT and business mail service provider.

FY21 witnessed solid growth with the revenue crossing the $800-million level, up 27% from previous year, partly due to the Big Chill acquisition. The Group bought Big Chill in April 2020 for a projected value of $145 million. While 80% of the amount was paid upfront, 20% will be paid in August.

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The Group witnessed an improvement in margins with over 30% growth in NPAT and EBITDA YOY. The Board has set a final dividend of 18c, taking the total dividend to 33.5c.

However, FRE’s results were impacted due to the level 4 lockdown in NZ in the first quarter of FY22.

FRE’s initiatives and outlook

The Group is investing in medical waste in Australia and various proposals of waste recycling in NZ. Startery, FRE’s in-house idea incubator, has evaluated 32 diverse concepts out of which 5 are now being further developed. The Group has pledged to reduce carbon emissions by 50% by 2035 across its network.

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Freightways expects to achieve earnings growth in FY22 despite its results being impacted by the level 4 lockdown in the first quarter and persistent curbs on businesses running in both NZ and Australia.

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With NZ moving to Alert Level 3 and below, the Group is aided by a rise in volumes propelled by online activity and market share increases in Express Package. The Group also remains satisfied with growth in medical waste in Australia and expects it to improve as conditions in Victoria get better.

Potential Risks

Freightways remains wary of the risks that can occur and ruin its plans. These risks include a tough labour market stressing on costs, existing and possible lockdowns in Australia & NZ, a controlled supply chain that can disturb the movement of goods coming in NZ and eventually affect the volumes that FRE gets from its customers.

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FRE continues to evaluate the portfolio of services and consider acquisition prospects that are complementary to its existing operations and competencies.

FRE ended the day 0.79% in red to close at $12.56.

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)