Ann: FLLYR: FRE: Full Year Results to 30 June 201

• Release Date: 12/08/13 11:55
• Summary: FLLYR: FRE: Full Year Results to 30 June 2013 and Final Dividend
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FRE
12/08/2013 09:55
FLLYR

REL: 0955 HRS Freightways Limited

FLLYR: FRE: Full Year Results to 30 June 2013 and Final Dividend

SUMMARY OF PRELIMINARY FULL YEAR ANNOUNCEMENT

Name of Listed Issuer: Freightways Limited

Reporting Period: 12 months to 30 June 2013

The abridged financial statements attached to this report have been audited
and are not subject to a qualification. A copy of the audit report applicable
to the full financial statements is attached to this announcement.

CONSOLIDATED INCOME STATEMENT

Current Full Year NZ$'000: Up(Down)%: Previous Corresponding Full Year
NZ$'000

OPERATING REVENUE:
406,117; 8%; 382,455

PROFIT BEFORE INCOME TAX
53,722; 9%; 49,305

INCOME TAX
13,375; 9%; 12,300

NET PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS
40,347; 9%; 37,005

Earnings per share
26.2; 24.1

Final Dividend (fully imputed)
9.75; 9.50
Record Date: 13 September 2013
Payment Date: 1 October 2013
Appendix 7 is attached.

Detailed information: The preliminary Full Year Announcement and presentation
are attached and can also be located in the Investor Relations section of
Freightways' website (www.freightways.co.nz).

FULL YEAR REVIEW
From the Chairman and Managing Director

The Directors are pleased to present the financial result of Freightways
Limited (Freightways) for the year ended 30 June 2013. In its 10th year since
listing on the New Zealand Stock Exchange (NZX) in September 2003,
Freightways has delivered another record result. This report discusses the
2013 full year result, reflects on some of the many achievements of the
Company over the past decade and provides our outlook for the future.

Operating performance

Consolidated operating revenue of $406 million for the year was 6% higher
than the prior comparative period (pcp).

Earnings (operating profit) before interest, tax, depreciation and
amortisation (EBITDA), Earnings (operating profit) before interest, tax and
amortisation (EBITA) and Net Profit after tax (NPAT) amounts used in
calculating the movements between years discussed below exclude the following
non-recurring income amounts:
-  Full Year 2012 EBITA included $1.5 million and NPAT $1 million relating to
Christchurch earthquake insurance claim proceeds recorded against corporate
costs.
-  Full Year 2013 EBITA and NPAT both include $2.1 million relating to the
reversal of accrued acquisition earnout payments that are not expected to be
paid. Of the $2.1 million, $1 million was recorded in the express package &
business mail division, while $1.1 million was recorded in the information
management division.

The Directors believe that the non-recurring income amounts detailed above
should not be included when assessing the underlying operating performance of
the Company.

EBITDA (excluding non-recurring income) of $77 million for the year and EBITA
(excluding non-recurring income) of $65 million for the year were 7% and 5%
higher than the pcp, respectively.

Consolidated NPAT (excluding non-recurring income) of $38 million for the
year was 6% higher than the pcp.

Cash flows generated from operations were again strong at $77 million.

Earnings per share (EPS) for the year (excluding non-recurring income) was
24.9 cents per share, an improvement of 6% over the pcp.

Dividend

The Directors have declared a final dividend of 9.75 cents per share, fully
imputed at a tax rate of 28%. This represents a pay out of approximately $15
million compared with $14.6 million for the pcp final dividend of 9.5 cents
per share. The final dividend will be paid on 1 October 2013. The record date
for determination of entitlements to the final dividend is 13 September 2013.

The Dividend Reinvestment Plan (DRP) will not be offered in relation to this
final dividend. As a capital management tool, the application of the DRP will
be reviewed for each future dividend.

REVIEW OF OPERATIONS

Record results have been achieved in both the express package & business mail
division and the information management division for the year ended 30 June
2013.

Express Package & Business Mail

The express package & business mail division operates a multi-brand strategy
in the domestic market through New Zealand Couriers, Post Haste, Castle
Parcels, NOW Couriers, SUB60, Security Express, Kiwi Express, DX Mail and
Dataprint.

Operating revenue of $308 million for the year was 6% higher than the pcp.

EBITDA (excluding non-recurring income) of $55 million for the year and EBITA
(excluding non-recurring income) of $49 million for the year were 3% and 1%
higher than the pcp, respectively.

2013 has been characterised by good revenue growth, yet only modest operating
earnings (EBITDA & EBITA) growth (excluding non-recurring income). A changing
business mix in both our express package and business mail businesses and the
cost of related investment to capture new growth has contributed to this
outcome.

The express package business mix has continued to progressively change as
increasing numbers of consumers buy goods online. This has meant faster
growth in Business-to-Consumer (B2C) volume than Business-to-Business (B2B)
volume. Our strategy to ensure we capture our share of this B2C growth and
that we appropriately service it has included increased investment in
customer support, IT development and in recent years the establishment of our
'Pass The Parcel' service. These strategies have proven successful, hence the
growth we are achieving. Compared to B2B volumes, a feature of the B2C market
is typically smaller packages and consequently lower revenue/margin per item.
Over time we expect that margins relating to this work will increase,
particularly as delivery density increases. Express package volumes are back
to pre-earthquake levels in Christchurch. The cost of doing business in
Christchurch is however higher than in the past and it will remain so for
some time due to the disparate nature of B2B delivery addresses now compared
to the previously compact CBD.

Our business mail division has continued to experience a change in business
mix as its traditional box-to-box letter volumes and general business mail
have declined through digital substitution. Our strategy to address this
natural decline has been three-fold:
-  Investment in a network of DX Mail posties in most centres throughout New
Zealand to enable the capture of a greater share of street delivery mail. We
expect the aggressive network changes proposed by our competitor, NZ Post,
will ultimately slow down the delivery of its customers' letters. We expect
those customers will in increasing numbers talk to DX Mail about its
alternative services.
-  The acquisition of Dataprint, a full service mailhouse that offers both
'digital and physical' mail delivery to its customers. In its first year of
Freightways ownership this acquisition has performed very well. It has
successfully leveraged its new sister companies' capabilities and customer
reach to support its business development plans and vice-versa.
-  The establishment of a Business Process Outsourcing service that brings
together the capability of DX Mail, Dataprint and Freightways' Information
Management division to assist in transitioning customers to a digital
workflow environment.

Overall the express package & business mail division has delivered sound
performance in a challenging year.

Information Management

The information management division is established in New Zealand through the
brands of Online Security Services, Archive Security, Document Destruction
Services and Data Security Services and in Australia through the brands of
DataBank, Archive Security, Filesaver and Shred-X.

Operating revenue of $100 million for the full year was 8% above the pcp.

EBITDA (excluding non-recurring income) of $23 million for the year and EBITA
(excluding non-recurring income) of $19 million for the year were both 13%
higher than the pcp.

The information management division has again recorded a strong result.
Highlights within this division include:
-  Strong growth of stored archive boxes, with similar levels of growth being
achieved in all locations.
-  Stepped growth in service activity and revenue achieved by our document
destruction operations in Australia has contributed to increased utilisation
of our recently established regional collection runs. This growth has also
helped mitigate the lower prices we are receiving for the sale of recycled
paper.
-  Growth in our emerging digital services, which enable us to participate in
the digital management, archiving and back-up of business information.

Overall, the performance of the information management division has again
been very strong.

Internal service providers

Fieldair Holdings provides airfreight linehaul services, Parceline Express
provides road linehaul services and Freightways Information Services provides
IT development and support to the express package & business mail division.
All three internal service providers have continued to deliver outstanding
service, underpinning the service offered by our front line businesses.

Corporate

Corporate overhead costs continue to be well contained and were lower than
the prior year. Strong operating cash flows enabled bank borrowings to be
reduced by $13 million during the year.

Freightways' finance facilities of NZD110 million and AUD70 million have been
extended by two years with effect from 26 July 2013, at existing pricing.
This has resulted in the profile of the facilities being restored to
maturities spread equally between 3-years, 4-years and 5-years.

Capital expenditure of $13 million was invested during the year, primarily to
provide capacity for growth, including expenditure on facilities and related
equipment, IT infrastructure and airfreight.

A DECADE OF ACHIEVEMENT

Freightways is in its 10th year since listing on the NZX. In its 2003
investment statement & prospectus Freightways was described to potential
investors as "a strong successful business ... positioned to deliver
continuing earnings growth ... offering an attractive dividend yield." By any
measure, Freightways has delivered upon these statements.

A strong successful business...

Freightways' core operating culture has stood the test of time, its business
model has been progressively enhanced through investment in the development
and retention of its people (that number approximately 3,000 across New
Zealand and Australia), progressive capacity expansion to accommodate growth,
the successful acquisition and start-up of a number of new businesses, the
introduction each year of innovative new services and on-going investment in
the technology that supports our core business processes and the services
that we offer our customers. Our customers ultimately tell us if we are on
the right track and the retention and growth of our large customer base is a
particularly pleasing aspect of the Company's development.

Diversification into the information management industry, that in 2013, has
seen our information management division reach $100 million in revenue and
contribute operating earnings of $23 million (EBITDA, excluding non-recurring
income), has been a highly successful strategic move for Freightways. The
information management strategy, while strengthening Freightways' overall
earnings profile, has enabled our entry into the Australian market and today
we operate businesses in every state and territory within Australia.

Freightways is a stronger and more successful business today than it was in
2003.

... positioned to deliver continuing earnings growth...

Freightways' performance has seen its revenue and profits more than double
since listing on the NZX:
o  Revenue growth since 2003 of 107%;
o  Operating Earnings (EBITDA & EBITA) growth since 2003 of 102%; and
o  NPAT growth since its first NZX published result in 2004 of 137%.

Freightways is better positioned today than it was in 2003 to deliver
continuing earnings growth.

...offering an attractive dividend yield.

Freightways policy since its listing in 2003 has been to pay 75% of NPATA as
dividends each year. The strong annual cash generation achieved by
Freightways has meant that Directors have been able to consistently comply
with this policy objective.

o  Gross dividends since listing of 241 cents per share
o  Total gross shareholder return (i.e. dividends plus share price
appreciation) from September 2003 to July 2013 of 387%

The very positive cash generating ability of the Company is such that
Directors remain comfortable with the current dividend policy for the
foreseeable future.

OUTLOOK

Overall we expect to be operating in a positive but slow growth environment
for the foreseeable future. Based on Freightways' current forecasting, 2014
is expected to demonstrate similar overall year on year improvement as was
achieved in 2013.

Within our express package businesses we expect incremental volume growth
from our existing customers. Price increases and efficiencies generated from
this anticipated increase in volume are expected to offset cost increases. We
will again step up our investment in technology solutions to support our
expectations for market share growth. B2C retail deliveries generated through
online shopping are again expected to grow more rapidly than B2B retail
volumes, albeit this latter volume is expected to also increase compared to
the prior year.

Our smaller DX Mail business will continue to operate in a challenging and
overall declining market, yet it is expected to attract increasing customer
demand for its street delivery, mailhouse and digital services (that also
leverages the information management division's capabilities).

The information management division is again expected to return good
year-on-year improvement, underpinned by strong volume growth. Accordingly,
we will step up our investment in capacity with related lease costs
increasing in 2014 by around $1m. The revenue we receive from the sale of
recycled paper will be slightly lower than that achieved in 2013 due to the
closure of a paper mill in Queensland. The paper volumes that previously went
to this mill are likely to be exported in the near term at a lower margin due
to related increased transport costs. The impact of the recent loss of two
customers from our media storage business is expected to be offset by new
customers won during the year.

To address the increasing demand for the digitisation of business processes
we have established a Business Process Outsourcing service that leverages the
existing capabilities of Dataprint, DX Mail and our information management
division. Encouraging progress has been made in establishing this service
alongside our existing customers, including within government agencies. We
expect our digital service revenues to continue growing.

Capital expenditure for the year ending 30 June 2014 is expected to be
approximately $14 million to support the growth and development of both
Freightways' operating divisions. Overall, cash flows are expected to remain
strong throughout the 2014 financial year.

Freightways will continue to seek out and develop growth opportunities,
including acquisitions and alliances that complement its core capabilities.

Subject to business factors beyond its control, Freightways is well
positioned to benefit from any further improvement in the markets in which it
operates.

CONCLUSION

Freightways has delivered a record full year result. The positive features of
the markets it operates in, the resilience and flexibility of its business
models and the successful execution of its growth strategies by a very
experienced and capable team are evident in this result. Accordingly, the
Directors have been able to declare a fully imputed 9.75 cents per share
final dividend.

The Directors acknowledge the outstanding work and ongoing dedication of the
Freightways team of people throughout New Zealand and Australia.
End CA:00239532 For:FRE    Type:FLLYR      Time:2013-08-12 09:55:06