Ann: MEETING: FRE: Annual Shareholders Meeting -

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• Summary: MEETING: FRE: Annual Shareholders Meeting - Chairman's & MD's Commentary
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FRE
25/10/2012 10:32
MEETING

REL: 1032 HRS Freightways Limited

MEETING: FRE: Annual Shareholders Meeting - Chairman's & MD's Commentary

A.  CHAIRMAN'S INTRODUCTION

Slide 1. Freightways - 25 October 2012, Annual Shareholders Meeting

Slide 2. Sue Sheldon, Chairman

Ladies and Gentlemen, welcome to Freightways' Annual Shareholders Meeting. My
name is Sue Sheldon. I am the Chairman of Freightways' Board of Directors.

Slide 3. Agenda

Before we get underway I will run through the structure of the meeting.

o I will begin with procedural matters, introduce the Freightways Board and
senior executive team to you, and then summarise some of the Company's 2012
highlights. I will then ask Dean Bracewell, Freightways' Managing Director,
to provide a review of the Company and an update on current trading
performance.

o I ask that you hold all questions about the performance of the Company
until the close of the Managing Director's presentation and direct them
through the Chair. Any questions related to resolutions should be asked when
we consider those resolutions.

o Following the Managing Director's presentation, I will introduce the
resolutions as outlined in the notice of meeting. Again this year polls will
be held in respect of the resolutions put to shareholders. The polls will be
conducted following the meeting.

o The notice of meeting, which includes the explanatory notes, has been
circulated to all shareholders, and I intend to take it as read.

The Company's constitution prescribes a quorum requirement of 3 shareholders.
As you can see this requirement is met. As a quorum is therefore present, the
meeting is duly constituted and I declare it open.

Proxies have been appointed for the purpose of this meeting in respect of
approximately 72 million ordinary shares. As was indicated on the proxy form,
where proxy discretion has been given, the Directors, and I as Chairman,
intend to vote those proxies we have received in favour of resolutions 1, 2
and 4 set out in the Notice of Meeting. As also indicated on the proxy form,
unless directed how to vote by the shareholder giving the proxy in respect of
resolution 3 relating to Directors' fees, the Directors, including myself,
will not be able to vote on resolution 3 on behalf of the proxy.

I would now like to introduce those at the table with me:

o Mark Royle, Freightways' Chief Financial Officer and Company Secretary.
Mark has 28 years accounting and commercial experience of which 13 years were
with a major international chartered accounting firm. Mark was appointed
Chief Financial Officer and Company Secretary of Freightways 12 years ago,
having spent a number of years prior to that with Freightways' then
Australian owner.

Your Directors at the table are:

o Dean Bracewell, Freightways' Managing Director. Dean has spent almost his
entire career with Freightways after initially joining the company in 1978.
He worked his way through the company and held a number of senior Executive
and General Management roles within Freightways' subsidiary businesses prior
to his appointment as Managing Director in 1999.

o Mark Verbiest. Mark was appointed a Director in February 2010.  He is a
professional director who has a strong working knowledge of technology and
technology-related businesses, as well as having extensive capital markets
experience. A lawyer by training, with widespread corporate legal experience
in private practice, he spent 7.5 years on the senior executive team of
Telecom NZ through until mid-2008, where among other things he had executive
accountability for two business units. Mark is Chairman of Telecom
Corporation of New Zealand Limited, Transpower New Zealand Limited and Willis
Bond Capital Partners Limited. Mark is also a member of the Financial Markets
Authority and a consultant to law firm Simpson Grierson.

o Sir William Birch. Sir William began his career in 1957, when he
established a private practice as a surveyor in Pukekohe. His keen interest
in community affairs led to six years as Deputy Mayor of Pukekohe and
election to Parliament in 1972.  During his 27 years in Parliament he served
for 15 years as a Minister of the Crown, including 6 years as Minister of
Finance between 1993 and 1999. Sir William retired from Parliament in 1999
and commenced a private consultancy.  He is a director of a number of public
and private companies, a trustee of the MFL and SIL Superannuation funds, an
advisor to Forsyth Barr in New Zealand and the Royal Bank of Scotland in
Australia. Sir William was knighted by the Queen for public services in 1999.

o Roger Corcoran. Roger is based in Australia and was appointed a Director in
May 2009. He gained extensive global business experience during a 30-year
career with multi-national transport and logistics operator, TNT. Roger
retired as CEO of TNT Australia, New Zealand and the Pacific Islands in 2008.

o Kim Ellis. Kim was appointed a Director in August 2009, having spent 28
years in chief executive roles in a number of sectors, including 13 years as
Managing Director of Waste Management NZ Limited, and has developed
businesses in both New Zealand and Australia. Kim is now a professional
director working with both private and listed companies. Kim is currently
Chairman of Envirowaste Services Ltd and NZ Social Infrastructure Fund Ltd
and a director of Ballance Agri-Nutrients Ltd, FSF Management Company Ltd,
Moa Group Ltd and several private companies.

o I was appointed a Director of Freightways ahead of its IPO in 2003 and
elected Chairman in 2010. I am a Chartered Accountant and full-time
professional director. I am currently Chairman of Chorus Limited, Deputy
Chairman of the Reserve Bank of New Zealand and a Director of Contact Energy
Limited and Paymark Limited. I am a former president of the New Zealand
Institute of Chartered Accountants and was made a Companion of the New
Zealand Order of Merit in 2007.

Also present today are several members of the Freightways executive team who
I would like to introduce to you:

o Steve Wells, General Manager of New Zealand Couriers.

o Mark Troughear, General Manager of the Freightways Information Management
Division.

o Richard Mitchell-Lowe, General Manager of Freightways Information Services.

o Mark Brightwell, General Manager of DX Mail and Online Security Services.

o Charles Giliam, General Manager of Fieldair Holdings.

o Neil Wilson, General Manager of Post Haste Limited.

o Devon Buckingham, Auckland Regional Manager of New Zealand Couriers.

o Aaron Stubbing, General Manager of Messenger Services Limited.

o Mark Skews, General Manager of Castle Parcels Limited.

And from our Australian businesses:

o Chris Cotterrell, General Manager of The Information Management Group Pty
Limited, which operates the DataBank, Archive Security and Filesaver
businesses.

o Van Karas, General Manager of Shred-X Pty Limited.

These people are representative of the wider Freightways team who operate in
every town and city throughout New Zealand and in all major states of
Australia. This executive team has considerable experience, often in more
than one Freightways business and has an average tenure at Freightways of
approximately 15 years per executive. It is a particular strength of
Freightways that it is able to identify and promote talent from within, not
only in these senior roles but across many occupations within the greater
company.

The Company's Auditors, PricewaterhouseCoopers, are represented here today by
Pip Cameron and the Company's legal advisors Russell McVeagh are represented
here today by Joe Windmeyer.

The Financial Statements for the year ended 30 June 2012 are set out in the
Company's Annual Report that was released to shareholders last month.

I would now like to speak briefly to some of the general and financial
highlights of Freightways' 2012 year. I will then ask Dean Bracewell to
address you.

Slide 4.  General Highlights - 2012

Highlights of 2012 include:
- Our result was above the prior year in all respects and was a record result
for the company;
- Growth strategies were successfully executed across both divisions of the
company;
- Acquisitions completed during 2012 added further depth to FRE's presence in
the Australasian information management market; and
- In the first half of the 2012 year Freightways' finance facilities were
renegotiated, which resulted in reduced funding costs, which was evident in
the 2012 result.

Slide 5. Financial Highlights - 2012

This slide shows Freightways' financial performance in 2012 compared to 2011.
A one-off $1.5 million EBITA benefit ($1 million after tax) relating to
proceeds from Christchurch earthquake insurance claims made in the prior year
was treated as non-recurring and is not included in these revenue and
earnings numbers. Similarly, a one-off $1.3 million EBITA charge ($0.9
million net of tax) relating to Christchurch earthquake costs subject to
insurance claims was treated as non-recurring in the prior year and is also
excluded from the comparative 2011 numbers. Non-recurring items are included
in the full year financial statements contained in your annual report.

Consolidated operating revenue of $382 million for the full year was 8%
higher than the prior comparative period.

EBITDA of $72 million for the full year (which excludes the non-recurring
items I just described) was 9% higher than the prior comparative period and
EBITA of $62 million for the full year (also excluding the non-recurring
items I just described) was 9% higher than the prior comparative period.

Consolidated NPAT of $36 million for the full year, excluding non-recurring
items, was 17% higher than the prior comparative period.

Earnings per share (EPS) for the full year (and again exclusive of
non-recurring items) were 23.4 cents per share, an improvement of 15% over
the prior comparative period.

Slide 6. Express Package & Business Mail division - 2012 performance

The Express Package & Business Mail division's 2012 result was underpinned by
a particularly strong first quarter that contributed to a very good first
half year result. As expected, revenue in this division in the second half
was comparatively not as strong as in the first half, yet revenue growth
nevertheless remained positive and consistent throughout the period.

Overall, the Express Package & Business Mail division was able to once again
demonstrate its resilience and its growth attributes to deliver a very good
full year result.

Slide 7. Information Management division - 2012 performance

The Information Management division's result in 2012 was achieved through
strong organic growth in all service lines, in all locations, which more than
offset the impact of lower paper prices received from the sale of recycled
paper from our document destruction businesses, and the benefits realised
from recent acquisitions.

Overall, the performance of the Information Management division, and its
demonstrated ability to sustain high levels of growth, was outstanding.

Slide 8. Final Dividend - 2012

The Directors declared a final dividend of 9.5 cents per share, fully imputed
at a tax rate of 30%, which was paid on 1 October 2012. This represented a
payout of approximately $14.6 million compared with $11.2 million for the
prior comparative period dividend of 7.25 cents per share. The full year's
dividend payout was in line with the Company's dividend policy of paying out
75% of annual Net Profit After Tax before Amortisation (or NPATA).

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

By any measure, 2012 was a very strong and successful year for your company.
The Board acknowledges the excellent work and ongoing dedication of the
Freightways team throughout New Zealand and Australia.

I'll now call on Dean Bracewell to address the meeting.

Slide 9. Freightways - Dean Bracewell, Managing Director

B.  MANAGING DIRECTOR'S REVIEW AND TRADING UPDATE

Thank-you Sue and thank-you ladies and gentlemen for coming along today.

Slide 10. Managing Director's presentation agenda

My presentation will discuss the industries that Freightways works in and its
businesses. I will then touch on Freightways' over-arching strategy, before
finishing with an update on recent trading performance and our outlook for
the foreseeable future.

Slide 11.  Express Package & Business Mail

Slide 12. Express Package & Business Mail - Industry overview and business
description

Slide 13. Information Management

Slide 14.  Information Management - Industry overview

Freightways offers specialist off-site management of electronic media in
climate-controlled vaults, archiving and physical storage of documents and
secure document destruction services to a wide range of business customers.

Key growth drivers in this industry include the increasing demand for expert
management of business information, risk management and compliance, and the
lower overall cost of an outsourced solution.

The robust and recurring nature of the storage revenue, as we experience in
our Information Management division, is naturally a favourable feature of
this industry.

Paper that is collected through the secure document destruction niche of this
industry is sold to paper buyers either domestically in Australia or New
Zealand or exported to Asia for recycling. As with most commodities, the
prices that are received from the sale of this paper will fluctuate depending
on demand. Global demand for recycled paper is currently low and accordingly
the prices we receive from the sale of this paper are also currently low,
compared to recent years.

The information management industry is relatively consolidated with a small
number of operators servicing both the New Zealand and Australian markets.

Slide 15. Information Management - Business description

Freightways has successfully diversified into the information management
industry, which in 2012 contributed 25% of Freightways' total revenue and
operating earnings. Over half of this contribution was generated in
Australia.

During 2012, Freightways acquired Iron Mountain's New Zealand operations and
the business and assets of Filesaver Pty Limited in Sydney. The financial
contribution from these acquisitions, including the value of synergies
achieved under Freightways' ownership, is tracking to our expectations.

The strong storage growth we have achieved in this division has been
accommodated through our investment in warehousing capacity throughout New
Zealand and Australia. This investment has enabled the winning of several
important nationwide customers.

New service lines, including the electronic capture and retrieval of data,
have been added to Freightways' suite of information management services,
adding breadth to our revenue and earnings growth profile.

Slide 16. Business strategy

Slide 17. Business strategy

Freightways' strategy contains several key elements. At a high level these
are:

o Firstly, and most importantly, our strategy to enhance capability and
service levels wherever possible within each of Freightways' existing
businesses to ensure the retention of existing customers and to grow market
share;
o Secondly, our strategy to diversify the company into the information
management industry to further strengthen the earnings base and increase the
company's resilience to adverse economic cycles that have a more immediate
impact on Freightways' core express package & business mail division;
o Thirdly, our strategy to diversify activity away from a sole reliance on
the domestic New Zealand market. This has been achieved by establishing
operations in every major state of Australia; and
o Lastly, the strategy to extend Freightways' presence into complementary
areas of growth, either through the establishment of alliances or by
acquisition.

Your company is very well positioned with quality capability and capacity to
benefit from further improvement in the New Zealand and Australian economies
and in each of its markets.

Freightways will continue to train and develop its people to ensure the
future of its business is in experienced hands.

Freightways will continue to innovate and wherever possible further improve
its service performance to customers. As demand emerges for complementary
and/or substitute services relating to the electronic communication and
management of both transactional mail and general business information, we
will work alongside our customers to develop appropriate solutions utilising
the skills we have developed internally over a number of years and those that
we have acquired through our recent acquisitions.

The strategies I have outlined are designed to sustain Freightways'
profitability and deliver long-term value to shareholders.

Acquisitions and alliances will continue to be explored where they complement
Freightways' capability and add value. In addition, start-up opportunities
will also be considered if they make commercial sense.

Slide 18. Trading update

These next two slides present the long-term performance of your company.

Slide 19. Operating revenue

Our 2012 revenue result was a good, sound step-up from the prior year and
brings our 10-year compound average annual growth rate for revenue to 7.5%.

Slide 20. EBITA

2012 operating earnings (or EBITA), as Sue has mentioned, were a record
result for the company, bringing our 10-year compound average annual growth
performance to 8%.

Slide 21. Current financial performance

This slide provides Freightways' financial performance for the 1st quarter
period from 1 July to 30 September 2012.

Revenue totalled $101 million, an 8% increase on the prior comparative period
(pcp). Earnings before interest, tax, depreciation and amortisation (EBITDA)
of $18.7 million was 12% above the pcp and earnings before interest, tax and
amortisation (EBITA) of $15.7 million was 11% above the pcp. Net profit after
tax (NPAT) of $9.2 million was 14% above the pcp.

Our first quarter performance, achieved in a low growth environment,
demonstrates the overall resilience of Freightways and the success of its
strategic development. Past decisions to diversify operations geographically
and by industry to increase the company's growth opportunities are evident in
this earnings result, as is Freightways' ability to better withstand the
inevitable performance cycles of the broader economy and our specific
markets.

Slide 22. Express Package & Business Mail division - current performance

Our express package & business mail division's revenue of $76 million was 4%
above the pcp. EBITDA of $13 million and EBITA of $12 million were 5% and 2%
ahead of the pcp, respectively.

Overall, express package volumes in the quarter were positive, which is a
sound outcome given the very strong performance achieved in the pcp. Letter
volumes in our smaller DX Mail business declined during this period. Modest
price increases across the entire division have been implemented to help
offset cost increases, particularly relating to road user charges and
insurance. Additionally, the higher cost of servicing a more disparate
customer base in Christchurch, along with increased turnover of our team in
that region, has added to the cost pressures we currently face in this
division. The full benefit of these price increases will not be seen until
the second quarter. Quality market share gains also contributed to our
revenue growth.

Slide 23. Information Management division - current performance

Our information management division has again performed strongly, with
revenue of $25 million being 23% above the pcp. EBITDA of $6 million and
EBITA of $5 million were 36% and 38% ahead of the pcp, respectively.

Increased utilisation at all our sites throughout New Zealand and Australia
was achieved through market share gains and organic growth. The strong
performance of our document and data storage operations contributed towards
offsetting the impact of significantly lower prices that we are currently
receiving for the sale of paper from our document destruction operations,
compared to the pcp. Additionally, the positive performances from our
recently acquired businesses also contributed to this outstanding result.

Slide 24. Recent acquisition activity

As previously announced, Freightways acquired Iron Mountain's New Zealand
operations, effective from 1 October 2011. The business of Filesaver was
acquired in Sydney during December 2011. These acquisitions complemented our
existing capabilities and also brought with them new service lines which we
have since introduced to our wider business.

Effective 1 July 2012, Freightways acquired the business and assets of
DataPrint Limited. DataPrint is an Auckland-based full service mailhouse that
provides its customers with both a physical and an electronic service for
transactional mail. DataPrint is working alongside DX Mail. Customers of both
these businesses and the wider Freightways group will be offered a broader
suite of services as a result of this acquisition, including the ability to
send electronic invoices to their respective customers who can then pay these
invoices online.

All 3 of these acquisitions are performing to expectation under Freightways'
ownership.

Slide 25.  Outlook

Slide 26. Outlook

We expect to be operating in a slow growth environment for the foreseeable
future. We are however mindful that any further deterioration in the global
economy will inevitably influence the markets that we operate in.

Within this environment, we expect our express package volumes to remain
sound, with growth in these volumes being primarily determined by the
performance of our existing customers. Letters volume in our DX Mail
business will remain under pressure. Our competitor, NZ Post, remains the
owner and operator of New Zealand's wholesale postal delivery network.
Freightways is dependant on access to this network for parts of its mail
service and has challenged the pricing model of our access for some time. It
is expected that the future terms of access to the NZ Post network, for those
letters that we don't deliver ourselves, will be resolved in the near future.
This will enable increased certainty for the growth and development of this
business. Price increases across the express package & business mail division
implemented during the first quarter will take full effect in the second
quarter and contribute to offsetting recent cost increases. Quality market
share gains will continue to be actively developed and new products will be
introduced to the market where demand exists.

The information management division is expected to continue to deliver good
year-on-year earnings growth, despite lower paper prices and the additional
cost of increased capacity.  The strong growth in storage volumes we are
experiencing throughout New Zealand and Australia is expected to be
sustained.

Capital expenditure for the full financial year is expected to be $14
million. Overall, cash flows are expected to remain strong throughout the
financial year.

In recent years, Freightways has strengthened its earnings profile by
diversifying its activities both geographically and deeper into the
information management market. Freightways will continue to seek and develop
growth opportunities to support this strategy and will also explore other
opportunities that complement its core capabilities.

Subject to business factors beyond its control, Freightways is well
positioned to reap the benefits of further improvement in the markets in
which it operates.

Thank-you.
End CA:00228852 For:FRE    Type:MEETING    Time:2012-10-25 10:32:30