ANNUAL SHAREHOLDERS MEETING
A.
CHAIRMAN’S INTRODUCTION
Slide 1.
Freightways – 27 October 2005, Annual Shareholders
Meeting
Slide 2.
Wayne Boyd, Chairman
Ladies and Gentlemen welcome to Freightways’ Annual Shareholders
Meeting. My name is Wayne Boyd and I am the Chairman of
Freightways’ Board of Directors.
Slide 3.
Agenda
- Chairman’s introduction
- Managing Director’s review and trading update
- Resolutions
Before we get underway I will run through the structure of the meeting.
 I will begin with procedural matters, introduce the Freightways Board
and senior executive team to you and then summarise some of the
Company’s 2005 highlights. I will then ask Dean Bracewell,
Freightways’ Managing Director, to provide a review of the Company
and an update on current trading performance.
 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.
 Following the Managing Director’s presentation, we will attend to the
resolutions as outlined in the notice of meeting.
 The notice of meeting, which includes the explanatory notes, has been
circulated to all shareholders, and I intend to take it as read.
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The Company’s constitution prescribes a quorum requirement of 5
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 50 million ordinary shares. As was indicated on the proxy
form, where proxy discretion has been given, the Directors and myself, as
Chairman, intend to vote those proxies we have received in favour of the
resolutions before the meeting.
I would now like to introduce those at the table with me:
 Mark Royle, Freightways’ Chief Financial Officer and Company
Secretary. Mark has over 20 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 5 years ago, having spent a number
of years prior to that with Freightways’ then Australian owner.
Your Directors at the table are:
 Dean Bracewell, Freightways’ Managing Director. Dean has spent
almost his entire career with Freightways. Over a 20-year term Dean
has held a number of senior Executive and General Management roles
within Freightways’ subsidiary businesses prior to his appointment to
Managing Director in 1999.
 Warwick Lewis. Warwick was Dean’s predecessor as Managing
Director of Freightways between 1994 and his retirement in 1999. Prior
to that role Warwick was Freightways’ Commercial Manager for 8
years and prior to that he founded and managed Chep Pallets, a
company that was previously part owned by Freightways.
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 Sir William Birch will not require a great deal of introduction, however
it may be helpful to recap Sir William’s career. 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.
Following the general election in 1999, Sir William retired from
Parliament to start a private consultancy. As a member of the ABN
AMRO Australia and New Zealand Advisory Council he is involved
with the ABN AMRO group of companies in an advisory capacity on
business transactions. He is currently a director of a number of public
and private companies including St George Bank New Zealand and is a
trustee of Mutual Fund Limited and Superannuation Investments
Limited.
 Sue Sheldon is a professional director and a partner in the Christchurch
chartered accountancy practice, Sue Sheldon Advisory. Sue is Deputy
Chairman of Christchurch International Airport, Chairman of the Board
of Trustees of the National Provident Fund and a director of CanWest
Media Works, Smiths City Group, Asure New Zealand, Ngai Tahu
Holdings, Fibre Tech NZ and Nimbus Bedware. Sue is a former
president of the Institute of Chartered Accountants and is a Board
Member of Guides New Zealand.
 I was appointed a Director and elected Chairman of Freightways in
June 2003. After practising law for 18 years and spending 5 years in
investment banking, I established a specialist advisory business and a
career as a professional director. I am also Chairman of the Auckland
International Airport and Meridian Energy, and am a director of
Telecom and Forsyth Barr.
Also present today are several members of the Freightways team. I
shall introduce the members of Freightways’ senior executive team to
you:
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 Steve Wells. General Manager of New Zealand Couriers and Parceline
Express. Steve has been with Freightways for 21 years.
 Mark Troughear. General Manager of Post Haste Couriers. Mark has
been with Freightways for 9 years.
 Richard Mitchell-Lowe. General Manager of Freightways Information
Services. Richard has been with Freightways for 17 years.
 Stewart Maclaren. General Manager of Online Security Services.
Stewart has been with Freightways for 15 years.
 Mark Brightwell. General Manager of DX Mail. Mark has been with
Freightways for 11 years.
 Andrew McMaster. General Manager Fieldair Holdings Limited.
Andrew joined Fieldair as General Manager of its Engineering division
in 2001 and was appointed General manager of Fieldair last year.
During 2005 we made three additional appointments to Freightways
Executive team.
 Devon Buckingham was appointed General Manger of Castle Parcels
Limited a subsidiary of Post Haste Limited. Devon has been with
Freightways for 9 years.
 Colin Shotter was appointed to the Freightways Executive in his
capacity of Auckland Manager of New Zealand Couriers. Colin has
been with Freightways for 25 years.
 Neil Wilson was welcomed back to Freightways after an absence of
several years. Neil was appointed to the role of General Manager,
Messenger Services Limited. Including his time in years gone by, Neil
has been with Freightways for 7 years.
I would like to congratulate Devon, Colin and Neil on their promotions
and appointment to the Freightways Executive team.
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As you can see the senior executive team of Freightways has considerable
depth of experience. It is a particular strength of Freightways that we are
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 David Randell and Vicki Bond and the Company’s legal advisors
Lee Salmon Long are represented here today by Matt Ryan.
The Financial Statements for the year ended 30 June 2005 have been set
out in the Company’s Annual Report that was mailed to shareholders
during September 2005. Spare copies are available at the rear of the room.
I would now like to speak briefly to some of the general and financial
highlights of Freightways’ 2005 year. I will then ask Dean Bracewell to
address you.
Slide 4.
General Highlights
2005 has been Freightways’ first full financial year as a listed company on
the NZX since its IPO in September 2003. A particular highlight of
working with the Freightways team is seeing first hand the successful
realisation of its strategies across all subsidiaries in the three distinct
markets it is working in. This has been achieved by taking quite different
strategies to each distinct market whilst leveraging the fundamental
business methodology of the Freightways group. All Freightways
subsidiaries have achieved profitable growth compared to the prior year.
The acquisition of Archive Security in March 2004 has delivered fully to
expectation in its first full year of Freightways ownership. Acquisitions
can be notoriously difficult. It is to the credit of the Freightways
management team that the successful identification and eventual
implementation of this particular acquisition, its first as a listed company,
has gone according to plan. Freightways has continued to demonstrate its
ability to successfully execute its growth strategies.
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Freightways’ shareholder base remains strong with the majority of its
shares held in New Zealand. The final sell-down by Freightways’ prior
owners of their residual 6% shareholding during August was supported
with demand from both institutional and retail investors and again
underpinned the market’s positive acceptance of Freightways as a listed
company.
Slide 5.
Financial Highlights
As you can see from these figures, Freightways has delivered improved
performance on all fronts against the previous year. The performance of
the Company has been simply outstanding and it has enabled the Board to
declare a dividend to shareholders well in excess of the previous year.
Slide 6.
Dividends
Those who invested at the time of Freightways IPO only two years ago at
the issue price of $1.60 per share have received a total shareholder return
(i.e. gross dividends plus share price appreciation) of over 100%.
The 2005 year has been another record year for Freightways, and the
Board would like to thank the Freightways team throughout NZ for their
consistently delivered efforts. Your Board has enjoyed its year with
Freightways Limited. I’ll now ask Dean Bracewell to address the meeting.
Slide 7.
B.
Freightways – Dean Bracewell, Managing Director
MANAGING DIRECTOR’S REVIEW AND TRADING
UPDATE
Thank-you Wayne and thank-you ladies and gentlemen for coming along
today to our second annual shareholders meeting.
Slide 8.
Managing Director’s presentation
My presentation will provide an update of the markets that we work in,
along with a brief description of our businesses. I will touch on
Freightways’ over-arching strategy, before finishing with an update on our
recent trading performance and outlook for the foreseeable future.
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Slide 9.
Pioneers
You will see this photo at all Freightways presentations. These 6 chaps
were the pioneers of New Zealand’s express package industry and are then
what is today New Zealand Couriers. New Zealand Couriers is
Freightways’ largest subsidiary and its flagship brand. From these humble
beginnings in 1964, Freightways now contracts to approximately 1,000
couriers throughout NZ and employs over 1,400 people who work in
every major town and city throughout NZ.
Slide 10.
Express package industry - overview and business
description
Slide 11. Express package industry
The express package industry can be viewed in two quite different
segments. Firstly there is the network courier segment, which is where
Freightways generates approximately 90% of its activity. This segment
requires a nationwide airfreight and road freight linehaul system, a
nationwide branch network and significant IT infrastructure. E.g. a
package picked up in Kaitaia at 5.00 p.m. tonight and delivered in Gore at
8.30 a.m. tomorrow morning will have travelled through up to 8 pairs of
hands, 2 couriers vans, 3 linehaul trucks, 5 depots and 1 aircraft.
A smaller segment of the industry is the point-to-point courier segment
that has quite different characteristics, including lower barriers to
competitors entering the market, hence this part of the market is highly
competitive with a number of players. A package travelling via a point-topoint courier is handled only once and requires no material physical
infrastructure.
The express package industry is embedded in customers’ supply chains.
We provide a service to all industries and most, if not all, NZ businesses
will have a relationship with a courier.
There are two major players in the express package industry - NZ Post and
ourselves.
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Growth of the express package industry is effectively underwritten by the
increasing demand for goods and services to be supplied faster today than
they were in years gone by. It is this demand for urgent Just-in-Time
delivery that continues to drive volumes to our businesses.
Slide 12. Business description – Strengths
The depth of experience of Freightways people is an absolute strength of
our company. The kind of experience you have heard mentioned in
relation to our executive team is replicated at many levels right through
our company. This depth of experience is very difficult for any competitor
to replicate and contributes to Freightways’ competitive advantage.
Our couriers and linehaul drivers that you see on the road are independent
owner-driver contractors. As such they have invested in their van or truck
to partner with Freightways and accordingly share in the risk and reward
of doing business with us. Our contractors are paid typically based on
their productivity – the more productive they are the more they earn. This
model provides a high degree of variability for our major direct cost.
Freightways has a great culture of operational excellence – of getting our
customers’ packages to the right place at the right time in good condition.
While we are not perfect we do achieve 99% plus accuracy. And we have
further improved this score even through the last two years of significant
growth. We also have a very healthy profit culture at Freightways. We
produce weekly P&L’s and talk revenue, costs and profit on a weekly
basis throughout all levels of our business.
Our front line businesses are supported by a dedicated express package
linehaul system. We own and operate aircraft and manage a road linehaul
system totally geared around express packages. As such we have no
conflict of priorities in our core linehaul network.
And we take a multi-brand strategy to the market, which is shown on the
next slide.
Slide 13. Multi-brand strategy
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We segment the express package market into 3, and position our brands at
different price and service points within these segments. NZC is our
premium brand, Post Haste our mid-tier brand and Castle Parcels our
economy brand.
This strategy enables us to provide customers with choice right across the
market and allows customers to move to a different service level without
having to leave the Freightways Group. Importantly major costs such as
linehaul, IT and occupancy are shared across these brands to ensure we do
not unnecessarily duplicate our costs.
Slide 14. Information Management and Business Mail
Slide 15. Information Management
Our information management brands provide a total information
management service for businesses, including the archiving and retrieval
of documents, the destruction of confidential documents and the archiving
and retrieval of computer backup tapes. We operate in AKL, WLG, PMR
and CHC. We view this niche as an emerging business within the
Freightways Group, one that we will continue to invest in and grow. After
only 5 years of aggressively being in this market we have established
ourselves as the third largest operator in New Zealand.
We have relocated to new purpose built facilities in AKL and CHC during
2005 to accommodate the outstanding growth we are achieving in the
records management division of this business.
The information management business complements our courier
businesses through the collection of Online’s back-up tapes and archive
boxes by our express package brands.
Slide 16. Business mail
DX Mail is a specialist business mail service provider. It has grown
successfully since the deregulation of NZ’s postal services industry in
1998 to be the only nationwide competitor to NZ Post.
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While continuing to leverage our traditional box-to-box network, we have
also invested in a street delivery network in CHC, WLG and HLZ and
have posties completing letterbox deliveries of business mail in these
centres. We will continue to rollout this network around New Zealand in a
manner that ensures the profitable growth of this business. The full
potential of this business will be realised over a number of years.
DX Mail drives volumes to the express package brands through the pickup and delivery of DX’s mail bags by NZC.
Slide 17. Business strategy
Slide 18. Strategy
Freightways is investing in a number of areas of its business to ensure it
retains and grows its market share. This investment has occurred
particularly in people with expanded sales/marketing and operational
teams, and also in the core infrastructure of our business to ensure
capacity for growth and to create further competitive advantage. This
investment, although initially resulting in an increased cost of sale, is
already delivering positive returns, as I will show in the coming slides.
We will continue to work in our three core markets where we have
unfinished business. Express package, business mail and information
management all continue to provide ample opportunity for growth, as we
are seeing.
We regularly review the positioning and relevance of each of our brands
and how we take these brands to the market. We will also continue to
innovate within the three markets that we operate in to extend our service
range to a broader customer base. Most importantly all our subsidiary
brands are well positioned with capacity to accommodate growth. We also
have specific objectives concerning our people, how we can further
improve our performance for our customers and naturally we are very
focused on sustaining our track record of profitable growth.
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We will continue to explore acquisitions and form alliances where we
believe they complement our core capability and add value to our
company. In this regard we recently announced the acquisition of Kiwi
Express Couriers, a long established and successful point-to-point courier
business based in Auckland and Wellington.
These strategies are designed to continue to deliver very good long-term
value to shareholders.
Slide 19. Trading update
Slide 20. Operating revenue
Our 2005 result clearly sustains the ongoing track record of Freightways.
From 1999 until the end of 2005 we have achieved compound average
revenue growth of 7%.
Slide 21. EBITA
Our revenue growth has been translated into EBITA or operating earnings
growth at an average 19% p.a. over the same period.
Slide 22. Current financial performance
This slide shows our most current ‘unaudited’ financial performance
drawn from our management accounts for the quarter through until 30
September 2005. As you can see Freightways has again demonstrated
consistently strong trading to deliver another record result, well above the
prior corresponding period. This performance has been achieved through
the continuing support of existing customers, good gains in market share
and some pricing improvement. While some existing customers are
trading at lower levels than for the same period last year, we have been
able to offset this organic volume decline with the successful
implementation of our growth strategies. This strong operating
performance, coupled with a proactive approach to managing our finance
facilities, results in a very positive net profit after tax improvement of
21% compared to the prior corresponding period.
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Slide 23. Outlook
Slide 24. Outlook
From Freightways’ viewpoint the domestic economy is less buoyant than
it has been in recent years. Freightways’ growth strategies are however
offsetting this economy-related volume decline, as evidenced by the year
on year improvement shown in our first quarter trading update.
We do not expect to see any material change to our competitors’
behaviour in the marketplace. We will not however be complacent against
any potential or existing competitor. Ultimately our best form of defence
is to offer a great service at a competitive cost and this is what we strive to
do.
Demand for Freightways services remains strong right across our group of
businesses and our services are more valid today than they ever have been.
Freightways will continue to take consistent well-developed strategies to
the market in areas where we have proven capability. These strategies
will continue to be designed for the long term good of the company.
At this stage of our annual business cycle, and subject to economic and
business factors beyond our control, the outlook for Freightways, its
shareholders and all other stakeholders remains positive.
Slide 25. Summary
In summary your company is strong and successful. We are well
positioned to deliver continuing earnings growth and we intend to pay a
good dividend along the way.
Thank-you ladies and gentlemen.
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