After having a tough year in its home base, Kiwi-based courier and express delivery company Freightways Group Ltd (ASX: FRW) is exploring a larger investor market in Australia, with its dual listing on the ASX last September.
The company recognises Australia's increasing significance in its activities, with Australian operations contributing to 30% of its total revenue in FY23.
With the listing, Freightways will collaborate with Australian fund managers who primarily focus on ASX-listed companies, thereby expanding its investor base in alignment with its business reach.
Freightways anticipates that growth in Australia will surpass that of New Zealand in the future. The company is currently trading on the ASX at A$7.75 with a market cap of A$1.39 billion (Figure 1).
Figure 1: Share price chart (Source: Google Finance)
In Australia since 2007
Freightways' foray into the Australian market began in 2007 with the purchase of Databank, an information management enterprise.
Since then, the company has expanded its services to include information management, secure destruction, and waste management.
The acquisition of the Allied Express business in October 2022 significantly enhanced Freightways' presence across Australia, diversifying its income sources and reducing its economic reliance on New Zealand.
To further bolster its operations, Freightways is set to enhance Allied Express in Australia by implementing automation in facilities located in New South Wales (NSW) and Victoria.
This initiative aims to support a potential revenue surge and ensure the company can seize a larger market share without being hampered by infrastructure limitations.
This strategic move is pivotal, considering the Australian express delivery market's size is roughly eight times greater than New Zealand's.
Looking ahead
In the face of a challenging economic climate, the company remains optimistic about the resilience of its business model, underscored by its diversification across various segments and geographies.
While volumes have stabilised in Australia and New Zealand, they remain sensitive to the economic conditions in these countries.
The labour markets, especially in New Zealand, have shown signs of relaxation, with the company anticipating normalisation of labour rate increases by the fiscal year 2025 (FY25).
On the operational front, Freightways medical waste management outfit, MedX in Victoria is set to kick off operations in the December quarter.
The company aims to enhance utilisation at the Ruakura facility throughout FY24, achieving breakeven by the March quarter of FY25 and projecting positive returns thereafter.
After a period of stabilisation, paper pricing has seen a slight recovery from the first quarter (Q1) lows.
The anticipated full-year capital expenditure is A$35 million, which includes the installation of the second automated sortation system at Allied Express in Victoria.
For FY25 and FY26, the focus will shift to margin restoration in both divisions, supported by easing labour rates and modest organic growth.
Looking ahead, the group intends to explore acquisition opportunities that align with its existing operations and capabilities, aiming to deliver value to its shareholders.
Background
Freightways business verticals are across four main areas: Express Package and Business Mail (EP & BM), Temperature Controlled, Information Management, and Waste Renewal.
The EP & BM sector is known for its expedited and same-day deliveries, oversized parcels and airfreight capabilities.
The Temperature Controlled segment provides critical refrigerated transport services, with ProducePronto leading the charge in national expansion, thereby enhancing connectivity with major fresh produce markets.
In Information Management, Freightways’s Stocka is a service aiding Australian eCommerce entities to penetrate the New Zealand market.
Stocka facilitates storage and comprehensive logistics management for small-medium businesses (SMBs) in New Zealand, streamlining their operations across the Tasman.
Additionally, the Waste Renewal division underscores Freightways’ commitment to environmental stewardship through its specialised medical waste management services.
These strategic initiatives across its diversified segments position Freightways to leverage growth opportunities, reinforcing its market presence and operational excellence in the logistics sector.
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