Annual Report and Section 209c Notice

Annual Report
Freightways Limited and its subsidiaries
Financial Year ended 30 June 2019
SO MANY
JOURNEYS

ITEMS MOVED
EACH YEAR
Over
85 million
KG AIRFREIGHTED
TONNES OF PAPER
RECOVERED AND
SHREDDED
ITEMS
STORED
TERABYTES BACKED
UP ONLINE
Over
30 million
45 thousand
Over
11 million
3.5 thousand
LOST TIME
INJURY
FREQUENCY
RATE (LTIFR)
10
Contents
06 Highlights
10 Chairman and CEO’s report
18 The Freightways family
20 People
22 Our Sustainable Development Goals
32 Community
34 Our board
35 Our leadership team
36 Directors’ report
44 Independent auditor’s report
49 Financial Statements
93 Shareholder information
95 Corporate governance

NEAR AND FAR
IMMEDIATE
AND OVER TIME
TO BUSINESS
AND CONSUMERS
PHYSICAL
AND DIGITAL
GROWTH IN
AVERAGE
COURIER
EARNINGS
7%
A journey for us is more than taking something from one place
to another. Increasingly, it’s about transforming things from one
form to another. Our core philosophy of Pick Up, Process and
Deliver now forms the basis for an expanding range of businesses
focused on adding value to products and services as they pass
through our hands.
By applying our entrepreneurial spirit to everything we do, we’ve
successfully expanded and diversified our business operations
in New Zealand and Australia from couriers to documents to
digitalisation. Today our portfolio of brands offers digital and
physical services to businesses and consumers, all with exciting
growth potential.
Freightways Limited and its subsidiariesAnnual Report 2019
3

Express Package
Our multi-brand strategy in the
New Zealand courier market includes
New Zealand Couriers, Post Haste,
Castle Parcels, NOW Couriers, SUB60,
Security Express, Kiwi Express, Stuck
and Pass The Parcel. Each brand caters
to specific customer needs, but they
share branch networks, air and road
linehaul and IT. Our joint venture airline,
Parcelair, adds airfreight capability for
our overnight Express Package
delivery service.
Business Mail
DX Mail and Dataprint offer physical
and digital postal services to business
customers throughout New Zealand.
DX Mail provides time sensitive delivery
across New Zealand while Dataprint
offers mailhouse-print services and
digital mail presentation platforms.
Information Management
The Information Management Group
(TIMG) provides physical storage and
information management services as
well as digital information processing
services such as digitalisation, business
process outsourcing, online back-up
and eDiscovery services.
Secure Destruction
Shred-X operates document destruction
services, along with eDestruction and
product destruction services. The
business also provides medical waste
services under the Med-X brand.
The Freightways growth strategy
OUR BUSINESS MODEL
FOCUSES ON ADDING
VALUE TO EVERYTHING
WE MOVE.
Each of our four business activities
focuses on achieving high quality and
efficiency through the stages of pick-up,
process and delivery. They rely on density
created in each niche to result in market
leading brands.
Freightways Limited and its subsidiariesAnnual Report 2019
4

Pick up
Process
Deliver
E
x
p
r
e
s
s

P
a
c
k
a
g
e
I
n
f
o
r
m
a
t
i
o
n

M
a
n
a
g
e
m
e
n
t
B
u
s
i
n
e
s
s

M
a
i
l
S
e
c
u
r
e

D
e
s
t
r
u
c
t
i
o
n
Network
Courier
Point to
Point
Aviation
Mailhouse
Document Media
& Storage
Digital Information
Processing
Online
Back-up
Document &
eDestruction
Product
Destruction
Medical
Wa ste
Digital
Mail
Freightways Limited and its subsidiariesAnnual Report 2019
5

$616M
REVENUE
6.0%
3.2%
2.3%
2.5%
INCREASE
INCREASE
INCREASE
INCREASE
$99M
EBITA
$63M
NPAT
30.5
CENTS PER SHARE
Financial highlights
GROWTH WAS ACHIEVED IN ALL
FOUR BUSINESS ACTIVITIES DESPITE
A SLOWING ECONOMIC BACKDROP
Highlights
TOTAL DIVIDEND PAYOUT FOR 2019
Freightways Limited and its subsidiariesAnnual Report 2019
6

Strong earnings in our core activities
were matched by encouraging growth
in our newer markets
Freightways operating revenue FY19 ($m)
Rounded to the nearest $m
Freightways net profit after tax ($m)
2018
2019
$581
$616
2018
2019
$62.2
$63.4
Freightways EBITA ($m)
Including non-recurring items
1

Freightways EBITA ($m)
Excluding non-recurring items
1

2018
2019
$96.3
$99.1
2018
2019
$93.7
$96.8
1. Refer to the Chairman and CEO’s report on page 10 for reconciliation
between operating profit before interest, tax and amortisation (EBITA)
including non-recurring items and EBITA excluding non-recurring items.
Divisional highlights
Information Management
revenue growth over ten years
Rounded to the nearest $m
Express Package & Business Mail
revenue growth over ten years
Rounded to the nearest $m
FY09 FY09
FY14 FY14
FY19 FY19
$279m$61m
$103m$330m
$451m
$164m
Total gross GHG emissions (tCO
2
e) per million dollars of revenue
Year-on-year reduction
10.0%
14.6%
2.0%
7.2%
CEMARS
®
certified
FY19 to be certified in November 2019
FY13/14
FY14/15
FY15/16
FY16/17
FY17/18
136.64
123.02
105.01
102.93
95.57
FY18/19
90.835.0%
Freightways Limited and its subsidiariesAnnual Report 2019
7

Greg Smith
Southern Regional Manager
“ I WISH TO BE THE
BEST LEADER THAT
I CAN POSSIBLY BE
AND JUMP AT ANY
OPPORTUNITIES THAT
ARE PRESENTED TO ME.”
Freightways Limited and its subsidiariesAnnual Report 2019
8

Greg Smith
MY CAREER
Greg’s career
at Freightways
started when he
went to a meeting
to become a
courier. But that’s
not the job he
accepted.
In 1998, Greg started his Freightways
career as the Decon Supervisor at
Post Haste (PHG) Christchurch. He
had originally planned to be a Courier
contractor but there were no courier
runs available. Three years later, he
became Depot Supervisor at
New Zealand Couriers (NZC).
In 2004, Greg moved into sales –
something he had always wanted to
do – when he became an Account
Manager for NZC Christchurch. A year
later, he moved back into operations as
the Fleet Manager of NZC CHC, and
stayed there for five years.
A brief period away from the company
was followed by a return to the NZC
sales team as a Senior Account
Manager in 2011 and then, in 2012,
Branch Manager at Post Haste Couriers
& Castle Parcels Christchurch, not
long after the earthquakes there. He
took up his current role in 2015. Right
now though he is on secondment
in Auckland working with the North
Harbour and Whangarei branches.
Greg says he has been surrounded
by some great leaders throughout
his career in the business who have
all shared their leadership skills and
offered tremendous support. He looks
forward to doing the same in the years
ahead to support the next generation of
Freightways managers.
1998
Decon Supervisor,
Post Haste (PHG)
Christchurch
2001
Depot Supervisor,
New Zealand Couriers
(NZC)
2004
Account Manager,
NZC Christchurch
2005
Fleet Manager,
NZC Christchurch
2011
Senior Account
Manager, NZC
Christchurch
2012
Branch Manager,
Post Haste Couriers
& Castle Parcels
Christchurch
2015
Southern Regional
Manager, Post Haste
Couriers & Castle
Parcels Christchurch
SO MANY
JOURNEYS
Southern Regional Manager
Christchurch
Freightways Limited and its subsidiariesAnnual Report 2019
9

THE STRENGTH
OF NETWORKS
The Directors are pleased to present the consolidated
financial results of Freightways Limited (Freightways)
for the year ended 30 June 2019. This report discusses
the results for each division, outlines the key strategies
and the outlook for the year ahead.
Highlights of the year include
• Overall year-on-year revenue, earnings and dividend growth.
In the Express Package & Business Mail (EP&BM) division
• Completing a number of business-critical IT projects to enable
our new Pricing For Effort initiative for residential deliveries;
• Improving route density, in residential areas in particular, and
using the benefits to reinvest into the contractor fleet, which
resulted in an average increase in contractor earnings of 7%
above the previous year, and
• Expanding our business mail network to take on new customers
and once again demonstrating growth year-on-year.
In the Information Management (IM) division
• Improving utilisation in our Australian document storage footprint
by 10% (from 61% to 67%). While this was short of our goal of
70%, it reflected a strong step forward in generating improved
returns in our document storage business;
• The completion of another large data collection/transformation
contract win, supporting the growth of the division’s suite of
digital IM services, and
• Strong growth in our secure destruction business, which is
successfully diversifying into complementary waste streams
which require efficient logistics and processing.
• Sustained strong cash generation from both divisions, leading
to reduced debt gearing levels.
Chairman and CEO’s Report
Note
2019
$M
2018
$M
Increase
%
Revenue615.7580.96.0
EBITA, before non-recurring items(i)
96.793.73.2
Non-recurring items2.42.6
EBITA(ii)99.196.32.9
NPAT, before non-recurring items(iii)61.059.62.3
Non-recurring items after tax2.42.6
N PAT(iv)63.462.21.9
Basic EPS (cents), before non-recurring items39.338.4
Notes:
i. Operating profit before interest, tax and amortisation, before non-recurring items.
ii. Operating profit before interest, tax and amortisation.
iii. Net profit after tax (NPAT), before non-recurring items.
iv. Profit for the year attributable to shareholders.
Operating performance
The below table presents the reported 2019 result compared
to the prior comparative period (pcp), both before and after the
inclusion of non-recurring items:
Freightways Limited and its subsidiariesAnnual Report 2019
10

Freightways Limited and its subsidiariesAnnual Report 2019
11

The results discussed throughout this
commentary exclude the impact of the
following non-recurring items that the
Directors believe should not be included
when assessing underlying trading
performance:
• 2019: Non-recurring benefits before tax
totalling $2.4 million (no tax applicable)
in respect of reversing $0.5 million of
previously accrued acquisition payables
that are no longer expected to be
required and a $1.9 million gain upon
recording the replacement of
earthquake-related damaged racking
funded by insurance proceeds.
• 2018: Non-recurring benefits before tax
totalling $2.6 million (no tax applicable)
in respect of reversing $1.6 million of
a previously accrued final acquisition
payable that is no longer expected
to be required and a $1.0 million
gain upon recording the replacement
of earthquake-related damaged racking
funded by insurance proceeds. The gain
on the racking replacement arises from
the insurance proceeds for new racking
($3.0 million) exceeding the $2.0 million
written down book value of the
structurally-compromised racking
written-off.
Dividend
The Directors have declared a final
dividend of 15.5 cents per share, fully
imputed at a tax rate of 28%, being a 2%
increase above the pcp final dividend of
15.25 cents per share. This represents
a payout of approximately $24.1 million
compared with $23.7 million for the pcp.
The dividend will be paid on 1 October
2019. The record date for determination
of entitlements to the dividend is 13
September 2019. The total dividend payout
in respect of the year ended 30 June 2019
will be 30.5 cents, being 2.5% above the
pcp of 29.75 cents.
The Dividend Reinvestment Plan (DRP)
will not be offered in relation to this
dividend. As a capital management tool,
the application of the DRP will be
reviewed for each future dividend.
Divisional performance
Divisional results for the year ended 30 June
2019 are provided below for each division.
Express Package & Business Mail
(EP&BM) division
2019 Result
Operating revenue of $453 million was
5.6% higher than the pcp. EBITA of $72.2
million was 6.3% higher than the pcp.
2019 was a year of two halves with respect
to organic growth levels within the EP&BM
division. The first half was characterised
by solid organic growth (circa 2.5%),
whereas same-customer volume flattened
off noticeably in the second half of the
year. Some hard calls were also made
on low margin business during the year,
with pricing reviews for customers where
margins were unacceptably low for the
value provided through our networks. The
results were pleasing for the year when
these factors, alongside material contractor
earnings and wage increases, were also
taken into account.
Chairman and CEO’s Report
Freightways Limited and its subsidiariesAnnual Report 2019
12

“ FREIGHTWAYS HAS CONTINUED
TO INNOVATE AND INVEST IN ITS
BUSINESSES TO ACHIEVE MARKET-
LEADING SERVICE QUALITY AND
RETURN ON INVESTMENT. ”
Freightways has consistently paid above
minimum wage in its freight sorting
operations and to ensure it continues to
do so, wages were lifted at the lower levels
by around 6% to maintain that premium.
Volume growth, and consequently revenue
and earnings, were stronger in the first half
of the year than the second half.
Freightways’ small postal business, DX
Mail, has come under direct attack from
NZ Post’s new zonal pricing structure for
bulk mail, which effectively offers their
customers the cheapest rates to those
areas that DX Mail delivers into, and more
expensive rates to those areas where
DX Mail does not deliver. Freightways is
assisting the NZ Commerce Commission
with its preliminary investigation into
NZ Post’s pricing tactics. DataPrint,
Freightways’ mailhouse business,
expanded its range of services during
the year and is well positioned to
help customers transition to digital
communications augmented by high
quality physical delivery through DX Mail.
The EP&BM division delivered a sound full
year result, and has positioned itself well to
avoid the pitfalls of many express package
operators around the world that appear to
have thrown themselves into residential
deliveries at what some may view as
producing unsustainably low margins.
Freightways is confident that its brands
will be able to provide higher quality
delivery services to residential areas,
sustainable courier remuneration and
ultimately generate returns from the
growing B2C market.
Freightways Limited and its subsidiariesAnnual Report 2019
13

Key Strategies in 2020
Pricing for Effort: Differential pricing was
introduced from 1 July 2019 for items
travelling to residential addresses as the
first of a two-step process to generate
higher remuneration for couriers performing
residential deliveries and to begin to
recover the higher costs associated with
low density deliveries. This strategy has
been enabled by significant investment in
geo-mapping and coding of addresses as
either business, residential or rural, as well
as the introduction of systems to enable
billing for residential delivery.
As this strategy unfolds, Freightways
expects to achieve a higher quality final
mile delivery, with couriers earning superior
returns for their efforts and Freightways’
brands also generating positive margins.
This will motivate the EP&BM division to
invest further into service quality initiatives
for the growing residential delivery sector.
Residential Network Review: In 2019
good progress was made to better
collaborate across the courier brands to
improve the division’s delivery efficiency
in residential areas. This strategy has now
become business-as-usual, with the use of
a number of analytical tools to continually
monitor and evolve residential runs so as
to drive better productivity and lower direct
costs for couriers through the need to
travel fewer kilometres each day.
Customer Visibility and Data Analytics:
New scanning technology was rolled-out
during 2019 which positions the business
well to provide value-added services to
customers and receivers by improving
visibility and ultimately the final-mile
delivery experience.
Information Management (IM) division
2019 Result
Operating revenue of $164.5 million was
6.9% higher than the pcp. EBITA of $29.3
million was 1.9% lower than the pcp.
While utilisation of facilities improved in
Australia and New Zealand, the margins
generated from data transformation
were slightly lower. In 2019, the Shred-X
business invested in growing its fleets
through New South Wales, Victoria and
Queensland in response to demand from
medical waste and product destruction
customers. Shred-X also incurred transition
costs while merging its Western Australia
site with a recently-acquired document
destruction business. This business was
fully integrated by May 2019.
Chairman and CEO’s Report
Australian IM annual earnings marginally
exceeded those of New Zealand IM for the
first time in 2019. Given the larger scale
of the Australian market, and the broader
range of opportunities, including in the
medical waste industry, it is expected
that Australia will widen its lead on
New Zealand’s earnings into the future.
Key Strategies in 2020
Facility Utilisation: Despite solid growth
in the Australian IM facilities, there were
a number of new customers secured that
had not transitioned their volume into TIMG
(The Information Management Group) by
the end of the financial year, meaning the
division fell 3% short of its 70% utilisation
target. The focus for 2020 is to on-board
and maintain double digit revenue growth
in this line of business.
Digital Services Growth: In Australia,
TIMG will focus on its capability with
respect to large digitalisation jobs. In
2019, it completed a significant job
which required data extraction, electronic
discovery and delivery of data within
tight timeframes (mirroring the capability
used for the NZ Census by the NZ
TIMG business in 2018). There are scale
opportunities in the Australian market
for quality providers of digitalisation and
e-discovery services.
Secure Destruction and Medical Waste:
Additional investment was made in teams,
fleets and facilities in 2019 to support
the growth of Shred-X’s document
destruction, medical waste and product
processing capabilities. It is planned to
continue the investment and management
focus on revenue streams in related
markets that complement the physical
footprint established by Shred-X in the
secure destruction market. These related
markets present an opportunity to apply
Shred-X’s consistent and high-quality
national service standards and sales
methodologies to grow through a number
of niches, including eDestruction, medical
waste, product destruction and other high
value recycling.
Acquisitions and Alliances
Freightways continues to actively
explore and investigate acquisition and
alliance opportunities for synergistic
and complementary service offerings.
Freightways completed three small
acquisitions early in the 2019 financial
year and these have been successfully
integrated into the Australian IM division.
The businesses acquired included a
records storage business, a secure
destruction business and a majority
stake in the software company that
provides the online back-up service for
TIMG’s customers.
Corporate
Corporate costs increased by $0.7 million
compared to the pcp, primarily due to the
reclassification of certain managers from
the divisions into newly-created corporate
roles, but also as a result of an uplift in
consulting costs relating to internal audit,
external reporting and ESG initiatives.
Net debt decreased by approximately
$3 million to $152 million during the
year, driven by strong cash flows from
operations, offsetting investment in
operating capacity and a number of small
acquisitions. Debt to debt & equity gearing
levels have decreased further below 40%.
Freightways Limited and its subsidiariesAnnual Report 2019
14

Mark Verbiest
Chairman
Mark Troughear
Chief Executive
Officer
26 August 2019
Outlook
Freightways has observed a slowdown
in New Zealand in terms of same-
customer trade over the second half of
2019 in its express package businesses.
Despite this headwind, management
remains optimistic that pricing and
efficiency initiatives in express package
and Freightways’ diversification
strategy in information management will
provide growth opportunities in 2020.
Freightways is once again targeting
year-on-year earnings growth in 2020.
Within the EP&BM division, indications
are that organic volume growth will be
lower in 2020 than it was in 2019. There
will be a strong focus on maintaining and
improving margins, along with improving
visibility to customers and receivers for
express package deliveries. Focus on
continuing to build courier remuneration
through intensification of their runs and
improved residential delivery pricing will
also be a priority.
Within the IM division, there will be a
continued drive on expanding storage
and handling margins through improved
facility utilisation. Leveraging digital
capability to attract new customers
will also be a key platform for growth
in 2020. Within the secure destruction
business, the division will look to
leverage the networks it has invested in
to provide medical waste and product
destruction services to both new and
existing customers.
Overall capital expenditure for the 2020
financial year is expected to be between
$22-24 million. Operating cash flows
are expected to remain strong
throughout 2020.
Strategic growth opportunities, including
acquisitions and alliances that are
synergistic or complementary to our
existing capabilities, will be executed
where they make commercial sense.
Conclusion
Freightways has continued to innovate
and invest in its businesses to achieve
market-leading service quality and return
on investment. The results for 2019 were
impacted in the latter half of the year
by modest to flat organic growth as the
New Zealand economy slowed. Despite
these headwinds, Freightways expects
to continue to demonstrate its long-held
disciplines in terms of managing margins,
investing appropriately for growth and
exploring new service opportunities.
There are opportunities for all of the
group’s business activities to continue to
grow and evolve their service offerings to
meet customers’ demands. Freightways’
agility and entrepreneurial outlook should
see it continue to adapt to changing
markets and conditions and continue
to be resilient in the face of external
factors. Freightways is committed to
improving the long-term sustainability of
its business for the benefit of its
teams of people, its customers, its
shareholders and the environments
in which it operates.
The Directors acknowledge the
outstanding work and ongoing dedication
of the Freightways teams of people
throughout New Zealand and Australia.
Freightways Limited and its subsidiariesAnnual Report 2019
15

Sadhna Ram
MY PROGRESS
After initially training
as a teacher,
Sadhna found her
way to Messenger
Services. Today
she manages our
Auckland branch.
Sadhna says she has always been
inspired to look for new opportunities.
That drive stems from working with
great managers, who role-modelled the
intensity, relentlessness and exceptional
standards required to succeed.
She has been in a wide variety of
roles and says she has taken learnings
from every one. “I’ve also come to realise
that I don’t have to know all the answers,
I just need to know someone who does.
Never shy from asking for help.”
The decision to shift from the
Countdown Fleet Management
team was an example of taking an
opportunity when it presents itself. “The
role (of Auckland Branch Manager)
was definitely in my sights,” she says,
“however I had only started in my new
role in January. It was a position I was
very much enjoying so I was unsure
whether to apply for the role or wait a
few more years. A brief chat with a senior
leader in the Freightways business, who
I consider my mentor, convinced me to
step up and apply.”
Sadhna says her ‘on the job’ learnings
have been supported by completing the
Freightways Fundamentals modules,
participating in the Management
Concepts Course and graduating from
the Freightways LEAD Development
programme in 2018.
2010
Call Centre
Representative,
Messenger Services
2011
Call Centre Supervisor,
Messenger Services
2017
Auckland Operations
Manager, Messenger
Services
2019
Joins Countdown Fleet
Management team,
Messenger Services
2019
Appointed Auckland
Branch Manager,
Messenger Services
SO MANY
JOURNEYS
Branch Manager
Messenger Services Ltd
Auckland
Freightways Limited and its subsidiariesAnnual Report 2019
16

Sadhna Ram
Branch Manager
“ IN THE NEXT 5 YEARS, I WOULD
LIKE TO WORK IN A FEW OTHER
BRANDS WITHIN FREIGHTWAYS
TO GAIN NEW LEARNINGS.”
Freightways Limited and its subsidiariesAnnual Report 2019
17

OUR JOURNEYS
THIS YEAR
The different parts of our business compete in
markets with different growth dynamics. In each case,
our best opportunities to add value lie in consistently
applying our Pick Up, Process, Deliver model to ensure
customers receive better services and experiences.
Express Package
E-commerce is a significant opportunity
for us. By recognising the importance of
the receiver experience, as well as sender
expectations, we aim to continue to lead
the market.
New technologies have changed the way
courier services work – with increased
package visibility and the ability to
re-route items already in transit. There
is now greater movement transparency
and advanced methodologies for parcel
tracking. Items are tracked online from the
moment of order, until they are collected
and delivered to the final receiver.
Higher residential delivery volumes also
bring higher costs because of the lower
delivery densities (versus business to
business delivery), increased travel time
and greater infrastructure requirements.
Over the last year Freightways has put in
place a number of plans to start addressing
the operational requirements for increasing
volumes of residential receivers and
the higher costs associated with such
deliveries. For example, we’ve gained
efficiencies through increased collaboration
between the courier brands for the ‘last
mile delivery’ – effectively increasing
delivery density in residential areas.
We are also looking to increase courier
remuneration in the residential space
– fair contractor pay for delivery effort
has always been key to a successful,
sustainable business model.
The Freightways family
Over the last 6 months we have been
communicating to our customers and staff
the need to price our services in line with
the effort and resource required (Pricing
for Effort). The very real extra costs
associated with business-to-consumer
deliveries need to be recouped. We
started implementing these changes
from the beginning of July 2019.
At the same time, we will introduce added
value services thanks to technology
improvements to ensure our overall
services meet our customer and receiver
expectations. Continued improvement
in the overall customer experience will
allow our courier businesses to charge
appropriately for a superior service offering.
Business mail
DX Mail is the nationwide alternative mail
provider, delivering 50 million mail items
per annum. In the last five years we have
increased our postie fleet by 50% to 220
posties, maintained next day local service,
and expanded the number of towns and
cities we service through our network.
Our business strategy is focused on
meeting the needs of our customers with
consistently high service standards.
Alongside this successful physical mail
strategy, we have been developing
smart technology solutions to support
customers as they transition to digital
mail alternatives.
DX Mail through its mailhouse, Dataprint,
are collaborating to provide customers a
fully integrated communications channel
across physical mail, email, SMS as well
as remote print and lodgment services.
DX Mail is now a key component of
New Zealand’s infrastructure providing
essential time sensitive delivery services
to DHBs, government and business alike
that no other mail provider can supply
as effectively.
Along the way, our State-owned
competitor has recently announced zonal
pricing that appears to provide the lowest
pricing in areas with DX Mail services, while
areas that DX Mail does not service are
priced higher. The Commerce Commission
are currently undertaking a preliminary
investigation into this issue.
Regardless of the outcome of this
investigation DX Mail will progressively
expand services, offer quicker delivery
options to customers and provide smart
digital solutions ensuring that we continue
to meet our customers’ needs.
Freightways Limited and its subsidiariesAnnual Report 2019
18

Information Management
TIMG has been expanding ever since it
began life in 2000. After opening in Sydney
TIMG established facilities in Melbourne,
Brisbane, Adelaide, Perth and Canberra.
Hobart and Darwin followed. Setting
up this network required considerable
investment, but now that the national
footprint is in place TIMG is well placed to
capitalise financially by filling warehouse
capacity across Australia. Over the last
year TIMG has improved utilisation by
10% to 67% providing an improved
financial performance along the way.
In New Zealand TIMG is the country’s
largest document storage business with
high utilisation levels of 82%.
With this winning formula producing
sustained growth, TIMG has invested in
further development of its portfolio model
to respond to the ever-increasing pace of
change and disruption in the information
management market. This investment has
led to the creation of the TIMG Horizon
3 team, to ensure that whilst the business
continues to execute growth across its
core and complementary services, it also
accelerates the search for the next wave
of new businesses.

Adopting a variety of tools and
frameworks, the team has developed
a repeatable process, unique to TIMG,
to take ideas from concept through to
scalable business opportunities. This
repeatable process for innovation will help
the business enhance what has already
proven a successful winning formula.
Secure Destruction
Since 2001 Shred-X has focused
its recycling and secure information
destruction services on customer service,
building a national logistics network,
sustainable processing centres, and
attaining the highest industry certifications
in safety, information security, quality and
environmental sustainability.
In 2017, Shred-X entered the medical
waste business with the acquisition of
State Waste Services (SWS Healthcare
Solutions and SWS Healthcare Logistics)
in New South Wales. SWS in turn became
the cornerstone for Med-X Healthcare
Solutions, officially launched as Med-X
in early 2018.
Med-X services expanded into Victoria
in 2018 with the acquisition of Medico
Hygiene Services and Medico Waste
Disposal, collectively Medico, and has
seen significant revenue growth since
the acquisition.
By combining the different businesses’
resources and service offerings, Shred-X
and Med-X collectively provide a secure,
safe and compliant service across
business sectors, and specifically
medical waste services to the fast-
growing health & medical industry.
In mid-2018 Med-X Queensland began
as a greenfield operation.
The company is currently adding
extensive Customer Relationship
Management (CRM) and automated
routing technologies to align all its
products and services for the safe and
secure handling, treatment and disposal
of clinical waste and related services
including sharps, hygiene and washrooms
products and services.
Shred-X and Med-X leadership foresee
continuing opportunities for rapid growth
through strong sales and marketing,
leveraging new partnerships with general
waste and cleaning companies as well as
strategic acquisitions.
Freightways Limited and its subsidiariesAnnual Report 2019
19

HELPING OUR
PEOPLE TO CONTINUE
TO MOVE FORWARD
We pride ourselves on being fair. Making sure our people
feel included and engaged has been a real focus this year,
along with introducing a new pricing initiative that enables
our couriers to reap the rewards of working with us.
Our first ever Diversity and
Inclusion survey
The variety of people who work for
us – with their many different skills,
beliefs, diverse backgrounds and
ways of thinking – has been key to
our businesses’ past success and
offer huge potential for the future.
We recognise that encouraging a
diverse team and inclusive workplace
has very real benefits for our people,
our customers and our business.
Diversity for us is about ensuring that
everyone feels valued and included
regardless of gender, ethnicity,
sexuality, (dis)ability, religion or any
other difference. A workplace that
welcomes, acknowledges and values
diversity in its people benefits because
valued teams build productivity,
diverse workplaces better reflect
today’s society, diversity of thought is
valuable and because the people who
work in such workplaces are more
likely to be caring and loyal.
2700+ of our people chose to take part
across Australia and New Zealand,
more than 20% of them contractors.
Two highlights to emerge from this
survey is that we are age-diverse
(43% being millennials or generation z)
and multi-cultural (11.3% of our team
speak other languages).
People
Among the findings:
60%
48%
71%
OF EMPLOYEES BELIEVE AGE IS
NO BARRIER TO OPPORTUNITY
HAVE BEEN WITH US
LESS THAN 5 YEARS
43%
HAVE A TERTIARY OR
TECHNICAL QUALIFICATION
ARE OF NON-EUROPEAN
ETHNICITY
In terms of our gender balance:
MALE
FEMALE
GENDER DIVERSE
59.6%
35.9%
0.6%
3.9%
PREFERRED NOT TO SAY
The results also highlighted we have
some work to do. So over the next year,
we will focus on:
1. Working to have transparent career and
business pathways – so everyone who wants
to develop either their career or their business
(contractors) knows how to go about it (SDG
8 – decent work and economic growth); and
2. Building awareness and tools
around positive wellbeing and mental
health - our people are our strength,
and their physical and mental health
is vital. (SDG 3 – good health and
well-being).
Freightways Limited and its subsidiariesAnnual Report 2019
20

Pricing for effort
The continued growth of Business to
Consumer (B2C) deliveries has been a key
growth factor to the courier industry, with
higher overall volumes, as e-commerce
continues to develop worldwide, and
growth levels more than double the
standard Business to Business (B2B)
volume growth.
However, with that growth has come
unintended consequences. Standard
B2B rating models and courier payment
levels were not in line with the changing
market. The high productivity model
associated with very dense pickup and
delivery areas when delivering business
to business does not apply for
deliveries to consumers.
This meant contractors delivering into
residential areas saw dramatically lower
productivity in terms of the number of
deliveries they could complete to one
drop point, coupled with a reduction in
the number of deliveries that could
be completed per hour.
This led to a cap on courier incomes which
did not meet the business aspirations of
the independent contractors.
In July 2019 Freightways introduced our
Pricing for effort (PFE) initiative which
enables us to charge customers and
pay the contractors appropriately for the
time and effort required to complete B2C
deliveries. Our overarching objective is to
ensure contractor incomes flourish and
that being a courier continues to be a
viable path for the small business owners
who are our independent contractors.
With this change Freightways are leading
the market in ensuring the viability of the
independent contractor model. This model
has been successfully in place for over 50
years in the New Zealand marketplace.
We want it to continue to succeed for
many more years to come.
There’s more on this in the Materiality
section of this report.
Freightways Limited and its subsidiariesAnnual Report 2019
21

SEEKING OUT
WHAT’S IMPORTANT
We continue to incorporate non-financial criteria
into our decision-making and public reporting to
meet growing demand by stakeholders for broader
information about our activities. Last year we
conducted an assessment to determine the issues
most material to our business and reporting.
The UN Sustainable Development Goals (SDGs) aim
to end all forms of poverty, fight inequalities and
tackle climate change through to 2030. Freightways’
businesses focus on five of the 17 SDGs and actively
look for ways to incorporate these.
Materiality Matrix
Impact on business
Stakeholder importance
7.0 7.2 7.4 7.6 7.8 8.0 8.2 8.4 8.6 8.8 9.0
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
SDG 8
SDG 3
SDG 16
SDG 9
SDG 13
M
a
t
e
r
i
a
l
i
t
y

c
u
r
v
e
Our Sustainable Development Goals
Freightways Limited and its subsidiariesAnnual Report 2019
22

Good health and well-being
Moving together
In July 2016 Post Haste, Castle Parcels
and NOW Couriers introduced a website-
based wellness program that gave team
members the ability to share their success
stories, and view information on being
healthy and getting active as well as
information and help when times are tough.
The Movement was born.
MSL joined in January 2019 and TIMG,
DX Mail and FIS in March and April. More
of our brands will come on board over the
next 12 months. All staff and contractors
are welcome to join.
The Movement platform enables us to
run nationwide or brand campaigns;
from a pedometer challenge to activate
teams, to a nutrition challenge to get our
teams thinking about how they fuel their
bodies. From participating in Mental Health
awareness week to working to raise money
and awareness for Breast Cancer. The site
offers everything from Mental Health advice
lines to discounts on eye examinations.
What began as a website is now an
environment to help keep our people
healthier – socially, physically, mentally
and spiritually.
Keep on trucking – safely
Parceline have been trialling a truck
simulator to enhance the safety of our
contractors and other road users. We’ve
been introducing the simulator to our
contractors so they and their drivers
can use it for driver training purposes.
We sourced the machine through
Autosense, who provided Parceline with
the Guardian Seeing Machines – the state-
of-the art fatigue detection technology that
literally keeps an eye on the drivers whilst
they work, recording their eye movement
and looking for signs of fatigue. Both the
simulator and eye detection technology
have been welcomed by our contractors.
SDG 16 Peace, justice
and strong institutions
• Ethics, bribery and corruption
(integrity)
• Transparency
SDG 13 Climate action
• GHG emissions
SDG 9 Industry, innovation
and infrastructure
• Product and process innovation
• Customer experience
• Data security
• New business opportunities
(e.g. medical waste management)
SDG 8 Decent work
and economic growth
• Profitability
• Organisational culture
• Growing the incomes of
our contractors
SDG 3 Good health
and well-being
• Health and Safety in
Employment – injury reduction
• Non-GHG emissions
(e.g. particulate, NOx)
• Road safety
• Employee wellness programme
Freightways Limited and its subsidiariesAnnual Report 2019
23

Decent work and
economic growth
Opening a career gateway for
young people
This year we partnered with On Demand
Training, who specialise in transport
and logistics training, to be part of
their Transport and Logistics Gateway
Programme. The programme provides
senior secondary school students with
industry learning and experience so that
they gain a sense of the career
possibilities open to them.
The students are 17 and 18 years old and
come into our business having recently
completed qualifications in Workplace
Health and Safety and Manual Handling
and Hearing Conservation, and gained their
OSH Forklift Licence. They are buddied
up within the different businesses and
rotate through a variety of tasks, from
building freight containers, mail franking or
working in the freight office to call centre,
dispatching or riding along with a courier.
Feedback from the students has been
positive, with all saying they are grateful for
the experience and several students from
the first programme gaining temporary
employment with us over the busy 2018
Christmas period.
The Transport and Logistics Gateway
Programme is a wonderful way to help
foster a decent work environment. Not only
does this programme allow the students to
experience how our business works and
the variety of roles and pathways available
in the transport and logistic industry, it also
gives them an insight into life after school.
Growing the income of our contractors
A key focus for our courier businesses
this year has been ‘Pricing for Effort’,
with a specific emphasis on ensuring our
business and our contractor’s businesses
are appropriately remunerated for
residential delivery work. The key
attributes of this project are;
• Building run density and efficiency –
which we are managing in collaboration
with our sister brands and the use of
new technologies (operational and
customer/receiver facing).
• Appropriate charging mechanisms –
recognising the effort required (by the
business and the contractor) to effect
significantly higher percentages of first-
time delivery to residential zones.
With the increasing impact of e-commerce
and the associated volumes of residential
deliveries, productivity improvements
will result in more deliveries per hour
in residential zones. Pairing increased
productivity with higher contractor
payments will significantly grow our
contractors’ incomes. This initiative
will specifically impact lower earning
courier runs.
The goal is for denser and more profitable
runs for our contractors and better service
to our residential receivers. We are aiming
to also increase transparency of career
pathways – allowing staff to migrate
into contractor roles and contractors
to be more aware of employee role
opportunities. There is now better visibility
of opportunities nationwide – a key area
identified through this year’s Diversity &
Inclusion Survey.
In the mid-term, addressing remuneration
levels and working hours should directly
contribute to an increased desirability
of contracting for Freightways’ courier
brands. It should also increase contractor
retention – maintaining institutional
knowledge and increasing customer
satisfaction levels. Focus on these areas
will directly feed into higher NPS scores
(higher customer and receiver satisfaction).
Our first ever Diversity and
Inclusion survey
In late 2018 we embarked on our first
anonymous Diversity and Inclusion Survey
to further understand our 4000+ staff
and contractors spread throughout
New Zealand and Australia. Knowing
more about our team helps us to make
better decisions for the future and improve
the business we work in. See the People
section in this report for more details on
what we discovered.
Our Sustainable Development Goals
Freightways Limited and its subsidiariesAnnual Report 2019
24

Climate action
Implementing EVs into the
Countdown delivery fleet
Freightways’ subsidary (Messenger
Services) and one of their existing
customers (Woolworths New Zealand)
are jointly investigating opportunities
to implement electric vehicles into the
Countdown delivery fleet.
The government operate a subsidised
programme to offset the upfront costs
of contracting an electric vehicle.
Woolworths have completed this,
resulting in a 50% subsidy.
Two Auckland store locations, Glenfield
and Ponsonby, have been identified as
suitable for the initial electric vehicles
because the delivery areas there are flat
and there are suitable docking set ups
for battery charging.
The immediate benefits of choosing
electric vehicles include a reduction in air
pollution and greenhouse gas emissions.
The cost to refuel an electric vehicle is also
a fraction of the cost of petrol meaning that
electric vehicles realise a lower total cost
of ownership to the contractor over the
lifetime of the vehicle.
Reducing GHG emissions at Post
Haste Group
Post Haste Group is proactively reviewing
how it can reduce GHG emissions by
introducing efficiencies in its delivery
operation. A key strategy to achieve this
is refocusing our run structures within
the company but across the wider
Freightways Group.
Such an approach will help us reduce
the number of vehicles on the road while
maintaining the operational performance
our customers expect. (See the Smart
Logistics story to the right for more
details on how we plan to do this).
35 vehicles have been eliminated
from the fleet so far (down from 355 in
April 2018 to 325) following reviews in
Auckland, Wellington and Christchurch.
Plans are already underway to look at
reducing GHG emissions in Hamilton
East, Blenheim, Central Otago
and Timaru.
Collaboration of run areas is now likely
to take priority over the next 12 months,
which should mean:
• New Zealand Couriers are likely to
reduce a few runs;
• Contractors will have smaller, more
condensed areas to cover;
• Post Haste contractors will start
delivering for all the Freightways
brands in selected areas;
• Vehicle age limits will be upgraded to
require newer, more fuel-efficient
vehicles on the road; and
• We will start operating parts of the fleet
at less congested times of the day in
order to achieve a higher success rate of
residential delivery e.g. 6pm – 8.30pm.
Smart Logistics
The courier industry continues to evolve,
with significant growth in home deliveries
coupled with greater awareness of the
environmental impacts of transport.
To help address both these issues,
Freightways are embarking on several
initiatives around route optimisation.
Our goal is to do more work with fewer
resources, improved service performance
and in fewer kilometres. This has become a
priority as the continued growth of Business
to Consumer deliveries (B2C) has impacted
our business through lower delivery run
densities, greater driving distances and
the need to meet ever changing service
expectations of both our customer and
their customers.
We have now started using Artificial
Intelligence (AI) to review our overall service
performance across these issues. Strategic
route planning requires continuous
optimisation for maximum results and using
AI to best effect will drive this opportunity.
We envisage that as we work through this
project we will meet all our objectives while
continuing to develop a range of delivery
initiatives to our customers.
Freightways Limited and its subsidiariesAnnual Report 2019
25

Industry, innovation and
infrastructure
Exploring new horizons
Over the past 30 years, TIMG has built a
successful portfolio through the steady
introduction of complementary new
services. Starting as a secure records
storage business, the addition of data
tape storage, document destruction,
e-waste services, and more recently
a variety of digital services, has seen
TIMG consistently build upon its core,
folding in new horizons of growth.
With this winning formula producing
sustained growth, TIMG has invested
in further development of its portfolio
model, in response to customer demand
in the information management market.
This investment has led to the creation
of the TIMG Horizon 3 Team. Their role
is to ensure that whilst the business
continues to execute growth across its
core services, a dedicated function is
positioned to accelerate the search for
the next wave of new services.
Adopting a variety of tools
and frameworks often used in
entrepreneurial and start-up
environments, the team has developed
a repeatable process unique to TIMG
to take ideas from concept through
to scalable business opportunity.
Examples include Jobs to be Done,
lean start-up, design thinking, and the
business model canvas. Like any good
agile-minded team, the tools and skills
used are in continuous review, and
through structured experimentation,
the team navigates uncertainty
through rapid testing and learning. It
is an exciting time for this Freightways
business - TIMG’s repeatable process
for innovation is working to enhance a
successful winning formula.
Our Sustainable Development Goals
Freightways Limited and its subsidiariesAnnual Report 2019
26

Peace, justice and strong
institutions
Robust governance
Freightways is committed to the highest
standard of corporate governance
and ethical behaviour, both in form
and substance, amongst its Directors
and the people of the Company and
its subsidiaries. The Board considers
that the Group has followed all the
recommendations outlined in the NZX
Corporate Governance Code. You will
find an overview of the Group’s main
corporate governance policies, practices
and processes adopted or followed by the
Board Of Directors on pages 95 to 97.
Shred-X secures its future
With its national logistics network and
ability to securely collect, track and
process sensitive, harmful and
recyclable waste, Shred-X is a unique
service provider, with no single direct
competitor offering the same range
and scale of services. Over the past 5
years, Shred-X has been working with
existing customers and new prospects
who require secure collection, destruction
and disposal of an array of products.
These include textiles, uniforms, high-end
garments and accessories, seized goods,
tobacco and associated products,
recalled items and liquids.
Positively contributing to a cleaner and
more sustainable world lies at the heart
of Shred-X. The business continues to
seek innovative solutions for processing a
broad range of products and textiles and
for ensuring their sustainable disposal. As
an industry leader recovering recyclable
paper, diverting almost 40,000 tonnes of
paper to recycling per annum, Shred-X
has pursued disposal and recycling
options for products and textiles that
will increase landfill diversion. This
has resulted in Shred-X exploring
partnership opportunities with textile
and fibre recycling and repurposing,
plastic product developers and waste
to energy processors. Additionally,
Shred-X is providing collaborative
solutions for the Quick Service
Restaurant (QSR) industry, working
towards Australia’s commitment to
eliminate food packaging going to
landfill by 2025.
Shred-X has applied these same
foundational goals of sustainability
and innovation to the medical waste
industry through its Med-X Healthcare
Solutions brand, partnering with
major waste companies and offering
new innovative solutions to replace
single use containers and further
reduce landfill.
Freightways Limited and its subsidiariesAnnual Report 2019
27

Matt started with
us through our
cadet programme.
Now he’s one of
our new generation
of business
development
managers.
MY LEARNINGS
In his first year in sales, Matt finished the
year at 173.9% of his budget, becoming
the top performing new business rep in
the Post Haste Group. He took up his
current role in July 2018.
Matt says the cadetship programme
gave him a strong overview of customer
services, operations and sales. As a result,
he has a very clear understanding of what
he’s good at and what he is still learning.
Customers appreciate that transparency,
he says.
“I really enjoy creating positive
relationships and partnerships with our
customers. Every day is different just
because of the sheer variety of industries
that we partner with and work alongside.”
Support from mentors and managers
across the business has played a crucial
role in helping him be a true consultant to
the people he works with.
Matt’s long-term goal is to be a Manager
in the business and as part of that he
has enrolled in the Freightways LEAD
programme. “The programme focuses
on developing and expanding leadership
skill-sets and encouraging innovative
thinking. I feel very lucky to be part
of this course. I think it will help me
develop the skills I need to be a future
thinker in this business.”
2014
Joined Freightways
as a cadet
2016
Achieved 174% of
budget in his first year
2019
Qualified for the
Freightways LEAD
programme
2018
Took up current role
with DX Mail
SO MANY
JOURNEYS
Matt Randrup
National Business
Development Manager
DX Mail, Auckland
Freightways Limited and its subsidiariesAnnual Report 2019
28

Matt Randrup
“ THERE’S PLENTY OF
POTENTIAL FOR US TO
INNOVATE IN A CHANGING
POSTAL MARKET.”
Freightways Limited and its subsidiariesAnnual Report 2019
29

Tineke Mann
“ AS PHYSICAL STORAGE AND
SERVICES CHANGE, DIGITAL
SERVICES ARE BECOMING
A FASTER GROWING PART
OF OUR BUSINESS.”
Freightways Limited and its subsidiariesAnnual Report 2019
30

Tineke Mann
MY DAY
Tineke joined us
as a junior sales
person. She is
now managing our
eBusiness and is a
valued member of
the executive team.
“Every day is a new challenge,” says
Tineke. “My time is spent leading my
team so that we are able to strategically
plan how we roll out new solutions for
our clients whilst ensuring we stay at
the forefront of the digital offerings.”
The eBusiness portfolio itself is diverse
and Tineke says she sees her role as
assisting clients in adapting and using
technology to transform their business,
now and for the future.
Since joining TIMG in 2003, Tineke
says she has never encountered a
problem that can’t be solved. Her job
is to ensure that each project receives
the right team, right energy and the
right technology to deliver what’s
needed. When you get that right, she
says, clients receive sound advice
coupled with cost-effective, value-
driven, customised strategies
to progress their business.
The companies that TIMG work with
are constantly changing their data
management requirements. “My
ultimate reward is leading my team and
seeing my clients embrace modern
technology and ingenious solutions.
With our help, many have achieved
immense productivity, growth and
financial rewards.”
As for the future, Tineke believes
“eBusiness will change dramatically
over the next few years...I look forward
to the chapters that lie ahead.”
2003
Joins TIMG as Sales
Consultant, Victoria
2006
Becomes TIMG,
State Sales Manager,
Queensland
2009
Appointed TIMG
Assistant State
Manager, Victoria
2019
Becomes TIMG
eBusiness Manager,
Sydney
SO MANY
JOURNEYS
eBusiness Manager
TIMG, Sydney
Freightways Limited and its subsidiariesAnnual Report 2019
31

BRINGING SUPPORT
TO COMMUNITIES
Every day we’re out in communities
big and small in New Zealand and
Australia. Sponsorship, involvement and
volunteering is part of showing those
communities that we value them. We
work with a variety of groups, supporting
them in the great work they do.
Child Cancer Foundation support
New Zealand Couriers is proud of its
long-standing relationship with Child
Cancer Foundation. In addition to being
a Support Partner, and providing a variety
of free courier services to support events
such as street appeals and Appeal
Month in March, our staff, contractors
and customers are very active in
supporting Wig Wednesday (including
New Zealand Couriers’ General Manager
Devon Buckingham, who is a Business
Ambassador for the event), and the
business is a Platinum Sponsor for the
Champions Luncheon fundraising. At a
branch level our teams take a very
active part in fundraising during the
March Appeal.
To learn more about the Child
Cancer Foundation please visit:
www.childcancer.org.nz
Partnering with the Clontarf Foundation
TIMG Australia recognises the outstanding
work that the Clontarf Foundation does.
The Foundation helps improve the
education, discipline, self-esteem, life
skills and employment prospects of young
Aboriginal and Torres Strait Islander men.
Our decision to partner with Clontarf
Foundation in July 2019 stems from our
belief in the the importance of diversity
and inclusion and the success diversity
brings to our workforce. Along with seeking
guidance and consultation with indigenous
recruitment agencies like AES (Aboriginal
Employment Strategy Ltd.), we will work
with Clontarf Foundation to develop a
robust indigenous participation plan to
be implemented throughout TIMG
Australia’s organisation.
TIMG will actively seek out potential
candidates for the mentorship
programme with a view to encourage
people of Aboriginal and Torres Strait
Islander descent to apply for positions
through our placement programme.
To learn more about Contarf Foundation
please visit: www.clontarf.org.au
Community
KidsCan Shoes for Kids
In association with Rotary of St Johns,
we sponsored an annual Charity Golf Day
to help raise funds for charity. St Johns
approached us about KidsCan receiving
the funds raised in 2019. These initial
discussions in turn led to us connecting with
KidsCan to investigate further partnership
possibilities beyond the one off golf day.
We quickly discovered we shared similar
philosophies around caring for and
supporting whānau in our communities
that may need help. 290,000 Kiwi kids live
in hardship through no fault of their own.
KidsCan helps Kiwi kids become more
engaged in their education so they can
have a better chance of reaching their
full potential by providing food at school,
raincoats, shoes and socks, and basic
health items.
As the lead partner for the KidsCan Shoes
for Kids programme, we’re proud to partner
with KidsCan to directly fund a specific
programme. Our partnership not only
allows for our team members to participate
in handing out the shoes to the kids at
school but also a range of volunteering
opportunities including skill sharing,
breakfast clubs, warehouse packing
and school working bees.
To learn more about KidsCan please visit:
www.kidscan.co.nz
Freightways Limited and its subsidiariesAnnual Report 2019
32

Key community initiatives
Kidsline (part of Lifeline)
Keep New Zealand Beautiful
The Hearing House
Beanies for Babies
Auckland Rescue Helicopter Trust
Cancer Society
Auckland Kidney Society
McGrath Foundation
Clontarf Foundation
Child Cancer Foundation
KidsCan Shoes for Kids
Duffy Books in Schools
New Zealand Breast Cancer Foundation
Rotary of St Johns
Freightways Limited and its subsidiariesAnnual Report 2019
33

OUR BOARD
Our board
Mark Verbiest
Chairman
LLB, CF Inst D
Mark Rushworth
BE (Hons), MEM
Kim Ellis
BE (Hons), BCA (Hons)
Peter Kean
PMD Harvard
Andrea Staines OAM
BEcon, MBA (Michigan), AICD Fellow
Abby Foote
LLB (Hons), BCA, CF Inst D, INFINZ (Cert)
Freightways Limited and its subsidiariesAnnual Report 2019
34

Leading us forward
OUR LEADERSHIP TEAM
Mark Troughear
Chief Executive Officer
BMS, Waikato University
Mark Royle
Chief Financial Officer and Company Secretary
B.BUS (Acc), CA
Matthew Cocker
Chief Information Officer
PhD, Georgetown University
Neil Wilson
General Manager, Freightways
Steve Wells
General Manager, Express Package Division
Freightways Limited and its subsidiariesAnnual Report 2019
35

Directors’ report
Directors’ report
The Directors of Freightways Limited (Freightways) resolved to
submit the following report with respect to the financial position of
the Group as at 30 June 2019 and its financial performance and
cash flows for the year ended on that date.
Directors
The names of the Directors of the Company in office at the date
of this report are:
Mark Verbiest LLB, CF Inst D.
Mark was appointed a Director in February 2010 and Chairman in
October 2018. He is a professional director with 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 over 7 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
currently a director of ANZ Bank New Zealand Limited, Meridian
Energy Limited and Chairman of PE Fund Willis Bond Capital
Partners Limited and Mycare Limited, a privately held early stage
digital company. Mark is also currently Chairman of ANZ
subsidiary, UDC Finance Limited, but is due to retire from this
position on 30 September 2019. Mark is also a member of the
Advisory Board of The Treasury.
Kim Ellis BE (Hons), BCA (Hons)
Kim was appointed a Director in August 2009. He spent 28 years
in chief executive roles in a number of sectors, including 13
years as Managing Director of Waste Management NZ Limited
until its sale in 2006 to Transpacific Industries Pty 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 a director and the Chairman
of NZ Social Infrastructure Fund Limited, Metlifecare Limited and
Sleepyhead Group Limited. He is also a director of Port of Tauranga
Limited, FSF Management Company Limited and Ballance Agri-
Nutrients Limited and an advisor to Envirowaste Services Limited.
Abby Foote LLB (Hons), BCA, CF Inst D, INFINZ (cert)
Abby was appointed a Director in June 2018. She is a professional
director with over 10 years’ governance experience, with
qualifications in both law and accounting. Abby has experience
in a range of senior management, finance and legal roles, with a
focus on corporate finance and commercial transactions. Abby
is currently the Chair of Z Energy Limited and a director of TVNZ
and Sanford Limited.
Peter Kean PMD Harvard
Peter was appointed a Director in July 2016. He brings to
Freightways many years of senior executive experience with the
Lion group of companies in both New Zealand and Australia.
Peter’s last executive roles were as Managing Director of Lion
Nathan New Zealand and Managing Director of Lion Dairy and
Drinks, based in Melbourne. Peter retired from Lion in 2014 and
has since developed his career in governance. Peter is also a
director of Sanford Limited, the New Zealand Rugby Union and
a number of private companies.
Mark Rushworth BE(Hons), MEM
Mark was appointed a Director in September 2015. He has
extensive experience in the technology sector, with a decade’s
governance experience, predominantly in the high tech and
innovation space. An electrical engineer by training, with
widespread operations and marketing experience, he spent
4 years on the senior executive team of Vodafone NZ, where
among other things he had executive accountability for the fixed
line business and as Director of Marketing. Mark previously served
as chief executive of Pacific Fibre, ihug and financial services
company, Paymark Limited. Mark is currently Chief Executive
Officer of private equity owned UP Education and a director of
a number of private companies.
Andrea Staines OAM, BEcon, MBA (Michigan), AICD Fellow
Andrea was appointed a Director in August 2018. Based in
Australia, she has 12 years’ governance experience with an
undergraduate degree in Economics, and a MBA focused on
financial analysis and strategy. Andrea’s executive experience
was mostly in airlines, including American Airlines in Dallas, and
Qantas Group in Sydney. During her last five years at Qantas, she
co-launched international subsidiary, Australian Airlines (mark II), as
Chief Commercial Officer, becoming CEO soon after launch. Earlier
roles at Qantas included running Global Revenue Management.
Andrea has chaired multiple Board Committees, including Audit &
Risk, Remuneration & Nomination, and temporary Committees with
a business unit or project focus. Andrea is currently a director of
SeaLink Travel (Australia), UnitingCare Qld and NDIA (the Australian
National Disability Insurance Scheme Agency).
The Board has determined for the purposes of the NZX Listing
Rules that, as at 30 June 2019, Mark Verbiest, Kim Ellis, Abby
Foote, Peter Kean, Mark Rushworth and Andrea Staines are
independent Directors.
Freightways Limited and its subsidiariesAnnual Report 2019
36

Directors’ report
Board Skill Matrix
Deep Expertise (NED)
Mark
Verbiest
Kim EllisAbby FooteMark
Rushworth
Andrea
Staines
Peter Kean
Governance
NZ Listed Market
Audit and Risk
Business Operations at Scale
International transport, logistics,
sector aligned expertise
Marketing/Brand/Sales
IT Platforms and Digital Innovation
Australian Market
Health & Safety
Entrepreneurial
2019
$000
2018
$000
Operating revenue615,692580,886
Operating profit before interest, income tax and amortisation of intangibles
99,13396,286
Amortisation of intangibles(2,071)(1,954)
Profit before interest and income tax
97,06294,332
Net interest and finance costs
(9,566)(9,666)
Profit before income tax
87,49684,666
Income tax(24,119)(22,505)
Profit for the year attributable to the shareholders63,37762,161
Consolidated result for the year
Directors holding office during the year were:
Parent:
Mark Verbiest (Chairman)
Kim Ellis
Abby Foote
Peter Kean
Mark Rushworth
Sue Sheldon (resigned 25 October 2018)
Andrea Staines (appointed 20 August 2018)
Subsidiaries:
Mark Troughear
Mark Royle
Our Board focuses on governance, strategy and the oversight of the performance of the different Freightways businesses and brands. Our
six Directors bring both proven experience in governance and a strong background in business to their decision making. Together, they
provide the wide-ranging skills needed to ensure the Board has the expertise to set and approve strategic direction, make senior management
appointments, monitor performance, manage risk and oversee our many stakeholder relationships. Our Board Skill Matrix sets out the skills of
each director against the range of expertise Freightways requires to succeed.
Freightways Limited and its subsidiariesAnnual Report 2019
37

Directors’ report
Directors’ report
Group
Fees (per annum)
Position
Note
2019
$
2018
$
Board of DirectorsChairman(1)160,000160,000
Member85,00085,000
Audit & Risk CommitteeChairman(2)15,00015,000
People & Remuneration CommitteeChairman(2)7,5007,500
Committee work pool (if required)55,40048,000
Total annual fee pool limit(3)662,900570,500
Notes:
(1) Inclusive of all fees
(2) Exclusive of Board member fee
(3) Approved by shareholders at Annual Shareholders Meeting in October
Approved remuneration of directors (effective 1 November)
Remuneration received by directors
2019
$
2018
$
Directors of Freightways (Parent company)
Mark Verbiest (appointed Chairman 25 October 2018)140,00096,833
Kim Ellis92,50090,000
Abby Foote (appointed 1 June 2018)95,1396,944
Peter Kean85,00083,333
Mark Rushworth85,00083,333
Sue Sheldon (resigned 25 October 2018)50,753157,333
Andrea Staines (appointed 20 August 2018)77,735-
Total non-executive Directors626,127517,776
Dean Bracewell (Managing Director; resigned 31 December 2017)-850,399
Total Parent626,1271,368,175
Directors of Group subsidiaries only
Mark Troughear (CEO; appointed 1 January 2018)872,912341,564
Mark Royle (CFO)582,585636,771
1,455,497978,335
Total Group2,081,6242,346,510
Freightways Limited and its subsidiariesAnnual Report 2019
38

Directors’ report
Directors’ report
Remuneration of executive Directors includes the incentive payments made during the year ended 30 June 2019 in respect of the
two previous six-month performance periods (1 January to 30 June 2018 and 1 July to 31 December 2018). No amount is included
above in respect of incentive payments for the period 1 January to 30 June 2019, as these were paid in August 2019. Remuneration
of the past Managing Director comprised a fixed remuneration package representing 70% of his total remuneration and an ‘at risk’
portion representing 30%, payable on achievement of short-term financial objectives. He also participated in the Freightways Senior
Executive Performance Share Plan described in Note 22 of the Financial Statements on page 79 of this report by way of an annual
allocation of partly-paid shares equivalent to 55% of his fixed remuneration, but otherwise on the same terms and conditions as other
Freightways executives. Remuneration of the Chief Executive Officer and Chief Financial Officer (being Directors of all of Freightways
Limited’s subsidiaries) comprises a fixed remuneration package representing 70% and 78% of their total remuneration, respectively,
and an ‘at risk’ portion representing 30% and 22%, respectively, payable on achievement of short-term financial objectives. They also
participate in the Freightways Senior Executive Performance Share Plan described in Note 22 of the Financial Statements by way of
an annual allocation of partly-paid shares equivalent to 32% and 25%, respectively of their fixed remuneration, but otherwise on the
same terms and conditions as other Freightways executives. The partly-paid shares have a 3-year vesting period and are subject to
the achievement of financial hurdles, as described in Note 22. The Company’s Remuneration Policy can be found at
https://www.freightways.co.nz/about/corporate-governance/.
Remuneration of other officers
Fixed remuneration of other officers, not being directors, representing a range from 76% to 78% of their total remuneration, is benchmarked to
market and consists of base salary and matched Kiwisaver contributions up to a maximum of 3%. The officers participate in an at-risk short-
term incentive (STI) scheme, representing a range from 22% to 24% of their total remuneration, that reflects the achievement of predetermined
company profit levels and individual performance objectives aligned to business strategy and goals. The officers also participate in the
Freightways Senior Executive Performance Share Plan (the ‘Plan’) described in Note 21 of the Financial Statements by way of an annual
allocation of partly-paid shares. The partly-paid shares have a 3-year vesting period and are subject to the achievement of financial hurdles,
as described in Note 22. Both the STI scheme and Senior Executive Performance Share Plan are variable, performance-based incentives
and are only awarded if specific financial and non-financial performance hurdles are met, and at the discretion of the Board. The Company’s
Remuneration Policy can be found at https://www.freightways.co.nz/about/corporate-governance/.
Freightways Limited and its subsidiariesAnnual Report 2019
39

Group
2019
2018
$100,000 – $109,99945 50
$110,000 – $119,99946 34
$120,000 – $129,99929 30
$130,000 – $139,99929 10
$140,000 – $149,99910 18
$150,000 – $159,99918 18
$160,000 – $169,99913 12
$170,000 – $179,99910 9
$180,000 – $189,99912 10
$190,000 – $199,9997 3
$200,000 – $209,9996 7
$210,000 – $219,9994 7
$220,000 – $229,9994 5
$230,000 – $239,9998 2
$240,000 – $249,9992 2
$250,000 – $259,9992 1
$260,000 – $269,9993 2
$270,000 – $279,9991 2
$280,000 – $289,9991-
$290,000 – $299,99912
$300,000 – $309,99921
$310,000 – $319,99912
$320,000 – $329,99921
$340,000 – $349,9991-
$350,000 – $359,999-1
$360,000 – $369,999-1
$370,000 – $379,99931
$380,000 – $389,999-2
$400,000 – $409,999-2
$410,000 – $419,999-1
$440,000 – $449,9991-
$450,000 – $459,9991-
$550,000 – $559,999-1
$680,000 – $689,999-1
Directors’ report
Directors’ report
Remuneration of employees
The number of employees, not being directors of Group subsidiaries, within the Group receiving annual remuneration and benefits above
$100,000 are as indicated in the following table:
Freightways Limited and its subsidiariesAnnual Report 2019
40

Directors’ report
Directors’ report
Entries in the register of directors’ interests
The Register of Directors’ Interests records that the following directors of Freightways Limited and its subsidiaries have an equity interest in the
Company. These Directors therefore have an interest in any transactions between Freightways Limited and any of its subsidiaries:
Freightways Limited shares
At balance date Directors held the following number of equity securities in the Company:
Fully-paid ordinary shares
Partly-paid
ordinary shares
BeneficiallyNon-beneficiallyBeneficially
Director
Mark Verbiest-10,000-
Kim Ellis-50,000-
Abby Foote-14,000-
Peter Kean51,500--
Mark Rushworth-8,000-
Andrea Staines---
Mark Troughear399,1672,48631,442
Mark Royle-173,61733,283
Freightways Limited and its subsidiariesAnnual Report 2019
41

Directors’ report
Directors’ report
Number$
Note
Acquired
(Disposed)
Cost
(Sale)
Mark Troughear
Beneficial ownership in partly-paid shares acquired 26 September 2018(i)17,016170
Beneficial ownership in partly-paid shares disposed of 26 September 2018(ii)(132)(1)
Mark Royle
Beneficial ownership in partly-paid shares acquired 26 September 2018(i)7,74077
Beneficial ownership in partly-paid shares disposed of 26 September 2018(ii)(248)(2)
Notes:
(i) Allocation of partly-paid shares under the Freightways Senior Executive Performance Share Plan.
(ii) Partly-paid shares redeemed for one cent each and cancelled by the Company under the Freightways Senior
Executive Performance Share Plan as the vesting hurdles were not met.
The following table shows transactions recorded in respect of securities acquired or disposed of by Directors of the Group during the year
ended 30 June 2019:
Directors’ and officers’ liability insurance
Deeds of indemnity have been granted by the Company in favour of the Directors of the Company and its subsidiaries, to the fullest extent
permitted by the Companies Act 1993. In accordance with the deeds of indemnity, the Company has insured all its Directors and the Directors
of its subsidiaries against liabilities to other parties (except the Company or a related party of the Company) that may arise from their positions
as Directors. The insurance does not cover liabilities arising from criminal actions.
For and on behalf of the Board this 26th day of August 2019.
Mark Verbiest
Chairman
Abigail Foote
Director and Chair of the Audit & Risk Committee
Freightways Limited and its subsidiariesAnnual Report 2019
42

Contents
Highlights 06
Chairman and CEO’s report 10
The Freightways family 18
People 20
Materiality 22
Community 30
Our Board 32
Our leadership team 33
Directors’ report 34
Independent auditor’s report 40
Shareholder information 89
Corporate governance 91
Financial statements
Contents
44 Independent auditor’s report
49 Income statement
50 Statement of comprehensive income
51 Statement of changes in equity
52 Balance sheet
53 Statement of cash flows
54 Notes to the financial statements
93 Shareholder information
95 Corporate governance statement
98 Notes to the financial statements
99 Directory and company particulars
Freightways Limited and its subsidiariesAnnual Report 2019
43

Independent auditor’s report
Independent auditor’s report
To the shareholders of Freightways Limited


PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Independent auditor’s report
To the shareholders of Freightways Limited
We have audited the financial statements which comprise:
 the balance sheet as at 30 June 2019;
 the income statement for the year then ended;
 the statement of comprehensive income for the year then ended;
 the statement of changes in equity for the year then ended;
 the statement of cash flows for the year then ended; and
 the notes to the financial statements, which include a summary of significant accounting policies.

Our opinion
In our opinion, the accompanying financial statements of Freightways Limited (the Company),
including its subsidiaries (the Group), present fairly, in all material respects, the financial position of
the Group as at 30 June 2019, its financial performance and its cash flows for the year then ended in
accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS)
and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the financial statements section of
our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our firm carries out other services for the Group in the areas of specified procedures over the poll for
the shareholder resolutions at the Annual General Meeting, Executive and Non-executive
remuneration benchmarking and other related assurance services. The provision of these other
services has not impaired our independence as auditor of the Group.
Freightways Limited and its subsidiariesAnnual Report 2019
44

Independent auditor’s report
Independent auditor’s report
To the shareholders of Freightways Limited

PwC
Our audit approach
Overview

An audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement.
Overall Group materiality: $4.2 million, which represents 5% of profit
before tax.
We chose profit before tax as the benchmark because, in our view, it is the
benchmark against which the performance of the Group is most commonly
measured by users, and is a generally accepted benchmark.
We have determined that there are two key audit matters:
 Impairment assessment of goodwill and brands
 Prepaid Ticket Liability (“PTL”)

Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the financial statements as a whole as set out above. These,
together with qualitative considerations, helped us to determine the scope of our audit, the nature,
timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the financial statements and
our application of materiality. As in all of our audits, we also addressed the risk of management
override of internal controls including among other matters, consideration of whether there was
evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the financial statements as a whole, taking into account the structure of the Group, the
accounting processes and controls, and the industries in which the Group operates.
We conducted full scope audit work at four divisions which make up 71% of external revenue and 76%
of profit before tax in New Zealand and Australia. The remaining divisions in the Group were not
considered individually significant and depending on our risk assessment were subject to other audit
procedures such as analytical review, enquiry, testing key balances or reconciliations.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements of the current year. These matters were addressed in the context
of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Freightways Limited and its subsidiariesAnnual Report 2019
45

Independent auditor’s report
Independent auditor’s report
To the shareholders of Freightways Limited

PwC
Key audit matter How our audit addressed the key audit matter
Impairment assessment of goodwill and
brands
As disclosed in note 14 of the financial
statements, the Group has goodwill at
30 June 2019 of $212.7 million and
brands valued at $113.9 million. The
Group is required to perform an annual
impairment assessment of both goodwill
and brands, which are accounted for as
indefinite life intangible assets.

This is a key focus of our audit due to the
value of these assets on the balance sheet
and the inherent judgement in assessing
these assets for impairment.

Management prepared an impairment
assessment for the Group based on the
latest forecasts for each Cash Generating
Unit (‘CGU’) using a discounted cash flow
model to support the goodwill and brands
balance on a value-in-use basis.

The key assumptions used by
Management in creating their cash flow
model are included in note 14 of the
financial statements and include:

 Growth rates; and
 Terminal growth rates; and
 Discount rates.
As detailed in note 14, as a result of these
impairment assessments the Directors
have not identified any impairment in the
current year.

Our audit procedures included aspects of the following
depending on the level of sensitivity of each CGU:

 We have considered the appropriate composition
of each CGU.
 We tested the calculation of the impairment model
including the inputs and mathematical accuracy of
the model and comparison to the net assets value.
 We assessed whether forecast earnings and growth
rates were supportable by performing the
following:
- assessing the reliability of management’s
historical budgets and forecasts by reference to
actual performance;
- assessing whether the growth rates used over
the 5 year forecast period were supported by
historic growth;
- where appropriate, we understood the key
changes between the performance for the year
to 30 June 2019 and the 2020 budget, in
particular, key movements in revenue and
expenditure. We considered these with
reference to past performance and changes
that have been made within the business.
 We assessed whether terminal growth rates were
supportable by comparing them against New
Zealand and Australian long-term inflation rates.
 We utilised our internal expert to assist us in the
review of the methodology utilised by management
in their value-in-use model and to assess the
discount rates based on our expert’s market and
valuation knowledge.
 We performed sensitivity analysis over
management’s key assumptions.
We have no matters to report from the procedures we
have undertaken.

Freightways Limited and its subsidiariesAnnual Report 2019
46

Independent auditor’s report
Independent auditor’s report
To the shareholders of Freightways Limited

PwC
Key audit matter How our audit addressed the key audit matter
Prepaid Ticket Liability (“PTL”)
The prepaid ticket liability is disclosed as
‘unearned income’ on the balance sheet
which represents the deferral of revenue
in relation to the sale of prepaid tickets for
courier services in advance of the service
being provided. The PTL at 30 June 2019
was $15.7 million.

The PTL is an area of focus due to the
extent of audit effort that is required to
test the liability.

At each balance sheet date, the calculation
of the PTL is based on the likely utilisation
of the prepaid tickets outstanding at year
end. This is based on historical prepaid
ticket utilisation. The percentage of
prepaid tickets not expected to be used are
released from the PTL to the income
statement as revenue.

Our audit procedures included the following:

 We checked the methodology applied for the year
ended 30 June 2019 and satisfied ourselves that it
was appropriate, including any changes to the
approach from prior years.
 We substantively tested the historical sales and use
of prepaid tickets to assess the usage assumptions
for the calculation of the liability in the current
year.
 We tested the system reports from which the data
used in the PTL calculation and revenue is
recorded as follows:
- the sales of prepaid tickets during the year,
which increases the liability, was sample tested
to invoices issued and cash received.
- for completeness of sales of prepaid tickets we
have agreed a sample of sales per the billing
system reports to check whether the sale of
prepaid tickets was recorded as an increase in
the liability. We have tested completeness of
the billing system reports through verifying the
sequential numbering of the order numbers in
the reports.
- to obtain comfort over the revenue recognised
from prepaid tickets being used, for a sample
of deliveries, we agreed the usage date to the
date that the package was scanned as delivered
per the parcel tracking website, and checked
that the driver was subsequently paid for
delivery.
 We challenged management’s underlying
assumptions of usage rates and the methodology
used in the PTL calculations by re-computing the
usage profile calculation based on the above tested
inputs, as well as assessing whether the revenue
recognition policies adopted comply with the
accounting standards.
 We re-performed the calculation of the PTL to test
the mathematical accuracy of the model.
We have no matters to report from the procedures we
have undertaken.


Freightways Limited and its subsidiariesAnnual Report 2019
47

Independent auditor’s report
Independent auditor’s report
To the shareholders of Freightways Limited

PwC
Information other than the financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the financial statements does not
cover the other information included in the annual report and we do not and will not express any form
of assurance conclusion on the other information.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated. If, based on the work we have performed on the other information that we obtained prior to
the date of this auditor’s report, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard, except that
not all other information was available to us at the date of our signing.
Responsibilities of the Directors for the financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the
Directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements, as a whole,
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (NZ) and ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the
External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-
report-1/

This description forms part of our auditor’s report.
Who we report to
This report is made solely to the Company’s shareholders, as a body. Our audit work has been
undertaken so that we might state those matters which we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our
audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Leopino (Leo)
Foliaki.
For and on behalf of:


Chartered Accountants
26 August 2019
Freightways Limited and its subsidiariesAnnual Report 2019
48

Group
Note
2019
$000
2018
$000
Operating revenue
2 & 3615,692580,886
Other income61,2522,572
Transport and logistics expenses(241,907)(229,812)
Employee benefits expenses(174,537)(159,161)
Occupancy expenses
(28,912)(26,385)
General and administration expenses(58,119)(57,798)
Other expenses6(1,252)(2,572)
Non-recurring items4 & 62,3542,556
Operating profit before interest, income tax, depreciation
and software amortisation, and amortisation of intangibles114,571110,286
Depreciation and software amortisation4(15,438)(14,000)
Operating profit before interest, income tax and amortisation
of intangibles99,13396,286
Amortisation of intangibles4(2,071)(1,954)
Profit before interest and income tax
97,06294,332
Net interest and finance costs4(9,566)(9,666)
Profit before income tax
87,49684,666
Income tax5(24,119)(22,505)
Profit for the year
63,37762,161
Profit for the year is attributable to:
Owners of the parent63,36762,161
Non-controlling interests10-
63,37762,161
Earnings per share25
Basic earnings per share (cents)40.8 40.1
Diluted earnings per share (cents)40.740.0
NB: All revenue and earnings are from continuing operations.
The above Income Statement should be read in conjunction with the accompanying notes.
Financial statements
Income Statement
For the year ended 30 June 2019
Freightways Limited and its subsidiariesAnnual Report 2019
49

Financial statements
Group
Note
2019
$000
2018
$000
Profit for the year (NPAT)63,37762,161
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations21(2,210)1,775
Cash flow hedges taken directly to equity, net of tax213282,261
Total other comprehensive income after income tax(1,882)4,036
Total comprehensive income for the year 61,49566,197
Total comprehensive income for the year is attributable to:
Owners of the parent61,48566,197
Non-controlling interests10-
61,49566,197
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
The Board of Directors of Freightways Limited authorised these financial statements for issue on the date below.
For and on behalf of the Board this 26th day of August 2019.
Mark Verbiest
Chairman
Abigail Foote
Director
Statement of Comprehensive Income
For the year ended 30 June 2019
Freightways Limited and its subsidiariesAnnual Report 2019
50

Financial statements
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
GroupContributed
equity

$000
Retained
earnings

$000
Cash flow
hedge
reserve
$000
Foreign
currency
translation
reserve

$000
Non-
controlling
interests


$000
Total
equity

$000
Balance at 1 July 2017124,430124,072
(6,490)
(5,444)-236,568
Profit for the year-62,161---62,161
Exchange differences on translation
of foreign operations
--- 1,775-1,775
Cash flow hedges taken directly to
equity, net of tax--2,261--2,261
Total Comprehensive Income-62,1612,2611,775-66,197
Dividend payments-(45,372)---(45,372)
Shares issued830----830
Balance at 30 June 2018125,260140,861(4,229)(3,669)-258,223
Profit for the year-63,367--1063,377
Exchange differences on translation
of foreign operations
---(2,210)-(2,210)
Cash flow hedges taken directly to
equity, net of tax--328--328
Total Comprehensive Income-63,367328(2,210)1061,495
Dividend payments-(47,002)---(47,002)
Acquisition of non-controlling interests----114114
Shares issued1,180----1,180
Balance at 30 June 2019126,440157,226(3,901)(5,879)124274,010
Statement of Changes in Equity
For the year ended 30 June 2019
Freightways Limited and its subsidiariesAnnual Report 2019
51

Financial statements
Group
Note
2019
$000
2018
$000
Current assets
Cash and cash equivalents815,9867,410
Trade and other receivables987,80582,150
Inventories105,0094,804
Total current assets108,80094,364
Non-current assets
Trade receivables and other non-current assets9
3,9844,803
Property, plant and equipment13
106,710103,102
Intangible assets14
365,152358,419
Total non-current assets475,846466,324
Total assets584,646560,688
Current liabilities
Trade and other payables16
68,96766,887
Finance lease liabilities
127126
Income tax payable6,4295,525
Provisions18860710
Derivative financial instruments11880451
Contract liability1915,66415,864
Total current liabilities92,92789,563
Non-current liabilities
Trade and other payables16
3,1373,446
Borrowings (secured)20
167,394161,800
Deferred tax liability1537,76237,506
Provisions184,7504,465
Finance lease liabilities129286
Derivative financial instruments11
4,5375,399
Total non-current liabilities217,709212,902
Total liabilities310,636302,465
Net assets274,010258,223
Equity
Contributed equity
126,440125,260
Retained earnings
157,226140,861
Cash flow hedge reserve11
(3,901)(4,229)
Foreign currency translation reserve
(5,879)(3,669)
21
273,886258,223
Non-controlling interests
124-
Total equity
274,010258,223
The above Balance Sheet should be read in conjunction with the accompanying notes.
Balance Sheet
For the year ended 30 June 2019
Freightways Limited and its subsidiariesAnnual Report 2019
52

Financial statements
Group
Note
2019
$000
Inflows
(Outflows)
2018
$000
Inflows
(Outflows)
Cash flows from operating activities
Receipts from customers609,744575,864
Payments to suppliers and employees(501,203)(471,175)
Cash generated from operations108,541104,689
Interest received137182
Interest and other costs of finance paid(9,379)(9,710)
Income taxes paid(23,292)(19,451)
Net cash inflows from operating activities
23
76,00775,710
Cash flows from investing activities
Payments for property, plant and equipment(16,844)(14,062)
Payments for software (6,429)(4,343)
Proceeds from disposal of property, plant and equipment2,4501,160
Payments for businesses acquired (net of cash acquired) 30(11,111)(7,865)
Receipts from joint venture2,478464
Cash flows from other investing activities
(470)(218)
Net cash outflows from investing activities(29,926)(24,864)
Cash flows from financing activities
Dividends paid(47,002)(45,372)
Increase (decrease) in bank borrowings9,512(7,521)
Proceeds from issue of ordinary shares 748704
Finance lease liabilities repaid(91)(114)
Net cash outflows from financing activities(36,833)(52,303)
Net increase (decrease) in cash and cash equivalents
9,248(1,457)
Cash and cash equivalents at beginning of year7,4108,423
Exchange rate adjustments
(672)444
Cash and cash equivalents at end of year
8
15,9867,410
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
Statement of Cash Flows
For the year ended 30 June 2019
Freightways Limited and its subsidiariesAnnual Report 2019
53

Financial statements
Note 1. Summary of significant accounting policies
(a) Reporting entity and statutory base
Freightways Limited is a company registered under the Companies
Act 1993 and is an FMC reporting entity under Part 7 of the Financial
Markets Conduct Act 2013. The financial statements of the Group
have been prepared in accordance with the requirements of Part 7
of the Financial Markets Conduct Act 2013 and the NZX Main Board
Listing Rules. In accordance with the Financial Markets Conduct
Act 2013, group financial statements are prepared and presented
for Freightways Limited and its subsidiaries. Accordingly, separate
financial statements for Freightways Limited are not required to be
prepared and presented.
The financial statements are stated in New Zealand dollars rounded
to the nearest thousand, unless otherwise indicated.
Basis of preparation
The consolidated financial statements of the Group have been
prepared in accordance with Generally Accepted Accounting
Practice in New Zealand (NZ GAAP).
The Group is a for-profit entity for the purposes of complying with
NZ GAAP. The consolidated financial statements comply with
New Zealand equivalents to International Financial Reporting
Standards (NZ IFRS), other New Zealand accounting standards
and authoritative notices that are applicable to entities that apply
NZ IFRS. The consolidated financial statements also comply with
International Financial Reporting Standards (IFRS).
The consolidated financial statements have been prepared on a
historical cost basis, except for derivative financial instruments
and acquisition earn-out payables, which have been measured
at fair value.
Critical accounting estimates and judgements
The preparation of financial statements in conformity with NZ IFRS
requires the use of certain critical accounting estimates, where
necessary, and may require management to exercise judgement
in the process of applying the Group’s accounting policies. There
are no judgements made that are considered to have a significant
risk of causing a material adjustment to the carrying value of assets
or liabilities. Specific areas of critical accounting estimates and
assumptions used are as follows:
(i) Carrying value of indefinite life intangible assets
Impairment reviews are performed by management, at least
annually, to assess the carrying value of indefinite life intangible
assets, including goodwill and brand names. The recoverable
amounts of cash-generating units have been determined based
on value-in-use calculations. These calculations require the use
of estimates. Refer to Note 14.
(ii) Accounting for contract liability
A contract liability is recorded in the balance sheet reflecting
the future service obligation for courier and postal products
that have been sold in advance of their use. The balance is
supported by reference to historical customer prepaid product
usage patterns. Accordingly, the balance is sensitive to
movements in the future level of customer purchases and use
of prepaid products, which involves estimates. Management
regularly reviews the historical usage patterns to ensure an
adequate contract liability is recognised.
(iii) Fair value of derivatives
The fair value of financial instruments that are not traded in an
active market is determined by using valuation techniques. The
Group uses its judgement to select a variety of valuation methods
and makes assumptions that are mainly based on market
conditions existing at the end of each reporting period.
(iv) Customer relationships
The estimation of the useful lives of customer relationships
has been based on historical experience. The useful lives are
reviewed at least once per year and adjustments to useful lives
are made when considered necessary.
(v) Acquisition earn-out amounts payable
The valuation of the Group’s acquisition earn-out amounts payable
are based on the post-acquisition performance of the acquired
businesses. These fair value measurements require, among other
things, significant estimation of post-acquisition performance of
the acquired business and judgement on time value of money.
Acquisition earn-out amounts payable shall be remeasured at
their fair value resulting from events or factors that emerge after
the acquisition date, with any resulting gain or loss recognised
in the income statement. Judgement is applied to determine key
assumptions (such as growth in sales and margins) adopted in
the estimate of post-acquisition performance of the acquired
business. Judgement is also applied to determine the appropriate
discount rate applied to calculate the present value of the amount
payable. Changes to key assumptions may impact the future
payable amount. Refer also to Note 30.
(b) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities that are controlled either directly by the
Company or where the substance of the relationship between the
Company and the entity indicates the Company controls it. The
results of businesses acquired or disposed of during the year are
included in the consolidated income statement from the date of
acquisition or up to the date of disposal.

Notes to the financial statements
For the year ended 30 June 2019
Freightways Limited and its subsidiariesAnnual Report 2019
54

Financial statements
The consolidated financial statements include the Company and
its subsidiaries accounted for using the acquisition method. The
cost of an acquisition is measured as the fair value of the assets
acquired, equity instruments issued and liabilities incurred or
assumed at the date of acquisition. Costs directly attributable to
the acquisition are expensed to the income statement. Identifiable
assets acquired, liabilities and contingent liabilities assumed in
a business combination are measured initially at their fair values
at acquisition date. The Group recognises any non-controlling
interest in an acquired entity on an acquisition-by-acquisition
basis either at fair value or as the non-controlling interest’s
proportionate share of the acquired entity’s net identifiable assets.
The excess of the consideration transferred over the fair value
of the Group’s share of the identifiable net assets acquired is
recorded as goodwill.
All material transactions between subsidiaries or between the
Company and subsidiaries are eliminated on consolidation.
Accounting policies of subsidiaries are consistent with those
adopted by the Group.
Any contingent consideration to be transferred by the Group
is recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration
that is deemed to be an asset or liability is recognised in
accordance with NZ IFRS 9 in the income statement. Contingent
consideration that is classified as equity is not remeasured,
and its subsequent settlement is accounted for within equity.
(ii) Joint arrangements and joint ventures
The Group applies NZ IFRS 11 to all joint arrangements. Under NZ
IFRS 11 investments in joint arrangements are classified as either
joint operations or joint ventures depending on the contractual
rights and obligations of each investor. The Group has assessed
the nature of its joint arrangements and determined them to be joint
ventures. Joint ventures are accounted for using the equity method.
Under the equity method of accounting, interests in joint ventures
are initially recognised at cost and adjusted thereafter to recognise
the Group’s share of the post-acquisition profits or losses and
movements in other comprehensive income. When the Group’s
share of losses in a joint venture equals or exceeds its interests
in the joint venture (which includes any long-term interests that,
in substance, form part of the Group’s net investment in the joint
venture), the Group does not recognise further losses, unless it
has incurred obligations or made payments on behalf of the
joint venture.
Unrealised gains on transactions between the Group and its joint
ventures are eliminated to the extent of the Group’s interest in
the joint ventures. Unrealised losses are also eliminated unless
the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of joint ventures are changed
where necessary to ensure consistency with the policies adopted
by the Group.
(c) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each entity in the
Group are measured using the currency that best reflects the
primary economic environment in which the entity operates (the
“functional currency”). The consolidated financial statements
are presented in New Zealand Dollars, which is the Company’s
functional currency and the Group’s presentation currency.
(ii) Transactions and balances
Transactions in foreign currencies are translated into the
functional currency using the foreign exchange rate ruling at
the date of the transaction. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the
income statement, except when deferred in equity as qualifying
cash flow hedges.
(iii) Foreign operations
The results and balance sheets of foreign operations (none of
which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
– assets and liabilities for the balance sheet presented are
translated at the closing rate at the date of the balance sheet;
– income and expenses for the income statement are translated
at average exchange rates (unless this is not a reasonable
approximation of the cumulative effect of the rates prevailing
on the transaction dates, in which case income and expenses
are translated at the dates of the transactions); and
– all resulting exchange differences are recognised as a
separate component of equity.
Goodwill and fair value adjustments arising on the acquisition
of a foreign operation are treated as assets and liabilities of the
foreign operation and translated at the closing rate.
Notes to the financial statements
For the year ended 30 June 2019
Freightways Limited and its subsidiariesAnnual Report 2019
55

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
(d) Revenue recognition
The majority of contracts the Group entered into with its customers
contain multiple performance obligations. The transaction price is
allocated to each performance obligation based on the stand-alone
selling prices. As the stand-alone selling prices of all goods and
services provided are observable and there is no implicit discount
offered, transaction prices allocated to individual performance
obligations usually match with respective stand-alone selling prices.
(i) Express package & business mail – courier and
postal services
The Group operates network (hub & spoke) courier, point-to-point
courier and postal services. Revenue from courier and postal
services is recognised over time in the reporting period in which
the service is provided. Revenue from sale of postal products
is recognised at the point the sale occurs. Income invoiced and
received in advance of a service being provided is recorded in the
balance sheet as ‘Contract Liability’. This income is brought to
account in the year in which the service is provided.
(ii) Information management – storage and destruction revenue
The Group provides archive management services for
documents and computer media, including storage, retrieval
and destruction services. The Group also provides secure
handling, treatment and disposal of clinical waste and related
services. Revenue from these services is recognised over time
in the reporting period in which the service is provided. Revenue
from sale of archive boxes, computer media and products
generated from destruction activities is recognised when control
of the products has transferred, being when the products are
delivered to the customer.
(iii) Information management – digital services
The Group provides digital information management services,
including imaging and document capture (scanning), data
extraction, customised digital workflow solutions and application
(app) development, under fixed-price and variable-price
contracts. Revenue from providing these digital information
management services is recognised in the period in which the
services are rendered. For fixed-price contracts, revenue is
recognised based on the actual service provided to the end of
the reporting period as a proportion of the total service to be
provided, because the service does not create an asset with an
alternative use to the Group and the Group has an enforceable
right to payment for performance completed. This revenue is
determined based on the efforts expended relative to the total
expected effort.
Estimates of revenues, costs or extent of progress towards
completion are revised if circumstances change. Any resulting
increases or decreases in estimated revenues or costs are
reflected in the income statement in the period in which the
circumstances that give rise to the revision become known by
management.
In the case of fixed-price contracts, the customer pays the
fixed amount based on a payment schedule. If the services
rendered by the Group exceed the payment, a contract asset
is recognised. If the payments exceed the services rendered, a
contract liability is recognised.
If the contract includes an hourly fee, revenue is recognised in
the amount to which the Group has a right to invoice.
(iv) Financing components
The Group does not expect to have any contracts where the period
between the transfer of the promised goods or services to the
customer and payment by the customer exceeds one year. As a
consequence, the Group does not adjust any of the transaction
prices for the time value of money.
(v) Interest income
Interest income is recognised on a time-proportionate basis using
the effective interest method, which takes into account the effective
yield on the relevant financial asset.
(vi) Dividend income
Dividend income from investments is recognised when the
shareholder’s right to receive payment is established.
(e) Impairment of non-financial assets
In respect of this policy, assets that have an indefinite life are not subject
to amortisation and are tested annually for impairment. Assets that are
subject to amortisation or depreciation are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised
for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s
fair value, less costs of disposal, and value-in-use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash-generating units).
(f) Financial assets
(i) Classification
The Group classifies its financial assets in the following
measurement categories:
– those to be measured subsequently at fair value either
through other comprehensive income or through the income
statement; and
– those to be measured at amortised cost.
The classification depends on the Group’s business model for
managing the financial assets and the contractual terms of the
cash flows. For assets measured at fair value, gains and losses will
either be recorded in the income statement or other comprehensive
income.
(ii) Recognition and derecognition
Regular purchases and sales of financial assets are recognised
on the trade date, i.e. the date on which the Group commits to
purchase or sell the asset. Financial assets are derecognised when
the rights to receive cash flows from the investments have expired
or the Group has transferred substantially all the risks and rewards
of ownership.
(iii) Measurement
At initial recognition, the Group measures a financial asset at its
fair value plus, in the case of a financial asset not at fair value
through the income statement, transaction costs that are directly
attributable to the acquisition of the financial asset. Transaction
costs of financial assets carried at fair value through the income
statement are expensed in the income statement.
Freightways Limited and its subsidiariesAnnual Report 2019
56

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
(g) Derivative financial instruments
Derivative financial instruments, such as interest rate caps and collar
contracts and interest rate swaps, are entered into from time to time
to manage interest rate exposure on borrowings. Forward exchange
contracts are also entered into from time to time to manage foreign
exchange exposures. Derivative financial instruments are initially
recognised at fair value on the date a derivative contract is entered
into and are subsequently remeasured to their fair value at the
reporting date. The method of recognising the resultant gain or loss
depends on whether the derivative financial instrument is designated
as a hedging instrument, and if so, the nature of the item being
hedged. The Group designates derivative financial instruments as
either fair value hedges (hedges of the fair value of recognised assets
or liabilities or a firm commitment) or cash flow hedges (hedges of
highly probable forecast transactions).
At the inception of the transaction, the Group documents the
relationship between the hedging instrument and the hedged item,
as well as its risk management objective and strategy for undertaking
the hedge transaction. The Group also documents its assessment,
both at hedge inception and on an ongoing basis, of whether the
derivative financial instruments that are used in hedging transactions
have been and will continue to be highly effective in offsetting
changes in fair values or cash flows of hedged items.
(i) Cash flow hedges
The effective portion of changes in the fair value of derivative
financial instruments that are designated and qualify as cash flow
hedges is recognised in equity in the cash flow hedge reserve.
The gain or loss relating to any ineffective portion is recognised
immediately in the income statement.
Amounts taken to equity are transferred to the income statement
when the hedged transaction affects profit or loss, such as when
hedged income or expenses are recognised or when a forecast
sale or purchase occurs. When the hedged item is the cost of a
non-financial asset or liability, the amounts taken to equity are
transferred to the initial carrying amount of the non-financial asset
or liability.
If the forecast transaction is no longer expected to occur, amounts
previously recognised in equity are immediately transferred to the
income statement. If the hedging instrument expires or is sold,
terminated or exercised without replacement or rollover, or if its
designation as a hedge is revoked, amounts previously recognised
in equity remain in equity until the forecast transaction occurs. If
the related transaction is not expected to occur, the amount is
taken immediately to the income statement.
(ii) Derivatives that do not qualify for hedge accounting
Changes in the fair value of derivative financial instruments that
do not qualify for hedge accounting or where hedge accounting
has not been adopted are recognised immediately in the income
statement.
(h) Fair value estimation
The fair value of financial assets and financial liabilities is estimated
for recognition and measurement or for disclosure purposes. The
fair value of financial instruments that are not traded in an active
market (for example, over the counter derivatives) are determined
using accepted treasury valuation techniques, such as estimated
discounted cash flows, by an external treasury management system
provider. The carrying value of trade receivables (less provision for
doubtful receivables) and payables approximate their fair values.
(i) Employee entitlements
(i) Wages, salaries and annual leave
Liabilities for wages and salaries, including non-monetary benefits,
and annual leave expected to be settled within 12 months of
the reporting date are recognised in respect of employees’
services rendered up to the reporting date. They are measured for
recognition by assessing the amounts expected to be paid when
the liabilities are settled.
(ii) Long service leave
Liability for long service leave is recognised and measured as the
present value of expected future payments to be made in respect
of services provided by the employee. Consideration is given to
expected future wage and salary levels, experience of employee
departures and periods of service.
(iii) Share-based compensation
The Group operates an equity-settled, share-based compensation
plan for senior executives, under which the Group receives
services from employees as consideration for partly-paid ordinary
shares in the Company. The fair value of the employee services
received in exchange for the partly-paid ordinary shares is
recognised as an expense. The total amount to be expensed is
determined by reference to the fair value of the partly-paid ordinary
shares allotted, taking into account market vesting conditions (for
example, total shareholder return measures such as outperforming
the median of the NZX50 Index), but excluding the impact of
any non-market service and performance vesting conditions (for
example, compound growth rates for earnings per share and
remaining an employee of the Group over a specified time period).
Non-market vesting conditions are included in assumptions about
the number of partly-paid ordinary shares that are expected to
vest. The total amount expensed is recognised over the relevant
vesting period, which is the period over which all of the specified
vesting conditions are to be satisfied. At each balance sheet
date, the Group revises its estimates of the number of partly-paid
ordinary shares that are expected to vest based on the non-
market vesting conditions. It recognises the impact of the revision
to original estimates, if any, in the income statement.
(j) Capitalised interest and finance costs
Interest and finance costs incurred for the construction of a
qualifying asset are capitalised during the period of time that is
required to complete and prepare the asset for its intended use.
Other interest and finance costs are expensed.
Freightways Limited and its subsidiariesAnnual Report 2019
57

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
(k) Goods and services tax (GST)
The income statement and statement of cash flows have been
prepared so that all components are stated exclusive of GST. All
items in the balance sheet are stated net of GST, with the exception
of trade receivables and payables, which include GST invoiced.
(l) Changes in accounting policies
Except as described below, the accounting policies and methods
of computation are consistent with those used in the year ended
30 June 2018.
The Group adopted the following new standards for which
application was mandatory for the first time in the financial year
beginning 1 July 2018 and they have had no material impact
on the classification, measurement and recognition of financial
instruments or revenue in the financial statements. Disclosures have
been expanded in accordance with the requirements of these new
standards:
– NZ IFRS 9: Financial Instruments addresses the classification,
measurement and recognition of financial assets and liabilities
and introduced new rules for hedge accounting and a new
impairment model for financial assets.
The Group transitioned to NZ IFRS 9 which allows any impact
on prior periods to be adjusted through opening equity.
However, there was no adjustment required from the Group
adopting NZ IFRS 9.
– NZ IFRS 15: Revenue for contracts with customers deals
with revenue recognition and establishes principles for reporting
useful information to users of financial statements about the
nature, amount, timing and uncertainty of revenue and cash
flows arising from an entity’s contracts with customers. It
replaced the previous revenue recognition guidance in NZ IAS
18 Revenue and NZ IAS 11 Construction Contracts and related
interpretations. The new standard is based on the principle that
revenue is recognised when a customer obtains control of a
good or service and therefore has the ability to direct the use
and obtain the benefits from the good or service.
The Group transitioned to NZ IFRS 15 using the modified
retrospective approach, which allows any impact on prior
periods to be adjusted through opening equity. However, there
was no adjustment required from the Group adopting NZ IFRS
15. The majority of revenue earned by the Group is derived from
performance obligations over time when the service has been
provided. There has been no change in revenue classification,
measurement or recognition from the adoption of the new
standard. An amended revenue recognition policy is disclosed in
Note 1(d) and revenue is disaggregated in Note 3.
Freightways Limited and its subsidiariesAnnual Report 2019
58

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
As at and for the year ended 30 June 2019
Express
Package &
Business
Mail
$000
Information
Management
$000
Corporate
$000
Inter-
segment
Elimination
$000
Consolidated
Operations
$000
Income statement
Sales to external customers
451,261164,429 2-615,692
Inter-segment sales
1,716 674,651 (6,434) -
Total revenue
452,977164,496 4,653 (6,434) 615,692
Operating profit (loss) before non-recurring items,
interest, income tax, depreciation and software
amortisation and amortisation of intangibles
80,015 35,347 (3,145) -112,217
Non-recurring items
-2,354--2,354
Operating profit (loss) before interest, income
tax, depreciation and software amortisation
and amortisation of intangibles
80,015 37,701(3,145) -114,571
Depreciation and software amortisation
(7,821) (6,082) (1,535) -(15,438)
Operating profit (loss) before interest, income
tax and amortisation of intangibles
72,19431,619 (4,680) -99,133
Amortisation of intangibles
(50)(2,021)--(2,071)
Profit (loss) before interest and income tax
72,14429,598(4,680)-97,062
Net interest and finance costs
(11)(30)(9,525)-(9,566)
Profit (loss) before income tax
72,13329,568(14,205)-87,496
Income tax
(19,967)(8,427)4,275-(24,119)
Profit (loss) for the year attributable to
the shareholders
52,16621,141 (9,930) -63,377
Balance sheet
Segment assets306,525236,09642,025-584,646
Segment liabilities63,54329,165217,928-310,636
Note 2. Segment reporting
A segment is a component of the Group that can be distinguished from other components of the Group by the products or services it sells, the
primary market it operates in and the risks and returns applicable to it. Operating segments are reported upon in a manner consistent with the
internal reporting used by the Chief Executive Officer, as the chief operating decision maker, and the Board for allocating resources, assessing
performance and strategic decision making.
The Group is organised into the following reportable operating segments:
Express package & business mail: Comprises network courier (hub & spoke), point-to-point courier and postal services.
Information management: Comprises secure paper-based and electronic business information management services.
Corporate and other: Comprises corporate, financing and property management services.
The Group has no individual customer that represents more than 3% of external sales revenue.
Freightways Limited and its subsidiariesAnnual Report 2019
59

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
As at and for the year ended 30 June 2018
Express
Package &
Business
Mail
$000
Information
Management
$000
Corporate
$000
Inter-
segment
Elimination
$000
Consolidated
Operations
$000
Income statement
Sales to external customers
427,096153,789 1-580,886
Inter-segment sales
1,664 384,535 (6,237) -
Total revenue
428,760153,827 4,536 (6,237) 580,886
Operating profit (loss) before non-recurring items,
interest, income tax, depreciation and software
amortisation and amortisation of intangibles
74,84035,378(2,488)-107,730
Non-recurring items
-2,556--2,556
Operating profit (loss) before interest, income
tax, depreciation and software amortisation
and amortisation of intangibles
74,84037,934(2,488)-110,286
Depreciation and software amortisation
(6,931) (5,550) (1,519) -(14,000)
Operating profit (loss) before interest,
income tax and amortisation of intangibles
67,90932,384(4,007)-96,286
Amortisation of intangibles
(50)(1,904)--(1,954)
Profit (loss) before interest and income tax
67,85930,480(4,007)-94,332
Net interest and finance costs
(20)(251)(9,395)-(9,666)
Profit (loss) before income tax
67,83930,229(13,402)-84,666
Income tax
(18,729)(8,105)4,329-(22,505)
Profit (loss) for the year attributable to the
shareholders
49,110 22,124 (9,073) -62,161
Balance sheet
Segment assets300,254220,93039,504-560,688
Segment liabilities60,08029,623212,762-302,465
Segment assets and liabilities are disclosed net of inter-company balances.
For the year ended 30 June 2019, external revenue from customers in the Group’s New Zealand and Australian operations was $496.0
million and $119.7 million, respectively (2018: $472.6 million and $108.3 million, respectively). As at 30 June 2019, non-current assets
in respect of the New Zealand and Australian operations (excluding deferred tax assets and financial assets) were $310.6 million and
$161.2 million, respectively (2018: $306.2 million and $155.3 million, respectively).
Freightways Limited and its subsidiariesAnnual Report 2019
60

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
Note 3. Revenue from contracts with customers
2019
Express
Package
$000
Postal
$000
Storage &
Handling
$000
Destruction
Activities

$000
Other


$000
Total
$000
Revenue from external customers397,22054,04162,56759,70742,157615,692
Timing of revenue recognition:
At a point in time
-3,480-20,0838,84832,411
Over time397,22050,56162,56739,62433,309583,281
397,22054,04162,56759,70742,157615,692
2018
Revenue from external customers376,60450,49262,13052,72138,939580,886
Timing of revenue recognition:
At a point in time
-3,468-18,9906,97429,432
Over time376,60447,02462,13033,73131,965551,454
376,60450,49262,13052,72138,939580,886
The Group derives revenue from the transfer of goods and services over time and at a point in time in the following major product lines:
Freightways Limited and its subsidiariesAnnual Report 2019
61

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
Group
Note
2019
$000
2018
$000
Income
Interest income81180
Operating expenses
Net loss (gain) on disposal of property, plant and equipment67(994)
Depreciation 1312,51611,778
Amortisation of intangible assets142,0711,954
Amortisation of software 142,922 2,222
Operating lease expenses27,70924,281
Auditors’ fees
Audit of annual financial statements and review
of interim financial statements 487402
Annual Shareholders Meeting – specified procedures88
Directors benchmarking fees2322
Data integrity audit-54
Costs of offering credit
Impairment loss (gain) on trade receivables(129)(26)
Interest and finance costs
Interest on bank borrowings9,6019,708
Interest on finance leases2424
Derivative fair value movement22(52)
Unwinding of discount on acquisition earn-out liability -166
Other
Net foreign exchange loss (gain)-3
Directors’ fees633518
Donations345347
Non-recurring (gain) loss*
Insurance proceeds for replacement racking(1,893)(2,994)
Impairment loss on damaged racking-1,978
Reversal of earn-out payables(461)(1,540)
* Non-recurring items for the years ended 30 June 2019 and 30 June 2018, as applicable, relate to:
· insurance proceeds received from the Group’s insurers to reinstate racking in Wellington damaged by the North Canterbury earthquake;
· impairment loss related to the write-off of the earthquake-damaged racking in Wellington; and
· reversal of previously-accrued earn-out payables that are no longer expected to be paid.
Note 4. Income and expenses
Profit before income tax includes the following specific income and expenses:
Freightways Limited and its subsidiariesAnnual Report 2019
62

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
Group
2019
$000
2018
$000
Current tax
Current tax on profit for the year24,109 22,325
Deferred tax (Note 15)
Reversal of temporary differences10 180
Total deferred tax10 180
Income tax expense24,119 22,505
Income tax applicable to the Group’s net profit before tax differs from the theoretical amount that would arise using the weighted average
tax rate applicable to the profits of the consolidated entities, as follows:
Profit before income tax87,496 84,666
Income tax calculated at domestic tax rates applicable to the accounting
profits in the respective countries24,724 23,934
Tax-effect of amounts which are treated differently
when calculating taxable income:
· Additional amounts deductible (868)
(1,426)
· Other263(3)
Income tax expense24,119 22,505
The Group has no tax losses (2018: Nil) and no unrecognised temporary differences (2018: Nil).
Note 5. Income tax expense
The income tax expense for the year is the tax payable on the current year’s taxable income based on the income tax rate for each
jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets
and liabilities and their carrying amounts in the financial statements.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are
recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant
tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or
liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax
asset or liability is recognised in relation to these temporary differences if they arose as a result of a transaction, other than a business
combination, that at the time of the transaction did not affect either accounting profit or taxable income. No deferred tax liability is
recognised if it arises from initial recognition of goodwill from a business combination.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses.
Current and deferred tax balances attributable to amounts that have been recognised in other comprehensive income or directly in equity,
are also taken to other comprehensive income or directly to equity, respectively.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the
same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Freightways Limited and its subsidiariesAnnual Report 2019
63

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
Group
2019
$000
2018
$000
Imputation credits account
Imputation credits available for use in subsequent reporting periods33,34831,287
The above amounts represent the balance of the imputation account as at the end of the reporting period, adjusted for:
(a) Imputation credits that will arise from the payment of the amount of the provision for income tax;
(b) Imputation debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
(c) Imputation credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
Imputation credits that will be attached to the final dividend for 2019 which was declared subsequent to 30 June 2019 will reduce the
above-stated available balance of imputation credits by approximately $9.4 million.
2018Before tax
$000
Tax (charge) /credit
$000
After tax
$000
Exchange difference on translation of foreign operations1,775-1,775
Cash flow hedges taken directly to equity 3,140(879)2,261
Other comprehensive income4,915(879)4,036
Current tax-
Deferred tax (879)
(879)
The tax (charge)/credit relating to components of other comprehensive income is as follows:
2019Before tax
$000
Tax (charge) /credit
$000
After tax
$000
Exchange difference on translation of foreign operations(2,210)-(2,210)
Cash flow hedges taken directly to equity 456(128)328
Other comprehensive income(1,754)(128)(1,882)
Current tax-
Deferred tax (128)
(128)
Note 6. Non-recurring items, other income and other expenses
Included in non-recurring items is a non-recurring benefit before tax totalling $1.9 million (no tax applicable) in respect of the gain arising
during the year upon the progressive recording of the replacement of earthquake-related damaged racking funded by insurance proceeds.
A gain on the racking replacement arises because the overall insurance proceeds for new racking will exceed the written down book value
of the structurally-compromised racking written-off.
Included in other expenses is an amount of $1.3 million in additional costs of operations resulting from the above-mentioned earthquake,
which are also recoverable from insurance, and compensation of $1.3 million received from the Group’s insurers for these additional costs
of operations has been included in other income.
Freightways Limited and its subsidiariesAnnual Report 2019
64

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
Group
2019
$000
2018
$000
Comprises
– Cash at bank
15,882 7,301
– Overnight deposits
104 109
Cash and cash equivalents in statement of cash flows
15,9867,410
Group
2019
$000
2018
$000
Recognised amounts
Fully imputed dividends declared and paid during the year:
Final dividend for 2018 at 15.25 cents per share (2017: 14.75 cents)23,69522,880
Interim dividend for 2019 at 15.0 cents per share (2018: 14.5 cents)
23,30722,492
47,00245,372
Unrecognised amounts
Final dividend for 2019 at 15.5 cents per share (2018: 15.25 cents)
24,10723,712
Subsequent to balance date the above unrecognised dividend was approved by a directors’ resolution dated 26 August 2019.
This amount has not been recognised as a liability at the reporting date, but will be brought to account when paid.
Note 8. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and overnight deposits. Bank overdrafts that are repayable on demand and form an
integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement
of cash flows. Bank overdrafts are shown within borrowings in the current liabilities on the balance sheet to the extent they exceed the
legal right of off-set against cash included in current assets.
Note 7. Dividends
Freightways Limited and its subsidiariesAnnual Report 2019
65

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
Group
2019
$000
2018
$000
Current
Trade receivables73,31270,994
Provision for doubtful receivables(1,500)(1,629)
71,81269,365
Accrued revenue4,2982,984
Other debtors and prepayments
11,1719,465
Share plan loans receivable from employee524336
87,80582,150
Non-current
Share plan loans receivable from employees443198
Other non-current assets3,5414,605
3,9844,803
Trade receivables are non-interest bearing and are generally on 7-30 day terms.
Recoverability of trade and other receivables is reviewed on an ongoing basis. Amounts that are known to be uncollectible are written-
off when identified. The Group applies a simplified approach in calculating expected credit losses, which uses a lifetime expected loss
allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit
risk characteristics and the days past due. For other receivables, an allowance for doubtful receivables is raised when there is objective
evidence that the Group will not be able to collect all amounts due according to the original terms of the receivable.
The movements in the provision for doubtful receivables for the Group were as follows:
Group
2019
$000
2018
$000
Opening balance1,6291,655
Provision for doubtful receivables(7)74
Receivables written off during the year as uncollectible(101)(117)
Exchange rate movement(21)17
Closing balance (Note 28.1(b))1,5001,629
Group
2019
$000
2018
$000
Finished goods2,0361,923
Ticket stocks, uniforms and consumables2,9732,881
5,0094,804
Note 10. Inventories
Inventories are stated at the lower of cost, determined on a first-in-first-out basis, and net realisable value. Full provision is made for
obsolescence, where applicable. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated
costs of completion and the estimated costs necessary to make the sale. The cost of inventories recognised as an expense and included in
‘general and administration expenses’ amounted to $11.8 million (2018: $11.7 million).
Note 9. Trade receivables and other non-current assets
Trade and other receivables are recognised at their fair value and subsequently measured at amortised cost using the effective interest rate, less
provision for impairment.
Freightways Limited and its subsidiariesAnnual Report 2019
66

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
Group
2019
$000
Asset (Liability)
2018
$000
Asset (Liability)
Current
Interest rate swaps – cash flow hedge
(668)(264)
Foreign currency options – cash flow hedge (206)(187)
Forward foreign exchange contracts – cash flow hedge(6)-
(880)(451)
Non-current
Interest rate swaps – cash flow hedge(5,015)(5,119)
Foreign currency options – cash flow hedge(165)(551)
Forward foreign exchange contracts – cash flow hedge643271
(4,537)(5,399)
The Group’s hedging reserves relate to the following hedging instruments:
Note 11. Derivative financial instruments
Cash flow hedge reserve
Intrinsic
value of
options

$000
Spot
component
of currency
forwards

$000
Interest
rate swaps

$000
Total hedge
reserve



$000
Balance at 1 July 2017(1,164)(254)(5,072)(6,490)
Change in fair value of hedging instrument
recognised in Other Comprehensive Income (OCI)
8976241,6193,140
Less: Deferred tax
(251)(175)(453)(879)
Balance at 30 June 2018(518)195(3,906)(4,229)
Change in fair value of hedging instrument
recognised in OCI
348366(258)456
Less: Deferred tax
(97)(103)72(128)
Balance at 30 June 2019(267)458(4,092)(3,901)
Freightways Limited and its subsidiariesAnnual Report 2019
67

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
Effects of hedge accounting on the financial position and performance are:
NZDAUD
2019
$000
2018
$000
2019
$000
2018
$000
Interest rate swaps:
Notional amount53,00059,00046,50058,000
Maturity date
Sept. 2019
– Feb. 2024
Apr. 2019
– Feb. 2024
Jul. 2019
– Jul. 2023
Sept. 2018
– Jul. 2023
Hedge ratio1:11:11:11:1
Change in fair value of outstanding hedging instrument(46)713(212)906
Change in value of hedge item used to determine
hedge effectiveness
46(713)212(906)
Weighted average strike rate for the year4.7%5.0%4.0%4.3%
Foreign currency options:
Notional amount12,98518,968--
Maturity date
Jul. 2019
– May 2021
Jul. 2018
– May 2021
--
Hedge ratio1:11:1--
Change in fair value of outstanding hedging instrument348897--
Change in value of hedge item used to determine
hedge effectiveness
(348)(897)--
Weighted average strike rate for the year
USD0.67:
NZD1
USD0.67:
NZD1
--
Forward foreign exchange contracts:
Notional amount18,38110,582--
Maturity date
Jul. 2019
– Jun. 2024
Jul. 2019
– Jun. 2023
--
Hedge ratio1:11:1--
Change in fair value of outstanding hedging instrument366624--
Change in value of hedge item used to determine
hedge effectiveness
(366)(624)--
Weighted average strike rate for the year----
An expense of $0.1 million, representing predominantly hedge instruments expiring, was recognised in the income statement during the
year (2018: income of $0.1 million).
Freightways Limited and its subsidiariesAnnual Report 2019
68

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
Hedge effectiveness
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to
ensure that an economic relationship exists between the hedged item and the hedging instrument.
For hedges of foreign currency purchases, the Group enters into hedge relationships where the critical terms of the hedging instrument match
exactly with the terms of the hedged item. The Group therefore performs a qualitative assessment of effectiveness. If changes in circumstances
affect the terms of the hedged item such that the critical terms no longer match exactly with the critical terms of the hedging instrument, the
Group uses the hypothetical derivative method to assess effectiveness.
In hedges of foreign currency purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what was originally
estimated, or if there are changes in the credit risk of the Group or the derivative counterparty.
The Group enters into interest rate swaps that have similar critical terms as the hedged item, such as reference rate, reset dates, payment
dates, maturities and notional amount. The Group does not hedge 100% of its loans, therefore the hedged item is identified as a proportion
of the outstanding loans up to the notional amount of the swaps. As all critical terms matched during the year, the economic relationship was
100% effective.
Hedge ineffectiveness for interest rate swaps is assessed using the same principles as for hedges of foreign currency purchases.
It may occur due to:
– The credit or debit value adjustment on the interest rate swaps which is not matched by the loan; and
– Differences in critical terms between the interest rate swaps and loans.
Name of entityPrincipal activitiesCountry of Incorporation
Air Freight NZ LimitedExpress package linehaulNew Zealand
Castle Parcels LimitedExpress package servicesNew Zealand
Fieldair Engineering LimitedGeneral & aviation engineering servicesNew Zealand
Fieldair Holdings LimitedAviation-related servicesNew Zealand
Freightways Finance LimitedGroup treasury managementNew Zealand
Freightways Information Services LimitedIT infrastructure support servicesNew Zealand
Freightways Properties LimitedProperty managementNew Zealand
Freightways Trustee Company LimitedTrustee of Freightways Employee Share PlanNew Zealand
Info Management Services Australia LPAustralian treasury servicesAustralia
LitSupport Pty LimitedInformation managementAustralia
Med-X Pty LimitedInformation managementAustralia
Messenger Services LimitedExpress package servicesNew Zealand
New Zealand Couriers LimitedExpress package servicesNew Zealand
New Zealand Document Exchange LimitedBusiness mailNew Zealand
NOW Couriers LimitedExpress package servicesNew Zealand
Parceline Express LimitedExpress package linehaulNew Zealand
Post Haste LimitedExpress package servicesNew Zealand
Shred-X Pty LimitedInformation managementAustralia
The Information Management Group (NZ) LimitedInformation managementNew Zealand
The Information Management Group Pty LimitedInformation managementAustralia
There has been no change in investments in subsidiaries during the year.
Note 12. Investments in subsidiaries
The Company’s investment in its only directly-owned subsidiary, Freightways Express Limited (FEL), comprises shares at cost.
Listed below are all the significant subsidiaries wholly-owned directly or indirectly by FEL. All subsidiaries have a balance date of 30 June.
Freightways Limited and its subsidiariesAnnual Report 2019
69

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
Group
Land
$000
Buildings
$000
Leasehold
Alterations
$000
Motor
Vehicles
$000
Equipment
$000
Total
$000
2019
Opening net book value
13,800 21,907 3,762 7,431 56,202 103,102
Additions-51,104 4,964 11,234 17,307
Acquisitions through business
combinations (Note 30)
---299380679
Depreciation expense-(1,605) (629) (1,516) (8,766) (12,516)
Disposals--(395)(91) (138) (624)
Exchange rate movement(55) (57) (69) (283) (774) (1,238)
Closing net book value13,745 20,250 3,773 10,80458,138106,710
As at end of year
Cost13,745 39,439 10,01921,478 125,346 210,027
Accumulated depreciation-(19,189) (6,246) (10,674) (67,208) (103,317)
Net book value13,74520,250 3,77310,80458,138 106,710
Note 13. Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment
losses. Historical cost includes all expenditure directly attributable to the acquisition or construction of the item, including interest.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it
is probable that future economic benefits associated will flow to the Group and the cost of the asset can be measured reliably.
Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred.
The carrying amount of the replaced part is derecognised. All other repairs and maintenance costs are recognised in the income
statement as incurred.
Depreciation is calculated on a straight-line basis on all tangible fixed assets, other than land and leasehold improvements, so
as to expense the cost of the assets to their estimated residual values over their estimated useful lives. Land is not depreciated.
Leasehold improvements are depreciated over the shorter of the unexpired period of the lease and the estimated useful life of the
improvements. Estimated useful lives are as follows:
Estimated useful life
Buildings 25 to 50 years
Leasehold alterations Shorter of the period of the lease or estimated useful life
Motor vehicles 5 to 10 years
Equipment 3 to 20 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date.
Freightways Limited and its subsidiariesAnnual Report 2019
70

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
The cost of equipment in respect of assets under construction for which depreciation has not commenced as at 30 June 2019 is $0.3
million (2018: $3 million).
The latest independent valuations of land and buildings (performed in June 2018) assess these assets to have a total fair value of
$71.3 million. The fair values have been derived using the direct capitalisation approach. The valuation technique uses significant
unobservable inputs, namely capitalisation rate and potential new market income of land and buildings. Therefore, these are considered
level 3 valuations, as defined in Note 28.1(d).
Note 14. Intangible assets
(i) Goodwill
Goodwill represents the excess of the consideration transferred in an acquisition over the fair value of the Group’s share of the net
identifiable assets of the acquired business at the date of acquisition. Goodwill is not amortised, but is tested for impairment annually
or whenever events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment
losses. Goodwill is allocated to cash-generating units for the purpose of impairment testing.
(ii) Brand names
Acquired brand names are recognised at cost, being their fair value at the date of acquisition if acquired in a business combination. Brand
names with indefinite useful lives are not subject to amortisation, but are tested for impairment annually or whenever events or changes in
circumstances indicate that they might be impaired, and are carried at cost less amortisation and impairment losses. The useful lives and
amortisation methods are reviewed and adjusted, if appropriate, at each balance sheet date.
Brand names are allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating
units or groups of cash-generating units that are expected to benefit from the brand names.
An independent valuation of the brand names was conducted by Deloitte in July 2019. This independent report assessed the fair market
value of the brand names as at 30 June 2019 to be between $360 million and $397 million, using the value-in-use approach. The valuation
technique uses significant unobservable inputs, namely discount rate, growth rate and cash flow. Therefore, these are considered level 3
valuations, as defined in Note 28.1(d).
(iii) Computer software
External software costs, together with payroll and related costs for employees directly associated with the development of software,
are capitalised. Costs associated with upgrades and enhancements are capitalised to the extent they result in additional functionality.
Amortisation is charged on a straight-line basis over the estimated useful life of the software which ranges between 3 and 10 years. Included
in the cost of software is work in progress of $4.3 million (2018: $2.9 million) for which amortisation has not commenced. Software under
development not yet available for use are tested annually for impairment.
Group
Land

$000
Buildings

$000
Leasehold
alterations
$000
Motor
vehicles
$000
Equipment

$000
Total

$000
2018
Opening net book value
13,748 23,452 3,618 5,739 54,435 100,992
Additions-11753 2,347 10,880 13,991
Acquisitions through business
combinations---7373481,085
Depreciation expense-(1,607) (665) (1,435) (8,071) (11,778)
Disposals--(3)(114) (2,029) (2,146)
Exchange rate movement52 51 59 157 639 958
Closing net book value13,800 21,907 3,762 7,431 56,202 103,102
As at end of year
Cost13,800 39,509 9,58717,280 115,662 195,838
Accumulated depreciation-(17,602) (5,825) (9,849) (59,460) (92,736)
Net book value13,80021,907 3,7627,43156,202 103,102
Freightways Limited and its subsidiariesAnnual Report 2019
71

Financial statements
Notes to the financial statements
For the year ended 30 June 2019
Group
Goodwill
$000
Brand
names
$000
Software
$000
Customer
relationships
$000
Other
$000
Total
$000
2019
Opening net book value
208,179 114,775 14,35918,086 3,020 358,419
Additions--6,429 -470 6,899
Acquisition through business
combinations (Note 30)8,426--1,722 -10,148
Amortisation expense
--(2,922) (1,887) (184) (4,993)
Exchange rate movement(3,868) (843) (69) (444) (97)(5,321)
Closing net book value212,737 113,932 17,79717,477 3,209 365,152
As at end of year
Cost231,399 113,932 33,83826,030 4,878 410,077
Accumulated amortisation(18,662)-(16,041) (8,553) (1,669) (44,925)
Net book value
212,737 113,932 17,79717,477 3,209 365,152
Group
Goodwill
$000
Brand
names
$000
Software
$000
Customer
relationships
$000
Other
$000
Total
$000
2018
Opening net book value
197,287114,045 12,17917,044 2,988 343,543
Additions--4,343 -218 4,561
Acquisition through business
combinations8,145--2,419 -10,564
Amortisation expense
--(2,222) (1,686) (268) (4,176)
Exchange rate movement2,747 730 59 309 82 3,927
Closing net book value208,179 114,775 14,35918,086 3,020 358,419
As at end of year
Cost226,841 114,775
27,540
24,979
4,526
398,661
Accumulated amortisation(18,662)-(13,181) (6,893) (1,506) (40,242)
Net book value
208,179 114,775 14,359 18,086 3,020 358,419
(iv) Customer relationships
· Contractual: An intangible asset is recorded at fair value in respect of the amount of any contractual termination fees payable by
customers of businesses acquired in respect of their document holdings. As it is not known when permanent retrieval fees may arise,
this asset is only amortised upon the actual retrieval fee being charged to the respective customer.
· Other: Non-contractual customer relationships acquired in a business combination are recognised at fair value at the acquisition
date. These customer relationships have an estimated finite useful life and are carried at cost less accumulated amortisation.
Amortisation is calculated using the straight-line method over the expected useful life of the customer relationship which ranges
between 10 and 20 years.
Freightways Limited and its subsidiariesAnnual Report 2019
72