Annual Shareholders Meeting – Chairman’s & CEO’s Commentary

ANNUAL SHAREHOLDERSMEETING
31 October 2019

AHERITAGE
THAT
STARTED
IN 1964

CHAIRMAN
Mark Verbiest
3
© Freightways 2019

1. CHAIRMAN’S INTRODUCTION2. CEO’S REVIEW & TRADING UPDATE3. RESOLUTIONS
AGENDA
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4

1. CHAIRMAN’S INTRODUCTION
GENERALHIGHLIGHTS
5
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1. CHAIRMAN’S INTRODUCTION
EXPRESS PACKAGE & BUSINESS MAIL•
Overall year-on-year revenue, earnings and dividend growth
•
Completed a number of business-critical IT
projects to enable our new Pricing For Effort
initiative for residential deliveries
•
Improved route density, in residential areas in particular, and using the benefits to reinvest into
the contractor fleet, which resulted in an aver
age increase in contractor earnings of 7% above
the previous year
•
Expanded our business mail network to take
on new customers and once again demonstrated
growth year-on-year
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HIGHLIGHTS
6

1. CHAIRMAN’S INTRODUCTION
INFORMATION MANAGEMENT•
Improved 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/tr
ansformation contract win, supporting the
growth of the division’s suite of digital IM services
•
Strong growth in our secure destruction business, which is successfully diversifying into
complementary waste streams which require efficient logistics and processing
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HIGHLIGHTS
7

FINANCIAL HIGHLIGHTS
1. CHAIRMAN’S INTRODUCTION
Note
FY19
$M
FY18
$M
Increase
%
Revenue
615.7
580.9
6.0
EBITA (before non-recurring items)
(i)
96.7
93.7
3.2
Non-recurring items
2.4
2.6
EBITA
(ii)
99.1
96.3
2.9
NPAT (before non-recurring items)
(iii)
61.0
59.6
2.3
Non-recurring items after tax
2.4
2.6
NPAT
(iv)
63.4
62.2
1.9
Basic EPS (cents)(before non-recurring items)
39.3
38.4
2.3
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 the
shareholders
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EXPRESS PACKAGE & BUSINESS MAIL
1. CHAIRMAN’S INTRODUCTION
FY19
$M
FY18
$M
Change
%
Operating Revenue
453.0
428.8
5.6
EBITDA
80.0
74.8
6.9
EBITA
72.2
67.9
6.3
EBITA Margin
15.9%
15.8%
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INFORMATION MANAGEMENT
1. CHAIRMAN’S INTRODUCTION
FY19*
$M
FY18*
$M
Change
%
Operating Revenue
164.5
153.8
6.9
EBITDA*
35.3
35.4
(0.1)
EBITA*
29.3
29.8
(1.9)
EBITA Margin*
17.8%
19.4%
NOTES* Excluding non-recurring items
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1. CHAIRMAN’S INTRODUCTION
•
FINAL DIVIDEND:
15.5 cps
•
IMPUTATION CREDITS:
6.0278 cps (fully imputed at 28% tax rate)
•
SUPPLEMENTARY DIVIDEND:
2.7353 cps
•
RECORD DATE:
13 September 2019
•
PAYMENT DATE:
1 October 2019
•
NO DRP WAS OFFERED IN RESPECT OF THIS DIVIDEND
DIVIDEND
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DIVIDEND PAYMENT HISTORY
YEARS ENDED 30 JUNE
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1. CHAIRMAN’S INTRODUCTION

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BIG CHILL DISTRIBUTION
FREIGHTWAYS ACQUIRES
• Announced acquisition, subject to OIO approval• Market leader in temperature-controlled express freight• Aligns with FRE core capabilities – Pick up, Process, Deliver

CORPORATE GOVERNANCE
1. CHAIRMAN’S INTRODUCTION
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•
Compliance with the NZX Corporate Governance Code
•
2019 annual report expands on Freightways’ strategy and a range of ESG initiatives
•
Sustained strong cash generation from both di
visions, leading to reduced debt gearing levels

CEO
Mark Troughear
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•
BUSINESS STRATEGY
•
ACQUISITION ACTIVITY
•
ESG INITIATIVES
•
TRADING UPDATE
•
OUTLOOK
AGENDA
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New Zealand Couriers
Post Haste Couriers
Castle Parcels
NOW Couriers
DX Mail
Dataprint
TIMG Australia &
New Zealand
Shred-X
Med-X
TIMG NZ
SUB60
Kiwi Express
Security Express
PROVEN, M
ARKET-LEADING
BRANDS
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2. CEO’S REVIEW & TRADING UPDATE

EXPRESS PACKAGE & BUSINESS MAIL
2. CEO’S REVIEW & TRADING UPDATE
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EXPRESS PACKAGE
LOOKING AHEAD:
1. Continue to drive the industry standard for c
ontractor earnings, service quality and productivity
2. Improve revenue and margin per item through Pr
icing for Effort and improved revenue capture
3. Utilise technology to improve visibility for both cu
stomers and our teams in terms of parcel tracking,
route optimisation, customer
reporting and parcel notifications
4. Implement new service offerings to target niches with growth potential
2. CEO’S REVIEW & TRADING UPDATE
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PFE RESIDENTIAL AVERAGE PRICING
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2. CEO’S REVIEW & TRADING UPDATE

BUSINESS MAIL
LOOKING AHEAD:© Freightways 2019
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2. CEO’S REVIEW & TRADING UPDATE
1. Continue to target customers that require superior service levels2. Provide a bundled digital & physical mail delivery service3. Improve productivity by 5% through the postie network4. Retention of our volume post customers despite
NZ Post targeting DX Mail delivery areas at a
lower price point

INFORMATIONMANAGEMENT2. CEO’S REVIEW & TRADING UPDATE
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LOOKING AHEAD:
INFORMATION MANAGEMENT
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2. CEO’S REVIEW & TRADING UPDATE
1. Improve margins in AU by improving the utilisat
ion of our facilities by 20% over the next 2 years
2. Exploit our digitalisation capability in NZ and AU to target scale opportunities3. Develop new services to market to
our large trans-Tasman customer bases
4. Continually assess the return
on investment on individual services

SECURE DESTRUCTION2. CEO’S REVIEW & TRADING UPDATE
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LOOKING AHEAD:SECURE DESTRUCTION© Freightways 2019
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2. CEO’S REVIEW & TRADING UPDATE
1. Continue to add density to our networks
through market share and bolt-on acquisitions
2. Develop new lines of business which s
hare common capability: Product and eDestruction
3. Improve our ability to quickly integrate
acquisitions into our operations and systems
4. Explore avenues in NZ to replicate the AU business model

ACQUISITIONS & ALLIANCES
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2. CEO’S REVIEW & TRADING UPDATE
•
Sustained strong cash generation from both di
visions, leading to reduced debt gearing levels
FY19
FY20 YTD
Secure Destruction
SSS Destruction
(WA)
Green Team
(SA)
Medical Waste
-
Country Hygiene
(NSW)
Records Storage
Formfile
(VIC)
-
Digital Services
Back Online
75% share
GoSweetSpot
33% share
Total consideration
$10.5m
$10.3m
Annualised EBITA
$1.7m
$1.3m

OVERVIEW OF BIG CHILL DISTRIBUTION
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2. CEO’S REVIEW & TRADING UPDATE

Big Chill is New Zealand’s leading temperature-controlled transport operator
200+Chiller / freezer truck and trailer fleet
1
2
million
Shipments in 2018
500+Active customers with long tenure. Averageassociation of Top10 customers > 10 years
11,000
sqm
Purpose-built depots over 9 sites nationwide, growing 3PL facilities
Highly experienced management with long tenureOver 95 years sector experience across management and vendor shareholders
370+Full time staff and contractors
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© Freightways 2019
MARKET LEADING OPERATOR
2. CEO’S REVIEW & TRADING UPDATE

GROWTH OPPORTUNITIES
• Expansion of Auckland facility to 9,300 pallets to be
completed in March 2020 in response to customer demand
• Favourable supply-demand imbalance in the current
temperature-controlled 3PL market
New
 
freezer
 
extension
New
 
freezer
 
extension
Existing
 
chiller
Existing
 
chiller
Auckland expansion
Existing
 
office
 
with
 
new
 
fit
 
out
Cold
 
3PL
 
expansion
 
Network
 
enlargement
 
Synergies
 
• Strong demand is supporting network expansion • Number of extensions to existing depots and new
locations are well advanced
• Potential last mile servic
e / temperature-controlled
delivery fleets
• Cross-selling across respective customer bases and
utilisation of respective network strengths

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2. CEO’S REVIEW & TRADING UPDATE

• Initial purchase price payment in cash of $117m for 100% of Big Chill, representing 80% of Big Chill’s enterprise value
(EV), adjusted for completion adjustments, and a final payment later in 2022
• To be funded through existing and increased bank facilities• Post-acquisition, Freightways will briefly have pro-forma net debt / EBITDA approaching 2.00x. Consistent with recent
years, Freightways expects the historic trend of debt amor
tisation to continue, which together with other business
initiatives is expected to bring the gearing back to ~1.75x in the short term
• Assuming settlement in the first half of Calendar 2020, Freightwa
ys anticipates the transaction will deliver mid single-
digit EPS accretion on a pro-forma full year basis (pre-synergies)
• The value of the final purchase price payment will represent 20% of Big Chill’s EV as at 30 June 2022, calculated
using actual FY22 EBIT at an agreed multiple determined by EBIT growth achieved in FY21
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FINANCIAL OVERVIEW & TRANSACTION FUNDING
2. CEO’S REVIEW & TRADING UPDATE

SDG 3 Good health and well-beingSDG 8 Decent work and economic growthSDG 9 Industry, innovation and infrastructureSDG 13 Climate actionSDG 16 Peace, justice and strong institutions
ESG INITIATIVES
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2. CEO’S REVIEW & TRADING UPDATE

ESG INITIATIVES
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2. CEO’S REVIEW & TRADING UPDATE
SDG 8 – DECENT WORK AND ECONOMIC GROWTH
Driven a 7% increase in average contractor earnings to $103.5k per annumMaintained wage rates above minimum wage for FRE employeesPut 216 of our team through personal improvement
training to assist them develop their careers
within Freightways•
Sustained strong cash generation from both di
visions, leading to reduced debt gearing levels

ESG INITIATIVES
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2. CEO’S REVIEW & TRADING UPDATE
SDG 3 - Good health and well-being
Established a companywide physical and mental health well-being campaign to engage staff and contractors across NZ and AULead partner for KidsCan Shoes for Kids programme

ESG INITIATIVES
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2. CEO’S REVIEW & TRADING UPDATE
Implementation of run intensification programme
and fleet modernisation has assisted in achieving
a further reduction of in Co2 emissionsEmissions per revenue unit have decreased by 5%Actively reviewing new technology vs the ta
sks required to be performed and ensuring our
contractors are remunerated to be able to make the
investment in that technology when it is proven
•
Sustained strong cash generation from both di
visions, leading to reduced debt gearing levels
SDG 13 – CLIMATE ACTION

Q1 TRADING UPDATE
2. CEO’S REVIEW & TRADING UPDATE
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© Freightways 2019

CONSOLIDATED PERFORMANCE
Underlying results (pre-leasing)
Note
Q1 FY20
$M
Remove
leasing
Q1 FY20
$M
Q1 FY19
$M
Increase
%
Revenue
156.7
156.7
155.1
1.0
EBITDA
(i)
33.6
(7.3)
26.3
27.6
(4.7)
EBITA
(ii)
23.3
(1.2)
22.1
23.9
(7.5)
NPATA
(iii)
14.0
0.5
14.5
15.6
(7.4)
NPAT
(iv)
13.4
0.5
13.9
15.1
(8.3)
NOTES(i)
Operating profit before interest, tax,
depreciation and amortisation
(ii)
Operating profit before interest, tax and
amortisation
(iii) Net profit after tax before amortisation(iv) Net profit after tax
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FIRST QUARTER
2. CEO’S REVIEW & TRADING UPDATE
Quarter ended: (unaudited)

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2. CEO’S REVIEW & TRADING UPDATE
Q1 EXPRESS PACKAGE & BUSINESS MAIL
* Unaudited and excludes new lease accounting
Q1 FY20
Q1 FY19
OPERATING
REVENUE
$116m
$114m
EBITDA
$20m
$19m
EBITA
$18m
$18m
EBITA MARGIN
15.2%
15.4%

Q1 EXPRESS PACKAGE & BUSINESS MAIL COMMENTARY
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2. CEO’S REVIEW & TRADING UPDATE
1. EP&BM incurred significant aircraft disruptions in Q1, with two 737’s offline with maintenance
requirements, resulting in an additional $0.75m in
costs incurred. All three aircraft are back in
service as of Q2.
2. Previously-disclosed discount to maintain a significant customer of $0.35m in Q1.3. Organic growth for Q1 was negative 1.5%.
Sustained strong cash generation from both di
visions, leading to reduced debt gearing levels

ORGANIC GROWTH TREND
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2. CEO’S REVIEW & TRADING UPDATE
-2.0-1.5-1.0-0.5
0.00.51.01.52.02.53.0
FY19 Q1
FY19 Q2
FY19 Q3
FY19 Q4
FY20 Q1

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2. CEO’S REVIEW & TRADING UPDATE
Q1 INFORMATION MANAGEMENT
* Unaudited and excludes new lease accounting
Q1 FY20
Q1 FY19
OPERATING
REVENUE
$42m
$42m
EBITDA
$8m
$9m
EBITA
$6m
$8m
EBITA MARGIN
14.3%
18.7%

Q1 INFORMAITON MANAGEMENT COMMENTARY
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2. CEO’S REVIEW & TRADING UPDATE
1. Shred-X relocated its NSW facility in Q1, incurring $0.4m in relocation costs2. TIMG AU incurred equipment and labour cost to sca
le up for a digitalisation project expected to
commence in Q2
3. Print and copy services performance in Au
stralia was poor, down $1.2m, and management have
a number of improvement initiatives underway
4. Paper sales were adversely impacte
d by $0.25m, due to lower paper prices
cash generation from both divisions,
leading to reduced debt gearing levels

OUTLOOK
2. CEO’S REVIEW & TRADING UPDATE
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© Freightways 2019

OUTLOOK
•
Incremental growth in Pricing For Effort returns through FY20, from
$0.55c to $0.75c per residential item by year end
•
We would expect to see improving organic trade from EP customers
through Q2, slowly improving in t
he second half of the financial year
•
Expect utilisation to improve in AU facilities - targeting 75% by year
end
•
Anticipate the commencement of a large digitisation
project in AU in Q2
•
Expect to work through OIO approval to complete Big Chill acquisition
later in FY20
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2. CEO’S REVIEW & TRADING UPDATE
43
© Freightways 2019

RESOLUTIONS
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© Freightways 2019

1. Re-election of Director: Kim Ellis2. Re-election of Director: Mark Verbiest3. Approval of Directors’ fees4. Authority to fix Auditor’s remuneration5. Approval of amended Constitution
2. RESOLUTIONS
45
© Freightways 2019

Re-election of
Director
Kim Ellis
2. RESOLUTIONS
46
© Freightways 2019

Re-election of
Director
Mark Verbiest
2. RESOLUTIONS
47
© Freightways 2019

1. Re-election of Director: Kim Ellis2. Re-election of Director: Mark Verbiest3. Approval of Directors’ fees4. Authority to fix Auditor’s remuneration5. Approval of amended Constitution
2. RESOLUTIONS
48
© Freightways 2019

THANK YOU
Disclaimer. This presentation has been prepar
ed by Freightways Limited ("Freightways")
for information purposes only. This pres
entation is not a product disclosure stat
ement, prospectus or investment statem
ent. Nothing in this presentation
constitutes an invitation to subscribe for shares, securities or
financial products in Freightways
. Nothing in this presentatio
n constitutes legal, accounting, financial or taxation advice or
any other advice of any kind. Any investor should consult
their own professional advisors and conduct their own independent in
vestigation of Freightways and the information contained in
this presentation, including any statements relating to t
he future performance of Freightways. The information in
this presentation is given in good faith and has been obtained from
sources believed to be reliable and accurate at the date of
this presentation. This presentation may include forward
‐
looking statements regarding future events and the future
financial performance of Freightways. Such forward
‐
looking statements are based on current expectations and involve risks and unc
ertainties. Actual results may be materially different from those sta
ted in any forward
‐
looking statements.
Nothing contained in this document is or should be relied on as a promise as to t
he future performance or condition of Freightways or as to any other futur
e events Except as required by law or the NZX Listing Rules, Freightways undertakes
no obligation to update any forward
‐
looking statements, whether as a result of new information,
future events or otherwise or to report against any forward
‐
looking statements. None of Freightways, thei
r affiliates, or their respective advisers or
representatives, give any warranty o
r representation as to the accuracy or completeness of the information contained in this presentation, and excl
ude their liability to the maximum extent permitted by law.
© Freightways 2019

ANNUAL SHAREHOLDERSMEETING
31 October 2019

---

ANNUAL SHAREHOLDERS MEETING


A. CHAIRMAN’S INTRODUCTION

Slide 1. Freightways - 31 October 2019, Annual Shareholders Meeting

Slide 2. Heritage slide

Slide 3. Mark Verbiest, Chairman

Shareholders and guests, welcome to Freightways’ Annual Shareholders Meeting.
My name is Mark Verbiest and I am the Chairman of Freightways.

Before we proceed, I would like to point out some housekeeping matters. The
bathrooms are located along the corridor. In the unlikely event of an emergency,
you will be required to evacuate and assemble outside the building in a designated
safe area. Should this occur please exit the room through the rear doors and follow
the directions of Eden Park staff. Please also take this opportunity to switch your
mobile phones to silent.

Slide 4. Agenda

I would now like to run through the structure of the meeting.

• I will begin with procedural matters, introduce the Freightways Board and some
of the team to you, and then summarise some of the Company’s 2019 highlights.
I will then ask Mark Troughear, Freightways’ Chief Executive Officer, to
provide a review of the Company, an update on current trading performance and
a commentary on our very recent acquisition of Big Chill Distribution.

• I ask that you hold all questions about the performance of the Company until the
close of the CEO’s presentation and direct them through me. Any questions
related to formal resolutions outlined in the Notice of Meeting should be asked
when we consider those resolutions.

• Following the CEO’s presentation, I will introduce the formal resolutions as
outlined in the Notice of Meeting and polls will be held in respect of them. The
polls will be conducted following the meeting.

• The Notice of Meeting, which includes the explanatory notes, was circulated to
all shareholders and I intend to take it as read.

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

Proxies have been appointed for the purpose of this meeting in respect of
approximately 77 million ordinary shares. As was indicated on the proxy form,
where proxy discretion has been given, the Directors, and I as Chairman, intend to
vote those proxies we have received in favour of resolutions 1, 2, 4 and 5 set out
in the Notice of Meeting. As also indicated on the proxy form, unless directed how
to vote by the shareholder giving the proxy in respect of resolution 3 relating to
Directors’ fees, the Directors, including myself, will not be able to vote on
resolution 3 on behalf of the proxy. As generally requested by the New Zealand
Shareholders Association, we will not disclose for each resolution the voting of
valid proxies received before shareholders vote today, and as usual we will declare
the outcome of the polls after the meeting on the NZX.

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

Your Directors are:

• Kim Ellis - Kim was appointed a Director in 2009, having spent 28 years in
chief executive roles in a number of sectors, including 13 years as Managing
Director of Waste Management NZ Limited. Kim is Chairman of Metlifecare,
Sleepyhead Group and NZ Social Infrastructure Fund and has a number of other
directorships, including Port of Tauranga.

• Abby Foote - Abby joined the Board in June of last year and is qualified in both
law and accounting. She brings to the Board over 10 years’ of governance
experience, including time spent in senior management roles. Abby is currently
Chair of Z Energy, and a director of TVNZ and Sanford Limited.

• Mark Rushworth - Mark was appointed a Director in 2015 and has extensive
experience in the technology sector, with a decade’s governance experience,
predominantly in the high tech and innovation space. He has widespread
operational and marketing experience. He spent 4 years on the senior executive
team of Vodafone NZ and has previously served as CEO of Pacific Fibre, ihug
and Paymark. Mark is currently CEO of private equity-owned UP Education.

• Andrea Staines - Andrea is a professional director based in Australia and was
appointed to the Board in August last year. Andrea has 12 years’ governance
experience on the Boards of a range of Australian entities, mostly in the
transport and retail services sectors, having previously held senior management
roles in the airline industry, in particular. She is currently a director of Sealink
Travel (Australia), UnitingCare Queensland and the Australian National
Disability Insurance Scheme Agency.

• I was appointed a Director of Freightways in February 2010 and elected
Chairman in October last year. I am a lawyer by training and have widespread
corporate legal experience in private practice, having also spent over 7 years on
the senior executive team of Telecom NZ through until mid-2008, where among
other things I had executive accountability for two business units. I’m currently

Chairman of Meridian Energy Limited, PE Fund Willis Bond Capital Partners
Limited and Mycare Limited, a privately-held early stage digital company, and
a director of ANZ Bank New Zealand. I’m also a member of the Advisory Board
of The Treasury.

• Our sixth director, Peter Kean, who is not here, has sent his apologies for being
unable to attend today’s meeting. Peter was appointed a Director in 2016,
bringing to Freightways many years of senior executive experience with the
Lion group of companies in both New Zealand and Australia. After retiring from
Lion in 2014 he has developed a career in governance. Peter is also a Director
of Sanford Limited, the New Zealand Rugby Union and a number of private
companies.

Also at the table are:

• Mark Royle, Freightways’ Chief Financial Officer and Company Secretary.
Mark was appointed to these roles 19 years ago. Mark is a key contributor to
the strategic direction and performance of the Company, with over 30 years
accounting and commercial experience, including 13 years at a major
international chartered accounting firm; and

• Mark Troughear, Freightways’ Chief Executive Officer, who was appointed to
the role of CEO in January 2018. Mark has been with Freightways in various
senior executive roles for over 20 years and has a comprehensive knowledge of
the group’s operations across both the Express Package & Business Mail
division and the Information Management division.

Also present today are representatives from the Freightways executive team who
you will be able to meet following the meeting. This executive team has
considerable experience, often in more than one Freightways business, and has an
average tenure at Freightways of almost 20 years per executive.

The Company’s Auditors, PricewaterhouseCoopers, are represented here today by
Leo Foliaki and the Company’s legal advisors, Russell McVeagh, are represented
here today by David Raudkivi.

The Financial Statements for the year ended 30 June 2019 are set out in the
Company’s Annual Report that was released to shareholders last month. This is the
second year where we have endeavoured to give shareholders and other interested
parties a lot more information about what we do at Freightways. At the same time,
we have reported on our environmental footprint, as we did last year, using the
Sustainable Development Goals developed by the United Nations. Mark Troughear
will talk to you more about our work on intensification of our network, which
works toward reducing our environmental impact.

We have written about the importance of our people, including our independent
contractor network, to give insight into how these essential relationships work, and

how we value career advancement, reward and safety for all our people. We also
describe our work towards being a good corporate citizen, especially amongst the
communities we work in. The intent is to continually improve our reporting to
you, our shareholders, on the matters we think are most relevant to our business.

I would now like to speak briefly to some of the financial highlights of
Freightways’ 2019 year. I will then ask Mark Troughear to address you.

Slide 5. General highlights - 2019 (cover slide)

Slide 6. Highlights - Express Package & Business Mail

The latest full year’s results for the year ended 30 June 2019 reflect the ongoing
strength of the Freightways businesses.

The express package & business mail division delivered a solid result. We
completed a number of business-critical IT projects to enable our new Pricing for
Effort initiative for residential deliveries. Improved route density also resulted in
an increase in average earnings for our independent contractors of 7% above the
prior year. Sharing the spoils with our contractors is a tenet of a sustainable and
profitable business model for both the company and our contractors. We loathe to
tamper with this model, given its success over many, many years. DX Mail has
expanded its network to facilitate the growth achieved from marketshare gains.

Slide 7. Highlights - Information Management

The information management division saw earnings from its Australian operations
surpass its New Zealand business in 2019, highlighting the division’s success in
leveraging a national footprint on each side of the Tasman to drive earnings and
position it for further growth. In particular, utilisation of Australian facilitates
improved by 10%. Ongoing growth in the division’s digital service offerings
continues to be underpinned by the successful completion of major data collection
and transformation projects, which are leading to new opportunities in that space.
Recent expansion into the medical waste industry in Australia is successfully
diversifying the division’s activities.

Slides 8. Financial highlights - 2019

This slide presents the reported 2019 result and the underlying trading result
compared to the prior comparative period, excluding the impact of non-recurring
items. EBITA refers to earnings (or operating profit) before interest, tax and
amortisation. NPAT refers to net profit after tax. EPS refers to earnings per share.

The 2019 non-recurring items comprised a non-taxable benefit of $0.5 million
relating to reversing an accrued final acquisition payment no longer expected to be
required, and a non-taxable $1.9 million gain relating to recording the replacement
of earthquake-damaged racking funded by insurance proceeds.

The 2018 non-recurring items comprised a non-taxable benefit of $1.6 million
relating to reversing an accrued final acquisition payment no longer required, and
a non-taxable $1 million gain relating to recording the replacement of earthquake-
damaged racking funded by insurance proceeds.

While these non-recurring items were included in the full year financial statements
contained in your annual report, we believe for the purposes of assessing the
underlying year-on-year operational performance of Freightways, these one-off
items should be excluded and accordingly have been excluded for this presentation
and my commentary.

Consolidated operating revenue of $616 million for the 2019 full year was 6%
higher than the prior comparative period.

EBITA of $97 million was 3.2% higher than the prior comparative period.

Consolidated NPAT of $61 million was 2.3% higher than the prior comparative
period.

EPS for the full year (and again exclusive of non-recurring items) was 39.3 cents
per share, also a 2.3% improvement on the prior comparative period.

Overall, the full year result delivered year-on-year revenue, earnings and dividend
growth.

Sustained strong cash generation from all divisions resulted in further reduced debt
gearing levels, giving us the opportunity to look for further growth opportunities.

Slide 9. Express Package & Business Mail division - 2019 performance

As mentioned, this division produced a solid result, while investing in its IT
capabilities to enhance its service delivery. Revenue was up year on year by 5.6%,
while EBITA was up 6.3%.

2019 was a year of two halves for the express package businesses with respect to
organic growth levels. 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. Consequently, revenue and earnings were stronger in the first half
of the year than the second half.

Some hard calls were also made on low margin business during 2019, 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.

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 the
cheapest rates to those areas that DX Mail delivers into, and more expensive rates
to those areas where DX Mail does not deliver. Needless to say, we have been in
dialogue with the NZ Commerce Commission in respect of NZ Post’s pricing
behaviour. Meanwhile, DataPrint, Freightways’ mailhouse business, expanded its
range of services during 2019 and is well positioned to help customers transition
to digital communications, augmented by high quality physical delivery through
DX Mail.

Overall, year-on-year earnings growth from this division in 2019 was an excellent
contribution to Freightways’ results.

Slide 10. Information Management division - 2019 performance

Operating revenue for the information management division in 2019 was $164.5
million, 6.9% higher than 2018.

EBITA, on the other hand, of $29.3 million, was 1.9% lower than 2018, as Shred-
X, in particular, invested in growing its fleets through New South Wales, Victoria
and Queensland in response to demand from medical waste and product destruction
customers. In addition, Shred-X also incurred transition costs while merging its
Western Australia site with a recently-acquired document destruction business,
completing that initiative by May 2019.

While utilisation of our document storage facilities led to improved margins in
Australia and New Zealand, the margins generated from data transformation were
slightly lower.

Although slightly down on 2018, the IM division’s 2019 contribution to
Freightways’ earnings was sound, while it positions itself for future growth
opportunities in many of its newly-developed revenue streams, including within
niches of the waste and destruction industries and in the growing digital
transformation market.

Slide 11. Final Dividend - 2019

The Directors declared a final dividend of 15.5 cents per share, fully imputed,
which was paid at the start of this month. This represented a pay-out of
approximately $24.1 million compared with $23.7 million for the prior
comparative period; a 2% increase. The full year’s dividend pay-out was in line
with the Company’s dividend policy of paying 75% of annual NPATA, excluding
any non-cash, non-recurring items.

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

Slide 12. Dividend Payment History

As this slide shows, Freightways has been improving its dividend payout year on
year for the last 10 years. This is testament to the strength of Freightways’ business
models, the expertise of its people and the positive features of the markets it
operates in. This was once again evident in the 2019 full year result and the
Directors acknowledge the outstanding work and ongoing dedication of the
Freightways team of people throughout New Zealand and Australia.

Slide 13. Big Chill Distribution

As many of you would be aware, we announced the acquisition of Big Chill
yesterday on the NZX. While it does still remain subject to Overseas Investment
Office approval, this is an exciting acquisition, which aligns with Freightways’
core strategic capabilities as a business that “Picks up, processes and delivers.” I
will leave Mark Troughear to expand on the key points and further rationale for
this acquisition in his address shortly.

Slide 14. Corporate Governance

The New Zealand Stock Exchange released a new Corporate Governance Code in
2017 that took effect for Freightways for the first time during 2018. As a
responsible corporate citizen, Freightways is in compliance with this new Code. In
addition, I refer you to the extensive information and reports available on our
website. If you haven’t seen the latest Annual Report please take the time to view
it on Freightways’ website. I think you’ll find it informative.

I’ll now call on Freightways’ CEO, Mark Troughear, to address the meeting.

Slide 15. Freightways – Mark Troughear, Chief Executive Officer

B. CHIEF EXECUTIVE OFFICER’S REVIEW AND TRADING
UPDATE

Thanks Mark and thank-you ladies and gentlemen for coming along today.

Slide 16. Chief Executive Officer’s presentation agenda

− Business Strategy
− Acquisition Activity
− ESG Initiatives
− Trading Update
− Outlook

Slide 17. Express Package, Business Mail, Information Management and
Secure Destruction Brands

Slide 18. Express Package & Business Mail (cover page)

Slide 19. Express Package
1. Continue to drive the industry standard for contractor earnings, service
quality and productivity
2. Improve revenue and margin per item through Pricing for Effort and
improved revenue capture
3. Utilise technology to improve visibility for both customers and our teams in
terms of parcel tracking, route optimisation, customer reporting and parcel
notifications
4. Implement new service offerings to target niches with growth potential

Slide 20. PFE Residential Average Pricing
1. This graph represents the average price per item and shows the improvement
we have achieved after the first quarter of $0.55 cents per item. Our target is
to add another $0.20 cents by the end of the year.

Slide 21. Business Mail
1. Continue to target customers who require superior service levels
2. Provide a bundled digital & physical mail delivery service
3. Improve productivity by 5% through the postie network
4. Retention of our volume post customers despite NZ Post targeting DX Mail
delivery areas at a lower price point

Slide 22. Information Management Cover Page

Slide 23. Information Management
1. Improve margins in Australia by improving the utilisation of our facilities
by 20% over the next 2 years
2. Exploit our digitisation capability in NZ and Australia to target scale
opportunities
3. Develop new services to market to our large trans-Tasman customer bases
4. Continually assess the return on investment for individual services

Slide 24. Secure Destruction Cover Page

Slide 25. Secure Destruction
1. Continue to add density to our networks through market share and bolt-on
acquisitions
2. Develop new lines of business which share common capability: Product and
eDestruction
3. Improve our ability to quickly integrate acquisitions into our systems and
operations
4. Explore avenues in NZ to copy the Australian business model

Slide 26. Acquisitions & Alliances
1. Acquisitions completed in 2019
− Secure Destruction – SSS Destruction Western Australia
− Record Storage – Formfile Victoria
− Digital Services – Back Online 75% share

2. Acquisitions completed in Q1, 2020
− Secure Destruction – Green Team South Australia
− Medical Waste – Country Hygiene New South Wales
− Digital Services – GoSweetSpot 33% share
− GoSweetSpot provides an electronic platform for customers who
require courier bulk freight and international freight services.
− GoSweetSpot has been highly successful in growing its market of
small and medium sized customers.
− It also provides a platform to target growth in Australia.

3. Continue to explore opportunities to add bolt-on acquisitions to current lines
of business, as well as acquisitions which are complementary to our business
model

Slide 27. Overview of Big Chill

Slide 28. Market Leading Operator
− 200 Chiller/Freezer truck and trailer fleet
− 2 million shipments in 2018
− 11,000sqm purpose-built depots over 9 sites nationwide, growing 3pl
facilities
− 370 full time staff and contractors
− 500+ active customers with long tenure
− Over 95 years sector experience across management and vendor
shareholders

Slide 29. Growth Opportunities
1. Cold 3PL Expansion
− Expansion of Auckland facility to 9,300 pallets to be completed in March
2020 in response to customer demand
− Favourable supply-demand imbalance in the current temperature-controlled
3PL market

2. Network Enlargement
− Strong demand is supporting network expansion
− Number of extensions to existing depots and new locations are well
advanced

3. Synergies
− Potential last mile service / temperature-controlled delivery fleets
− Cross-selling across respective customer bases and utilisation of respective
network strengths

Slide 30. Financial Overview and Transaction Funding
1. Initial purchase price payment in cash of $117m for 100% of Big Chill,
adjusted for completion adjustments, and a final payment later in 2022
2. To be funded through existing and increased bank facilities
3. Post-acquisition, Freightways will briefly have pro-forma net debt /
EBITDA approaching ~2.00x. Expect to reduce this to ~1.75x in the short
term through ongoing cash generation and a number of other business
initiatives. Freightways is comfortable with these levels of gearing
4. Assuming settlement in the first half of Calendar 2020, Freightways
anticipates the transaction will deliver mid-single-digit EPS accretion on a
pro-forma full year basis (pre-synergies)
5. The value of the final purchase price payment will represent 20% of Big
Chill’s EV as at 30 June 2022, calculated using actual FY22 EBITA at an
agreed multiple determined by EBITA growth achieved in FY21

Slide 31. ESG Initiatives
− SDG 3 Good health and well-being
− SDG 8 Decent work and economic growth
− SDG 9 Industry, innovation and infrastructure
− SDG 13 Climate action
− SDG 16 Peace, justice and strong institutions

Slide 32. ESG Initiatives
− SDG 8: Driven a 7% increase in average contractor earnings to $103.5k per
annum
− SDG 8: Maintained wage rates above minimum wage for FRE employees
− SDG 8: Put 216 of our team through personal improvement training to assist
them develop their careers within Freightways

Slide 33. ESG Initiatives
− SDG 3: The Movement - Established a companywide physical and mental
health well-being campaign to engage staff and contractors across NZ and
Australia
− SDG 3: Lead partner for KidsCan Shoes for Kids programme

Slide 34. ESG Initiatives
− SDG13: Implementation of run intensification programme and fleet
modernisation has assisted in achieving a further reduction of in Co2
emissions
− SDG13: Emissions per revenue unit have decreased by 5%

− SDG13: Actively reviewing new technology vs the tasks required to be
performed and ensuring our contractors are remunerated to be able to make
the investment in that technology when it is proven

Slide 35. Q1 Trading Update Cover Page

Slide 36. Q1 Consolidated Performance

This slide shows our first quarter’s result, both in compliance with the new lease
accounting standard, which became effective for Freightways from 1 July this year,
and excluding the relevant leasing adjustments, so as to provide a comparison to
Q1 last year on a like for like basis.

You will note that the impact on Q1 of the new lease accounting standard is a
reduction to NPAT of $0.5m. While the new approach to accounting for leases
affects the income statement presentation, as shown, the actual cash flows from
operating lease payments continue as they always have. Next year the results will
be on a consistent accounting basis, which will be helpful.

My presentation of results for Freightways and its divisions excludes the new lease
accounting adjustments for ease of comparing the underlying trading results
between years.

− Consolidated operating revenue of $156.7 million was 1% higher than Q1
last year.

− EBITDA of $26.3 million and EBITA of $22.1 million were 4.7% and 7.5%
lower than Q1 last year, respectively.

− Consolidated NPATA of $14.5 million and NPAT of $13.9 million were
7.4% and 8.3% lower than Q1 last year, respectively.

There are a number of reasons why the earnings stepped-back in Q1 this year
compared to last year and I will explain why, as I cover each of the 2 divisions’
results next.

Slide 37. Q1 Express Package & Business Mail

− Consolidated operating revenue of $116 million was higher than the prior
comparative period.

− EBITDA of $20 million was above the prior comparative period and EBITA
of $18 million was on par with the prior comparative period

Slide 38. Q1 Express Package & Business Mail Commentary
− EP&BM incurred significant aircraft disruptions in Q1, with two 737’s
offline with maintenance requirements, resulting in an additional $0.75m in
costs incurred. All three aircraft are back in service as of Q2.
− Previously disclosed discount to maintain a significant customer impacted
Q1 by $0.35m
− Organic growth for Q1 was negative 1.5%.

Slide 39. Organic Growth Trend
This chart represents growth from our customers (excluding the impact of pricing).
Organic growth has decreased steadily throughout the past 12 months as the NZ
economy has slowed.

Slide 40. Q1 Information Management
− Consolidated operating revenue of $42 million was on par with the prior
comparative period.

− EBITDA of $8 million and EBITA of $6 million were both below the prior
comparative period, and this can be explained as follows.

Slide 41. Q1 Information Management Commentary
− Shred-X relocated its NSW facility in Q1, incurring $0.4m in relocation
costs
− TIMG Australia incurred equipment and labour cost to scale-up for a
digitisation project expected to commence in Q2
− Print and copy revenue in Australia was disappointing, down $1.2m on the
prior comparative period. Management has a number of improvement
initiatives underway
− Paper sales were adversely impacted by $0.25m, due to lower paper prices

Slide 42. Outlook Cover Page

Slide 43. Outlook
1. Incremental growth in Pricing For Effort returns through FY20, from $0.55c
to $0.75c per residential item by year end
2. We expect to see improving organic trade from EP customers in the second
half of the year
3. Expect utilisation to continually improve in our Australian facilities -
targeting 75% by year end
4. Anticipate the commencement of a large digitisation project in Australia in
Q2
5. Expect to work through OIO approval to complete Big Chill investment later
in FY20

Thank-you.