Half Year Results to 31 Dec 2019 and Interim Dividend

24 February 2020 NZX: FREHY20 RESULTS PRESENTATION

AGENDA1. HIGHLIGHTS2. Operating performance3. Interim dividend4. Business strategy5. Outlook6. Conclusion
HY20 RESULTS PRESENTATION
2
© Freightways 2020

EXPRESS P
ACKAGE &
BUSINESS MAIL
1. HIGHLIGHTS
HY20 RESULTS PRESENTATION
3
•
After suffering a decline in organic volume through much of 2019, due to lower same-
customer trading, December showed signs of that decline abating.
•
Pricing for Effort (PFE) delivered an average of $0.66 per item by December, up from $0.55
at the end of October.
•
Despite needing to match cheaper competitor pricing in the letters business, DX Mail
successfully retained its customers through providing quality and timely mail services.
© Freightways 2020

4
1. HIGHLIGHTS
HY20 RESULTS PRESENTATION
© Freightways 2020 •
Poor performance in a number of smaller service lines and the delayed commencement of digitisation
contractsprovedadragon1
st
half year Australian earnings. A number of initiatives are in place to
address the performance of these service lines during the 2
nd
half of FY20.
•
Revenue growth in the Australian records
storage business of 10% for the half year.
•
A major data digitisation contract was secured, wh
ich will commence in Q3 and continue through most
of calendar 2020.
•
14% revenue growth in the SD & medical waste business in Australia
•
A decline in SD paper pricing of approximately $1.5m in the half year. The earnings impact of the
decline in paper pricing was mitigated to some extent by higher paper volumes than the priorcomparative period (pcp) and lower processing costs.
INFORMATION MANAGEMENT & SECURE DESTRUCTION

FINANCIAL HIGHLIGHTS
5
© Freightways 2020
HY20 RESULTS PRESENTATION
1. HIGHLIGHTS
HY19
HY20
Change
GAAP
IFRS16
lease
adj.
Excl.
leasing
GAAP
IFRS16
lease
adj.
Excl.
leasing
GAAP
Excl.
leasing
Note
$M
$M
$M
$M
$M
$M
%
%
Revenue
314.8
-
314.8
318.9
-
318.9
1.3
1.3
EBITA, before non-recurring items
i.
50.7
-
50.7
50.1
(2.4)
47.7
(1.2)
(5.9)
Non-recurring items
1.4
-
1.4
-
-
-
(100.0)
(100.0)
EBITA
ii.
52.1
-
52.1
50.1
(2.4)
47.7
(3.8)
(8.4)
NPAT, before non-recurring items
iii.
32.0
-
32.0
29.2
1.1
30.3
(8.7)
(5.3)
Non-recurring items after tax
1.4
-
1.4
-
-
-
(100.0)
(100.0)
NPAT
iv
33.4
-
33.4
29.2
1.1
30.3
(12.6)
(9.3)
Basic EPS (cents)(before non-recurring items)
20.6
20.6
18.8
19.5
(8.7)
(5.3)
GAAP – Generally Accepted
Accounting Principles (IFRS-compliant)
Notes:• Operating profit before interest, tax and amortisation, before non-recurring items. • Operating profit before interest, tax and amortisation. • Net profit after tax (NPAT), before non-recurring items. • Profit for the half year attributable to shareholders.

2020 – Lease accountingThe new NZ IFRS 16 Leases accounting standard becam
e mandatory for Freightways from 1 July 2019. The
pcp results are not required to be re
stated in the first year of adopti
ng NZ IFRS 16 and accordingly, the
Directors believe that providing commentary excl
uding the impact of NZ IFRS 16 provides a better
comparison to the pcp.2019 – Non-recurring itemThe non-recurring benefit before tax totalling $1.4 million
(no tax applicable) in 2018 was in respect of the
gain arising during that half year fr
om the progressive recording of the replacement of earthquake-related
damaged racking funded by insurance proceeds. A gain
on the racking replacement arose because the
overall insurance proceeds for new
racking exceeded the written down book
value of the structurally-
compromised racking written-off.
HY20 RESULTS PRESENTATION
6
© Freightways 2020 1. HIGHLIGHTS
Adjusted Items

7
© Freightways 2020
REVENUE SEGMENTATION
HY20 RESULTS PRESENTATION
Dec-19
$M
Dec-18
$M
Change
%
Express Package
209.4
204.5
2.4
Postal
27.2
28.2
(3.4)
Storage & Handling
31.2
31.7
(1.6)
Destruction Activities
31.9
30.0
6.1
Other
19.2
20.4
(5.9)
Total Revenue
318.9
314.8
1.3
1. HIGHLIGHTS

AGENDA1. Highlights2. OPERATING PERFORMANCE3. Interim dividend4. Business strategy5. Outlook6. Conclusion
HY20 RESULTS PRESENTATION
8
© Freightways 2020

9
© Freightways 2020 2. OPERATING PERFORMANCE - DIVISIONAL
HY20 RESULTS PRESENTATION
HY20 EXPRESS PACKAGE & BUSINESS MAIL
* EBITDA, EBITA and EBITA margin represent the operating results of the division, exclusive of the impact of NZ IFRS 16
HY20
$M
HY19
$M
Change
%
OPERATING REVENUE
237.6
233.5
1.8
EBITDA
43.4
42.4
2.4
EBITA
39.1
38.6
1.1
EBITA MARGIN
16.4%
16.5%

EXPRESS P
ACKAGE
HY20 RESULTS PRESENTATION
10
Activity levels: • Revenue growth on the pcp
of 1.3% in Q1 increased to 2.1% in Q2.
• Q2 had organic decline of
0.8%
2. OPERATING PERFORMANCE - DIVISIONAL© Freightways 2020
-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
FY20 Q2
% Change
ORGANIC GROWTH TREND

11
EXPRESS P
ACKAGE
HY20 RESULTS PRESENTATION
Pricing for Effort: • By December, average PFE
revenue reached $0.66 per item, up from $0.55 at the end of October. Target remains $0.75
• December saw a peak in the
number and proportion of residential items travelling through the network.
• December residential on-time
delivery performance levels measured at 93%, 1% higher than our main competitor.
2. OPERATING PERFORMANCE - DIVISIONAL© Freightways 2020
$8.25
PFE AVERAGE PRICE PER ITEM
$

BUSINESS MAIL
HY20 RESULTS PRESENTATION
12
•
Despite needing to match cheaper competitor
pricing for bulk mail, DX Mail successfully
retained its customers through provid
ing quality and timely mail services.
•
The level of discounting has had an adverse ef
fect on earnings in this division as DX
discounted some large mail contracts to retain business.
•
The NZ Commerce Commission, for the time being,
will not be pursuing an investigation into
NZ Post’s targeted discounted zonal pricing,
although we remain in dialogue with them.
2. OPERATING PERFORMANCE - DIVISIONAL© Freightways 2020

13
© Freightways 2020 2. OPERATING PERFORMANCE - DIVISIONAL
HY20 RESULTS PRESENTATION
HY20 INFORMATION MANAGEMENT & SECURE DESTRUCTION
* EBITDA, EBITA and EBITA margin represent the operating results of the division, exclusive of any non-recurring items and the
impact of NZ IFRS 16
HY20
$M
HY19
$M
Change
%
OPERATING REVENUE
82.3
82.2
0.1
EBITDA
14.4
17.6
(18.4)
EBITA
11.0
14.7
(24.8)
EBITA MARGIN
13.4%
17.9%

HY20 RESULTS PRESENTATION
© Freightways 2020
14
2. OPERATING PERFORMANCE - DIVISIONAL
INFORMATION MANAGEMENT & SECURE DESTRUCTION
AU RECORDS
+$0.5m Revenue
PAPER PRICNG
-$1.5m Revenue
PRINT & COPY
-$1.3m Revenue
DESTRUCTION &
MEDICAL
+$3.1m Revenue
DIGITISATION
-$0.6m Revenue

HY20 RESULTS PRESENTATION
© Freightways 2020
15
•
Digitisation: Work commenced on a major digi
tisation contract in late-January 2020 (later
than originally anticipated) and will conti
nue through calendar 2020. The work leverages
TIMG’s secure logistics and storage capability, as
well as its data trans
formation experience.
It will engage up to 250 staff at its peak.
2. OPERATING PERFORMANCE - DIVISIONAL
INFORMATION MANAGEMENT & SECURE DESTRUCTION

16
© Freightways 2020
TIMGWORKFLOWDIAGRAM
HY20 RESULTS PRESENTATION

BALANCE SHEET KEY POINTS
HY20 RESULTS PRESENTATION
•
Total Assets have increased since FY19 by $217m, due to the impact of NZ IFRS 16
($195m), acquisitions ($14m) and higher trade and other receivables due to increasedactivity ($14m) contributing to higher recorded assets
•
Total Liabilities have increased since FY19 b
y $228m from recognising lease liabilities upon
the adoption of NZ IFRS 16 ($220m)
•
Net borrowings have increased by $24m since FY
19, mainly to fund acquisitions and capital
expenditure
•
No significant changes in issued capital during the half year
17
2. OPERATING PERFORMANCE - DIVISIONAL© Freightways 2020

CASH FLOWKEY POINTS
HY20 RESULTS PRESENTATION
•
Underlying cash generated from operations (i.e. b
efore reclassifying $15m of lease payments
into interest and principal separately in the cash flow statement to comply with NZ IFRS 16)of $46m was $5m below the PCP, reflecting timing of receipts from customers and paymentsto suppliers. Net cash inflows from operating activities (i.e. after deducting interest and taxpayments) were $7m below the PCP at $25m, also excluding the NZ IFRS 16 impact)
•
Cash outflows from investing activities were up $6m on the PCP, due predominantly to $4mmore in acquisition payments compared to the PCP
•
Excluding the $11m of operating lease principal payments under NZ IFRS 16, there was a
$4m decrease in cash outflows from financing act
ivities compared to the PCP reflecting the
drawdown of $13m of debt this year compared to $8m drawn down in the PCP
18
2. OPERATING PERFORMANCE - DIVISIONAL© Freightways 2020

CAPITAL EXPENDITURE & DEPRECIATION
HY20 RESULTS PRESENTATION
19
2. OPERATING PERFORMANCE - DIVISIONAL
2020
Half Year
Actual
$M
2020
Full Year
Forecast
$M
Capital Expenditure
12
25 - 26
Depreciation
818
© Freightways 2020
* Depreciation numbers above exclude the impact of NZ IFRS 16

AGENDA1. Highlights2. Operating performance3. INTERIM DIVIDEND4. Business strategy5. Outlook6. Conclusion
HY20 RESULTS PRESENTATION
20
© Freightways 2020

•
INTERIM DIVIDEND:
15 cps
•
IMPUTATION CREDITS:
5.8333 cps (fully imputed at 28% tax rate)
•
SUPPLEMENTARY DIVIDEND:
2.6471 cps
•
RECORD DATE:
13 March 2020
•
PAYMENT DATE:
1 April 2020
•
THE DRP WILL BE OFFERED:
Also, FRE intends to fully-underwrite the DRP in
respect of this dividend
INTERIM DIVIDEND
21
FRE HY20 PresentationHY20 RESULTS PRESENTATION
© Freightways 2020

AGENDA1. Highlights2. Operating performance3. Interim dividend4. BUSINESS STRATEGY5. Outlook6. Conclusion
HY20 RESULTS PRESENTATION
22
© Freightways 2020

23
EXPRESS P
ACKAGE
HY20 RESULTS PRESENTATION
4. BUSINESS STRATEGY1.
Pricing for Effort (PFE): The EP brands will c
ontinue to work at increasing average pricing
per item through the remainder of FY20 toward our goal of $0.75 per item. The additionalcourier income generated from this price inc
rease has been meaningful for contractors who
work residential areas and has assisted in delivering a higher level of productivity and on-time delivery.
2.
Customer Visibility and Data Analytics: A number of new customer and business-facing IT
projects are delivering better visibility for
parcels travelling through the network and more
accurate information on utilisation, freight-mix and margins by customer, route and brand.There are further customer-facing enhancements planned for the remainder of FY20 and forFY21 which will streamline the experience f
or customers and enable new services to be
offered to the market
© Freightways 2020

24
EXPRESS P
ACKAGE
HY20 RESULTS PRESENTATION
4. BUSINESS STRATEGY3.
New Service offerings: In the 2
nd
half of FY20, the EP division will commence a same day
delivery service for Auckland, which will
be positioned between cheaper hub & spoke
services and the more expensive point-to-poi
nt deliveries, to provide customers with
guaranteed same-day delivery. These services will be Priced for Effort to ensure that bothcontractors and the Company benefit from the initiative.
© Freightways 2020

25
1. Facility Utilisation: The IM division will continue to ta
rget profitable records storage growth, particularly in
facilities where there is low utilisation.
2. Digital Services Growth: TIMG has been successful to dat
e in winning significant digitisation contract work
and will continue to target scale opportunities in the Australian market for digitisation and e-discoveryservices. These projects require a unique combinatio
n of security, logistics and data management skills,
for which TIMG is uniquely positioned.
INFORMATION MANAGEMENT
HY20 RESULTS PRESENTATION
4. BUSINESS STRATEGY© Freightways 2020

26
SECURE DESTRUCTION
HY20 RESULTS PRESENTATION
4. BUSINESS STRATEGY
1. Additional investment was made in teams, fleets, fac
ilities and acquisitions in
calendar 2019 to support the
growth of Shred-X’s document destruction, m
edical waste and product processing capabilities
2. It is planned to continue the management focus on revenue streams in related markets that complement
the physical footprint established by Shred-X in the secure destruction market
3. These related markets present an opportunity to app
ly Shred-X’s consistent and high-quality national
service standards and sales methodol
ogies to grow through a number of nic
hes, including eDestruction,
medical waste, product destruction and other high value recycling.
© Freightways 2020

27
FRE HY20 Presentation
ACQUISITIONS & ALLIANCES
HY20 RESULTS PRESENTATION
4. BUSINESS STRATEGY
1. Freightways is pleased to announce it completed a number of small acquisitions during the half
year, as discussed in the Q1 trading update. Additionally there was a subsequent acquisition inQ2 of a small Medical Waste business in NSW which will provide additional processing capacityand broaden the footprint of the business in that state.
2. The application for Overseas Investment Office (OIO) approval for the acquisition of Big Chill
Distribution Limited is in progress. A further announcement will be made upon receiving OIOapproval, which is still expected to be around the start of Q4 FY20.
© Freightways 2020

AGENDA1. Highlights2. Operating performance3. Interim dividend4. Business strategy5. OUTLOOK6. Conclusion
HY20 RESULTS PRESENTATION
28
© Freightways 2020

© Freightways 2019
OUTLOOK
HY20 RESULTS PRESENTATION
•
In EP the decline in organic growth showed signs of abating in December, which provides
some confidence that the 2
nd
half of FY20 may return modest organic growth.
•
We have yet to see any material impact from Covid-19. If in future it has a broader impact on
the economies in which we operate, it could ultimately impact Freightways, and this will bemonitored closely.
•
First half result for IM was disappointin
g, however we expect a turnaround in the 2
nd
half as
we take action on the poorer performing service
lines and the major digitisation contract work
commences.
•
Within SD & Medical Waste, the division will
continue to leverage the footprint to provide
medical waste and product destruction servic
es to both new and existing customers. Paper
pricing is not expected to recover materially in the short term.
•
Management will be focused on integrating the Big Chill business into Freightways in 2020,
assuming OIO approval is granted.
29
© Freightways 2020

AGENDA1. Highlights2. Operating performance3. Interim dividend4. Business strategy5. Outlook6. CONCLUSION
HY20 RESULTS PRESENTATION
30
© Freightways 2020

CONCLUSION
HY20 RESULTS PRESENTATION
•
Notwithstanding the two macro issues of NZ domestic growth and its impact on EP volumes
and lower international paper pricing, Frei
ghtways has made significant advances in
improving returns from residential courier
delivery work and at the same time improving
those contractors’ incomes, productivity and thereby reducing emissions.
•
Freightways has also built a strong platform in Australia for large-scale digitisation work and
has a fast-growing, medical waste busines
s to complement the nationwide secure
destruction footprint established over the previous decade.
•
The company is well positioned with its impending acquisition of Big Chill to leverage another
niche of the New Zealand express freight market.
•
We are committed to continuous improvements within our portfolio of businesses, as well as
focusing on long-term sustainability for the benefit of Freightways’ people, customers,shareholders and the environments in which it operates.
31
© Freightways 2020

CONCLUSION
HY20 RESULTS PRESENTATION
•
The Directors acknowledge the outstanding work and ongoing dedication of the Freightways
teams of people throughout New Zealand and Australia.
32
© Freightways 2020

THANK YOU
Disclaimer. This presentation has
been prepared by Freightways Limi
ted ("Freightways") for inform
ation purposes only. This pres
entation is not a product disclosure state
ment, 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 investigation of Frei
ghtways and the information contained in
this presentation, including any statem
ents relating to the future performance
of Freightways. The information in
this presentation is given in
good faith and has been obtained from sources believ
ed to be reliable and accurate at the date of
this presentation.
This presentation may include forward
-
looking statements regarding fu
ture 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, its affiliates, or its respective advisers or
representatives, give any warranty o
r representation as to the accuracy or completeness of t
he information contained in this presentation, and excl
ude their liability to the maximum extent permitted by law.
© Freightways 2020

24 February 2020 NZX: FREHY20 RESULTS PRESENTATION

---

Results for announcement to the market
Name of issuer FREIGHTWAYS LIMITED
Reporting Period 6 months to 31 December 2019
Previous Reporting Period 6 months to 31 December 2018
Currency New Zealand dollars
Amount (000s) Percentage change
Revenue from continuing
operations
$318,914 1%
Total Revenue $318,914 1%
Net profit/(loss) from
continuing operations
$29,195 (13%)
Total net profit/(loss)
$29,195 (13%)
Interim Dividend
Amount per Quoted Equity
Security
$0.20833333
Imputed amount per Quoted
Equity Security
$0.05833333
Record Date 13 March 2020
Dividend Payment Date 1 April 2020
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
31 December 2019 - ($0.58) 31 December 2018 - ($0.52)
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Refer to the section “Half Year Review” for commentary.
Authority for this announcement
Name of person

authorised
to make this announcement
Mark Royle
Contact person for this
announcement
Mark Royle
Contact phone number +61 407 777 039
Contact email address mark.royle@freightways.co.nz
Date of release through MAP

24/02/2020


Unaudited financial statements accompany this announcement.

2

HALF YEAR REVIEW
From the Chairman and Chief Executive Officer

The Directors are pleased to present the consolidated financial results of Freightways Limited (Freightways)
for the six months ended 31 December 2019. This report discusses the results, reviews the operations of each
division and provides an outlook for the balance of the financial year ahead.

Key matters of note in respect of the half year include:
 The agreement to acquire Big Chill Distribution Limited (Big Chill) is pending Overseas Investment
Office (OIO) approval, which is expected around the end of Q3 in FY20.
 In the Express Package & Business Mail (EP&BM) division:
- After suffering a decline in organic volume through much of 2019, due to lower same-customer
trading, December showed a slight uplift in terms of year on year activity levels.
- Pricing for Effort (PFE) delivered an average of $0.66 per item by December, up from $0.55 at the
end of October.
- Despite needing to match cheaper competitor pricing in the letters business, DX Mail successfully
retained its customers.
 In the Information Management & Secure Destruction (IM&SD) division:
- Poor performance in a number of smaller service lines and the delayed commencement of digitisation
contracts proved a drag on first half year Australian earnings. A number of initiatives are in place to
improve this performance in the 2
nd
half of FY20.
- Growth in the Australian records storage business of 10% for the half year.
- A major data digitisation contract was secured, which will commence in Q3 and continue through
most of calendar 2020.
- 14% revenue growth in the SD and medical waste business in Australia.
- A decline in SD paper pricing of approximately $1m (and $0.5m in NZ) in the half year. The earnings
impact of the decline in paper pricing was mitigated to some extent by higher paper volumes than
the prior comparative period (pcp) and lower processing costs.
The results discussed throughout this commentary exclude the impact of:
 The new NZ IFRS 16 Leases accounting standard, which became mandatory for Freightways from 1 July
2019. The pcp results are not required to be restated in the first year of adopting NZ IFRS 16 and
accordingly, the Directors believe that providing commentary excluding the impact of NZ IFRS 16
provides a better comparison to the pcp. The table below presents the results including and excluding the
impact of having adopted NZ IFRS 16; and
 Non-recurring items - The Directors believe the following non-recurring benefit should not be included
when assessing underlying trading performance: the non-recurring benefit before tax totalling $1.4 million
(no tax applicable) in 2018 in respect of the gain arising during that half year from the progressive
recording of the replacement of earthquake-related damaged racking funded by insurance proceeds. A
gain on the racking replacement arose because the overall insurance proceeds for new racking exceeded
the written down book value of the structurally-compromised racking written-off.

3

 
Operating performance The below table presents the reported half y
ear result compared to the pc
p, both before and after the inclusion of non-recurrin
g items that were reported in the
pcp, and inclusive and exclusive of the newly-adopted
NZ IFRS 16 Leases accountin
g standard adjustments:
 


HY19 HY20 Change


GAAP
IFRS16
lease
adj.
Excl.
leasing

GAAP
IFRS16
lease
adj.
Excl.
leasing

GAAP
Excl.
leasing
Note
$M $M $M

$M $M $M

% %
Revenue

314.8 - 314.8

318.9 - 318.9

1.3 1.3










EBITA, before non-recu
rring items
i.
50.7
-
50.7

50.1 (2.4) 47.7

(1.2) (5.9)
Non-recurring items

1.4 - 1.4

- - -

(100.0) (100.0)
EBITA ii. 52.1 - 52.1

50.1 (2.4) 47.7

(3.8) (8.4)










NPAT, before non-recurring items
iii.
32.0
-
32.0

29.2 1.1 30.3

(8.7) (5.3)
Non-recurring items after tax

1.4 - 1.4

- - -

(100.0)

(100.0)

NPAT iv 33.4 - 33.4

29.2 1.1 30.3

(12.6) (9.3)
 
GAAP – Generally Accepted Accounting Principles (IFRS-compliant) 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 half year attributable to shareholders.

4
Dividend
The Directors have declared an interim dividend of 15 cents per share, fully imputed at a tax rate of 28%, in
line with the pcp interim dividend. This represents a payout of approximately $23.3 million, also in line with
the pcp. The dividend will be paid on 1 April 2020. The record date for determination of entitlements to the
dividend is 13 March 2020.

As previously announced, Freightways is awaiting OIO approval to acquire Big Chill. While it is planned to
fund this acquisition from Freightways’ existing syndicated bank facilities, the Directors have determined that
the Freightways Dividend Reinvestment Plan (DRP) will be offered for the above interim dividend and may
be offered for the final dividend in October 2020 to mitigate the level of debt funding required. In this regard,
when the DRP is offered, it is intended that it will be fully-underwriten for the applicable dividends to
maximise the cash flow benefit for Freightways of activating the DRP, while still allowing shareholders the
choice of shares or cash for their dividend payments.

As a capital management tool, the application of the DRP will be reviewed for each future dividend.

DIVISIONAL PERFORMANCE
EP&BM for the half year ended 31 December 2019
Operating revenue of $237.6 million was 1.8% higher than the pcp. EBITA of $39.1 million was 1.1% higher
than the pcp.

Activity levels: After suffering a noticeable decline in organic volume through much of 2019, due to lower
same-customer trading, December showed signs of that decline abating. Revenue growth on the pcp of 1.3%
in Q1 increased to 2.1% in Q2. All things being equal, it gives rise to some confidence that through the
remainder of 2020 the EP businesses may see a steady improvement in volume trends.

Pricing for Effort: By December, average PFE revenue reached $0.66 per item, up from $0.55 at the end of
October. December also saw a peak in terms of the number and proportion of residential items travelling
through the network, with residential on-time delivery performance levels tested and measured at 93%, 1%
higher than our main competitor for the same period.

DX Mail: Despite needing to match cheaper competitor pricing for bulk mail, DX Mail successfully retained
its customers through quality and timely mail services. The NZ Commerce Commission has advised, for the
time being, it will not be pursuing an investigation into NZ Post’s targeted discounted zonal pricing. The level
of discounting has had an adverse effect on earnings in this division.
Key Strategies in 2020
Pricing for Effort: The EP brands will continue to work at increasing average pricing per item through the
remainder of FY20 toward our goal of $0.75 per item. The additional courier income generated from this price
increase has been meaningful for contractors who work residential areas and has assisted in delivering a higher
level of productivity and on-time delivery.

Customer Visibility and Data Analytics: A number of new customer & business-facing IT projects are
delivering better visibility for parcels travelling through the network and more accurate information on
utilisation, freight-mix and margins by customer, route and brand. There are further customer-facing
enhancements planned for the remainder of FY20 and for FY21 which will streamline the experience for
customers and enable new services to be offered to the market.

New Service offerings: In the 2
nd
half of FY20 the EP division will commence a same day delivery service
for Auckland, which will be positioned between cheaper hub & spoke services and the more expensive point-
to-point deliveries, to provide customers with guaranteed same-day delivery. These services will be Priced for
Effort to ensure that both contractors and the Company benefit from the initiative.

5
IM&SD for the half year ended 31 December 2019
Operating revenue of $82.2 million was 0.1% higher than the pcp. EBITA of $11 million was 24.8% lower
than the pcp, primarily due to lower volumes moving through the largely fixed cost print & copy bureaus and
the impact of lower paper prices experienced in the SD businesses on both sides of the Tasman.

Australian IM Performance: Poor performance in a number of smaller revenue streams (including the print
& copy business) proved a drag on Australian earnings. A number of initiatives are in place to address this
performance, including right-sizing the business and strategically reviewing the portfolio of services offered
by TIMG Australia. Conversely, strong revenue growth of 10% was recorded in the Australian records storage
& service business for the half year.

Digitisation: Work will commence in late-January (later than originally anticipated) and will continue through
calendar 2020 on a major digitisation contract. The work leverages TIMG’s secure logistics and storage
capability, as well as its data transformation experience. It will engage up to 250 staff at its peak.

Secure Destruction: Strong momentum has continued in the Australian SD and medical waste business, with
14% revenue growth in the half year. This included the acquisition of a number of smaller businesses in the
later part of the half year. The benefits of this growth for the overall IM&SD division have been somewhat
muted by the decline in paper pricing of approximately $1.5m in the half year. The earnings impact of lower
paper prices, while still significant, was mitigated to some extent by higher paper volumes than the pcp and
efficiencies that were gained in processing costs.
Key Strategies in 2020
Facility Utilisation: The IM division will continue to target profitable records storage growth, particularly in
facilities where there is low utilisation.

Digital Services Growth: TIMG has been successful to date in winning significant digitisation contract work.
We will continue to target scale opportunities in the Australian market for digitisation and e-discovery services.

Secure Destruction and Medical Waste: Additional investment was made in teams, fleets, facilities and
acquisitions in calendar 2019 to support the growth of Shred-X’s document destruction, medical waste and
product processing capabilities. It is planned to continue management’s focus on revenue streams in related
markets that complement the physical footprint established by Shred-X in the SD 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 is pleased to announce it completed a number of small acquisitions during the half year as
discussed in the Q1 trading update. Additionally there was a subsequent acquisition in Q2 of a small medical
waste business in NSW, which will provide additional processing capacity and broaden the footprint of the
business in that state.

The application for OIO approval for the Big Chill acquisition is in progress. A further announcement will be
made when this approval process is complete.

Corporate
Corporate costs were marginally below the pcp and continued to be well contained.

Net debt increased by approximately $24 million to $175 million during the period. While cash flows from
operations remained strong and adequately covered all planned expenditures, approximately $15 million was
invested in a number of acquisitions and $14 million was spent on capital expenditure. Freightways continues
to have excellent support from its lenders and sufficient headroom in debt facilities and gearing levels to
complete the Big Chill acquisition and actively pursue its solid pipeline of other acquisition opportunities.

6
OUTLOOK
The EP&BM division observed a slowdown in terms of same-customer trade over the 2
nd
half of FY19 and
into the 1
st
half of FY20. In December this trend showed signs of abating, which provides some confidence
that the 2
nd
half of FY20 may return modest organic growth.

Freightways’ businesses are yet to see any material impact from Covid-19. If in future it has a broader impact
on the economies in which they operate, it could ultimately impact Freightways, and this will be monitored
closely.

While the 1st half result for IM was disappointing due to the performance of the print & copy bureau, lower
paper pricing and the delayed start to a major digitisation contract, we expect a turnaround in the 2
nd
half as
we take action on the poorer performing service lines and the digitisation contract work commences.

Within the SD business, the division will look to leverage the larger footprint it has invested in to provide
medical waste and product destruction services to both new and existing customers. Paper pricing is not
expected to recover materially in the short term.

Overall capital expenditure for FY20 is still expected to be between $25-26 million, not including any potential
capital expenditure associated with Big Chill, if that acquisition proceeds before the end of the financial year.
Operating cash flows are expected to remain strong throughout 2020.

Management will be focused on integrating the Big Chill business into Freightways in 2020, assuming OIO
approval is granted, as well as driving synergies from the smaller medical waste and destruction businesses
acquired during calendar 2019.

CONCLUSION
The 1
st
half of FY20 exhibited a continued level of lower same-customer volumes in the EP businesses,
although signs at the end of the half year were that this situation may be beginning to slowly improve. Paper
pricing in the SD business is also well below the pcp, which has an impact on the IM&SD revenue and margin.
Notwithstanding these two macro issues, Freightways has made significant advances in improving returns
from residential courier delivery work and at the same time improving those contractors’ incomes and
productivity and as a result we have reduced emissions in these areas. Freightways has also built a strong
platform in Australia for large-scale digitisation work and has a small, but fast-growing, medical waste
business to complement the national SD footprint established over the previous decade. Freightways is well
positioned with its impending acquisition of Big Chill to leverage another niche of the New Zealand express
freight market. The Company is committed to continuous improvements within its portfolio of businesses, as
well as focusing on long-term sustainability for the benefit of Freightways’ people, customers, shareholders
and the environments in which it operates.

The Directors acknowledge the outstanding work and continuing ongoing dedication of the Freightways teams
of people throughout New Zealand and Australia.


Mark Verbiest Mark Troughear
Chairman Chief Executive Officer

21 February 2020

7
FREIGHTWAYS LIMITED
CONSOLIDATED INCOME STATEMENT
for the half year ended 31 December 2019 (unaudited)




6 mths
ended

31 Dec 2019
$000
6 mths
ended

31 Dec 2018
$000
Variance

%

Operating revenue 318,914 314,769 1%
Other income - 1,194 (100%)


Transport and logistics expenses (124,672) (123,962) 1%
Employee benefits expenses (92,440) (88,003) 5%
Occupancy expenses (2,623) (14,403) (82%)
General and administrative expenses (27,890) (30,181) (8%)
Other expenses - (1,194) (100%)
Non-recurring items - 1,373 100%

Operating profit before interest, income tax,
depreciation and software amortisation and
amortisation of intangibles



71,289



59,593


20%

Depreciation and software amortisation (21,178) (7,492) 183%
Operating profit before interest, income tax and
amortisation of intangibles

50,111 52,101 (4%)
Amortisation of intangibles (1,151) (1,004) 15%
Operating profit before interest and income tax 48,960 51,097 (4%)
Net interest and finance costs* (8,530) (5,009) 70%
Profit before income tax 40,430 46,088 (12%)
Income tax (11,235) (12,686) (11%)
Profit for the period 29,195 33,402 (13%)

Profit for the period attributable to:
Owners of the parent 29,173 33,402 (13%)
Non-controlling interests 22 - 100%
29,195 33,402 (13%)


* The 2019 net interest amount includes $4 million in respect of the interest component of operating lease
payments, now accounted for under NZ IFRS 16.

8
FREIGHTWAYS LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the half year ended 31 December 2019 (unaudited)

6 mths ended
31 Dec 2019
$000
6 mths ended
31 Dec 2018
$000

Profit for the period 29,195 33,402

Other comprehensive income
Items that may be reclassified subsequently to profit or loss:

Exchange differences on translation of foreign operations
(437) (2,373)
Cash flow hedges taken directly to equity, net of tax
890 324
Total other comprehensive income after income tax 453 (2,049)

Total comprehensive income for the period 29,648 31,353

Total comprehensive income for the period is attributable to:
Owners of the parent 29,626 31,353
Non-controlling interests 22 -
29,648 31,353

9
FREIGHTWAYS LIMITED

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the half year ended 31 December 2019 (unaudited)



Contributed
equity
Retained
earnings

Cash flow
hedge
reserve

Foreign
currency
translation
reserve

Non-
controlling
interests
Total equity



$000

$000

$000

$000

$000 $000

Balance at 1 July 2019

126,440 157,226 (3,901) (5,879)
124 274,010
Impact of adoption of NZ IFRS 16

- (16,499)
-
-
- (16,499)
Restated Balance at 1 July 2019

126,440 140,727 (3,901) (5,879)
124 257,511
Profit for the period

- 29,173
-
-
22 29,195
Exchange differences on translation of foreign
operations

- - - (437) - (437)
Cash flow hedges taken directly to equity, net of tax

- - 890 - - 890
Total Comprehensive Income

- 29,173 890 (437)
22 29,648
Dividend payments

- (24,084)
-
-
- (24,084)
Shares issued

729 - - - - 729
Balance at 31 December 2019

127,169 145,816 (3,011) (6,316)
146 263,804



Balance at 1 July 2018

125,260 140,861 (4,229) (3,669)
- 258,223
Profit for the period


-

33,402

-

-

- 33,402

Exchange differences on translation of foreign
operations


-

-

-

(2,373)

- (2,373)

Cash flow hedges taken directly to equity, net of tax

-

-

324

-

- 324

Total Comprehensive Income


-

33,402

324

(2,373)

- 31,353

Dividend payments


-

(23,695)

-

-

- (23,695)

Acquisition of non-controlling interests

- - - - 109 109
Shares issued


1,180 -

-

-

- 1,180

Balance at 31 December 2018


126,440

150,568

(3,905)

(6,042)

109 267,170

10
FREIGHTWAYS LIMITED
CONSOLIDATED BALANCE SHEET
as at 31 December 2019 (unaudited)

As at
31 Dec 2019
$000
As at
31 Dec 2018
$000
As at
30 Jun 2019
$000
ASSETS
Current assets

Cash and cash equivalents 4,272 3,441 15,986
Trade and other receivables 102,119 95,199 87,805
Inventories 6,006 5,327 5,009
Income tax receivable 1,196 - -
Total current assets 113,593 103,967 108,800

Non-current assets
Trade receivables and other non-current assets 3,855 3,390 3,984
Property, plant and equipment 110,600 106,531 106,710
Right-of-use assets 194,948 - -
Intangible assets 371,373 363,532 365,152
Investment in associates 7,758 - -
Total non-current assets 688,534 473,453 475,846
Total assets 802,127 577,420 584,646

LIABILITIES
Current liabilities

Trade and other payables 75,997 72,718 68,967
Lease liabilities 22,030 119 127
Income tax payable 3,862 3,687 6,429
Provisions 998 745 860
Derivative financial instruments 858 617 880
Contract liability 14,641 15,548 15,664
Total current liabilities 118,386 93,434 92,927

Non-current liabilities
Trade and other payables 2,567 3,201 3,137
Borrowings (secured) 179,635 166,487 167,394
Deferred tax liability 30,788 37,394 37,762
Provisions 5,152 4,720 4,750
Lease liabilities 198,472 208 129
Derivative financial instruments 3,323 4,806 4,537
Total non-current liabilities 419,937 216,816 217,709
Total liabilities 538,323 310,250 310,636
NET ASSETS 263,804 267,170 274,010

EQUITY
Contributed equity 127,169 126,440 126,440
Retained earnings 145,816 150,568 157,226
Cash flow hedge reserve (3,011) (3,905) (3,901)
Foreign currency translation reserve (6,316) (6,042) (5,879)
263,658 267,061 273,886
Non-controlling interests 146 109 124
TOTAL EQUITY 263,804 267,170 274,010

Net tangible assets (liabilities) per security ($0.58) ($0.52) ($0.47)

11

FREIGHTWAYS LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
for the half year ended 31 December 2019 (unaudited)


6 mths
ended

31 Dec 2019
$000
6 mths
ended

31 Dec 2018
$000


Inflows
(Outflows)
Inflows
(Outflows)
Cash flows from operating activities


Receipts from customers 305,501 304,469
Payments to suppliers and employees
(244,095) (252,636)
Cash generated from operations
61,406 51,833
Interest received 25 51
Interest and other costs of finance paid*
(8,844) (4,610)
Income taxes paid
(16,132) (14,925)
Net cash inflows from operating activities 36,455
32,349

Cash flows from investing activities

Payments for property, plant & equipment (10,508) (10,199)
Payments for software
(1,924) (1,972)
Proceeds from disposal of property, plant & equipment
89 507
Payments for businesses acquired (net of cash acquired)
(7,159) (10,516)
Payments for investment in associates (7,468) -
Receipts from associate 702 1,709
Payments for other investing activities
(77) (204)
Net cash outflows from investing activities
(26,345) (20,675)

Cash flows from financing activities

Dividends paid (24,084) (23,695)
Increase in bank borrowings
12,970 8,193
Proceeds from issue of ordinary shares
453 390
Principal elements of lease payments (2018 – Principal
elements of finance lease payments)

(11,129) (68)
Net cash outflows from financing activities
(21,790) (15,180)

Net decrease in cash and cash equivalents (11,680) (3,506)
Cash and cash equivalents at the beginning of the period 15,986 7,410
Exchange rate adjustments (34) (463)
Cash and cash equivalents at the end of the period 4,272 3,441

* The 2019 interest paid amount includes $4 million in respect of the interest component of operating lease
payments, now accounted for under NZ IFRS 16.

12


Earnings per Security (EPS)

Calculation of basic and fully diluted EPS in accordance with NZ IAS 33: Earnings Per Share:


Current half year
(cents per share)
Previous corresponding
half year (cents per
share)
Basic EPS 18.8 21.5
Diluted EPS 18.8 21.5

Basic and diluted earnings per share calculated on the profit for the period attributable to shareholders,
excluding non-recurring items and the impact of NZ IFRS 16, net of tax, are both 19.5 cents (2018: both 20.6
cents).


Dividends Paid


Date Paid Cents per share (fully
imputed)
Final Dividend for the year ending 30 June
2019
1 October 2019 15.50
15.50



Post Balance Date Events

Dividend declared

On 21 February 2020, the Directors declared a fully imputed interim dividend of 15 cents per share
(approximately $23.3 million) in respect of the year ended 30 June 2020. The dividend will be paid on 1 April
2020. The record date for determination of entitlements to the dividend is 13 March 2020. A supplementary
dividend of 2.65 cents per share will be paid to overseas shareholders when the interim dividend is paid. The
Freightways Dividend Reinvestment Plan will be offered for this dividend and a notice to shareholders inviting
their participation will be sent out in due course.

Non-recurring Items, Other Income and Other Expenses

The non-recurring item before tax totalling $1.4 million (no tax applicable) in 2018 was a non-recurring benefit
in respect of the gain arising during that half year from the progressive recording of the replacement of
earthquake-related damaged racking funded by insurance proceeds. A gain on the racking replacement arose
because the overall insurance proceeds for new racking exceeded the written down book value of the
structurally-compromised racking written-off.

Included in other expenses in 2018 is an amount of $1.2 million in additional costs of operations resulting
from the above-mentioned earthquake, which was also recoverable from insurance. Compensation of $1.2
million received from the Group’s insurers for these additional costs of operations was included in other
income.

13
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 (hub & spoke) courier, 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.

Express
package &
business
mail
Information
management
Corporate &
other
Inter-
segment
elimination
Consolidated
operations
$000 $000 $000 $000 $000
Half year ended
31 December 2019


Sales to external customers 236,635 82,279 - - 318,914
Inte
r-segment sales 931 - 2,436 (3,367) -
Total revenue 237,566 82,279 2,436 (3,367) 318,914

Operating profit (loss) before
interest, income tax,
depreciation and software
amortisation and amortisation of
intangibles 49,805 23,037 (1,553) - 71,289
Depreciation and software
amortisation (9,929) (10,394) (855) - (21,178)
Operating profit (loss) before
interest, income tax and
amortisation of intangibles 39,876 12,643 (2,408) - 50,111
Amortisation of intangibles,
excluding software amortisation (25) (1,126) - - (1,151)
Operating profit (loss) before
interest and income tax 39,851 11,517 (2,408) - 48,960
Net interest and finance costs (1,399) (2,667) (4,464) - (8,530)
Profit (loss) before income tax 38,452 8,850 (6,872) - 40,430
Income tax (10,574) (2,623) 1,962 - (11,235)
Profit (loss) for the period
attributable to the shareholders 27,878 6,227 (4,910) - 29,195

14
Segment Reporting (continued)

Express
package &
business
mail
Information
management
Corporate &
other
Inter-
segment
elimination
Consolidated
operations
$000 $000 $000 $000 $000
Half year ended
31 December 2018


Sales to external customers 232,613 82,156 - - 314,769
Inte
r-segment sales 866 - 2,414 (3,280) -
Total revenue 233,479 82,156 2,414 (3,280) 314,769

Operating profit (loss) before
non-recurring items, interest,
income tax, depreciation and
software amortisation and
amortisation of intangibles 42,401 17,609 (1,790) - 58,220
Non-recurring items - 1,373 - - 1,373
Operating profit (loss) before
interest, income tax,
depreciation and software
amortisation and amortisation of
intangibles 42,401 18,982 (1,790) - 59,593
Depreciation and software
amortisation (3,773) (2,947) (772) - (7,492)
Operating profit (loss) before
interest, income tax and
amortisation of intangibles 38,628 16,035 (2,562) - 52,101
Amortisation of intangibles,
excluding software amortisation (25) (979) - - (1,004)
Operating profit (loss) before
interest and income tax 38,603 15,056 (2,562) - 51,097
Net interest and finance costs (6) (99) (4,904) - (5,009)
Profit (loss) before income tax 38,597 14,957 (7,466) - 46,088
Income tax (10,689) (4,147) 2,150 - (12,686)
Profit (loss) for the period
attributable to the shareholders 27,908 10,810 (5,316) - 33,402

15
Revenue from Contracts with Customers

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:


Express
Package

Postal
Storage &
Handling

Destruction
Activities

Other Total
Half year ended
31 December 2019
$000 $000 $000 $000 $000 $000
Revenue from external
customers
209,430 27,205 31,215 31,885 19,179 318,914
Timing of revenue
recognition:

At a point in time - 1,774 - 9,715 5,376 16,865
Over time 209,430 25,431 31,215 22,170 13,803 302,049
209,430 27,205 31,215 31,885 19,179 318,914

Half year ended
31 December 2018

Revenue from external
customers
204,454 28,159 31,729 30,046 20,381 314,769
Timing of revenue
recognition:

At a point in time - 1,727 - 10,591 4,236 16,554
Over time 204,454 26,432 31,729 19,455 16,145 298,215
204,454 28,159 31,729 30,046 20,381 314,769

16

Business Combinations

During the half year ended 31 December 2019, the Group acquired four small information management
businesses in Australia for an aggregate purchase consideration totalling approximately $7.2 million. These
businesses have been integrated into the Australian businesses of the Group’s information management
division. The acquisitions were of the business & assets of:
 Green Team in South Australia (SA) on 2 September 2019
 Country Hygiene in New South Wales (NSW) on 1 October 2019
 Scanning Conversion Services in SA on 1 November 2019
 Specialised Waste Treatment Services in NSW on 2 December 2019

The contribution of these businesses to the Group results for the half year ended 31 December 2019 was
revenue of $0.8 million and operating profit before interest, income tax and amortisation of intangibles of
$0.04 million, net of acquisition costs of $0.2 million.

If these acquisitions had all occurred at the beginning of the period, the contribution to revenue and operating
profit before interest, income tax and amortisation of intangibles for the half year is estimated at $2.6 million
and $0.5 million (net of acquisition costs of $0.2 million), respectively.

Details of net assets acquired and goodwill for these acquisitions are as follows:

Purchase consideration
$000
Cash consideration paid during the period 7,159

Fair value of assets and liabilities arising from the acquisition

Trade and other receivables 6
Inventories 23
Plant and equipmen
t 348
Customer relationships
2,290
Goodwill 5,803
Trade and other creditors (288)
Provisions
(458)
Deferred tax liability (565)

7,159

The goodwill of $5.8 million arising upon these acquisitions is attributable to the intellectual property obtained
and economies of scale expected to be enhanced by integrating these businesses into the operations of the
Group. None of the goodwill recognised is expected to be deductible for income tax purposes.

The acquisition accounting for these acquisitions has been determined on a provisional basis. The fair value
of assets and liabilities acquired, including identified intangible assets, will be finalised within 12 months from
the respective acquisition dates and upon confirmation of certain determinants.
Prior period acquisitions:

State Waste Services (SWS)

Effective 1 September 2017, the Group acquired the business and assets of SWS, an Australian-based medical
waste collection and destruction business, for an initial payment of approximately $6.5 million (A$5.9 million)
and a future maximum earn-out of up to $4.5 million (A$4.1 million). SWS was branded as Med-X and
integrated into the Group’s Shred-X business within the information management division.

As at 31 December 2019, an estimated discounted future earn-out payment of $1 million may be payable in
September 2021 and has been accrued for in the financial statements, but is contingent upon certain financial
performance hurdles being achieved for the years ended 30 June 2019, 2020 and 2021. The potential
undiscounted amount of the future earn-out payment that the Group expects could be required to be made in
respect of this acquisition is between nil and $4.5 million. The Group has forecast several scenarios and
probability-weighted each to determine a fair value for this contingent payment arrangement.

17

Contingent Liability – Acquisition of Big Chill Distribution Limited

In October 2019, the Group entered into a sale & purchase agreement to acquire 100% of Big Chill Distribution
Limited (Big Chill), subject to Overseas Investment Office approval. Completion of the acquisition is expected
to occur in the first half of Calendar 2020. Big Chill is a New Zealand market leader in temperature-controlled
transport, specialising in fast moving consumer goods (FMCG) and time critical parcel freight, both chilled
and frozen. The acquisition involves an initial payment of $117m, representing 80% of an agreed enterprise
value (EV) for Big Chill, and a final payment later in 2022, representing 20% of Big Chill’s EV at 30 June
2022 (FY22), which will be calculated by reference to the FY22 earnings before interest and tax (not adjusted
for NZ IFRS 16 Leases) (EBIT) at a multiple based on the growth in EBIT achieved for the 15 months ending
30 June 2021 (FY21) compared to the financial year ending 31 March 2020. When each of the initial and final
purchase price payments are settled, completion adjustments will be made in respect of Big Chill’s net debt,
employee entitlements and working capital positions.

Borrowings (secured)

In December 2019, the Group negotiated increases of NZ$70 million and A$20 million to its existing
syndicated bank facilities with 4-year and 5-year maturity, respectively. The increased facilities were effective
from 23 December 2019 and are at similar pricing to existing facilities.

Investment in Associate

In October 2019, the Group acquired a 33% interest in Sweetspot Group Limited (trading as GoSweetSpot
(GSS)) for $7.5m. GSS is a New Zealand-based courier and freight aggregator. GSS purchases courier
services from the Group for on-selling to its customers. The Group also utilises the GSS software solution to
support some of its own customers.

Changes in Accounting Policies

Except for the adoption of NZ IFRS 16 Leases, the accounting policies and methods of computation are
consistent with those used in the most recent annual report.

The Group adopted NZ IFRS 16 for which application was mandatory for the first time in the financial year
beginning 1 July 2019. The impact of adopting NZ IFRS 16 is detailed below.

There are no other new standards, amendments or interpretations that are not yet effective that would be
expected to have a material impact on the Group.

Adoption of NZ IFRS 16: Leases

This standard replaces the guidance in NZ IAS 17. Under NZ IFRS 16, a contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. Under NZ IAS 17, a lessee was required to make a distinction between a finance lease (on
balance sheet) and an operating lease (off balance sheet). NZ IFRS 16 now requires a lessee to recognise a
lease liability reflecting future lease payments and a ‘right-of-use’ (ROU) asset for virtually all lease contracts.
Included is an optional exemption for lessees in respect of certain short-term leases and leases of low value
assets.

From the effective date of adoption, the income statement is impacted by the removal of operating lease
expenses, the recognition of an interest expense applicable to the future lease payment obligations and the
recognition of a depreciation expense in respect of the ROU asset.

This standard has changed the accounting for the Group’s operating leases. As at the effective date, the Group
had non-cancellable operating lease commitments of $127 million. Upon adoption, NZ IFRS 16 has a material
impact on a number of elements of, and disclosures within, the Group’s balance sheet, income statement and
statement of cash flows. Importantly, the Group’s actual overall cash flows are unaffected by the adoption of
this standard.

18
The Group has implemented a new lease management system to manage its lease portfolio which also
calculates the full financial impact of NZ IFRS 16 on the Group’s operating leases as at 1 July 2019, being the
date of adoption. In calculating the financial impact, management was required to make various key
judgements, including:
- incremental borrowing rate (IBR) used to discount the ROU assets and the future lease payment obligations
(lease liabilities);
- lease terms, including any rights of renewal expected to be exercised;
- foreign exchange conversion rates; and
- application of practical expedients and recognition exemptions allowed under NZ IFRS 16, including
exemptions for low value assets and short-term leases.

Management has applied IBR’s of between 2.45% to 4.23% to discount the ROU assets and the future lease
payment obligations, depending on the nature of the relevant leases. Some of the factors taken into
consideration when calculating the IBR for each asset category included observable market rates, economic
conditions and lease tenor.

The new standard allowed a choice of transition methods. Management determined that the most appropriate
approach for the Group to use was the modified retrospective transition method. Under this transition method,
the Group was allowed to retrospectively value the ROU asset on a lease by lease basis without having to
restate comparatives and to recognise the cumulative effect of initially applying the standard as an adjustment
to retained earnings. Alternatively, the ROU asset could have been measured at an amount equal to the value
of the lease liability. In arriving at the below financial impact of adopting the new standard, the latter approach
was applied to value the ROU asset for the majority of the Group’s operating leases by number, but with 20
high value property operating leases (representing approximately 80% of the lease liability to be recognised)
being retrospectively valued.

Management’s process identified that the financial impact on the balance sheet as at 1 July 2019 was as
follows:
- Recognition of ROU assets of $200 million;
- Recognition of lease liabilities of $223 million;
- Recognition of a deferred tax asset of $7 million; and
- A decrease in opening retained earnings of $16 million.

The financial impact on the income statement for the half year ended 31 December 2019 was a reduction in
net profit after tax of $1.1 million. This is made up of the following changes:
- a $15.1 million decrease in operating lease rental expenses (removed);
- a $12.7 million increase in depreciation (relating to ROU assets);
- a $4 million increase in interest expense (relating to lease liabilities); and
- a $0.5 million decrease in tax expense.

The only changes to the Group’s statement of cash flows as a result of adopting the new standard was to
presentation, as operating lease payments will continue to be paid as usual. The adjustments above are only
for financial reporting purposes.

---

Distribution Notice




Please note: all cash amounts in this form should be provided to 8 decimal places

Section 1: Issuer information
Name of issuer Freightways Limited
Financial product name/description Fully Paid Ordinary Shares
NZX ticker code FRE
ISIN (If unknown, check on NZX
website)
NZFREE0001S0
Type of distribution
(Please mark with an X in the
relevant box/es)
Full Year Quarterly
Half Year X Special
DRP applies X
Record date 13 March 2020
Ex-Date (one business day before the
Record Date)
12 March 2020
Payment date (and allotment date for
DRP)
1 April 2020
Total monies associated with the
distribution
1

$ 23,319,000
Source of distribution (for example,
retained earnings)
Current earnings for the year ending 30 June 2020
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution
2
$0.20833333
Gross taxable amount
3
$0.20833333
Total cash distribution
4
$0.15000000
Excluded amount (applicable to listed
PIEs)
$-
Supplementary distribution amount $0.02647059
Section 3: Imputation credits and Resident Withholding Tax
5

Is the distribution imputed Fully imputed

1
Continuous issuers should indicate that this is based on the number of units on issue at the date of the form
2
“Gross distribution” is the total cash distribution plus the amount of imputation credits, per financial product, before the deduction of
Resident Withholding Tax (RWT).
3
“Gross taxable amount” is the gross distribution minus any excluded income.
4
“Total cash distribution” is the cash distribution excluding imputation credits, per financial product, before the deduction of RWT.
This should include any excluded amounts, where applicable to listed PIEs.
5
The imputation credits plus the RWT amount is 33% of the gross taxable amount for the purposes of this form. If the distribution is
fully imputed the imputation credits will be 28% of the gross taxable amount with remaining 5% being RWT. This does not constitute
advice as to whether or not RWT needs to be withheld.

If fully or partially imputed, please
state imputation rate as % applied
6

28%
Imputation tax credits per financial
product
$0.05833333
Resident Withholding Tax per
financial product
$0.01041667
Section 4: Distribution re-investment plan (if applicable)
DRP % discount (if any)
[TBA] %
Start date and end date for
determining market price for DRP
16/03/2020 20/03/2020
Date strike price to be announced (if
not available at this time)
23/03/2020
Specify source of financial products to
be issued under DRP programme
(new issue or to be bought on market)
New issue
DRP strike price per financial product
$
[TBA]

Last date to submit a participation
notice for this distribution in
accordance with DRP participation
terms
15/03/2020
Section 5: Authority for this announcement
Name of person

authorised to make
this announcement
Mark Royle
Contact person for this
announcement
Mark Royle
Contact phone number (09) 571 9670
Contact email address Mark.royle@freightways.co.nz
Date of release through MAP

24/02/2020





6
Calculated as (imputation credits/gross taxable amount) x 100. Fully imputed dividends will be 28% as a % rate applied.