Annual Shareholders Meeting - Freightways



ANNUAL SHAREHOLDERS MEETING

A. CHAIRMAN’S INTRODUCTION

Slide 1. Freightways – 25 November 2004, Annual Shareholders Meeting

Slide 2. Wayne Boyd, Chairman

Ladies and Gentlemen welcome to Freightways inaugural Annual Shareholders Meeting. My name is Wayne Boyd and I am the Chairman of Freightways’ Board of Directors.

Slide 3. Agenda

Before we get underway I will run through the structure of the meeting.

• I will begin with procedural matters, introduce the Freightways Board and senior executive team to you and then summarise some of the Company’s 2004 highlights. I will then ask Dean Bracewell, Freightways’ Managing Director, to provide a review of the Company and an update on current trading performance.

• I ask that you hold all questions about the performance of the Company until the close of the Managing Director’s presentation and direct them through the Chair. Any questions related to resolutions should be asked when we consider those resolutions.

• Following the Managing Director’s presentation, we will attend to the resolutions as outlined in the notice of meeting.

• The notice of meeting, which includes the explanatory notes, has been circulated to all shareholders, and I intend to take it as read.

The Company’s constitution prescribes a quorum requirement of 5 shareholders. As you can see this requirement is met. As a quorum is therefore present, the meeting is duly constituted and I declare it open.

Proxies have been appointed for the purpose of this meeting in respect of approximately 45 million ordinary shares. As was indicated on the proxy form I intend to vote all undirected proxies I have received in favour of the resolutions before the meeting.

To ensure proper record keeping and administration of the meeting, before you speak or raise a question, can I ask that you please indicate whether you are a shareholder or a proxy and give your name. Also please limit your questions to the subject matter currently being dealt with.

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

• Mark Royle, Freightways’ Chief Financial Officer and Company Secretary. Mark has 20 years accounting and commercial experience of which 13 years were with a major international chartered accounting firm. Mark was appointed Chief Financial Officer and Company Secretary of Freightways 4 years ago, having spent a number of years prior to that with Freightways’ then Australian owner.

Your Directors at the table are:

• Dean Bracewell, Freightways’ Managing Director. Dean has spent almost his entire career with Freightways. Over a 19-year term Dean has held a number of senior Executive and General Management roles within Freightways’ subsidiary businesses prior to his appointment to Managing Director in 1999.

• Warwick Lewis. Warwick was Dean’s predecessor as Managing Director of Freightways between 1994 and his retirement in 1999. Prior to that role Warwick was Freightways’ Commercial Manager for 8 years and prior to that he founded and managed Chep Pallets a company that was previously part owned by Freightways.

• Sir William Birch will not require a great deal of introduction, however it may be helpful to recap Sir William’s career. Sir William began his career in 1957, when he established a private practice as a surveyor in Pukekohe. His keen interest in community affairs led to six years as Deputy Mayor of Pukekohe and election to Parliament in 1972. During his 27 years in Parliament he served for 15 years as a Minister of the Crown, including 6 years as Minister of Finance between 1993 and 1999.

Following the general election in 1999, Sir William retired from Parliament to start a private consultancy. As a member of the ABN AMRO Australia and New Zealand Advisory Council he is involved with the ABN AMRO group of companies in an advisory capacity on business transactions. He is currently a director of a number of public and private companies including St George Bank New Zealand Limited and Dorchester Pacific Limited, and is a trustee of Mutual Fund Limited and Superannuation Investments Limited.

• The only Director not at the table today is Susan Sheldon who has conveyed her apologies for not being able to attend this meeting. Sue is currently overseas. Sue is a chartered accountant and consults from her Christchurch practice. Sue is Deputy Chairman of Meridian Energy and Christchurch International Airport, Chairman of the Board of Trustees of the National Provident Fund and a director of Ngai Tahu Holdings, CanWest Media Works and Asure New Zealand. Sue is a former president of the Institute of Chartered Accountants and is a Board Member of Guides New Zealand.

• I was appointed a Director and elected Chairman of Freightways in June 2003. After practising law for 18 years and spending 5 years in investment banking, I established a specialist advisory business and a career as a professional director. I am also Chairman of the Auckland International Airport Limited and Ngai Tahu Holdings, and am a director of Telecom, Forsyth Barr and Tru-Test Corporation.

Also present today are several members of the Freightways team. I shall introduce the members of Freightways’ senior executive team to you:

• Steve Wells. General Manager of New Zealand Couriers and Parceline Express. Steve has been with Freightways for 20 years.

• Mark Troughear. General Manager of Post Haste Couriers and Castle Parcels. Mark has been with Freightways for 8 years.

• Richard Mitchell-Lowe. General Manager of Freightways Information Services. Richard has been with Freightways for 16 years.

• Stewart Maclaren. General Manager of Online Security Services. Stewart has been with Freightways for 14 years.

• Mark Brightwell. General Manager of DX Mail. Mark has been with Freightways for 10 years.

• Brett Wilson. General Manager of Messenger Services. Brett has been with Freightways for 12 years.

• Bill Olsen. General Manager of Fieldair Holdings. Bill has been associated with Freightways for 14 years and been with Fieldair for 39 years. Bill retires at the end of this year to a part-time role with Fieldair. The Board would like to acknowledge Bill’s longstanding contribution to Freightways’ aviation investments and indeed his contribution to New Zealand’s aviation industry. Bill’s replacement as General Manager of Fieldair Holdings is:

• Andrew McMaster. Andrew joined Fieldair and Freightways 3 years ago as General Manager Fieldair Engineering. Congratulations on your well deserved promotion Andrew.

As you can see the senior executive team of Freightways has considerable depth of experience.

The Company’s Auditors PricewaterhouseCoopers are represented here today by Bruce Hassall and Vicki Bond and the Company’s legal advisors Lee Salmon Long are represented here today by Matthew Pasley.

The Financial Statements for the year ended 30 June 2004 have been set out in the Company’s Annual Report that was mailed to shareholders during September 2004. Spare copies are available at the rear of the room.

I would now like to speak briefly to some of the general highlights of Freightways’ 2004 year and the Company’s financial performance compared to its IPO forecasts. I will then ask Dean Bracewell to address you.

Slide 4. 2004 General Highlights

The Company has gone through 3 changes of owner in 2 years. While some see operating a listed company as somewhat daunting I think it is fair to say that the Freightways’ executive team see it as a breath of fresh air to not be reeling from one due diligence process to another.

The listing of the Company in September last year was well supported by approximately 7,000 investors.

In effect the listing of Freightways has seen the return of this significant New Zealand company to NZ ownership with just on 90% of Freightways shares held in NZ.

The 2004 year has been a milestone year for Freightways and the Board would like to thank the Freightways team throughout NZ for their consistently delivered efforts, irrespective of ownership changes and such distractions that can adversely affect business performance.

Slide 5. Financial performance vs. IPO forecast

As you can see from these figures Freightways has delivered on all counts against its IPO forecast. The performance of the Company has been simply outstanding and it has enabled the Board to declare a dividend in excess of its forecast intentions. Those who invested at the time of the IPO have received the equivalent of an 11.9% gross dividend on their initial $1.60 investment. For the 12 months since listing the total shareholder return (i.e. gross dividends plus share price appreciation) for an original investor was 77.5%.

Your Board has enjoyed its first year with Freightways Limited. I’ll now ask Dean Bracewell to address the meeting.

Slide 6. Freightways - 25 November 2004, Dean Bracewell, Managing Director

B. MANAGING DIRECTOR’S REVIEW AND TRADING UPDATE

Thank-you Wayne and thank-you ladies and gentlemen for coming along today to our first annual shareholders meeting.

Slide 7. Managing Director’s presentation

While I acknowledge you will have developed an appreciation of our company via the IPO investment statement and prospectus and annual report I thought it may help your understanding of Freightways if I talk to some of the key aspects of our company. My presentation will therefore provide an overview of the industries that we work in and provide a brief description of our businesses. I will also touch on Freightways’ strategy before finishing with a trading update and an outlook on the foreseeable future.

Slide 8. Pioneers

You will see this photo at all Freightways presentations. These 6 chaps were the pioneers of New Zealand’s express package industry and are then what is today New Zealand Couriers. New Zealand Couriers is Freightways’ largest subsidiary, its flagship brand. From these humble beginnings in 1964, Freightways now contracts to approximately 1,000 couriers throughout NZ and employs over 1,200 people who work in every major town and city throughout NZ.

Slide 9. Express package industry overview and business description

Slide 10. Express package industry

The express package industry can be viewed in two quite different segments. Firstly there is the network courier segment which is where Freightways generates approximately 90% of its activity. This segment requires a nationwide linehaul system including roadfreight and airfreight, a nationwide branch network, significant IT infrastructure and support people. All these characteristics form fairly high barriers to a competitor entering the market from scratch. A smaller segment of the industry is the point-to-point courier segment that has quite different characteristics, including lower barriers to competitors entering the market, hence this part of the market is highly competitive with a number of players.

The express package industry is embedded in customers’ supply chains. We provide a service to all industries and most, if not all, NZ businesses will have a relationship with a courier. The industries we do most of our work for are Manufacturing, Retail and Wholesale trade.

There are two major players in the express package industry - NZ Post and ourselves. NZ Post effectively consolidated the industry for us when they acquired a number of operators throughout the 1990’s.

Growth of the express package industry is effectively underwritten by consumers, be they private or business consumers, wanting product delivered faster today than we did in years gone by. It is this demand for urgent Just-in-time delivery that drives volumes to our businesses.

Slide 11. Business description – Strengths

The depth of experience of Freightways people is an absolute strength of our company. The kind of experience you have heard mentioned in relation to our executive team is replicated at many levels right through our company. This depth of experience is very difficult for any competitor to replicate and contributes to Freightways’ competitive advantage.

All our couriers and linehaul drivers that you see on the road are owner drivers. As such they have invested in their van or truck to partner with Freightways and accordingly share in the risk and reward of doing business with us. Our contractors are paid typically based on their productivity – the more productive they are the more they earn. This model provides a high degree of variability for our major direct cost.

Freightways has a great culture of operational excellence – of getting the item to the right place at the right time in good condition. While we are not perfect we do achieve 99% plus accuracy. We also have a very healthy profit culture at Freightways. We produce weekly P&L’s and talk revenue, costs and profit on a weekly basis throughout out all levels of our business.

Our front line businesses are supported by a dedicated express package linehaul system. We own and operate aircraft and manage a road linehaul system totally geared around express packages. As such we have no conflict of priorities in our core linehaul infrastructure.

And we take a multi-brand strategy to the market, which is shown on the next slide.

Slide 12. Multi-brand strategy

We segment the express package market into 3 and position our brands at different price and service points within the market. NZC is our premium brand, Post Haste our mid-tier brand and Castle Parcels our economy brand.

This strategy enables us to provide customers with choice right across the market and allows customers to move to a different price and service point without having to leave the Freightways Group. This multiple brand strategy also contributes to a strong defence against any incoming competitor.

Importantly our major costs are shared across these brands such as road linehaul and in outer lying areas courier delivery so that we do not unnecessarily duplicate costs.

Slide 13. Information Management and Business Mail

Slide 14. Information Management

Our information management brands provide services for the storage and archiving of paper, the destruction of confidential paper and the storage and retrieval of computer backup tapes. They operate in AKL, WLG, PMR and CHC and provide a total information management solution. We view this niche as an emerging business within Freightways’ portfolio of businesses, one that we will invest in and grow. After only 5 years of aggressively being in this market we have established a credible 13% estimated share of the archive market.

The business complements our courier businesses through the collection of Online’s back-up tapes and archive boxes by our express package brands.

Slide 15. Business mail

DX Mail is a specialist business mail service provider. It has grown since the deregulation of the NZ Postal market in 1998 and continues to leverage its traditional box-to-box network. DX drives deliveries to NZC through NZC picking-up and delivering all DX Mail’s mail bags.

Slide 16. Business strategy

Slide 17. Strategy

Freightways’ strategy is quite straightforward. Simply speaking we have unfinished business in the 3 markets we have chosen to work in. Each market continues to display growth opportunities. We have specific strategies to achieve growth based on the positioning of our brands as leaders in their respective market niches, we have well developed strategies for the ongoing training, development, retention and reward of our people, we are absolutely focused on performance and want customers to choose our services and stay with us because of our service. And naturally we are focused on driving increasing profits and wealth to our shareholders.

We will continue to explore complementary acquisitions and the successful acquisition of Archive Security earlier this year is evidence of that.

In this coming year we will also invest in our IT system and infrastructure.

Slide 18. Trading update

Slide 19. Operating revenue

Through until our most recent announcement Freightways has established a creditable growth trend on average of 7% p.a. over the last 5 years.

Slide 20. EBITA

Our revenue growth has been translated into EBITA or operating earnings at an average 18% p.a. over the same 5-year period. As we have substantial investment already sunk in our infrastructure we gain significant operating leverage in this business that results in earnings growth of more than 2 times our rate of revenue growth.

Slide 21. Current financial performance

This slide shows our most current financial performance through until 31 October 2004 drawn from our management accounts. These numbers are unaudited. As you can see the very positive trend of 2004 has continued unabated. Revenue growth of 11% and operating earnings growth of 32% over the prior corresponding period is testament to the strength of Freightways’ ability to perform.

For the first four months of the current financial year, Freightways trading has again been consistently strong. Volumes in all businesses are ahead of last year. These volume increases have arisen from higher activity from existing customers and increased market share. There has also been some small pricing and margin improvement compared to the previous year. In addition, the small acquisition Freightways made of an information management business in March of 2004 has contributed positively and to expectation.

This result continues the strong historic performance of Freightways and the Company is well on track to deliver continued record earnings.

Slide 22. Outlook

Slide 23. Outlook

From Freightways’ viewpoint the domestic economy remains favourable. As at October we have seen no sign of a trend that would suggest a slowdown in any area of our business.

We are not aware of any material changes to our operating environment that may negatively impact on Freightways’ performance. We have however heard a lot of talk and we may in deed see the names of our competitors change.

If the government decides to start selling public assets again we may see NZ Post’s courier businesses sold into a joint venture company. At this stage it appears that NZ Post are only talking to the German Post owned DHL. If DHL ends up owning a part of NZ Post we do not envisage they will change the primary competitive characteristics of our industry and accordingly will back ourselves to compete against them, the same as we have competed successfully against NZ Post and others for many years now. At the same time we have asked both NZ Post and the Government that Freightways be given the opportunity to look at these public assets with a view to us possibly acquiring them.

Likewise, if any Australian transport operator actually makes a foray into our market, as has been talked about in recent months, we will also back ourselves to compete against them. It is not easy nor is it an inexpensive task to start up a successful nationwide express package business. Other than the infrastructure barriers I mentioned earlier, a primary barrier to entry for a new entrant is the sheer volume of pick-ups and deliveries that is required to enable an adequate service to be offered to the market at a competitive rate.

Freightways has grown successfully in a competitive environment for the last 40 years. We have fine-tuned our strategies in this environment and we are well used to competing. We will not be complacent against any potential or existing competitor. Ultimately our best form of defence is to offer a great service at a competitive cost and this is what we do. We have seen a lot of competitors come and go over the years and we expect to see more come and go in the future.

Freightways will continue to take consistent well-developed strategies to the market in areas where we have proven capability.

At this stage of our annual business cycle, and subject to economic and business factors beyond our control, the outlook for Freightways, its shareholders and all other stakeholders remains very positive. It is business as usual at Freightways.

Slide 24. Summary

In summary your company is strong and successful. We are well positioned to deliver continuing earnings growth and we intend to pay a good dividend along the way.

Thank-you ladies and gentlemen.

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download