In its second major deal in more than two years, Freightways plans to buy Australia’s Allied Express Transport in a cash-and-stock deal worth A$160 million ($177.9 million).
Freightways CEO Mark Troughear said Allied
– the company’s first major investment in the Tasman – will be a growth platform there.
The express package company acquired Big Chill Distribution in 2020 for an initial outlay of $117 million.
Today’s deal involves the McDowell family’s A$100 million investment in Freightways shares and A$60 million in cash.
Freightways shares will be issued to the family at $9.66 per share.
“We’ve been looking for a courier package business like this in Australia for a long time,” Troughear said.
The acquisition follows Troughear’s review of Freightways documents, which took place in a non-disclosure agreement signed with Allied in 2005.
“Over the years, we’ve gotten to know them and it’s been a really good business,” he said.
“We have a similar operating culture and we’ve been impressed with what they’ve done.
“They don’t compete with Australia Post or TNT – they operate in a niche market,” he said.
“But in Australia, the niche is really big.”
Allied is a bit more difficult to trade in the market – packages 22kg and above – usually flat-packed furniture.
“This transaction provides us with a successful model to enhance our services across the Tasman, leveraging Freightways’ core capabilities in express pickup, handling and delivery, while creating a niche in oversized freight,” he said. “
In its results, Freightways reported a 4.1% rise in net profit to $73.9 million in June, excluding the impact of the last payment to acquire Big Chill in 2020.
Big Chill’s profit provision was $3.7 million, compared with a provision of $23 million in the prior year.
The key driver of the improved performance was the company’s information management business, which was relatively unaffected by the Covid-19 lockdown.
Instead, the express parcel business has been affected by lockdowns and worker absences due to the Omicron variant of Covid-19.
Revenues reached $873.1 million, up 9% year over year, and EBIT (EBIT) was $130.2 million, up 1%.
Freightways’ final dividend of 19cps brings the full-year dividend to 37cps, an increase of 3.5cps from last year.
Despite Covid-19’s challenges to frontline workforce numbers, supply chains and labour markets, the post-lockdown surge in demand and a surge in new customers provided reasonable year-end results and increased the company’s overall market share, Troughear said.
Like many other businesses, frontline workers at Freightways were severely affected by Omicron.
Freightways’ customers were also affected, resulting in lower freight volumes in the second half of the year.
“This impact was largely offset by market share gains, a surge in sales following the lifting of restrictions, and tailwinds from businesses in our network, including Big Chill Distribution and Med-X, which continued to perform well. “
The company said that in the first six weeks of fiscal 2023, consignment of express package items decreased slightly by 1% compared to the previous comparative period.
Trading volumes from existing clients were 5% lower than in the prior comparable period, largely offset by a net 4% increase in market share.
Business-to-business trade at Freightways was down 5% and business-to-consumer trade was down 11%.
“We believe that the impact we’re seeing right now on customer trade is being driven by a combination of factors, including chronic labor shortages that limit businesses to optimal output, ongoing supply chain disruptions and slowing economic activity,” Troughear said.
Looking ahead, Troughear expects the labor market to remain tight for some time.
“Certainly, there will be some pressure on the economy,” Trauher said.
“But how long is anyone’s guess.”