Freightways Group Limited (FRW) Earnings Call Transcript & Summary

Shareholders and guests, welcome to Freightways Annual Shareholder Meeting. I'm Mark Verbiest, and I'm the Chairman of Freightways. I declare the meeting open. The meeting has been duly convened, and a quorum is present. The minutes of last year's meeting are held by the Company Secretary and General Counsel. Today, given the COVID level in Auckland, we are running this meeting as a virtual meeting using the Computershare online meeting platform. Welcome to everyone joining us online wherever you are based. Again, due to the COVID levels around New Zealand, the Freightways Board of Directors and executive team are also joining from a variety of locations around the country. As this is the first time we've held our annual shareholder meeting completely online rather than as a physical and virtual hybrid, I'd like to specifically draw your attention to the procedures for asking questions and for voting. As set out in our virtual meeting guide, any shareholder or proxy attending the meeting is eligible to ask a question. [Operator Instructions] Please note that whilst you can submit questions from now on, I will not address them until the relevant time in the meeting. Please also note that your questions may be moderated, particularly if we receive multiple questions on 1 topic. And then they'll be amalgamated together. Finally, due to time constraints, if we run out of time to answer all your questions, we will answer them in due course via e-mail. [Operator Instructions] When asked at the relevant time that the resolutions are put, if you are eligible to vote at this meeting, you will be able to cast your vote under the vote tab. Once voting is opened, the resolutions will allow for votes to be submitted. To vote, simply select your voting direction from the options shown on the screen. You can vote for all resolutions at once or by each resolution. Your vote would have been cast when the tick appears. If you want to change your vote, simply select change your vote. You have the ability to change your vote up until the time I declare voting closed. Voting today will be conducted by way of poll on all items of business. In order to provide you with enough time to vote, I will shortly open the voting for all resolutions. Persons attending the meeting who are not shareholders, proxy holders or corporate representatives of a shareholder cannot vote. I now declare voting open on all items of business. The resolutions will be open in the vote tab and you can submit your votes at any time. I will give you a warning before I move to close the voting. I will remind everyone again of these 2 processes when we come to the resolutions later in the meeting. And now just running through the structure of the meeting. I will begin first with procedural matters. I'll introduce the Freightways Board and some of the executive team to you, summarize some of our 2021 financial year highlights, and then I'll ask Mark Troughear, our CEO, to provide an overview of the company, an update on current trading performance and a commentary on our outlook for the rest of this financial year. Questions about the performance of the company will be addressed after the close of Mark's presentation. Any questions relating to the formal resolutions outlined in the notice of meeting will be dealt with when we consider those resolutions. Following the CEO's presentation and questions relating to the management of the company, I will introduce the formal resolutions as outlined in the Notice of Meeting, and polls will be held in respect of them. And polls will be conducted following the meeting. The Notice of Meeting, which sets out explanatory notes as well, was circulated to all shareholders, and I will take it as read. Proxies have been appointed for the purpose of this meeting in respect of approximately 70 million ordinary shares. As 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 favor of the 6 resolutions set out in the Notice of Meeting. I also note that as set out in the proxy form, directors standing for reelection or election will abstain from voting discretionary proxies in respect of their own appointment. As requested by the New Zealand Shareholders' Association, we will not disclose voting of valid proxies received for each resolution 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 members of the Board and management team joining the call. Your directors, Abby Foote. Abby joined the Board in 2018 and is qualified in both law and accounting. She brings to the Board over 12 years governance experience in addition to time spent in senior management roles. Abby is currently Chair of Z Energy and a Director of Sanford. It's also just been announced that she is joining the Board of Kathmandu. Abby is retiring rotation and standing for reelection at this meeting. Fiona Oliver. Fiona is the newest Director on our Board, having been appointed in July this year, and she stands for election today. Fiona brings a wealth of experience from her executive career in the financial services sector. In New Zealand, her roles included Chief Operating Officer of Westpac's investment arm, BT Funds Management, and General Manager of AMP, New Zealand's Wealth Management division. In Sydney and London, Fiona managed the risk and operations function of AMP's private capital division. And prior to this, Fiona was a senior corporate lawyer in New Zealand and overseas, specializing in mergers and acquisitions. She is a professional director holding or having held governance roles across a range of business sectors including renewable energy, natural gas, technology and financial services. 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. Kim is Chairman of Green Cross Health and New Zealand Social Infrastructure Fund and has other directorships including Port of Tauranga. Kim will retire as a Director of the effect from the end of this meeting, and I wish to personally and sincerely acknowledge and thank Kim for his commitment to Freightways. He's been a great director representing your shareholder interests. Mark Cairns. Mark was appointed to the Board in April of this year and stands today for election. Mark brings highly relevant experience to the Freightways Board, having been Chief Executive of Port of Tauranga, New Zealand's largest and most successful port since 2005. He was previously Chief Executive of Toll Owens Limited and Owens Cargo Company Limited. He has extensive experience in logistics, infrastructure contracting and significant exposure to capital markets. Mark sits on a number of boards, including Meridian Energy and Sanford and is the intended Chairman of 2degrees IPO proceeds. 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 to Vodafone and has previously served as CEO of Pacific Fibre, iHug and Paymark. Mark is currently CEO of private equity-owned UP Education. Peter Kean. 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, has developed a career and governance. He's also a Director of Sanford and a number of private companies. Peter is retiring by rotation and standing for reelection at this meeting. In terms of myself, I was appointed a Director of Freightways in February 2010 and elected Chairman in 2018. I am a lawyer by training and have widespread corporate legal experience both in private practice, and I've also spent over 7 years on the senior executive team of Telecom New Zealand, where among other things, I had executive accountability for 2 business units. I'm currently Chair of Meridian Energy and Summerset Holdings and the Director of ANZ New Zealand. I intend to retire from the Board during the next year as part of our Board's succession plan. The Board is conscious for the need for both continuity of experience alongside Board renewal. In terms of the management team. Also joining us today are Mark Troughear, Freightways Chief Executive Officer, who was appointed to that role in January 2018. Mark has been with Freightways in various executive roles for approximately 25 years and has a comprehensive knowledge of the group's operation across all divisions in New Zealand and Australia. Stephan Deschamps. Freightways' Chief Financial Officer. Stephan joined the Freightways senior leadership team in the midst of the COVID-19 crisis in April of last year. He's previously held a number of senior finance roles, most recently as acting CFO of Air New Zealand. Stephan also spent 14 years at Fonterra, including 2 regional CFO roles in Latin America and China. Also on the call today are the company's auditors, PricewaterhouseCoopers, represented here today by Keren Blakey and Jack Worthington and the company's legal advisers, Russ McVeagh, represented today by David Raudkivi. The financial statements for the year ended 30 June 2021, are set out in the company's annual report that you will have received in August. The annual report contains continues the practice of recent years and giving shareholders and other interested parties, a lot more information about what we do at Freightways. COVID-19 remained a significant factor during the year in both New Zealand and Australia, although its impact on Freightways was more limited in the 2021 financial year. In the annual report, we provide information on how the company was impacted and how we've continued to respond. And I'd especially like to convey how impressed the Board has been with the commitment of each and every employee and contractor of Freightways who rally to ensure our staff, customers, communities and shareholders were all well looked after. We completed last year the acquisition of Big Chill Distribution, which has been an outstanding success. The 2021 financial year was much about consolidating the significant acquisition and giving time for our balance sheet to return to stronger levels. The addition of the Big Chill team into Freightways has been seamless. The intent is also with our reporting to continuously improve that to you, our shareholders on matters we consider most relevant to our business. I will now speak briefly to some of the financial highlights of our 2021 year. And then I'll ask Mark Troughear to address you. The 2021 financial year saw very solid growth both at top and bottom line. Our revenue broke through the $800 million threshold, a 27% increase on last year. Part of this is due to Big Chill being included for the entire year, but even without Big Chill, revenue increased by 14%. This reflects the quality of the services we offer, which has allowed us to grow our market share as well as the entrepreneurial nature of our people across the business. This has led to new business opportunities in medical waste, for example, and recycling. Our margins have also included -- improved with EBITA and net profit after tax, both growing at or more than 30% year-on-year. This excludes the impact of the accrual for the final payment on the Big Chill acquisition, which I will now come to. There was a $23 million accrual that we made this year through the P&L. And to explain, when Big Chill was acquired in April 2020, We estimate its value at $145 million, and we paid 80% of that, $116 million, upfront. The final 20% is to be paid in August 2022 and will be based on the performance of Big Chill in 2021 and the 2022 financial years. Because this performance has been so much better than expected, we've had to revise upward what the final payment will be, and we now expect it to be roughly $51 million. This means that we need to accrue $23 million more than we had already done. And to recognize this as a cost, we have to do this through our P&L. But I should stress that this only shows how well the Big Chill investment is performing, and it was a noncash cost for us in 2021, these are positive issues, frankly, to have. Finally, in line with our formalized capital management policy that I will cover later, the Board set a final dividend of $0.18, bringing the total dividend for the year to $0.335. This is 10% higher than the last full dividend we paid in the 2019 financial year and is the highest dividend we've paid in the last 15 years or so. Our performance has also benefited our people. Thanks to such initiatives as Pricing for Effort, our couriers have seen an increase in the remuneration of 8% year-on-year on average. We continue to invest in the safety of our people, and we've also seen a decrease in workplace injury. Beyond our current successes, we are actively planning for and investing in growth areas and new business opportunities. We're continuing to invest in medical waste in Australia, which we purchased first in 2017, and in different initiatives in relation to waste recycling in New Zealand. Our in-house ideas and incubator, which is called The Startery, has assessed 32 different ideas, 5 of which are now being further developed. Finally, Freightways also want to do the best for our communities and wider stakeholders. We have committed to reducing our carbon emissions across our network by 50% by 2035. We're also making good progress to reduce the use of fossil-based plastics in our network. As Freightways remains a very acquisitive company, the Board did further work with management to clarify our capital management policy, including the way we set dividends. We haven't introduced any significant change, but we have made the order of priorities very clear. Our primary objective is to optimize our cost of funds so that we target a credit profile that would be equivalent to a BBB-rated company. One of the criteria we used to assist this is our net debt-to-EBITDA ratio, and we want to maintain that in a range of 2 to 3x. This influences how we manage the company. If the ratio is closer to then our focus will be on cash generation and debt repayment and could extend to reducing CapEx. If it is getting closer to 2x, meaning we -- this means that we are either preparing for acquisitions or could consider a further return to shareholders. Corrected for noncash exceptionals the ratio in the 2021 financial year was 2.4x. This will also guide how we set dividend. The first rule is that dividends will be set at a level that does not challenge our capital management objective, which I've just worked through. We will also set the dividend at a level that we believe is sustainable over time. Taking these 2 items into account, we will aim to set a dividend around 75% of net profit after tax and amortization corrected for significant non- cash one-off items. I'll now ask our CEO, Mark to address the meeting.

Thanks, Mark, and welcome again to all those shareholders joining us virtually for the 2021 ASM. Welcome also to those and Freightways team that are joining us. And for the Freightways team, again, I'd like to express my thanks to you and your teams for the outstanding work that you've done over the past year and that you continue to do as we ramp into Christmas and deal with pretty heavy volumes of freight through the express businesses and through the Medical Waste business in Australia. I'll talk to a brief summary of Freightways strategy, and that includes an update on 2 of our most recent investments. I'll also talk to our high-level ESG goals, which are tied to UN SDGs and providing a trading update for the first quarter along with the outlook for the year. So excuse me. Settle in for about 15 minutes. If you just want to come back to the exciting in voting part, it will be about them. I've got a script here. I've got to try and keep to. So I'll do my best to do that for you and give you a bit of a view of the company and trading update. The first slide you'll see here, we call the Freightways blueprint. So this helps tie the Freightways strategy together because we occupied a number of different market spaces across both New Zealand and Australia. Our purpose is to move you to a better place, and that applies to all of our stakeholders. So if you follow me, I'll work my way up the triangle and give you a view of how we see things that operate here. And our core, what we do is pick up, process and deliver. And we pick up, process to deliver items through 4 key divisions, Express Package, which includes our courier brands and Big Chill Distribution and will include ProducePronto. Business Mail, which includes our DX and data print businesses; information management, we were handling archives and media storage along with digital processing; and waste renewal, which we used to call secure destruction, but now is much broader than secured destruction that incorporates medical waste, and it's incorporating high-value recycling. So across all those areas, we pick up, process, deliver and we handle about 100 million items a year. On average, each one of those items is touched 5 times through its journey. So if you imagine a Express Package item being picked up in the far north to be delivered in the far South, that will go through at least 5 pairs periods of hands to be picked up, consolidated, flown on an aircraft, taken off the aircraft onto a truck and eventually delivered at its destination. It's around 0.5 billion individual movements every year. So if you come up the next layer of the triangle, it's really critical that we strive for efficiency. Any delays and inefficient practices in handling 100 million items can easily have a significant impact on the business. And so at the heart of our business is efficiency and how we manage that. Delivering reliably for our customers is absolutely paramount. And again, it doesn't matter whether we're handling secure confidential destruction or courier and mail items, delivering reliably as again at the heart of what we do. Thirdly, loving our customers. I'm always amazed at the tenure of customers that we have throughout our businesses. Retaining their loyalty, understanding their needs both now and in the future is critical to the success of our business. And then fourthly, acting like entrepreneurs. I think the wonderful thing about our businesses is that the people who lead them, invest that money as if it were their own. And we're constantly searching for new horizons of growth. There's 3 core principles that guide how we operate. So those are around taking ownership at every level by role, by department, branch and brand by acting and thinking commercially in all we do. It's really critical that the deals we do with customers and the deals we have with contractors and with the suppliers are done on a commercial basis and they make sense. Working as a family. And again, I'm constantly amazed at how well our teams at department level, branch level, business level really adopt that family philosophy. It really is intrinsic Freightways and has been over the 50-plus years of operation. All of that helps us move you to a better place. And if you're an employee, that means we're helping to grow career opportunities for our people. For contractor, it means we're attempting to increase in tons and move people into better runs with better levels of remuneration, helping our customers grow and achieve their business goals and of course, increasing returns for our shareholders. I'd speak to some of the specific points in and around the strategy for this year. They can be summed up in the bullet points on the screen there. So the first one is really ensuring that the services we provide and the pricing at which we price those services is reflective of the effort goes into them. And I think what we've done really successfully over the last year has addressed what we call PFE, Pricing for Effort, for residential freight, in particular. This year, we have embarked on making sure that PFE for local movements and the courier business are priced at the right level. And as we mentioned at the full year, we will assess what we do with the larger items that travel through our network, and, again, make sure they are appropriately priced for the effort. The second part of the strategy sits around e-commerce, and e-commerce really is the flavor of the month, particularly when you're in level 2 and 3 lockdowns. Our strategy has been primarily to target small- and medium-sized enterprises and to assist them by providing them a suite of tools and services to meet their needs. And from what I see through our retail-facing teams, we're doing that really well. The third thing is leveraging the service advantage that we have, and that has become even more apparent through lockdowns, where through the media, you will see other courier companies are really challenged by the volume that they have, and they have significant volumes buying through networks, and it leads to delays. The service advantage we have across our brands, we transit test on a regular basis. The latest transit test that I've received in the last couple of days show us performing by a margin of 50% better than our nearest competitor. So that type of service performance is helping us gain market share, but we're gaining market share where the pricing makes sense in both Express Package and Business Mail. Expanding our temperature-controlled market share and developing a further horizon of growth in this market by capitalizing on the acquisition of ProducePronto. So the Big Chill business, as Mark said earlier, has been a real success story. Big Chill last year in April added third-party logistics warehousing for frozen and chilled goods to their transport business. So there was the second horizon of growth. The third horizon of growth is adding ProducePronto with the same day and 4PL offer, which we can bolt on to Big Chill. So again, we're pushing that third horizon of growth for Freightways businesses to make sure that we are relevant for our customers. [indiscernible] is around information management, and it's growing our digital or business process outsourcing services for our clients in both Australia and New Zealand. Those customers trust us with their archives. They trust us storing media in our vaults. But increasingly, they're trusting us with processing data typically from paper into a digital format. And again, it's a real focus for that division to provide another horizon of growth. Executing our strategy, add high-value waste streams to our collection and processing networks is really important in Australia. Medical Waste has grown at a rapid rate. It's helped offset the decline in secure destruction and while cities like Sydney and Melbourne have been locked down. We've added SaveBoard as an investment to grow that high-value recycling aspect, and I'll talk to that in the next slide. And then finally, we're using a division called The Startery. So The Startery is a group of people who are focused on product development. It's a group of people that allow us in a very structured way to have a look at the opportunities in front of us that are adjacent to the businesses that we run now and make really good process-orientated decisions using data, using customer feedback to decide whether we keep growing those services or kill them quickly and move on to the next slide there. Talk to the 2 investments that we've made recently. So the first of those is ProducePronto. And ProducePronto, we will take ownership of next week, on the first of November. And as I said, it's highly complementary to Big Chill produce. ProducePronto have a team of [ 40], and what they do is provide same-day delivery of fresh and frozen product around New Zealand -- they deliver to well over 1,000 destinations, businesses, convenience stores, service stations and the like. And we're confident that their offering has a growth pathway that we can continue to exploit and we can grow by leveraging Big Chill and Express Package assets. So specifically there, we will be able to leverage Big Chill line haul storage facilities as ProducePronto needs more capacity. We'll be able to utilize the Express Package air line haul system to help with same day and overnight delivery on fresh and frozen food. The purchase price for ProducePronto is $10 million upfront. Again, it is based on an earnout like many of the M&A that we do. That earnout has a potential of $4 million maximum over 3 years. And to achieve that, ProducePronto, will need to step through some growth milestones. The second of investment's also exciting, and it links into our waste renewal area of the business, and it's a business called SaveBoard. SaveBoard is a business, which will take tetra pack-type containers, so liquid paperboard containers combined with [courier] satchels and coffee cups and produce building material. You're not all in the room but I can wave this around in front of my camera as best you might be able to see it. It enables us to make a building product, which can be used as a rigid air barrier solution as a roofing substrate or internal wall linings, and it's 100% recycled. We currently have a 22% shareholding of SaveBoard business, that will increase to 36% in March next year as we set up a Sydney plant. We expect to produce the first boards around the end of this year. So again, we've been challenged by spike chain constraints, bringing equipment and machinery into New Zealand and in fact, bringing the people that we need to assemble that equipment into New Zealand. But in the last couple of weeks, that has been well underway, and we're confident that we can roll the first boards for the end of this year. Those 2 sites down in Hamilton, in Te Rapa and Hamilton and the second side will be in West Sydney. It's highly complementary to our waste renewal business. So in that waste renewal business. Our strategy is pick up products through the same fleet, process them through the same buildings and the same shredders and then provide feedstock or add value to the material we have collected. I'll talk briefly now to the SDGs that Freightways aligns our ESG strategy to. The approach to selecting these SDGs was conducted a couple of years ago where we did a materiality analysis. We involved a number of our stakeholders to help us decide what were the areas that we could move the dial on and help us focus on those. Some of the key areas of focus for us over the next year are around health and safety, well-being, keeping our people safe and helping their well-being as they are employed with us. We've added a dedicated General Manager of Safety, who has come from within the business, been in the business for well over 20 years and worked in a number of different parts of the operation. We are employing new technology to help train and educate our teams and monitor the progress that we are making around safety. There's significant focus on all of those people to constantly improve our approach to ensure that we're getting it right and getting our people home safely every night. So that includes training programs, ensuring that at the lowest level, we have health and safety committees are equipped with the latest knowledge as to how to help their people remain safe. The other key initiative we've had in the area has been mental well-being and awareness training. And we've conducted that in 2020 for over 250 managers through our business to help them recognize if their people are behaving differently, if there are under stresses and strains that we should be aware of and that we could assist them with. The second of those areas is around providing opportunities for career enhancement for our teams. And again, for Freightways, that's a really important aspect of the way that we operate. We have constantly moved people up and through the business by improving education, training and so on to improve their capabilities and help them succeed within the company. We've also done similar with our couriers to improve their incomes, improve the density and improve the performance of [indiscernible]. Thirdly, developing new adjacent business services, which help grow our revenues and provide opportunities for our people. And again, I think SaveBoard what we have done in Medical Waste and what we can do in waste renewal are good examples of that. The next one is around climate action, and it's around reducing our emissions. And as Mark said earlier, it's really critical for us to recognize that we are an emitter. We run fleets of trucks and light vans through all of our business operations. And so we've set our first science-based target to reduce those emissions by 50% by 2035. I think it's important to note we have a really strong track record in an industry where there's actually few viable alternatives to running vans and trucks. What we have done is successfully reduced our emissions by 5%, pretty much year-on-year per unit and we've reported on those emissions publicly since 2014. What we are confident of is that there will be viable alternatives in the next 3 to 4 years. The reality is that our contractors and our own fleets are amongst the most modern fleets in New Zealand for both small vehicle and heavy transport. Our couriers update their vehicles on average every 7 years. And we're confident with the increases in remuneration that we're pushing through the contractor fleet. They will maintain that ability to move to EVs or alternative fuel cell as it becomes available. We're closely in tune with what that technology is doing, but only a very few models that are available here in New Zealand at the moment. And they're restricted by range and they're restricted by weight in terms of what they can carry. But you can see the pathway coming. And again, as I say, I think over the next 3 to 4 years, we will see a greater range in supply of those vehicles available to us. Every transport will be a bit of a challenge, but we will monitor with interest the developments around battery, electric and hydrogen, biofuels and any other technologies. It's important to note the 50% reduction that we have forecast through to 2035 is achieved by addressing the light vehicle fleet. So if we can address the light vehicle fleet and achieve 100% change-out by 2035, we will achieve that goal. The last goal we have there is around a reduction of plastic packaging waste courier satchels, freight bags, in particular, make up a big proportion of the waste that we have through our networks. And so by moving to a recycled product and finding other ways of reducing what we use in the way of plastic, we're targeting a 70% reduction over the coming year. I'll now move to the quarter 1 trading update. So there are a couple of graphs here, which paint a picture not just on the quarter, but actually over the first 15 weeks of the year. The first graph on the screen represents those first 15 weeks of FY '22. There's 2 lines on there. So the lighter line shows growth on 2020, and then the dark line shows growth on 2019. And the reason we've showed that is 2019, in our terms, was a normal year, largely unaffected by COVID lockdowns. 2020, pretty well known that there were a series of lockdowns, particularly in Auckland, that came and went on various levels of magnitude, and those lockdowns have a material impact on our business. The key points to note through that graph is that drop in overall activity through the blue shaded area. So that traverse as lockdown Level 4, which commenced on August 18 and worked its way through September. So within that period there, businesses were essentially closed and our business-to-business volumes fell dramatically. And from a business-to-consumer point of view, only essential items are allowed to travel through courier networks. So you can see the decrease at that stage. What's interesting to note is that decrease was not as great as we experienced in April 2020. You can then see that as we came out of the Level 4 lockdown went to Level 3, the volumes began to increase pretty rapidly. And in fact, over the last 4 weeks, we've been dealing with large increases in B2C and the return of B2B around most of New Zealand. So those gains show an increase of 20% on the 2019 base and in excess of 10% on 2020 volumes over those last 4 weeks. Second graph talks to B2C volumes. So residential home delivery volume again for our network courier business. You can see in the middle of the shaded period where B2C volumes began to increase rapidly. And again, this graph shows growth on a 2019 base the dark blue line; and on the 2020 period, the light blue line. And again, the increase is in here are material. Our businesses are feeling those as they transfer through the networks. But as I say, really happy with the service levels that our teams are managing to achieve through that period. In terms of a benchmark on 2019, you can see over a 7-week period. That increase is in excess of 100% and on the 2020 base, around 35% over that 7-week period. We expect those types of levels to maintain and as businesses are allowed to open again, particularly in Auckland, B2B will increase and B2C will come off as people are allowed back into retail outlets. In terms of the results for the first quarter then, there are a number of things to note around these results. So the first one is that we have 1 less week in FY '22 than we had in the prior corresponding period. And that's a function of Freightways adopting a 4 week, 4 week, 5 week accounting month. So last year, we had 13 weeks, we had extra week in that period -- this year, we have 13 weeks in that period. The second thing was New Zealand's Level 4 lockdown, which was reflected in the Express Package grants that we had previously. And then the third impact was Australia's lockdowns in New South Wales in particular, but also Victoria. As a result, in the first quarter, revenue was down by 4.1%. EBITA was lower by 9.2%, and NPATA and NPAT were lower by 5.7% on the prior corresponding period. The estimated EBITA impacts for the 3 points that I mentioned at the start of this slide, for the extra week, around $2.1 million EBITA, The Level 4 impact in New Zealand has estimated impact of $4.5 million EBITA. And for the Australian lockdowns versus the prior period, the impact was estimated at $0.4 million EBITA. So a total impact of around $7 million for the extra week and the impact of lockdowns primarily in New Zealand but also in Australia. The next slide reflects Express Package. I'll get back to my script. So in terms of revenue, a decrease of 4.7%, again, primarily contributed to by the effect of Level 4. EBITA down by 8.1%. For Express Package specifically, the extra week is estimated to cost us around $1.9 million of EBITA. That's the difference between the prior corresponding period and this year. And the Level 4 lockdown in August and September had an EBITA impact of around $3.9 million for Express Packaging & Business Mail. For Information Management revenue was impacted and 1.8% below the prior corresponding period and EBITA 10.1% below the prior corresponding period. Again, the impact of the extra week in terms of the comparison was $0.2 million in EBITA. The New Zealand lockdown affecting our TIMG New Zealand business impacted by around $0.6 million and the Australian lockdown for both [indiscernible] and TIMG impacted by $0.4 million over the period. In terms of the outlook. While quarter 1 has clearly been affected by the Level 4 lockdown in New Zealand and the continued restrictions on businesses operating in New Zealand and Australia, we remain confident that we'll achieve earnings growth for the company in FY '22. We have been encouraged by the increase in volumes driven by e-commerce activity and market share gains in our Express Package business as we've moved to Level 3 and as those restrictions has eased around the country. We're also very pleased with the growth that we've had in Medical Waste in Australia. Our teams have done an outstanding job and meeting the demand that the market has for medical waste collections in Australia. And while we would expect that to ease up as the situation in Victoria in particular improves, it should occur around the same time as activity comes back into our Information Management businesses for archives, media and secure destruction. We do remain conscious though that there are a number of factors that we don't control and even our best laid plans may be influenced by macro factors such as a tight labor market, which put upward pressure on labor costs. Any further current and potential lockdowns in Australia and New Zealand, particularly if they drive back into a Level 4 type environment. And to a lesser extent, but still notable, a constrained supply chain, which could continue to disrupt the flow of goods coming into New Zealand and ultimately impact the volumes that we receive from our customers. We are one step removed in terms of those supply chain constraints. But ultimately, they can have an impact on a number of containers and the amount of goods customers have available to ship through networks. Again, we will continue to review the portfolio of services we provide through the businesses with a view to make sure that we deliver a superior long-term returns to shareholders through both the short, medium and long term. The company will also continue to consider acquisition opportunities that are complementary to our existing businesses, operations and capabilities. Finally, I'd like to again just exceed my thanks to the teams of people across New Zealand and Australia that work or drive and then come from Freightways. Your work is outstanding and the performance, I know of many of the business units and periods of high volume or adapting to lower volume has been quite exceptional. In closing, I'd also like to thank Kim Ellis. Kim, I'd like to extend management's congratulations on your tenure as a Freightways director, and thank you for your input into the business. I think the things that you have brought to the business, primarily your experience, you run an operational business and you understand what it's like to run a business with a lot of moving parts. Your intuition on what is important and what is urgent has been really valued. And most of all, I guess, you're humorous. You know how to have a sense of humor, I think, which is important businesses like these and you've been highly relatable to the team here. So we respect you. We've really enjoyed what you have contributed to Freightways. We wish you all the best, but know that you are part of the Freightways family now and forever. Thank you.

Great summary, Mark. Thank you. And yes, again, reiterating the contribution of Kim has been fantastic. Now I will open the floor to questions, comments or discussions in relation to the financial statements, presentations et cetera. So if you just bear with me at the moment because I have to use some other technology here. I've got a few questions showing up.

The first one is from [ Bret Bird ]. What are you forecasting for fuel prices and its impact on Freightways? What are you forecasting for rising inflation I'd probably give that to you, Mark, to answer.

Absolutely. Look, in terms of fuel prices, they're at an all-time high, really at the moment. The impact to Freightways is mitigated. So we implemented a fuel adjustment factor around about 15 years ago. And so what that means is Freightways' price has rise and fall with the price of fuel, and that system is designed to offset the increased costs we have. So we can pass that on to our contractors, use it to pay for the jet fuel and the line haul fuel that we use within the business. So look, where fuel prices will carry on going, I don't know. I don't think anyone knows that necessarily, but you can be assured that Freightways has a mechanism which offsets the increases that we have in fuel. In terms of inflation, look, I think the biggest thing we see is labor inflation. So labor is our single biggest cost, being payments to contractors for the services they provide for the teams that we have. And it's certainly a tight labor market. There's no question around that. Minimum wage has driven the base level of wages up consistently in New Zealand by around about 5% year-on-year. But as I said, I think more importantly than that, the tight labor market means you have to compete for talent. And in some cases, you'll have to pay those people a little bit more than you do currently.

Okay. Thanks. Another question from Bridgette. Can you clarify the accounting treatment of the Big Chill purchase and its impact on the P&L rather than being a balance sheet-only item? I hope I clarified that somewhat before. The additional amount of the earnout payment that we have to make in 2022, we've accrued an additional $23 million, which is recorded as an expense in the P&L. I might ask Stephan to just expand on that.

Thank you, Mark. Yes, you are correct. The reason we are recognizing that in the P&L and not on the balance sheet is because that final payment is driven by factors that were unknown at the time of the acquisition. So because of that, we cannot recognize it as part of the acquisition price and the goodwill that would be sitting on the balance sheet. Because it's driven by the impact of COVID and such factors, we have to recognize it as new information, and so it drives to the P&L and not the balance sheet.

Thank you. A question for Mark. How does Board management view the supply chain bottleneck that's being experienced worldwide? Is it a threat or an opportunity? Is the company making or considering any operating changes on account of this? Very good question.

Yes. So as I said, we are one step removed from the primary impact of the supply chain impacts, and I think general consensus is that these are likely to go on for at least another year yet. We're one step back. So our customers may, in some cases, rely on imported products come into the country, which then they will stock into their warehouses and they may use a courier or a bulk trade provider to ship down to their customers. There's a couple of potential impacts that we do see. So sometimes because of the congestion in the supply chain, those customers might choose to use a faster courier service domestically than a slower bulk freight service to get it to the final destination. In other cases, it might mean that they have certain stock lines that they simply don't have to strip through the networks. We haven't seen a material impact over the last 1.5 years, either way, but it's something that we're really well attuned to. In terms of opportunities, look, I think one of the key ones was one that we jumped on last year, where the constraint of international air freight capacity, particularly Trans-Tasman gave us an opportunity to divert our jets to fly Auckland-Sydney, Auckland to Melbourne and provide much needed airfreight capacity. We did that for a period of around about 8 to 9 months that contributed to our results in the previous financial year. But the volumes are such in New Zealand at the moment that we need those aircraft all flying on a full schedule here in New Zealand. So look, the opportunities are bound where customers have an urgent need, we will be there to help them. The threat will be if customers simply can't get product into New Zealand. But on balance, those things seem to have balanced each other out, and we're not seeing a material impact.

Thanks, Mark. We now have a question from the Shareholders' Association. Good questions around our business. How many brands do Freightways operate? And does this cause an issue with a fragmentation of market presence? Well, I'll get Mark to answer the exact number of brands, but we do operate a number, and that is a deliberate strategy with different business units, for example, different courier companies within our fleet operating in different parts of the market with addressing different customer needs. But Mark, would you like to expand on that and also confirm how many brands we actually do operate under?

We've got a heap. Look, we run a lot of brands. And it's a strategy that we've had for a very long time, and I could talk to you about that all day. But in summary, using various brands at the retail level allows those brands to focus acutely on what they do in that niche, and it allows them to price accurately for the niche. So if you look in couriers, for example, New Zealand Couriers is providing an overnight by 9:30 service can price the service for the level of effort it requires to get items here by 9:30. Castle Parcels is operating an economy service can price at a lower level based on getting that product there the next day rather than over 9:30. The risk we see if you combine those brands at the retail level is that your pricing has a real risk of dropping down to the lowest common denominator, and we have seen that elsewhere. I think the second really important thing to understand is that the -- behind the sticker on the van, so behind that retail front end, it's a consolidated network, okay? So it's just 1 track going to the far north with everybody's freight on it. It's 1 aircraft taking every brand's right. The branch network is consistent. The IT system for network courier is the same IT system. So we're smart enough to make sure that we leverage all of those back end pieces, and we don't duplicate. But in customers' minds, what they're getting is a brand that's absolutely expert at what it claims to do and does it for the right price.

Okay. I'm not seeing any further questions. So I will move to the formal resolutions to be considered. Polls will be conducted at the conclusion of the meeting. In respect of the resolutions. The conduct of the polls will be administered by Computershare Investor Services Limited, our share registrar. And also the auditors PricewaterhouseCoopers will act as scrutineers. As this is a virtual meeting, all voting will take place online. Please follow the instructions of the virtual meeting guide that was provided. A reminder, of the voting process again for those logged on as shareholders or proxies. The resolution and voting options will have appeared on your screen. You can vote for all resolutions at once or by each individually. For each resolution, please select the appropriate box on screen and indicate your vote. Your vote has been cast when the green ticket appears. And as I said earlier, to change your vote, you just select change your vote. Again, as a reminder, that any eligible shareholder or proxy attending the meeting remotely is eligible to ask a question. [Operator Instructions]. And we will publish the results of the polls through the NZX later today. The first resolution relates to the election of Mark Cairns as a director. Mark was appointed to the Board in April 2021 and retires and being eligible will offer himself for election today. The Board unanimously recommends that shareholders vote in favor of Mark's election. So I will first ask Mark to speak in support of his election.

Thank you, Chairman. [Foreign Language]. Good morning, ladies and gentlemen. I'm delighted to have joined the Board back in April earlier this year. You have brief details on my background in the Notice of Meeting. I'm a civil engineer by profession and a fellow of Engineering New Zealand. Earlier this year, I retired after 16 years as Chief Executive of NZX listed Port of Tauranga to pursue a full-time governance career. From the Port and previous roles at Fulton Hogan and Toll Owens, I bring extensive experience in senior management roles and business operations at scale, including significant exposure to capital markets. I've been around complex logistics operations for most of my working life. It is intended that I will Chair the People and Remuneration Committee for analysis retirement. I'm really passionate about sustainability. We have only 1 planet, and I'm pleased that Freightways have moved beyond the typical corporate green washing and have set some pretty lofty goals for decarbonization and waste reduction for our operations, targeting a halving of greenhouse gas emissions by 2035. I'm proud that Toitu Envirocare have singled out Freightways as one of the top 10 carbon producers in New Zealand. I consider that Freightways is a fantastic company with an outstanding management team and has a great future. I seek your support to serve you as a director. [Foreign Language], Thank you, ladies and gentlemen.

Thank you, Mark. Are there any questions or matters for discussion concerning the resolution to elect Mark as a director? I'm not seeing any. So I will put the resolution to a vote. So please mark your vote. [Voting]

The second resolution relates to the election of Fiona Oliver as a Director. Fiona was appointed to the Board in July of this year and will retire and being eligible, offers herself for reelection. The Board unanimously recommends that shareholders vote in favor of Fiona's election. Fiona, I will ask you to speak.

Thank you, Mark. [Foreign Language]. Good morning. I was delighted to be asked to join the Freightways Board and have the opportunity to work with the talented and committed group of people and contribute to the success of the Freightways business. To me, there are many attractions to being part of the Freightways team principal amongst which is the central focus of Freightways and its customers. I have developed an interest or passion really in manufacturing products and services that suit customer needs and deliver appropriate customer outcomes during my executive roles and more recently in governance. The concept of customer centricity has developed significantly since my time as Chief Operating Officer of BT Funds Management and indeed continues to do so. It is exciting to be part of a business that has embedded within its processes, systems and culture, the belief that customers should receive choice, value and superior levels of service, and one that continually strives to improve on its offering. The other key attractions for me are Freightways' strong focus on people, including ensuring the quality of their work and that they return safe to their families at the end of their working day and the ambitious standards in SDG and managing nonfinancial risk. These are, I believe, vital ingredients of sustainable shareholder growth. As our Chairman, Mark Verbiest mentioned, my governance experience has been gained across a range of business sectors. I'm currently a Director and Audit Chair of the First Gas Group, Gentrack Group and BNZ's Insurance businesses. I will bring my varied and broad experience to benefit the already astute and effective governance at Freightways. Prior to my experience in executive roles and funds management and private equity and which Mark Verbiest has also mentioned, I practiced as a senior corporate and commercial lawyer in New Zealand, New South Wales and the U.K. This professional legal experience has given me a deep understanding of New Zealand and key overseas regulatory frameworks and corporate and commercial laws and a speciality in mergers and acquisitions transactions. I will contribute to maintaining the strong reputation and a high level of trust and confidence that Freightways business has built with its stakeholders, including by maintaining a high standard of regulatory compliance. I bring my professional and commercial skills and experience and my understanding of the New Zealand and wider global business environments and their respective capital markets to Freightways. I would welcome your support as my election as an independent Director to the Board. If elected, I will bring my focus, which I know is shared by current Board members and the senior management team on delivering value and sustainable returns to you, the shareholders. Thank you.

Thanks, Fiona. Are there any questions or matters for discussion concerning this resolution to elect Fiona as a director? I'm not seeing any. So I will put the resolution to a vote. Please mark your vote. [Voting]

The third resolution relates to the reelection of Abby Foote as a director. This year, Abby has retired to retire by rotation, and she will retire and being eligible offers herself for reelection. The Board unanimously recommends that shareholders vote in favor of Abby's reelection. Abby, I'll ask you to speak in support, please?

Thanks, Mark. [Foreign Language]. Good morning, everyone. So I've been a member of the Board of Freightways since June of 2018, and I Chair the Board's Audit and Rick Committee. As Mark noted in his introduction, I'm also a Director of Sanford, Z Energy and Kathmandu Holdings. I've been a full-time professional director for over 10 years now. So although I have a background in law and finance with experience in large projects, M&A and treasury amongst other things, primarily, I bring to this role deep and extensive governance experience. I've served on a mixture of listed and crown-owned entities, and I'm an experienced Board and Committee Chair. That experience enables me to make a strong contribution across many areas. I have particular expertise in the areas of strategy, risk, health and safety and ESG, and I'm conscious of the need for boards and companies to stay abreast of the increasing expectations of a wider range of stakeholders. Freightways is a great company with engaged and committed people who are dedicated to performance outcomes and to treat the business through it were their own. Within that context, the role of the Board is to support that team and ensure that the company's strategy and foundations continue to support our growth ambitions. I'd be very grateful for your support from our reelection to the Board today and very happy to answer any questions that you have. Thanks.

Thank you, Abby. Are there any questions or matters for discussion concerning the resolution to reelect heavy as a director? And I'm not seeing any. So I'll put the resolution to a vote. Please mark your vote. [Voting]

The fourth resolution relates to the reelection of Peter Kean as a director. This year, Peter required to retire by rotation, and he will retire and being eligible offers himself for reelection. The Board unanimously recommends that shareholders in favor of Peter's reelection. Peter, I'll ask you to speak in support of the motion.

Thank you, Mark. [Foreign Language] and good morning to everyone and also a big welcome, and thanks for your ongoing support. If you're on this call today, you are very important to the Freightways business. My name is Peter Kean, and I've been on the Board of Freightways for 5.5 years now. During that time, we've continued to achieve steady growth both in revenue and profitability. I believe the key areas that I can add particular value to Freightways are in sales, marketing, innovation, supply chain and logistics. My previous experience in both New Zealand and Australia have given me a strong focus on our consumers, but more importantly, on our customers, who of course are at the heart of everything we do. As well as being an experienced company director, I'm also a business owner, therefore, understand all the intricacies that come with that, especially in these COVID times. I look forward to being part of the solution to our challenges and opportunities, which we will continue to face in the coming years. I do hope I can rely on your support for my reelection on the Freightways Board. And before I sign off, I would also like to just mention how much I've enjoyed having Kim work alongside me on the Board and also to all the staff and management of the Freightways business. You are a pleasure to work with. Thank you all very much.

Thanks, Peter. Are there any questions or matters for discussion concerning the resolution to reelect Peter as a director? And I'm not seeing any. So I will put the resolution to a vote and ask you to please mark your vote. [Voting]

The fifth resolution relates to the increase in the total quantum of the annual Director fee pool by an aggregate of $161,000 to $857,145 such amount to be divided among directors as they deem appropriate. We regularly review fees generally annually to ensure the aggregate amount available for directors' remuneration is adequate so that they remain aligned to market levels. Last year, we did not apply for an annual incremental adjustments due to the impact of COVID-19. So the current fee levels have stayed unadjusted for 2 years. It should also be noted that last year during the first lockdowns in New Zealand, directors took a 20% fee cut for a quarter. Since the last increase, the number of directors had also increased from 6% to 7%, including the chair. This increase in number is actually the main driver in the available pool increase with the actual fees to be paid or the increase being more modest. The Board does consider the importance of ensuring diversity of thought and experience around the Board table and the need to attract quality candidates. This year, we obtained independent market advice from Ernst & Young and a summary of their report was attached to the Notice of Meeting. including an independence direct declaration from the agent party -- partner. The directors propose to apply an increase this year, which allows for nonexecutive directors to be paid at approximately or just below the medium level of the peer group market data presented by EY. The proposed increase also allows for members of board committees, in particular, Board chairs -- Board subcommittee chairs whose workload is quite a bit higher than it used to be paid at approximately or just below the median of their peer group. And please also note finally that the increase that we've gone for is actually below the amount recommended by EY. In accordance with the NZX main board Listing Rule 6.3.1, the directors and their associated persons are restricted from voting on this resolution. We unanimously recommend that shareholders vote in favor of the increase. Are there any matters or discussion or questions concerning the resolution? I'll check. I can't see any. Then I will put the resolution and ask that you please mark your vote. [Voting]

The final resolution for consideration is to authorize us, your directors to fix the auditor's remuneration. The present auditors, PricewaterhouseCoopers will continue in office under the Company's Act 1993. Are there any questions or matters for discussion concerning the resolution? Not seeing any I'll now put the resolution to a vote. Please mark your vote. [Voting]

As mentioned earlier, the results of the polls will be advised to the NZX later today. Ladies and gentlemen, that concludes our discussion on all items of business, After a brief pause, I will close the voting system. Please ensure you've cast your vote on all resolutions. I'll now pause to allow you a final time to vote. [Voting]

Ladies and gentlemen, thank you for voting. Voting will be counted by Computershare and scrutinized by the company's auditors, PwC, and the results will be advised to the stock exchange later today. Thank you for attending our Freightways Annual Shareholder Meeting online and indeed, for your ongoing support for the company. It's appreciated. I now declare the meeting closed. Thanks.