FREIGHTWAYS GROUP LIMITED - Annual Report 2023

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries 1

Mapping our growth

==> picture [358 x 96] intentionally omitted <==

----- Start of picture text -----

DARWIN
TOWNSVILLE
----- End of picture text -----

Increasingly, business for the Freightways Group is about mapping growth across two complementary markets as we think, work and organise as a Trans-Tasman organisation. This year that dual presence worked well for us with the New Zealand market quieter while Australia grew at a good pace.

The significant contributions coming from Allied Express, Big Chill, Shred-X and others prove that we make successful acquisitions. The emerging successes of our innovative startups show that we have what it takes to build out a presence in emerging markets like 3PL, digitisation and medical waste. Our workhorse businesses remain well-managed, to meet our busy customers’ needs and expectations.

Key things unite us: our underlying capability of pick-up, process and deliver infuses everything we do. Our shared capabilities and principles drive our vision to “move you to a better place”. And our commitment to grow sustainably and responsibly is evident in the way we established sciencebased targets and the plans put in place to achieve them. Market dynamics will always be cyclical. Our approach to growth focuses on seeing past that, through holistic planning, a portfolio approach and investing methodically for the future.

BRISBANE PERTH SYDNEY ADELAIDE CANBERRA MELBOURNE HOBART Key NETWORK COURIER NETWORK COURIER TEMPERATURE INFORMATION AU: ALLIED EXPRESS CONTROLLED MANAGEMENT POINT-TO-POINT NZ: NEW ZEALAND NZ: BIG CHILL , NZ: TIMG / AU: TIMG TEMPERATURE CONTROLLED COURIERS, POST HASTE, PRODUCEPRONTO CASTLE PARCELS, WASTE RENEWAL BUSINESS MAIL NOW COURIERS, PASS THE PARCEL BUSINESS MAILNZ: DX MAIL , DATAPRINT AU: SHRED-X , MED-X SUPPORT POINT-TO-POINT GROUP SUPPORT INFORMATION MANAGEMENT COURIER WASTE RENEWAL AU: ALLIED EXPRESS NZ: FIELDAIR, PARCELINE NZ: SUB60, KIWI EXPRESS, STUCK

==> picture [458 x 397] intentionally omitted <==

----- Start of picture text -----

WHANGAREI TAURANGA
AUCKLAND / NORTH SHORE ROTORUA
HAMILTON / PUTARURU
HAWKE'S BAY
NEW PLYMOUTH
TAUPO
WHANGANUI PALMERSTON NORTH
WELLINGTON
NELSON / BLENHEIM
CHRISTCHURCH
CENTRAL OTAGO /
CROMWELL
TIMARU
INVERCARGILL
DUNEDIN
----- End of picture text -----

Key

Freightways Annual Report | Financial Year ended 30 June 2023

==> picture [596 x 842] intentionally omitted <==

----- Start of picture text -----

freightways.co.nz Freightways Group Limited and its subsidiaries 3
Chair and Bigger proves to be better.
CEO's Report The oversize courier story
10 18
Fresh ideas for convenience Parcel-sized fulfilment.
foods. ProducePronto The Stocka story
28 34
Sustainability Climate-related
Report disclosures
39 54
Our board Directors' Report
and leadership and financials
76 80
----- End of picture text -----

==> picture [596 x 842] intentionally omitted <==

Our Annual Report

4 This year's highlights
6 Our growth strategy 8 Our family of brands 10 Chair and CEO’s Report

This year we combine our Annual and Sustainability Reports to provide insight into our financial and non-financial matters in one document.

16 Living our capabilities in 2023
18 Oversize courier case study
24 Our people
28 ProducePronto case study
32 Our communities
34 Stocka case study

Our Sustainability Report

40 Environmental Statement 42 Materiality review
43 Our SDGs
54 Climate-related disclosures
76 Our Board and Leadership

==> picture [256 x 172] intentionally omitted <==

79 Financial summary
80 Directors' Report
91 Financial statements and notes

==> picture [299 x 172] intentionally omitted <==

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

==> picture [4 x 6] intentionally omitted <==

----- Start of picture text -----

4
----- End of picture text -----

==> picture [280 x 233] intentionally omitted <==

----- Start of picture text -----

7 [%]
Group wide
NPAT growth
----- End of picture text -----

==> picture [17 x 17] intentionally omitted <==

----- Start of picture text -----

2
----- End of picture text -----

==> picture [192 x 192] intentionally omitted <==

----- Start of picture text -----

29 [%]
Group wide
revenue growth
----- End of picture text -----

==> picture [17 x 17] intentionally omitted <==

----- Start of picture text -----

1
----- End of picture text -----

This year's highlights

==> picture [266 x 153] intentionally omitted <==

----- Start of picture text -----

5
32 [%]
Group wide
Express Package
revenue growth
----- End of picture text -----

==> picture [165 x 339] intentionally omitted <==

----- Start of picture text -----

Group wide
EBITA growth
15 [%]
----- End of picture text -----**

==> picture [17 x 18] intentionally omitted <==

----- Start of picture text -----

3
----- End of picture text -----

==> picture [289 x 131] intentionally omitted <==

----- Start of picture text -----

7
Express
Package
Calculation includes impacts of EBITA
flooding, and Cyclone Gabrielle
on volumes
EBITA is a non-GAAP measure
(GAAP – Generally Accepted 17 [%]
Accounting Principles)
----- End of picture text -----*

==> picture [17 x 17] intentionally omitted <==

----- Start of picture text -----

9
----- End of picture text -----

==> picture [193 x 152] intentionally omitted <==

----- Start of picture text -----

52 [%]
Digitisation growth
year-on-year
----- End of picture text -----

Operating revenue for FY23
NPAT growth in FY23
EBITA** growth for FY23
Cash flow growth FY23
Express Package revenue FY23
Information Management revenue FY23
Express Package EBITA**
Australia revenue for FY23
Digitisation growth year-on-year

==> picture [498 x 372] intentionally omitted <==

----- Start of picture text -----

year-on-year
10. Boxes archived in
TIMG NZ/AU
8
143 [%] 26 [%]
Australia Group wide
revenue growth cash flow growth
----- End of picture text -----

==> picture [162 x 110] intentionally omitted <==

----- Start of picture text -----

3MILLION
Boxes archived at
TIMG, Group wide
----- End of picture text -----

==> picture [161 x 110] intentionally omitted <==

----- Start of picture text -----

6
15 [%]
Information
Management
revenue growth
----- End of picture text -----

==> picture [17 x 17] intentionally omitted <==

----- Start of picture text -----

10
----- End of picture text -----

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

The Freightways Growth Strategy

STAKEHOLDERS:

Our customers Our team Our shareholders Our communities

==> picture [510 x 375] intentionally omitted <==

----- Start of picture text -----

��
��
OUR VISION
OUR PRINCIPLES
��
��
OUR CAPABILITIES
��
��
OUR ACTIVITIES
��
��
----- End of picture text -----

==> picture [158 x 13] intentionally omitted <==

----- Start of picture text -----

��
----- End of picture text -----

OUR PURPOSE:

What we do

Freightways is a business that is always on the move. Across the Group, we pick-up, process and deliver physical and digital items providing a reliable and efficient service for our customers. We look to develop our people through career opportunities. We seek appropriate and sustainable returns for our investors. And we look to move the dial for communities through the causes we support by reducing our emissions and employing or contracting local people.

OUR PRINCIPLES & CAPABILITIES:

How we work

Three principles guide how our teams and our partners deliver:

We take ownership and responsibility at every level for what we do and what we can improve.
We think commercially about the deals we make so that they make sense for our customers, our contractors, our business and our shareholders.
We work as a family by supporting people, by prioritising their safety and wellbeing and by doing everything we can to ensure they get home safe each day.

We depend on our capabilities to deliver what our customers, investors and communities expect. We’re efficient. This critical capability enables us to move around 100,000,000 items through our various businesses every year. We are reliable. We target flawless execution, which enables us to shift multiple items through multiple touchpoints in our network, across two nations, every day. We act like entrepreneurs. We recognise and execute on high-value opportunities. We always look forward and up. We love our customers, both internal and external because we know they’re crucial to our commercial success.

OUR VISION:

Why we do this

Better outcomes won’t just happen. It takes a conscious effort from our team to move things forward for our customers, our team, our shareholders and our communities.

Our “why” is to move you to a better place.

==> picture [225 x 200] intentionally omitted <==

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Our family of brands

==> picture [452 x 405] intentionally omitted <==

----- Start of picture text -----

��
��
��
��
��
��
��
��
��
��
��
��
��
v
��
li
��
e e
��
D r
��
��
� �
� ��
�
�
s
es Pi
c c
o k
�
�
r –
�
�
P u
�
�
p
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
----- End of picture text -----

Our market-leading brands combine shared infrastructure with specialist knowledge in each niche.

We work across a range of business sectors, achieving high levels of quality and efficiency, through our focus on adding value to how we pick-up, process and deliver.

Our strong culture and commitment unifies our people and feeds our deep team spirit. We draw on all of that to continue to evolve our businesses to meet the changing needs of our customers.

E XPRESS PACKAGE AND BUSINESS MAIL

Our multi-brand strategy in the Australasian courier and business mail markets caters to a range of customer needs and delivery timeframes. Our New Zealand courier operations share branch networks, air and road linehaul, and IT. These brands include New Zealand Couriers, Post Haste, Castle Parcels, NOW Couriers, SUB60, Security Express, Kiwi Express, STUCK and Pass the Parcel. We also offer airfreight capability for our overnight Express Package delivery service through our joint venture airline, Parcelair, and our linehaul partner, Parceline. Our national Australian network is operated by Allied Express and includes a full spectrum of national, local and 3[rd] Party Logistics (3PL) courier services.

DX Mail is New Zealand’s only dedicated business mail specialist offering time-sensitive physical postal services.

Dataprint offers mailhouse-print services and digital mail presentation platforms across New Zealand. Our technology and solutions transform data into effective communications for customers.

TEMPERATURE CONTROLLED

Big Chill Distribution and ProducePronto make up our national temperature-controlled business, together servicing the chilled logistics needs of Kiwi businesses. Combining our chilled national linehaul with an urban, chilled van network allows us to offer national delivery, same day delivery, 3PL & 4PL under one responsive umbrella.

INFORMATION MANAGEMENT

The Information Management Group (TIMG) helps businesses protect and add value to the data they entrust us with. It offers physical storage and information management services, as well as digital information processing services such as digitalisation, business process outsourcing, online back-up and eDiscovery services. This year we increased the utilisation of our storage facilities by starting an eCommerce 3PL service called Stocka.

WASTE RENEWAL

Shred-X offers document destruction, eDestruction and product destruction services. We also provide medical waste collection and processing services under the Med-X brand. This year we continued to find new ways to transform what would once have been waste into new products.

��

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

==> picture [44 x 842] intentionally omitted <==

==> picture [486 x 48] intentionally omitted <==

----- Start of picture text -----

Chair & CEO's Report 2023
----- End of picture text -----

==> picture [263 x 249] intentionally omitted <==

" Strategically, we are confident these investments will form a powerful, collective catalyst for sustained growth in FY24 and beyond. "

Against a backdrop of quite different market dynamics on each side of the Tasman, our teams have worked tirelessly to meet the needs of our customers and we have selectively invested in the exciting future we see for ourselves.

INVESTING IN MOVING YOU TO A BET TER PLACE

Despite economic pressures, we remain committed to "Moving you to a better place". Investment across our four key activities – Express Package and Business Mail, Temperature Controlled, Information Management and Waste Renewal – is broadening our business footprint, leveraging our expertise and presence in exciting ways.

Strategically, we are confident these investments will form a powerful, collective catalyst for sustained growth in FY24 and beyond. Along the way, they will create opportunities to increase volume and achieve economies of scale, enhance our responsiveness and reliability for customers and strengthen our Group overall with more resilient, more efficient businesses.

Growth in the Australian economy in FY23 helped deliver solid financial performance from our Allied Express business, which lifted the overall Group result. The New Zealand economy, by contrast, was sluggish as businesses grappled with the challenges of a tight labour market, high labour costs, inflationary pressures and, of course, destructive weather. While some parts of our business, such as Information Management, have rebuilt after COVID-19, our linehaul businesses for both courier and temperature-controlled goods incurred much higher operating costs and disruptions during the year along with subdued growth in the operating environment.

OUR THREE HORIZONS FUTURE

The exciting feature of our three horizons approach is that it enables us to expand, in a disciplined way, into new areas characterised by greater value.

The end result reflected these contrasts. Overall, operating revenue increased by 29% from last year, with our Australian businesses growing by 143% and our New Zealand businesses increasing by 6% — net profit after tax lifted by 7% overall.

Our first horizon revenue streams are the backbone. Often built over decades, they provide the core expertise, infrastructure and national network capabilities. Businesses here range from business-tobusiness (B2B) deliveries to temperature-controlled transport to archive storage and document destruction.

G R O W T H O N B O T H S I D E S O F T H E TA S M A N

==> picture [262 x 249] intentionally omitted <==

In Australia, installing a new automated sortation system for Allied Express and establishing a new medical waste processing facility for Shred-X in Victoria will underpin efficiencies and enable these businesses to pick-up, process and deliver greater quantities at improved efficiency.

LEVERAGING OUR E XISTING NETWORKS

25kg+ couriers, same-day temperature-controlled delivery and high-value recycling all align with our core pick-up, process and deliver ethos. These activities have all been developed by using the facilities, teams of people, IT systems and customer-bases of our horizon one businesses.

A BUSY YEAR FOR ALL

Our Allied Express business has had a very good first year. Leveraging its footprint across five states has produced pleasing revenue growth. Now we are looking to make even more of their presence through world-class facilities that have the capacity to cope with a doubling of revenue in an express delivery market which is around 8 times larger than New Zealand's.

• Second horizon businesses utilise the fixed cost base established for horizon one but have faster growth prospects. These are activities like business-toconsumer (B2C) deliveries, temperature-controlled 3[rd] Party Logistics (3PL), digitisation and medical waste.

Complementing the larger facilities with automation in NSW and Victoria is the first step. This project, which started towards the end of the year, will pair investment in the best freight sorting automation with Allied Express’ deep business relationships to build the capacity for material growth. This will allow us to pursue growing market share and grow the business without worrying about constraints in infrastructure. To assist that growth, we are building a new business sales team in Australia to maximise the opportunities from Allied's service proposition.

• Our third horizon businesses are the innovators – focused on delivering long-term revenue streams by identifying emerging niches with healthy potential. Opportunities in this space include oversize express couriers, same-day temperature-controlled deliveries, high-value recycling and 3PL for eCommerce.

We are also actively looking for synergistic merger or acquisition opportunities to complement this investment in the years ahead.

CREATING ROOM TO GROW

After a surge in growth driven by demand for our services during the peak COVID-19 period, our Waste Renewal businesses have reverted to trend levels in terms of both volumes and growth expectations. We foresaw this. But we also anticipated the opportunity for investment, again to allow these businesses to pursue more growth in the years ahead. With that in mind, we have developed a new medical waste facility set to open in Victoria in early FY24.

Our investments this year and next are about adding capacity for growth within our integrated model. For example, our new Big Chill facility in Ruakura will give us the room for growth that we need to meet the ongoing demand for temperature-controlled 3PL as well as expanding our nationwide delivery capability. Equally, our new ProducePronto facility in Auckland will allow us to grow our temperature-controlled same-day and 4PL offering.

In New Zealand, our Express Package brands have experienced a net gain in market share thanks to strong relationship/business development and differentiated service offerings that customers value. While the New Zealand economy goes through tougher times, it has been inspiring to see our teams winning new customers aided by superior performance and reliability and keeping customers better informed about their deliveries.

The arrival of our first Boeing 737-800 is a game-changer for our air freight services, enabling us to improve the resilience and efficiency of our first horizon businesses. This newer, faster and more fuel-efficient aircraft will allow us to carry more freight with reduced emissions and at better levels of reliability. The remainder of the fleet will be steadily upgraded over the rest of this decade.

==> picture [43 x 842] intentionally omitted <==

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

==> picture [44 x 842] intentionally omitted <==

==> picture [43 x 842] intentionally omitted <==

Chair & CEO's Report

2023 G R O W T H O N B O T H S I D E S O F T H E TA S M A N

==> picture [1106 x 249] intentionally omitted <==

A BUSY YEAR FOR ALL (CONTINUED)...

Work over the coming year will highlight the size of the Australian market, our cost of entry and the approach we will take should we decide to progress.

From October 2023, this state-of-the-art facility will enhance our existing capabilities with increased links to Port of Tauranga, the Waikato and the Bay of Plenty, and increase same-day and overnight services to Auckland. The new site will also allow us to store a significant number of temperature-controlled pallets.

Well over 95% of our total Group emissions come from the fuel we use across our vehicles and aircraft. Our 2030 target of a 35% reduction in CO2e and our 2035 target of a 50% reduction in C02e align with what society needs to achieve globally to keep global warming to within 1.5 degrees Celsius.

Cost pressures have been material this year. High labour costs, in particular, have prompted us to announce new pricing from the beginning of the next financial year (1 July 2023) to offset those costs.

OUR SUSTAINABILIT Y JOURNEY CONTINUES

Our Temperature Controlled businesses have also faced their share of challenges, with Cook Strait ferry disruptions and Cyclone Gabrielle adversely affecting a finely tuned supply chain system and generating cost pressures through the year's second half. Our teams have done a remarkable job of countering setbacks across a network where there is no inherent ‘give’ in the system. For both Big Chill and ProducePronto, time is our most significant advantage but potentially a costly adversary. When frozen perishables are waylaid because trucks are stranded in remote locations, often some distance from the nearest depot, the pressures come thick and fast. Our people battled disruptions, shortage of trucks and drivers, and delays to do the best for our customers.

We continue to make steady progress in the area of sustainability. We remain committed to our science-based target of a 50% drop in Scope 1, 2 and 3 emissions by 2035.

This generates new opportunities to build our customer base in these active food-producing regions and strengthen volumes. Adding 3PL services will align the site with our Auckland and Christchurch facilities and enable us to add more logistics services for clients if needed as part of our nationwide expansion.

Electrification of our forklifts and company vehicles has been a key initiative which commenced this year. At this stage, we plan to convert 25% of our company cars to PHEV by 2025, with 100% either PHEV, EV or hydrogen by 2030. Our contractors' light vehicles will begin to meaningfully transition to EVs from 2028, with our entire light vehicle fleet made up of low-emission vehicles by 2035. We are looking at finance options and continued upward movements in courier incomes to help our contractors do this. We also anticipate that our heavy transport fleet will commence using alternative fuels from 2030, and by 2035 we foresee that half of these vehicles will have transitioned – in particular the metro trucks which service customers within city and town locations.

We have been TOITŪ certified since 2014. This year, we have brought together our performance and sustainability reporting into this one report, reflecting our wish to think about – and report on – our broader progress as a business. As we signalled last year, we reviewed our Sustainable Development Goals (SDGs) materiality as part of a review we do every five years to ensure our Goals continue to align with the interests of our stakeholders.

We’re also investing in new vehicles for the business over the next 12 months. These fleet improvements will add resilience to our model, provide more capacity to take on new business as we look forward to strengthening the Big Chill network and produce lower emissions through better fuel efficiency.

Our Information Management business grew well this year in terms of volumes as people returned to the office. We are especially pleased with our TIMG team's fantastic job in successfully completing a large digitisation project.

We will continue to report on SDG 13 - Climate Action because we have firm commitments to this. Still, we will set a new baseline for those actions with the inclusion of our Australian businesses (and will include a full year of Allied Express in our FY24 report) and our Big Chill business in New Zealand.

For many of those customers, daily or even multiple-timesper-day deliveries are a commercial necessity. With no redundant refrigeration anywhere in the system to hold stock, stoppages can potentially hurt everyone. The big out-take from what has happened this year was that some extra capacity across our network is a game changer.

The significant growth of the ProducePronto network in recent months has led us to invest in a new, much larger depot for Auckland to meet the same-day delivery needs of the growing convenience food market and quick services restaurants demands. We’ve identified a similar opportunity for such an offer in Australia.

We already have milestones in place to move us to alternative fuels through our light vehicle and metro truck fleets as and when the technology to do so realistically becomes available.

We’re excited about the opening of Big Chill’s new 13,000sqm 3PL cold store facility in Ruakura, adding to the nine depots we already have in our nationwide network.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

==> picture [44 x 842] intentionally omitted <==

Chair & CEO's Report 2023

OUTLOOK FY24

The economic climate has presented challenges over the past six months, and we expect this to continue through FY24. In New Zealand, while same-customer volume is lower than in FY23, we have secured new customers who are mitigating this impact. The tight labour markets in both New Zealand and Australia are beginning to ease. In the short term, we are cautious about the impact of the economy, particularly in New Zealand.

Investing in our aviation assets will strengthen the network. At the same time, our investments in Big Chill are about taking advantage of growth opportunities where we see them. What heartens us are the number of new business opportunities we have identified in some of our divisions. Information Management will benefit from utilising existing capacity and Waste Renewal will take advantage of new capacity in Victoria.

Notwithstanding the current economic environment, we are excited about the potential to grow our revenue and profitability on both sides of the Tasman in the longer term.

We will continue to develop our third horizon business and expect growth in 25kg+ courier, same-day temperaturecontrolled transport, high value waste opportunities and Stocka – our 3PL eCommerce offering.

We look forward to a resumption of demand across our New Zealand businesses as the economy steadies and re-gathers confidence, hopefully later in the financial year. For our Express Package brands, our goals will be maintaining our quality network at the right price and containing and recovering costs where we can.

In Australia, we’re confident that our investment in Allied Express will benefit from organic growth and will seek out complementary acquisition targets.

==> picture [352 x 349] intentionally omitted <==

----- Start of picture text -----

� ��
� ��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
�
��
��
��
��
�
��
��
��
��
��
�
�
��
��
� �
�
�
�
�
�
�
�
�
�
� �
�
�
��
�
�
�
�
�
�
�
��
��
��
�
�
�
�
�
��
�
��
�
��
��
�
��
��
�
�
��
�
�
��
� ��
��
�
��
�
�
��
��
�
� ��
�
��
�
�
�
��
��
��
��
��
�
� �
�
��
��
�
��
�
��
��
�
�
��
�
��
��
�
�
��
�
�
��
�
��
��
��
�
��
��
�
��
�
�
�
�
��
�
��
�
�
�
�
�
�
�
�
�
�
�
�
�
�
� �
�
�
� �
�
��
�
�
�
��
��
�
��
��
�
��
��
��
�
��
�
��
��
��
��
�
��
��
�
��
�
�
�
�
��
�
��
��
�
��
----- End of picture text -----

==> picture [43 x 842] intentionally omitted <==

G R O W T H O N B O T H S I D E S O F T H E TA S M A N

==> picture [263 x 247] intentionally omitted <==

We will continue to manage capital in a prudent way that seeks to achieve a number of objectives:

Invest to maintain or improve the level of service quality and network resilience: for example, fleet replacement or new facilities;
Invest in new technologies that support our value proposition;
Invest in businesses that support our horizons of growth.

In addition, Freightways, through the acquisition of Allied Express in Australia, has acquired a strong network across Australia and is further investing in capacity there as well as considering bolt-on acquisitions.

We will manage the level of debt carefully and aim to preserve our Investment Grade credit profile at all times. Our capital management will continue to reflect this objective.

Freightways does not consider that this process will have a material financial or operational impact on the Group.

ASX DUAL LISTING

Freightways Group Limited will today apply for admission to the official list of the Australian Securities Exchange (ASX) by way of an ASX Foreign Exempt Listing. Freightways’ primary listing will remain on the NZX Main Board (NZX) while its dual listing on the ASX reflects the changing profile of the business, with Australian operations representing a higher proportion of Freightways’ revenue and profit, particularly since the acquisition of Allied Express in October 2022. Freightways has had a presence in Australia since its 2007 acquisition of Databank and has steadily grown its footprint through the acquisition and growth of its information management, secure destruction and waste management businesses.

TOTAL CAPITAL E XPENDITURE FOR THE YEAR WAS $37M

As we reach the upper range of our target gearing we will assess the tools available to us to reduce debt and stay within the guidelines established by our capital management policy while taking into account the merger and acquisition opportunities that can be accretive for shareholders.

In closing, we'd like to acknowledge our people's fierce loyalty and commitment. Thanks to all of you for engaging with our challenges and giving your all every day to make us the Freightways we are all so proud of.

Freightways’ name was changed to “Freightways Group Limited” and NZX ticker code was changed to “FRW”, each with effect from market open on 1 March 2023 to allow for a potential dual listing. Its ASX ticker code will also be “FRW”.

Thanks, too, to our board for your guidance as we stepped up our investments this year and to our shareholders and customers who continue to believe in and support us. We're excited about what's ahead.

Subject to ASX approval, Freightways expects to become officially listed in mid-September 2023.

==> picture [90 x 63] intentionally omitted <==

MARK TROUGHEAR CHIEF EXECUTIVE

REGULATORY

Freightways is subject to a Commerce Commission investigation and is cooperating with the Commerce Commission.

MARK CAIRNS CHAIRMAN

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Living our capabilities in 2023

Our organisational capabilities are a set of strategic skills that we continuously draw on to get work done, execute our business strategies and meet our customers' expectations. Here are some standout examples from our FY23 activities.

==> picture [1191 x 484] intentionally omitted <==

----- Start of picture text -----

WE HAVE MOVED OUR FOCUS
WE MAINTAIN LEADING
FROM CUSTOMER SERVICE TO WE HAVE LEASED NEX T
DIFOT (DELIVER IN FULL
CUSTOMER EXPERIENCE TO GENERATION AIRCRAF T
ON TIME) THROUGH
IMPACT THE WAY WE INTERACT FOR OUR AIR NET WORK
ALL OF OUR OPERATIONS
WITH OUR CUSTOMERS
ESTABLISHMENT OF A 48% INCREASE IN ADDRESS
MEDICAL WASTE TREATMENT VALIDATIONS, IMPROVING WE COMMENCE ALLIED EXPRESS’
FACILIT Y IN VICTORIA DELIVERY ACCURACY, SORTING AUTOMATION STRATEGY IN VIC
RESULTING IN LOWER COST EFFICIENCY AND SUCCESSFUL AND NSW IN F Y24
PER KG FOR PROCESSING FIRST AT TEMPT DELIVERIES
WE HAVE EXPERIENCED
ALL NEW BUSINESS AND
GROUP LEVEL EXECUTIVES THE CUSTOMER-CENTRICIT Y
PRODUCT DEVELOPMENT,
AND MANAGEMENT TO DRIVE OF OUR EXPRESS PACK AGE
GROUP WIDE, IS BUILT
CULTURAL CAPABILIT Y AROUND BRANDS CONTINUES TO BE A
USING DIRECT CUSTOMER
CUSTOMER INTERACTION COMMERCIAL DIFFERENTIATOR
RESEARCH AND INSIGHT
AND SERVICE
WE HAVE BROADENED OUR
WE CONTINUE TO
WE L AUNCH T WO NEW FOOTPRINT ACROSS EXPRESS
ACTIVELY SEARCH FOR NEW
BUSINESSES: STOCK A PACK AGE AND TEMPERATURE
HIGH-VALUE RECYCLING
AND KIWI OVERSIZE CONTROLLED TO MAKE ROOM
BUSINESS OPPORTUNITIES
FOR GROW TH
I
O
P
I
E
I
I
A
V
C
E
K
L V
O
T
L
E E
L
E
M
I
I
V
E
B
E
E
F
E
S
R N
R
F N
U
L
E
T
R
O
D
O
T
R
F
U
A
E
Y
T
C
R
R
C
L
R
N
S
E Y
C
N
U
S
A
E R
----- End of picture text -----

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Bigger proves to be better

Our two carriers of express oversized parcels, Allied Express in Australia, and Kiwi Oversize in New Zealand, have quite different backgrounds – but together, they intend to contribute considerably to Freightways in the years ahead.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

==> picture [596 x 366] intentionally omitted <==

Allied Express

Founded 45 years ago, Allied Express specialise in larger courier parcels - items typically greater than 22kgs. The company can reach every corner of Australia with operations across all states and partnerships with key linehaulers and long-term agents in more rural or regional centres.

In fact, Allied Express are now one of the largest independent courier operators in the country, with an established, well-recognised brand and a reputation as the national market leader in specialised freight, including big and bulky freight. Not only does Allied Express operate at a different scale than anyone else, but they can also reach every rural or urban destination, and they specialise in larger, hard-to-handle items.

==> picture [65 x 61] intentionally omitted <==

And because almost everything goes through their network (as opposed to being contracted out to another operator), delivery performance and customer service are consistently high.

The decision to specialise was conscious, enabling Allied Express to side-step the low margin mainstream courier volumes and focus instead on so-called “ugly freight” – the items that mainstream operators struggle to move through their automated sortation systems but that Allied Express can transport efficiently via the specialised network they have built around oversize parcels.

==> picture [1191 x 296] intentionally omitted <==

----- Start of picture text -----

instead on so-called “ugly freight” – the items that mainstream
operators struggle to move through their automated sortation LIVING OUR CAPABILITIES EVERYDAY:
systems but that Allied Express can transport efficiently via the
ABOUT ALLIED EXPRESS: specialised network they have built around oversize parcels.
Allied Express has around 1800 customers, ranging from blue
• Founded in 1978
chip large corporates to SMEs, predominantly in the business-to-
• $200m+ revenue annually business and business-to-consumer sectors. Prominent industry groups include automotive, retail, electronics, homeware, whiteware The company has a solid customer service ethic that has built a portfolio
• Five primary depots across and manufacturing. A key reason the company has grown so significantly is its nimbleness. It led the market by evolving quickly of loyal customers. In fact, their top 20 customers have been with them on
all key states and effectively to meet eCommerce needs, doing well through average for 10 - 12 years.
COVID-19 with the rise in demand for online shopping. Allied’s
• 700 drivers (contractor model)
bigger depots have also allowed them to use space more efficiently,
and their excellent service record has generated more work.
and 450 staff
• Nationwide agency of 50 Since being acquired by Freightways, the company has
invested significantly in an automation strategy that will give
independent partners them unique technology to deal with oversized items through
700 drivers, 450 staff and an agency
their largest depots in Sydney and Melbourne. At the same time,
• Partners with a network of key the business has increased the size of its operation to prepare network across the country mean
linehaulers and airlines for the projected growth. New or expanded facilities in Sydney, Allied Express can deliver to almost
any location in Australia, with a 98%
Melbourne, Perth, Adelaide and Brisbane (new build completed
on-time performance.
• 98% on-time delivery July 2024) will create room to pursue more expansion opportunities.
O
I
I
E
A
L V
O
T M
L
V
E
B
E
S
E
U
E
L
O
D R
U
R
R
R
Y
L
C S
----- End of picture text -----

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

==> picture [298 x 366] intentionally omitted <==

==> picture [299 x 366] intentionally omitted <==

==> picture [299 x 295] intentionally omitted <==

LIVING OUR CAPABILITIES EVERYDAY:

This opportunity is born out of customer need, with a service approach based on deep and recent customer research from The Startery. Kiwi Oversize is a customer-centric O business at its core.

The idea for this business was seeded by our people, who then used The Startery as support. Because the concept is new in New Zealand, we have the advantage of learning and developing with the business and using an entrepreneurial mindset. P

Kiwi Oversize

Just as in Australia, Kiwi Oversize proved to be the missing link in the market, sitting between bulk transport and Express Package but not fitting easily into the existing business models for either. Customers also said they wanted a service that could reliably deliver at similar network speeds to Express Package. That meant Kiwi Oversize was able to operate a national service out of key locations in Auckland, Wellington and Christchurch, using existing resources within Express Package, including linehaul.

Kiwi Oversize started in New Zealand more than 12 months ago. Like many innovations in the Freightways business, it was made market-ready in The Startery. They are currently at Phase Five in that process - developing out the prototype by finding customers for the product.

Express Package contractor owners/drivers were already investing in long wheel-based vehicles and box trucks to handle the freight volumes they move daily. A significant advantage for Kiwi Oversize is that they can recruit contractors from the existing network, which ensures experience and high-quality control. Drivers are now opting to do both traditional and Kiwi Oversize courier runs, which lifts their income and enables greater efficiency across runs.

Speed and accuracy are critical, which is also why Kiwi Oversize has used the learnings from Freightways’ Price for Effort initiative to ensure contractors’ remuneration matches the effort required to deliver.

The company also has a direct sales force in place to target customers. So far, key verticals are predominately in the business-to-consumer (B2C) sector, including flatpack furniture, medical equipment, construction, truck parts and automotive.

Between the established Allied Express business in Australia and the emerging Kiwi Oversize venture, the goal is to build significant business across two markets over the next ten years.

ABOUT KIWI OVERSIZE:

Founded in 2022
Ready-made for B2B and B2C deliveries
National reach through Freightways depot network locations
Leverages Express Package linehaul and technology

==> picture [35 x 42] intentionally omitted <==

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Our people

While COVID-19 has not released its grip entirely in terms of illness and staff and supply shortages, by and large, we saw a solid return to business as usual this year.

Team has always been a critical component of Freightways' culture and that hasn't wavered. We value every individual for their hard work, skills, and contributions to our collective effort daily.

We are as committed to our people as they have proven loyal to us. We want them to be able to develop personally, find happiness here and contribute to our overall cultural health. We foster an inclusive, safe workplace where people can be confident of job security and career advancement if they want it and where we care about their wellbeing.

NEW HEAD OF PEOPLE & CULTURE APPOINTED FOR THE GROUP

People are at the centre of everything we do – they are what makes the difference. To ensure this focus is maintained and progressed, we welcomed Ami Van Gils as our Group Head of People and Culture. Ami’s role is responsible for driving the people-related strategic priorities of the business. Ami comes to us after eight years in the Freight and Logistics environment. She is a commercially focused, empathetic HR Leader with a passion for offering pragmatic advice and building strong, high-performing teams. We will utilise Ami’s experience across our employee life cycle - including recruitment, talent and capability management, diversity and inclusion, wellbeing, learning and leadership development and remuneration.

Our commitment to Sustainable Development Goal 8 influences how we help people advance and feel good at work. On page 46, you can read more about what we're doing around learning and development opportunities. We also take wellbeing seriously. Recent developments include a Psychological Safety Training module which is due to go company-wide in FY24.

Another distinguishing feature of our culture is executive accessibility. We recognise the need for structure for commercial reasons. Still, it's essential that everyone feels they can engage personally with leaders when they need to. Executive availability is an intrinsic part of that.

WELCOMING NEW PEOPLE AS WE EXPAND

As we expand our Group and acquire and merge with other businesses, we continue to welcome new people into our Group. It's great to see the fantastic people at Allied Express and ProducePronto now fully embedded into the Freightways family. We are delighted to have all of them with us.

We are cognisant of the challenges associated with joining a large and diverse Group like Freightways, especially for those who have been part of a smaller team. The key to making this work is to give everyone time to adjust to working in the Group, to be supportive and, above all, to respect them and the expertise and experience they bring. We are here to learn from each other.

AMI VAN GILS

REMAINING AT TRACTIVE AS AN EMPLOYER

The talent market remained tight, but we are expecting that to ease slightly in the foreseeable future. We remain competitive, with a workplace offer that includes strong levels of security, competitive salary and wage packages, Pricing for Effort (PFE) for our contractors and career progression inside the business as a cultural norm.

STOCKA TEAM

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Our people

==> picture [298 x 171] intentionally omitted <==

==> picture [299 x 171] intentionally omitted <==

==> picture [298 x 171] intentionally omitted <==

==> picture [299 x 171] intentionally omitted <==

Ben Armstrong

NATIONAL BUSINESS DEVELOPMENT MANAGER, SHRED-X

I joined Freightways 12 years ago when Shred-X acquired my business. We were based in Geelong, shredding and recycling paper. So, I came to Freightways with some experience in entrepreneurship.

My role is business development. I find it’s important to have a structured week. The first four days I work on sales numbers, and then Friday is when I think about stuff outside the box. Typically that’s around searching for residual value in waste.

Textiles are my current obsession. It’s a big problem for us all because we never get rid of the stuff we import, so it goes to landfills. We can’t recycle textiles, so we look at processes that reduce them to more useful sub-materials or turn them into biodiesel.

It pays to have a bit of tenacity in my job. Finding value in waste means creating a market need and developing the product. We also support many start-ups to help them develop a product we can use.

Making revenue is the end goal, and margins can be small, so it’s essential to be efficient – collect volume, build in value, find a market, link it up with our logistics and then scale!

I’ve learnt a lot in my time here. Always give things a try, fail small, make margin as you go, and create tension between structure and freedom to keep the entrepreneurial spirit alive.

Scarlett Liu

COMMERCIAL FINANCE MANAGER, HEAD OFFICE – POST HASTE GROUP

It’s my job to help the business be more efficient - for Head Office, branches, finance and non-finance. Improvements must be quick and make sense to the practical nature of our people — complete information, a bit of guidance and a strong collaborative approach.

I have lots of respect for our operational teams. They have deadline pressures every day.

I am always impressed at how collaborative the business is – within Post Haste and across Express Package. Reliability is vital to what we do, and the collaboration makes that a reality. It honestly takes a village of dedicated people to make reliability happen.

We talk a lot about service at Post Haste. It’s how we show love for our customers, and I see strong expressions of this love daily.

Having a duty of care as an employee is essential to excelling at work. I believe we must think and act as if we own the business and ask questions like ‘What can I do or how can I respond today to make things better than they were yesterday?'

The family-feel of Post Haste/ Freightways has made engaging easy. I appreciate being part of an organisation that values this. I also appreciate how hard that is to do, considering we are such a large organisation. Our culture builds loyalty, and it stimulates personal growth within our people.

Rebecca Westbury

CHRISTCHURCH OPERATIONS MANAGER, DX MAIL

I look after about 35 DX posties in our Christchurch branch. The job attracts all types - semi-retirees, young people just starting and everything in between. That’s my pastoral care role, plus, my business care role ensures we meet our customers’ expectations.

A lot is happening in mail. New technology to help efficiency. An increase over here, a decrease over there. It keeps us flexible because we are constantly moving to suit the market.

Reliability in the mail industry is everything. You have to work like clockwork because that’s what builds trust. We deal with volume, and we must be consistent. Reliable, over and over again, being great at processing volume - for the long term.

And yet, we still do extraordinary things if needed - like dropping mail off on the way home. It’s about looking after the people that trust us with their post. We work with our customers for a long time, some since the earthquakes. The business had to be built from the ground and they were there when we did that.

That creates loyalty, and it makes business a personal thing for me. We are a business, but theres nothing wrong with a bit of heart mixed into your professional life.

The future is bright, which is probably a funny thing to say about mail, but I believe it’s true.

Tony Aspey-Gordon

NATIONAL OPERATIONS MANAGER, PARCELINE

It's my job to balance efficiency and cost-effectiveness with our service levels. But the most crucial thing I contribute is helping us deliver the 'can do' attitude – our role is to ensure we 'get through'. That is who we are as a business. Operationally and culturally.

The easiest thing to do is to park and wait. It's much harder to make up our minds about what happens next and find a way. What became very apparent during the lockdowns was the amount of medical, perishable, and critical freight we transported - not getting through had a knock-on effect on everyone connected.

Dealing with disruption is part of our business. Weather, road closures, ferries, trucks breaking down, and aircraft having issues will happen. It's the experience and flexibility of our people that all collaborate to identify options and find the correct answer.

Reliability is in our DNA, but it's more complex than being on time. It's about investing in our equipment, building relationships, looking after the trucks, prioritising freight, and knowing our customers. Our network is entirely shaped by the end customers' expectations.

As a Freightways business, we have a clear focus, good support, and governance. Our guidelines and expectations are clear. I like the tagline "Driven by Freightways" our brands use with their logos – it encapsulates our strength in numbers.

Freightways Annual Report | Financial Year ended 30 June 2023

Freightways Group Limited and its subsidiaries

freightways.co.nz

Fresh ideas for convenient foods

ProducePronto is a fast-growing part of our Group with a national presence enabling us to stay close to the major fresh produce markets.

==> picture [182 x 92] intentionally omitted <==

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

ProducePronto

Alongside their fresh foods, the company also delivers longer-life (frozen or ambient) products. Together, these food deliveries now add up to serious volumes at over 400 sites nationwide daily. And ProducePronto is confident, given trends overseas, that there is still plenty of potential for growth in the years ahead. "Convenience food is a huge business in developed markets like the US and Europe", says Co-founder Josh Bartley-Smith. "We are seeing remarkable growth. Our customers are deeply investing in their store fit-outs and the quality of products to grow sales. Some take a full van-load of food every day."

The business started in 2011 when two friends, Josh and Jason, came home from corporate life in the UK and decided to open what they envisaged as an online fresh grocery delivery company that would deliver fresh food to homes, just like they had seen overseas.

The founders imagined it would be a rival to online supermarkets. But a lack of last-mile temperature-controlled logistics options made the business model hard to scale. They pivoted to fresh commercial deliveries such as fruit and milk to offices and quickly built density. "We tried hard to make the first iteration of the business work", says Co-founder Jason Brennan. "We'd seen it do well in the UK, but we were probably a little ahead of the curve here."

As they accumulated these more significant volumes, the business realised they would need customised technology. Building it as they went, ProducePronto innovated quickly, allowing customers to place orders directly into the ProducePronto integrated logistics and stock management system. A customer billing system, live delivery tracking, proof of delivery and temperature control management are all part of the system.

From this experience, a picture began to form of where their real future potentially lay – last-mile chilled and frozen boxed deliveries. The challenge was getting enough volume to support a national network of vehicles and depots. The convenience food market was a perfect gateway (service station cafes and large retail cafe chains) as this market was growing strongly and required specialised temperaturecontrolled boxed deliveries to support this growth.

In the time that ProducePronto has been part of Freightways, they have grown over 30%, leading to challenges with space. As a result, new premises in Auckland, Wellington, and Christchurch come online through 2023. In Auckland, a considerably larger depot – more than eight times the size of their current premises – goes live in October. Wellington and Christchurch operations will join more extensive shared facilities with Big Chill Distribution.

Once one customer saw the benefits, others followed – and today ProducePronto connects food suppliers with several large retail networks wanting to offer great convenience food to their customers.

The business will also undertake a strategic change in the next 12 months to adopt the Freightways contracted owner/ drivers model in a bid to lift efficiency and delivery reliability.

Along the way, ProducePronto's food delivery portfolio has grown to include pies, sweet treats, muffins, sandwiches, drinks and most recently, Krispy Kreme doughnuts. They have quickly become an integral part of New Zealand's growing obsession for convenience food on the go and to take home.

ProducePronto is conscious of sustainable business practices, with most vehicles now meeting the Euro 6 emission standard. In the medium term, the company plans to trial EVs as soon as technology allows by utilising the charging stations at many of the service stations they visit. The business is also taking steps to reduce waste via recycling and participating in the Soft Plastics Recycling Scheme with pallet wraps.

Fresh stock is prepared daily by various food suppliers in Auckland and then delivered nationwide by ProducePronto. Daily flights to Wellington and Christchurch meet waiting vehicles where product is cross-docked and road-freighted to multiple destinations making logistics unique and complex.

==> picture [149 x 160] intentionally omitted <==

==> picture [150 x 160] intentionally omitted <==

==> picture [298 x 338] intentionally omitted <==

==> picture [299 x 181] intentionally omitted <==

LIVING OUR CAPABILITIES EVERYDAY:

growth since 30[%] November 2021

ProducePronto's entrepreneurship was evident when Freightways first met them. The ability to self-assess and stay curious while delivering daily for their existing customer base is an P excellent capability to be proficient in.

Carrying perishable freight requires logistics that work like clockwork. This means working on the plan daily and having alternatives and back-ups available when the plan goes array. ProducePronto is an expert here because they know fresh food waits for no one. I

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Supporting a deeper sense of community

==> picture [192 x 8] intentionally omitted <==

----- Start of picture text -----

KidsCan Life Flight
----- End of picture text -----

==> picture [27 x 7] intentionally omitted <==

----- Start of picture text -----

NZRSA
----- End of picture text -----

==> picture [136 x 208] intentionally omitted <==

==> picture [135 x 208] intentionally omitted <==

==> picture [136 x 208] intentionally omitted <==

==> picture [72 x 7] intentionally omitted <==

----- Start of picture text -----

Clontarf Foundation
----- End of picture text -----

==> picture [72 x 7] intentionally omitted <==

----- Start of picture text -----

RSPCA Queensland
----- End of picture text -----

==> picture [89 x 7] intentionally omitted <==

----- Start of picture text -----

Ronald McDonald House
----- End of picture text -----

==> picture [136 x 208] intentionally omitted <==

==> picture [135 x 208] intentionally omitted <==

We support a wide

range of organisations in the community.

We have 16 charitable organisations that we have worked with for some time. In addition, many of our brands and branches also support worthy grassroots causes locally – from sports clubs and sports people, schools, and childhood care centres to community initiatives.

We encourage all businesses to develop relationships with the charities of their choice and to offer them support through volunteered time and resources.

Beanies for Babies
Cancer Society New Zealand
Child Cancer Foundation
Clontarf Foundation
Keep New Zealand Beautiful
KidsCan
Life Flight
New Zealand Breast Cancer Foundation
Prostate Cancer Foundation Australia
NZRSA
Ronald McDonald House
RSPCA Queensland
The Hearing House
Westpac Rescue Helicopter

KIDSCAN

The 2022 Child Poverty Monitor found that 16.3% of New Zealand's children live in low-income households. One in six children lives in households where food runs out sometimes or often due to a lack of money. Students growing up in disadvantaged communities are also more likely to leave school before they achieve NCEA levels.

Our company’s principal charity KidsCan is dedicated to helping Kiwi kids affected by poverty. KidsCan's programmes are available in 897 schools and 206 early childhood centres nationwide - where they are helping to feed over 55,000 children, plus provide jackets, shoes, socks, and health products, so our most vulnerable can thrive.

RSPCA QUEENSL AND

Sadly, pets can also be the victims of domestic violence situations. TIMG Australia is proud to support the excellent work of RSPCA Queensland as part of their ‘Pets in Crisis, supported by the Petbarn Foundation’ – set up to regularly investigate and find safe shelter for pets in domestic violence incidents. Most domestic violence refuges are neither equipped nor permitted to take pets, which can cause stress to violence victims, potentially preventing them from leaving. Indeed, research has shown that 25% of victimised women have stayed in violent relationships due to pets at home.

Pets in Crisis provides a safe house, and vet care for pets of individuals at serious risk of domestic violence. With an average stay of up to 33 days, and some 350 people affected annually, the programme finds shelter at RSPCA's Animal Care Shelters or through RSPCA foster carers network.

TIMG Australia supports RSPCA Queensland via an annual donation.

RONALD MCDONALD HOUSE

Ronald McDonald House Charities (RMHC) keeps families of seriously ill or injured children together and close to the medical care they need. Families of children undergoing treatment are accommodated within walking distance of major hospitals across Australia through their network of support homes.

The charity has been close to our company's heart as a part of our workplace giving for over 20 years. Our people have donated for every 'Dress Down' or casual Friday. Shred-X and Med-X partnered with RMHC as part of the national Easter 2023 campaign, raising $17,000 by donating a percentage of sales over the campaign. RMHC's 11 Australian chapters will benefit from the funds raised.

In New Zealand, New Zealand Couriers and Post Haste - Christchurch are also proud to support this foundation.

LIFE FLIGHT

Freightways are proud to partner with Life Flight, a registered charity that operates aeromedical services in both fixed-wing aircraft and rescue helicopters in New Zealand. The partnership has a tenure of 15 years now, and it has helped Life Flight support over 1,200 Kiwis every year in their times of greatest need, from hospital transfers to accidents and emergencies.

The Fieldair Group, Freightways' aviation business, operates fixed-wing aircraft for Life Flight, including all the crewing and regulatory functions. Fieldair also provides aviation engineering services for these aircraft. The partnership has recently expanded to include the Fieldair Group as the primary sponsor of Life Flight's annual company golf day.

freightways.co.nz

Freightways Group Limited and its subsidiaries

==> picture [8 x 6] intentionally omitted <==

----- Start of picture text -----

34
----- End of picture text -----

Freightways Annual Report | Financial Year ended 30 June 2023

Parcel–sized fulfilment

Stocka is revolutionising how eCommerce businesses based in Australia can build their customer base in New Zealand.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

==> picture [298 x 356] intentionally omitted <==

==> picture [299 x 357] intentionally omitted <==

==> picture [299 x 305] intentionally omitted <==

LIVING OUR CAPABILITIES EVERYDAY:

==> picture [236 x 64] intentionally omitted <==

----- Start of picture text -----

We developed Stocka with a particular
customer in mind. This customer profile
has influenced all business set-up and
growth aspects, including Stocka's
processes, key performance indicators
O and rate card calculations.
E O
T M
V
S
U
E
O
U
R
R
L
C S
----- End of picture text -----

==> picture [224 x 76] intentionally omitted <==

----- Start of picture text -----

Stocka is a meeting place for
several need states for our business,
plus some need states we saw that
customers required to have met.
Familiarity with 3PL was a strength,
and the pathway to profit was
reasonably straightforward.
P
LIK
E E
E
R N
T
T
A
E
C
N
N
U
A
E R
----- End of picture text -----

Stocka

In a first for small-to-medium-sized eCommerce companies looking to grow their New Zealand presence, Australian businesses can store their inventory on this side of the Tasman and Stocka's Auckland-based team will manage, pick, pack and book couriers to ship their offering around the country.

As part of the service, the Stocka team can prepare stock for delivery and select from Freightways' Express Package couriers to deliver packages at the best speed and price.

The business is scaling nicely, with several big clients already onboard and a healthy growing pipeline. A lot of the enquiries are coming through Stocka's digital platforms as digitally savvy business owners interact in the ways that feel most natural to them.

SHIPPING MADE EASY

Stocka was established to cater for all-sized businesses but has the specific capability to help start-ups and smaller eCommerce companies who need a logistics partner that understands their challenges and will work constructively with them to remove obstacles. Dan Ward, Head of Product at The Startery, says, "It makes sense to cater to new and smaller customers because they aren't that well served presently. We can teach them so much and grow our footprint alongside them".

A BIT OF A SQUEEZE, BUT A GREAT FIT

Space is the one big issue for the business as it expands. Until now, Stocka has been using TIMG's warehousing capacity – but with their three businesses already growing into those spaces, having enough room is a pressing priority. "Striking the balance between space for the business to grow and paying for unutilised space is the challenge for this business, but one we are working to solve", says Dan. The benefit is that Stocka is very close, both physically and philosophically, to other businesses inside the Freightways Group, and, as everyone is finding out, there are plenty of learnings from different parts of the Group that can be applied to Stocka's benefit.

For emerging eCommerce companies, organising to get what they offer to the people who have bought from them is not a core business. So, the Stocka team teach their customers how to build up stock, manage and deliver their products into the market. The flat fee structure removes much of the uncertainty that eCommerce businesses might otherwise face. Stocka's set-up also means customers don't have to arrange storage or run delivery vehicles. Removing all these potential barriers and points of worry adds stability and simplicity to businesses that want to cross borders.

The current site in Auckland is also an advantage. Recent research recommends locating a 3PL provider as close to the most significant concentration of consumers and customers as possible. We decided not to extend the idea to other New Zealand locations due to the Express Package courier brands' reliability and ability to reach all parts of the country within 24 hours. This is well inside customers' expected timeframes. So one existing building offers fulfilment for a nationwide end-customer base in one place.

AIMING TO BE A TOP PERFORMER

A new venture by TIMG and supported by Freightways' innovation programme, The Startery, the goal is for Stocka to become New Zealand's go-to eCommerce fulfilment company, with the highest Net Promoter Score in the industry and strong annual revenues in the next few years. As part of embedding the business into the Group, Freightways' executives will stay involved to ensure consistency across processes, lift performance, establish reporting set-ups and strengthen customer service and stock control processes as Stocka continues to scale. For example, one of the significant learnings for the Stocka team has been shifting their understanding of stock control from documents and boxes to products as varied as electronics and cosmetics. Mid to longterm stock management needed a series of small trials and errors to work out how best to ensure stock was cared for and always consumer-ready. Customers are 50% New Zealand-based and 50% based in Australia.

A feasibility study on opening in Australia will need to be completed before we can be confident about that opportunity. The immediate goal is to firm up the pathway to profit, which includes securing good margins as Stocka scales. Achieving this is about balancing set-up costs with planned revenue to achieve a consistent margin. At this point, Stocka has surpassed its initial target, hitting $1 million in annual revenue during start up. The business is now ready to scale and set new growth records in the coming 24 months.

REVENUE: $ annually during 1M development

freightways.co.nz

Freightways Group Limited and its subsidiaries

Our Sustainability Report 40 Environmental Statement 42 Materiality review 43 Our SDGs SDG 3 SDG 8 SDG 9 SDG 13 SDG 16

54 Climate-related disclosures

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Environmental Statement

We recognise that our core business is reliant on transportation to service our customers. As an emissions intense organisation, our commitment to the TOIT Ū certification process (which includes external audit and year-on-year carbon reduction) encourages our people and our partners to make environmentally positive decisions every day.

01: Our Responsible Growth Strategy

GOAL:

To balance the commercial needs of our business with our responsibility to protect the environment in which we operate.

SUPPORTING POLICIES:

When implementing our positioning, people, performance and profit strategies, we will incorporate tactics that support our environmental approach.
We will ensure development, growth and capital projects align with our commitment to TOITŪ certification, so that as we grow, we reduce our carbon emissions and minimise our environmental impact.

Guiding Principles

We recognise that protecting the environment today is essential to creating a sustainable business future.
We actively seek to minimise the environmental impact of all our activities.

02: Our Cleaner Air Strategy

We work in partnership with all stakeholders to promote good environmental practice.

GOAL:

To promote cleaner air by minimising carbon emissions.

We comply with relevant environmental legislation.

SUPPORTING POLICIES:

We are a TOITŪ certified organisation. Our greenhouse gas emissions are measured in accordance with ISO 14064-1:2018 and we are committed to managing and reducing our relative emissions.
Our vehicle fleet will not be leased for a period longer than four years to ensure that it’s within current technology.
As part of this transition we are continuing to trial hybrid and electric vehicles.
We recognise that by gaining efficiencies for our core business model we enable our services to be delivered with as low environmental impact as possible.
Our contractors are strongly encouraged to use later model, lower emission vehicles.
We regularly review our operational activities, systems and training to ensure our business practices are aligned with these guiding principles.
Our hub & spoke network is segmented and reviewed on a continuous basis to ensure minimisation of kilometres.
Our aviation business actively measures and manages its performance to ensure minimisation of fuel usage and emissions.

TOITŪ Certification

TOITŪ certification allows us to take a very positive step toward reducing our carbon emissions and further minimising our relative impact on the environment. We are currently committed to a 50% reduction to Scope 1,2 and 3 emissions by 2035.

We maintain TOITŪ certification by measuring our carbon emissions on a business-by-business basis and committing to managing and reducing them.

==> picture [150 x 170] intentionally omitted <==

==> picture [150 x 169] intentionally omitted <==

==> picture [299 x 169] intentionally omitted <==

03: Our Conservation &

04: Our Education & Awareness Strategy

Waste Management Strategy

GOAL:

To promote education and awareness of better environmental practice among stakeholders.

To implement actions that, wherever practical, see us recycle, reuse and minimise waste of the products and resources we consume.

SUPPORTING POLICIES:

We promote our environmental approach among staff and ensure individuals understand their role with our environmental objectives.

SUPPORTING POLICIES:

Our range of recyclable courier satchels is currently transitioning to contain no less than 80% New Zealand sourced plastic waste.
Our suppliers are actively encouraged to demonstrate their environmental practices to ensure they align with our objectives.
Wherever possible, our destruction business utilise ‘best in class’ recycling technologies to avoid resource waste and landfill solutions.
We actively promote the benefits of good environmental practice among our customer base.
We position and promote our document destruction business in the marketplace as ‘secure recycling’.
We endeavour to actively educate and communicate with our staff, contractors, customers and suppliers, our commitment to TOITŪ certification, ensuring they understand our objectives and the role they can play in achieving these.
We encourage our customers to receive electronic invoices to minimise paper wastage.
We commit to identifying, measuring and documenting our carbon emissions as part of our TOITŪ certification. We will continue to develop and refine systems to reduce emissions overtime.

05: Our Responsible Partnership Strategy

GOAL:

To seek to partner and work with others who can demonstrate a commitment to the environment.

OUR GOAL:

SUPPORTING POLICIES:

50[%]

To make our business partners aware of our environmental policy, our TOITŪ certification commitment, and the expectations arising from these.
Where all other things are equal, to choose the partners and contractors who can demonstrate sound environmental policies.

reduction in C02e Scope 1, 2 and 3 by 2035

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Having a material impact

ASSESSING OUR MATERIAL ISSUES

Four years ago, we undertook an assessment of our material issues for stakeholders as we looked to incorporate more non-financial criteria into our decision-making and reporting. In FY23, we reviewed our materiality to check the relevance of our ESG activities.

The assessment has involved an external party engaging with various internal and external stakeholders – from board members and leadership to staff and contractors to customers, suppliers and investors – to get their opinions.

We've used a double materiality assessment approach because it provides greater insights and directly recognises that organisations such as ours have financial and non-financial impacts that are significant and that need to live alongside one another. As the name suggests, double materiality adopts different perspectives to gain a more holistic view:

Results will be published in FY24, and we will update our reporting then to reflect the findings. We expect the assessment to lead to some adjustments in how we report beyond the bottom line.

'Inside out' impacts – which looks at the company's impacts on society and the environment by assessing scale (impact on health, the environment and society), scope (how many people are affected) and irremediability (the ability to fix issues or not)

• 'Outside in' financial materiality impacts – which examines size (the amount of financial impact) and likelihood (the chances of an impact happening).

2023 DOUBLE MATERIALIT Y MATRIX

�� ~~�� ~~ �� ~~��~~ ��

~~��~~ ��

��

Staying on course for 2023

This year we will continue to report on our existing SDG framework and Areas of Focus as part of our non-financial decision making and reporting in FY23.

Health and safety in employment. Injury reduction TRIFR reduced from 8 to 6

==> picture [63 x 63] intentionally omitted <==

SDG[#] 3 Good health and wellbeing

Deployment of handbrake alarm technology in all linehaul vehicles
Delivered numerous training and skills development programmes

==> picture [63 x 63] intentionally omitted <==

SDG[#] 8 Decent work and economic growth

Increased contractor earnings, ensuring sustainability
Increased employee earnings
Cybersecurity resilience

==> picture [63 x 63] intentionally omitted <==

SDG[#] 9 Industry, innovation and infrastructure

Operating culture of accountability and ownership
Significant linehaul network and building infrastructure investment
Airfreight network upgrade

==> picture [63 x 63] intentionally omitted <==

GHG Emissions reduction with a target to reduce Scope 1, 2 and 3 emissions by 50% by 2035 to ensure that our contribution to global warming is no greater than 1.5 degrees Celsius

SDG[#] 13 Climate action

Reduced plastic usage and waste by replacing single use mother bags with multi-use bags
Ethics and integrity

==> picture [63 x 63] intentionally omitted <==

SDG[#] 16 Peace, justice and strong institutions

Transparency

Importance and impact on Freightways' business success

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Good health & wellbeing

SDG 3

==> picture [276 x 168] intentionally omitted <==

==> picture [278 x 168] intentionally omitted <==

==> picture [553 x 168] intentionally omitted <==

OUR AREAS OF FOCUS:

Health and safety in employment. Injury reduction TRIFR reduced from 8 to 6
Deployment of handbrake alarm technology in all linehaul vehicles

SDG3 & OUR BUSINESS:

People lie at the heart of who we are. Relationships, expertise and hard work are integral to our ability to add value on a daily basis. Our commitment to SDG3 reflects our intention to protect the health and wellbeing of those who work here and to minimise the adverse impacts that our vehicles have on communities. Applying this SDG to how we plan ensures that we always carefully consider the human implications in the acquisitions we make and the actions and initiatives we undertake.

==> picture [83 x 82] intentionally omitted <==

We adopt a proactive approach to minimising physical and mental harm across our business. A crucial part of that is encouraging people to speak up when needed and providing external help and support when they need guidance.

INJURY / SICKNESS REDUCTION

TRIFR (Total Recordable Incident Frequency Rate) is a calculation that includes every incident relating to health and safety, including lost time, injuries, accidents, medical treatment, and medical practitioner visits - divided by manhours.

We use this metric because we regard it as a more transparent, holistic calculation: it records all injuries, not just lost time, giving us a more accurate view of how often incidents happen, not just the serious injuries.

This year, we are pleased to report that our TRIFR reduced from 8 to 6. We had a lot less COVID-19 cases this year.

ROAD SAFET Y TOP-OF-MIND

On any given day, we have a significant number of drivers on the road in two countries. In the course of their work, they are subject to a range of pressures - weather, traffic, personal stress and deadlines – that have the potential to compromise their safety.

Mitigating the risks to our drivers and contractors is very important to us. We've had in-cab monitoring in place for well over 12 months. It's proven very successful, helping us to diagnose and eliminate driver behaviours such as fatigue and distraction that could put drivers at risk.

Cameras in cabins look in on the driver and out on the road, enabling us to quickly resolve situations if incidents occur.

We've also installed handbrake alarms in our linehaul and metro trucks across the New Zealand fleet. They sound if the driver's door opens and the handbrake hasn't been applied.

Another vital component for safety is vehicle age and maintenance. We have high minimum standards for our owned and contractor-owned vehicles. Our Pricing for Effort strategy (PFE) ensures our contractors are well compensated so they can afford to upgrade their vehicles regularly. Pride in their work and vehicles has proven a compelling motivation to our people to engender a duty of care towards their customers and us.

NEW AI TECH IS IMPROVING OUR FORKLIF T SAFET Y

Forklifts are a safety focus for all companies that use them. They are responsible for most of the accidents and near misses in any depot situation.

We are currently trialing AI technology to analyse all our depot video footage retrospectively. After hours, the technology assesses CCTV footage of human versus forklift interactions and checks that a safety distance of three metres has been followed. Importantly, it captures near-miss situations where people may have breached the three-metre rule and loads those incidents into a reel for us to view the following day.

We use this technology primarily as an identification and education tool to keep safety in the depot front-of-mind for the people concerned. It helps us pick up patterns and gives us lead indicators of potential issues. It also enables us to identify repeat offenders so that we can take this up with them individually.

PSYCHOLOGICAL HEALTH AND SAFET Y TRAINING

We are currently developing a training module to encourage open dialogue within our workplaces. We want people to speak up and ask questions, to forward ideas, concerns or mistakes, share feedback, and work through disagreements together — knowing that leaders value honesty, candour, and truth-telling and that team members will have one another's backs. The training will help leaders identify and control risks associated with psychological safety at work and how to respond to incidents. The new module will be available company-wide in 2023/24.

EMPLOYEE ASSISTANCE PROGRAMME (EAP)

EAP offers access to external confidential counselling professionals to help people address physical and mental health issues and provide financial advice and partner counselling. It's proven a powerful and practical resource for our people, especially during the last few years with the pressures of COVID-19, rising economic pressures and cost of living matters.

TRIFR REDUCTION FROM: All Total Recordable Injury Frequency Rates are based on 200,000 hours worked” 8 -6

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

SDG 8 Decent work

==> picture [278 x 213] intentionally omitted <==

OUR AREAS OF FOCUS:

Delivered numerous training and skills development programmes
Increased contractor earnings, ensuring sustainability
Increased employee earnings

==> picture [277 x 211] intentionally omitted <==

SDG8 & OUR BUSINESS:

To be successful as a business, employer and as a partner to our contractor drivers, we need to foster an inclusive work environment and provide the services that meet the needs of our customers. Success depends on building an environment where a diverse team of committed Kiwis and Australians can contribute, develop their skills, and be paid fairly. Our businesses growth is fuelled by encouraging our team of professionals to consistently learn and develop.

==> picture [278 x 212] intentionally omitted <==

==> picture [82 x 82] intentionally omitted <==

& economic growth

It matters deeply to us that our people feel happy and safe in their work. Our people were paid fairly this year, and we competed effectively in the labour market to maintain our service levels. As part of that, we continued our serious commitment to training and developing our people at all levels.

LEADERSHIP DEVELOPMENT

New Zealand Couriers are currently running a leadership development programme – Driving Ahead – a partially funded programme by the Tertiary Education Commission (TEC) through the employer-led Workplace Literacy and Numeracy fund. Driving Ahead focuses on core leadership skills like health and safety practices, feedback processes and problem-solving that leaders can directly implement into their roles. Graduates with 52 credits receive a New Zealand Certificate in Business (Introduction to Team Leadership) – Level Three, a nationally recognised qualification. Driving Ahead started with four groups in Auckland but is now rolling out nationally.

GROUP LEARNING & DEVELOPMENT

Learning and development was in full swing this year, with a full range of courses and modules available across the business. Some of those programmes included:

IGNITE - a customer experience programme initiated by New Zealand Couriers. A core team of customer experience (CX) experts representing different business areas come together to diagnose, implement and coach improvements in our customer experience delivery.

PEOPLE MANAGER TRAINING

This two-year course equips managers at all levels of TIMG NZ, DX Mail, Dataprint and Parceline in New Zealand with essential people management skills in the modern workplace. Immersive, hands-on and practical, the training covers employee relations, communication, conflict, mentoring and coaching techniques and problem-solving.

Grow our People – a development course for budding people leaders at our Post Haste Group. This course covers both personal growth (via self-presentation and management) and business information (improving sales and reporting).

PAYING OUR PEOPLE WELL

It's important to us that our people feel remunerated fairly for their energy and expertise. We regularly review salaries and wages to ensure they are competitive. We offer clear pathways for anyone looking to increase their take-home pay and value to the business through learning and development.

Strengths Development - a Strengths-based approach is a powerful differentiator that helps companies attract top talent, bringing out the best performance in every employee and creating organic business growth.
Manual Handling and Dangerous Goods – this training is for all Freightways staff who lift, hold and move freight. It also provides crucial learning for those who interact with dangerous goods.

Contractor remuneration is another area of ongoing focus for us. Through our groundbreaking PFE initiative, we ensure our contractors are fairly paid for their effort. Underpinning the initiative is the philosophy of loading rates to our customers where delivery involves extra time, care and resources. Examples include deliveries that are 25kg+ on Saturdays or in rural areas or regions that lack density to support delivery costs.

Driving Safety Culture (DSC) - a Health & Safety Culture awareness programme delivered to all operational managers and supervisors.

As customers adjust to this approach to pricing, we will continue to incrementally lift our rates. In doing so, we want to prepare our contractors to invest in alternatively fuelled vehicles. We want them to be able to move quickly when the right technology becomes available.

NUMBER OF PARTICIPANTS:

PERCENTAGE INCREASE:

4400[+] completed training and development, Group wide

6.6[%]

in contractor remuneration for FY23

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

& infrastructure

SDG 9 Industry, innovation

==> picture [276 x 168] intentionally omitted <==

==> picture [278 x 169] intentionally omitted <==

==> picture [553 x 169] intentionally omitted <==

OUR AREAS OF FOCUS:

Cybersecurity resilience
Operating culture of accountability and ownership
Significant linehaul network and building infrastructure investment
Airfreight network upgrade

SDG9 & OUR BUSINESS:

Freightways businesses are focused on adding value for our customers at every opportunity. Whether it is working to constantly improve our transport businesses, helping our customers improve their supply chain and ‘final mile’ services, or introducing ‘step-change’ improvements in our Information Management businesses, we play an integral role in helping our customers work more efficiently, responsibly and profitably.

==> picture [82 x 82] intentionally omitted <==

Our commitment to growing our horizon opportunities continued at a pace this year. Getting this right is about building our network to meet the needs of our expanding capacity. Businesses like ProducePronto successfully supply nationwide convenience stores and service stations daily and have outgrown their Auckland depot, while the new Ruakura depot for Big Chill is about accommodating their next ten years of growth.

SO MUCH HAPPENING ON THE HORIZON

Particularly exciting has been the steady emergence of the third horizon activities, with the launch of Stocka (a horizon 3 initiative for our Information Management businesses), textile waste as a high-value recycling opportunity in Australia for Shred-X (horizon 3 for our Waste Renewal activities) and the launch of Kiwi Oversize in New Zealand and ongoing growth of Allied Express in Australia (horizon 3 for the Express Package and Business Mail part of our Group). ProducePronto is also a horizon 3 business for Temperature Controlled.

At the same time, we have been careful to ensure our growth remains aligned with our sustainability responsibilities. The lease of the more fuel efficient 737-800 aircraft with lower emissions is a good example.

ACCOUNTABILIT Y AND OWNERSHIP

Our principles of Take Ownership, Think Commercially, and Work as a Family build accountability and ownership for staff and people leaders and are an intrinsic part of our shared cultural DNA.

Our growth strategy permits our people to take ownership and treat the business like their own.

Our experience is that promoting accountability and ownership motivates people to think in commercial ways, display good problem solving and stand by their decisions. Our goal for all our people is increased feelings of competency and commitment. Ownership for leaders means no overbearing or micro-management practices. We assess our leaders by their ability to build team confidence, trust and respect.

Together, these principles and ideas engender commercially strong, industrious, innovative companies resourced by confident problem solvers.

INFRASTRUCTURE INVESTMENT ACROSS THE BOARD

Our new 737-800 aircraft will allow us to carry more freight at better economies of scale. The remainder of the fleet will be steadily upgraded over the rest of this decade as part of a significant upgrade to our air network. Our goal is a fleet that is wider, longer and can shift more freight in fewer cycles.

Our new Big Chill facility in Ruakura is a 13,000 sqm 3PL cold store that will help us prepare for the next ten years of growth in that business. It also improves our links from the Port of Tauranga and the food-producing Waikato and Bay of Plenty and enables easy, daily links to Auckland.

We are making ongoing fleet improvements in linehaul and metro vehicles for our Express Package and Temperature Controlled businesses to cover replacement, increasing the fleet size for growth and having contingency vehicles available in times of need. These improvements are on top of our ongoing high quality and maintenance standards for our vehicles, which give us the best performance, better safety, lower emissions and positive brand association.

ProducePronto's new, much larger depot in Auckland will help them meet same-day delivery demands for convenience and QSR restaurants in Auckland and enable easier stock transfer nationally.

Allied Express is beginning its automation strategy through the purchase of the only automation belt for oversized items in Australia - for Sydney and Melbourne. They have also expanded facilities in all five major cities: Sydney, Melbourne, Adelaide, Perth and Brisbane.

Our new recycling facility for Shred-X in Victoria is in preparation for expected growth as the business continues finding new ways to find value in the stuff people throw away.

SECURING OUR CYBER-ENVIRONMENTS

We are aligning to industry best practices by adopting a riskbased approach to cybersecurity.

Recognising that each business within the Group has a different risk profile and appetite, we've taken a business-led risk-based approach to discovering, mapping, and applying risk measures for their services and the information and IT assets they manage. This approach enables us to leverage a consistent Group-wide baseline capability while also individually tailoring cyber risk management strategies that are suitable and appropriate for each business's unique risk profile within the Group.

To ensure the best outcome for our businesses and stakeholders, we've had the programme externally audited receiving feedback that the consistency and pragmatism of the program reflected a comprehensive and mature understanding of our diverse business functions and associated risks.

Compliance requirements remain different for each business and industry vertical, making external audits against security standards such as ISO27001, SOC2 and PCI DSS an essential part of our businesses offering. Customising the risk management and mitigation across the Group, and having a governance function across security, provides cost oversight and peace of mind for our businesses and investors. It also means cybersecurity is one less roadblock for sales because our customers are confident that we are operating at the correct levels of capability.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

SDG 13

==> picture [277 x 213] intentionally omitted <==

EACH OF OUR BUSINESSES CONTRIBUTE INDIVIDUALLY TO OUR GREATER TRANS-TASMAN ENVIRONMENTAL FOOTPRINT

OUR AREAS OF FOCUS:

GHG Emissions reduction with a target to reduce Scope 1, 2 and 3 emissions by 50% by 2035 to ensure that our contribution to global warming is no greater than 1.5 degrees Celsius

ALLIED E XPRESS COURIERS

PARCELINE

TOIT Ū CARBON REDUCE MEMBER PASS THE PARCEL TOIT Ū CARBON REDUCE MEMBER

CO2 EMISSIONS MEASURED FY24 BIG CHILL TOIT Ū CARBON REDUCE MEMBER

CASTLE PARCELS COURIERS TOIT Ū CARBON REDUCE MEMBER

POST HASTE COURIERS

Reduced plastic usage and waste by replacing single use mother bags with multi-use bags

TOIT Ū CARBON REDUCE MEMBER VIRGIN PLASTIC USAGE REDUCTION

DATAPRINT TOIT Ū ENVIROMARK DIAMOND

PRODUCEPRONTO

TOIT Ū CARBON REDUCE MEMBER EURO 6 EMISSION STANDARD VEHICLES

DX MAIL

TOIT Ū CARBON REDUCE MEMBER

FIELDAIR

SECURIT Y E XPRESS TOIT Ū CARBON REDUCE MEMBER SHRED-X PAPER / CARD RECYCLING EWASTE AND IT ASSETS REPURPOSING AND RECYCLING PRINTER'S WASTE RECYCLING STUCK

TOIT Ū CARBON REDUCE MEMBER LEASE OF 737 800 FOR FUEL EFFICENCIES AND LOWER EMISSIONS

KIWI E XPRESS

TOIT Ū CARBON REDUCE MEMBER

MED-X

CLOSED LOOP SYSTEM FOR SHARPS AND SHARPS CONTAINERS

TOIT Ū CARBON REDUCE MEMBER SUB60

NOW COURIERS

TOIT Ū CARBON REDUCE MEMBER TIMG AU PAPER / CARD RECYCLING

TOIT Ū CARBON REDUCE MEMBER

NEW ZEALAND COURIERS TOIT Ū CARBON REDUCE MEMBER CUSTOMER EMISSION REPORTING–ISO14041 COMPLAINT VIRGIN PLASTIC USAGE REDUCTION MEMBER OF SOFT PLASTICS RECYCLING SCHEME UPCYCLING OF USED COURIER SATCHELS INTO BUILDING-BOARD

TIMG NZ

==> picture [82 x 82] intentionally omitted <==

TOIT Ū CARBON REDUCE MEMBER PAPER / CARD RECYCLING

Climate action

As a transport-focused business, we are well aware of the climate implications of our everyday business. One of the key reasons we instigated science-based targets was to look realistically at what reductions we could achieve over time in greenhouse gas (GHG) emissions. Elsewhere, we continue to make good progress with reducing our use of virgin plastics.

We are prepared to move quickly and decisively. Still, any transition must make commercial sense, and the infrastructure has to be reliable. We can't afford to break down or not have the ability to recharge our vehicles – because of the types of products we move. We must play it safe. Our customers depend on us doing so.

DOING WHAT WE CAN WITHIN LIMITATIONS

While there are strong expectations from customers and investors that logistics companies like us will address contributions to climate change within their businesses, there has been a noticeable slowdown from Government from a legislative / directional perspective this year. Our enterprisesized clients are also looking for movement, or direction setting at the least, to comply with their international reporting standards. This is significant because the infrastructural support for all alternative fuels needs to rest with central Government.

PL ASTICS REDUCTION

We continue to reduce our use of plastic waste through recycling and repurposing. In particular, we are now using less virgin plastic than ever before.

There is a shared appetite between all stakeholders to address the climate change profile of the logistics sector. Indeed, we are feeling pressure from customers and investors to show progress in this area and to help our enterprise-sized clients to comply with their international reporting standards. We are also acutely aware of the reputational risk should they think we need to be faster to change.

Our courier express packs across Express Package are made from up to 80% reclaimed New Zealand-sourced plastic diverted from landfills. All our courier brands are also part of the Soft Plastics Recycling Scheme.

Enviro360 is a New Zealand Couriers innovation that has been running for two years. Enviro360 allows customers to collect used express packs using our Enviro360 collection bag. When the bag is full, we pick them up, consolidate the load and linehaul them to saveBOARD, where they are upcycled into a new low-carbon building board.

We would move quickly and decisively if we could, but the reality is more complex. For example, there have been no significant technology improvements since last year for either EVs or hydrogen transportation in New Zealand. Hydrogen trucks were due to land last year. They haven't arrived yet – and, not surprisingly, there is corresponding reluctance for scaled first-mover investment from a range of parties. Some first-generation EV vans have arrived in the country, but they remain too small for our purposes, and once loaded, the battery doesn't last long enough.

Mother bags enable us to consolidate our express courier packs into destination/branch-specific bags, protecting them from the rigours of the network and improving security and accuracy by consolidating all items into one inter-branch movement. In the past, mother bags have been made of virgin, single-use soft plastic and were only good for two/three cycles. Thanks to the excellent work of our inventory team, we have now sourced reusable mother bags that can be used hundreds of times and last for years. We currently have over 14,000 of these bags in our branches and networks throughout our courier businesses, vastly reducing the amount of Class 4 plastics we use.

Dialogue continues. We have engaged with Government about commercial infrastructure for EVs. We are also awaiting further details on the capacity of the power grid to handle the capacity that would be needed."

SDG13 & OUR BUSINESS

Creating our own infrastructure through Government funding, while an alternative, would also require us to make the refuelling centre publicly accessible around the clock. That's impractical given the items we carry 24/7 (dangerous goods, medicines, secure documents etc.)

The efficiencies our transport business brings to our customers’ supply chain substantially reduce emissions through the economy. Intensification of all our networks – increasing the business we do against the kilometres we travel – means growth doesn’t necessarily equate to higher emissions. We are in an emissions-intensive industry – but long-term planning and collaboration, coupled with our modern, fuel efficient fleet of planes, trucks and vans means we are on track for a steady reduction in CO2e per item we carry.

Currently, the Government's EV rebate scheme caps out at $80,000 – far below the cost of the light commercial vehicles we need. However, we are in the process of putting together finance packages for our contractors to enable them to transit to alternatively fuelled vehicles once this becomes tenable.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

SDG 16 Peace, justice

We place significant emphasis on being straight-up and acting as good corporate citizens. We pay our taxes in both countries we operate in and abide by all laws and regulations. We pay our suppliers on time, every time, and we seek to enter into responsible partnerships.

OUR AREAS OF FOCUS:

• Ethics and integrity

Transparency

SDG16 & OUR BUSINESS:

WORKING OPENLY

As a publicly listed company that partners with numerous other institutions and contractors in both Australia and New Zealand, our geographic spread of brands, employees and worksites, and our desire to contribute to business and community leaves no flexibility in the context of ethics and legal obligations. Whether it be gender equality, diversity of thought and origin, or justice – we will be fair and accountable.

Our Annual Reports and investor presentations bring a high level of disclosure to our communications with regulators, investors, customers, communities and other stakeholders.

It's important to us that stakeholders know our stories and our intentions.

This year, we decided to combine our sustainability and annual reporting to give investors a clearer sense of what we are doing across our financial and non-financial activities. We are also in the middle of reviewing our materiality. This year, we've included TCFD filings for the third time. In Australia, we have filed our latest Modern Slavery Statement for our businesses.

We openly acknowledge our teams' hard work and commitment and the collective impact they have on our success. Our people make our success real. We maintain a focus on engagement, accountability and ownership to build duty of care and loyalty.

Finally, we know that we cannot affect change on our own. Our Climate Leaders Coalition and TOITŪ membership indicates our willingness to work alongside others to achieve cleaner ways of doing business.

==> picture [82 x 82] intentionally omitted <==

& strong institutions

==> picture [256 x 212] intentionally omitted <==

OUR RANGE OF POLICIES AND PROCESSES INCLUDES THE FOLLOWING:

Charters for our board and each of our sub-committees
Code of Ethics
Disclosure & Communication Policy
Diversity & Inclusion Policy
Insider Trading Policy
Protected Disclosures (Whistleblower) Policy
Remuneration Policy
Risk Management

OUR WEBSITE INCLUDES DETAILED INFORMATION ABOUT THE FOLLOWING:

==> picture [256 x 213] intentionally omitted <==

Our Board of Directors
Our leadership team
Our brands
Our results
Our dividends – including our dividend history, reinvestment plan and policy

WE REPORT ON OUR ACTIONS THROUGH:

Disclosures to the NZX
Climate Leaders Coalition Annual Questionnaire

==> picture [256 x 212] intentionally omitted <==

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Climate–related disclosures

Background CLIMATE CHANGE IS ONE OF THE MOST SIGNIFICANT CHALLENGES WE FACE AS A SOCIET Y AND WILL RAISE MANY BUSINESS RISKS – AND OPPORTUNITIES - ACROSS THE ECONOMY.

Governments and businesses alike are taking steps to face these challenges in several ways: enacting legislation to foster a low-carbon economy, defining transition pathways and deadlines to achieve carbon neutrality, making the disclosure of greenhouse gas (‘GHG’) emissions inventories and reduction targets mandatory, and industry-led initiatives such as the Climate Leader’s Coalition, which Freightways joined in 2019.

Aotearoa New Zealand’s first Emissions Reduction Plan (‘ERP’) was published in June 2022, containing strategies, policies, and actions for New Zealand to achieve its first emissions budget as required by the Climate Change Response Act 2002[1] . The transport sector is responsible for 17% of New Zealand’s total gross GHG emissions and 39% of total CO2 emissions[2] . To support New Zealand’s emissions budget, the ERP states that the transport sector would need to achieve a 41% reduction in total emissions by 2035 from 2019 levels. For freight transport[3] , this would mean a 35% reduction in emissions by 2035.

==> picture [175 x 162] intentionally omitted <==

As one of New Zealand’s major transport services providers, the bulk of Freightways’ GHG emissions are generated from consuming transport fuels. We operate several businesses in New Zealand and Australia, covering express package and other complementary services in information management, business mail and chilled transport (Figure 1 displays our organisational structure). Freightways has grown organically and through acquisitions, and now has representation in every major town in New Zealand.

Our core business of picking up, processing, and delivering goods enables us to move thousands of items per day in a resource and emissions-efficient way. Our investments in technology to drive continuous improvement of fuel efficiency aligns with the objective of reducing our GHG emissions.

This is our third annual climate-related disclosure and describes our current governance and management approach to assessing and managing climate change risks and opportunities to our businesses.

==> picture [175 x 229] intentionally omitted <==

FIGURE 1: FREIGHTWAYS GROUP LIMITED'S STRUCTURE

==> picture [469 x 437] intentionally omitted <==

----- Start of picture text -----

E XPRESS PACK AGE AND BUSINESS MAIL INFORMATION
MANAGEMENT
NEW ZEALAND AUSTRALIA NEW ZEALAND
NEW ZEALAND AUSTRALIA
REFRIGERATED
NETWORK COURIER POINT-TO-POINT BUSINESS MAIL SUPPORT
TRANSPORT
™
The fresh way to buy.
----- End of picture text -----

1 New Zealand Government, 2022. Aotearoa New Zealand’s First Emissions Reduction Plan. June 2022.

2 Figures are 2019 emissions based on New Zealand's Greenhouse Gas Inventory 1990–2020.

3 Freight transport includes emissions from trucks, rail, and ships. It excludes light vehicles and aviation.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Climate–related disclosures

Freightways recognises that our core business of providing transportation services for our customers is currently emissions intensive.

We have an important role to play, both in building resilience to climate

Freightways’ position on climate change

change impacts and in the transition to a low-carbon economy. We intend to make direct contributions to climate adaptation and mitigation efforts within our sector and the markets we operate in.

==> picture [406 x 366] intentionally omitted <==

----- Start of picture text -----

FREIGHT WAYS BOARD we operate in.
We will also work to be a
strategic partner for our
customers, supporting
and enabling their
BOARD AUDIT
& RISK COMMIT TEE responses to the climate
change challenge.
GM SUSTAINABILIT Y
FREIGHT WAYS CFO FREIGHT WAYS CEO
& SAFE T Y
CONTROLLED BUSINESSES ' E XECUTIVE LE ADERSHIP / GM ' S
Risks and opportunities
Sustainability metrics (inc. climate)
----- End of picture text -----

We will also work to be a strategic partner for our customers, supporting and enabling their responses to the climate change challenge.

FIGURE 2: GOVERNANCE STRUCTURE FOR CLIMATE-RELATED RISKS AND OPPORTUNITIES, AND METRICS

Climate-related disclosures

Governance

Following the release by the New Zealand External Reporting Board (“XRB”) of New Zealand Climate Standards (“NZ CS”) in December 2022, mandatory climate-related reporting now applies to certain New Zealand entities – including Freightways - for reporting periods commencing 1 January 2023 onwards.

For Freightways, this means the first year of mandatory reporting is 1 July 2023 to 30 June 2024. The NZ CS follows the format of the Task Force on Climate-related Financial Disclosures (“TCFD”) guidelines and is structured around four thematic areas that represent core elements of how organisations operate: governance, strategy, risk management, and metrics and targets.

Our Directors have experience in climate change and sustainability matters and this is supplemented by specialist external third party when required. Third-party support has included advice related to our climaterelated reporting.

GOVERNANCE BODY OVERSIGHT

Freightways’ Board of Directors are responsible for overseeing the management of risk, including those related to climate change.

The Board is also responsible for approving the development of Freightways’ GHG emission reduction target and strategic climate initiatives. The Board receives monthly updates on progress against climate-related metrics and reviews strategic objectives and climate targets annually. Freightways performs annual measurement and receives third-party assurance of our GHG emissions, which allows us to understand changes in our GHG emissions and our carbon price exposure year on year. The Board is also responsible for approving management remuneration, which is not currently linked to climate-related metrics.

MANAGEMENT’S ROLE

Freightways’ Chief Executive Officer (CEO) and Chief Financial Officer (CFO) have delegated authority from the Board to take responsibility for assessing and managing consolidated risks and opportunities related to all controlled businesses. As part of this role, the CEO and CFO are engaged in structuring Freightways’ strategic and risk management approach to these climaterelated risks and opportunities. General Managers and executive teams at each of Freightways’ controlled businesses are responsible for identifying and assessing risks at an operational level, including climate-related risks and opportunities, and providing those to Freightways’ executive leadership team. This process occurs annually.

The Audit and Risk Committee is responsible for the management, monitoring, and reporting of risks, as well as the review of risk management policy. Climate risks fit within Freightways’ definition of risk and are assessed according to their likelihood and potential impact. Each Freightways-owned business is responsible for identifying their own risks and opportunities (including those relating to climate) and developing future strategies. These are then consolidated at corporate level and taken to the Board for review. The Audit and Risk Committee conducts an annual review of those risks and mitigating actions[4] .

At the corporate level, the daily management of Freightways’ sustainability metrics and strategy (including climate) is delegated to the General Manager (“GM”) of Safety and Sustainability. The GM of Safety and Sustainability prepares monthly reports on progress against targets and relevant metrics, which is shared with the executive leadership and the Board.

The relationship between the Board and Management in relation to climate risk and opportunities is provided in Figure 2.

4https://www.freightways.co.nz/about/corporate-governance/

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Climate–related disclosures

FREIGHT WAYS’ BOARD OF DIRECTORS ARE RESPONSIBLE FOR OVERSEEING THE MANAGEMENT OF RISK , INCLUDING THOSE REL ATED TO CLIMATE CHANGE.

Strategy

Due to the qualitative nature of this assessment, the results do not speak to the impact on earnings and only assess the likelihood based on our enterprise risk management framework. Freightways will continue to develop an understanding of the full risk assessment rating to enable quantitative modelling of the financial impact of each risk in the future.

Freightways conducted a qualitative assessment of its climate-related risks and opportunities in a low and high GHG emissions scenario, considering the physical, policy, technology, markets, and stakeholder impacts associated with those scenarios.

The scenario analysis process is led by Freightways’ management, who engage a third-party consulting service with expertise in analysing climate-related risks and opportunities to support internal risk assessment activities.

The scenarios outlined in Table 1 are informed by Intergovernmental Panel on Climate Change (IPCC) reports[5] , the International Energy Agency (IEA) energy scenarios[6] and recommendations provided by the New Zealand Climate Change Commission on how New Zealand can meet its emissions budgets[7] . Leveraging the public reports from these organisations provides a transparent and credible source of information on physical climate change predictions, the energy and transportation transition, and potential New Zealand-specific policy settings. Because of this, we believe that the scenarios are relevant and appropriate for assessing the resilience of our business model and strategy in relation to climate-related risks and opportunities.

The results of any scenario analyses are provided to the Freightways Board of Directors annually. Climate-related scenario analysis is currently a standalone process; however, Freightways will continue to look for ways to integrate scenario analysis into our strategy processes as the management of climate-related risks and opportunities matures. Our scenario analysis was first set in 2020 and will be updated prior to FY24 reporting.

==> picture [283 x 250] intentionally omitted <==

For our key transition risk – exposure to an increasing carbon cost – we conducted a quantitative assessment of the cost of fuel under the New Zealand Climate Change Commission’s ‘Headwinds’ and ‘Tailwinds’ scenarios in combination with our in-house assessment of our fleet’s transition to low emission vehicles (Table 1).

The tables that follow below describe the physical risks (Table 2), transition risks (Table 3) and climate-related opportunities (Table 4) that were identified, and their expected impacts on the business.

SCENARIO ANALYSIS

TABLE 1: CLIMATE-REL ATED RISK AND OPPORTUNIT Y SCENARIOS RELEVANT TO THE TRANSPORTATION SECTOR

SCENARIO	THE PATH TO 2100 IN A HIGH EMISSIONS SCENARIO	THE PATH TO 2100 IN A LOW EMISSIONS SCENARIO
Physical impact	Emissions continue to rise	Global emissions decline from the short-term
	Average global temperature rise of 3.2°C – 5.4°C by 2100	Average global temperature rise of 0.9°C – 2.3°C by 2100
Policy	Little / inefectual policy action on climate change	Consistent with the International IEA Sustainable Development
		Scenario and NZ Climate Change Commission advice, which
	The Paris Agreement fails as major economies withdraw	shows a carbon price of around US$80/tCO2e (NZD$110-120) by 2030 and NZD$160 by 2035
	Australia continues its current climate and energy policy, e.g. no pricing on carbon emissions	Strict regulatory requirements e.g. carbon budgets, fuel emission restrictions, increased monitoring and reporting obligations
Technology Market	Advancements in low-carbon technologies such as alternative transport fuels and energy mainly driven by market supply and demand mechanisms Consumer and business purchasing behaviour	The NZ Climate Change Commission’s advice to the Government is for 100% of new light vehicles and 10% of heavy trucks be electric by 2035 Globally, IEA modelling projects EVs to reach 12.25% of global vehicle fleet, and 28.8% of sales by 2030 High demand for low-carbon products or services to reduce
	is driven by quality / price ratio irrespective of the carbon footprint of the product or service	emissions, this could provide a competitive advantage / disadvantage depending on whether the business can meet the market demand
Stakeholder	Little to no expectations from stakeholders	High stakeholder expectations concerning climate mitigation
	to act on climate change	eforts and resilient investments

5 https://www.ipcc.ch/site/assets/uploads/2018/02/ipcc–wg3–ar5–chapter8.pdf

6 https://www.iea.org/reports/energy-technology-perspectives-2020

7 https://www.climatecommission.govt.nz/our-work/advice-to-government-topic/inaia-tonu-nei-a low-emissions-future-for-aotearoa/modelling/

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Climate–related disclosures

PHYSICAL RISK delivery times for customers and higher DESCRIPTION 1: transport costs as freight is diverted DISRUPTED TRANSPORT to alternative routes. In the second NET WORK half of this century, sea level rise and increased temperatures are expected Freightways’ business model relies on to lead to long term or permanent a network of transportation assets and damage to assets such as Auckland logistics infrastructure to move goods Airport or the Cook Strait ferry crossing for our customers. and further amplify the impacts of extreme weather events (e.g. storm The impacts of climate change, surges, surface flooding). This could including more prevalent extreme weather events, sea level rise, cause cost increases and impacts on the resilience of our operations. Our increased average temperatures planning of alternate routes or alternate and high wind speeds all threaten to runways is helping to address this risk.

The impacts of climate change, including more prevalent extreme weather events, sea level rise, increased average temperatures and high wind speeds all threaten to damage and disrupt the roads, airports and shipping ports that keep our customers’ goods moving around the country and the world.

Freightways understands this risk is greater under a high emissions scenario where physical climate impacts are more prevalent. According to the New Zealand National Climate Change Risk Assessment, the exposure to physical climate hazards experienced by New Zealand roads, airports and ports varies[8] .

Extreme weather events such as storms combined with king tides are likely to increase temporary disruption to the transport network, especially coastal roads in New Zealand and Australia. This could lead to longer

Ports are currently considered to have limited exposure to climate hazards; however, this increases to a moderate exposure in 2050. Roads and airports, on the other hand, are already considered to have a major exposure to climate hazards through to 2050. Under a low emissions scenario, this risk is expected to be significantly lower.

We are currently in the beginning stages of understanding this risk to our business, particularly in relation to our business strategy. Previous disruptions to the transportation network, most notably the 2016 Kaikoura Earthquake and 2023 flooding in Auckland and Hawkes Bay, have provided us with experience in managing disruption successfully.

PHYSICAL RISK

DESCRIPTION 2: ASSET DAMAGE AND UTILIT Y SERVICES DISRUPTION

A core part of our business is the processing of items we deliver for our customers. To achieve this, we rely on a wide range of fixed assets and utilities services (e.g., fuel, electricity) across our network. Physical climate change impacts such as more prevalent extreme weather, sea level rise and heat stress threaten to damage and disrupt operations at our buildings or the utilities that support these buildings. This may limit our ability to process and deliver goods for our customers on time.

Due to the expansive nature of our network, our buildings are likely to experience different physical climate impacts depending on their location.

For buildings in Australia and the north of New Zealand, building failure due to heat may become an issue, making it difficult for buildings’ electrical systems to operate and, in some areas, uncomfortable and unproductive for our staff during high temperature days.

For operational assets in low lying and coastal areas, damage from continued flooding caused by sea level rise and storm events may eventually render the buildings unusable or uninsurable from mid-century. These kinds of disruption could have a longer-term impact on our network while a suitable replacement building is found. At a country wide level, extreme weather events may lead to damage of electricity infrastructure that could impact several of our sites simultaneously.

Under a high emissions scenario the physical risk posed to buildings is expected to be greater than under a

low emissions scenario. According to the National Climate Change Risk Assessment, the exposure of New Zealand’s buildings to climate hazards is already considered major and is expected to grow to an extreme exposure by 2050[9] .

As with the risk of damage and disruption to the transportation network, we are currently still in the early stages of understanding this risk to our business. Going forward, we will need to assess the climate-related risks at a site level. This information will allow us to proactively manage our assets as climate change impacts materialise, as well as providing a better understanding of the overall impact of this risk on our business strategy.

Table 2, below, describes the significant physical risks that were identified, and their expected impacts on the business strategy.

PHYSICAL CLIMATE RISKS

TABLE 2: SIGNIFICANT PHYSICAL CLIMATE-REL ATED RISKS

RISK TO FREIGHT WAYS CLIMATIC DRIVERS TCFD RISK T YPE OPERATIONAL IMPACT T YPE OF RISK ASSESSMENT	RISK ASSESSMENT AND TIMEFRAME INITIAL RISK TREATMENT ACTIONS BUSINESS MODEL AND STRATEGY RESPONSE
1. Extreme weather events and sea level rise cause prolonged/sustained disruptions to the transport network Extreme weather Sea level rise Increased temperature Acute/chronic Temporary disruption to certain transport routes Delays in service delivery Higher costs for transportation Significant alteration to network design, routes and transport methods Qualitative	2035 Likelihood ratings Low emission scenario: Unlikely High emission scenario: Possible Review our established processes for dealing with weather related events preparing alternate operational plans Review the capability of our experienced team who are involved in the decision-making process to prepare for future events Build flexibility and redundancies through our network Build facilities to increase resistance to weather-related events 2050 Likelihood ratings Low emission scenario: Unlikely High emission scenario: Very likely
2. Higher temperatures and extreme weather impair operating assets and disrupt utility services Extreme weather Sea level rise Increased temperature Heat Stress Acute/chronic Temporary disruption to processing activities at select buildings Increased delivery times for customers Higher insurance costs for certain buildings Certain buildings are no longer usable Qualitative	2035 Likelihood ratings Low emission scenario: Unlikely High emission scenario: Possible Further analyse our assets and associated utility services for their vulnerability to physical climate impacts 2050 Likelihood ratings Low emission scenario: Unlikely High emission scenario: Likely

RISK TO FREIGHT WAYS
CLIMATIC
DRIVERS
TCFD RISK T YPE
OPERATIONAL IMPACT
T YPE OF RISK
ASSESSMENT

RISK ASSESSMENT AND
TIMEFRAME
INITIAL RISK TREATMENT
ACTIONS
BUSINESS MODEL
AND STRATEGY
RESPONSE

1. Extreme weather events and sea level rise
cause prolonged/sustained disruptions to the
transport network
Extreme weather
Sea level rise
Increased temperature
Acute/chronic
Temporary disruption to certain
transport routes
Delays in service delivery
Higher costs for transportation
Significant alteration to network design, routes
and transport methods
Qualitative

2035 Likelihood ratings
Low emission scenario: Unlikely
High emission scenario: Possible
Review our established processes for dealing
with weather related events preparing alternate
operational plans
Review the capability of our experienced
team who are involved in the decision-making
process to prepare for future events
Build flexibility and
redundancies through
our network
Build facilities to
increase resistance to
weather-related events
2050 Likelihood ratings
Low emission scenario: Unlikely
High emission scenario: Very likely

2. Higher temperatures and extreme weather
impair operating assets and disrupt utility
services
Extreme weather
Sea level rise
Increased temperature
Heat Stress
Acute/chronic
Temporary disruption to processing activities at
select buildings
Increased delivery times for customers
Higher insurance costs for
certain buildings
Certain buildings are no longer usable
Qualitative

2035 Likelihood ratings
Low emission scenario: Unlikely
High emission scenario: Possible
Further analyse our assets and associated
utility services for their vulnerability to physical
climate impacts
2050 Likelihood ratings
Low emission scenario: Unlikely
High emission scenario: Likely

8/9 https://environment.govt.nz/publications/national-climate-change-risk-assessment-for-new-zealand-main-report

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Climate–related disclosures

Our business model

and strategy is reliant on efficient utilisation of various vehicles and assets to process and transport our customers’ items at each step in our logistics network.

TRANSITION RISK

DESCRIPTION 1: INCREASING FUEL COSTS RESULTING FROM HIGHER COST OF CARBON

Fuel costs at Freightways are largely paid by our independent contractor drivers as a cost of operating their vehicles.

We believe that this model promotes efficient fuel usage, reducing the amount of transport fuel used by our businesses.

However, regardless of how our fuel costs are paid, we understand that our business has significant financial exposure to changes in transport fuel prices.

With the cost of carbon expected to rise in New Zealand, increases in the carbon price will impact Freightways’ fuel costs and could make other forms of freight transport, such as electric vehicles more cost competitive. A higher carbon price may also provide an increased incentive to source goods locally, decreasing the demand for freight.

This, together with offering an adequate return to our contractor drivers, is driving our transition strategy of adopting low-emission alternatives to reduce carbon costs from fossil fuel consumption.

In 2021 we undertook quantitative modelling to better understand the approximate financial impact that higher carbon prices would have on our fuel costs by 2035.

Table 3, below, describes the significant transition risks that were identified, and their expected impacts on the business.

==> picture [339 x 238] intentionally omitted <==

CLIMATE TRANSITION RISKS

TABLE 3: SIGNIFICANT TRANSITIONAL RISKS

RISK TO FREIGHT WAYS TRANSITION DRIVERS TCFD RISK T YPE OPERATIONAL IMPACT	T YPE OF RISK ASSESSMENT	RISK ASSESSMENT AND TIMEFRAME RISK TREATMENT BUSINESS MODEL AND STRATEGY RESPONSE
1. Increasing cost of fuel as a result of higher carbon costs Reduced availability of New Zealand Units (NZUs) Reducing carbon allowance under national carbon budgets Higher costs of operating ICE vehicles Technology Policy and Legal Higher operational costs Increased costs for customers Loss of competitive advantages over other freight companies that have lower carbon footprints Exacerbation of the cost of ineficiencies across the delivery network	Quantitative (2035 assessment)	2035 Low emission scenario: Medium High emission scenario: High Achieve reductions in line with our science-based targets Currently planning to transition the fleet to low emissions vehicles in line with targets set using the Paris-aligned targets Continue ongoing optimisation and utilisation improvements to our routes and service oferings Frequent upgrading of linehaul units to lower emitting vehicles In the past year, we have managed to decrease our fleet by 4% while increasing the number of items sent through our networks10 Progressively replace our fleet of vans and trucks with cleaner energy models Continue to optimise our network to reduce energy consumption Support our contractors to acquire clean-energy vehicles Ensure drivers are enabled to switch to cleaner energy vehicles 2050 Likelihood rating Low emission scenario: Unlikely High emission scenario: Possible
	Qualitative (2050 assessment)
2. Climate compliance requirements raise barriers for new drivers, hindering business growth Restrictions on import and use of internal combustion engine vehicles Increasing fuel costs (due to cost of carbon) High upfront cost of low emissions vehicles Technology Reputation Inability to retain or attract drivers or higher cost to contract drivers due to their need for EVs Delays and a loss of reliability for our services Reputational damage	Qualitative	2035 Low emission scenario: Possible High emission scenario: Very Unlikely Designing of contracts to incentivise eficient driving, route choices and proper vehicle maintenance Providing early signals to contractors about when replacement vehicles must be low emission Reviewing and adapting contractor remuneration rates to support them into low 2050 Likelihood rating Low emission scenario: Likely High emission scenario: Possible

Reviewing and adapting contractor remuneration rates to support them into low emission vehicle

10 Freightways 2020 Sustainability Report

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Climate–related disclosures

We have assessed the net present value (NPV) of our financial exposure to increasing fuel costs resulting from an increasing cost of carbon under two different scenarios as of 2021 – note this will expand to three scenarios for FY24. These scenarios took into consideration the estimated rates of low-emission vehicle uptake within our fleet, our Paris-aligned targets work, and the “Headwinds” and “Tailwinds” scenarios released as part of the draft advice from the New Zealand Climate Change Commission in February 2021.

Assessment methodology

Our methodology assumes that 100% of the carbon price is translated to the cost of fuel.

'Tailwinds' and New Zealand Climate Change Commission Scenarios used for modelling the impact of 'Headwinds' carbon price changes on fuel costs:

'TAILWINDS'

The most optimistic emissions reductions scenario with a steady and clear reduction to net zero emissions by 2050.
Presents a future where there are fewer barriers to the uptake of new vehicle technology and widespread behaviour change amongst the population.
Freightways can follow its planned transition to low emissions vehicles, beginning in 2024.

'HEADWINDS'

The least optimistic emissions reductions scenario with a much more sudden and aggressive reduction to net zero emissions by 2050.
Presents a future where there is delayed uptake of new vehicle technology and slow behaviour change amongst the population.
Freightways’ planned transition to low emissions vehicles is delayed by five years, beginning in 2029.

==> picture [175 x 170] intentionally omitted <==

==> picture [175 x 171] intentionally omitted <==

Due to Australia not having a carbon price at this time, this modelling was limited to our New Zealand operations. As a reference point, Freightways estimated exposure to the cost of carbon (embedded in fuel prices) based on 2019 fuel consumption was approximately NZD1.3m. Work is under way to capture all emissions from our Australian businesses and model the financial impact.

Low emission vehicle adoption rates

Carbon price

Freightways’ (and its driver-contractors’) adoption of low emissions vehicles varies between the Headwinds and Tailwinds scenarios. This reflects the differing rate of change between the two scenarios as illustrated in Figure 3 below. Under a Tailwinds scenario, Freightways acts early to reduce emissions with relevant technology being widely available, while a Headwinds scenario sees us delay our emissions response. This is based on the differing availability and costs of technology between the Headwinds and Tailwinds scenario, with low emissions vehicle technology costs decreasing more quickly under Tailwinds than Headwinds. Due to uncertainties surrounding the adoption of low emissions technologies for heavy vehicles and aircraft, the costs associated with transitioning the fleet to low-carbon fuel sources is currently excluded from this analysis.

FIGURE 3: LOW EMISSIONS VEHICLE ADOPTION COMPARED FOR A HEADWINDS AND TAILWINDS SCENARIO. SOURCE: FREIGHTWAYS MODELLING

==> picture [371 x 420] intentionally omitted <==

----- Start of picture text -----

Low emissions vehicles as a proportion of total fleet (Tailwinds vs Headwinds)
��
��
��
��
��
��
��
��
��
��
��
��
��
��
The annual carbon price in the Climate Change Commission’s analysis is consistent across both
the Headwinds and Tailwinds scenarios. They are a yearly prediction of what the price of carbon
could be to create economic incentives to meet emission reduction targets. This is presented in
Figure 4 below:
FIGURE 4: ESTIMATED CARBON PRICE (2021-2035) UNDER HEADWINDS AND TAILWINDS
SCENARIOS. SOURCE: CLIMATE CHANGE COMMISSION
Estimated Carbon Price (2021-2035)
��
��
��
��
��
��
��
��
��
�
��
��
��
��
----- End of picture text -----

The annual carbon price in the Climate Change Commission’s analysis is consistent across both the Headwinds and Tailwinds scenarios. They are a yearly prediction of what the price of carbon could be to create economic incentives to meet emission reduction targets. This is presented in Figure 4 below:

FIGURE 4: ESTIMATED CARBON PRICE (2021-2035) UNDER HEADWINDS AND TAILWINDS SCENARIOS. SOURCE: CLIMATE CHANGE COMMISSION

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Climate–related disclosures

Assessment findings

Our transition initiatives

Under a “Tailwinds” scenario, by 2034 all vehicles in the motorbike, passenger vehicle, and van fleets are expected to be fully electric. The 2021 NPV of our financial exposure to the cost of carbon in transport fuels over the 2022 to 2035 period is approximately NZD 68.3m with a peak financial exposure of approximately NZD 10.1m in 2029 when the risk subsides as the proportion of EVs in the fleet increases steadily. Despite this, continued growth in aviation fuel use means the cost of carbon to the business in 2035 is 33% higher than 2019 levels. By 2050, it is expected that all land-based light transport fleets will be fully electric (or similar low emissions technology), which will considerably reduce Freightways’ exposure to this risk. While we have not made any commitments at this time to invest in low-emission aviation fuels or propulsion types, we anticipate more of these options becoming available from 2030 onwards.

Under a “Headwinds” scenario, none of our vehicle fleets become fully electric by 2035. The NPV of our financial exposure to the cost of carbon in transport fuels between 2022 and 2035 is approximately NZD 82.1m, with a peak financial exposure of approximately NZD 13.4m in 2032, when the reduction in fuel use from the introduction of plug-in hybrid electric vehicles (PHEVs) in the passenger vehicle fleet (from 2029) begins to counteract the rising cost of carbon. Combined with the growth in aviation fuel use, the cost of carbon in 2035 remains at 86% higher than 2019 levels. By 2050, this risk is expected to have reduced from 2035 levels. However, the delay in adoption of low emission heavy vehicles and the continued use of hydrocarbons in the aircraft fleet mean that Freightways may have exposure to the risk posed by the increasing cost of carbon in transport fuels.

The overall financial impact of this increasing carbon cost exposure will depend on the extent to which this cost can be passed onto consumers. Freightways’ ability to pass this cost on to consumers will itself depend on the impact that these higher carbon costs have on the demand for transportation services and the speed at which our competitors decarbonise their fleets.

To help reduce this risk over time, we have several initiatives underway. Firstly, we have annual measurement and third-party assurance of our GHG emissions, which allows us to understand the trajectory of our carbon exposure year-on-year. Secondly, Freightways has developed its emissions reduction using Paris-aligned targets. This work includes planning our transition towards low emissions vehicles. Lastly, Freightways is constantly exploring ways to improve the efficiency and utilisation of our routes and service offerings.

Figure 5, to the right, shows the projected financial exposure that Freightways has to a rising cost of carbon in transport fuels. The New Zealand dollar amount represents only the carbon cost component of the cost of fuel. The remaining components embedded in the price per litre (i.e., other taxes and the cost of the fuel itself) are in addition to the amount show.

FIGURE 5: FINANCIAL IMPACTS OF CARBON CONTENT IN TRANSPORT FUELS (2019-2035). SOURCE: FREIGHT WAYS MODELLING

Additional cost of fuel due to carbon prices 2019-2035 (NZ only)

==> picture [477 x 252] intentionally omitted <==

----- Start of picture text -----

��
��
��
��
��
��
��
��
��
��
�� [��] ��
��
----- End of picture text -----

==> picture [479 x 251] intentionally omitted <==

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Climate–related disclosures

TRANSITION RISK DESCRIPTION 2:

CLIMATE COMPLIANCE REQUIREMENTS IMPACT POOL OF CONTRACTOR DRIVERS

Freightways recognises the essential role that our contractor drivers play in the success of our business model and strategy. To ensure we attract and retain the best people in the freight and logistics sector, we work to offer a competitive package for our contractors. A transition to a low carbon economy has the potential to undermine this competitiveness if we do not factor in costs that a transition could bring. In particular, we understand that a low carbon economy will likely lead to higher upfront costs for contractors as they transition to low emissions vehicles.

Additionally, the projected carbon prices in New Zealand will increase fuel costs for those who continue to use fossil fuel vehicles, which may raise barriers to attracting new contractor drivers. This would limit many of our core business activities, causing delays in our services and causing reputational damage amongst our customers.

To help mitigate this risk in the future, Freightways is leveraging several initiatives. Firstly, we have designed the agreements with our contractors to incentivise fuel-efficient driving, route choice and vehicle maintenance. This helps to reduce the emission intensity of our operations and improves margins for our contractors. Having established our emissions reduction plan, we can signal to our contractors when we will require any new replacement vehicles to be low emissions to meet our reduction targets. This allows our current and future contractors to factor in the potential additional up-front cost of this transition early on in their financial planning. Finally, to support the upcoming changes to our fleet, we have been improving the remuneration rates for contractors to help them meet any higher upfront costs of transitioning to low emissions vehicles when the time comes.

Table 4, to the right, describes the climate-related opportunities that were identified, and their expected impacts on the business.

TABLE 4: CLIMATE-REL ATED OPPORTUNITIES

OPPORTUNIT Y	OPPORTUNIT Y	TCFD	POTENTIAL	T YPE OF	OPPORTUNIT Y	BUSINESS MODEL
FOR FREIGHT WAYS	DRIVERS	OPPORTUNIT Y	BENEFITS	OPPORTUNIT Y	MATERIALISATION	AND STRATEGY
		T YPE		ASSESSMENT	TIMEFRAME	RESPONSE
1. New markets and eficiencies spring up as part of the economic transition to net zero	Increased investment and expansion of renewable, low emission, zero waste and social equity activities throughout the economy	Markets Products and Services	Market growth Market share Improved fleet utilisation	Qualitative	5 to 10 years	Ensure that our contractors are suficiently rewarded and incentivised to be able to invest in cleaner energy
			Greater breadth of revenue streams			vehicles
2. New oferings enhance customer relationships	Freightways being a partner in its customers’ emission reduction Customer demand for greater	Resource Eficiency Products and Services	Additional/ enhanced service oferings for customers Lower prices for freight services	Qualitative	5 to 10 years	Measure and reflect the environmental cost of services
	emissions transparency		for customers
	Improved emissions measuring		Improved company reputation
	and reporting tools
3. Climate resilient transport	Impact of physical climate risks	Resilience	Improved reputation amongst	Qualitative	20 to 30 years	Invest in clean energy
network provides Freightways a strategic advantage	Customer demand for a reliable freight delivery network		both current and potential customers			infrastructures and fleet
			Overall business resilience
	Investment in the resilience and		against climate change
	adaptability of Freightways’ network

OPPORTUNIT Y 3 - IMPROVED COMPETITIVE ADVANTAGE

OPPORTUNIT Y 2: CUSTOMER GROW TH AND IMPROVED RELATIONSHIPS

OPPORTUNIT Y 1: NEW MARKETS AND EFFICIENCIES

Our customers are becoming increasingly aware of not just their own direct carbon emissions but the often much larger volume of indirect emissions of their suppliers and business partners. Leveraging our technology to provide customers with accurate data on the emissions embedded in their transported goods is a transition action we are already fielding requests for. As low emissions vehicles enter the fleet over the coming decade, customers will also be able to report on the reduction in indirect transportation emissions. Additionally, transitioning our fleet to low emissions, low cost-to-run vehicles could yield cost savings to our drivers and our business. As with the new markets and efficiencies opportunity, this will work to support our business strategy by strengthening our capability of striving for efficiency.

The drivers of climate change are known to extend beyond simply emissions from transport. As the world continues to invest in sustainability activities that reduce carbon emissions, we believe that there will be new markets and customers that our business can serve. For example, the rise of product stewardship and producer responsibility is increasing the need for reverse logistics. Not only will this develop new business opportunities for Freightways, but it will also support improved fleet utilisation and optimisation through a reduction in ‘empty kilometres’ vehicles travel. This will work to support our business strategy by strengthening our capability of striving for efficiency.

As physical climate risks become more material, the importance of a resilient transport network will grow. Through investing in our network over the coming decade, including assessing and responding to our network’s vulnerabilities to physical climate change impacts, we can improve our network resilience and flexibility. This has the potential to give Freightways an advantage amongst others in our sector who do not attempt to invest in their network’s resiliency. The result would likely see new customers leverage our network as they seek our reliability in the face of increase physical climate impacts. This will work to support our business strategy by strengthening our capability of delivering reliably.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Climate–related disclosures

Risk

management

Freightways’ process of identifying, assessing, and managing climate-related risks and opportunities takes into consideration activities occurring across its value chain. This approach requires Freightways to consider both the upstream and downstream risks of its direct operations. For example, physical risks impacting upstream infrastructure such as ports are considered due to their impact on our ability to deliver packages to our customers.

Freightways uses climate scenario analysis to support our identification and assessment of climate related risks. Climate-related risks are identified as:

PHYSICAL CLIMATE IMPACTS:

Physical climate impacts arise from extreme weather events (e.g., storm, flood, drought) or from the longer-term shifts in climate patterns (e.g., increasing temperatures). These changes may result in financial risks or opportunities due the direct and indirect impacts they can have on business operations, assets, markets or to supply chains.

Risk

management

Climate-related risks are identified through multiple internal and external sources. These include:

EX TERNAL SOURCES

INTERNAL SOURCES

Our disaster recovery and business continuity plans assess the impacts of acute events.
Our involvement in the Climate Leaders Coalition[12] and other industry groups focused on addressing climate change.
Regular reviews of critical risks assessments.
Briefings and advice from climate change specialists.
Reports produced by government agencies, such as the Emissions Reduction Plan and the Climate Change Commission’s recommendations.

TRANSITION CLIMATE PACTS:

Transition climate impacts refer to risks and opportunities resulting from the policy, legal, technology, and market changes occurring in the transition to a low carbon economy. Depending on the nature, speed, and focus of these changes, transition impacts may pose varying levels of financial and reputational risk or opportunity.

For example, the New Zealand’s Ministry of Transport’s Pathway to Net Zero by 2050 document[11] sets out three themes to phase out emissions across our transport system. Table 5 below shows Freightways’ actions in line with them (where applicable).

TABLE 5: PATHWAYS TO ZERO CARBON BY 2050 – INITIATIVES BY THEME

TRANSPORT SECTOR EMISSION REDUCTION	TRANSPORT SECTOR EMISSION REDUCTION	FREIGHT WAYS INITIATIVES
THEMES
Theme 1	Land-use changes; improvements to walking,	N/A
Changing	cycling, and public transport networks; and demand
the way we	management levers (including parking, congestion,
travel	and distance-based pricing).
Theme 2	Phasing out the importation of Internal Combustion	Our plan for EV uptake starts in 2024 and ramps up
Improving	Engine (ICE) light vehicles by 2035; banning the use	as availability of alternatives allow. With early action
passenger	of all ICE light vehicles in 2050; adoption of biofuels	our entire fleet can be made up of low emission
vehicles	in light vehicles and buses and electrifying the Public	vehicles by 2035.
	Transport bus fleet by 2035.
Theme 3	Energy saving and logistic improvements (such as	Freightways have systems in place to enable
Supporting	freight routes optimisation; freight consolidation and	optimisation, such as freight consolidation and last
a more eficient	improved last mile eficiency); mode-shift from road freight to rail and to coastal shipping; adoption of	mile eficiency and driver training. As a consolidation business we understand the
freight system	biofuels for road freight and accelerating uptake of electric medium trucks.	economic and environmental benefit of being resource eficient

Freightways have systems in place to enable optimisation, such as freight consolidation and last mile efficiency and driver training. As a consolidation business we understand the economic and environmental benefit of being resource efficient.

==> picture [480 x 366] intentionally omitted <==

12 https://www.climateleaderscoalition.org.nz/who/signatories/signatories/freightways

11 Ministry of Transport – Transport Emissions: Pathway to Net Zero by 2050

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Climate–related disclosures

Risk

management

LIKELIHOOD AND IMPACT

To determine the risk rating of climate-related risks, we use our general business risk matrix (Figure 6). This approach considers two variables: likelihood and impact (Table 6 and Table 7). The ratings reflect our short, medium, and long-term timeframes and the financial impact on the company; scenario analysis is also included in assessing risks. As most of our risks and opportunities assessments are currently only qualitative, we only use the likelihood rating elements. The likelihood rating produced from the assessment of each identified climate-related risk is used to determine the relative significance of all climate-related risks. Because we also use the likelihood rating as part of our determination of other risks Freightways faces, we can also determine the relative likelihood of climate-related risks in relation to other risks.

TABLE 6: FREIGHT WAYS' RISK LIKELIHOOD RATINGS

LIKELIHOOD	DEFINITION	COULD HAPPEN WITHIN:	TIME HORIZON
Very unlikely	Only expected to happen in	10 years	Long-term
	exceptional circumstances
Unlikely	Has been known to	3 to 5 years	Medium-term
	occur, including in other organisations
Possible	Has happened before within	1 to 2 years	Short-term
	the company or the industry
Likely	Regular occurrence within the	1 year	Short-term
	industry or company
Very likely	Happens with high frequency	1 month	Short-term

TABLE 7: FREIGHT WAYS' RISK IMPACT RATINGS

==> picture [481 x 49] intentionally omitted <==

----- Start of picture text -----

FINANCIAL IMPACT REPUTATION H&S COMPLIANCE
IMPACT COULD > EBITA BY:
----- End of picture text -----

Minor	<1%	Can be ignored or managed through informal	Minor physical injury or emotional impact or near miss; can be	Breach of internal policy only
		communication	managed at team level
Moderate	<5%	Minor but credibility/	Lost time injury less than 5 days;	Breach of external guidelines;
		integrity of FRE questioned	emotional impact requiring EAP	non-notifiable breach of privacy
		and requires formal	assistance; minor increase in	law; breach of administrative or
		response	absenteeism or turnover	non-material provision of other
				statute or regulation
Significant	<10%	Moderate incident that	Lost time injury between 5 and	Breach of statutory or regulatory
		could damage FRE's	10 days, professional/medical	obligation; relevant regulator aware
		reputation and lead to some	treatment required; incident	or must be notified (e.g. privacy
		media coverage	attracts some media attention;	breach requiring notification to
			WorkSafe investigation with risk of	privacy regulator)
			improvement or prohibition notice
Major	<33%	Credibility/integrity of FRE	Serious harm with hospitalization/	Breach of NZX Listing Rule or other
		challenged with national/	lost time injury of more than 10 days;	material legislative breach with risk
		sustained media coverage;	WorkSafe investigation with risk of	of financial penalty and/or restriction
		shareholder enquiries likely	prosecution/significant penalties	on operation
Catastrophic	33%+	Significant and sustained	Severe accident involving multiple	Breach of NZX Listing Rule or other
		negative media coverage;	hospitalisations/permanent	material legislative breach with
		requires communications to	disability or death; WorkSafe	risk of trading suspension, high
		shareholders and/or NZX	investigation with risk of	profile court proceeding, FMA/SFO
			prosecution/significant penalties	investigation and/or criminal penalty

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Climate–related disclosures

Risk

management

RISK REGISTER

We conducted our scenario analysis in 2020, and the resulting climate risks were incorporated into Freightways’ risk register. Each controlled business is required to maintain their risk register which also considers mitigation and risk trends, including climate related risks. Freightways’ executive leadership team is required to reflect on each risk at least annually. A collective agreement on prioritisation follows, which informs the decisions on how to mitigate, transfer, accept or control each risk. Note that the scenario analysis and risk register will be updated prior to FY24 reporting to reflect the XRB requirement to analyse three scenarios (currently Freightways has considered two).

During our initial scenario analysis, we identified that climate risks will peak in impact beyond the upper 10-year limit of our risk assessment framework with a reasonably high degree of certainty. Therefore, it is possible that these risks may not be rated sufficiently using our current risk framework. Given this, and the fact that Freightways has acquired new businesses, we will update our risk assessment approach over the next year to review time horizons, risks and opportunities identified, and use most up-to-date scientific data.

Metrics and targets

Freightways uses emissions data and targets to measure and assess our climate related risks, as well as emissions price. Emissions price used (NZD per tonne of CO2e) are as per Climate Change Commission’s advice, set as NZD140 in 2030, NZD190 in 2040 and NZD250. Below, we outline our Scope 1, 2 and 3 emissions, and our Paris-aligned targets.

SCOPE 1, SCOPE 2, AND 3 EMISSIONS

To understand and report transparently against our emissions reduction goals, we are committed to managing and reducing our carbon footprint and have been measuring Scope 1, 2, and 3 GHG emissions since 2014 for our New Zealand operations, meeting the requirements of TOITŪ Carbonreduce[TM] certification and ISO 14064-1:2006. Table 8 provides a summary of emissions.

Our emissions calculation approach can be found here (https://www.toitu.co.nz/our-members/ members/freightways-limited). Freightways’ emissions calculation uses an operational control consolidation approach and only includes fuel, electricity, and refrigerants. Emissions factors and Global Warming Potentials (GWPs) were provided by TOITŪ and reference the IPCC fifth assessment report (AR5). Remaining sources have been excluded on the basis that they are de minimis. The following business unit was excluded:

FIGURE 6: RISK RATING MATRIX

==> picture [383 x 370] intentionally omitted <==

----- Start of picture text -----

5 4 3 2 1
Very Medium Medium High Very high Very high A
likely
Likely Low Medium High High Very high B
Possible Low Medium Medium High High C
Unlikely Low Low Medium Medium High D
Very Low Low Low Medium High E
unlikely
Minor Moderate Significant Major Catastrophic
Impact when occurs (EBITA reduction)
Likelihood: probability of occurrence
----- End of picture text -----

Prior to FY22, GHG emissions below excluded Big Chill Distribution Limited and the Group’s Australia operations.
Freightways acquired Allied Express Transport Pty Limited (Allied) effective 30 September 2022. The GHG emissions below exclude Allied. Freightways intends to include Allied’s GHG emissions from FY24.

TABLE 8: SUMMARY OF GHG EMISSIONS *FY23 GHG emissions data to be audited in November 2023

		BASELINE 2019	F Y20	F Y21	F Y22	F Y23*
	Scope 1 (tCO2e) Scope 2 (tCO2e) Scope 3 (tCO2e) Total absolute emissions (tCO2e) Total emissions	3,912.34 873.07 40,277.60 45,063.01 90.85	3,679.88 825.95 46,118.74 50,624.57 102.98	4,151.34 802.04 47,483.49 52,436.87 94.16	10,083.61 4,485.67 71,502.15 86,071.43 98.58	11,700.31 3,549.33 68,271.04 83,520.68 89.38
	intensity (gross tCO2e / $Millions

EMISSIONS REDUCTION TARGETS

In FY21, we set 2030 and 2035 emission reduction targets, which were supported by a thirdparty consultant. We are working toward a 2030 target of 30% reduced GHG emissions and a 2035 target of 50% reduction in absolute GHG emissions from a 2019 baseline. Over 95% of our emissions come from the fuel we use in our fleet cars, our contracted courier vans and trucks, and the aircrafts we use. Freightways’ efforts to achieve our targets are dependent on low emissions technology, which is not yet available to allow for meaningful progress made against the targets.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries 77

Our Board

==> picture [256 x 159] intentionally omitted <==

MARK CAIRNS ABBY FOOTE Chairman LLB (Hons), BCA, BE (Hons), BBS, MMGT, FIPENZ, CF Inst D CF Inst D, INFINZ (Cert)

==> picture [255 x 159] intentionally omitted <==

==> picture [256 x 159] intentionally omitted <==

MARK RUSHWORTH BE(Hons), MEM

PETER KEAN PMD – Harvard

==> picture [256 x 160] intentionally omitted <==

==> picture [73 x 19] intentionally omitted <==

----- Start of picture text -----

FIONA OLIVER
LLB, BA, CF Inst D
----- End of picture text -----

DAVID GIBSON B.Com LL.B (Hons)

Our Leadership

==> picture [256 x 107] intentionally omitted <==

==> picture [256 x 185] intentionally omitted <==

AMI VAN GILS Head of People and Culture, BA – University of Auckland Freightways

==> picture [256 x 106] intentionally omitted <==

MARK TROUGHEAR Chief Executive Officer BMS – University of Waikato

==> picture [256 x 185] intentionally omitted <==

NEIL WILSON General Manager Freightways

==> picture [257 x 106] intentionally omitted <==

STEPHAN DESCHAMPS Chief Financial Officer, MBA – Master in Finance B Poli Sci, M Fin (Institut d’Etudes Politiques, Paris)

NICOLA SILKE General Counsel and Company Secretary LLB (Hons), BA – University of Canterbury

==> picture [257 x 107] intentionally omitted <==

==> picture [256 x 106] intentionally omitted <==

MAT THEW COCKER Chief Information Officer PhD – Georgetown University

STEVE WELLS General Manager Express Package Division

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Financial Summary

For the year ended 30 June 2023

==> picture [512 x 190] intentionally omitted <==

----- Start of picture text -----

2023 2022 Increase
Note $000 $000 %
Operating revenue 1,121,620 873,094 28.5
EBITA (i) 145,285 126,522 14.8
NPAT (ii) 75,297 70,182 7.3
EBITA (excluding other expenses) 145,285 130,222 11.6
NPAT (excluding other expenses, net of tax) 75,297 73,882 1.9
Other expenses:
Change in fair value of contingent consideration –
Big Chill Distribution Limited (BCD) (iii) - (3,700)
Total - (3,700)
- -
Tax benefit applicable to other expenses
-
Other expenses, net of tax (3,700)
----- End of picture text -----

Notes:

(i) Operating profit before interest, income tax and amortisation of intangibles

(ii) Profit for the year attributable to the shareholders

(ii) The estimated discounted future final payment for the BCD acquisition was increased from $51.3 million as at 30 June 2021 to $56.2 million as at 30 June 2022. This increase of $3.7 million (net of impact of unwinding of discount on acquisition earn-out liability of $1.2 million) reflected the strong performance of BCD, which determined the final payment in August 2022 for the acquisition of the company.

The Directors believe that the other expenses detailed above should not be included when assessing the underlying trading performance of the Group.

*EBITA is a non-GAAP measure

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Director’s Report

The Directors of Freightways Group Limited (Freightways) resolved to submit the following report with respect to the financial position of the Group as at 30 June 2023 and its financial performance and cash flows for the year ended on that date.

DIRECTORS

The names of the Directors of the Company in office at the date of this report are:

Peter Kean | PMD Harvard

Mark Cairns | BE (Hons), BBS, MMGT, FEngNZ, CF Inst D

Peter was appointed a Director in July 2016. He brings to Freightways many years of senior executive experience with the Lion group of companies in both New Zealand and Australia. Peter’s last executive roles were as Managing Director of Lion Nathan New Zealand and Managing Director of Lion Dairy and Drinks, based in Melbourne. Peter retired from Lion in 2014 and has since developed his career in governance. Peter is involved in a number of private companies both in New Zealand and in Australia.

Mark was appointed a Director in April 2021. He was Chief Executive of Port of Tauranga, New Zealand’s largest and most successful port, from 2005 until his retirement in June 2021 to pursue a full-time governance career. Mark was previously Chief Executive of Toll Owens Limited and Owens Cargo Company Limited. Mark has extensive experience in logistics, infrastructure, contracting and significant exposure to capital markets. Mark is also a director of Auckland International Airport Limited and Meridian Energy Limited.

Fiona Oliver | LLB, BA, CF Inst D

Abby Foote | LLB (Hons), BCA, CF Inst D, INFINZ (cert)

Fiona was appointed a Director in July 2021. She is a professional director, holding governance roles across a range of business sectors including renewable energy, natural gas, technology, and financial services. She is a director (and Audit Committee Chair) of Gentrack Group Limited, the First Gas Group, and Wynyard Group Limited (in liquidation). Fiona’s executive career was in the financial services sector in New Zealand and overseas. In New Zealand, her roles included Chief Operating Officer of Westpac’s investment arm, BT Funds Management, and General Manager of AMP NZ’s Wealth Management division. In Sydney and London, Fiona managed the Risk and Operations function for AMP’s private capital division. Prior to this, Fiona was a senior corporate and commercial solicitor in New Zealand and overseas, specialising in mergers and acquisitions.

Abby was appointed a Director in June 2018. She is a professional director with over 14 years’ governance experience, with qualifications in both law and accounting. Abby has experience in a range of senior management, finance and legal roles, with a focus on corporate finance and commercial transactions. Abby is currently a director of KMD Brands Limited, Sanford Limited and Christchurch City Holdings Limited.

David Gibson | B.Com, LLB (Hons)

David was appointed to the Board in April 2022. David is a professional director and has a strong background in strategy and finance with over 20 years investment banking experience, including as Co-Head of Investment Banking in New Zealand for Deutsche Bank and Deutsche Craigs. During his finance career David has advised on many of New Zealand’s largest capital market transactions. David is also a director of NZME Limited, Goodman (NZ) Limited and Rangatira Limited.

Mark Rushworth | BE (Hons), MEM

Mark was appointed a Director in September 2015. He has extensive experience in the technology sector, with a decade’s governance experience, predominantly in the high tech and innovation space. An electrical engineer by training, with widespread operations and marketing experience, he spent 4 years on the senior executive team of Vodafone NZ, where among other things he had executive accountability for the fixed line business and as Director of Marketing. Mark previously served as chief executive of Pacific Fibre, ihug and financial services company, Paymark Limited. Mark is currently Chief Executive Officer of private equity owned UP Education and a director of a number of private companies.

Director’s Report

BOARD SKILL MATRIX

The Board focuses on governance, strategy and the oversight of the performance of the different Freightways businesses and brands. The Directors bring both proven experience in governance and a strong background in business to their decision making. Together, they provide the wide-ranging skills needed to ensure the Board has the expertise to set and approve strategic direction, make senior management appointments, monitor performance, manage risk and oversee our many stakeholder relationships. The Board Skill Matrix below sets out the skills of each Director against the range of expertise Freightways requires to succeed.

==> picture [512 x 231] intentionally omitted <==

----- Start of picture text -----

Mark Abby David Peter Fiona Mark
Deep Expertise (NED)
Cairns Foote Gibson Kean Oliver Rushworth
Governance
NZ Listed Market
Audit And Risk
Business Operations At Scale
International Transport, Logistics,
Sector Aligned Expertise
Marketing / Brand / Sales
It Platforms And Digital Innovation
Australian Market
Health & Safety
Environmental, Social & Governance (ESG)
Entrepreneurial
----- End of picture text -----

PRINCIPAL ACTIVITIES

The principal activities of the Group during the year ended 30 June 2023 were the operation of express package & business mail services and information management services.

INDEPENDENCE OF THE BOARD

The Board has determined for the purposes of the NZX Listing Rules that, as at 29 June 2023, Mark Cairns, Abby Foote, David Gibson, Peter Kean, Fiona Oliver and Mark Rushworth are independent Directors.

The Board assessed each Director’s independence with regard to the NZX Listing Rules, the interests and relationships of each Director and by considering each of the factors set out in Table 2.4 of the NZX Corporate Governance Code. The Board is satisfied that none of the factors set out in Table 2.4 apply to any of the Directors.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Director’s Report

CONSOLIDATED RESULT FOR THE YEAR

==> picture [512 x 136] intentionally omitted <==

----- Start of picture text -----

2023 2022
$000 $000
Operating revenue 1,121,620 873,094
Operating profit before interest and income tax 133,962 118,994
Net interest and finance costs (28,585) (20,292)
Profit before income tax 105,377 98,702
Income tax (30,080) (28,520)
Profit for the year attributable to the shareholders 75,297 70,182
----- End of picture text -----

DIRECTORS HOLDING OFFICE DURING THE YEAR WERE:

Subsidiaries: Mark Troughear Stephan Deschamps Stephen Micallef (Australian subsidiaries only)

Parent: Mark Cairns (Chairman) Abby Foote David Gibson Peter Kean Fiona Oliver Mark Rushworth

APPROVED REMUNERATION OF DIRECTORS (EFFECTIVE 1 NOVEMBER 2021)

==> picture [483 x 204] intentionally omitted <==

----- Start of picture text -----

Group Fees (per annum)
2023 2022
Position Note $ $
Board of Directors Chair (i) 180,000 180,000
Member – NZ 100,000 100,000
Member – NZ 100,000 100,000
Member – NZ 100,000 100,000
Member – NZ 100,000 100,000
Audit & Risk Committee Chair (i) 120,000 120,000
People & Remuneration Committee Chair (i) 115,000 115,000
Committee work pool (if required) 42,145 42,145
Total annual fee pool limit (ii) 857,145 857,145
----- End of picture text -----

Director’s Report

REMUNERATION RECEIVED BY DIRECTORS

==> picture [512 x 189] intentionally omitted <==

----- Start of picture text -----

2023 2022
$ $
Directors of Freightways (Parent company)
Mark Cairns 180,000 123,917
Abby Foote 120,000 114,667
David Gibson (appointed 1 April 2022) 100,000 25,000
Peter Kean 115,000 101,417
Fiona Oliver (appointed 5 July 2021) 100,000 97,667
Mark Rushworth 100,000 97,667
-
Mark Verbiest (resigned 31 March 2022) 130,000
-
Kim Ellis (resigned 28 October 2021) 33,333
Total non-executive Directors 715,000 723,668
----- End of picture text -----

Directors of the Company’s subsidiaries do not receive any remuneration or other benefits in their capacity as a director of those companies, except indemnity and insurance referred to in the Directors’ and Officers’ Liability Insurance section on page 89.

CHIEF EXECUTIVE ' S REMUNERATION

==> picture [512 x 174] intentionally omitted <==

----- Start of picture text -----

2023 2022
$ $
CEO – Mark Troughear
Salary 945,000 874,000
Benefits 39,000 39,000
Subtotal 984,000 913,000
Pay for Performance:
STI 511,000 565,000
LTI 298,000 190,000
Subtotal 809,000 755,000
Total remuneration 1,793,000 1,668,000
----- End of picture text -----

Notes:

(i) Inclusive of Board member fee

(ii) Approved by shareholders at Annual Shareholders Meeting in October 2021

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Director’s Report

FIVE-YEAR SUMMARY: CHIEF EXECUTIVE’S REMUNERATION

==> picture [512 x 106] intentionally omitted <==

----- Start of picture text -----

Financial CEO Total remuneration % STI against % vested LTI against Span of LTI
Year ($000) maximum maximum performance period
2023 Mark Troughear 1,793 91 84 FY20-FY22
2022 Mark Troughear 1,668 100 100 N/A
2021 Mark Troughear 970 88 - N/A
2020 Mark Troughear 843 72 - N/A
2019 Mark Troughear 873 100 - N/A
----- End of picture text -----

The remuneration of the CEO in the remuneration tables above includes the STI and LTI incentive payments made during the year ended 30 June 2023 in respect of the two previous six-month performance periods (1 January to 30 June 2022 and 1 July to 31 December 2022). No amount is included above in respect of incentive payments for the period 1 January to 30 June 2023, as these were paid in August 2023.

BREAKDOWN OF CHIEF EXECUTIVE’S PAY FOR PERFORMANCE (RELATED TO F Y23 OBJECTIVES)

==> picture [512 x 215] intentionally omitted <==

----- Start of picture text -----

Description Performance measures Achieved (%)
STI 55% of base salary. Based on a 50% weighting on achievement of Board 60
combination of financial and non-financial approved earnings before interest, tax and
performance measures. amortisation (EBITA).
50% weighting on individual performance 100
comprising strategy development & delivery, health
& safety and carbon emissions reduction strategy.
LTI Conditional awards of shares under long-term Relative TSR (rTSR) - Based on Freightways’ 91% achieved and will
incentive scheme. Introduced in July 2019 with a TSR compared to that of the constituents of the be exercised in the
vesting period of 3 years ending 30 June 2023. NZX50 Index over the vesting period. 50% of the first half of FY24
rTSR Share Rights eligible for vesting will vest
if Freightways outperforms the NZX50 Index
median, pro-rated up to 100% for achieving the
75th quartile of the Index constituents.
Absolute TSR (aTSR) - Up to 50% of Share Rights 91% achieved and will
will vest based on exceeding a cost of capital be exercised in the
hurdle over the vesting period. first half of FY24
----- End of picture text -----

Director’s Report

THREE-YEAR SUMMARY: TSR PERFORMANCE

==> picture [508 x 200] intentionally omitted <==

----- Start of picture text -----

��
��
��
��
��
��
��
Financial Quarter
TSR %
----- End of picture text -----

CHIEF EXECUTIVE’S REMUNERATION PERFORMANCE PAY FOR F Y23

REMUNERATION OF OTHER OFFICERS IN THE FREIGHT WAYS GROUP

Fixed remuneration of other officers, not being Directors of the Company, representing a range from 73% to 80% of their total remuneration, is benchmarked to market and consists of base salary and matched KiwiSaver contributions up to a maximum of 3%. The officers participate in an at-risk short-term incentive (STI) scheme, representing a range from 20% to 27% of their total remuneration, that reflects the achievement of predetermined company profit levels and individual performance objectives aligned to business strategy and goals. In addition, the officers receive a range from 1% to 2% of earnings before interest, tax and amortisation (EBITA) over a Board approved EBITA target. The officers also participate in the Freightways Senior Executive Performance Share Plan (the ‘Plan’) described in Note 22 of the Financial Statements by way of an annual allocation of PSRs. The PSRs have a 3-year vesting period and are subject to the achievement of financial hurdles, as described in Note 22. Both the STI scheme and Senior Executive Performance Share Plan are variable, performance-based incentives and are only awarded if specific financial and non-financial performance hurdles are met, and at the discretion of the Board.

==> picture [230 x 172] intentionally omitted <==

----- Start of picture text -----

��
��
��
��
��
��
��
��
��
��
�
��
��
$000
----- End of picture text -----

The Company’s Remuneration Policy can be found at https://www.freightways.co.nz/about/corporate-governance/.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Director’s Report

REMUNERATION OF EMPLOYEES

The number of employees, not being Directors of the Company, within the Group receiving annual remuneration and benefits above $100,000 are as indicated in the following table:

==> picture [512 x 481] intentionally omitted <==

----- Start of picture text -----

Group
2023 2022 2023 2022
$100,000 – $109,999 136 101 $350,000 – $359,999 4 2
$110,000 – $119,999 96 56 $360,000 – $369,999 1 -
$120,000 – $129,999 63 41 $370,000 – $379,999 2 -
$130,000 – $139,999 48 42 $380,000 – $389,999 - 1
$140,000 – $149,999 33 29 $390,000 – $399,999 - 1
$150,000 – $159,999 24 16 $400,000 – $409,999 - 1
$160,000 – $169,999 22 18 $410,000 – $419,999 1 -
$170,000 – $179,999 24 11 $420,000 – $429,999 - 2
$180,000 – $189,999 14 11 $430,000 – $439,999 - 2
$190,000 – $199,999 13 9 $440,000 – $449,999 1 -
$200,000 – $209,999 13 6 $480,000 – $489,999 - 1
$210,000 – $219,999 9 12 $510,000 – $519,999 - 1
$220,000 – $229,999 8 4 $530,000 – $539,999 - 1
$230,000 – $239,999 4 7 $550,000 – $559,999 1 -
$240,000 – $249,999 4 3 $580,000 – $589,999 1 -
$250,000 – $259,999 6 3 $610,000 – $619,999 1 -
$260,000 – $269,999 1 8 $640,000 – $649,999 1 -
$270,000 – $279,999 4 2 $650,000 – $659,999 1 1
$280,000 – $289,999 1 3 $740,000 – $749,999 - 1
$290,000 – $299,999 4 5 $780,000 – $789,999 - 2
$300,000 – $309,999 2 1 $820,000 – $829,999 - 1
$310,000 – $319,999 1 1 $840,000 – $849,999 1 -
$320,000 – $329,999 1 1 $1,660,000 – $1,669,999 - 1
$330,000 – $339,999 1 1 $1,790,000 – $1,799,999 1 -
$340,000 – $349,999 2 -
----- End of picture text -----

Director’s Report

ENTRIES IN THE REGISTER OF DIRECTORS’ INTERESTS

The Register of Directors’ Interests records that the following Directors of Freightways Group Limited have an equity interest in the Company.

FREIGHT WAYS GROUP LIMITED SHARES

At balance date Directors of Freightways Group Limited held the following number of equity securities in the Company:

==> picture [512 x 137] intentionally omitted <==

----- Start of picture text -----

Fully-paid ordinary shares
Director
Mark Cairns 50,000
Abby Foote 14,363
David Gibson 20,812
Peter Kean 51,500
Fiona Oliver 2,800
Mark Rushworth 28,000
----- End of picture text -----

==> picture [512 x 94] intentionally omitted <==

----- Start of picture text -----

The following table shows transactions recorded in respect of securities
Number $000
acquired or disposed of by Directors of Freightways Group Limited
during the year ended 30 June 2023:
Acquired Cost
(Disposed) (Sale)
Mark Rushworth
Ordinary shares acquired on 24 March 2023 10,000 93
----- End of picture text -----

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Director’s Report

OTHER INTERESTS

Listed below are details of the entries made in the Interests Register of the Company during the year, together with the existing entries as at 30 June 2023.

==> picture [511 x 327] intentionally omitted <==

----- Start of picture text -----

Name Name of company / entity Nature of interest
Mark Cairns Auckland International Airport Limited Director
Meridian Energy Limited Director
Sanford Limited Director
Abby Foote Christchurch City Holdings Limited Director*
KMD Brands Limited Director
Sanford Limited Director
David Gibson Goodman (NZ) Limited Director
NZME Limited Director
Rangatira Limited Director
Peter Kean Sanford Limited Director
Trojan Holdings Limited Director
Fiona Oliver Barramundi Limited Director
BNZ Life Insurance Limited Director
BNZ Insurance Services Limited Director
Gentrack Group Limited Director
First Gas group companies Director
Guardians of New Zealand Superannuation Director
Kingfish Limited Director
Marlin Global Limited Director
Summerset Group Holdings Limited Director
Mark Rushworth UP Education Group Chief Executive
----- End of picture text -----

Director’s Report

DIRECTORS’ AND OFFICERS’ LIABILIT Y INSURANCE

Deeds of indemnity have been granted by the Company in favour of the Directors of the Company and its subsidiaries, to the fullest extent permitted by the Companies Act 1993. In accordance with the deeds of indemnity, the Company has insured all its Directors and the Directors of its subsidiaries against liabilities to other parties (except the Company or a related party of the Company) that may arise from their positions as Directors. Freightways’ liability insurance also covers Officers of the Group. The insurance does not cover liabilities arising from criminal actions.

For and on behalf of the Board this 21st day of August 2023.

Mark Cairns Abigail Foote Chairman Director

Entry added by notice given by the Director during the year.
** Entry removed by notice given by the Director during the year.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Financial Statements

91 Independent Auditor’s Report 97 Income Statement
98 Statement of Comprehensive Income 99 Statement of Changes in Equity

Independent Auditor's Report To the shareholders of Freightways Group Limited

100 Balance Sheet
101 Statement of Cash Flows
102 Notes to the Financial Statements
152 Shareholder information

Independent auditor’s report

To the shareholders of Freightways Group Limited (formerly known as Freightways Limited)

154 Corporate Governance Statement 160 Directory
161 Company particulars

Our opinion

In our opinion, the accompanying financial statements of Freightways Group Limited (the Company), including its subsidiaries (the Group), present fairly, in all material respects, the financial position of the Group as at 30 June 2023, its financial performance and its cash flows for the year then ended in accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).

What we have audited

The Group's financial statements comprise:

the balance sheet as at 30 June 2023;
the income statement for the year then ended;
the statement of comprehensive income for the year then ended;
the statement of changes in equity for the year then ended;
the statement of cash flows for the year then ended; and
the notes to the financial statements, which include significant accounting policies and other explanatory information.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs (NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements.

Our firm carries out other services for the Group in the areas of standardised general treasury training. In addition, certain partners and employees of our firm may deal with the Group on normal terms within the ordinary course of trading activities of the Group. The provision of these other services and relationships have not impaired our independence as auditor of the Group.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current year. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Independent Auditor's Report To the shareholders of Freightways Group Limited

Description of the key audit matter	How our audit addressed the key audit matter		Description of the key audit matter		How our audit addressed the key audit matter
Revenue recognition The Group’s revenue of $1,122 million for the current year primarily consisted of express package and business mail – courier, express freight, refrigerated transport and storage and postal services and information management – storage, destruction and digital services, as disclosed in Note 3 of the financial statements. The Group has deferred revenue of $14.4 million included in contract liabilities for service obligations not yet performed as at 30 June 2023. Revenue recognition under NZ IFRS 15 is a key audit matter due to the number of revenue streams and information systems used to record revenue. Management judgement is also required to estimate the contract liability for deferred revenue based upon historical usage patterns as disclosed in Note 19.	We obtained an understanding and evaluated the Group’s processes and controls relating to revenue recognition for each material revenue stream and recognition of a contract liability for deferred revenue. Our audit procedures in relation to revenue recognition for each material revenue stream included: ● challenging the material judgements made by management in applying the standard, including assessing a sample of individual contracts against the requirements of NZ IFRS 15, particularly the determination of performance obligations; ● performed test of controls to ensure the controls in place are effective to prevent and detect material misstatement at a transactional level; ● performed substantive analytical procedures to ensure the accuracy of revenue for specific revenue streams, including considering the reliability of the data used in the analytics; ● testing a sample of revenue transactions to assess the completion of performance obligations; ● testing a sample of revenue transactions to assess the accuracy of pricing to supporting documentation; ● for a sample of transactions within accounts receivable at balance date we obtained either confirmation of the amount owing from the customer, or evidence of the amount owing from alternative procedures including testing of subsequent receipts or shipping documentation; and ● assessing the disclosures made against the requirements of the accounting standards. Our audit procedures in relation to the contract liability for deferred revenue included: ●testing the system reports from which the data used in the contract liability calculation is derived; and ●understanding the models used by management to determine the release to revenue for estimated unredeemed tickets based upon historical usage patterns by utilising substantive analytical procedures.		Impairment assessment of goodwill and indefinite lived brand names As disclosed in Note 14, the Group has goodwill and indefinite lived brands with carrying values of $406.7 million and $157.3 million respectively (30 June 2022: $306.1 million and $128.3 million) which include the provisional goodwill and indefinite lived brands for Allied Express Transport Pty Limited (AEX) of $100.3 million and $29.4 million respectively. Goodwill and brand names are allocated to cash-generating units (CGUs) for the purpose of impairment testing. Management performed an annual impairment assessment using value in use (VIU) models to determine whether the carrying value of assets held by each CGU is recoverable. Our audit focused on this area as it involves estimation and judgement about future business performance which includes certain key assumptions such as revenue growth, earnings before Interest, tax, depreciation and amortisation (EBITDA) margin, terminal year growth rate, the pre-tax discount rate and the likely impact of climate change. A probabilistic approach was also adopted where a number of different growth scenarios were considered and weighted by likelihood of achievement. For each CGU, the recoverable amount based on the value in use was higher than the carrying value of the CGU and as a result, no impairment charge was recognised. Based on the level of headroom and the sensitivity to impairment of each CGU, our audit procedures relating to the estimations and judgments in the VIU models included some or all of the following: ● gaining an understanding of the business process applied by management in preparing the impairment assessments; ● considering the appropriateness of the determination of each CGU and recalculating the carrying amounts of the CGU net assets; ● evaluating whether corporate costs had been allocated appropriately and included in the cash flows for each CGU; ● testing the mathematical accuracy of the models used to determine the VIU of each CGU; ● reviewing historical years actual revenue and EBITDA against the original budgeted performance to determine the reliability of the budgeting process and considering the impact on forecast performance; ● obtaining an understanding of the current and forecast outlook for the business and management’s basis for determining the key assumptions in preparing the forecast cash flows.This included management's assessment of the likely impact of climate change; ● agreeing forecast future performance included in the impairment assessments to the budgets approved by the Board of Directors, based on the FY24 forecasts with a growth rate applied for the future periods; ● with the assistance of our auditor’s valuation expert, assessing the appropriateness of the terminal growth and discount rates and assessing against industry trends and external market forecasts; and ● performing a sensitivity analysis over key assumptions to determine whether reasonably possible changes would result in impairment of goodwill. We also reviewed the financial statements for appropriate identification and disclosure of key assumptions, including the impact of reasonably possible changes which would result in an impairment.

PwC

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Independent Auditor's Report To the shareholders of Freightways Group Limited

Description of the key audit matter

How our audit addressed the key audit matter

Our procedures over accounting treatment of the acquisition included:

Allied Express Transport Pty Limited (AEX) acquisition accounting

As disclosed in Note 30, on 30 September 2022, the Group completed the acquisition of AEX, for a total consideration of approximately NZ$215.3 million which includes cash, the issue of shares in the Group, a promissory note and a completion adjustment. AEX was an independently owned courier and express freight business in Australia at the time of purchase. As disclosed in Note 30, the fair value of certain assets and liabilities arising from the acquisition have been determined on a provisional basis as the completion adjustment is currently being finalised.

●reading the Sale and Purchase Agreement to understand the key terms and conditions;

●agreeing the consideration to supporting documentation. This included agreeing the value assigned to the Company shares that were issued as part of the consideration to the market value of the Company’s shares at the transaction date;
●with the assistance of our internal experts considered the appropriateness of the accounting treatment and disclosure of the Promissory Note under NZ IFRS 3 Business combinations (NZ IFRS 3);

We consider this acquisition to be a key audit matter due to the significance of the acquisition to the Group and the application of significant management judgement in completing a provisional assessment of the fair value of the assets and liabilities acquired, including recognising the following separately identifiable intangible assets:

●gaining an understanding of the valuation approach and methodology undertaken by management to identify separately identifiable intangible assets against the criteria in NZ IFRS 3 and fair value the assets and liabilities acquired;

● obtaining and reading the valuation report prepared by management’s external experts on the purchase price allocation for the acquisition and engaging our auditor’s valuation expert to:

Brands of $30.6 million
Non-compete agreements with the founders/directors of $3.1 million
● Customer relationships of $54.7 million.
a) assess the valuation approach, methodology and assumptions undertaken by management in relation to the valuation of the brands, customer relationships and noncompete agreements;

b) test the mathematically accuracy of the calculations;

recalculating the provisional purchase price allocation and the resulting provisional goodwill as a result of the acquired assets and liabilities; and
assessing the disclosures made against the requirements of the NZ IFRS 3.

Independent Auditor's Report To the shareholders of Freightways Group Limited

Our audit approach

Overview

Overall group materiality: $5,268,000 which represents approximately 5% of profit before tax.

We chose profit before tax as the benchmark because, in our view, it is the benchmark against which the performance of the Group is most commonly measured by users, and is a generally accepted benchmark.

Following our assessment of the risk of material misstatement,

Full scope audits were performed for four components of the Group based on their financial significance
● Specified audit procedures and analytical review procedures were performed on the remaining 22 entities.
As reported above, we have three key audit matters, being: ● Revenue recognition ● Impairment assessment of goodwill and indefinite lived brand names
● Allied Express Transport Pty Limited (AEX) acquisition accounting

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

Materiality

The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance about whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Group materiality for the financial statements as a whole as set out above. These, together with qualitative considerations, helped us to determine the scope of our audit, the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the financial statements as a whole.

How we tailored our group audit scope

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates.

PwC

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Independent Auditor's Report To the shareholders of Freightways Group Limited

Other information

The Directors are responsible for the other information. The other information comprises the information included in the Annual report, but does not include the financial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of audit opinion or assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the financial statements

The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of the financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements, as a whole, are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (NZ) and ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located at the External Reporting Board’s website at: https://www.xrb.govt.nz/assurance-standards/auditors-responsibilities/audit-report-1/

This description forms part of our auditor’s report.

Income Statement

For the year ended 30 June 2023

==> picture [512 x 410] intentionally omitted <==

----- Start of picture text -----

Group
Note 2023 2022
$000 $000
Operating revenue 2 & 3 1,121,620 873,094
Transport and logistics expenses (479,169) (344,534)
Employee benefits expenses (309,879) (252,488)
Occupancy expenses (6,935) (6,857)
General and administration expenses (110,754) (80,634)
Change in fair value of contingent consideration –
Big Chill Distribution Limited 30 - (3,700)
Depreciation and software amortisation 4 (69,598) (58,359)
Amortisation of intangibles 4 (11,323) (7,528)
Operating profit before interest and income tax 133,962 118,994
Net interest and finance costs 4 (28,585) (20,292)
Profit before income tax 105,377 98,702
Total income tax 5 (30,080) (28,520)
Profit for the year 75,297 70,182
Profit for the year is attributable to:
Owners of the parent 75,144 70,095
Non-controlling interests 153 87
75,297 70,182
Earnings per share 25
Basic earnings per share (cents) 43.1 42.3
Diluted earnings per share (cents) 43.1 42.2
NB: All revenue and earnings are from continuing operations.
The above Income Statement should be read in conjunction with the accompanying notes.
----- End of picture text -----

Who we report to

This report is made solely to the Company’s shareholders, as a body. Our audit work has been undertaken so that we might state those matters which we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our audit work, for this report or for the opinions we have formed.

The engagement partner on the audit resulting in this independent auditor’s report is Keren Blakey. For and on behalf of:

Chartered Accountants Auckland 21 August 2023

PwC

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

Statement of Comprehensive Income For the year ended 30 June 2023

==> picture [512 x 243] intentionally omitted <==

----- Start of picture text -----

Group
2023 2022
Note $000 $000
Profit for the year (NPAT) 75,297 70,182
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations 21 (5,796) 2,858
Cash flow hedges taken directly to equity, net of tax 21 226 3,373
Total other comprehensive income after income tax (5,570) 6,231
Total comprehensive income for the year 69,727 76,413
Total comprehensive income for the year is attributable to:
Owners of the parent 69,574 76,326
Non-controlling interests 153 87
69,727 76,413
----- End of picture text -----

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

The Board of Directors of Freightways Group Limited authorised these financial statements for issue on the date below.

For and on behalf of the Board this 21st day of August 2023.

Statement of Changes in Equity For the year ended 30 June 2023

==> picture [512 x 382] intentionally omitted <==

----- Start of picture text -----

Group Contributed Retained Cash flow Foreign Non- Total
equity earnings hedge currency controlling equity
reserve translation interests
Note reserve
$000 $000 $000 $000 $000 $000
Balance at 1 July 2021 182,571 163,522 (1,195) (6,945) 148 338,101
Profit for the year - 70,095 - - 87 70,182
Exchange differences on translation
- - - -
of foreign operations 2,858 2,858
Cash flow hedges taken directly
- - - -
to equity, net of tax 3,373 3,373
Total Comprehensive Income - 70,095 3,373 2,858 87 76,413
Dividend payments 6 - (59,678) - - - (59,678)
Shares issued 21 1,778 - - - - 1,778
Balance at 30 June 2022 184,349 173,939 2,178 (4,087) 235 356,614
Profit for the year - 75,144 - - 153 75,297
Exchange differences on translation
- - - -
of foreign operations (5,796) (5,796)
Cash flow hedges taken directly
to equity, net of tax - - 226 - - 226
Total Comprehensive Income - 75,144 226 (5,796) 153 69,727
Dividend payments 6 - (63,465) - - - (63,465)
Shares issued 21 113,726 - - - - 113,726
Balance at 30 June 2023 298,075 185,618 2,404 (9,883) 388 476,602
----- End of picture text -----

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

Mark Cairns Abigail Foote Chairman Director

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

100

101

Balance Sheet As at 30 June 2023

==> picture [512 x 603] intentionally omitted <==

----- Start of picture text -----

Group
Note 2023 2022
$000 $000
Current assets
Cash and cash equivalents 7 44,485 24,137
Trade and other receivables 8 150,434 127,072
Inventories 9 9,650 8,674
Contract assets 1,875 1,332
Derivative financial instruments 10 1,126 963
Total current assets 207,570 162,178
Non-current assets
Trade receivables and other non-current assets 8 5,999 6,070
Property, plant and equipment 12 155,200 134,180
Right-of-use assets 13 315,536 271,020
Intangible assets 14 677,639 501,668
Investment in associates and joint venture 15 12,480 11,407
Derivative financial instruments 10 2,212 2,061
Total non-current assets 1,169,066 926,406
Total assets 1,376,636 1,088,584
Current liabilities
Trade and other payables 17 138,602 172,822
Lease liabilities 13 44,774 34,735
Income tax payable 16,807 7,209
Provisions 18 3,552 1,550
Contract liability 19 14,407 15,876
Total current liabilities 218,142 232,192
Non-current liabilities
Trade and other payables 17 4,159 3,709
Borrowings 20 297,194 176,210
Deferred tax liability 16 56,824 37,087
Provisions 18 10,216 7,382
Lease liabilities 13 313,499 275,390
Total non-current liabilities 681,892 499,778
Total liabilities 900,034 731,970
NET ASSETS 476,602 356,614
EQUIT Y
Contributed equity 21 298,075 184,349
Retained earnings 185,618 173,939
Cash flow hedge reserve 10 2,404 2,178
Foreign currency translation reserve (9,883) (4,087)
21 476,214 356,379
Non-controlling interests 388 235
TOTAL EQUIT Y 476,602 356,614
----- End of picture text -----

Statement of Cash Flows

For the year ended 30 June 2023

==> picture [512 x 490] intentionally omitted <==

----- Start of picture text -----

Group
2023 2022
$000 $000
Inflows Inflows
Note (Outflows) (Outflows)
Cash flows from operating activities
Receipts from customers 1,119,913 851,573
Payments to suppliers and employees (909,812) (672,075)
Cash generated from operations 210,101 179,498
Interest received 1,003 83
Interest and other costs of finance paid (29,589) (20,375)
Income taxes paid (25,707) (35,522)
Net cash inflows from operating activities 23 155,808 123,684
Cash flows from investing activities
Payments for property, plant and equipment (34,190) (23,020)
Payments for software (3,061) (4,098)
Proceeds from disposal of property, plant and equipment 2,296 1,148
Payments for businesses acquired (net of cash acquired) 30 (128,472) (12,070)
Payments for investment in associates (612) (2,674)
Receipts from joint venture and associate 2,711 2,930
Cash flows from other investing activities - 2
Net cash outflows from investing activities (161,328) (37,782)
Cash flows from financing activities
Dividends paid (63,465) (59,678)
Increase in bank borrowings 128,088 9,803
Proceeds from issue of ordinary shares 644 1,778
Principal elements of lease payments (41,734) (34,008)
Net cash inflows (outflows) from financing activities 23,533 (82,105)
Net increase in cash and cash equivalents 18,013 3,797
Cash and cash equivalents at beginning of year 24,137 19,940
Exchange rate adjustments 2,335 400
Cash and cash equivalents at end of year 7 44,485 24,137
----- End of picture text -----

The above Statement of Cash Flows should be read in conjunction with the accompanying notes.

The above Balance Sheet should be read in conjunction with the accompanying notes.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

102

103

Notes to the financial statements For the year ended 30 June 2023

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Reporting entity and statutory base

Freightways Group Limited, formerly known as Freightways Limited, is a company registered under the Companies Act 1993 and is an FMC reporting entity under Part 7 of the Financial Markets Conduct Act 2013. The financial statements of the Group have been prepared in accordance with the requirements of Part 7 of the Financial Markets Conduct Act 2013 and the NZX Main Board Listing Rules. In accordance with the Financial Markets Conduct Act 2013, Group financial statements are prepared and presented for Freightways Group Limited and its subsidiaries. Accordingly, separate financial statements for Freightways Group Limited are not required to be prepared and presented.

The financial statements are stated in New Zealand dollars rounded to the nearest thousand, unless otherwise indicated.

Basis of preparation

The financial statements of the Group have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (NZ GAAP).

The Group is a for-profit entity for the purposes of complying with NZ GAAP. The financial statements comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS), other New Zealand accounting standards and authoritative notices that are applicable to entities that apply NZ IFRS. The financial statements also comply with International Financial Reporting Standards (IFRS).

The financial statements have been prepared on a historical cost basis, except for derivative financial instruments and acquisition earn-out payables, which have been measured at fair value.

Critical accounting estimates and judgements

The preparation of financial statements in conformity with NZ IFRS requires the use of certain critical accounting estimates, where necessary, and may require management to exercise judgement in the process of applying the Group’s accounting policies. Specific areas of critical accounting estimates and assumptions used are as follows:

(i) Carrying value of indefinite life intangible assets

Impairment assessments are performed by management, annually or where there is an indicator of impairment, to assess the carrying value of indefinite life intangible assets, including goodwill and brand names. The recoverable amounts of cash-generating units have been determined based on the greater of value-in-use and fair value less cost of disposal calculations. These calculations require the use of estimates. Refer to Note 14.

(ii) Customer relationships

The estimation of the useful lives of customer relationships has been based on historical experience. The useful lives are reviewed at least once per year and adjustments to useful lives are made when considered necessary. Refer to Note 14.

(iii) Acquisition earn-out amounts payable

The valuation of the Group’s acquisition earn-out amounts payable are based on the post-acquisition performance of the acquired businesses. These fair value measurements require, among other things, significant estimation of post-acquisition performance of the acquired business and judgement on time value of money. Acquisition earn-out amounts payable shall be remeasured at their fair value resulting from events or factors that emerge after the acquisition date, with any resulting gain or loss recognised in the income statement. Judgement is applied to determine key assumptions (such as growth in sales and margins) adopted in the estimate of post-acquisition performance of the acquired business. Judgement is also applied to determine the appropriate discount rate applied to calculate the present value of the amount payable. Changes to key assumptions may impact the future payable amount. Refer to Note 30.

(iv) Purchase price allocation for acquisitions

During the financial year ended 30 June 2023, the Group acquired Allied Express Transport Pty Limited. All identifiable assets and liabilities including intangible assets were measured at fair value at acquisition date (refer Note 30). In deriving a fair value for identifiable intangibles, the Group used a variety of valuations methods and key assumptions to reflect what a typical market participant would apply if they were to buy or sell each asset on an individual basis.

(b) Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities that are controlled either directly by the Company or where the substance of the relationship between the Company and the entity indicates the Company controls it. The results of businesses acquired or disposed of during the year are included in the income statement from the date of acquisition or up to the date of disposal.

The financial statements include the Company and its subsidiaries accounted for using the acquisition method. The cost of an acquisition is measured as the fair value of the assets acquired, equity instruments issued and liabilities incurred or assumed at the date of acquisition. Costs directly attributable to the acquisition are expensed to the income statement. Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at acquisition date. The Group recognises any noncontrolling interest in an acquired entity on an acquisition-by-acquisition basis either at fair value or as the non-controlling interest’s proportionate

share of the acquired entity’s net identifiable assets. The excess of the consideration transferred over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill.

All material transactions between subsidiaries or between the Company and subsidiaries are eliminated on consolidation. Accounting policies of subsidiaries are consistent with those adopted by the Group.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with NZ IFRS 9 in the income statement. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

(ii) Joint arrangements and joint ventures

The Group applies NZ IFRS 11 to all joint arrangements. Under NZ IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method.

Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income. When the Group’s share of losses in joint venture equals or exceeds its interests in the joint venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint venture), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint venture.

Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of joint ventures are changed where necessary to ensure consistency with the policies adopted by the Group.

(c) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each entity in the Group are measured using the currency that best reflects the primary economic environment in which the entity operates (the “functional currency”). The financial statements are presented in New Zealand Dollars, which is the Company’s functional currency and the Group’s presentation currency.

(ii) Transactions and balances

Transactions in foreign currencies are translated into the functional currency using the foreign exchange rate ruling at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges.

(iii) Foreign operations

The results and balance sheets of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
assets and liabilities for the balance sheet presented are translated at the closing rate at the date of the balance sheet;
income and expenses for the income statement are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
all resulting exchange differences are recognised as a separate component of equity.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

104

105

Notes to the financial statements For the year ended 30 June 2023

NOTE 2. SEGMENT REPORTING

(d) Impairment of non-financial assets

Assets that have an indefinite life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value, less costs of disposal, and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

(e) Financial assets

(i) Classification

The Group classifies its financial assets in the following measurement categories:

those to be measured subsequently at fair value either through other comprehensive income or through the income statement; and
those to be measured at amortised cost.

The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in the income statement or other comprehensive income.

(ii) Recognition and derecognition

Regular purchases and sales of financial assets are recognised on the trade date, i.e. the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or the Group has transferred substantially all the risks and rewards of ownership.

(iii) Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through the income statement, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through the income statement are expensed in the income statement.

(f) Fair value estimation

The fair value of financial assets and financial liabilities is estimated for recognition and measurement or for disclosure purposes. The fair value of financial instruments that are not traded in an active market (for example, over the counter derivatives) are determined using accepted treasury valuation techniques, such as estimated discounted cash flows, by an external treasury management system provider. The carrying value of trade receivables (less provision for doubtful receivables) and payables approximate their fair values.

(g) Goods and services tax (GST)

The income statement and statement of cash flows have been prepared so that all components are stated exclusive of GST. All items in the balance sheet are stated net of GST, with the exception of trade receivables and payables, which include GST invoiced.

(h) Changes in accounting policies

The accounting policies and methods of computation are consistent with those used in the year ended 30 June 2022.

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 and business mail

Comprises network (hub & spoke) courier, express freight, refrigerated transport, point-to-point courier and postal services.

Information management

Comprises secure paper-based and electronic business information management services. This segment also comprises secure handling, treatment and disposal of clinical waste, waste renewal, and related services.

Corporate and other

Comprises corporate, financing and property management services.

The Group has no individual customer that represents more than 4% of external sales revenue.

As at and for the year ended 30 June 2023:

==> picture [512 x 379] intentionally omitted <==

----- Start of picture text -----

Express Information Corporate Inter- Consolidated
Package & Management Segment Operations
Business Mail Elimination
$000 $000 $000 $000 $000
Income statement
Sales to external customers 907,637 213,983 - - 1,121,620
Inter-segment sales 3,510 315 8,125 (11,950) -
Total revenue 911,147 214,298 8,125 (11,950) 1,121,620
Operating profit (loss) before interest,
income tax, depreciation and software amortisation
-
and amortisation of intangibles 169,776 56,411 (11,304) 214,883
-
Depreciation and software amortisation (44,329) (23,717) (1,552) (69,598)
Operating profit (loss) before interest,
-
income tax and amortisation of intangibles 125,447 32,694 (12,856) 145,285
- -
Amortisation of intangibles (9,050) (2,273) (11,323)
Profit (loss) before interest
and income tax 116,397 30,421 (12,856) - 133,962
Net interest and finance costs (8,606) (4,607) (15,372) - (28,585)
-
Profit (loss) before income tax 107,791 25,814 (28,228) 105,377
Income tax (29,675) (7,777) 7,372 - (30,080)
Profit (loss) for the year attributable to
the shareholders 78,116 18,037 (20,856) - 75,297
Balance sheet
-
Segment assets 866,301 350,506 159,829 1,376,636
-
Segment liabilities 411,652 180,882 307,500 900,034
----- End of picture text -----

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

106

107

Notes to the financial statements For the year ended 30 June 2023

As at and for the year ended 30 June 2022:

==> picture [512 x 456] intentionally omitted <==

----- Start of picture text -----

Express Information Corporate Inter- Consolidated
Package & Management Segment Operations
Business Mail Elimination
$000 $000 $000 $000 $000
Income statement
Sales to external customers 687,023 186,071 - - 873,094
Inter-segment sales 2,009 996 5,639 (8,644) -
Total revenue 689,032 187,067 5,639 (8,644) 873,094
Operating profit (loss) before other income and
expense, interest, income tax, depreciation and software
-
amortisation and amortisation of intangibles 142,156 55,232 (8,807) 188,581
Change in fair value of contingent consideration –
- - -
Big Chill Distribution Limited (Note 30) (3,700) (3,700)
Operating profit (loss) before
interest, income tax, depreciation and software
-
amortisation and amortisation of intangibles 142,156 55,232 (12,507) 184,881
-
Depreciation and software amortisation (34,687) (22,105) (1,567) (58,359)
Operating profit (loss) before interest,
-
income tax and amortisation of intangibles 107,469 33,127 (14,074) 126,522
- -
Amortisation of intangibles (5,195) (2,333) (7,528)
Profit (loss) before interest and
income tax 102,274 30,794 (14,074) - 118,994
Net interest and finance costs (6,200) (4,804) (9,289) - (20,292)
-
Profit (loss) before income tax 96,074 25,990 (23,362) 98,702
Income tax (26,067) (7,745) 5,292 - (28,520)
Profit (loss) for the year attributable to
the shareholders 70,007 18,245 (18,070) - 70,182
Balance sheet
-
Segment assets 702,906 344,361 41,317 1,088,584
-
Segment liabilities 315,888 185,085 230,997 731,970
----- End of picture text -----

Segment assets and liabilities are disclosed net of inter-company balances.

For the year ended 30 June 2023, external revenue from customers in the Group’s New Zealand and Australian operations was $775.8 million and $345.8 million, respectively (2022: $730.1 million and $142.4 million, respectively). As at 30 June 2023, non-current assets in respect of the New Zealand and Australian operations (excluding deferred tax assets and financial assets) were $779 . 3 million and $389 . 8 million, respectively (2022: $707 . 8 million and $259.8 million, respectively).

Notes to the financial statements For the year ended 30 June 2023

NOTE 3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue recognition

The majority of contracts the Group entered into with its customers contain multiple performance obligations. The transaction price is allocated to each performance obligation based on the stand-alone selling prices. As the stand-alone selling prices of all goods and services provided are observable and there is no implicit discount offered, transaction prices allocated to individual performance obligations usually match with respective standalone selling prices.

In the case of fixed-price contracts, the customer pays the fixed amount based on a payment schedule. If the services rendered by the Group exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is recognised.

If the contract includes an hourly fee, revenue is recognised in the amount to which the Group has a right to invoice.

(iv) Financing components

(i) Express package & business mail – courier, express freight, refrigerated transport & storage and postal services

The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction prices for the time value of money.

The Group operates network (hub & spoke) courier, express freight, refrigerated transport and storage, point-to-point courier and postal services. Revenue from these services is recognised over the time of delivery, being from the time of acceptance of the goods to delivery to the final destination. Revenue from sale of postal products is recognised at the point the sale occurs. Income invoiced and received in advance of a service being provided is recorded in the balance sheet as ‘Contract Liability’. This income is brought to account in the year in which the service is provided. Revenue from refrigerated storage is recognised over time in the reporting period in which the service is provided.

(v) Interest income

Interest income is recognised on a time-proportionate basis using the effective interest method, which takes into account the effective yield on the relevant financial asset.

(vi) Dividend income

Dividend income from investments is recognised when the shareholder’s right to receive payment is established.

(ii) Information management – storage and destruction revenue

The Group provides archive management services for documents and computer media, including storage, retrieval and destruction services. The Group also provides secure handling, treatment and disposal of clinical waste, waste renewal and related services. Revenue from these services is recognised over time in the reporting period in which the service is provided. Revenue from sale of archive boxes, computer media and products generated from destruction activities is recognised when control of the products has transferred, being when the products are delivered to the customer.

(iii) Information management – digital services

The Group provides digital information management services, including imaging and document capture (scanning), data extraction, customised digital workflow solutions and application (app) development, under fixed-price and variable-price contracts. Revenue from providing these digital information management services is recognised in the period in which the services are rendered. For fixed-price contracts, revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total service to be provided, because the service does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed. This revenue is determined based on the efforts expended relative to the total expected effort.

Estimates of revenues, costs or extent of progress towards completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in the income statement in the period in which the circumstances that give rise to the revision become known by management.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

108

109

Notes to the financial statements For the year ended 30 June 2023

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:

==> picture [512 x 295] intentionally omitted <==

----- Start of picture text -----

Express Package Postal Storage & Destruction Other Total
and Refrigerated Handling Activities including
Transport & Digital
Storage Services
2023 $000 $000 $000 $000 $000 $000
Revenue from external customers 855,631 52,005 64,395 87,175 62,414 1,121,620
Timing of revenue
recognition:
At a point in time - 2,794 - 27,311 18,326 48,431
Over time 855,631 49,211 64,395 59,864 44,088 1,073,189
855,631 52,005 64,395 87,175 62,414 1,121,620
2022
Revenue from external customers 641,410 45,613 59,319 83,521 43,231 873,094
Timing of revenue
recognition:
At a point in time - 2,540 - 22,033 13,406 37,979
Over time 641,410 43,073 59,319 61,488 29,825 835,115
641,410 45,613 59,319 83,521 43,231 873,094
----- End of picture text -----

Notes to the financial statements For the year ended 30 June 2023

NOTE 4. INCOME AND EXPENSES

==> picture [512 x 491] intentionally omitted <==

----- Start of picture text -----

Profit before income tax includes the following specific income and expenses: Group
Note 2023 2022
$000 $000
Income
Interest income 1,003 83
Operating expenses
Net gain on disposal of property, plant and equipment (137) (81)
Depreciation of property, plant and equipment 12 19,732 17,800
Depreciation of right-of-use assets 13 45,423 36,909
Amortisation of intangible assets 14 11,323 7,528
Amortisation of software 14 4,443 3,650
Auditor’s fees
Audit of annual financial statements and review of interim
financial statements
PwC New Zealand 561 485
PwC Australia 363 143
Total 924 628
General treasury training 1 -
Executives’ remuneration benchmarking - 6
Costs of offering credit
Impairment loss (gain) on trade receivables (650) (782)
Interest and finance costs
Interest on bank borrowings 15,827 8,352
Interest on leases 13 13,625 10,864
Other interest expense 136 1,232
Other
Directors’ fees 718 724
Donations 271 215
Net foreign exchange (gain) loss (287) 465
Change in fair value of contingent consideration –
Big Chill Distribution Limited "(BCD)" 30 & (i) - 3,700
----- End of picture text -----

(i) The estimated discounted future final payment for the BCD acquisition was increased from $51 . 3 million as at 30 June 2021 to $56 . 2 million as at 30 June 2022. This increase of $3 .7 million (net of impact of unwinding of discount on acquisition earn-out liability of $1 . 2 million) reflected the strong performance of BCD, which determined the final payment in August 2022 for the acquisition of the company. Refer Note 30.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

110

111

Notes to the financial statements For the year ended 30 June 2023

NOTE 5. INCOME TAX EXPENSE

The income tax expense for the year is the tax payable on the current year’s taxable income based on the income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose as a result of a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable income. No deferred tax liability is recognised if it arises from initial recognition of goodwill from a business combination.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Notes to the financial statements

For the year ended 30 June 2023

==> picture [512 x 96] intentionally omitted <==

----- Start of picture text -----

Group
2023 2022
$000 $000
Imputation credits account
Imputation credits available for use in subsequent reporting periods 58,266 56,872
----- End of picture text -----

The above amounts represent the balance of the imputation account as at the end of the reporting period, adjusted for:

(a) Imputation credits that will arise from the payment of the amount of the provision for income tax; (b) Imputation debits that will arise from the payment of dividends recognised as a liability at the reporting date; and (c) Imputation credits that will arise from the receipt of dividends recognised as receivables at the reporting date.

Current and deferred tax balances attributable to amounts that have been recognised in other comprehensive income or directly in equity, are also taken to other comprehensive income or directly to equity, respectively.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

==> picture [512 x 138] intentionally omitted <==

----- Start of picture text -----

Group
2023 2022
$000 $000
Current tax
Current tax on net profit for the year 35,776 31,121
Deferred tax (Note 16):
Reversal of temporary differences (5,696) (2,601)
Total deferred tax (5,696) (2,601)
Income tax expense 30,080 28,520
----- End of picture text -----

Income tax applicable to the Group’s net profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to the profits of the consolidated entities, as follows:

applicable to the profits of the consolidated entities, as follows:

Profit before income tax	105,377 98,702
Income tax calculated at domestic tax rates applicable to the accounting profits in the respective countries	30,040 27,880
Tax-efect of amounts which are treated diferently when calculating taxable income:
- Additional amounts non-deductible	(405) 640
- Other	445 -
Income tax expense	30,080 28,520

The tax (charge)/credit relating to components of other comprehensive income is as follows:

==> picture [512 x 257] intentionally omitted <==

----- Start of picture text -----

2023 Before tax Tax (charge) /credit After tax
$000 $000 $000
Exchange difference on translation of foreign operations (6,865) 1,069 (5,796)
Cash flow hedges taken directly to equity 314 (88) 226
Other comprehensive income (6,551) (981) (5,570)
Current tax -
Deferred tax 981
(981)
2022 Before tax Tax (charge) /credit After tax
$000 $000 $000
Exchange difference on translation of foreign operations 2,907 (49) 2,858
Cash flow hedges taken directly to equity 4,685 (1,312) 3,373
Other comprehensive income 7,592 (1,361) 6,231
Current tax -
Deferred tax (1,361)
(1,361)
----- End of picture text -----

The Group has no tax losses (2022: Nil). There are no unrecognised temporary differences (2022: Nil).

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

112

113

Notes to the financial statements For the year ended 30 June 2023

NOTE 6. DIVIDENDS

==> picture [512 x 174] intentionally omitted <==

----- Start of picture text -----

Group
2023 2022
$000 $000
Recognised amounts
Fully imputed dividends declared and paid during the year:
Final dividend paid 2022 at 19 cents per share (2021: 18 cents) 31,527 29,833
Interim dividend for 2023 at 18 cents per share (2022: 18 cents) 31,938 29,845
63,465 59,678
Unrecognised amounts
Final dividend for 2023 at 19 cents per share (2022: 19 cents) 33,712 31,503
----- End of picture text -----

NOTE 7. CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash balances and cash deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Bank overdrafts are shown within borrowings in the current liabilities on the balance sheet to the extent they exceed the legal right of off-set against cash included in current assets.

==> picture [512 x 93] intentionally omitted <==

----- Start of picture text -----

Group
2023 2022
$000 $000
Cash at bank 44,376 24,026
Cash deposits 109 111
Cash and cash equivalents in statement of cash flows 44,485 24,137
----- End of picture text -----

Notes to the financial statements For the year ended 30 June 2023

NOTE 8. TRADE RECEIVABLES AND OTHER NON-CURRENT ASSETS

Trade and other receivables are recognised at their fair value and subsequently measured at amortised cost using the effective interest rate, less provision for impairment.

==> picture [512 x 245] intentionally omitted <==

----- Start of picture text -----

Group
2023 2022
$000 $000
Current
Trade receivables 129,254 107,747
Provision for doubtful receivables (3,219) (2,124)
126,035 105,623
Accrued revenue 7,918 6,865
Other debtors and prepayments 16,000 14,100
Share plan loans receivable from employee 481 484
150,434 127,072
Non-current
Share plan loans receivable from employees 406 470
Other non-current assets 5,593 5,600
5,999 6,070
----- End of picture text -----

Trade receivables are non-interest bearing and are generally on 7-30 day terms.

Recoverability of trade and other receivables is reviewed on an ongoing basis. Amounts that are known to be uncollectible are written-off when identified. The Group applies a simplified approach in calculating expected credit losses, which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. For other receivables, an allowance for doubtful receivables is raised when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivable.

The movements in the provision for doubtful receivables for the Group were as follows:

	Group
	2023 $000 2022 $000
Opening balance	2,124 3,014
Provision for doubtful receivables	589 124
Receivables written of during the year as uncollectible	(97) (244)
Provisions added from acquired businesses	750 -
Unused amounts reversed	(104) (792)
Exchange rate movement	(43) 22
Closing balance (Note 28.1(b))	3,219 2,124

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

114

115

Notes to the financial statements For the year ended 30 June 2023

NOTE 9. INVENTORIES

Inventories are stated at the lower of cost, determined on a first-in-first-out basis, and net realisable value. Full provision is made for obsolescence, where applicable. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. The cost of inventories recognised as an expense and included in ‘general and administration expenses’ amounted to $10 . 5 million (2022: $9 . 8 million).

==> picture [512 x 94] intentionally omitted <==

----- Start of picture text -----

Group
2023 2022
$000 $000
Finished goods 5,480 4,324
Ticket stocks, uniforms and consumables 4,170 4,350
9,650 8,674
----- End of picture text -----

Notes to the financial statements For the year ended 30 June 2023

==> picture [512 x 185] intentionally omitted <==

----- Start of picture text -----

Group
2023 2022
$000 $000
Asset (Liability) Asset (Liability)
Current
Interest rate swaps – cash flow hedge 107 175
Forward foreign exchange contracts – cash flow hedge 1,019 788
1,126 963
Non-current
Interest rate swaps – cash flow hedge 2,212 1,189
Forward foreign exchange contracts – cash flow hedge - 872
2,212 2,061
----- End of picture text -----

NOTE 10. DERIVATIVE FINANCIAL INSTRUMENTS

Derivative financial instruments, such as interest rate caps and collar contracts and interest rate swaps, are entered into from time to time to manage interest rate exposure on borrowings. Forward exchange contracts are also entered into from time to time to manage foreign exchange exposures. Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the reporting date. The method of recognising the resultant gain or loss depends on whether the derivative financial instrument is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates derivative financial instruments as either fair value hedges (hedges of the fair value of recognised assets or liabilities or a firm commitment) or cash flow hedges (hedges of highly probable forecast transactions).

At the inception of the transaction, the Group documents the relationship between the hedging instrument and the hedged item, as well as its risk management objective and strategy for undertaking the hedge transaction. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivative financial instruments that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.

(i) Cash flow hedges

The effective portion of changes in the fair value of derivative financial instruments that are designated and qualify as cash flow hedges is recognised in equity in the cash flow hedge reserve. The gain or loss relating to any ineffective portion is recognised immediately in the income statement.

Amounts taken to equity are transferred to the income statement when the hedged transaction affects profit or loss, such as when hedged income or expenses are recognised or when a forecast sale or purchase occurs. When the hedged item is the cost of a non-financial asset or liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability.

If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are immediately transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction occurs. If the related transaction is not expected to occur, the amount is taken immediately to the income statement.

The Group’s hedging reserves relate to the following hedging instruments:

==> picture [512 x 219] intentionally omitted <==

----- Start of picture text -----

Cash flow hedge reserve
Intrinsic Spot Interest Total hedge
value of component rate swaps reserve
options of currency
forwards
$000 $000 $000 $000
Balance at 1 July 2021 - 123 (1,318) (1,195)
Change in fair value of hedging instrument
-
recognised in Other Comprehensive Income (OCI) 1,491 3,193 4,684
Less: Deferred tax - (417) (894) (1,311)
Balance at 30 June 2022 - 1,197 981 2,178
Change in fair value of hedging instrument
recognised in OCI - (641) 955 314
Less: Deferred tax - 179 (267) (88)
Balance at 30 June 2023 - 735 1,669 2,404
----- End of picture text -----

(ii) Derivatives that do not qualify for hedge accounting

Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting or where hedge accounting has not been adopted are recognised immediately in the income statement.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

116

117

Notes to the financial statements For the year ended 30 June 2023

~~Efects of hedge accounting on the financial position and performanc~~ e are:

==> picture [512 x 343] intentionally omitted <==

----- Start of picture text -----

NZD AUD
2023 2022 2023 2022
$000 $000 $000 $000
Interest rate swaps:
Notional amount 52,000 37,000 15,000 10,000
Maturity date 05/25 – 04/28 05/23 – 05/26 07/23 – 04/27 06/23 – 07/23
Hedge ratio 1:1 1:1 1:1 1:1
Change in fair value of outstanding
hedging instrument 1,986 2,325 333 868
Change in value of hedge item used to
determine hedge effectiveness (1,986) (2,325) (333) (868)
Weighted average strike rate for the year 2.4% 2.7% 2.7% 3.1%
Forward foreign exchange contracts:
Notional amount 12,631 12,988 - -
Maturity date 07/23 – 06/24 07/22 – 06/24 - -
Hedge ratio 1:1 1:1 - -
Change in fair value of outstanding
- -
hedging instrument 1,019 1,491
Change in value of hedge item used to
- -
determine hedge effectiveness (1,019) (1,491)
Weighted average strike rate for the year USD0.71: NZD1 USD0.69: NZD1 - -
----- End of picture text -----

Notes to the financial statements For the year ended 30 June 2023

HEDGE EFFECTIVENESS

Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and the hedging instrument.

For hedges of foreign currency purchases, the Group enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item. The Group therefore performs a qualitative assessment of effectiveness. If changes in circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the critical terms of the hedging instrument, the Group uses the hypothetical derivative method to assess effectiveness.

In hedges of foreign currency purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what was originally estimated, or if there are changes in the credit risk of the Group or the derivative counterparty.

The Group enters into interest rate swaps that have similar critical terms as the hedged item, such as reference rate, reset dates, payment dates, maturities and notional amount. The Group does not hedge 100% of its loans, therefore the hedged item is identified as a proportion of the outstanding loans up to the notional amount of the swaps. As all critical terms matched during the year, the economic relationship was 100% effective.

Hedge ineffectiveness for interest rate swaps is assessed using the same principles as for hedges of foreign currency purchases. It may occur due to:

The credit or debit value adjustment on the interest rate swaps not being matched by the loan; and
- Differences in critical terms between the interest rate swaps and loans.

There was no derivative movement recognised in the income statement during the year (2022: nil).

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

118

119

Notes to the financial statements For the year ended 30 June 2023

NOTE 11. INVESTMENTS IN SUBSIDIARIES

The Company’s investment in its only directly-owned subsidiary, Freightways Express Limited (FEL), comprises shares at cost. Listed below are all the significant subsidiaries wholly-owned directly or indirectly by FEL. All subsidiaries have a balance date of 30 June.

==> picture [511 x 360] intentionally omitted <==

----- Start of picture text -----

Country of
Name of entity Principal activities
Incorporation
Air Freight NZ Limited Express package linehaul New Zealand
Allied Express Transport Pty Limited Express package services Australia
Allied Overnight Express Pty Limited Express package services Australia
Big Chill Distribution Limited Temperature-controlled transport & facilities New Zealand
Castle Parcels Limited Express package services New Zealand
Fieldair Engineering Limited General & aviation engineering services New Zealand
Fieldair Holdings Limited Aviation-related services New Zealand
Freightways Finance Limited Group treasury management New Zealand
Freightways Information Services Limited IT infrastructure support services New Zealand
Freightways Properties Limited Property management New Zealand
Freightways Trustee Company Limited Trustee of Freightways Employee Share Plan New Zealand
Info Management Services Australia LP Australian treasury services Australia
LitSupport Pty Limited Information management Australia
Med-X Pty Limited Information management Australia
Messenger Services Limited Express package services New Zealand
New Zealand Couriers Limited Express package services New Zealand
New Zealand Document Exchange Limited Business mail New Zealand
NOW Couriers Limited Express package services New Zealand
Parceline Express Limited Express package linehaul New Zealand
Post Haste Limited Express package services New Zealand
Shred-X Pty Limited Information management Australia
The Information Management Group (NZ) Limited Information management New Zealand
The Information Management Group Pty Limited Information management Australia
----- End of picture text -----

Other than the acquisition of Allied Express Transport Pty Limited and subsidiaries, there has been no change in investments in subsidiaries during the year.

Notes to the financial statements For the year ended 30 June 2023

NOTE 12. PROPERT Y, PLANT AND EQUIPMENT

Property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes all expenditure directly attributable to the acquisition or construction of the item, including interest.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated will flow to the Group and the cost of the asset can be measured reliably. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. The carrying amount of the replaced part is derecognised. All other repairs and maintenance costs are recognised in the income statement as incurred.

Depreciation is calculated on a straight-line basis on all tangible fixed assets, other than land and leasehold improvements, so as to expense the cost of the assets to their estimated residual values over their estimated useful lives. Land is not depreciated. Leasehold improvements are depreciated over the shorter of the unexpired period of the lease and the estimated useful life of the improvements. Estimated useful lives are as follows:

Estimated useful life

	Estimated useful life
Buildings	25 to 50 years
Leasehold alterations	Shorter of the period of the lease or estimated useful life
Motor vehicles	5 to 10 years
Equipment	3 to 20 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date.

Interest and finance costs incurred for the construction of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use. Other interest and finance costs are expensed.

==> picture [512 x 244] intentionally omitted <==

----- Start of picture text -----

Land Buildings Leasehold Motor Equipment Total
Alterations Vehicles
$000 $000 $000 $000 $000 $000
Group
2023
Opening net book value 15,886 16,118 12,814 32,201 57,161 134,180
Additions - - 3,975 3,037 27,178 34,190
Acquisitions through business
combinations (Note 30) - - 514 320 7,856 8,690
-
Depreciation expense (1,328) (1,923) (5,247) (11,234) (19,732)
Disposals / Transfers - 796 97 (678) (1,255) (1,040)
Exchange rate movement (59) (26) (55) (215) (733) (1,088)
Closing net book value 15,827 15,560 15,422 29,418 78,973 155,200
As at end of year
Cost 15,827 43,309 28,462 66,497 163,510 317,605
-
Accumulated depreciation (27,749) (13,040) (37,079) (84,537) (162,405)
Net book value 15,827 15,560 15,422 29,418 78,973 155,200
----- End of picture text -----

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

120

121

Notes to the financial statements

For the year ended 30 June 2023

==> picture [512 x 261] intentionally omitted <==

----- Start of picture text -----

Land Buildings Leasehold Motor Equipment Total
Alterations Vehicles
$000 $000 $000 $000 $000 $000
Group
2022
Opening net book value 15,782 17,448 11,599 28,588 54,921 128,338
Additions - - 2,928 7,433 10,511 20,872
Acquisitions through
business combinations - - - 1,684 878 2,562
-
Depreciation expense (1,376) (1,727) (4,818) (9,879) (17,800)
Disposals - - (43) (1,050) (100) (1,193)
Exchange rate movement 104 46 57 364 830 1,401
Closing net book value 15,886 16,118 12,814 32,201 57,161 134,180
As at end of year
Cost 15,886 39,915 23,067 53,145 151,655 283,668
-
Accumulated depreciation (23,797) (10,253) (20,944) (94,494) (149,488)
Net book value 15,886 16,118 12,814 32,201 57,161 134,180
----- End of picture text -----

The cost of equipment in respect of assets under construction for which depreciation has not commenced as at 30 June 2023 is $20 . 3 million (2022: $0 . 7 million).

The latest independent valuations of land and buildings (performed in June 2022) assess these assets to have a total fair value of $104 . 4 million. The fair values have been derived using the direct capitalisation approach. The valuation technique uses significant unobservable inputs, namely capitalisation rate and potential new market income of land and buildings. Therefore, these are considered level 3 valuations, as defined in Note 28 . 1(d).

NOTE 13. LEASES

This note provides information for leases where the Group is a lessee.

The Group’s leases predominantly relate to property, equipment and vehicles. Rental contracts are typically made for fixed periods of 3 to 12 years but may have extension options. Lease terms are negotiated on an individual basis and contains a wide range of different terms and conditions. The lease agreements do not impose covenants other than the leased assets may not be used as security for borrowing purposes. The right-of-use (ROU) asset is depreciated over the shorter of the asset’s useful life and the expected lease term on a straight-line basis.

Lease liabilities have been measured at the present value of the remaining lease payments, discounted using a discount rate derived from the incremental borrowing rate (IBR) when the interest rate implicit in the lease was not readily available. Factors taken into consideration when calculating the IBR for each asset category included observable market rates, economic conditions and lease tenure. The incremental borrowing rates applied to lease liabilities range between 1 . 69% to 7 . 22% (2022: 1 . 69% to 5 . 27%), with a weighted average rate of 4 . 37% (2022: 3.74%).

Some property leases contain an extension option exercisable by the Group. At the commencement of a lease, the Group assesses whether it is reasonably certain an extension option will be exercised. The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of the Group. The extension options are only exercisable by the Group and not the lessor. Where it is reasonably certain the extension will be exercised, that extension period and related costs are recognised on the balance sheet.

Notes to the financial statements

For the year ended 30 June 2023

The following tables show the movements and analysis in relation to the ROU assets and lease liabilities. The balance sheet shows the following amounts relating to leases:

==> picture [512 x 522] intentionally omitted <==

----- Start of picture text -----

2023 2022
Group $000 $000
Right-of-use assets
Opening net book value 271,020 275,849
Lease additions, modifications and terminations 79,073 29,719
-
Additions through business combinations 12,791
Depreciation for the year (45,423) (36,909)
Exchange rate movement (1,925) 2,361
Closing net book value 315,536 271,020
Cost 497,950 420,968
Accumulated depreciation (182,414) (149,948)
Closing net book value 315,536 271,020
2023 2022
Group $000 $000
Right-of-use assets
Buildings 285,709 248,950
Equipment 6,271 7,630
Motor vehicles 23,556 14,440
315,536 271,020
2023 2022
Group $000 $000
Lease liabilities
Opening lease liabilities 310,125 311,635
Lease additions, modifications and terminations 79,298 29,818
-
Additions through business combinations 12,791
Interest for the year 13,625 10,864
Lease repayments (55,442) (44,815)
Exchange rate movement (2,124) 2,623
Closing lease liabilities 358,273 310,125
----- End of picture text -----

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

122

123

Notes to the financial statements For the year ended 30 June 2023

NOTE 14. INTANGIBLE ASSETS

(i) Goodwill

==> picture [512 x 98] intentionally omitted <==

----- Start of picture text -----

2023 2022
Group $000 $000
Analysis of lease liabilities:
Current 44,774 34,735
Non-current 313,499 275,390
358,273 310,125
----- End of picture text -----

Lease liabilities maturity analysis:

==> picture [512 x 184] intentionally omitted <==

----- Start of picture text -----

|||||
|---|---|---|---|
|Minimum lease|
|payments|Interest|Present value|
|2023|$000|$000|$000|
|Within one year|59,108|14,207|44,901|
|One to five years|188,886|39,557|149,329|
|Beyond five years|189,170|25,127|164,043|
|Total|437,164|78,891|358,273|
|2022|
|Within one year|46,710|10,575|36,135|
|One to five years|144,045|31,987|112,058|
|Beyond five years|189,784|27,852|161,932|
|Total|380,539|70,414|310,125|

----- End of picture text -----

Lease related expenses included in the income statement:

Goodwill represents the excess of the consideration transferred in an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired business at the date of acquisition. Goodwill is not amortised but is tested for impairment annually or whenever events or changes in circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units for the purpose of impairment testing.

(ii) Brand Names

Acquired brand names are recognised at cost, being their fair value at the date of acquisition if acquired in a business combination. Brand names with indefinite useful lives are not subject to amortisation but are tested for impairment annually or whenever events or changes in circumstances indicate that they might be impaired and are carried at cost less amortisation and impairment losses. Brand names with finite useful lives are amortised over their expected useful lives. The useful lives and amortisation methods are reviewed and adjusted, if appropriate, at each balance sheet date.

Brand names are allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the brand names.

(iii) Computer software

External software costs, together with payroll and related costs for employees directly associated with the development of software, are capitalised if the development creates an intangible asset that the Group controls and the intangible asset meets the recognition criteria. Cloud-based software costs that do not result in intangible assets are expensed as incurred, unless the costs are paid to the suppliers of the cloud-based software to significantly customise the cloud-based software for the Group, in which case the costs paid upfront are recorded as prepayments for services and amortised over the expected terms of the cloud computing arrangements. Amortisation is charged on a straight-line basis over the estimated useful life of the software which ranges between 3 and 10 years. Included in the cost of software is work in progress of $0 . 4 million (2022: $0 . 1 million) for which amortisation has not commenced. Software under development not yet available for use is tested annually for impairment.

(iv) Customer relationships

Contractual

An intangible asset is recorded at fair value in respect of the amount of any contractual termination fees payable by customers of businesses acquired in respect of their document holdings. As it is not known when permanent retrieval fees may arise, this asset is only amortised upon the actual retrieval fee being charged to the respective customer.

Other

Non-contractual customer relationships acquired in a business combination are recognised at fair value at the acquisition date. These customer relationships have an estimated finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected useful life of the customer relationship which ranges between 10 and 20 years.

==> picture [512 x 170] intentionally omitted <==

----- Start of picture text -----

||||
|---|---|---|
|2023|2022|
|Group|$000|$000|
|Depreciation charge for right-of-use assets|
|Buildings|36,153|28,122|
|Motor vehicles|6,104|5,991|
|Equipment|3,166|2,494|
|45,423|36,607|
|Interest on leases|13,625|10,864|
|Total cash outflow in relation to leases is $41 . 7 million (2022: $43 . 1 million).|

----- End of picture text -----

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

124

125

Notes to the financial statements

For the year ended 30 June 2023

==> picture [512 x 523] intentionally omitted <==

----- Start of picture text -----

Goodwill Brand Software Customer Other Total
names relationships
Group $000 $000 $000 $000 $000 $000
2023
Opening net book value 306,116 128,286 12,896 50,814 3,556 501,668
Additions - - 3,030 - 31 3,061
Acquisition through
business combinations (Note 30) 106,606 30,654 2,167 56,329 3,141 198,897
Disposals / Transfers - - 162 - - 162
Amortisation expense - (77) (4,443) (10,501) (745) (15,766)
Exchange rate movement (6,072) (1,580) (107) (2,451) (173) (10,383)
Closing net book value 406,650 157,283 13,705 94,191 5,810 677,639
As at end of year
Cost 425,312 157,411 33,701 129,458 11,031 756,913
Accumulated amortisation
and impairment (18,662) (128) (19,996) (35,267) (5,221) (79,274)
Net book value 406,650 157,283 13,705 94,191 5,810 677,639
Goodwill Brand Software Customer Other Total
names relationships
Group $000 $000 $000 $000 $000 $000
2022
Opening net book value 295,505 126,869 12,872 52,568 3,568 491,382
Additions - - 3,788 - 310 4,098
Acquisition through
business combinations 7,549 873 - 4,554 525 13,501
Amortisation expense - (51) (3,650) (6,549) (928) (11,178)
Written-off - - (144) - - (144)
Exchange rate movement 3,062 595 30 241 81 4,009
Closing net book value 306,116 128,286 12,896 50,814 3,556 501,668
As at end of year
Cost 324,778 128,337 36,171 75,772 8,047 573,105
Accumulated amortisation
and impairment (18,662) (51) (23,275) (24,958) (4,491) (71,437)
Net book value 306,116 128,286 12,896 50,814 3,556 501,668
----- End of picture text -----

Notes to the financial statements For the year ended 30 June 2023

Impairment tests for indefinite life intangible assets

Goodwill and brand names are allocated to those cash-generating units (CGU) or groups of CGU that are expected to benefit from them. The carrying amount of intangible assets allocated by CGU or group of CGU is outlined below:

	Goodwill Brand names
	2023 $000 2022 $000 2023 $000 2022 $000
Allied Express	100,271 - 29,399 - 85,183 85,183 14,638 14,714
Big Chill
Messenger Services	8,766 8,766 5,100 5,100
New Zealand Couriers	47,752 47,752 58,500 58,500
New Zealand Document Exchange and Dataprint	15,092 15,092 7,318 7,318
Post Haste, Castle Parcels and NOW Couriers	27,159 27,159 18,395 18,395
Total Express Package & Business Mail	284,223 183,952 133,350 104,027
The Information Management Group (New Zealand)	17,577 17,577 4,400 4,400
The Information Management Group (Australia)	57,526 58,478 16,168 16,438
Shred-X	47,324 46,109 3,365 3,421
Total Information Management	122,427 122,164 23,933 24,259
Total	406,650 306,116 157,283 128,286

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

126

127

Notes to the financial statements For the year ended 30 June 2023

(i) Key assumptions used for value-in-use calculations

The value-in-use analysis prepared for NZDX is based on the following key assumptions:

On an annual basis, the recoverable amount of goodwill and brand names is determined based on the greater of value-in-use and fair value less costs of disposal calculations specific to the CGU or group of CGUs associated with both goodwill and brand names.

The value-in-use calculations use pre-tax cash flow projections based on financial budgets prepared by management and approved by the Board for the year ended 30 June 2024. Cash flows beyond June 2024 have been extrapolated using growth rates which take into consideration current and forecast economic conditions for the relevant products and industries. A probabilistic approach was also adopted where a number of different growth scenarios were considered and weighted by likelihood of achievement. In addition, the sensitivity of the main financial variables was tested and considered in the final estimation. No adjustments have been made to forecast cash flows for the unknown impacts of future legislative changes in relation to climate change, as further disclosed in the note “Climate change” below.

Revenue growth rates and a consistent EBITDA margin assuming costs increase in line with revenue, reflecting both historical and expected growth, have been applied to the value-in-use calculation with the same scenarios and sensitivities applied as described in the Significant estimate – sensitive to changes in assumptions section below. Growth rates have been aligned with the observed long-term inflation for each geographic region and each CGU’s ability to increase customer prices and grow with nominal GDP. Pre-tax discount rates, reflecting the current environment in financial markets and the countries each CGU or group of CGUs operates in, have been used. The CGU or group of CGUs specific growth rates and pre-tax discount rates applied are:

==> picture [512 x 202] intentionally omitted <==

----- Start of picture text -----

Growth rate beyond Pre-tax discount rate
next financial year, including
terminal growth
2023 2022 2023 2022
% % % %
Allied Express 3.0% - 13.7% -
Big Chill 2.5% 2.0% 13.5% 12.1%
Messenger Services 2.5% 2.0% 15.8% 11.1%
New Zealand Couriers 2.5% 2.0% 14.1% 11.1%
New Zealand Document Exchange and Dataprint 2.5% 2.0% 16.9% 16.9%
Post Haste, Castle Parcels and NOW Couriers 2.5% 2.0% 14.6% 11.1%
The Information Management Group (New Zealand) 2.5% 2.0% 16.1% 11.1%
The Information Management Group (Australia) 3.0% 2.5% 14.0% 13.2%
Shred-X 3.0% 2.5% 14.0% 13.2%
----- End of picture text -----

Note: Post-tax discount rates were disclosed in the annual report for the year ended 30 June 2022. Pre-tax discount rates, including for the 2022 comparatives, have now been disclosed to conform with NZ IAS 36: Impairment of Assets.

(ii) Significant estimate – Sensitivity to changes in assumptions

From the value-in-use assessment for all CGU’s, management believes that no reasonably possible change in any of the above key assumptions would cause the carrying values of goodwill and brand names to exceed their respective recoverable amounts.

Following are the significant estimate notes included in last year’s annual report carried forward to this year’s annual report for comparative purposes:

COVID-19 has particularly impacted the financial performance of NZDX and TIMG AU, which are more sensitive to changes in the key assumptions. Revenue of the two businesses have decreased and in the case of NZDX, costs have increased due to inefficiencies arising from operating in the COVID-19 environment, especially due to staff absenteeism. The value-in-use analysis prepared for NZDX and TIMG AU assume the FY23 financial performance returns to pre COVID-19 level, through higher volume and significant price increases that are already being implemented. Growth rate of 2.0% for NZDX and 2.5% for TIMG AU is then assumed from FY24.

100% achievement of FY23 budgeted revenue;
2 . 5% Revenue growth per year (with a range of scenarios from -4% to 4% p.a considered);
2 . 5% terminal EBITDA growth rate; and
Post-tax discount rate of 9 . 9%.

The recoverable amount of NZDX would equal its carrying amount if any of the key assumptions were to change as follows:

==> picture [512 x 104] intentionally omitted <==

----- Start of picture text -----

2022
From To
% %
Achievement of FY24 budgeted revenue 100% 72%
Revenue growth per year (FY25-FY28) 2% (8.8%)
Terminal EBITDA growth rate 2% (5.8%)
Post-tax discount rate 12.5% 17.0%
----- End of picture text -----

The value-in-use analysis prepared for TIMG AU is based on the following key assumptions:

100% achievement of FY23 budgeted revenue;
2 . 5% Revenue growth per year (with a range of scenarios from – 4% to 4% p.a considered);
2 . 5% terminal EBITDA growth rate; and
Post-tax discount rate of 9 . 9%

The recoverable amount of TIMG AU would equal its carrying amount if any of the key assumptions were to change as follows:

==> picture [512 x 103] intentionally omitted <==

----- Start of picture text -----

2022
From To
% %
Achievement of FY24 budgeted revenue 100% 81%
Revenue growth per year (FY25-FY28) 2.5% (3.9%)
Terminal EBITDA growth rate 2.5% 0%
Post-tax discount rate 9.9% 11.7%
----- End of picture text -----

Climate change

Freightways strongly believes that sustainable business practices are fundamental to our future. These include minimising the environmental impact of our daily operations and actively seeking initiatives to protect the environment.

More than 95% of Freightways’ emissions come from the combustion of transport fuel, including that of our contracted couriers. The most significant financial impact would therefore be due to an increase to the cost of fuel and the cost of carbon credits linked to the volume of fuel used. Freightways would expect, however, to be able to recoup most of that impact as mechanisms are already in place to adjust prices for movement of the price of fuel. The risk of disruption due to natural events linked to climate change can be managed through the flexibility of our network across New Zealand. Finally, most of the vehicles used in the Express Packaging businesses are owned by contractors and Freightways is exploring ways through which it will be able to facilitate the transition of the vehicles to electric or hydrogen.

The New Zealand External Reporting Board (XRB) published the Aotearoa New Zealand Climate Standards in December 2022. The new standards are effective for annual reporting periods beginning on or after 1 January 2023. Early adoption is permitted. The Group is currently assessing the new standards and intends to adopt the new standards in the 2024 financial year.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

128

129

Notes to the financial statements For the year ended 30 June 2023

NOTE 15. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

The Group has a 33 . 3% investment and voting rights in Sweetspot Group Limited (GSS), a company that provides freight brokerage service. The principal place of business and country of incorporation of GSS is New Zealand.

GSS is the only material associate of the Group as at 30 June 2023. GSS has share capital consisting solely of ordinary shares, which are held directly by the Group.

GSS is accounted for using the equity method. The carrying value of the investment in GSS is $7 . 8 million (2022: $8 . 3 million). GSS is a private entity with no quoted price available.

The tables below provide summarised financial information for GSS. The information disclosed reflects the amounts presented in the financial statements of GSS and not Freightways Group Limited’s share of those amounts.

==> picture [512 x 162] intentionally omitted <==

----- Start of picture text -----

GSS
2023 2022
$000 $000
Summarised Statement of Comprehensive Income
Revenue 32,298 33,380
Profit from continuing operations 4,920 5,116
Profit for the year 4,920 5,116
- -
Other comprehensive income
Total Comprehensive Income 4,920 5,116
----- End of picture text -----

	GSS
	2023 $000 2022 $000
Summarised Balance Sheet
Total current assets	4,449 6,257
Total non-current assets	430 563
Total current liabilities	(2,287) (2,706)
Total non-current liabilities	- -
Net Assets	2,592 4,114
Reconciliation to carrying amounts:
Opening net assets	4,114 1,689
Profit for the period	4,920 5,116
Other comprehensive income	- -
Dividend paid	(6,442) (2,691)
Closing Net Assets	2,592 4,114

Group’s share in GSS	33.3% 33.3%
Group’s share in net assets	863 1,370
Goodwill	6,948 6,948
Carrying Amount	7,811 8,318

GSS does not have any capital commitments and contingent liabilities as at 30 June 2023 (2022: Nil).

The carrying value of other individually immaterial investments in associates and joint ventures as at 30 June 2023 is $4 . 7 million (2022: $3 . 1 million).

Notes to the financial statements For the year ended 30 June 2023

NOTE 16. DEFERRED TAX LIABILIT Y

The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same jurisdiction, is as follows:

==> picture [512 x 589] intentionally omitted <==

----- Start of picture text -----

Property, Employee Accruals and Derivative Intangible Leases Total
plant and entitlements provisions financial assets
equipment instruments
Group $000 $000 $000 $000 $000 $000 $000
2023
Balance at beginning of year (7,717) 8,278 4,245 (848) (50,612) 9,567 (37,087)
Prior period adjustment (1,071) (217) (141) - 39 105 (1,285)
Transfer to income statement 909 416 413 - 3,650 1,593 6,981
Amounts relating to business
combinations (Note 30) (1,139) 1,183 871 - (27,037) - (26,122)
Adjustment for cash flow
hedge reserve - - - (88) - - (88)
Other 480 - (468) 1 42 (347) (292)
Exchange rate movement 51 (101) (56) - 1,253 (78) 1,069
Balance at end of year (8,487) 9,559 4,864 (935) (72,665) 10,840 (56,824)
Property, Employee Accruals and Derivative Intangible Leases Total
plant and entitlements provisions financial assets
equipment instruments
Group $000 $000 $000 $000 $000 $000 $000
2022
Balance at beginning of year (7,980) 7,964 5,001 464 (50,576) 8,401 (36,726)
Prior period adjustment (138) 74 (415) - (140) - (619)
Transfer to income statement 407 112 (378) - 2,051 1,028 3,220
Amounts relating to business
combinations - 35 - - (1,636) - (1,601)
Adjustment for cash flow
- - - - -
hedge reserve (1,312) (1,312)
Exchange rate movement (6) 93 37 - (311) 138 (49)
Balance at end of year (7,717) 8,278 4,245 (848) (50,612) 9,567 (37,087)
----- End of picture text -----

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

130

131

Notes to the financial statements

For the year ended 30 June 2023

NOTE 17. TRADE AND OTHER PAYABLES

Trade and other payables are recognised when the Group becomes obligated to make future payments resulting from the purchase of goods or services. They are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method. Acquisition earn-out payables have been measured at fair value. The amounts are unsecured.

Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months of the reporting date are recognised in respect of employees’ services rendered up to the reporting date. They are measured for recognition by assessing the amounts expected to be paid when the liabilities are settled. Included in employee entitlements is an accrual of $2. 8 million (2022: $2. 8 million) for potential remediation for New Zealand Holidays Act non-compliance.

Liability for long service leave is recognised and measured as the present value of expected future payments to be made in respect of services provided by the employee. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.

==> picture [512 x 191] intentionally omitted <==

----- Start of picture text -----

2023 2022
Group $000 $000
Current
Trade creditors 51,291 48,416
Employee entitlements 32,358 27,587
Acquisition earn-out payables 676 56,184
Other creditors and accruals 54,277 40,635
138,602 172,822
Non-current
Acquisition earn-out payables 4,159 3,709
- -
Other non-current payables
4,159 3,709
----- End of picture text -----

NOTE 18. PROVISIONS

A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate of the obligation can be made. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The increase in the provision due only to the passage of time is recognised as an interest expense.

Notes to the financial statements

For the year ended 30 June 2023

==> picture [512 x 430] intentionally omitted <==

----- Start of picture text -----

Customer Long service Lease Total
claims leave obligations
Group $000 $000 $000 $000
2023
Balance at beginning of year 873 4,388 3,671 8,932
Additions through business combinations 222 1,773 728 2,723
Current year provision 384 1,310 1,598 3,292
Amounts used during the year (54) (517) (239) (810)
Movement in exchange rate (8) (303) (58) (369)
Balance at end of year 1,417 6,651 5,700 13,768
Customer Long service Lease Total
claims leave obligations
Group $000 $000 $000 $000
2022
Balance at beginning of year 938 4,108 3,495 8,541
Current year provision 873 385 128 1,386
Amounts used during the year (938) (232) - (1,170)
Movement in exchange rate - 127 48 175
Balance at end of year 873 4,388 3,671 8,932
2023 2022
$000 $000
Analysis of total provisions
Current 3,552 1,550
Non-current 10,216 7,382
Total 13,768 8,932
----- End of picture text -----

Explanation of provisions

Provision for customer claims relates to actual claims received from customers that are being considered for payment as at reporting date and are expected to be resolved within the next two months.

Provision for long service leave relates to the potential leave obligation for employees who reach continuous employment milestones required under Australian regulations. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.

Provision for lease obligations relates to estimated payments to reinstate leased buildings and equipment used to an appropriate condition upon the expiry of the respective lease terms.

NOTE 19. CONTRACT LIABILIT Y

A contract liability of $14 . 4 million (2022: $15 . 9 million) is recorded in the balance sheet reflecting the future service obligation for courier and postal products that have been sold in advance of their use. The balance is supported by reference to historical customer prepaid product usage patterns.

Revenue recognised during the year that was included in the contract liability balance at the beginning of the year was $9 .4 million (2022: $9 . 6 million). There are no other significant financing components in the Group’s revenue arrangement.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

132

133

Notes to the financial statements For the year ended 30 June 2023

NOTE 20. BORROWINGS

Interest-bearing bank loans and overdrafts are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method. Costs incurred in establishing finance facilities are amortised to the income statement over the term of the respective facilities.

==> picture [512 x 96] intentionally omitted <==

----- Start of picture text -----

Group
2023 2022
$000 $000
Bank borrowings
Non-current 297,194 176,210
297,194 176,210
----- End of picture text -----

(a) Bank borrowings

The bank borrowings agreement contains a negative pledge deed. The negative pledge includes a provision restricting the Group from granting security interests and a cross-guarantee of all relevant indebtedness by majority of the Company’s subsidiaries.

(b) Finance facilities

The following finance facilities existed at the reporting date:

==> picture [512 x 321] intentionally omitted <==

----- Start of picture text -----

Facilities denominated in Facilities denominated in
New Zealand Dollars Australian Dollars
2023 2022 2023 2022
$000 $000 $000 $000
Bank overdraft
Total bank overdraft facilities available 8,000 8,000 - -
Amount of overdraft facilities unused 8,000 8,000 - -
Loan facilities
Total loan facilities available 170,000 170,000 180,000 200,000
- - -
Maturing 30 June 2023 70,000
- -
Maturing 11 July 2025 20,000 20,000
- -
Maturing 15 March 2026 120,000 120,000
Maturing 15 December 2026 10,000 10,000 10,000 10,000
Maturing 15 March 2027 30,000 30,000 80,000 80,000
Maturing 19 March 2028 10,000 10,000 20,000 20,000
- - -
Maturing 14 December 2029 50,000
Amount of loan facilities used 124,000 89,000 158,700 78,200
Amount of loan facilities unused 46,000 81,000 21,300 121,800
Effective interest rate at 30 June as
amended for interest rate hedges 5.67% 5.30% 4.92% 4.13%
----- End of picture text -----

Notes to the financial statements

For the year ended 30 June 2023

The fair values of borrowings are not materially different to their carrying amount, since the interest payable on those borrowings is either close to market rate or the borrowings are of a short-term nature.

In March 2021, the Group entered into a new US$160 million uncommitted finance facility with a US-based lender on the same terms as the syndicated bank facilities. Of this facility, the US dollar equivalent of NZ$20 million and A$100 million was drawn as at 30 June 2023 (2022: NZ$20 million and A$50 million). The drawn amounts mature in July 2025, December 2026, March 2028 and December 2029, as detailed in the maturity table above.

In June 2023, A$70 million of the syndicated bridge facility used to fund the acquisition of Allied Express Transport Pty Limited matured. The Group has sufficient headroom in its remaining finance facilities and the A$70 million was not required to be renewed.

Compliance with banking covenants

The Group was in compliance with all of its banking covenants throughout the year ended 30 June 2023. The Group’s banking covenants forecast indicates that the Group will remain compliant with all of its banking covenants in the next twelve months. The forecast includes a sensitivity analysis of a 20% decline in forecast earnings before interest, income tax, depreciation and amortisation.

Net debt reconciliation

An analysis of net debt and movements in net debt are as follow:

==> picture [512 x 250] intentionally omitted <==

----- Start of picture text -----

Liabilities from financing activities
Cash Leases Bank Total
borrowings
Group $000 $000 $000 $000
Balance at 1 July 2021 19,940 (311,635) (163,696) (455,391)
Cashflow 3,797 34,008 (9,803) 28,002
Lease additions, modifications and terminations - (29,818) - (29,818)
Other non-cash movements - - (471) (471)
Exchange rate movement 400 (2,680) (2,240) (4,520)
Balance at 30 June 2022 24,137 (310,125) (176,210) (462,198)
Cashflow 14,713 41,734 (128,088) (71,641)
Lease additions, modifications and terminations - (79,298) - (79,298)
- -
Additions through business combinations (12,791) (12,791)
Other non-cash movements - - (516) (516)
Exchange rate movement 5,635 2,207 7,620 15,462
Balance at 30 June 2023 44,485 (358,273) (297,194) (610,982)
----- End of picture text -----

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

134

135

Notes to the financial statements

For the year ended 30 June 2023

NOTE 21. EQUIT Y

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a reduction in the amount of proceeds arising from the issue of shares.

==> picture [512 x 176] intentionally omitted <==

----- Start of picture text -----

2023 2022 2023 2022
Group Ordinary shares Ordinary shares $000 $000
Balance at beginning of year 165,795,056 165,530,836 184,349 182,571
Share-based payment expenses - - - (471)
Shares issued during the year:
- -
- Partly-paid shares, fully paid up to ordinary shares 200,342 1,489
- -
- Share rights 127,565 1,016
- Employee share plan 65,000 65,000 595 747
(Increase) decrease in employee share plan
unallocated shares 5,250 (1,122) 49 13
- -
Issue of fully paid ordinary shares 11,435,347 112,066
Balance at end of year 177,428,218 165,795,056 298,075 184,349
----- End of picture text -----

Notes to the financial statements For the year ended 30 June 2023

(iv) Employee Share Plan

On 5 December 2022, the Company issued 65 , 000 fully paid ordinary shares at $9.16 each to Freightways Trustee Company Limited, as Trustee for the Freightways Employee Share Plan (December 2021: 65 , 000 fully paid ordinary shares at $11 . 49 each). In total, participating employees were provided with interest-free loans of $0 . 6 million to fund their purchase of the shares in the Share Plan (December 2021: $0 . 7 million). The loans are repayable over three years and repayment commenced in December 2022.

As at 30 June 2023, the Trustee held 579 , 717 (2022: 593 , 573) fully paid ordinary shares representing 0 . 3% (2022: 0 . 4%) of all issued ordinary shares of which 3 ,140 (2022: 8 , 390) were unallocated. These shares are held for allocation in the future.

The Employee Share Plan operates in accordance with section CW 26C of the New Zealand Income Tax Act 2007 and the Trustees are appointed by the Freightways Group Limited Board of Directors.

Issue of fully paid ordinary shares

On 30 September 2022, the company issued 11 , 435 , 347 fully paid ordinary shares as part of a placement to the vendors of Allied Express Transport Pty Limited (AEX) in connection with the acquisition of AEX by the Group. (Refer to Note 30).

Nature and purpose of reserves

(i) Cash flow hedge reserve

The cash flow hedge reserve is used to record gains or losses on a hedging instrument within a cash flow hedge. The amounts are recognised in the income statement when the associated hedged transactions affect profit or loss, as described in Note 10(i).

(ii) Foreign currency translation reserve

Contributed equity

The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations into New Zealand dollars, as described in Note 1(c).

The increase from the prior year reflects:

(i) Fully paid ordinary shares

As at 30 June 2023, there were 177 , 431 , 358 shares issued and fully paid (2022: 165 , 803 , 446). All fully paid ordinary shares have equal voting rights and share equally in dividends and surplus on winding up.

increased value of foreign operations and balance sheet following the acquisition of AEX (refer Note 30 for fair value of assets and liabilities arising from the AEX acquisition); and
a change in the NZD:AUD closing exchange rate from 1:0.9031 at 30 June 2022 to 1:0.9182 at 30 June 2023.

(ii) Share rights

Share rights are issued to certain senior executives under the rules of the Freightways Long Term Incentive (LTI) Scheme, with vesting determined at the end of a 3-year vesting period. Vesting is subject to the achievement of certain financial hurdles set by the Board and included in the annual offer of participation to executives. Each share right converts to one Freightways fully paid ordinary share upon vesting. Share rights do not carry a dividend entitlement and are non-transferable.

On 16 September 2022, 127 , 565 share rights vested upon achievement of certain financial hurdles set by the Board and each of the share rights converted to one Freightways fully paid ordinary share (2022: Nil). The issue price per share was $8 . 06 (2022: Nil).

On 21 September 2022, 35 , 227 share rights were redeemed and cancelled (2022: Nil).

On 17 May 2023, 152 , 160 share rights were issued to certain senior executives under the rules of the Freightways LTI Scheme (2022: 94 ,370).

As at 30 June 2023, there were 392 , 006 share rights on issue (2022: 402 , 638).

(iii) Partly-paid ordinary shares

No partly-paid shares were fully paid-up during the year (2022: 200,342). The average issue price per share for the shares issued in 2022 was $7 . 43.

As at 30 June 2023, there were no partly-paid shares on issue (2022: Nil).

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

136

137

Notes to the financial statements For the year ended 30 June 2023

NOTE 22. SHARE-BASED PAYMENTS

The Group operates equity-settled, share-based compensation arrangements for senior executives, under which the Group receives services from employees as consideration for share rights in the Company. The fair value of the employee services received in exchange for the share rights is recognised as an expense. The total amount to be expensed is determined at grant date by reference to the fair value of the share rights allotted, taking into account market vesting conditions (for example, total shareholder return measures such as outperforming the median of the NZX50 Index), but excluding the impact of any non-market service and performance vesting conditions (for example, compound growth rates for earnings per share, expected profit target against the capital employed and remaining an employee of the Group over a specified time period). Non-market vesting conditions are included in assumptions about the number of share rights that are expected to vest. The total amount expensed is recognised over the relevant vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At each balance sheet date, the Group revises its estimates of the number of share rights that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement.

a) Description of share-based payment arrangements

Freightways Long-term Incentive Scheme (the ‘Scheme’)

In July 2020, the Board approved a long-term incentive scheme for certain Freightways senior executives. Under this Scheme, share rights are issued at ‘Nil’ consideration which entitles participants to receive ordinary shares in Freightways within three years of vesting period. The total contractual life of share rights is 3 years.

Share rights will vest if the participant remains employed by Freightways for the duration of the vesting period and the following performance hurdles are met over the assessment period. They will vest in the following proportions:

Total Shareholder’s Return (TSR) class of rights (50% of share rights)

This will vest over the assessment period on a progressive vesting scale based on the Group’s TSR relative to the TSR of other constituents of the NZX50 Index.

Notes to the financial statements

For the year ended 30 June 2023

Fair value measurement of share-based payment arrangements

The fair value of share rights has been measured using Monte Carlo simulation. The fair value measurement also considers the terms and conditions upon which partly-paid shares and share rights were issued. Service and non-market performance conditions attached to the arrangements were not considered in measuring fair value.

The inputs used in the measurement of fair values at grant date of share rights issued during the year were as follows:

==> picture [512 x 180] intentionally omitted <==

----- Start of picture text -----

Share rights
Grant date: 19 Oct 2020 28 Oct 2021 24 Nov 22
Fair value at grant date $4.14 - TSR $7.28 - TSR $6.51 - TSR
class of rights class of rights class of rights
$7.43 – NOPAT $11.73 – NOPAT $9.13 – NOPAT
class of rights class of rights class of rights
Exercise price Nil Nil Nil
Share price at grant date $8.29 $12.71 $9.99
Expected dividends 4% 2.5% 2.5%
Expected volatility 24.9% 26.8% 29.9%
Expected life 0.2 years 1.2 years 2.2 years
Risk free interest rate (based on government bonds) 0.10% 1.82% 4.48%
----- End of picture text -----

Cost of Capital class of rights (50% of share rights)

This will vest based on net operating profit after tax (NOPAT) exceeding a cost of capital hurdle (determined by the Board) over the assessment period.

Expected volatility has been based on an evaluation of the historical volatility of the Freightways’ share price, particularly over the historical period commensurate with the expected term. The expected term of share rights has been based on historical experience and general option holder behaviour.

On vesting date, subject to meeting service and performance conditions, each share right can be exercised to receive one ordinary share. The senior executives are liable for tax on the shares received at this point.

b) Reconciliation of outstanding partly-paid shares and share rights

==> picture [512 x 122] intentionally omitted <==

----- Start of picture text -----

Number of partly-paid shares Number of share rights
2023 2022 2023 2022
-
Balance at beginning of the year 200,342 402,638 308,268
- -
Issued during the year 152,160 94,370
- - -
Cancelled during the year (35,227)
- -
Fully paid-up or exercised during the year (200,342) (127,565)
Balance at end of the year - - 392,006 402,638
- -
Exercisable at end of the year 166,352 158,854
----- End of picture text -----

c) Effect of share-based payment arrangements on profit or loss, financial position and equity

c) Efect of share-based payment arrangements on profit or loss, financial position and equity
	2023 $000 2022 $000
Total amount expensed during the year	1,016 1,031

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

138

139

Notes to the financial statements For the year ended 30 June 2023

NOTE 23. RECONCILIATION OF PROFIT FOR THE YEAR

WITH CASH FLOWS FROM OPERATING ACTIVITIES

==> picture [512 x 295] intentionally omitted <==

----- Start of picture text -----

Group
2023 2022
Note $000 $000
Profit for the year 75,297 70,182
Add non-cash items:
Depreciation and amortisation 4 80,921 65,887
Movement in provision for doubtful debts 650 (782)
Movement in deferred income tax (2,595) (2,601)
Net gain on disposal of property, plant and equipment (137) (81)
Net foreign exchange (gain) loss (287) 466
Change in fair value of contingent consideration –
-
Big Chill Distribution Limited 3,700
Write-off of software - 144
Share of profits of associates (3,173) (3,386)
Movement in working capital, net of effects of acquisitions of businesses:
Increase in trade and other receivables (3,385) (20,907)
Increase in inventories (1,556) (2,498)
Increase in trade and other payables 3,106 15,432
Increase (decrease) in income taxes payable 6,967 (1,872)
Net cash inflows from operating activities 155,808 123,684
----- End of picture text -----

Notes to the financial statements For the year ended 30 June 2023

Diluted earnings per share

Diluted earnings per share is calculated by dividing the profit for the year attributable to shareholders by the weighted average number of ordinary shares outstanding during the year, adjusted to include all dilutive potential ordinary shares (for example, share rights on issue) as if they had been converted to ordinary shares at the beginning of the year:

==> picture [512 x 118] intentionally omitted <==

----- Start of picture text -----

Group
2023 2022
Profit for the year attributable to shareholders ($000) 75,297 70,182
Weighted average number of ordinary shares (‘000) 174,525 165,739
Effect of dilution (‘000) 392 403
Diluted weighted average number of ordinary shares (‘000) 174,917 166,142
Diluted earnings per share (cents) 43.1 42.2
----- End of picture text -----

NOTE 26. NET TANGIBLE ASSETS PER SECURIT Y

Net tangible assets (liabilities) per security at 30 June 2023 was ($1 . 06) (2022: ($0 . 80)). Net tangible assets exclude intangible assets but includes software. There were 177 , 431 , 358 shares issued and fully paid as at 30 June 2023 (2022: 165 , 803 , 446).

NOTE 24. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

The Group had made capital commitments to purchase or construct buildings and equipment for $9 . 3 million at 30 June 2023 (2022: $6 . 5 million), principally relating to the completion of operating facilities and purchase of replacement equipment throughout the Group.

As at 30 June 2023, the Group had outstanding letters of credit and bank guarantees issued by its lenders totalling approximately $9 . 9 million (2022: $4 . 6 million). The letters of credit relate predominantly to support for regular payroll payments. The bank guarantees relate to security given to various landlords in respect of leased operating facilities.

Freightways is subject to a Commerce Commission investigation and is cooperating with the Commerce Commission. Freightways does not consider that this process will have a material financial or operational impact on the Group.

NOTE 25. EARNINGS PER SHARE

Basic earnings per share

Basic earnings per share is calculated by dividing the profit for the year attributable to shareholders by the weighted average number of ordinary shares outstanding during the year:

outstanding during the year:
	Group
	2023 2022
Profit for the year attributable to shareholders ($000)	75,297 70,182
Weighted average number of ordinary shares (‘000)	174,525 165,739
Basic earnings per share (cents)	43.1 42.3

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

140

141

Notes to the financial statements For the year ended 30 June 2023

NOTE 27. TRANSACTIONS WITH RELATED PARTIES

Trading with related parties

The Group has not entered into any material external related party transactions which require disclosure. The Group does trade, on normal commercial terms, with certain companies in which there are common directorships.

Purchases from entities controlled by key management personnel

The Group leases a property, on normal commercial terms, from an entity that is controlled by a member of the Group’s key management personnel.

Notes to the financial statements For the year ended 30 June 2023

NOTE 28. FINANCIAL RISK MANAGEMENT

28.1 Financial Risk Factors

The Group’s activities expose it to various financial risks, including liquidity risk, credit risk and market risk (which includes currency risk and cash flow interest rate risk). The Group’s overall risk management programme focuses on the uncertainty of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.

Treasury activities are performed centrally by the Group’s corporate team, supplemented by external financial advice and the use of derivative financial instruments is governed by a Group Treasury Policy approved by the Company’s Board of Directors.

Payments to associates

During the year, the following transactions occurred with Sweetspot Group Limited (GSS), an entity incorporated in New Zealand and is 33 . 3% owned by the Group:

==> picture [512 x 108] intentionally omitted <==

----- Start of picture text -----

Group
2023 2022
$000 $000
Sale of courier services to GSS 13,304 14,841
Purchase of goods and services from GSS 1,463 1,620
Receivables from GSS at end of year 1,290 1,616
Payables to GSS at end of year 82 140
----- End of picture text -----

Payments to joint venture

During the year, the Group paid Parcelair Limited $16 . 3 million (2022: $14 . 8 million) for the provision of airfreight linehaul services on normal commercial terms. Parcelair Limited is incorporated in New Zealand and is half-owned by the Group.

Intercompany loan

An intercompany promissory note of $14 . 5 million and intercompany receivable which arose on the acquisition of Allied Express Transport Pty Limited (AEX), exists between IMS Group Australia Pty Ltd (IMS) and AEX. The receivable and promissory note are eliminated in the consolidated financial statements of Freightways. (Refer to Note 30).

Key management compensation

Compensation paid during the year (or payable as at year end in respect of the year) to key management, which includes senior executives of the Group and non-executive independent directors, is as follows:

==> picture [512 x 80] intentionally omitted <==

----- Start of picture text -----

Group
2023 2022
$000 $000
Short term employee benefits 10,668 11,384
Share-based payments (Note 22) 1,016 1,031
----- End of picture text -----

The Group does not engage in speculative transactions or hold derivative financial instruments for trading purposes.

(a) Liquidity Risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they fall due. The Group’s approach to liquidity risk management includes maintaining sufficient cash reserves and ensuring adequate committed finance facilities are available. In assessing its exposure to liquidity risk, the Group regularly monitors rolling 3, 6 and 12 months cash requirement forecasts.

The table below analyses the Group’s financial liabilities into relevant maturity groupings, based on the remaining period from the reporting date to the contractual maturity date.

The amounts disclosed below are contractual, undiscounted cash flows.

==> picture [512 x 173] intentionally omitted <==

----- Start of picture text -----

Less than 6-12 1-2 2-5 More than Total
6 months months years years 5 years
Group $000 $000 $000 $000 $000 $000
2023
Bank borrowings 9,243 9,252 18,238 283,217 59,306 379,256
Trade and other payables 117,499 33,008 4,159 - - 154,666
Lease liabilities 29,955 29,150 55,228 133,659 189,171 437,163
2022
Bank borrowings 4,231 4,638 8,614 163,245 32,852 213,580
Trade and other payables 149,912 22,910 - 3,709 - 176,531
Lease liabilities 23,158 22,152 41,885 103,833 189,784 380,812
----- End of picture text -----

The amounts expected to be payable in relation to the interest rate swaps have been estimated using forward interest rates applicable at the reporting date.

Short-term employee benefits paid during the year are lower than the prior comparative period (pcp) due predominantly to:

a higher number of partly-paid shares vesting in the pcp upon achievement of agreed performance targets in accordance with the terms of the Freightways Senior Executives Performance Share Plan; and
short-term incentives paid to key management during the pcp were higher due to achievement of predetermined company profit levels and individual performance objectives.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

142

143

Notes to the financial statements For the year ended 30 June 2023

(c) Market risk

(b) Credit risk

Credit risk refers to the risk of a counterparty failing to discharge its obligation. Financial instruments which potentially subject the Group to credit risk principally consist of bank balances, accounts receivable and derivative financial instruments.

The Group has credit policies that are used to manage the exposure to credit risk. As part of these policies, exposures with counterparties are monitored on a regular basis. The Group performs credit evaluations on all customers requiring credit and generally does not require collateral.

A default in a financial asset is when the counterparty fails to make contractual payments when debt recovery processes have been exhausted and/or the counterparty is declared bankrupt or in the case of companies, placed in administration, receivership or liquidation.

The Group’s Treasury Policy ensures due consideration is given to the financial standing of the counterparty banks with which the Group holds cash reserves and transacts derivative financial instruments. A minimum Standard & Poor’s long-term credit rating of A/A- is required to qualify as an approved counterparty, with the exception that a maximum of 1% of total debt exposure may be with counterparty with BBB credit rating. The quantum of transactions entered into with the Group’s various financial lenders is also balanced to mitigate exposure to concentrated counterparty credit risk with any one financial provider.

The Group does not have any significant concentrations of credit risk.

For counterparties to trade receivables that are neither past due nor impaired, payments have historically been received regularly and on time.

The Group considers its maximum exposure to credit risk to be as follows:

==> picture [512 x 88] intentionally omitted <==

----- Start of picture text -----

2023 2022
Group $000 $000
Cash and cash equivalents 44,485 24,137
Trade and other receivables 137,510 118,529
181,995 142,666
----- End of picture text -----

Cash and cash equivalents are held with banks with Standard & Poor’s rating of AA-.

Trade receivables analysis

At 30 June aging analysis of trade receivables is as follows:

Foreign exchange risk

Exposure to foreign exchange risk arises when (i) a transaction is denominated in a foreign currency and any movement in foreign exchange rates will affect the value of that transaction when translated into the functional currency of the Company or a subsidiary; and (ii) the value of assets and liabilities of overseas subsidiaries are required to be translated into the Group’s reporting currency.

The Group’s Treasury Policy is used to assist in managing foreign exchange risk. In accordance with Treasury Policy guidelines, foreign exchange hedging is used as soon as a defined exposure to foreign exchange risk arises and exceeds certain thresholds.

As disclosed in Note 20, at 30 June 2023 the Group had Australian dollar denominated bank borrowings of AUD158 , 700 , 000 (2022: AUD78 , 200 , 000). Of these borrowings, AUD14 , 200 , 000 (2022: AUD14 , 200 , 000) were borrowed by a New Zealand subsidiary and have been translated at the prevailing foreign currency rate as at balance date. The rest of the Australian dollar denominated bank borrowings have been borrowed by an Australian subsidiary and are translated as part of the consolidation of the Group for reporting purposes. The Group has no other outstanding foreign currency denominated monetary items.

The table on the following page details the Group’s sensitivity to the increase and decrease in the New Zealand dollar (NZD) against the Australian dollar (AUD) in respect of the Australian dollar denominated bank borrowings, borrowed in New Zealand. The sensitivity analysis only includes outstanding foreign currency denominated monetary items at the reporting date and adjusts their translation as at that date for the change in foreign currency rates. A positive number indicates a decrease in liabilities (bank borrowings) where the NZD strengthens against the AUD.

Interest rate risk

Exposure to cash flow interest rate risk arises in borrowings of the Group that are at the prevailing market interest rate current at the time of drawdown and are re-priced at intervals not exceeding 180 days.

Interest rate risk is identified by forecasting short and long-term cash flow requirements.

The Group’s Treasury Policy is used to assist in managing interest rate risk. Treasury Policy requires projected annual core debt to be effectively hedged within interest rate risk control limits against adverse fluctuations in market interest rates.

The following table demonstrates the sensitivity of the Group’s equity and profit after tax to a potential change in interest rates by plus or minus 100 basis points, with all other variables held constant and in relation only to that portion of the Group’s borrowings that are subject to floating interest rates.

Significant assumptions used in the interest rate sensitivity analysis include:

(i) reasonably possible movements in interest rates were determined based on the Group’s current mix of debt in New Zealand and Australia, the level of debt that is expected to be renewed and a review of the last two year’s historical movements; and
(ii) price sensitivity of derivatives has been based on a reasonably possible movement of interest rates at balance dates by applying the change as a parallel shift in the forward curve.

==> picture [511 x 147] intentionally omitted <==

----- Start of picture text -----

2023 2022
Gross Expected Loss Gross Expected Loss
carrying loss rate allowance carrying loss rate allowance
amount amount
Group $000 % $000 $000 % $000
Current 105,382 1.0% 1,053 90,246 0.5% 451
31-60 days over standard terms 20,081 4.5% 900 12,205 2.0% 244
60-90 days over standard terms 2,202 25.0% 551 2,559 16.0% 409
91+ days over standard terms 1,589 45.0% 715 2,737 37.2% 1,020
129,254 3,219 107,747 2,124
----- End of picture text -----

The Group has $ 20.7 million (2022: $15.4 million) of financial assets that are overdue and not impaired.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

144

145

Notes to the financial statements For the year ended 30 June 2023

Sensitivity Analysis

Sensitivity Analysis
		Interest rate Movement NZD/AUD Movement
	Impact on profit	Impact on other components of equity Impact on liabilities & equity
	Carrying amounts $000 +100 basis points $000	-100 basis points $000 +100 basis points $000 -100 basis points $000 +or– 10% in value of NZD $000
2023
Financial assets	44,485 320 143,510 - 3,338 453 297,194 (2,140)	(320) 320 (320) - - - - - (453) 1,652 (1,864) - 2,140 (2,140) 2,140 1,406/(1,718)
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Financial liabilities
Borrowings
2022
Financial assets	24,137 187 122,336 -	(187) 187 (187) -
Cash and cash equivalents
Trade and other receivables		- - - -
Derivative financial instruments	3,024 340 176,210 (1,269)	(340) 1,017 (1,300) - 1,269 (1,269) 1,269 1,429/(1,747)
Financial liabilities
Borrowings

(d) Fair value estimation

The carrying value less impairment provision of trade receivables and payables is a reasonable approximation of their fair values due to the short-term nature of trade receivables and payables. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

The fair values of financial instruments are estimated using discounted cash flows. The fair value of interest rate swaps and foreign exchange hedges are calculated as the present value of the estimated future cash flows.

Unless otherwise stated, all other carrying amounts are assumed to equal or approximate fair value.

The Group uses various methods in estimating the fair value of a financial instrument. The methods comprise:

Level 1 – Quoted prices (adjusted) in active markets for identical assets or liabilities at the reporting date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

Notes to the financial statements For the year ended 30 June 2023

Specific valuation techniques used to value financial instruments include:

In respect of interest rate swaps, the fair value is calculated as the present value of the estimated future cash flows based on observable yield curves;
In respect of forward foreign exchange contracts, the fair value is calculated using forward exchange rates at the balance sheet date, with the resulting value discounted back to present value;
In respect of USPP, the fair value is calculated on a discounted cash flow basis using the USD Bloomberg curve and applying discount
factors to the future USD interest payment and principal payment cash flows; and
Discounted cash flow analysis for other financial instruments.

Specific valuation techniques used to value contingent consideration in a business combination and estimated purchase price adjustments include:

fair value is calculated as the present value of the estimated future cash flows based on management’s assessment of future performance; and
management’s knowledge of the business and the industry it operates in.

The amounts below are for the derivative financial instruments, USPP and contingent consideration in a business combination. There were no transfers between levels during the year.

==> picture [512 x 306] intentionally omitted <==

----- Start of picture text -----

Level 1 Level 2 Level 3 Total
$000 $000 $000 $000
2023
Assets
Derivative financial instruments - 3,338 - 3,338
Total assets - 3,338 - 3,338
Liabilities
USPP - 128,909 - 128,909
Contingent consideration in a
business combination - - 4,835 4,835
Total liabilities - 128,909 4,835 133,744
2022
Assets
Derivative financial instruments - 3,024 - 3,024
Total assets - 3,024 - 3,024
Liabilities
USPP - 72,738 - 72,738
Contingent consideration in a
business combination - - 59,892 59,892
Total liabilities - 72,738 59,892 132,630
----- End of picture text -----

Level 2 – Inputs that are observable for the asset or liability, either directly (i.e., as prices; other than quoted prices referred to in Level 1 above) or indirectly (i.e., derived from prices). The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives and US Private Placement (USPP)) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the fair value of an instrument is included in Level 2.

Level 3 – Inputs for the asset or liability that are not based on observable market data (i.e., unobservable inputs). In these cases, the fair value of an instrument would be included in Level 3.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

146

147

Notes to the financial statements For the year ended 30 June 2023

The following table shows the valuation technique used in measuring Level 3 contingent consideration in a business combination and estimated purchase price adjustments:

==> picture [512 x 308] intentionally omitted <==

----- Start of picture text -----

Description Fair value as at 30 Fair value as at 30 Unobservable Range of inputs Range of inputs Relationship of
June 2023 June 2022 Input 2023 2022 unobservable inputs to
fair value (sensitivity)
Contingent 4,835 59,892 Achievement of 92.5% - 107.5% 92.5% - 107.5% A change in the
Consideration Annual Budget achievement of the
annual budget by 250
bps would increase /
decrease the FV of
the consideration
by $0.1 million
(2022: $0.1 million)
Probability 99% 99% A change in the
weighted achievement of the
average of annual budget by 250
achieving bps would increase /
Annual Budget decrease the FV of
the consideration
by $0.1 million
(2022: $0.1 million)
Discount Rate 4.0% 4.0% A change in the
discount rate by 100
bps would increase /
decrease the FV of
the consideration
by $0.1 million
(2022: $0.1 million)
----- End of picture text -----

Notes to the financial statements

For the year ended 30 June 2023

The following table presents the changes in Level 3 instruments, which are carried at fair value through profit or loss.

==> picture [512 x 233] intentionally omitted <==

----- Start of picture text -----

Contingent consideration in a business combination
2023 2022
$000 $000
Opening balance 59,892 51,305
Acquisition of businesses 1,126 3,709
Settlement (a) (56,183) (54)
- -
Purchase price adjustment
-
Change in fair value of contingent consideration 3,700
-
Unwinding of discount on contingent consideration 1,232
Closing balance 4,835 59,892
Total losses for the year included in the income statement
for liabilities held at the end of the reporting period, under:
-
- Change in fair value of contingent consideration 3,700
– Big Chill Distribution Limited
- Net interest and finance costs - 1,232
- 4,932
----- End of picture text -----

a. Payment of contingent consideration for the acquisition of Big Chill Distribution Limited (BCD).

28.2 Capital risk management

Group capital (Shareholders Funds) consists of share capital, other reserves and retained earnings. To maintain or alter the capital structure, the Group has the ability to vary the level of dividends paid to shareholders, return capital to shareholders or issue new shares, reduce or increase bank borrowings or sell assets. The Group does not have any externally imposed capital requirements.

The Group’s long term debt facilities impose a number of banking covenants. These covenants are calculated monthly and are reported to the banks halfyearly on a rolling 12-months basis. The most significant covenant relating to capital management is a requirement for the Group to maintain its operating leverage (net debt divided by profit before interest, tax, depreciation and amortisation) below a maximum level. There have been no breaches of banking covenants or events of review during the current or prior year.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

148

149

Notes to the financial statements For the year ended 30 June 2023

NOTE 29. FINANCIAL INSTRUMENTS BY CATEGORY

(a) Assets, as per balance sheet

==> picture [483 x 151] intentionally omitted <==

----- Start of picture text -----

Financial assets at Derivatives used
Total
amortised cost for hedging
2023 2022 2023 2022 2023 2022
$000 $000 $000 $000 $000 $000
Group
Trade and other receivables
(excluding prepayments) 137,510 115,225 - - 137,510 115,225
Cash and cash equivalents 44,485 24,137 - - 44,485 24,137
Derivative financial instruments - - 3,338 3,024 3,338 3,024
Total 181,995 139,362 3,338 3,024 185,333 142,386
----- End of picture text -----

Notes to the financial statements For the year ended 30 June 2023

NOTE 30. BUSINESS COMBINATIONS

Acquisition of Allied Express Transport Pty Limited (AEX)

Effective 30 September 2022, the Group acquired 100% of AEX, a company operating in Australia in the courier and express freight market for total consideration of $215 . 3 million. The consideration comprises of cash payment of $88 . 1 million, issue of Freightways shares of $112 . 1 million, promissory note of $14 . 5 million and a completion adjustment of $0.7 million. A$50 million of the shares issued to the vendors are subject to an escrow on sale for a period of 12 months from 30 September 2022 and A$25 million of those shares will then remain subject to an escrow on sale for a further period of 12 months thereafter.

Included in AEX at the time of the acquisition was a shareholder loan of $14 . 5 million receivable by AEX from the vendor. Concurrent with the acquisition, this receivable of $14 . 5 million in AEX was satisfied through the issue of a promissory note (non-cash) from IMS Group Australia Pty Limited (IMS), a Freightways subsidiary, to AEX. This obligation is now within the Freightways Group and is reflected in the respective Group legal entities of AEX and IMS. The receivable and promissory note are eliminated in the consolidated financial statements of Freightways.

AEX operates within the Group’s express package & business mail division.

The contribution of AEX to the Group results for the year ended 30 June 2023 was revenue of $187.2 million and net profit after tax of $13 . 2 million. If this acquisition had occurred at the beginning of the year, the contribution to revenue and net profit after tax for the period is estimated at $249 . 2 million and $18 . 2 million, respectively.

The following table summarises the amounts determined for purchase consideration and the provisional fair value of assets acquired and liabilities assumed:

(b) Liabilities, as per balance sheet

==> picture [483 x 155] intentionally omitted <==

----- Start of picture text -----

Derivatives used for Other financial liabilities Other financial liabilities
Total
hedging at amortised cost held at fair value
2023 2022 2023 2022 2023 2022 2023 2022
$000 $000 $000 $000 $000 $000 $000 $000
Group
Borrowings (excluding
- - - -
lease liabilities) 297,194 176,210 297,194 176,210
Lease liabilities - - 358,273 310,125 - - 358,273 310,125
- -
Trade and other payables 100,667 84,783 4,835 59,892 105,502 144,675
Total - - 756,134 571,118 4,835 59,892 760,969 631,010
----- End of picture text -----

==> picture [512 x 357] intentionally omitted <==

----- Start of picture text -----

Preliminary
Purchase consideration $000
Cash paid during the year 88,070
Issue of Freightways shares 112,066
Promissory note 14,472
Completion adjustment 681
Total purchase consideration 215,289
Fair value of assets and liabilities arising from the acquisition
Cash and cash equivalents 18,512
Trade and other receivables 24,414
Intercompany receivable 14,472
Plant and equipment 8,644
Right-of-use assets 12,791
Software 2,167
Brand name 30,654
Customer relationships 54,739
Non-compete agreement 3,141
Goodwill 104,553
Trade and other payables (18,319)
Income tax payable (2,053)
Deferred tax liability (25,635)
Lease liabilities (12,791)
215,289
----- End of picture text -----

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

150

151

Notes to the financial statements For the year ended 30 June 2023

The goodwill of $104 . 6 million arising upon this acquisition is attributable to the business know-how and the premium paid for strategic reasons, including acquiring an entry point into the Australian courier and express freight market.

The fair value of certain assets and liabilities arising from the acquisition have been determined on a provisional basis as the completion adjustment is currently being finalised. Plant and equipment, software, customer relationships, brand name, non-compete agreement, other payables and income tax payable have been measured provisionally, pending confirmation of certain determinants and finalisation of independent valuations. The fair value of these assets will be finalised within 12 months from the acquisition date.

Other acquisition

Notes to the financial statements For the year ended 30 June 2023

NOTE 31. SIGNIFICANT EVENTS AFTER BALANCE DATE

Dividend declared

On 21 August 2023, the Directors declared a fully imputed final dividend of 19 cents per share (approximately $33 . 7 million) in respect of the year ended 30 June 2023. The dividend will be paid on 2 October 2023. The record date for determination of entitlements to the dividend is 15 September 2023. The Freightways Dividend Reinvestment Plan will be offered for this dividend.

At the date of this report, there have been no other significant events subsequent to the reporting date.

During the year, the Group acquired a small IT asset disposal and recycling services business in Australia for $2 . 7 million. This business operates with the Group’s information management division.

Prior period acquisition – ProducePronto (“PP”)

Effective 1 November 2021, the Group acquired the business and assets of PP for an initial consideration of approximately $12 . 1 million and future earn-out of up to $3 . 8 million over 3 years. PP operates fourth party logistics (4PL) services with 365 day per year, same-day fresh and frozen delivery to convenience outlets in New Zealand and businesses across Auckland. This acquired business operates within the Group’s express package & business mail operating segment.

As at 30 June 2023, the estimated discounted future earn-out payment for the acquisition of PP was $3 . 7 million (30 June 2022: $3 .7 million). This represents no change in the estimated undiscounted future earn-out payment from the last balance date. The Group has forecast several scenarios and probability-weighted each to determine an updated fair value for this contingent payment arrangement. The liability is presented within non-current trade and other payables in the balance sheet.

Prior period acquisition – Big Chill Distribution Limited (“BCD”)

On 1 April 2020, the Group acquired 100% of BCD, a company operating in the New Zealand temperature-controlled transport and facilities market, for an initial consideration of $114 . 6 million and future contingent consideration representing approximately 20% of BCD Enterprise Value as at 30 June 2022.

At 30 June 2022 the estimated discounted future contingent consideration for the acquisition of BCD was $56 . 2 million and this was paid in August 2022.

==> picture [512 x 96] intentionally omitted <==

----- Start of picture text -----

Reconciliation of payments for businesses acquired $000
Cash paid for the acquisition of AEX 88,070
Cash paid for contingent consideration for the acquisition of BCD 56,162
Cash paid for other acquisitions during the year 2,752
Cash acquired from acquisition of AEX (18,512)
Payments for businesses acquired (net of cash acquired) 128,472
----- End of picture text -----

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

152

153

Shareholder information

Stock exchange listing

The Company’s fully paid ordinary shares are listed on NZSX (the New Zealand Stock Exchange).

Distribution of shareholders and shareholdings as at 31 July 2023

==> picture [512 x 272] intentionally omitted <==

----- Start of picture text -----

Number Number % of issued
of holders of shares held capital
Size of shareholding
1 to 1,999 4,077 3,571,219 2.01
2,000 to 4,999 2,415 7,242,246 4.08
5,000 to 9,999 1,136 7,459,447 4.20
10,000 to 49,999 737 12,635,345 7.12
50,000 to 99,999 30 1,846,447 1.04
100,000 to 499,999 32 6,483,830 3.66
500,000 to 999,999 8 6,207,262 3.50
1,000,000 and over 26 131,985,562 74.39
Total shareholders 8,461 177,431,358 100.00
Geographic distribution
New Zealand 8,077 144,863,780 81.65
Australia 314 32,315,762 18.21
Other 70 251,816 0.14
8,461 177,431,358 100.00
----- End of picture text -----

Substantial product holders as at 31 July 2023

Based upon notices received, the following persons are deemed to be substantial product holders in accordance with Section 293 of the Financial Markets Conduct Act 2013:

	Voting securities	Voting securities
	Number	%
Colin McDowell	11,282,382	6.80
ANZ New Zealand Investments Limited, ANZ Bank New Zealand Limited and ANZ Custodial Services New Zealand Limited	9,053,023	5.46

Shareholder information

Top twenty registered shareholders of listed shares as at 31 July 2023

==> picture [512 x 370] intentionally omitted <==

----- Start of picture text -----

Number of % of issued
Shares held capital
Custodial Services Limited 23,290,157 13.13
Colin McDowell 10,989,294 6.19
FNZ Custodians Limited 10,239,753 5.77
BNP Paribas Nominees (NZ) Limited * 8,932,409 5.03
Forsyth Barr Custodians Limited <1-Custody> 8,536,960 4.81
TEA Custodians Limited * 6,860,100 3.87
JPMorgan Chase Bank * 6,585,066 3.71
Citibank Nominees (New Zealand) Limited * 6,528,659 3.68
ANZ Custodial Services New Zealand Limited * 5,031,704 2.84
HSBC Nominees (New Zealand) Limited * 4,965,276 2.80
HSBC Nominees A/C NZ Superannuation Fund Nominees Limited * 4,654,117 2.62
Accident Compensation Corporation * 4,328,523 2.44
ANZ Wholesale Australasian Share Fund * 3,914,421 2.21
HSBC Nominees (New Zealand) Limited * 3,858,216 2.17
New Zealand Depository Nominee Limited 3,610,087 2.03
JBWere (NZ) Nominees Limited 3,551,861 2.00
PTJR Pty Limited 2,989,054 1.68
Generate Kiwisaver Public Trust Nominees Limited * 1,895,807 1.07
Dean John Bracewell & Phillipa Anne Bracewell & Bracewell Trustee Company Limited
1,753,733 0.99
FNZ Custodians Limited 1,520,683 0.86
124,035,880 69.90
----- End of picture text -----

*Held through NZ Central Securities Depository Limited

The total number of issued voting securities of the Company as at 31 July 2023 was 177,431,358.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

154

155

Corporate Governance Statement

This statement is an overview of the Group’s main corporate governance policies, practices and processes adopted or followed by the Board of Directors of Freightways Group Limited (the Board). The Group’s corporate governance processes do not materially differ from the principles set out in the NZX Corporate Governance Code, except as set out within this statement. In preparing this statement, Freightways has elected to report against the NZX Corporate Governance Code dated 17 June 2022.

This statement has been approved by the Board and is current as at 30 June 2023.

The role of the Board of Directors

The Board is committed to the highest standards of corporate governance and ethical behaviour, both in form and substance, amongst its Directors and

the people of the Company and its subsidiaries (Freightways).

Board responsibilities

The Board’s corporate governance responsibilities include overseeing the management of Freightways to ensure proper direction and control of Freightways’ activities.

In particular, the Board will establish corporate objectives and monitor management’s implementation of strategies to achieve those objectives. It will approve budgets and monitor performance against budget (including Financial Reporting and any applicable Non-Financial Reporting). The Board will ensure adequate risk management strategies are in place and monitor the integrity of management information and the timeliness of reporting to shareholders and other stakeholder groups.

The Board will follow the NZX Corporate Governance Code and Directors will act in accordance with their fiduciary duties in the best interests of the Company.

A formal Board Charter, which can be found at https://www.freightways.co.nz/about/corporate-governance/, has been adopted by the Board that elaborates on Directors’ responsibilities. The Board will internally evaluate its performance and the performance of its committees annually. Any recommendations flowing from this review will be implemented promptly. The Board will review its Corporate Governance practice against current best practice and continue to develop company policies and procedures, as deemed necessary.

Board composition, appointment and performance

In accordance with the NZX Listing Rules, the Board will comprise not less than three Directors. The Board will be comprised of a mix of persons with complementary skills appropriate to the Company’s objectives and strategies, having regard to the Diversity & Inclusion Policy and any measurable objectives set by the Board. The Board must include not less than two persons (or if there are eight or more Directors, three persons or one third rounded down to the nearest whole number of Directors) who are deemed to be independent. The majority of the Board must be independent Directors, including the Chairman. The Chairman and the CEO must be different people.

Freightways’ Board currently comprises six Directors: the non-executive Chairman and five non-executive Directors. All Freightways’ Directors are independent. Key executives attend board meetings by invitation.

Each Director must enter into a written agreement with the Company on appointment that outlines the terms of the Director’s appointment.

The Directors all undertake appropriate training to remain current on how to best perform their duties as Directors of the Company.

Corporate Governance Statement

Board Meetings

The following table outlines the number of board meetings attended by Directors during the course of the 2023 financial year:

==> picture [512 x 133] intentionally omitted <==

----- Start of picture text -----

Meetings Held Meetings Attended
Director
Mark Cairns 8 8
Abby Foote 8 8
David Gibson 8 8
Peter Kean 8 8
Fiona Oliver 8 8
Mark Rushworth 8 6
----- End of picture text -----

Board Committees

Standing committees have been established to assist in the execution of the Board’s responsibilities. These committees utilise their access to management and external advisors at a suitably detailed level, as deemed necessary and report back to the full Board. Each of these committees has a charter outlining its composition, responsibilities and objectives. The committees are as follows:

Audit & Risk Committee:

The Audit & Risk Committee is responsible for overseeing risk management, accounting and audit activities and reviewing the adequacy and effectiveness of internal controls, meeting with and reviewing the performance of external auditors, reviewing the Annual Report and Half Year Results Release and making recommendations on financial and accounting policies. The Company’s Audit & Risk Committee Charter can be found at https://www.freightways.co.nz/ about/corporate-governance/.

The Audit & Risk Committee oversees the Company’s engagement and communications with its external auditors, which includes meetings between members of the Audit & Risk Committee and the external auditors (both with and without management present). Services provided by the external audit firm to the Company outside of its statutory audit role are monitored by the Audit & Risk Committee to ensure that the independence of its auditors is maintained.

The Group has an established internal audit function for financial controls and draws on external expertise where required to perform complementary internal audits of non-financial control related areas of the Group. The internal audit programme covers a broad spectrum of risks and findings are presented to the Audit & Risk Committee.

The members are Abby Foote (Chair), Mark Cairns and David Gibson. All members are independent non-executive Directors. Meetings were held and attended, as follows:

Please see Director’s Report section of this Annual Report for further disclosures relating to the Board.

Diversity & Inclusion

The Company has a formal diversity & inclusion policy which can be found at https://www.freightways.co.nz/about/corporate-governance/. The Company is committed to encouraging diversity throughout all levels of its operations and by ensuring all employees have an equal opportunity to realise their career ambitions within Freightways. As required to be reported by the NZX Listing Rules, the Company advises that from a gender diversity perspective, as at 30 June 2023, the Board was comprised of 4 male Directors, 2 female Directors and no Directors who identify as gender diverse (2022: 4 male Directors, 2 female Directors and no Directors who identify as gender diverse), and the officers of the Company were comprised of 5 male officers and no officers who identify as gender diverse (2022: all 5 officers of the Company were male and no officers who identify as gender diverse).

==> picture [512 x 89] intentionally omitted <==

----- Start of picture text -----

Meetings Held Meetings Attended
Director
Abby Foote 6 6
Mark Cairns 6 6
David Gibson 6 5
----- End of picture text -----

The Company has committed to promoting diversity and inclusion in the workplace through the development and advancement of under-represented groups in the Group with career opportunities, professional development courses and training. The Company has set an objective of having 40% of the Executive, Leadership Teams and Freightways Board to be composed of representatives of currently under-represented groups (women, ethnic groups and employees under 43 years-old) by 2030. As at 30 June 2023, these under-represented groups make up 43% of the Executive, Leadership Teams and Freightways Board, exceeding the 40% objective.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

156

157

Corporate Governance Statement

People & Remuneration Committee:

The People & Remuneration Committee is responsible for overseeing the Freightways human resource practices, providing for a remuneration policy for Directors and executives, reviewing the remuneration and benefits of the senior management, reviewing and recommending the remuneration of Board members, and making recommendations to the Board in respect of succession planning. The Company’s People & Remuneration Committee Charter and the Company’s Remuneration Policy can be found at https://www.freightways.co.nz/about/corporate-governance/. The Company’s Remuneration Policy does not prescribe specific relative weightings to remuneration and relevant performance criteria as the Board has determined that it is more appropriate for the People & Remuneration Committee to consider and adopt relevant weightings and performance criteria on a case by case basis in respect of each applicable officer.

The members of the People & Remuneration Committee are Peter Kean (Chair), Mark Cairns, Fiona Oliver and Mark Rushworth. All members are independent non-executive Directors. Meetings were held and attended, as follows:

==> picture [512 x 104] intentionally omitted <==

----- Start of picture text -----

Meetings Held Meetings Attended
Director
Peter Kean 4 4
Mark Cairns 4 4
Fiona Oliver 4 4
Mark Rushworth 4 4
----- End of picture text -----

Nominations Committee:

The Nominations Committee is responsible for ensuring the Board is composed of Directors who contribute to the successful management of the Company, reviewing the suitability of a Director nominee in respect of that nominee’s proposed appointment, ensuring formal review of the performance of the Board, individual Directors and the Board’s committees, ensuring effective induction programmes are in place for the Directors and confirming the status of Directors’ independence for external reporting purposes. The Company’s Nominations Committee Charter can be found at https://www.freightways.co.nz/about/ corporate-governance/.

The members of the Nominations Committee are Mark Cairns (Chair), Abby Foote, David Gibson, Peter Kean, Fiona Oliver and Mark Rushworth. All members are independent non-executive Directors. Meetings were held and attended, as follows:

==> picture [512 x 133] intentionally omitted <==

----- Start of picture text -----

Meetings Held Meetings Attended
Director
Mark Cairns 1 1
Abby Foote 1 1
David Gibson 1 1
Peter Kean 1 1
Fiona Oliver 1 1
Mark Rushworth 1 1
----- End of picture text -----

Code of ethics

Freightways expects its Directors and employees to maintain high ethical standards that are consistent with Freightways’ core values, business objectives and legal and policy obligations. A formal Code of Ethics has been adopted by the Board and can be found at

Corporate Governance Statement

Protected disclosures (whistleblower)

The Company is committed to encouraging, supporting and respecting open and honest accountable work practices. The Company believes all employees have a responsibility to eliminate serious wrongdoing in the workplace and has adopted a formal whistleblowing policy that provides employees with access to a confidential third-party agency. The Company’s Protected Disclosures (Whistleblower) Policy can be found at https://www.freightways.co.nz/about/ corporate-governance/.

Delegation of authority

The Board delegates its authority where appropriate to the Chief Executive Officer for the day-to-day affairs of Freightways. Formal policies and procedures exist that detail the parameters that the Chief Executive Officer and in turn his direct reports are able to operate within.

Share trading by directors and management

The Board has adopted a policy that ensures compliance with applicable securities trading laws. This policy requires prior consent by the Chief Financial Officer and General Counsel in relation to any trading by executive management, and in the case of Directors of the Company and its subsidiaries, prior consent by the Chairman of the Board, Chief Financial Officer and General Counsel. Any trading by the Chairman of the Board requires prior consent by the Chair of the Audit & Risk Committee, Chief Financial Officer and General Counsel. The Company’s Securities Trading Policy can be found at https://www.freightways.co.nz/about/corporate-governance/.

Treasury policy

Exposure to foreign exchange and interest rate risks is managed in accordance with the Group’s Treasury Policy that sets limits of management authority. Derivative financial instruments are used by the Group to manage its business risks; they are not used for speculative purposes.

Reporting and disclosure

The Company is committed to promoting investor confidence by providing timely, accurate and full disclosure of information in accordance with the NZX Listing Rules. The Company has appointed its Chief Financial Officer as its Disclosure Officer. The Disclosure Officer is responsible for monitoring Freightways’ business to ensure it complies with its disclosure obligations. The Disclosure Officer has access to all necessary information provided by the direct reports of Freightways’ Chief Executive Officer in respect of their areas of responsibility. The Disclosure Officer will regularly request certification from the Chief Executive Officer’s direct reports that all reasonable enquiries have been made to ensure all relevant material information has been disclosed to the Disclosure Officer. The Company’s Disclosure & Communications Policy can be found at https://www.freightways.co.nz/about/corporate-governance/.

Copies of other key governance documents, including the Code of Ethics, Insider Trading Policy and Guidelines, Board and Committee Charters, Diversity and Inclusion Policy and Remuneration Policy, and are all available on the Company’s website at https://www.freightways.co.nz/about/corporate-governance/.

Copies of the Company’s Annual Report from prior years can be found at https://www.freightways.co.nz/investor-relations/annual-reports/.

In accordance with the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act 2021, Freightways will be required to meet climaterelated disclosure obligations set out in the External Reporting Board’s reporting standards in respect of its financial reporting period commencing on 1 July 2023. Work is under way to ensure compliance with the standards.

Risk management

The Company operates in an environment that contains a number of operational and strategic risks. It actively manages risk to ensure it operates a safe workplace and is able to sustain the achievement of its business objectives. Risk management techniques and capability assist managers to focus on uncertainties and vulnerabilities associated with the future, thereby improving the likelihood of meeting business objectives.

The management of risk is a core management responsibility. All managers and employees are accountable to employ risk management processes within their area of control to aid in the achievement of business objectives. A process to ensure risk has been adequately identified, considered and can be managed, is evident in all key decision-making processes. The Chief Executive Officer, Chief Financial Officer and subsidiary management ensure that risks to the business are identified, evaluated and, where necessary, reported to the Board, that effective responses and control activities are developed and that appropriate monitoring and timely re-evaluation is conducted. The Company reports externally on key risks which it considers are relevant to shareholders and other external stakeholders, including climate related risks and health and safety risks, but does not report generally on all material risks which may apply to the Group. All risks to the Group are included within a detailed internal risk reporting regime where risks relevant to specific business units are identified and mitigating actions are recorded.

https://www.freightways.co.nz/about/corporate-governance/. Freightways’ people are expected to continue to lead according to this Code. New and existing employees are required to complete training on the Code of Ethics. The Code deals specifically with conflicts of interest, proper use of information, proper use of assets and property, conduct and compliance with applicable laws, regulations, rules and policies and the other matters set out in recommendation 1.1 of the NZX Corporate Governance Code.

Breaches of the Code of Ethics are required to be notified in accordance with the Company’s Protected Disclosures (Whistleblower) Policy.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

158

159

Corporate Governance Statement

The Board and its Audit & Risk Committee are responsible for setting policy, assessing and monitoring strategic risks and ensuring management maintains an effective risk management framework.

The Company draws on external expertise where required to perform internal audit on areas assessed to be highest risk for the business and these areas are reviewed on a regular basis, including IT project management, payroll processing and managing business continuity.

The Company’s Risk Management Policy can be found at https://www.freightways.co.nz/about/corporate-governance/.

Donations

In accordance with section 211(1)(h) of the Companies Act 1993, the Freightways Group made donations totalling $0.3 million during the year. No political contributions were made during the year.

Health, safety & wellbeing risks

Under the Board’s oversight, the Company’s management team and Health & Safety Committee are responsible for oversight of the Company’s health, safety and wellbeing risks. The prevention of accidents and injuries is of vital importance and no task is regarded to be so important that it may be done in an unsafe manner. The Company has developed and maintains a Health & Safety Manual that details the procedures required of all managers, employees and contractors to maintain a healthy and safe working environment.

The Company is subject to internal and external audit and review, including external audit as part of the Accident Compensation Corporation’s Accredited Employers Programme and also New Zealand’s Civil Aviation Authority audit of the Group’s Fieldair operations.

The Company has a mental health and wellbeing programme that includes Freightways’ The Movement online portal available to all employees to provide them with support and information. Employees can also access EAP (Employee Assistance Programme) which is an external professional counselling helpline.

The Board monitors, supports and completes its own due diligence on the health, safety and wellbeing practices of the Company. Health, safety and wellbeing is a standing Board agenda item that is discussed at all scheduled Board meetings.

Takeover response plan

The Board has adopted a Takeover Response Plan to assist the Directors and management with the response to unexpected takeover activity. The Plan summarises key aspects of takeover preparation, and sets out, governance, conflict and communications protocols for takeover response. This Plan provides that in the event of a takeover offer, the Board would establish an Independent Takeover Response committee to manage its takeover response obligations.

Freightways Annual Report | Financial Year ended 30 June 2023

freightways.co.nz

Freightways Group Limited and its subsidiaries

160

161

FREIGHTWAYS GROUP LIMITED AND ITS SUBSIDIARIES

Allied Express Transport Pty Limited

New Zealand Couriers Limited

Shred-X Pty Limited

32 Botha Road

PO Box 1184 Oxenford Queensland 4210 AUSTRALIA Telephone: +61 1 300 747 339 www.shred-x.com.au www.med-xsolutions.com.au

3 Murray Jones Drive Bankstown Aerodrome New South Wales 2200 Australia Telephone: +61 13 13 73 www.alliedexpress.com.au

Penrose DX CX10119 Auckland Telephone: +64 9 571 9600 www.nzcouriers.co.nz

New Zealand Document Exchange Limited

The Information Management Group (NZ) Limited

Big Chill Distribution Limited

28 Pukekiwiriki Place Highbrook Auckland Telephone: +64 9 272 7440 www.bigchill.co.nz

20 Fairfax Avenue

33 Botha Road Penrose DX EX10975 Auckland Telephone: +64 9 580 4360 www.timg.co.nz

Penrose DX CR59901 Auckland Telephone: +64 9 526 3150 www.dxmail.co.nz www.dataprint.co.nz

Castle Parcels Limited

163 Station Road Penrose DX CX10245 Auckland Telephone: +64 9 525 5999 www.castleparcels.co.nz

The Information Management Group Pty Limited

NOW Couriers Limited

161 Station Road Penrose Auckland Telephone: +64 9 526 9170 www.nowcouriers.co.nz

PO Box 21 Enfield New South Wales 2136 Australia Telephone: +61 2 9882 0600 www.timg.com www.filesaver.com.au www.litsupport.com.au

Fieldair Holdings Limited

Post Haste Limited

Palmerston North International Airport Palmerston North DX PX10029 Palmerston North Telephone: +64 6 357 1149 www.fieldair.co.nz

32 Botha Road Penrose DX EX10978 Auckland Telephone: +64 9 579 5650 www.posthaste.co.nz www.passtheparcel.co.nz

Messenger Services Limited

32 Botha Road Penrose ProducePronto DX EX10911 10 Te Apunga Place Auckland Mt Wellington Telephone: +64 9 526 3680 Auckland www.sub60.co.nz Telephone: +64 800 12 34 55 www.kiwiexpress.co.nz www.producepronto.co.nz www.stuck.co.nz www.securityexpress.co.nz

Company particulars

BOARD OF DIRECTORS

Mark Cairns (Chairman) Abby Foote David Gibson Peter Kean Fiona Oliver Mark Rushworth

REGISTERED OFFICE

32 Botha Road Penrose DX CX10120 Auckland Telephone: (09) 571 9670 www.freightways.co.nz

AUDITORS

PricewaterhouseCoopers 15 Customs Street West Auckland CBD Auckland 1010

SHARE REGISTRAR

Computershare Investor Services Limited

159 Hurstmere Road Takapuna North Shore City 0622 DX CX10247

STOCK EXCHANGE

The fully paid ordinary shares of Freightways Group Limited are listed on NZX Limited (the New Zealand Stock Exchange).

FOR INQUIRIES IN RELATION TO FREIGHTWAYS’ SERVICES AND PRODUCTS CONTACT THE OFFICES LISTED ABOVE OR REFER TO FREIGHTWAYS’ WEBSITE AT WWW.FREIGHTWAYS.CO.NZ

A New Platform For Growth

AI assistant

FREIGHTWAYS GROUP LIMITED — Annual Report 2023

64946_rns_2023-09-11_d7dc876a-5df1-48b0-83cb-2c8f52822f23.pdf

Mapping our growth

Key

Our Annual Report

Contents

Our Sustainability Report

This year's highlights

The Freightways Growth Strategy

STAKEHOLDERS:

OUR PURPOSE:

What we do

OUR PRINCIPLES & CAPABILITIES:

How we work

OUR VISION:

Why we do this

Our family of brands

E XPRESS PACKAGE AND BUSINESS MAIL

TEMPERATURE CONTROLLED

INFORMATION MANAGEMENT

WASTE RENEWAL

INVESTING IN MOVING YOU TO A BET TER PLACE

OUR THREE HORIZONS FUTURE

G R O W T H O N B O T H S I D E S O F T H E TA S M A N

LEVERAGING OUR E XISTING NETWORKS

A BUSY YEAR FOR ALL

CREATING ROOM TO GROW

Chair & CEO's Report

A BUSY YEAR FOR ALL (CONTINUED)...

OUR SUSTAINABILIT Y JOURNEY CONTINUES

Chair & CEO's Report 2023

OUTLOOK FY24

G R O W T H O N B O T H S I D E S O F T H E TA S M A N

ASX DUAL LISTING

TOTAL CAPITAL E XPENDITURE FOR THE YEAR WAS $37M

REGULATORY

Living our capabilities in 2023

Bigger proves to be better

Allied Express

Kiwi Oversize

ABOUT KIWI OVERSIZE:

Our people

NEW HEAD OF PEOPLE & CULTURE APPOINTED FOR THE GROUP

WELCOMING NEW PEOPLE AS WE EXPAND

REMAINING AT TRACTIVE AS AN EMPLOYER

Our people

Ben Armstrong

NATIONAL BUSINESS DEVELOPMENT MANAGER, SHRED-X

Scarlett Liu

Rebecca Westbury

Tony Aspey-Gordon

Fresh ideas for convenient foods

ProducePronto

Supporting a deeper sense of community

KIDSCAN

RSPCA QUEENSL AND

RONALD MCDONALD HOUSE

LIFE FLIGHT

Parcel–sized fulfilment

Stocka

SHIPPING MADE EASY

A BIT OF A SQUEEZE, BUT A GREAT FIT

AIMING TO BE A TOP PERFORMER

Contents

Environmental Statement

01: Our Responsible Growth Strategy

GOAL:

SUPPORTING POLICIES:

Guiding Principles

02: Our Cleaner Air Strategy

GOAL:

SUPPORTING POLICIES:

TOITŪ Certification

03: Our Conservation &

04: Our Education & Awareness Strategy

Waste Management Strategy

GOAL:

GOAL:

SUPPORTING POLICIES:

FREIGHTWAYS GROUP LIMITED Annual Report 2023