Good morning, and thank you for joining the Freightways FY 2024 results briefing. We will begin with a presentation by the Freightways management team, followed by a Q&A session. If you would like to ask a question, please select the Raise Hand button to be placed in the virtual queue. The Raise Hand button can be found at the bottom of your Zoom screen or within your Reactions button. Now, I'll hand across to the Freightways management team. Over to you, Mark.
Good morning, all, and welcome to Freightways' FY 2024 full year results presentation. We've got a number of the Freightways team here, so I'll introduce those people briefly, and then we'll work through the slides and have an opportunity for questions at the end. I'll cover off the overview, talk about the divisional performance, and then the outlook for the business. Stephan Deschamps will co-cover off the financial summary, the consolidated result for Freightways, talk about our capital management strategy. In terms of the divisional strategies for information management and temperature control, Neil Wilson will cover that, and across the express package businesses, Aaron Stubbing will cover that side. Just a couple of slides to start with.
I guess to reinforce, we're often called a bellwether of the New Zealand economy, and while that is true for a large number of our businesses, I think it's important just to remember that Freightways is a really reasonably diversified business these days. So on this slide here, you can see a number of the brands that we operate in both New Zealand and Australia, and across four distinct activities. But all of those activities linked in terms of being specialized logistics business involved in pickup, process, and deliver. The revenue streams across express package and business mail, around just under NZD 1 billion of revenue this year. And information management, which is our traditional storage businesses, along with waste renewal, around NZD 214 million. Similarly, we're diversified across two different geographies.
Australia is now a very material part of Freightways. It's around 35% of the revenue of the business, at 65% of revenue in New Zealand. Again, while we are a bellwether, and we're very tightly tied into that New Zealand economy, the reality is, with the acquisition of Allied Express and the growth of the information management businesses, there's a greater degree of diversification to Freightways than there has been in the past. Hand over to Stephan to talk through the consolidated results and some of the financial highlights.
Thank you, Mark, and good morning, everyone. As I was reviewing last year and preparing for this presentation, it struck me that it felt a little bit like the release of a new iPhone, and by that I mean it's a little bit better than the previous generation, but still essentially the same. So, that's probably not a bad outcome, given the economic environment we had. But if we look at some of the key numbers, our revenue reached NZD 1.2 billion across New Zealand and Australia. That's up almost 8%, and that reflects the fact that we had a full year of Allied with us compared to the previous year. But also that we've seen pretty much all of our express package businesses growth apply.
That growth is coming from a combination of pricing, but also aggressive market share gain. If we look at the profit now, the EBITDA, which is the measure we use the most internally, has increased about 2.5% to NZD 149 million. At this level, we see a number of conflicting factors. On the positive side, some of our businesses have increased their margin, and that's, for example, the case of our largest business, New Zealand Couriers. On the negative side, we still see a lot of labor costs. We still saw a lot of labor cost pressure, so labor overall was up 9.3% compared to the previous year. We've also had some businesses that were impacted more than the rest by the economic slowdown.
Big Chill is probably the most significant one, because the product range they manage, being quite upmarket, is quite sensitive to the economic environment. And finally, we've had a number of costs associated with investment for growth that impacted us this year, and I'll talk to them a bit more in the next slide. If we go to the profit now, the NPAT was down about 6% to NZD 70 million, and that's a reflection of a couple of things. The main one is an increased interest spend, and that's mostly driven by the extent of the lease liabilities with some of the investments we've made. And we also have a tax impact of NZD 1.5 million linked to a change of the building depreciation tax policies.
So I've talked to some of these numbers already, but I wanted to stress a few points maybe about that. So I mentioned the fact that labor was still a significant cost and a significant increase for us in FY 2024. The good news is that we're not seeing that this year. So in FY 2025, the labor cost increase is a lot more reasonable than what we've seen in the last two years. I also mentioned some of the costs associated to some investments we made, so I want to talk a bit more about that. The first one is Allied Express in Australia, that we acquired a bit more than a year and a half ago. We have invested in two state-of-the-art sortation machines in Sydney and Melbourne.
This hasn't brought a lot of additional revenue or income this year, but it gives us the ability to manage to manage a much higher level of volume and parcels with only minimal marginal cost increase. We have also invested in Big Chill, so we have a new chilled and frozen facility that opened in Ruakura earlier this year. As we are building usage of that facility, it's a net cost for us in FY 2024 for about NZD 5 million. The good news is that we expect to be able to break even from July this year, or we are breaking even from July this year, because the facilities have filled slightly faster than what we were expecting. We have also invested in a number of other businesses.
We bought a business called FGL, which gives us much improved access to the global e-commerce. And we've also invested in our medical waste treatment facilities in Victoria, in Australia. And we've waited a long time to get the license allowing us to operate the plant, but it's now available, and so that we will be able to start generating revenue on the back of that. So the reason I'm mentioning all this cost is, they're growth investment that are impacting on the cost side in FY 2024, but for most of them, we will only start seeing significant revenue this year. And talking now about the balance sheet.
So we have a publicly stated capital management policy, which is that we want to keep essentially an investment-grade credit profile, and one of the measures we use for that is that we want the net debt post IFRS 16 to be between 2x and 3x our EBITDA. We closed last year at 2.8x . We've slightly decreased that multiple to 2.7x, despite all the investments I mentioned, and we are still very driven to maintain our credit profile and our balance sheet management within these parameters. On the dividend side, we've maintained the dividend at NZD 0.37 per share, which is the same level as the last two years, and we believe reflects both our confidence that the business will remain strong or will grow stronger in the future, but also the still difficult economic environment around us. On this, I'll hand over back to Mark to talk about the divisional performance.
So just we'll work through the two divisions. Just a few points I think to make on the market backdrop. So look, it's certainly been tough, particularly in New Zealand, no, no question of that. I think the great strength Freightways has is that there are an awful lot of executives who run the Freightways businesses that have been through two, if not three recessions over time, that have a good feel for the levers that you can pull just to manage cost, keep it close to your volume, know how to build market share, and so on. So while it has been tough times, and I think there's been, you know, some pretty sobering results come out of the New Zealand market, I think this one for Freightways shows a good deal of resilience.
In terms of that market backdrop, in New Zealand, four quarters of negative GDP growth over the last six quarters. We're starting to see that easing in monetary policy. But realistically, and when we talk to the outlook further, I think there'll be a little bit more pain to come before we start to see organic growth flow through the businesses. In Australia, as we have talked about the last couple of results, the result is certainly a couple of notches up on New Zealand. So the economy is in a slightly better shape. Even though they are not firing on all four cylinders, you can see that there's slightly better growth outcomes across Australia. The other one that really has changed is the competitive market.
In New Zealand, we've been in a competitive market where there has been Freightways, New Zealand Post, PBT, Aramex, and then a number of smaller players. What has happened just recently is that New Zealand Post have acquired PBT, and so effectively that market has shrunk from four to three. Really, you have New Zealand Post and Freightways dominating the vast majority of the overnight network business across this country. In Australia, the picture is a little different. In Australia, the market's really fragmented and very niche-focused. The other thing that's changed significantly is that the labor markets have loosened in both countries, and again, more so in New Zealand.
But the reality is, it is far easier to get people into the key roles we have in the business, whether they be freight sorting, customer service, drivers, and so on. And that's taken a huge amount of pressure off our people. It was probably the biggest source of pressure for our teams through the COVID years and through the previous year, was the ability to get quality people. In terms of the divisional results, for Express Package, 9.7% growth in terms of revenue, 7.1 EBITDA, 2.4 EBITA. That revenue really driven by a full year of Allied Express, and some really good growth across that Allied Express business, and a really good performance by New Zealand Couriers here domestically.
Big Chill, as Stephan alluded to earlier, they've had weaker same customer volumes, so their customers generally are down around about 8% in volume terms. There's a bit of uplift in terms of pricing. There's a bit of market share gain, but 8% less items traveling from their existing customers. And then the impact of the Ruakura site, which, as Stephan has said, we have steadily built to break-even level by the end of the financial year. DX Mail performed really well this year, off the back of better pricing, a little bit of market share gains, and some really good operational efficiencies through that business. So good performance in the mail business.
The overall EBITA percentage margin diluted a little by Allied Express, just operating at a slightly lower margin than our New Zealand Express package businesses, and Big Chill also operating at a lower margin. The Allied Automation Depot program, that'll add around about AUD 3 million in incremental depreciation and lease costs through FY 2025. So there's two large sortation machines, one which has gone into Sydney, one which went into Victoria, by the end of June, FY 2024, and we will shift into a new premise in Brisbane, this week. We expect those extra costs to be largely offset by new business gains, growth, and the efficiencies that we get out of that sortation equipment. Just a few of the metrics. I won't talk through all of these, but, same customer volumes, you know, a real point of interest here in New Zealand.
So in the first half of the year, down around 5.5%. The second half of the year, down around 5%. Clearly, in that second half of the year, we would have started to lap a quieter period around May, June, than the previous period. But look, fundamentally, volumes are pretty consistent. Average daily volume, average weekly volume, has now been pretty consistent for over twelve months in terms of the raw number. We have picked up new business, which has helped mitigate the majority, of those decreases, but there's around 4%- 4.5% market share gains that have offset the same customer decline. The second one I call out is just that average price per item, NZD 8.50. Reality is that's remarkably cheap.
You know, when you look around express markets globally, if you look at our near neighbors in Australia, AUD 8.50 per item is a really cheap rate. And there's a number of things that Aaron will talk about in terms of our ability to get pricing and billing systems to a level where we can charge for the right amount of effort across our business. Always bearing in mind the competitive pressures that we will have. Again, the team have done a great job in terms of average courier pay. So these are the courier contractors that we have within the business, NZD 507 a day. We really take pride on making sure the contractors within the business are sustainable and are earning good incomes.
I think when you look at the fleet vacancies number down on the bottom right corner, that's testament to that, right? If you look through the fleets, less than 1% vacancies. If we have turnover of a driver, we might put a wage driver in until the next contractor comes in, but the reality is there are just no vacancies throughout those fleets. So there's been good demand, and I think what we are paying those couriers is retaining the people in the fleet or attracting new ones. A couple of the other ones call out, local deliveries represent 29% of the total volume going through the network businesses. We will talk a bit more around local pricing and what we think we need to do with local rates, because the average local price in our business is circa NZD 3 per item.
The landscape there, as Aaron will talk about, has changed pretty dramatically. So across New Zealand Express package, in the first half, volumes, including Temu, so including a large e-commerce customer that we had, were up 1.6%. In the second half, down 1.9%, for the year, essentially flat. But what should be recognized is Temu contributed to around 1.6% of the FY 2024 volume. So really, pretty consistent when you take Temu out of H1, across H1, H2, and for the full year. As I say, a pretty flat year, helped by those market share gains. In a couple of other areas of the express package business, so outside of the network business, the Woolworths contract fully exited from September.
So that was the home delivery of groceries for Woolworths through our Messenger Services business, which has phased itself out of the business over the last year and a half. By September, that was fully gone. As I said earlier, Big Chill Transport, just those same customer volumes, which are down 8%, and then growth in the oversized New Zealand courier revenue, and now running at a run rate of around 10 million per annum. In Australia, quite stark contrast, and if we think about the, you know, the economic backdrop that we talked about earlier, but also the fact that we have invested quite heavily in new business teams, and are knocking on the door of prospective customers trying to bring them into the Allied fold. So those volumes in the first half, up 13%, second half, up 9%.
They're pushed by bigger and bigger online shopping days, Black Friday, Cyber Monday, end of finance, short year sales, and those types of events, giving overall volume up 11%. So that's out of some existing customers, where we've got a greater share of wallet and a lot of new business activity. Those new systems help us deal with that volume at the busiest time of year, so we will look forward this year when we hit peak, having two really good quality systems in the big hubs of Victoria and Sydney. There's a good prospect pipeline. The team are working really well on the prospects that we can keep bringing into the business. And as I say, the footprint we have across the Allied network would comfortably allow us to double the business without needing extra properties.
So we're really happy with the capacity that we have. You're aware a little bit in terms of those extra lease costs and depreciation, but when you look at the growth profile of the business, we're confident that we will fill that over time. We move over to Information Management, pretty flat. Flat top line, flat bottom line. You know, a game of two halves. There are a number of positive parts to the revenue. So document storage and activity volume is still growing, mainly through market share and a bit of pricing. Digital revenue, you know, the trend for digitization, our Horizon Two business, has remained strong over many years. 17% growth over the last year. And then a few of the drags on the division this year, paper pricing, below by NZD 2.5 million.
So pretty close to the 2.7 that we estimated earlier in the year. So that's prices for the waste paper that we collect through document destruction and sell off to brokers. We also lapped a very large non-recurring digital project that we had in New Zealand, which was around NZD 7 million in FY 2023, which didn't occur again, obviously, given the one-off nature in FY 2024. Medical waste revenue was down 10%, and that was predominantly to do with a lack of capacity in Victoria. We had been waiting for the license to operate the Victorian facility that we had invested in. It finally came through, I think it was the seventh of May. I think that date's embedded in my memory, along with the apology from EPA for the delay in the license. But we're happily up and running now.
Facility's working well, happy with the efficiency that we're getting out of it. We'll talk just a bit about the strategy in the year to come. So I'll firstly hand over to Aaron, who looks after the Express Package business here in New Zealand, just to talk through the three horizons of growth.
Thanks, Mark, and good morning, everybody. The three horizons of growth for Express Package, Horizon One being B2B. We're going to focus on profitable market share gains and continue to ensure the service is a differentiator for our customers, and we will assess the local pricing and infrastructure costs. Horizon Two is our B2C component. Last year in November, we acquired First Global, which is also gonna provide us with a cross-border e-commerce capability. And we understand that we're going to have to maintain high levels of service to be able to command a premium price for those deliveries. Horizon Three is our oversized opportunity. New Zealand will scale in this particular area. Allied Express and Australia have a new business team that are working on market share gains, and we will assess any bolt-on M&A opportunities in Australia. Project Evolve.
Project Evolve is a multi-year investment in modernizing pricing, courier pay, and billing systems that will support the New Zealand Express Package business. It's designed to basically bring our pricing for effort to the fore, and for us to be able to differentiate in pricing for local items, and based on distance and size and complexity, and an efficient means for us remunerating our contractors and handling billing processes for our customers. The expected implementation costs will be NZD 5 million in FY 2025 and NZD 5 million in FY 2026, and we expect it to be paid back in 4.5 years. It's important to note, under the current accounting standards, this will be treated as an expense. Local network courier pricing for this package.
The background here is, that for the last 30+ years, the pricing structure hasn't changed. It's a flat rate per item for 25 kg up to 0.125 m³ . Local pricing hasn't kept pace with congestion, geographical spread, or the size of the average item traveling in the network. Yet, city boundaries have grown. In 1996, Auckland was about 65 km in size, and now it traverses about 120 km. And with that, increased infrastructure is required. So effectively, we have more depots, more shuttle trucks, and more people to service that local solution.
Moving forward, we need to put in a charge-based system that recognizes distance, size, and complexity, to maintain margin and remunerate our couriers for effort, and ensure that pricing reflects the effort and resources required to deliver locally, especially in New Zealand's larger cities. I think the sobering thought on all this is that the pricing in Auckland today for a local item is 1/3 of the cost of what you would pay in Sydney or Melbourne for the equivalent service. I'm going to hand over to Neil for, temperature control and the information management division.
Good morning, everyone. Starting off with Horizon One, probably the most critical development for Big Chill this year will be the new TMS or Transport Management System, which we're calling Big Chill Connect, which went live from July this year. It really moves Big Chill from an environment which was paper-based, labor-intensive, and with very limited customer reporting, to an environment which is fully automated, where shipment data is online and it's transferred in electronically. There's real-time tracking, pricing and automated KPI exception reporting for customers. So from a Horizon One perspective, we see that as quite a critical tool in terms of securing new business. And in that space, Big Chill's really got a first-mover advantage, which we'll look to capitalize on over the next couple of years.
From a Horizon Two perspective, as Mark touched on, their rural courier, 3PL, has done really well. It's profitable from July this year, which is three months ahead of expectation. We've got committed and sort of forecast volumes that will see that site 95% utilized, by the end of FY 2025. So we already have the scope work underway, considering the viability of adding an extra 3PL facility, to continue to scale that business. If the initial feasibility stacks up, then we'll most likely commence that, that build in 2026. Lastly, the Produce Pronto business, which we acquired in late 2021, continues to perform really well, and is well positioned for future growth opportunities.
That business has moved into new facilities in all the main centers in the last year, based off increased customer demand, and they've done really well in securing new business. In Auckland, for example, Produce Pronto moved into a new depot, which is adjacent to Big Chill, which more than doubled their capacity, and we expect that to be, that site to be filled by December of this year. Then moving on to information management. In the current year, stored revenues and margins have improved, we expect that trend to continue into the future. And what will be most critical there is pricing improvement and continuing to secure new business. The availability of warehouse capacity in Australia is far greater, so most of that growth in terms of new business will come in Australia.
And we expect the alignment to be closely linked to digital growth. For example, what I mean by that is that, when we digitize medical administrative records in Australia now, we get the revenue from digitizing those records, but we then also get the storage revenue of storing the boxes in our warehouses after the fact. So it's helping our Horizon One and our Horizon Two revenues, which is great. While storage revenues continue to grow organically, we are starting to see a trend with some customers where activity levels are reducing. So effectively, we're seeing more static storage. But to address that trend, we're looking at, you know, whether greenfield sites outside of the main centers would make sense.
If we, if we position warehouses outside of the main centers, we could potentially leverage cheaper property lease prices, and then we could utilize the Freightways courier network to reposition boxes or tapes back to customers on the odd occasion they actually wanna retrieve records. So, that could be quite an interesting way forward in the future. From a Horizon Two perspective, digital revenues are continuing to scale. TIMG Australia has just recently signed a NZD 15 million scope work for a customer, which will be spread across two years, which will further assist that growth. It's an area that TIMG in Australia are increasingly gaining credibility in the market.
We're seeing more health and government customers across there making longer term commitments via rolling scopes of work, rather than just having one-off project-based work on a piecemeal basis, which is what we saw historically. So that's quite an encouraging trend for that digitalization business. And then lastly, from an H3 perspective, our Stocka business, which is relatively small but is growing quickly, is performing well, meeting unmet customer demands in that e-commerce space, targeting small to medium SMEs. Where customers want a service which is directly linked to our, to our courier service, and so that's going well as well.
And finally, across the waste renewal business, so this is the business where the Horizon One activity, document destruction, actually still growing really strongly. The reality, I think, in both Australia and New Zealand, is that we're number one by market share. It's an area that our competitors aren't necessarily continuing to invest in. And in this business you do have shredders, conveyors, equipment, trucks, and what have you, that you do need to keep investing in to maintain that service. And so what we do find is that certainly in regional areas of Australia, as a good example, our competitors on a number of occasions will come to us and say, "Hey, could you service this area? We're not gonna continue servicing a particular geography." It's allowed that business to continue growing. You know, we push pretty hard to make sure we have the best quality of service in that niche.
We are reliable. It's a good brand presence, and it's a really good customer experience, which scores consistently highly on the NPS scores that we run through document destruction. The strategy there, really, is to continue to make market share gains, to continue to build density, and to look at different pricing policies and systems which enable us to maintain a good margin out of that line of business. The Horizon Two business, medical waste, so we've built this off the back of the fact that we have branch networks around Australia. We have people, trucks, shredders, facilities, sales teams, and so on. And that business grew really quickly through COVID, and COVID peaked at around 26 million in revenue.
It's eased off since then, obviously, with a number of testing centers, vaccination clinics, and just the general amount of medical waste coming off that peak, but really happy with how we are positioned across the eastern seaboard of Aussie. So Victoria, New South Wales, and Queensland are the markets that we choose to play in for medical waste. In New South Wales we have two facilities, which are very efficient, and we're seeing good demand for our services in New South Wales. In Victoria, the facility, as I mentioned earlier, was up and running early May. We think there's a good opportunity for growth there. Already having gained our own facility, we're starting to pick up some market share in Vic, but we're processing the waste at a much more efficient rate.
So previously, we were having to pass it on to a competitor of ours. The processing cost for us now is less than half what it was costing when it was outsourced. But the strategy there, really to grow market share, utilize those facilities, and in Sydney, make sure we're getting the best efficiency out of those two. And Victoria, push as hard as we can to get to the quota that we have for Vic.
The Horizon 3 business is, again, pretty unique. So, you know, as a specialized logistics company, what we really focus on is how we can pick up products which can be taken out of the waste stream, taken out of landfill, and recycled or repurposed. And there are a number of different products that we are targeting there. Packaging materials, which go through SaveBoard, which is roughly 1/3 shareholding Freightways has in a business which takes packaging waste, shreds it, puts it under heat, time, and pressure, and produces a wall board from it, or a ceiling tile, or a RAB board. Targeting the product destruction market. And again, there's a huge amount of product destruction coming out of businesses.
So over in Australia, the likes of Australian Border Force are a key customer for us, where they have contraband and they have products which need to be destroyed and taken out of the market. We are typically the first choice for them. And then, areas like textiles and e-waste, again, sources of waste where the Australian regulations, in particular, are starting to push to say, "These things can't be put into landfill. You have to make sure they are diverted away from a landfill stream, and dealt with appropriately." And again, these are the areas that we're positioning ourselves with the fleets we have, the equipment, and the teams that we have across Australia. Just touch briefly on M&A. The acquisition strategy and the investment criteria for Freightways really hasn't changed too much over the years.
We pride ourselves on being pretty well-targeted in terms of the businesses we might look to acquire. We make sure they're aligned with strategy and, importantly, the culture. I think it's important that if we pick up a business, we're either folding it in, or if it is the beachhead for us in one of the lines of activity that we are in, that that culture is well-aligned with what we're doing here at Freightways. The disciplined approach mean that every year we would look at anywhere between fifty and a hundred businesses, and we would typically buy anywhere from one to two to three. So we say no to a hell of a lot more than we say yes to, but again, it's making sure that they fit that criteria that we have.
FY 2024, there was two small businesses that we picked up. First Global, which we've rebranded Freightways Global, and as Aaron talked about a little bit earlier, it's effectively an e-commerce freight forwarder. So what it does is taps into global e-commerce volumes coming into New Zealand, that we can push out and deliver through our various courier fleets. We see that as an important capability to have, to be able to attract that business. Again, we're pretty disciplined on the type of freight that we bring through there, so it's got to be at the right margin, it's got to feed our business and actually deliver a margin through the business, and also pay the couriers the right amount of money for delivery.
The second small business that we picked up was a company called OnSend, which is involved in oversized freight. So really complementary to the Kiwi oversized business we have. And what we've done is integrate that in with the Kiwi oversized business. It means we'll have a revenue run rate of around 10 million per annum that we'll kick off the year with, and we will aim to keep growing that segment. So these are typically items anywhere between 25 kg and 50 kg that can be handled through the networks we have for express package, but often with a dedicated courier delivering a slightly bigger item. We've built relationships with a large number of Australian targets we've got around Australia. We've got to know the market, understand the various niches, and the various players that we might be interested in.
I think we're also starting to see just some businesses are a little bit more stressed across New Zealand and Australia, given the backdrop, and sometimes that brings opportunities at good value. So it's an observation we would make, that through the transport sector in New Zealand and Australia, there are a number of businesses not quite traveling as well as Freightways. The investments we've made there in this year have been pretty modest in terms of M&A. Both First Global and OnSend are pretty modest investments. Didn't come with big checks, and instead, we had put some of that CapEx into those automated systems that we've got in Sydney and Melbourne. Outlook. My best Adrian Orr impression, or thinking about what might be happening here.
Some good news, obviously, with the first rate cut that's occurred in New Zealand. Look, the reality is that economic climate's still tough. I don't think July has got any better than what we had seen in the rest of the year. We're still seeing a consistent trend of those same customer volumes still being down around that 5%. And as I said earlier, that's now starting to lap a period where they might have been down kind of 1% to 2% in the previous period. So pretty tough for businesses out there. You know, there's a number of our customers that will be acquired by other customers. And it's just that typical thing that you see in recessionary periods. As I say, many of us here have seen that two, if not three times previously.
So we think the first half of the year remains pretty subdued. We don't really see a material worsening or improvement in that volume profile. We think that'll stay pretty consistent in the first half of this year, and we're hopeful that we get a little bit of organic growth, a little bit of same customer growth in the second half of the year. And perhaps by that stage, there have been a few more rate cuts. Maybe there's a bit more confidence in the New Zealand economy. Australia. Look, we're in a slightly more buoyant position where we sit today, but I think in Australia, it's been made pretty clear that there's probably no rate cuts prior to Christmas. And so again, I think Australia has lagged New Zealand probably in terms of rates going up and then rates coming down.
We don't expect a massive improvement in terms of same customer volume either. We'll continue to target new business opportunities and look for our growth in those particular avenues. Our focus is still on restoring margins, so there's a bit of a rolling maul of initiatives that we have through the business. Many of those are small. You know, the reality is, when you run good lean businesses, there aren't big bang opportunities where you take a massive amount of cost out of a business, but there are a whole lot of smaller initiatives that we keep working through to make sure we have got a highly tuned network, and there's a whole range of those occurring, particularly in New Zealand, where that climate is a little bit tougher. We expect some positive contribution from Victoria and from Big Chill and Ruakura.
So where they were both a bit of a drag on profit in FY 2024, we expect some positive contribution from both of those in the coming year. Full year CapEx will be pretty steady for us. It was around NZD 35 million last year. We expect it to be the same this year, and again, it's tools of the trade. In some cases, replacing assets, and in some cases, positioning for growth. It's trucks, it's IT equipment, and a little bit of mechanization for the New Zealand Express Package businesses. Darren said earlier, there'll be around NZD 5 million that we spend in OpEx, that in days gone by, might have been treated as CapEx. So around NZD 5 million, both this year and next, in billing systems, which help us bill in a much, much more flexible way and do it more efficiently.
And what we expect to see is some of the pricing benefits from FY 2026 and onwards. We'll keep assessing those M&A opportunities. We'll stay close to them, but our commitment is we'll stay disciplined on whatever we choose to act on. So again, it's been a pretty steady pipeline for quite some period. You know, at some point there will be a meeting of the right fit for Freightways, hitting all the criteria we're after and hitting the right value. That brings the presentation to a close here. I'll hand back to Kiara, and there'll be the opportunity to take a few questions.
Thank you. We'll now begin the Q&A session. As a reminder, if you'd like to ask a question, please select the Raise Hand button at the bottom of your Zoom screen to be placed in the virtual queue. After your name is announced, please unmute yourself, state your name, company, and ask your question. Our first question comes from Grant Lowe. Grant, please go ahead and ask your question.
Oh, hi, team. It's yeah, Grant Lowe from Jarden. Just regarding the EP pricing versus labor increase, what are you thinking for the coming year in terms of that gap between the two?
Good day, Grant. Yes, so we communicated the upgrade, oh, around about May, yeah, I think, Aaron?
Yeah.
Through to our customers. Look, we're expecting to net about 5% out of that upgrade across the board. So we went at a headline rate around six and a half. You have some customers that are contracted, you have some where you're locked into particular mechanisms, some that you negotiate with, etc . But look, we think we'll net about 5% out of that. Been pretty happy really with the job that the team have done in explaining the cost increases. Probably the other part of the question that you haven't asked, but I think you probably would jump into, so I'll answer that now, is that we expect the labor cost increase in our business this year to be around 3.5%. So look, there certainly are other cost increases in the business.
You know, there's a number of costs around aviation, for example. Some properties will have higher market rent adjustments, those types of things, but labor is a pretty big proxy, and it's a pretty big cost for Freightways. So we think we can hold that at 3.5% in the current labor market. There'll be a few other pieces, rates, insurance, aviation, but we think we'll net 5% out of that price increase.
Thank you. Our next question comes from Andy. Andy, if you'd like to go ahead and ask your question.
Thank you, and good morning, guys. I'll have a couple of questions, if that's all right, please. The first of which is around-
Yes.
Just the outlook commentary. So there's a few moving parts in here, Mark, and I recognize that you don't provide guidance, but how should we view your commentary from a broader profit growth perspective?
Look, Andy, we acknowledge it is still, w e're not out of the woods. She's still pretty tough times, but we expect to grow profit in the coming year. And there'll be contributions to that from that Big Chill and the medical waste piece, so we expect to grow some profit. We, those were a bit of a drag on the business. And look, a lot of it will be based around that organic piece, but yeah, certainly from a Freightways point of view, we expect profits to improve. We're making effort to increase margin. The level of revenue growth we have, I guess, is the big unknown in relation to the New Zealand economy and to a lesser extent, Australia. But yeah, we expect to be sitting here in a year's time in a better position than we were now.
Good, good stuff. But second question, just around margin restoration, as you put it, in express package. I guess recovery is another word for restoration. The commentary suggests that we can see that expand, or at least the margins expands in FY 2025 and FY 2026. What's the broader impact of Project Evolve in terms of your thoughts around restoration? Does that get in the way? Can we expand margins or recover margins in excess of those Project Evolve costs over the next couple of years?
Yeah. So, it's not in this year, because we'll be building the system. FY 2026, we think we start to get some of the benefits from that system, but it is a multi-year implementation for us, so that cost is just staged over a number of years. FY 2026, we think we will get some of the benefit from some of the pricing strategies, and then we think we get the full benefit from FY 2027 onwards.
And just to put a little bit more color around that for you, as Aaron talked about earlier, you know, when you look at Auckland, and you're charging an average of NZD 3, and it could be from Manukau to Manukau, or it could be Pukekohe to Wellsford, the systems that we have had, and in fact, the way most express package operators have priced local deliveries, has typically been this flat fee. And there's clearly a much higher cost associated with getting an item from Pukekohe up to Orewa, than there is going from, you know, Penrose to Penrose. The other thing that their pricing's never taken account of, has been the size of the item. So how much real estate does it take up in the courier's van?
And so what we'd like to get to is a point where we can charge a higher price, because it's a bigger item going a greater distance, as opposed to, you know, a smaller item traveling within a depot area. And so the big benefits from that, we think we will really achieve from FY 2027 onwards. And we think those benefits can be in the region of the cost we're spending on Evolve in a given year. So we think there's around a NZD 5 million per annum prize in that local pricing area, per annum.
But in the meantime, as we're expensing the cost of Project Evolve, we can still expand or recover margins, so improve margins year on year, because of the differential between GRI, you know, broader pricing initiatives and costs. So margins go up over the next couple of years?
So what we're calling out with Evolve, I guess, is, in years gone by, this would've been a NZD 10 million CapEx that we would've done, and appreciated NZD 1 million a year over 10 years. We're just calling that out, because it'll be a couple of one-off lumps of cost in these two years.
Just remember that margins for EP in Australia are lower than New Zealand, so as we grow Australia, it will dilute the overall margin.
Sure. Thanks, guys.
Thank you. Our next question comes from Wade. Wade, if you'd like to go ahead and unmute yourself to ask your question.
Hi, guys, Wade from Craigs. Just look, just following on, the comments you're making about sort of pricing opportunities, from Project Evolve. Where do you see the, the competitor response here? Because if, you know, if you suddenly have this ability to, to price things better. Like you've, you know, like you've done in the past, but NZ Post doesn't, you know, can you really increase your prices for some of these sort of bread and butter, you know, jobs, moving things intra-city?
Yeah. Look, it's a really good point, Wade. I fundamentally think the competitive environment is probably the best it's ever been. You know, geez, been in this business 29 years. 29 years ago, we had about 10 national competitors. You know, each of the airlines had their own courier company, XP and Northern, and, you know, it went on, and on, and on. As I said, the stresses of the last year or so have certainly put pressure on businesses, so you've got another competitor that's disappeared from the landscape. The reality is, we operate as efficiently as anybody, and so if you struggle to make money at NZD 3 for a local item, you can dead set guarantee that your competitors are losing money on that.
I think, you know, with a couple of the competitors that we still have in the market, the reality is, they would probably like to be doing better. I think if you look at the financials for them, you know, they're pretty grim, looks pretty tough. And all we're doing is targeting the areas that are probably either negative margin or really low margin. So look, we're gonna play the game we're playing. We'll be cognizant. We don't wanna lose volume. So you're right, it'll be a reality check as to how far you can go. Can we get to where we really have the ambition to get to, or do we just have to do it in a very staged way? But I think we've got a good track record.
If you look at that pricing for effort, for residential items, started at zero. You know, we're up in the dollar sixties now as a surcharge per item. And we just did it in a really careful, staged way to make sure we didn't lose volume, that we helped customers understand the true cost. Yeah, I think customers certainly understand. I think our competitors are probably in a worse financial position than we are, and should have every motivation to, you know, to make sure they're recovering their costs. But I guess that's one that we'll wait and see.
Just while we're on Project Evolve, yeah, you know, is it, is there a cost side to this as well? Or is it all about, you know, enabling pricing decisions?
Yeah, there is a cost out as well. So the pricing and ticketing system we have currently is really more from what we had for prepaid tickets, which was a big part of the courier landscape in New Zealand for forever, really. And that system really was designed to deal with prepaid tickets, so we're moving out of that. It has been. You know, it's pretty inefficient way of billing people. But we do expect that we pick up some efficiency benefits as well as pricing.
Okay. Just following on from some of the comments you made, about, sort of, you know, the drags from Med-X and, the Big Chill facility, you know, as they're ramping up or, you know, or prior to the Med-X, facility coming on. Are you able to give us, an indication of what sort of the, the delta is between FY 2024 and FY 2025 in terms of, you know, how much it sort of cost you last year versus, you know, what you're expecting to get this year out of it?
I can give you a bit of a feel of what it cost us last year. And we won't sort of break down what we expect to get for those particular facilities. We won't go that granular for next year. But over the past year, Ruakura cost us about NZD 3 million. So as Stephan talked about, it's about a NZD 5 million annual cost. There was obviously a bit of revenue that built through that period. So the net cost to us was negative NZD 3 million for Ruakura, and for the Med-X facility, it's in the region of around NZD 1.5 million. We got operating at the tail end of the year. Got a bit of benefit out of that.
Yeah, so combined, you're probably NZD 4-NZD 4.5 million of negative cost that we wouldn't expect in the coming year and expect to do a little bit better than that in each business. One of the things just to note with Ruakura, so what the guys have done is a great deal with storage. Got a lot of volume in there from a storage point of view, but customer demand or consumer demand means we're not picking and packing at the same rate that we might have done in normal times. So really happy with utilization. It gets up, so you can start to cover your power bill and your rent bill, but a lower level of activity coming out of there, just because consumers aren't demanding as much of those products in the current environment.
Okay, and finally for me, just in terms of Big Chill and the sort of the run rate between the first half and the second half, you know, they were both down, but, you know, did the environment, was it sort of stable through the second half, or was there a further deterioration?
No, stable. Really stable things. I mean, in some ways, as Stephan said, it sort of feels like we're repeating a lot of what we talked about at the half year, but it's just the reality is the climate really has stayed pretty stable. You know, market share gains have stayed stable. Same customer activity is really not materially changed too much anywhere. Has been pretty steady as she goes. It was like the All Blacks in the second half against Argentina, right? It was draw.
Okay, cool. Thank you. That's all from me.
Our next question comes from Marcus. Marcus, if you'd like to ask your question.
Good morning. Just a couple. I just wondered if you could give us a little bit more color around the transport EBIT movement during the year. So, you know, it'd be great to get, you know, some sort of overall directional illustrations, you know, within the big buckets, you know, NZ Package, Big Chill, Allied. So overall, obviously it was up a little, but yeah, could you break that down to any great degree?
Yeah, so look, Allied grew EBIT through the year, and New Zealand Couriers grew their EBIT through the year. The biggest sort of backsteps were in and around Big Chill, because of that same customer volume and Ruakura. So the margin went backwards, and EBITA dollars went backwards. The impact of Woolworths moving out of the messenger services business, so you had a decrease there, NZD 2 million. The fixed line haul we have for the New Zealand Express Package businesses, again, went backwards around about NZD 1.5 million, due to the cost pressures that you had on there and not a lot of revenue growth. So they were the key ones within Express Package.
Better, better in Australia, better for New Zealand Couriers, less for messenger services with the Countdown contract, less for Big Chill, and less for Parceline , which is our line haul network that we operate. In information management, better for the two storage businesses and a bit worse across that medical waste piece.
Okay, thank you. And then just into Allied, you know, you've commented on the volume increase, I think it was 11% for the year. So, you know, the EBIT improvement obviously less than that, with margins coming down, and then you're stepping into this year, you've obviously got some increased costs. So, you know, is the right assumption for Allied relatively flat at the EBIT line, heading into 2025?
Yeah, they look, roughly, we think we'll get a little bit of growth, Marcus, but dependent a little bit on the Aussie economy. But yeah, that's right. So a bit of extra cost coming in for that extra capacity. We think we'll keep up a bit of momentum with the new business wins. Yeah, so flat to a slight increase.
And then, Mark, you know, just into New Zealand, could you talk a little bit about, you know, the Temu situation? It doesn't sound like you're doing any of that activity at the moment, you know, is that obviously a conscious decision to step away from that, and for what reason? Maybe just a little bit more color.
Y eah, I'll get Aaron to talk through that, Marcus. He's been pretty close to it.
Yeah, we did a ton of work for about six months, back end of last year, and we found that, when we actually wanted some commitment from them in terms of volume, so we could build infrastructure to match the volume, there was a requirement for the associated price to be within our limits, or acceptable limits. They didn't really fancy that, so they reduced their volume with us and went in another direction. In retrospect, it really was only providing contractor pay. There was no real margin in it. It was a bit of a sugar rush, so we've stepped away from it and don't have any Temu in the business. I think it's paid dividends moving forward because it hasn't clouded what we're doing.
It's making sure that we're clear on what we're doing and standing on our own two feet with our current business and focusing on our current customers and growing the service standard for them.
Yeah. But yeah, spot on. I think, you know, reality is some of that that's probably amongst the cheapest e-com stuff out there, you know, and it probably needs another two bucks.
Yeah.
Probably, for us to get real keen and interested. But there's a whole lot of other ones that we are working on, so we're more attracted to those where they probably want a higher quality delivery, and the price can represent that.
And so, yeah, as we step into this year on new customers, obviously there's no plans to the Temu volume. So, you know, yeah, what sort of, yeah, net gains are you seeing at the moment, and where are they coming from? As obviously, NZ Post is, you know, going through the period of integration with PBT and got a brand new super site. So yeah, could you talk a little bit about whether that's affecting the ability to win customers?
Yeah, look again, get Aaron just to talk through what we're seeing on the ground, and I'll add a little bit to that.
Look, as with every opportunity when an acquisition occurs, there's no guarantees that all the customers will proceed to go to the business that's allegedly purchased their business. So, we are certainly seeing opportunities within the market to attract some of the PBT work into Freightways and taking care of that. There's also opportunities on the e-commerce site that our team are working with across the border in Australia, and making the most of those advantages as well. So there is plenty of activity. That's the good news.
Pretty consistent pipelines, Marcus. I think over the last few years, that pipeline has consistently been at the same level, so we're reasonably optimistic that we keep making gains in terms of that. As Aaron said, the PBT thing is, you know, that's disruptive, right? It's disruptive for PBT, but it'll be disruptive for Post, no doubt, as well. You know, Aramex probably had some issues around courier retention, just from what we see. So I think, you know, pretty high turnover. When you have high turnover of couriers, your service is not so great. Customers, you know, kind of live with that experience for only so long. So look, we're pretty optimistic about the opportunities we have off the back of a real quality service to keep picking up market share in the year ahead.
Okay. And then just the final question. You know, you've obviously flagged the incremental NZD 5 million worth of OpEx. You know, and you've got the other big driver, you know, in terms of margin, is obviously the improvement, you know, with regard to Big Chill and Med-X. But it sort of feels like those numbers are quite similar. You know, one's a - 5, the other one's a + 5. So, you know, does that, broadly speaking, leave the business, you know, with the reliance on sort of the price increase list, the operating cost is the key driver of margin improvement in the year coming, or am I misjudging it?
Oh.
The NZD 5,000,000.
Yeah. No, I think you misjudge it. Yeah, I think you're being harsh on us there. No, we think that, yes, Evolve will be NZD 5 million. We think we will grow the profitability of all of the businesses over this year. So we think those pricing strategies, market share, some of the efficiency initiatives, which, you know, many of them, as I said, is just a rolling maul of small things that we can do through each business. We think that we'll still deliver improved EBIT, and then you'll have the five million come off for Evolve this year and next year. Yeah, we still expect that when we're sitting here in a year's time, having expensed five million of Evolve, that we'll still have a higher level of EBITDA, as we think of it, that key operating metric for us.
Is the five million from Evolve, what line item is it gonna be booked under? It's not amortization, is it?
Which one, sorry?
NZD 5 million of Evolve. Oh, that's just, IT costs.
Okay, thank you.
Very good. I think, and I think with that, we're probably at time. So look, thanks very much everyone for attending. As I say, just to summarize, I think pretty resilient effort in the type of economy that we've been operating here. Really proud of the team of people that we have throughout New Zealand and Australia that have helped deliver efficiently, reliably for customers, and I think helped with what is a pretty good result in a pretty tough time. Thanks, everyone, and I'm sure we'll see some of you through the week. Cheers.
Thank you.