Full Year Results to 30 June 2024 and Final Dividend

FULL YEAR REVIEW From the Chairman and Chief Executive Officer Going the extra mile pays off In what was a challenging year for many businesses, as both the New Zealand and Australian economies slowed down, we are pleased with a resilient result despite lower customer activity – particularly across Express Package and Temperature Controlled transport. The reality is that it has been a tough year for our customers. The declining macroeconomic environment meant consumers bought less on the back of higher interest rates and living costs. However, our ability to win market share from strong service levels has been a critical factor in mitigating the recession we experienced in New Zealand, which means our businesses have performed well in these tough times. Our diversification also helped. Being less reliant on solely the New Zealand economy and with specialised logistics services spanning several different sectors, including Waste Renewal and Information Management, gave us resilience and opportunities to grow. Overall, operating revenue showed good growth, increasing by 7.8% from last year on the back of solid performances from Allied Express and New Zealand Couriers. Earnings before interest and tax was up 1.8%, with net profit after tax down by 5.8% principally because of a higher interest expense. One macroeconomic factor we were pleased to see reverse was the availability of quality labour in both markets. In recent years, the tight market has made it challenging to recover the total increase in labour costs. But since the later half of 2023, we’ve seen more job applicants and a lower turnover rate in our depots and drivers' network. This trend will help us better manage our margins with less pressure on wage rates. Keeping our customers moving to a better place The year saw activity from our existing customers reduce by about 5% in New Zealand and a slightly higher rate in Temperature Controlled transport. However, we were able to mitigate a significant amount of that loss through new business gained by our sales and account management teams. Winning new customers through strong service levels and relationships that customers valued made a considerable difference and strengthened our positions in various niches in which we operate. These wins enabled us to keep our overall volume at a similar level to last year and mitigate the worst impacts of the New Zealand recession. Resilience in a quieter market In quieter times, the key to the Express Package businesses is to maintain a largely variable cost structure. A number of our costs flex up or down with an increase or decrease in customer activity. This makes our network courier and linehaul business resilient in challenging times and, in the context of our portfolio of businesses, helps us effectively balance our risks and exposures. The hard yards we have put in over recent years to build courier remuneration meant our contractors were well paid for their work, and we were insulated against falling volumes. As it happened, item volumes remained largely constant, and our fleet size remained similar to last year with high service levels. In fact, New Zealand Couriers recorded their highest-ever Net Promoter Score this year. In Australia, our Allied Express business’s second year was again characterised by healthy revenue growth. The automation sortation systems we have implemented in NSW and Victoria, mean we now have one of the best freight sorting automation in the country for big and bulky freight, backed by loyal business relationships. These new facilities in Sydney and Melbourne will enable Allied Express to pick-up, process, and deliver greater quantities with better efficiency. We can now move freight through the depots much more quickly, weighing, cubing and measuring every single item, reducing manual handling and the likelihood of damage. We’ve also increased the capacity for growth across Allied Express through larger depots that give us high-quality facilities across the five Australian states. We’ve complemented that increase in capacity by introducing sales capability in Australia to maximise the opportunities from Allied's service proposition. Business Mail Despite structural decline in the wider physical mail market in New Zealand, DX Mail have continued to expand their network in FY24 by adding new postie runs in Auckland, Waikato and Wellington to meet the increase in volume experienced during the year. This additional volume combined with cost efficiencies achieved through the new automated letter sortation systems resulted in a strong year-on-year improvement for DX Mail. Temperature Controlled was subdued It’s been a tougher year for the temperature-controlled market as consumers switched down their food choices, affecting demand for higher-grade, chilled, and frozen food. Same-customer volumes were down about 8%. The Big Chill network is intrinsically fixed cost because the business owns the trucks, leases the facilities, and employs the team – meaning the impacts are higher when volumes drop. Conversely, we can leverage that model quickly and restore margins when volumes return. In the meantime, we have continued to invest. Our Big Chill facility in Ruakura is now open, offering us new capacity to meet the demand for temperature-controlled logistics and expand our nationwide delivery capability. The 13,000sqm 3PL cold store facility brings to ten the number of depots in the nationwide network, increasing our links to the Port of Tauranga, the Waikato and the Bay of Plenty, and our same-day and overnight services to Auckland. Despite the sector challenges, utilisation at Ruakura has built up nicely, enabling us to achieve break-even by the end of the year. While the pick/ pack activity level is down from what we anticipated because of consumer demand, we are ahead of our forecasts in storage. We’re confident inventory turnover will pick up when the economy rebounds. Meanwhile, our new ProducePronto facility in Auckland enables us to grow our temperature-controlled, same-day and 4PL offering in the convenience food markets. We’ve also increased capacity in Wellington and Christchurch to make space for growth. ProducePronto focuses on convenience stores at the moment, but we are also looking at other opportunities for time-sensitive delivery of frozen and chilled food, at places that need on-time, reliable deliveries each day, such as fast food chains and cafes. Good growth in our horizons Our Information Management business is a steady and consistent asset to own in tough times. Earnings and revenue streams remain resilient because, by document storage's very nature, things remain stable. This year we've also seen good digital growth again, with revenue up 18% in Australia on the back of greater demand for scanning, lifting and reforming data. The team have strong forward future commitments which will ensure this growth continues into next year and beyond. Stocka is one of our third horizon businesses that has gone from strength to strength this year. Targeted at an under-served niche, this brand works to supply storage and pick/ pack services to small and mid-sized eCommerce businesses with small packages to ship into our courier network. While only small at this stage, we expect to be able to use any spare document storage capacity to provide this service to customers in New Zealand and, i $3m n the future, Australia. A mixed year for Waste Renewal Good market share and an ongoing investment in the right equipment has seen our Waste Renewal businesses continue to do well, particularly with document destruction. While we have supposedly been moving towards an increasingly paperless world since the late 1970s, our teams have been gaining market share year-on-year for the last decade. By contrast, our Med-X team, who handle medical waste, had a tough year as we suffered delays in getting regulatory approval for our Victoria waste treatment facility. Now that we have received it, we are confident we can improve our processing efficiency and grow our customer base. Waste Renewal is an area of the Group where we have a lot of third horizon activity, and our teams have worked hard all year to find new products that align with our pick-up, process and deliver philosophy. Textile recycling and e-destruction have performed well this year, enabling us to keep fabrics and computer parts out of landfill. Our saveBOARD operations are also running in Sydney and New Zealand and slowly building momentum. Sustainable and feasible We have been TOITŪ certified for ten years now, and we remain committed to reducing our emissions across Scope 1, 2 and 3. We will release our Climate-related Disclosures ahead of our Annual Shareholders Meeting. This year, our Climate-related Disclosures will include emissions reporting for Allied Express for the first time. We have reviewed our Sustainable Development Goals (SDGs) materiality, and decided to reduce our priority SDGs to four to allow for a stronger focus on the other Goals SDG 13 - Climate Action is a priority, and we have the ambition to transition to alternative fuels through our road and air fleets as and when the technology and infrastructure to do so becomes available and feasible. Capital expenditure steady Debt and gearing remain stable although near the top end of guidance. The range established by our Capital Management policy aims to maintain the company at an investment-grade profile. We remain committed to these guidelines and to preserving our credit profile, while taking into account the merger and acquisition opportunities that can be accretive for shareholders. The current allocation for capital expenditure is approximately 3% of revenue – and we will continue to invest at that level over the year. The major project we are about to start will consolidate how we can more flexibly price our services and bill across the Express Package business. The new system will also deliver efficiencies and mitigate billing risks. For example, it will enable us to be more flexible in how we charge for Pricing for Effort and different levels of service. We expect the spend for this project to be staggered over several years with $5m in FY25 and $5m in FY26 and expect we will start to see benefits in FY26, building into FY27. Looking ahead The economic climate has presented challenges on both sides of the Tasman and remains difficult across broad swathes of the economy. In New Zealand we are hopeful that we have seen the worst and see some improvement, supported by lower interest rates, by the second half of FY25. In Australia, the situation is slightly more encouraging currently although the challenges with inflation are comparable. In New Zealand, the market gains in our Express Package businesses, underpinned by the solid returns of our Information Management services highlight the benefits of our diversified approach. Our Temperature Controlled businesses are well positioned for when volumes return, and there is an opportunity at Ruakura to continue to scale should we decide to do so. In Australia, our investment in Allied Express has delivered on our business case expectations. The business has experienced strong revenue growth in the last year and has a new capacity to grow into. Meanwhile, we will continue to develop our third horizon business and to grow our presence in niche markets through 25kg+ courier, same-day temperature-controlled transport, high-value waste opportunities and Stocka. Once again, our board has provided invaluable guidance and strategic input, and we thank them for their contributions. Finally, to our shareholders and customers, thank you for continuing to support us.