New Zealand Post Group Annual Result

New Zealand Post Group Annual Result

27 August 2013

Financial services, courier operation boost New Zealand Post Group operating result

The New Zealand Post Group has achieved a net profit after tax (NPAT) of $121 million in the year ended 30 June 2013, compared to a reported profit in the previous year of $170 million. As occurred last year, a number of one-off non operating items have influenced the reported profit results.

While the NPAT result is down on last year, at an operating level the Group performance improved from $80 million to $111 million (up 41 percent).

The operating performance improvement was driven by a solid financial result from the financial services (Kiwibank) businesses, and growth in the courier segments of the Group. The postal segment however, continues to face an accelerating decline in mail volumes, further highlighting the need for fundamental changes in how services are delivered.

The result in part reflected the first year of the return to full ownership of Express Couriers Limited (ECL) which operates the CourierPost and Pace services. ECL performed well in a highly competitive environment to post an after tax profit of $17 million.

Group Chief Executive Brian Roche said ECL’s performance reaffirmed that express delivery is a core element of the Group’s current and future strategy.

“ECL’s result in a highly competitive market was encouraging. There is significant growth potential in our express delivery business for parcels and time-sensitive documents,” said Mr Roche.

Kiwibank led a strong performance by the Group’s financial services business operations with a 23 percent improvement in after-tax profit of $97 million.

Mr Roche said Kiwibank achieved an increase in market share in a relatively static credit environment. Bad debt expense was improved by the release of several large specific provisions following successful resolution of those debts.

“Our financial services portfolio continues to be a key growth driver for the Group. That growth and Reserve Bank regulatory requirements however create the demand for more capital.

“Kiwibank’s own earnings, planned market issuances and support from the Group will meet those demands in the short-to-medium term. Discussions around the long-term capital support for the Bank are ongoing,” said Mr Roche.

The postal business experienced a fall in revenue of $30 million with the decline in postal volumes accelerating from 6.7 percent to 7.5 percent. There were 63 million fewer items in the postal network compared to the previous period.

Mr Roche said tight cost management enabled the letters business to essentially break even at an operating level, however consistent with global trends the rapid decline in the use of letters as a means of communication is placing increasing pressure on this service. He said that while there continue to be opportunities for the Group’s Mail & Communications business, fundamental change is required in the network to adjust to changing customer preferences and access these opportunities.

“We are implementing strategies such as the reconfiguration of our mail processing network and exploring digital solutions. That is only part of the solution and there remains a pressing need for greater flexibility in the Deed of Understanding with respect to delivery and the retail store network. The desired flexibility is required so we can implement further strategies when necessary and to provide our customers with certainty.

“We continue to face significant challenges in both our traditional letters business and the maintenance of our store network. Change is therefore inevitable as we design and execute on a new service model which allows for a financially sustainable future and an acceptable return on capital,” said Mr Roche.

The one-off adjustment for the impairment of $30.6 million taken against some of the postal assets, including mail processing capacity to be decommissioned, is a further reflection of the necessary action taken to achieve fundamental change.

The Group balance sheet was aided by the retirement of debt utilising the proceeds of the sale of the stake in Datacom (which recognised a gain on sale of $71.1 million) and the sale of properties. The debt retired was raised principally to fund the acquisition of the courier business in 2012.
“The Group remains optimistic and sees opportunities across its business activities especially the financial services and parcel businesses,” said Mr Roche. FY 2013 $m FY 2012 $m
Revenue 1688 1309
Expenditure 1623 1224
EBIT 163 205
NPAT 121 170
Operating NPAT 111 80

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