Finnish postal group Posti will focus on distribution and delivery services in its home market as well as logistics services in Russia and the Baltic states, and target better profits under a new three-year strategy.
The group is currently in the midst of a major transformation programme which has seen it dispose of small freight operations in Scandinavia. In addition, its financial results have been weak. In 2014, revenues dropped by 6% to €1.86 billion and operating profits declined to just €5.8 million from €9.9 million the previous year. The operating result before non-recurring items improved slightly to €50.8 million when excluding €45 million worth of restructuring costs.
The group’s Board of Directors has now specified the company's strategic goals for 2015 – 2017 which are targeted at renewing Posti into a “customer-oriented, first-class, profitable postal and logistics service company” while improving profitability. Overall, Posti aims to be the number one choice for its customers as the provider of postal and logistics services in 2018.
Explaining the background to the new strategy, Posti forecast that changes taking place in the postal sector will become more rapid in the next few years when letter and publication distribution volumes fall as a result of electronic communications. “Digitalisation will change Posti's current business models and create new services and growth opportunities,” it predicted.
At the same time, competition will become more fierce in postal and logistics services, and the role of e-commerce will become more prominent. The best customer experience, multi-channel service, the capability to reform and competent personnel are the most important success factors, according to the group.
Heikki Malinen, President and CEO of Posti Group, said that in the new strategy the group's postal and logistics operations will focus on Finland, Russia and the Baltic countries. “We are Finland's largest postal and logistics company with the broadest service range and network,” he emphasised.
In financial terms, Posti said it needs to renew its business model in order to secure its profitability, which is currently “not at the desired level”. Malinen said: “For profitability, we must be able to be one step ahead of the transformation of the postal industry. Through renewal, we ensure sufficient profit performance.”
The key financial targets are an operating profit margin of at least 5%, return on invested capital of at least 10%, and a target of more than 10% of net sales coming from new business areas in 2018.
In particular, Posti wants to make its logistics and domestic freight business “clearly profitable” and to speed up the renewal in postal services, due to the dramatic decline in postal volumes. Efficiency and productivity are also improved by utilising new technology and increasing automation.
Outlining its strategic focus areas for 2015 – 2017, Posti said it will defend the distribution business of publications and direct marketing by extending the product lifecycle so that it is as long as possible. “We will shape our capacity with the aim of maintaining good cost competitiveness and service capability when letter and publication volumes are decreasing”.
In addition, Posti is “Finland's leading logistics service provider in parcel, warehouse and transport businesses and a major logistics operator in Russia. We create solutions that enable the online shopping of goods”. For example, the group will look for synergy benefits from new growing markets such as home services, meal deliveries and food logistics that will make use of its nationwide distribution network.
Sanna Ahonen, Senior Vice President, Strategy & Development, explained that Posti wants to develop multi-channel digital services and other services to meet customers' changing needs. Although letter and publication delivery volumes will decrease by some 10%, the market for home services is growing. For example, the need for home services, i.e. meal and home help services, is constantly growing as the population is ageing. In addition, a new growth area and synergy opportunity is offered by food logistics.
“Posti holds a key position in developing home services, because people trust in Posti and we visit the door of every Finn five times a week,” Ahonen said. “During this strategy period, Posti will expand its operations to temperature-controlled transports, including foodstuffs. Food logistics is a logical growth target, which complements Posti's logistics service portfolio and in part supports the growth targets of our company.”
In parcel services, Posti’s strategy is to act as an enabler of online shopping for Finnish companies and consumers in a situation where online shopping is internationalising at a quick pace. “We want to be the number one choice of consumers and a strong partner for online retailers. Quality and speed of delivery are important for consumers. In addition, new information system solutions bring efficiency to the delivery chain, speed up capital circulation among online retailers and support the growth of online shopping,” Ahonen added.
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