New Zealand Post today unveiled higher profits for 2013-14 with parcel revenues overtaking lettersfor the first time and claimed its new transformation strategy is starting to pay off.
The state-owned group hailed the improved results as vindication of its five-year ‘Delivering our Future’ strategy, announced last year, which aims to transform the group in responseto falling letter volumes and profit growth opportunities in financial services and parcels.
NZ Post’s group revenues were slightly down at NZ$1,661 million in the year ending June 2014but expenditure dropped significantly to NZ$1,505 million. This pushed operating profits up toNZ$187 million from NZ$163 million the previous year. The group’s underlying net profit, excludingthe previous year’s NZ$72 million gain from the sale of Datacom, rose by 11 per cent to NZ$124million from NZ$111 million.
The improvement was driven by lower structural costs, growth in the parcels and logisticsbusiness, and a steady financial result from Kiwibank.
CEO Brian Roche said the better operating performance was an encouraging validation of NewZealand Post’s strategy so far, as the group starts to rebuild sustainable profitability.Transformation from a traditional postal service business would continue and New Zealand Postexpected to make further progress this year.
Roche said overall, the delivery services (mail and logistics) business had performed wellin 2014 and improved its contribution, in a year that marked a historic shift in revenue mix.
“For the first time in New Zealand Post’s history, revenue from packages and parcels hasexceeded revenue from letters. This marks a significant moment for us and reinforces the need tomake the changes we have embarked upon,” he declared. “We will continue to invest in an integratedparcels, logistics and letters business, move non-corporate retail outlets to a ‘store within astore’ basis and seek parcel growth and e-commerce opportunities as letter volumes drop further.”
NZ Post’s combined mail & logistics revenues dropped back to NZ$713 million in 2013-14,from NZ$767 million the previous year, the group’s annual report showed. But the segment made asmall pre-tax profit of NZ$20 million compared to the previous year’s NZ$31 million loss. A revenuebreakdown was not provided but the company said it now delivers about 690 million mail items and 27million parcels a year while Express Couriers delivers a further 33 million express parcels. NZPost’s domestic letter volumes fell by around 7 per cent to 642 million in 2014 and are forecast todrop to below 500 million a year within three years.
Roche said in a presentation that integration of Express Couriers sales and management teamsinto the group was well advanced. The integration would enable ECL to leverage the postal operator’s worldwide logistics connections and partnerships and generate domestic volume growth.
Meanwhile, the YouShop e-commerce platform, enabling New Zealanders to shop online fromoverseas e-retailers, now has more than 100,000 users. Coverage has been extended from the US toEurope (including the UK) with plans to add China within the next two months.
Financial services and banking revenues rose to NZ$479 million in 2013-14 from NZ$446million the previous year, and Kiwibank generated slightly higher pre-tax profits of NZ$139million. Kiwibank returned a 3 per cent improvement in after-tax profit of NZ$100 million, drivenprimarily by increased interest margins and release of bad debt provisions.
In a significant change in emphasis, Kiwibank has recently been given operationalresponsibility for all corporate retail stores, to further develop and deepen customer servicerelationships.
Roche said overall he was satisfied with progress made during the year against the Group’sstrategy. “The changes we have made are starting to flow through in our financial performance andwe expect further improvements from these changes over time. However, the continuing decline ofletter volumes here and overseas and a highly competitive environment for banking and parcels meanswe cannot afford to take our foot off the accelerator. Our total focus on successful implementationof the strategy will continue in 2015.”
The group announced last month that it wants to sell off the small domestic Australianexpress parcels business Couriers Please, which has some 570 couriers and more than 130 staff.Couriers Please has operations in 12 urban areas, delivering over 10 million parcels a year forsome 40,000 customers.
