Growth in the digital economy & StarTrack acquisition boost Australia Post's income

18 October 2013
  • All customer and community service indicators have exceeded targets.
  • Group profit of $312 million after tax, up 10.9 per cent on last year - the third consecutive year of profit growth under current Future Ready strategy.
  • Growth in online shopping, acquisition of StarTrack and disciplined cost management key drivers of profit growth.
  • Strong performance in non-regulated business produces profit of $648.1 million up 16.7 per cent, with profits from parcels up 29.1 per cent.
  • Regulated mail business losses widen to $218.4 million on the back of another decline of 263 million mail articles (5.4 per cent) on last year.

The non-regulated parcels and retail services businesses continue to be the key driver of both revenues and profit for Australia Post, helping to offset the substantial and accelerating losses in the traditional mail business, Australia Post Managing Director and CEO Ahmed Fahour said following the tabling of the Corporation's 2012/13 Annual Report in Parliament.

In 2012/13 Australia Post achieved a group profit of $312 million after tax - a 10.9 per cent increase on the previous year - and, as a result, will deliver a $244 million dividend to the Australian Government.

"Our parcels business - bolstered by the acquisition last year of the remaining 50 per cent stake in StarTrack - remains the key driver of revenue and profit growth for Australia Post," Mr Fahour said.

Australia Post's parcels business generated $355 million profit in the last financial year, with domestically delivered parcels volume growing by 9.3 per cent fuelling underlying revenue growth of 8.4 per cent1 and with the addition of StarTrack business boosted profit growth to 29.1 per cent in 2013.

Despite a challenging retail market and declining foot traffic, Australia Post's retail business defied trends and grew profit by 12.9 per cent to $200.6 million.

"In 2012/13 we met or exceeded all of our important Community Service Obligations including maintaining the most extensive retail network in the country with 4429 outlets across Australia delivering a range of postal and essential services to communities.

"Furthermore, we have rolled out Australia's largest network of 108 parcel lockers for 24/7 access to online purchased items across the country, reaching 7 million customers within 10 minutes of their homes," Mr Fahour said.

Customer satisfaction with our retail products and services also remained strong with our average customer satisfaction score an extremely high 9.06 out of 10. Demonstrating the resilient, trusted nature of our brand, Australia Post was again ranked the second most reputable brand in the country in the 2013 AMR RepTrak survey.

"Our non-regulated commercial business activities were bolstered by the acquisition of StarTrack and produced a combined profit of $648 million, up from $555 million - an improvement of 16.7 per cent," Mr Fahour said.

"Service performance in our regular parcels business remained strong with 98 per cent of our parcels delivered on-time or early and 99 per cent of our Express Post products being delivered on time."

Mail volumes continued their steep declines in 2012/13 falling by 5.4 per cent. Australia Post now delivers one billion fewer letters per year than we did in 2008 due to the shift by both businesses and consumers to digital means of communication.

As a result of volume decline and the absence of a stamp price increase for the last three years, mail revenue has continued to fall by 4.5 per cent in 2012/13 and losses in the domestic mail business grew by almost 60 per cent. The regulated mail business lost $218.4 million in the last financial year. Despite this steep and large loss, mail service performance remained high with 96 per cent of bulk and ordinary mail delivered on-time or early.

"These negative volume trends in letters will continue and the cost to deliver on our Community Service Obligations will also continue to grow constraining our ability to continue to deliver an efficient and cost-effective service for Australian consumers and businesses," Mr Fahour said.

"If unchanged, the widening losses in our traditional letter services will eventually stifle positive developments in our parcels business.

"Despite our very strong financial and operating results, Australia Post has hit a turning point in its business trajectory where strong cost management and our $2 billion investment in our national logistics network will soon not be enough to compensate for the losses we make in our traditional mail business."

During a period of significant change, Australia Post employees remain engaged and committed to the company that has served the Australian community for more than 200 years.

"One of the biggest achievements of the past year has been the increase in employee engagement across the business. Our engagement score rose four points this year to 78 per cent and our new Enterprise Agreement was endorsed by 75 per cent of our 30,000 plus award staff," Mr Fahour said.

"This demonstrates our staff's commitment to the business and we acknowledge the effort of our hard working staff and the important contribution of our contractors and licensees. We will continue working with our people, our Shareholder and the community to ensure our strong, trusted brand can evolve and grow to meet the modern communication, shopping and transacting needs of the Australian community."

CSO performance standard 2012/13 Actual
10,000 street posting boxes 15,927
94 per cent of non-bulk letters delivered on time 95.5 per cent
4000 retail outlets nationwide 4429
2500 outlets in rural and remote areas 2561
98 per cent of addresses to receive deliveries five days a week 98.8 per cent
Financial performance 2011/12 2012/13 Year on Year
Corporate revenue $5126m $5,893m +15%
Profit before tax $367m $403m +10%
Profit after tax $281m $312m +11%
Australian Government dividend $194m $244m +26%
Return on equity 16.8 per cent 18.5 per cent +170bsp
Parcel & Express Services $275m $355m +29%
Retail Services $178m $201m +13%
Mail $(117m) $(187m) (60%)
Regulated mail services loss ($187m) ($218m) (17%)
Non-regulated commercial services profit $555m $648m +17%
  2009 2010 2011 2012 2013
Mail Volumes (m) 5,323 5,145 5,038 4,843 4,580
Revenue ($m) 4,975 4,856 4,987 5,126 5,893
Profit Before Tax ($m) 380.9 103.0 332.3 366.7 402.8
Profit After Tax ($m) 260.5 89.5 241.2 281.2 311.9
Profit/Loss from reserved services ($m) (69.2) (250.1) (66.5) (114.4) (147.4)
Operating profit/(loss) from regulated mail services ($m) n/a n/a (122.4) (186.9) (218.4)
Operating profit/(loss) from non-regulated services ($m) n/a n/a 457.5 555.2 648.1
Return on equity (%) 17.2 6.2 15.0 16.8 18.5
Debt to debt plus equity 23.3 26.4 23.6 29.1 27.3
Interest cover (times) 11.0 4.6 10.9 10.8 13.7
Ordinary dividend - cash ($m) 277.8 171.9 78.5 193.9 243.7

1 Excludes StarTrack Services

2 Amounts prior to 2011 included the collection, processing and distribution of international inbound letters and packets (weighing less than 2kg) in accordance with the arrangement of the Universal Postal Union. This is now included within regulated services.

3 Return on equity is calculated as profit after tax as a percentage of equity. Equity has been normalised to remove the impact of the group's net superannuation liability/asset.