Australia Post achieves $103 million profit despite challenging conditions

Friday, 15 October 2010

Australia Post today announced that in the face of historic declines in letter volumes it achieved a pre-tax profit of $103 million for the 2009/10 financial period. The postal corporation's underlying pre-tax profit was $253 million, but this figure includes a $150 million provision for business restructuring and voluntary redundancy costs.

Australia Post Chairman, David Mortimer, said that the corporation had been heavily impacted by the global shift towards digital communications. He said that electronic substitution is now affecting mail volumes worldwide and that Australia Post had implemented a number of measures during 2010 to prepare the business for ongoing challenges in its traditional core markets.

"Against a backdrop of a 4.2% decline in mail volumes and in the face of rising costs, the 2009/10 year was the toughest in Australia Post's history," said Mr Mortimer.

Following the retirement of long-serving Managing Director Graeme John in late 2009, the Board announced that former NAB Australia CEO Ahmed Fahour had been appointed as his successor. Mr Fahour officially started in the role as Managing Director and CEO on 1 February 2010.

"At the start of this year, the Board identified three key priorities that would help stabilise the business and encourage growth: establishing harmonious industrial relations; tackling costs by reducing overheads; and securing a letter price increase," said Mr Mortimer.

"We managed to achieve all of these objectives by the end of the financial year, and there are clear signs that our financial performance is now improving.

"In April, Ahmed announced the corporation's Future Ready business renewal program, which involves transforming Australia Post into a more customer-focussed, high-performing and financially sustainable business."

Mr Fahour said while last year was a difficult period for the business, he is pleased with its recent trading performance and is upbeat about Australia Post's near term prospects.

"Despite experiencing the worst mail volume decline in our history and absorbing rising costs due to inflation, our net cash was $500.7 million, consistent with last year's figure. This preserved cash balance means we've maintained the strength in our balance sheet.

"The Board set a clear goal of stabilising the business, including completing a Fair Work Agreement and addressing costs while identifying new areas of revenue growth," said Mr Fahour.

"The first part of this was to establish the Future Ready business renewal program, which comprises four strategic business units: Postal Services, Retail Services, Distribution & Express Services and eServices.

"We've set about laying the foundation for the future by expanding our capabilities in eServices, distribution and logistics, and leveraging our retail network as a shopfront for government and financial agencies.

"The growth in online shopping is going to be a key piece in our recovery strategy, as we leverage the spin-off effects in our parcels market.

"We've worked hard to prune costs at the very top levels of the business - at headquarters and state head offices - and we have made provisions for voluntary redundancies in the face of continuing mail volume declines.

"It's clear that the services Australians need from us have changed, so whilst we continue to be a trusted provider of mail delivery, letters will no longer be the backbone of the business," he said.

Mr Fahour said Australia Post is now pursuing opportunities in the digital arena, such as the launch of an iPhone app and the trial of a digital mailbox that delivers letters electronically to a secure web interface.

"We've taken advantage of preliminary opportunities in the digital field that give us a testing ground to determine how we can introduce bigger and better ideas."

Some key results from the 2009/10 Annual Report include:

• a net profit of $89.5 million despite significant market challenges
• delivering 96.1% of domestic letters on time or early
• handling 5.14 billion items of mail and delivering to over 10.7 million Australian addresses
• processing more than $77 billion in payments through Australia Post's suite of financial and agency services
• total dividend payments of $79.1 million to our shareholder, the Federal Government
• conducting 1.5 million Australian passport interviews, and becoming the first external entity permitted to process British passports
• servicing around 240 million customer visits every year in 4,415 retail outlets Australia-wide
• strong performance in the parcels and logistics portfolio with 16.8% volume growth for the eParcel service.

The full Annual Report can be viewed at: http://auspost.com.au/about-us/annual-reports.html