The Australia Post Group has achieved significant milestones in realising our growth and performance opportunities in the final year of our Future Ready business renewal program. However, this year was a turning point for our overall profitability as the effects of digital disruption on our letters and retail businesses significantly impacted the positive results achieved in our parcels business.
Performance
This year the Group's profit after tax was $116.2 million. This includes $63.0 million of costs associated with our corporate restructuring program, which will reduce overheads in our corporate centre so we can direct valuable resources into frontline services for our customers. Our underlying profit after tax (excluding restructuring costs) was $179.2 million, which is in line with last year's result (up 1.0 per cent).
This marginal profit growth reflects the challenges we face in our mail services business, which is under considerable pressure due to the continued take-up of digital methods for communicating and transacting. We expect that letter volumes will continue to decline at an accelerated rate as a result of this shift in customer behaviour. The full impact of this decline has been partially offset by robust yield management due to the increase to the Basic Postage Rate in March, price increases for our PreSort products and volume growth resulting from the Federal Election in September.
The shift towards electronic payment substitutes along with declining customer visits to our post offices has impacted our retail trading. This is being countered by the continued investment in trusted services, which has resulted in revenue growth in our financial, identity and commercial services portfolio.
We have declared a dividend to our shareholder, the Australian Government, of $78.8 million (down 59.1 per cent year-on-year due to our lower profit result). Our return on equity was 6.7 per cent.
Investment
Our total cash investment this year across strategic projects and asset replacement was $523.1 million. This program focused on new infrastructure to boost capacity in our parcel network by expanding the footprint of our major parcel processing facilities and investing in cutting-edge automation technology. We continued to strengthen our digital infrastructure, predominantly MyPost Digital Mailbox (formerly known as Australia Post Digital Mailbox) which gives businesses and consumers a digital alternative for sending and receiving mail.
This was the largest capital expenditure program in the history of the Australia Post Group and reflects the major transformation our business is undergoing to adapt to changing customer preferences. These investments will strengthen our position as a world-class parcels business and help build a sustainable communications business across both physical and digital platforms.
Taxes
The Group made a significant contribution to the Australian economy through our total tax contribution of $494.2 million. This comprised $243.4 million in income and property taxes and, indirectly, $250.8 million in GST and withholding taxes.
Segment performance
Our Parcel Services business again delivered a strong performance this year, returning an operating EBIT of $337.5 million (up 20.8 per cent) and revenue growth of 16.4 per cent. Underpinning this result was domestic parcel volume growth of 12.8 per cent which included a full year of StarTrack trading (compared to eight months last year). Revenue for this portfolio increased, despite the increasingly competitive landscape and economic uncertainty that is impacting consumer confidence. We again achieved an outstanding parcels service delivery result of 97.8 per cent.
The structural challenges facing our mail services business resulted in an operating EBIT loss of $328.4 million (up 15.2 per cent). This loss was driven by the continued decline in addressed letter volumes, which were down 4.0 per cent (or 5.0 per cent excluding Federal Election volumes). Once again, the fixed-cost nature of our letters network meant that the loss could not be offset by cost savings.
Operating EBIT for our retail business remained relatively flat (down 1.3 per cent). This was impacted by declining customer visits to our post offices (down 9.7 million or 5.0 per cent), which resulted in lower merchandise sales and payment revenue. Growth in our financial, commercial and trusted services portfolio was not enough to offset the revenue implications of declining customer visits.
Outlook
Over the past four years, Australia Post's Future Ready program has delivered strong results by embedding a change culture and execution discipline to transition the business from a postal to a parcels-dominant business. However, the continued migration of businesses and consumers to digital methods for communicating and transacting remains the greatest challenge for our letters and retail businesses, and the Group as a whole.
While our Parcel Services business is expected to continue to deliver volume and revenue growth, aggressive competition from other parcel and logistics providers remains our biggest threat. Our focus is to invest and innovate to ensure we can compete on price and offer our customers exceptional levels of service.
Five-year trends
|
|
2010 |
2011 |
2012 |
2013 |
2014 |
|
Revenue ($m) |
4,856.2
|
4,986.5
|
5,126.2
|
5,893.2
|
6,383.3
|
|
Profit before tax ($m)(3) |
103.0
|
332.3
|
366.7
|
210.7
|
103.0
|
|
Profit after tax ($m)(3) |
89.5
|
241.2
|
281.2
|
177.4
|
116.2
|
|
Profit/(loss) from reserved services ($m)(1)(3) |
(250.1) |
(66.5) |
(114.4) |
(198.0) |
(242.6) |
|
Return on equity (%)(2)(3)
|
6.2
|
15.0
|
16.8
|
10.5 |
6.7 |
|
Return on average operating assets (%)(3) |
3.8
|
10.9
|
11.5
|
6.2
|
3.4
|
|
Debt to debt plus equity |
26.4
|
23.6
|
29.1
|
27.3
|
28.8
|
|
Dividends declared ($m) |
79.1
|
173.2
|
213.7
|
192.7
|
78.8
|
|
Interest cover (times)(3) |
4.6
|
10.9
|
10.8
|
7.7 |
3.6 |
|
Reserved services letter volumes (m) |
3,876.6 |
3,738.8 |
3,545.3 |
3,305.7 |
3,173.5 |
(1) The 2014 balance includes the impact of organisational restructuring.
(2) Return on equity is calculated as profit after tax as a percentage of equity. Equity has been adjusted to remove the impact of the Group's net superannuation liability/asset.
(3) Changes to AASB 119 Employee Benefits took effect on 1 July 2014. 2013 has been restated for like-for-like comparison. Years prior to 2013 have not been adjusted to reflect this change in accounting standard.
Revenue
($m)
Profit before tax(3)
($m)
Profit after tax(3)
($m)
Shareholder return on equity(2)(3)
(%)
Dividends declared
($m)
Capital expenditure (cash)
($m)
