Leadership

Reforming our letters service

The biggest challenge that Australia Post faced this year was, again, the accelerating decline in the use of letters, as Australians continued to switch to digital alternatives. The 7.3 per cent decline in addressed letters this year brings the cumulative volume decline to 30.6 per cent since our mail peak in 2007/08.

Consistent with our forecasts, this was the year where the financial losses we incurred in the letters service actually overwhelmed the profits we earned from parcels, and retail and agency services.

Given the accelerating rate of volume declines and mounting financial losses in letters, we worked closely with the Government on developing a regulatory response to the structural decline of this valued community service. The Federal Government announced that it would support the regulatory reform of the letters service in March 2015. At the time of writing, those reforms are before the Parliament.

This is a crucial reform because it will enable us to reduce the size of our losses in letters, and remain a self-funding corporation with the capacity to invest in contemporary services for the benefit of all Australians.

The reform also preserves those aspects of our service that the community values most highly – including five-day-a-week delivery and the maintenance of 4,000-plus post offices.

That’s vitally important for Australia, because our physical network underpins commercial activity, enables universal access to services, and promotes social inclusion – especially in rural and remote communities.

Delivering eCommerce

Our future is clearly linked to enabling and supporting the growth of eCommerce – through our nationwide networks, as well as our growing range of trusted identity and payments services.

However, given the trend towards borderless commerce, the logistics market is becoming intensely competitive and increasingly global. This year there was a noticeable trend of overseas operators entering our domestic market.

In response, we have maintained our strategic focus on creating more customer-centric services, capabilities and cultural attributes to cement our leading role in the delivery of online shopping for all Australians.

We are very mindful that customer behaviour continues to shift, rapidly, as customers, everywhere, seek greater value and convenience in this era of mobile connectivity.

I am confident that Australia Post now has the right team, culture and strategy to leverage our nationwide infrastructure – and meet the rising expectations of our customers.

Thank you

I want to sincerely thank my fellow directors, our Managing Director & Group CEO Ahmed Fahour, the management team, our employees, licensees, contractors and agents – for all of your hard work and commitment throughout this tough transition year.

Our many achievements this year will stand us in good stead to return to a sustainable and profitable position in the years ahead.

John Stanhope
Chairman

Our 2014/15 performance

As we expected, this was a challenging year for Australia Post.

Across the Australia Post Group, we incurred a full-year loss, as letter volume declines accelerated (down 7.3 per cent on last year) leading to a record loss in our letters business. Total revenue for the year was $6.4 billion (down 0.1 per cent), and our after-tax loss was $221.7 million (down from last year’s profit of $116.2 million).

In terms of community service, we again met all of our performance standards, including delivering 94.8 per cent of letters on time or early (well ahead of our 94 per cent target) and maintaining 4,406 post offices (against a target of 4,000 access points).

The other encouraging aspect of this year’s results is the ongoing reduction in workplace injuries. Our lost-time injury frequency rate (LTIFR) was 7.0 this year (down from 8.0 in 2013/14). Our sustained focus on improving our safety culture has resulted in a 39 per cent reduction in our LTIFR over the past three years.

Regulatory reform

We welcomed the Federal Government’s announcement this year that it will reform the regulations that apply to our letters service. This is the first change to the regulations since they were drafted in the pre-digital era.

These reforms will enable us to introduce a two-speed letters service for consumer mail, as well as increase stamp prices, so that they reflect the true cost that we incur in delivering the mail. In framing the reformed letters service, we will continue to offer discounted postage to the most disadvantaged Australians and senior citizens.

Building in eCommerce

Over the past five years, we have been building the infrastructure and digital assets that will enable us to support the growth of Australian eCommerce.

The reform of the letters service means we will have the capital and the resources that we need to manage the ongoing transition of our core business, as we seek to become the trusted partner that supports eCommerce delivery and services – for all Australians.

This year, our expanded Sydney and Melbourne parcels facilities became operational, effectively doubling our processing capacity at both sites. And we also made great progress with the development of our personalised, digital offering, under the MyPost brand. By year’s end, over two million Australians had registered on MyPost.

Our people and partners

As we manage this change in our core business, we are supporting our existing employees and our business partners to make the transition with us.

Under our successful Post People 1st program, 59.9 per cent of all available roles at Australia Post were filled by internal candidates in 2014/15. We also demonstrated our commitment to sustaining the post office network this year, by boosting payments to post office licensees and community agents.

Thank you

I firmly believe that our future success begins with looking after our own people. If we have happy staff, they will delight our customers and help to build healthy, functioning communities – and that will please our shareholder. Thank you, once again, to everyone working across our broad, nationwide team.

It is a great privilege to work with you, every day.

Ahmed Fahour
Managing Director & Group CEO