Letters on the way out but Australia Post looks to reverse trend
The traditional engine room of Australia Post – its letters division – is on the decline as more people turn to email or SMS to keep in touch.
Australia Post today reported a one per cent lift in net profit to $374.9 million for the 2004/05 year, off a record $4.32 billion in revenue.
But the letters division's earnings fell almost $57 million to $248.3 million.
The big area of improvement for the government-owned Australia Post came in the parcels and logistics business which increased its profit by $41.4 million or 28.9 per cent to $184.8 million.
Australia Post chairman Linda Nicholls said the impact of electronic substitution on the letters business was being felt globally.
"With our letter prices currently frozen and our costs rising with the addition of around 200,000 new addresses each year, growth in letter volume is going to be the crucial element determining our future profitability in the letters business," Ms Nicholls said.
In 1960, the letters share of the total messaging market totalled almost 50 per cent but by last year it had shrunk to 14 per cent.
The bulk of that market is now dominated by transactional letters such as the mailing of accounts, bills, statements and cheques.
Social letters involving letters, postcards and private greetings amount to just five per cent of the market.
But Australia Post is not yet prepared to accept defeat in letters.
Managing director Graeme John said there is growth potential in letters, especially in direct mail, because people prefer to receive important information on paper.
"We are continuing to develop new letters products that help businesses communicate with, and sell to, their customers," he said.
Australia Post has also earmarked parcels, banking and bill payment services and identity checking as growth areas.
Ms Nicholls said that over the next 12 months Australia Post will rebrand giroPost as Bank@Post and offer Australians living in regional and remote areas greater access to banking services.
She said with the increase in identity fraud, Australia Post is also beefing up its 100 point identity check service as well as growing its international money transfers and travellers' cheques business.
Another area Australia Post sees as ripe for growth is assisting local manufacturers in their dealings with China through its joint venture with China Post.
The postal service envisages storing goods bought by Australian retailers at its own warehouse in China before shipping them back either straight to customers or to the retailers' outlets.
"They can reduce their costs if they don't have all the stock sitting in warehouses in Australia," Australia Post external relations manager Matt Pollard said.
Australia Post paid the government, its sole shareholder, an increased dividend of $286.2 million – or 75 per cent of net profit – for 2004/05 compared to the prior year's $220 million.
Mr Pollard said any speculation of privatisation of Australia Post was premature.
"Our shareholder has made it very clear that privatising Australia Post is not on the radar," he said.
AAP
Media Release: Australia Post
MediaNet Press Releases 10-12-2005
This is a media release – distributed by AAP MediaNet. EMBARGOED UNTIL 12 noon, Wednesday 12 October 2005 Australia Post Delivers Service, Dividends and Profit
Australia Post met or exceeded all community service obligations, maintained solid profitability and increased dividends to the federal government in 2004-05, despite declining profits from its letters business, according to the corporations annual report released today. Chairman Linda Nicholls said the results underscore the corporations strong record of adapting to a changing marketplace. We again delivered quality customer service to all Australians while achieving healthy commercial results, which allow us to meet our own capital and operating costs, provide a return to our shareholder and reinvest in our business, she said We face ongoing challenges but the reason we are regarded as one of the most successful postal businesses in the world is that we continually adapt our traditional services so they remain fresh, relevant and highly valued by Australian businesses and consumers.
Highlights from the annual report include: * Revenue increased by 3.9 per cent to $4.32 billion. * Profit after tax increased by 1 per cent to $374.9 million. * Mail volumes increased by 1 per cent to 5.36 billion items. * 94.9 per cent of domestic letters were delivered on time or early. * On average, 1.1 million customers were served in Post outlets each working day. * Labour productivity was up by 2.6 per cent. * Maintenance of Australias largest physical retail network with 4,474 outlets (including 2,574 in rural and regional areas). * Overwhelming staff support for the corporations sixth enterprise bargaining agreement. * The introduction of Express Courier International, a new international express delivery service for overseas-bound mail.
The corporation will return a dividend of $286.2 million to the Commonwealth, based on 75 per cent of the years net profit. The report reveals that Post also paid $527.4 million in taxes and government charges during the year. Managing Director Graeme John said the continued growth of Australia Post is going to be essential to maintain a high quality postal service for all Australians, service an increasing cost base and maintain a healthy return to its shareholder. Of Australia Posts three core business areas (letters, retail & agency services, and parcels & logistics), the letters business has traditionally been the major contributor to the corporations revenue and profit. In 2004-05, however, the letters business achieved only marginal revenue growth and its pre-tax profit fell by $56.9 million. A combination of factors contributed to the decline, including the price cap on basic postage, a modest increase in letter volumes and rising costs due to wage increases and the addition of almost 200,000 Australian addresses. Solid results from Australia Posts other two core business areas partly offset the lower profit from letters. The parcels & logistics business increased its profit by $41.4 million and the retail business (post offices) earned $3.4 million more than the previous year. In other areas, including property sales, the corporation earned an additional $15.5 million in 200405. Mr John said the increased profit was a very positive result given the lower return from the letters business this year. Its the result of a strong business strategy and a dedicated team. Our people have put in another great year. We achieved productivity gains of 2.6%, our safety record improved again and our sixth enterprise bargaining agreement was wholeheartedly supported by a vote of staff, allowing all of our people to share in our continued commercial success, he said. The Annual Report also shows that Australia has one of the lowest-cost and most reliable domestic letter services in the world. Our research shows there is still growth potential from letters, especially in direct mail, because consumers prefer to receive important information on paper. We are continuing to develop new letters products that help businesses communicate with, and sell to, their customers, Mr John said. For business customers the cost of bulk transactional mail has actually decreased by about 55% since 1992, accounting for inflation, the absorption of GST and discounts offered with the introduction of barcoding, he said. In 2004-05 Australia Post added a range of new and additional agency services to its retail offering and this is expected to help drive continued growth in that business. Mr John said he was also encouraged by the strong result from the parcels & logistics business because it continues to be an essential growth engine for the corporation. We have a stated ambition to become a major parcels distribution provider for Australian business, he said. So this year we did a lot of work on further developing our systems, capacity and flexibility so we can further meet our customers changing needs. Australia Post acquired two companies during the year State Warehouse and Distribution Services (SWADS) and SnapX Couriers that add capacity to the corporations national logistics and courier operations. In February, Australia Post launched a joint venture with China Post to create a China-based logistics business called Sai Cheng Logistics International that will offer Australian businesses improved distribution and logistics services in the Asia-Pacific region. Media enquiries: Matt Pollard Manager, External Relations Phone: (03) 9204 7134 Further information available at: www.auspost.com.au/annualreport Please note high resolution images of the Chairman and Managing Director, as well as generic Australia Post images, are available on request SOURCE: Australia Post
