Australia Post’s profit plummets 35.7%

Australia Post described their latest annual financial results as “solid” – despite a 35.7% drop in pre-tax profit. The government owned company recorded a pre-tax profit of $380.9m for 2008/9, compared to 2007/8’s record high of $592.2m.

Despite of this, Australia Post’s revenue grew by $26.1m (or 0.5%) in 2008/09 to $5bn, with growth in all three core business areas.

The corporation’s underlying profit, however, fell by just 14% in 2008/09, according to Australia Post chairman David Mortimer. He said that superannuation cost in a tougher financial market, movements in bond rates and property valuations were the factors that had the biggest impact on the decline in the corporation’s bottom line and totalled $127.2m.

“This was a very tough year for Australia Post, as it was for businesses throughout the world, but our underlying profit shows that we are still in a strong position,” said Mortimer.

“Over recent years we have invested heavily in broadening our revenue base and cutting our operational costs. So those strategic investments meant we were well prepared for the tougher economic conditions experienced this year.”

“We foreshadowed a 40% decline in profit against our plan at a Senate Estimates hearing in May. So this result is ahead of those revised forecasts.”

Some key results and highlights from the 2008/09 Annual Report include:

• a net profit of $260.6m despite difficult economic conditions;
• handling 5.3bn items of mail and delivering to 10.7m Australian addresses;
• serving one million customers every business day in 4,433 postal outlets;
• adopting a more rigorous approach to corporate responsibility issues with the release of Australia Post’s first standalone Corporate Responsibility Report;
• contributing $499.5m in taxes and government charges during the year; and
• an ordinary dividend declared of $184m to the Commonwealth (based on 75% of the corporation’s after-tax profit), as well as a special dividend of $38.4m declared from 2008/09 earnings.

Mortimer said the corporation was focusing on Australia Post’s future with $700m recently approved by the board for key strategic projects over the next three years.

“The board has approved funding for a major upgrade of our point-of-sale technology to drive future growth in our financial and agency services and to build our identity services business,” said Mortimer.

“We have also invested heavily in upgrading our major IT platforms such as mail production and parcel tracking systems while continuing to upgrade our transport fleet.”

Australia Post met or exceeded all of its community service obligations, including delivering 95.5% of domestic letters on time or early (exceeding its 94% target).

For the first time in six years, the volume of all items sent through Australia Post declined from a record high of 5.6bn items last year to 5.3bn this year. However, Australia Post’s letter volumes have remained resilient compared to overseas declining by 4.1% in 2008/09. In comparison, the United States mail volumes are down 12.9% from October 2008 to June 2009.

“We know the slowdown in economic activity has seen a decline in the volume of business to business mail. However, as with the wider economy, we have fared better than our overseas counterparts and this is evident when comparing our volumes to theirs,” said Mortimer.

Australia Post’s parcels and logistics business remains strong with overall revenue for the portfolio increasing by 2.5% in 2008/09 to $1.3bn. By comparison, the letters business overall revenue increased by 0.7%, contributing $2.8bn. The agency services and retail products portfolio grew by 3.2% to $736m.

“I am proud that despite the difficult economic conditions we maintained our staffing levels during the financial year. We will continue to seek productivity improvements, but in a way that maintains our customer service standards and respects the contribution our people have made to our success,” Mortimer said.

“The hard work of our people has contributed to a very solid result in what has been one of the most challenging years in recent history,” said Mortimer.

“Strong strategic leadership by our retiring managing director Graeme John over the past 16 years and significant investment in modernising Australia Post ensured the corporation was well placed to deal with the tough economic conditions we experienced this year.”