Australia Post renewal plan brings 31% profit growth

Australia Post has returned to profitable growth, it said today as it released its latest annual results, for the 12 months up to the end of June 2011. The company saw profits tumble last year, but launched a business transformation programme in April 2010, dubbed Future Ready, seeking to cut costs and improve efficiency in the wake of the global downturn and mail volume declines.

Under the Future Ready slogan, Australia Post has been pushing three strategies – stabilising the letters business, pushing the parcels business with e-commerce improvements, and developing new retail and digital services.

Today, the Post declared that its program “achieved what we set out to do”, as for the first time in four years revenues grew faster than costs, with a 2.8% rise in overall sales outpacing the 1.2% increase in outgoings.

Australia Post recorded a 31.3% increase in profit before tax for the year, up to $332.3m, on its $5bn revenue.

During the year, the Post increased the number of its retail outlets slightly to 4,419, and its 33,000 staff met domestic delivery targets by delivering 96% of domestic letters on time or early, along with 96.3% of bulk mail and 99.3% of express mail.

Chief executive Ahmed Fahour noted that this year’s profit had returned to 2009 levels, but said despite the successes of the Future Ready initiative, there was “still much to be done”.

“Despite our many achievements this year, we cannot lose sight of the ongoing challenges that face our business,” he said. “Digital substitution will continue to cause a decline in our letter volumes and retail traffic.”

Letters

Part of the improvement in results came thanks to this year’s election mailings and an increase in postage rates, with the basic stamp price increasing five cents to 60c, helping to stem some of the losses in the letters business, which saw last year’s $250.1m loss soften to a $91.3m loss this year.

Letter business revenues rose 2.6% for the year even as volumes declined 3.7% – and would have seen a 4.6% decline but for federal election volumes.

Although this was not as bad as the 5.5% decline seen last year, the 89m fewer letters posted this year in Australia represented the fourth year in a row where letter volumes fell by more than 3% per year.

Parcels

On the positive side, the Australian Post chief executive highlighted the 18.7% growth in profit, to $40.5.3m, for Australia Post’s competitive services, led by growth in parcel services, along with financial and identity services.

Fahour pointed to some key developments he said would set Australia Post up for the future, including the launch of a new smartphone app, new partnerships with ecommerce giants eBay and PayPal, and the trial of new services including parcel terminals.

“Our focus on ecommerce has been vindicated as we’ve experienced overall parcel volume growth of 10.9%, which drove parcels revenue up 5.3%,” he said. “This is only going to continue as online retailing in Australia continues to grow at a rapid rate.”

Commenting on this year’s results, Fahour also noted the somewhat bitter-sweet increase in inbound international parcel volumes, driven by the strong Australian dollar, since Australia Post currently loses money on every parcel it receives from overseas thanks to the current system of international postage “terminal dues” arranged through the Universal Postal Union.

New income

The Post Office Agents Association Ltd (POAAL), which represents operators of 3,000 privately-owned, licensed post offices, said of the latest Australia Post results that the company had taken steps to face the challenges facing the mail industry.

But the group’s chief executive Ian Kerr stressed the need for Australia Post to expand its range of services in order to continue its growth.

“With its core businesses fully mature there is a pressing need for Australia Post to modernise and to seek new and appropriate income streams while maintaining high service levels in its traditional business,” said Kerr.