New Zealand Post cautious despite doubling first-half profits
New Zealand Post downplayed a surge in its profits as it released its latest financial results today, warning that it still has some way to go in facing up to declining mail volumes. The group more than doubled its net profit after tax in the six months up to the end of December, compared to the same period in 2010, from NZD $15.8m ($13.2m USD) to NZD $35.4m ($29.6m USD).
But group chief executive Brian Roche said the performance was not a case of “turning the corner” after the NZD $35.6m ($29.7m USD) loss seen in the year ended June 2011.
He said that plans are now being finalised to address society’s ongoing move towards digital communications.
New Zealand Post, which recently saw its outlook downgraded to “negative” by credit rating agency Standard & Poor because of concerns about its core mail business, achieved a NZD $27.7m ($23.1m USD) year-on-year growth in its revenue in the first half of its 2011 fiscal year, taking in NZD $679.7m ($568.2m USD) from its operations during the half.
However, postal banking unit Kiwibank was the “significant” contributor to the growth in revenue.
The group’s postal business saw its letter volume decline continuing, although the 7% decline was in line with expectations, as New Zealanders posted 29.4m fewer items than the same period last year.
New Zealand Post said its courier and logistics business was providing a “solid contribution” to earnings, and did describe the overall result for the half as “pleasing”.
But, Roche said the group was operating in a flat domestic economy and uncertain global economy, while continuing to recover from last year’s Christchurch earthquake.
“The improved result does not alter the urgency and need to maintain momentum for New Zealand Post to pursue its strategies of delivering a sustainable postal network for the future, growing Kiwibank, creating new digital offerings, and recreating our store network to meet modern consumer needs,” said the group CEO.
Costs and technology
Roche said his company was continuing to counter letter volume declines by keeping a close eye on its costs, but that cost-cutting “is not going to deliver a sustainable earnings performance in the postal business”, he warned.
He said: “We are finalising a plan of action to ensure New Zealand Post can operate a physical network that is sustainable and addresses the fundamental change that technologies are making to customer behaviour.”
New Zealand Post has been testing new technology and systems over the past six months to transform its retail store network, including the introduction of new self-service postal and bill payment kiosks for several stores and the trial of pilot stores featuring a slimmed-down product range.
The Post has also been developing its digital services, which its CEO said would plan an “important part” in the company’s strategy for its primary business.
“The business is making good progress towards implementing its major strategies,” said Roche.
