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NZ Post earnings improve but 'fundamental change' still needed

BUSINESSDESK: Record earnings from Kiwibank helped push underlying net profit after tax up 38% to $79.8 million in the year to June 30, but postal revenues still fell $17 million as the trend away from posting letters continued.

"Kiwis posted 54 million fewer letters in the past year," says chief executive Brian Roche, as this was "further evidence we must proceed with fundamental change".

"Our postal business is benefiting from improvements to product and service offergins, careful management of costs and continued improvements to our operations model," he says. "However, we have exhausted these short term fixes."

The postal operator is bound by delivery service obligations negotiated with the government before the advent of email and other digital communications, and Mr Roche says NZ Post is working through changes to those regulations with its government owner.

"Much work lies ahead to achieve the design of a sustainable, viable physical network and improved service delivery network."

Top-line net profit results showed NZ Post bouncing back from a $3.6 million loss in the 2011 financial year to a $169.7 million profit, but both years included one-off items.

Some $96.2 million of this year's profit figure related to the non-cash addition impact of Post's purchase during the year of the 50% share of the Express Courier previously owned by the global courier firm DHL.

"This transaction led to the release for accounting purposes of the previously unrealised gain that arose when the joint venture was created in 2005," Mr Roche says.

Total revenues for the NZ Post group, which includes Kiwibank, came to $1.31 billion, compared to $1.27 billion in the previous year, while total costs were down at $1.22 billion, compared to $1.30 billion a year earlier.

The company does not explicitly split out postal service results.

Comments and questions

It would be very interesting to see how NZ Post and Kiwibank allocate costs when operating out of the same building.

I wonder who could be propping up who?