NZ Post profit takes a hammering

New Zealand Post Group has recorded a net profit after tax of $15.8 million for the half year ended December 31, 62.8% down from its $42.5 million result in the same period last year.
Operating revenue increased by $30.5 million to $652 million compared with the same period last year, with Kiwibank and Datam being the main contributors to the improvement.

The postal business and store network produced lower revenues due to the continuing customer trend towards electronic mail and online transaction use.

However, overall the postal business has performed above expectations in the first half of the year.

Expenditure was $49.8 million higher at $638.8 million, due mainly to a $26 million increase in bad debt provisioning (to $45.5 million) by Kiwibank, a one-off $5.7 million loss on sale of an Air Post aircraft, and ongoing cost pressures.

The result was also affected by a $13 million reduction in fair value gains in Kiwibank.

Mr Roche said the loss on sale of the aircraft is expected to be recouped over time by avoiding the associated, uneconomic, maintenance and servicing costs.

The directors have declared an interim dividend of $1.8 million for the period, compared with $5.7 million for the same period last year.

Mr Roche said that slow economic activity, digital substitution and competitive trading conditions remained immediate ongoing challenges, but he was optimistic about the longer-term future of the Group.

Mr Roche said that, excluding the higher debt provisioning, the core Kiwibank business continued to grow, although at a slower rate than in the corresponding period last year.

Domestic mail volumes for the period were down by 3.6%t, or 15.7 million items – a lower rate of decline than in recent years, with local body election mailouts offsetting an underlying annual volume decline of about 4.5%.

Flat economic activity resulted in static courier and freight volumes for Express Couriers Limited (ECL), New Zealand Post’s 50:50 joint venture with DHL in New Zealand.

Trading conditions were also challenging for Parcel Direct Group (PDG), the 50:50 joint venture with DHL in Australia.

Following the reported write down of PDG in the 2009/10 financial year, its future status had been reviewed and a decision made to start a divestment process for all or part of that business.

In the shorter term, the conditions affecting the first half results had continued into the second half of the financial year and he did not expect the group to achieve its full-year net profit target of $60.8 million.