Letters deliver losses to Australia Post
The business of delivering letters is dragging down Australia Post and it wants urgent reform of its “community service obligations”.
The mail, parcel and retail group announced a full-year profit after tax of $116.2 million, down 34.5 per cent on last year.
However, the continued decline in mail volumes pushed the enterprise into an overall second-half loss.
The ongoing decline prompted Group CEO Ahmed Fahour to warn Australia Post could lose billions.
“Addressed letter volumes declined 5.0 per cent over the year,” he said.
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“This level of volume decline, coupled with the fixed cost nature of the network, means these losses will inevitably continue to grow.
“Unfortunately, without significant and urgent reform of our community service obligations, the loss in the regulated mail business will overwhelm the entire company and result in the enterprise making a loss in the near future.
“Importantly as our customers’ behaviour changes, driving us to change, we will continue to work and consult with our staff as well as those groups most reliant on our services, the elderly and disadvantaged and our Licensees, on the best solutions to complete our service changes.”
The good news for Australia Post was that parcel services performed strongly despite a slowdown in e-commerce activity and intensified competition, generating an operating EBIT of $337.5 million, an increase of 20.8 per cent.
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The service will be extended to include Saturday delivery.
“This is the fourth consecutive year of growth for our parcels business which has doubled profit since 2010,” Fahour said.
“Our investments have expanded our parcel facilities, doubling our processing capacity, and as part of our focus on customer convenience, we will introduce Saturday delivery options for our Express Post services, including parcel delivery, from this Christmas.
“Furthermore as letter volumes decline we have been able to grow our parcel volume and today, over 25 per cent of all parcels are delivered by our posties,
compared to a small amount in 2010.”
Australia Post, however, faces challenges as consumers change how they communicate and how they pay their bills.
“These results are a stark illustration of the urgent need for changes to the regulations governing our letters service.
“Without these, a government-commissioned external report estimates that we will incur $12.1 billion cumulative losses in letters, and $6.6 billion for the enterprise over the next 10 years.
“Our ability to manage these losses is constrained without reform.”.
In FY14, the Australia Post Group increased revenue by 8.3 per cent to $6.4 billion, but after-tax profit was down 34.5 per cent to $116.2 million.
Consequently, the declared dividend to the Federal Government in 2014 is $78.8 million, down 59.1 per cent on last year.
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