New Zealand Post preserves profits despite falling revenues

NZ Post increase in revenue

The annual results of state-owned New Zealand Post (NZ Post) were not particularly inspiring, although the postal group seems to have been holding up relatively well in a very challenging market for its letter business in recent times.

Despite a significant drop in full-year revenues – down 6.6% to NZ$1.4bn from about $1.6bn one year earlier – it managed to preserve its underlying earnings by cutting costs, which also fell 6.6% year-on-year. As a result, its underlying net income margin grew 30 basis points to 8.3%, partly boosted by a profit after tax of $124m.

At $197m, EBIT was $12m lower year-on-year, but comparable figures at operating level were distorted as the group restated certain financial items in the prior year.

Chief Executive, Brian Roche, noted that annual profits are “largely due to Kiwibank and the proceeds from the sale of New Zealand Post’s Australian-based subsidiary Converga to Canon Australia”.

“Kiwibank had a good first half performance, however this was not matched in the second six months,” he added. In the interim results released in February, it emerged that its financial services unit – Kiwi Group Holdings, including Kiwibank – had reported a profit of “$73m, up $1m on the December 2014 half year”.

The group’s core postal services business – including parcels, letters and logistics services – saw letter volumes decline by about 8%, while parcel volumes and revenues grew, rising 6.4% and 2.9%, respectively. Excluding one-offs, the postal services business made a small loss.

Although it continues to pursue a leaner corporate tree, the group is also committed to new investment, with particular focus on “processing and delivery technology” that ought to “position it well for the future”.

Alongside the sale of Converga for AU$75m – which generated a capital gain of NZ$43m and helped to free up capital for new investment – the highlights for the year ended 30 June included a solid growth rate for inbound international parcel volumes, up 15.5% year-on-year, and the processing of nearly “10m letters for the two postal flag referendums.”

Furthermore, it introduced a new range of parcel delivery options, giving customers more choice about where and when they receive their parcels, while flagging the completion of a new facility for courier and postal activities in Te Rapa.

Finally, the group received dividends of $29m from its subsidiary Kiwibank, which grew deposits by 7.6% to $14.8bn from $13.7bn, while lending and advances to customers rose by 7% to $16.7bn from $15.6bn one year earlier.

More Insight?

Source: Transport Intelligence, 30 August, 2016

Author: Alessandro Pasetti