New Zealand Post Group records $42.5 million half year profit

26 February 2010

New Zealand Post Group has recorded a net profit after tax of $42.5 million in a difficult half year ended 31 December 2009.

Group Chief Executive Brian Roche said that, although down by 19.4 per cent on the $52.8 million net earnings in the corresponding previous half year, the current period's net profit was an acceptable result given the significant impacts of the global economic downturn and increasing competition.

"The recessionary conditions in the last financial year continued into the first half of the current year and led to further volume reductions in our postal, courier and distribution businesses," he said.

At the same time, tight net interest margins and changing fee structures in an intensely competitive banking sector resulted in a reduction from $25.8 million to $24.0 million in the net profit of Kiwi Group Holdings, which includes Kiwibank.

"Trading conditions were therefore challenging across the Group," said Mr Roche.

The Group profit before tax was $55.1 million, down 21.2 per cent on the $69.9 million in the 2008 half year period. A 5.3 per cent decline, to $621.5 million, in revenue from operations was also due largely to the economic downturn and financial sector changes, however the Group's cost management strategy had been successful in reducing expenditure by $9.1 million to $589.0 million.

The Board of Directors has declared an interim dividend of $5.7 million for the six months ended 31 December 2009. This compares with an interim dividend of $6.9 million for the corresponding previous half year.

Mr Roche said the dividend level is in line with the amended dividend policy set out in the Statement of Corporate Intent (SCI). This provides for a lower level of dividend in the two years ending 30 June 2010 to enable reinvestment in the business.

Looking ahead, Mr Roche said meeting the Group's year end financial targets would be a challenge.

"There are encouraging signs of an economic recovery, although we don't expect benefits to be felt in the second half of the financial year. We are alert to the opportunities that will come with improved economic conditions and are optimistic there are good prospects for our banking, courier, logistics and data management businesses.

"While developing strategic options to address the broader market and consumer challenges that lie ahead, we are placing a particular emphasis on supporting Kiwibank's continued growth, addressing the fundamental difficulty of declining mail volumes in our Postal Services business and improving the performance of our Australian courier joint venture, ParcelDirect Group."

Mr Roche said the economic downturn accelerated an existing trend of declining letter volumes caused by electronic substitution and competition. This was placing significant pressure on postal organisations around the world.

Domestic mail and parcel volumes handled by the Postal Services business during the half year were 5.7 percent - or 27 million items - down on the corresponding previous half year.

"While we are seeing some stabilisation of parcel volumes, the underlying decline in letters is expected to continue. We are closely examining a range of options to structure and position our Postal Services business for future market conditions."

Mr Roche said the Group was responding appropriately to changing market conditions and competitive pressures and taking the steps necessary to maximise its financial and operational performance.

"We will continue to maintain a strong focus on prudent and sustainable cost management, while at the same time ensuring our services are efficient, innovative and customer-focused."

Mr Roche, who took up the Group Chief Executive role last month, said his immediate attention has been on familiarising himself fully with all aspects of the Group's business and considering the future strategy and positioning of New Zealand Post Group.

New Zealand Post Group: Key Results

$ Million

12 Months ended 30 June 2009
(Audited)

Six Months ended 31 December 2009
(Unaudited)

Six Months ended 31 December 2008
(Unaudited)

Revenue from Operations

1,253.8

621.5

656.2

Expenditure

1,163.4

589.0

598.1

Profit before Income Tax

93.5

55.1

69.9

Net Profit

71.8

42.5

52.8

Dividends

6.9

5.7

6.9

Shareholders' Equity

669.2

738.3

650.6