NZ Post posts strong interim result

20 February 2017

NZ Post (not including Kiwibank) today reported underlying net profit after taxation (NPAT) of $14 million for the six months to December 2016.

The result for the postal services (mail, parcels and logistics) business, which excludes one-offs, is up $15 million on the same period last year.

The improvement is attributable to benefits flowing through from cost savings over the past three years, more efficient delivery of mail and parcels, and a 7.5% increase in parcel volumes over the six-month period, Chief Executive Brian Roche said.

Mr Roche said he was very encouraged by the turnaround in the postal services business performance from a year ago.

“This is a strong first half result. Given we face the same challenge every year of having to combat the $20-30 million in revenue we lose annually due to the decline in letters, we are pleased that our strategy is delivering and putting the postal services business further in the black.

“Online shopping continues to boom as more businesses embrace e-commerce. We are now in a better position to capture more of that growth. That is the major difference from where we were this time last year.”

The NZ Post Group, including Kiwi Group Holdings (KGH), had undergone significant change since December 2015, including the partial sale of KGH to the NZ Super Fund (NZSF) and the Accident Compensation Corporation (ACC), Mr Roche said.

The sale on 31 October 2016 of 47% of the Group’s shareholding in KGH, which includes Kiwibank, Kiwi Insurance and Kiwi Wealth, for $493.5m had put the postal services business on a strong financial footing and able to take advantage of growth opportunities.

A gain of $25m was realised on the partial sale, with the remaining 53% shareholding valued at $709m as at 31 December 2016. $180m of debt has been repaid and an interim special dividend of $100m will be paid to the Crown.

Other key points:

  • Revenue of $467m, down $46m from the prior comparable period – attributable to foregone revenue from the sale of Converga in November 2015 and the decline of letter volumes, not fully offset by growth in the parcel business.
  • Expenditure reduced by $65m, to $446m.
  • 2 million additional parcels processed in November and December, on the same previous period.
  • New parcel delivery options launched – Authority to Leave at home, and Parcel Collect at 180 handy alternative collection locations.
  • Parcel and mail delivery now integrated at 85 sites throughout New Zealand.
  • Waikato Operations Centre in Te Rapa, Hamilton, opened, and state-of-the-art Christchurch parcel centre on track to begin operations by midyear.
  • New technology reduced scanning blind spots by 80%, increasing the number of parcels with real-time tracking.
  • You Shop reached just under 220,000 signed up customers.
  • Letter volumes fell by 9%.
  • Kiwibank: Since 30 June 2016, total lending increased 4.4% from $16.69 billion to $17.43 billion, customer deposits grew 3.9% from $14.78 billion to $15.36 billion and impaired assets fell to 0.05% of total loans and advances.
  • KGH set up a new subsidiary called Kiwi Financial Services Retail Ltd (KFSR) and transferred corporate retail staff from New Zealand Post to the new company.

Summary of the NZ Post’s financial performance (including its investment in KGH)

$ millions 6 months ended 31 Dec 2016 (unaudited) 6 months ended 31 Dec 2015 (reclassified)*
Revenue from operations 467 513
Expenditure 446 511
Net profit after tax excluding KGH 35 37
Net profit from KGH** 54 73
Net profit after tax 89 110
Share capital 192 192
Total equity 1,382 1,259

* The comparative period has been reclassified to separately show the net profit from KGH and exclude its revenue and expenditure from the Group figures.

** The net profit from KGH for the current period includes 100% of net profit to 31 October and the Group’s 53% share of net profit for 1 November to 31 December 2016. The net profit from KGH for the pcp is 100% of net profit for the full six months.

An interim dividend to the Crown of $2.5 million was declared.