NZ Post annual profit falls 12% as Kiwibank, parcel growth offsets shrinking mail

New Zealand Post, the state-owned mail delivery service and trading bank owner, reported a 12 percent fall in annual profit as shrinking mail volumes were offset by gains in its Kiwibank and parcel businesses.

Net profit fell to $107 million in the 12 months ended June 30 from $121 million a year earlier, which was bolstered by the $72 million gain on the sale of its stake in Datacom, the Wellington-based company said in a statement. Revenue fell 1.6 percent to $1.66 billion, with domestic letter volumes shrinking 7 percent to 642 million and forecast to drop below 500 million in the next three years. Kiwibank lifted net profit 3 percent to $100 million on fatter interest margins and lower provisioning for bad debts.

"The changes we have made are starting to flow through in our financial performance and we expect further improvements from these changes over time," chief executive Brian Roche said. "However, the continuing decline of letter volumes here and overseas and a highly competitive environment for banking and parcels means we cannot afford to take our foot off the accelerator."

NZ Post is grappling with the continued slide in the volume of letters posted as consumers switch to the internet, email and social media for everything from paying bills to sending birthday greetings and keeping in touch with loved ones. It embarked on a major transformation programme last year, slashing its workforce and putting greater emphasis on growing its banking business.

Roche told a briefing in Wellington the mail service had clamped down on costs, reducing headcount by about 450 in the year, with the next big reduction to come in July 2015 when the frequency of delivery is reduced. Group expenditure fell 7.2 percent to $1.51 billion in the year.

The SOE declared a $5 million dividend to the government, unchanged from a year earlier.

Revenue from the mail and logistics unit fell 7 percent to $713 million, though the division turned a profit of $10 million compared to a loss of $38 million a year earlier.

Roche said sales from packages and parcels exceeded mail for the first time in the period, which he expects to continue as more people buy international retail goods over the internet.

"The cross-over in terms of revenue from the dominance of letters into parcels is incredibly significant for us," he said.

Revenue from the financial banking services gained 7.4 percent to $479 million, while non-banking financial services revenue slipped 6.3 percent to $45 million.

NZ Post injected $40 million of equity into Kiwibank, which Roche said was a long-term investment.

Last year, NZ Post said it would be able to meet Kiwibank's capital needs for the next few years, primarily to meet regulatory requirements for the lender to hold more top tier capital on its books and to overhaul its business systems.

The SOE has $200 million of bonds listed on the NZX debt market. The notes, which pay annual interest of 7.5 percent, last traded at a yield of 5.85 percent, according to NZX data.

(BusinessDesk)