Tough second-half hurts NZ Post and Kiwibank full year earnings

State-owned New Zealand Post and its banking subsidiary Kiwibank both reported reduced profits after tax for the year to June 30, with NZ Post's result bolstered by one-off benefits from an Australian asset sale and Kiwibank experiencing a difficult second-half to the financial year.

The Kiwibank group, which includes savings, insurance and investment products, saw profit fall 0.8% to $131 million in the latest financial year, with the banking operation providing $124 million of that total.

"The flat result reflected the challenging environment following global uncertainty and increased funding costs for banks," chief executive Paul Brock said, citing "a very competitive market and during a period of significant investment in bank infrastructure and services."

Meanwhile, NZ Post reported net profit after tax of $141 million for the year the June 30, down 1.4%, characterised by chief executive Brian Roche as "confirming a steady year-on-year financial performance for the group overall."

A major contributor to the profit result was the $43 million net proceeds from the sale of NZ Post's Converga subsidiary in Australia, for $A75 million generating a gain of $NZ43 million, and freeing up capital funds for investment.

Total revenues were down 6.6% for the year at $1.49 billion, matched by an equal percentage drop in spending, at $1.34 billion. NZ Post declared a $5 million dividend for the year to the Crown.

"The profit is largely due to Kiwibank and the proceeds from the sale of NZ Post's Australian-based subsidiary Converga to Canon Australia," Mr Roche said. "Kiwibank had a good first half performance. However, this was not matched in the second six months."

Brock said Kiwibank's "profitability and rates of return ... were satisfactory in what is a very competitive environment."

The banking operation built up its loan portfolio by 7% to $16.7 billion and customer deposits rose 7.6% to $14.8 billion, with market share in the personal mortgage market maintained at 7% while banking services to small and medium enterprises grew to 8.4% of the market. The bank did not provide comparative figures for the size of its portfolios in today's announcement.

The year had seen "consolidation with significant progress in the integration of the new core IT operating system" and "major changes to our retail network,"  Mr Brock said.

NZ Post is in the process of divesting 45% of its holding in the Kiwibank group to the NZ Superannuation Fund and the Accident Compensation Corp, which will take 25% and 20% respectively.

"We are now actively engaged with the parties to reach a timely conclusion of this transaction," Mr Roche said.

NZ Post's postal services business "made a small loss," with letter volumes continuing their long-term decline at a rate of approximately 8% over the previous year, although parcel volumes and revenues rose 6.4% and 2.9% respectively and the company would "actively explore market opportunities to grow our core future business in parcels," Mr Roche said.

While margin growth was difficult in current market conditions, "investment in processing and delivery technology position it (the postal business) well for the future," he said.

(BusinessDesk)

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