New Zealand Post Announces Half Year Result
New Zealand Post announced today an unaudited net profit after tax of $16.0 million for the six months to December 2001. The result, although lower than the same period in 2000 ($22.4 million), takes into account operating expenses of $5.7 million for Kiwibank.
New Zealand Post Chairman, Dr Ross Armstrong, said the result exceeded budget targets and was strong given challenges faced by the Company such as rising underlying costs and disruption caused to the mail network following anthrax-related incidents.
"This is a pleasing result which demonstrates the strength of New Zealand Post's diverse business units and our commitment to the future growth of the Company. Retail and Agency Services performed ahead of budget, which is a positive result ahead of Kiwibank outlets opening throughout the country," said Dr Armstrong.
Chief Executive Elmar Toime said a highlight for the period included an increase in letter volumes of 1.3% on the same period to December 2000. Parcel, courier and unaddressed mail volumes were steady.
"Letter volumes moved against recent trends during the period - a pleasing outcome in light of the anticipated downturn in mail volumes and the disruption caused to international mail networks from anthrax-related incidents in mid-October," said Mr Toime.
Operating revenue for the six months to 31 December 2001 was $506.2 million compared with $520.1 million for the same period in 2000. The main factor that influenced revenue streams was a change in the way New Zealand Post recognises revenue from its Australian subsidiary Couriers Please.
"Our Australian subsidiary, Couriers Please, which was acquired in July 2000, had previously been reported on a gross basis," said Mr Toime. "The change has reduced reported revenue for the six months, although it has had no impact on the bottom line."
Mr Toime said that New Zealand Post's cost containment strategies continued to be successfully managed across all business areas.
"At $475.6 million, operating expenditure was at the same level as the previous year (2000: $475.7 million) but substantially improved on budgeted targets. If the current performance is maintained, New Zealand Post will meet its annual targets," said Mr Toime.
Other highlights for the period were the sale of an 8.0% shareholding in rural online supply company, RD1.com to Fonterra with a 75% return on investment; an interim dividend of $9.6 million; and registration of Kiwibank with the Reserve Bank of New Zealand on 29 November 2001.
"New Zealand Post achieved several major milestones during the six-month period to the end of December, particularly in relation to Kiwibank," said Mr Toime. "The next six months present an exciting challenge with the opening of Kiwibank outlets throughout New Zealand Post's retail network."
Disappointments included the cessation of the management contract with South African Post Office (SAPO). However, international consultancy Transend continued to work with SAPO in its counter automation project.
"Although the end of the contract was disappointing, Transend continued to provide ancillary work to SAPO. The agreement negotiated saw all outstanding amounts owing to Transend paid and overall the project was profitable for New Zealand Post," Mr Toime said.
New Zealand Post's long-term expectations are for continued pressure on mail volumes from competition and electronic alternatives to post.
"These issues are being addressed by seeking ongoing productivity improvements and investment in business areas that will add long-term value for our Shareholders," said Mr Toime.
Six months ended 31 December 2001 Operating revenue $506.2m Operating expenditure $475.6m Net earnings $16.0m Issued and paid-up capital $192.2m Shareholder funds $296.8m
Six months ended 31 December 2000 Operating revenue $520.1m Operating expenditure $475.7m Net earnings $22.4m Issued and paid-up capital $120.0m Shareholder funds $219.6m
Twelve months ended 30 June 2001 Operating revenue $981.9m Operating expenditure $926.3m Net earnings $21.0m Issued and paid-up capital $120.0m Shareholder funds $209.5m
QUESTIONS AND ANSWERS
Was the profit result for the half year to December 2001 in line with expectations? The unaudited net profit result of $16.0 million was ahead of target. It was a pleasing result that takes into account operating expenses of $5.7 million for Kiwibank as well as successful cost containment across all business areas.
Will postage prices change over the following year? New Zealand Post has no intentions of increasing the cost of a standard letter this year. At 40 cents, postage in New Zealand remains at the lowest level in developed economies.
Were there any one-off items which affected the half year result? New Zealand Post sold its 8% shareholding in online supply company, RD1.com to Fonterra for a 75% return on investment. Also operating expenses for Kiwibank for the half year to 31 December were $5.7 million.
What is New Zealand Post's projection for 2002? In the coming year New Zealand Post will be focusing on building value through international and electronic business markets as well as ensuring our mail, courier and retail services remain efficient.
We expect continued pressure on mail volumes from electronic substitution and competition so our diversification strategy remains a key to growing the company. Kiwibank is a major part of the diversification strategy for 2002 with outlets opening in Post's retail network throughout New Zealand.
New Zealand Post will meet its annual targets if current performance is maintained.
What is New Zealand Post's revenue result for six months to December 2001? Operating revenue was $506.2 million to the end of December 2001 (2000: $520.1 million). The reduced reported revenue is mainly a result of the way New Zealand Post recognises revenue from its Australian subsidiary Couriers Please.
What effect does the change in reporting for Australian subsidiary, Courier Please, have on revenue? Previously the revenue was reported on a gross basis. A change in the way revenue is reported has reduced reported revenue for the six months, although it has no effect on the bottom line. Adjusting for the effect, revenues were actually marginally ahead of last year.
Is New Zealand Post planning further acquisitions? New Zealand Post has invested $6.5 million in Maltapost, with a first payment of $2.6 million being made in February 2002. New Zealand Post is always looking for opportunities as part of its business diversification strategy, both in New Zealand and overseas.
Was there any effect from reduced revenue from the South African Post Office contract? International consultancy revenues were well down following the termination of the South African Post Office management contract. However, Transend continued to provide ancillary work for the Post Office and the agreement negotiated saw all outstanding amounts owing to Transend paid.
Why were operating expenses substantially improved on budgeted targets? At $475.6 million, operating expenditure was at the same level as the previous year but below budgeted levels for the period. The improved outcome was largely due to continued cost containment with the core business. Operating expenses of $5.7 million for Kiwibank were also within budget.
Mail volumes and competition
Why have letter volumes gone against recent trends? Letter volumes increased by 1.3% on the same period to December 2000, while parcel, courier and unaddressed mail volumes were steady. The Local Body Government elections contributed to the increase in volume, but the overall result is very pleasing in light of the anticipated downturn in volumes due to competition, electronic substitution and disruption to the mail network caused by anthrax-related scares.
What is New Zealand Post's approach to new business opportunities? New Zealand Post continues to look for investments that will deliver long-term value to shareholders as part of its business diversification strategy.
How is the dividend to the government calculated? The dividend policy is outlined in the Statement of Corporate Intent. The Board declared an interim dividend of $9.6 million for the six months to December 2001. It represents 60% of after tax profit. This compares with a dividend of $7.4 million for the same period last year.
Why is the dividend higher than last year? When the Government gave approval to develop banking services in 2001, it agreed to allow New Zealand Post to retain earnings of $6.0 million. This effectively reduced the interim dividend payable in 2001.