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NZ Post improves half year result but big challenges remain

25 February 2013

New Zealand Post Group improves half year result but big challenges remain

The New Zealand Post Group has posted an overall improved result for the half year ended 31 December 2012 but with mixed results across its financial services, and its logistics and mail businesses.

The Group recorded a net profit after tax of $59.6 million, compared with $35.4 million in the corresponding period in 2011.

The Directors have declared an interim dividend of $2.5 million for the period, the same as for the first half of the previous financial year.

New Zealand Post Group Chief Executive Brian Roche said the result was boosted by the performance of Kiwibank and the Group’s financial services businesses.

Mr Roche said Kiwibank’s first half performance builds on its market position. The bank performed well in a highly competitive market, particularly in the face of aggressive competition in the home loan environment.

There were mixed results across the logistics and mail businesses. The result reflects the benefits of the full consolidation of the courier business – Express Couriers Limited (ECL) – following the acquisition of the remaining 50 percent of the business in June 2012. However that was balanced against a continued decline in letter volumes and revenue.

Mr Roche said ECL’s performance was very encouraging in the extremely competitive courier market.

“ECL has performed well to increase profitability compared with the previous year. The result supports our decision to purchase the remaining shares in this company so as to have 100 percent ownership of a business providing express delivery services.

However challenges remain for the mail business with total mail volumes falling by 35 million compared with the corresponding period the previous year – a drop of 8.1 percent. Tight cost management helped offset the declines in revenue.

“Thirty five million fewer pieces of mail in the network is a stark reminder of the need for change. New Zealand Post Group is confident it can maintain a viable and sustainable physical network if it is given the flexibility to make necessary changes in the future.

“Making those changes can still be achieved in a measured and planned manner working in the best interests of the community and business. But the latest mail volume statistics are further evidence that the ability to make the right decisions needs to be given now rather than put off,” Mr Roche said.

The New Zealand Post Group full year financial outlook is to meet expectations. Despite an increasingly competitive residential banking sector, Kiwibank has maintained strong levels of profitability, although further pressure is expected towards year end. The mail business continues to manage the decline in letter volumes with operational changes to ensure the business remains viable while longer term initiatives are implemented. ECL continues to trade strongly.

Other key decisions made in the first half of this financial year include the divestment of the shareholding in Datacom, which will result in a one-off gain on sale, and the sale of two office buildings in Auckland and Wellington, all of which will free up capital for both the bank and continuing change in the logistics and mail businesses.

“The Group remains committed to and confident of achieving the strategic goals of growing the bank and delivering a sustainable network for the future”, said Mr Roche. $ millions 6 months ended 31 December 2012
(unaudited) 6 months ended 31 December 2011 (unaudited) 12 months ended 30 June 2012 (audited)
Revenue from operations 872.3 670.2 1,309.4
Operating expenditure 793.1 628.5 1,223.5
Profit before income tax 78.4 43.9 190.1
Net profit after tax 59.6 35.4 169.7
Share capital 192.2 192.2 192.2
Shareholders’ equity 1,019.2 833.0 959.5

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