Australia Post is back in the black, but says it will still lose $1.5bn on letters over 5 years

Photo: Don Arnold/Getty Images

Putting up the price of letters helped Australia Post stem some of the losses, with the government-owned business announcing a $36 million full-year profit after tax for FY16, a $258 million turnaround on the previous year.

The before tax profit was $41 million and a dividend of $20 million has been recommended.

The mail side of Australia Post still lost $138 million, with the deficit made up by the parcels side, which saw profit increase by 8% to $314 million.

In FY15, Australia Post had its first negative result in 30 years, losing $222 million, primarily due to the letters business ending up $381 million in the red.

This fin year, revenue was up 3% year-on-year to $6.6 billion. Total volumes were down 290 million to 4,024 million in FY16.

But it’s been a rocky year for the service and its $4.8 million CEO, Ahmed Fahour, as he seeks to transform the logistics business. A plan to charge people up to $9 to hold their parcels was scrapped, despite initial claims it was what customers wanted.

And hiking the price of letters by 42% to $1 in January, as well as giving itself longer to deliver the mail appears to have helped hasten the decline in mail, with letter volumes falling another 9.7% in FY16, the largest ever 12-month decline.

“Changes to the letters business introduced earlier this year were an important factor in the group returning to profitability. While the letters business is in structural decline, we have reduced our forecast cumulative losses in letters from around $5bn to $1.5bn over the next five years,” Fahour said.

The business has also been looking at selling off its $300 million property portfolio, including 7 historic capital city GPOs.

AP has been trialing drone deliveries for small parcels, but has also been facing disruption from new players in the parcel sector.

Fahour said strong financial discipline across the business helped in the turnaround.

Here’s the comparison chart of Australia Post’s performance over the last two years:

Source: supplied

“Returning to profit is a pleasing result for our employees, post office operators and our other important stakeholders, and shows that Australia Post is on a more sustainable path for future growth,” he said.

“The parcels business has performed well despite increased competition from overseas players. We have outperformed in difficult market conditions to post an 8% profit increase.”

The CEO said ongoing investments in eCommerce added capabilities and capacity for future growth, while a strategic alliance with global logistics provider Aramex will improve the delivery side.

Australia Post partnered with the CSIRO’s data innovation group Data61, as it sought to transform into an ecommerce and eGovernment services company.

They’re even hoping to get into the electronic voting business, according to a submission to Victoria’s parliamentary inquiry into e-voting.

The business now has more than 2,800 licensed post office operators sharing in $125 million of additional annual payments committed to over the past three years, a 39% increase. And MyPost added 1.9 million new members this financial year, with more than 4 million Australians now registered.

Meanwhile, giving itself an extra two business days to deliver a letter has helped lift AP’s on time performance rates 3% over the last year to 98.2% in a comparison between the first six months of 2015 and 2016.

By June this year, the company was claiming 98.% on time performance for letters, but between financial years, the improvement was only 1.4% to 96.2. Over the same period, the parcel service performance increased just 0.1% to 95.2%.

The business claims a 99% success rate on its Express service over the last three years.

Here are the figures:

Source: supplied