Parcels give Australia Post’s profit a huge lift

Source: supplied.

Australia Post’s rapidly growing parcel business has been great for the bottom line, with the government-owned entity announcing a before tax profit of $197 million for the six months to 31 December, 2016. The dramatic jump follows a full year profit of $36 million in FY16 and a $222 million the previous year.

Overall EBIT (earnings before interest and tax) growth was 15.6% for H1 FY17. EBITDA more than doubled to $369 million for H1 FY17, compared to $178 million a year earlier.

Domestic parcel volumes were up 5.7% and profit from the division jumped 16% to $189 million.

Australia Post now gets 70% of its revenue and all of its profit from commercial activities in parcels and ecommerce.

Group revenue increased by 8% year-on-year to $3.52 billion for the half.

Here’s a snapshot of how the national postie performed in the second half of 2016.

Source: Australia Post

Letter volumes continued their decline, falling a further 11% in the first six months, but after managing director and CEO Ahmed Fahour warned in previous years that the group looked set to lose billions of dollars as a result, today he said the venture was now break-even, with $600 million in losses avoided so far due to reforms.

Today Fahour quit after seven years in the top job in an apparent row with the Turnbull government, which was demanding a reduction in is $5.6 million pay packet.

Six months ago, he was warning the letters business would lost $1.5 billion over five years, having increased the price of postage by 42% to $1 and created a two-tier system that takes up to six business days to deliver mail. The price to get a letter more than doubled to $1.50 for delivery within four days.

The result is a partial vindication for Fahour, who faced widespread criticism over his $5.6 million pay packet, including from prime minister Malcolm Turnbull, who said the CEO was overpaid.

“This is one of the strongest first half results in recent history and it demonstrates that we are on the right path to ensuring the future of Australia Post for our people, the community and our important stakeholders,” Fahour said.

“We are delivering more parcels than ever before, with domestic parcel volumes up 5% in the first half, market share increasing and at the same time we’re trialling new delivery innovations like evening and weekend deliveries to give our customers an even better experience.

“We are also responding to global competitors entering the local market by investing in the future. Last year we made a strategic investment in global parcels/ecommerce giant Aramex and we are already reaping rewards in growing our inbound and outbound parcel volumes.”

Fahour said the reforms the business implemented “avoided the need for a multi-billion dollar rescue package” by the government.

“It has also meant we have kept our people in meaningful employment while returning a dividend to the Federal Government,” he said.

As part of the changes, 9,800 people have been redeployed to growth areas of business, while the outsourcing of post office operations has seen payments to those concessions increase by $26 million (13%).

Slower delivery times have also improved the company’s KPIs for customer service when it comes to “on-time” delivery, which now stands at 98.5%, well above Australia Post’s own target of 94%.

Australia Post will release its full year results in September 2017.

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