KEY POINTS:
The increasing importance to New Zealand Post of its banking subsidiary is highlighted in the state-owned enterprise's latest half year result.
NZ Post said today that its net profit for the six months to the end of December increased by 9.2 per cent to $52.9 million from $48.4m in the previous corresponding figure.
The year ago figure was restated under new accounting rules from $38.2m.
The state-owned enterprise will pay the Government a dividend of $16.9m, down from $20.3m, which included a $5m one-off payment.
Revenue rose to $663.8m from $612.5m.
Kiwibank's share of the profits rose to $22.7m from $17.2m - increasing by nearly $1m more than the overall group profit did.
In contrast, the contribution from postal services fell to $41m from $42.5m.
NZ Post chief executive John Allen cautioned that the segmentation was carried out to meet the new accounting rules, and was not a breakdown into units that would be used for business reporting purposes.
But he acknowledged that the domestic full-rate letter market was probably declining at between 3 and 5 per cent a year, some of that possibly market share shift due to competition.
"Our view is that that level of decline is accelerating," Mr Allen said.
"What we're seeing is margin constraint, really caused by electronic substitution, that is loss of what was in the envelope into the electronic environment, and in growth in the cost base necessary to actually enable us to deliver," Mr Allen said.
The international postal market, though also challenging, had a strong half. International mail volumes were volatile and were driven largely by international trade, particularly in the trans-Tasman market.
Business mail volumes had been relatively stable, but that category did include much of the local government mail carried by NZ Post, he said.
During the half year NZ Post's Datamail Group was responsible for the production of 2.8m information packs and voting documents for local authorities, while the Postal Services Group delivered the documents and returned them to the councils.
Mr Allen said the domestic letters business was positive but if NZ Post had not invested in efficiency programmes during the past few years and had not raised some prices the position would be "much more difficult".
The return from domestic mail was not huge, "but it is a very important service," he said.
"What we have been doing is recognising that particular area of our business is not going to be delivering a huge return over time, and we've been diversifying into new areas of activity, so we can say, confidently to the people of New Zealand, that the NZ Post group is continuing to create and add value."
The domestic letters business would remain at the heart of NZ Post's activities and the company would continue to deliver that service, Mr Allen said.
As well as the big contribution from Kiwibank, NZ Post also reported strong performances from its Express Couriers business, and from Datamail.
"We are a courier business, we are a data management business, we are an IT business, we are a postal distribution business, and we are a banking business," Mr Allen said.
The company's new Send and You Shall Receive advertising campaign had resulted in positive feedback from customers and goodwill towards the group.
"I am sure that will translate in time into more people using our mail products, but that takes time," he said.
"It's not going to happen overnight and this is a long term initiative."
- NZPA
