Tough second-half hurts NZ Post and Kiwibank full-year earnings

Friday 26th August 2016

State-owned New Zealand Post and its banking subsidiary Kiwibank both reported reduced profits after tax for the year to June 30, with NZ Post's result bolstered by one-off benefits from an Australian asset sale and Kiwibank experiencing a difficult second-half to the financial year.

The Kiwibank group, which includes savings, insurance and investment products, saw profit fall 0.8 percent to $131 million in the latest financial year, with the banking operation providing $124 million of that total.

"The flat result reflected the challenging environment following global uncertainty and increased funding costs for banks," said chief executive Paul Brock, citing "a very competitive market and during a period of significant investment in bank infrastructure and services".

Meanwhile, NZ Post reported net profit after tax of $141 million for the year the June 30, down 1.4 percent, characterised by chief executive Brian Roche as "confirming a steady year-on-year financial performance for the group overall".

A major contributor to the profit result was the $43 million net proceeds from the sale of NZ Post's Converga subsidiary in Australia, for A$75 million generating a gain of NZ$43 million, and freeing up capital funds for investment.

Total revenues were down 6.6 percent for the year at $1.49 billion, matched by an equal percentage drop in spending, at $1.34 billion. NZ Post declared a $5 million dividend for the year to the Crown.

“The profit is largely due to Kiwibank and the proceeds from the sale of NZ Post’s Australian-based subsidiary Converga to Canon Australia,” Roche said. “Kiwibank had a good first half performance, however this was not matched in the second six months."

Brock said Kiwibank's "profitability and rates of return ... were satisfactory in what is a very competitive environment".

The banking operation grew its loan portfolio by 7 percent to $16.7 billion and customer deposits rose 7.6 percent to $14.8 billion, with market share in the personal mortgage market maintained at 7 percent while banking services to small and medium enterprises grew to 8.4 percent of the market. The bank did not provide comparative figures for the size of its portfolios in today's announcement.

The year had seen "consolidation with significant progress in the integration of the new core IT operating system" and "major changes to our retail network", said Brock.

NZ Post is in the process of divesting 45 percent of its holding in the Kiwibank group to the NZ Superannuation Fund and the Accident Compensation Corp, which will take 25 percent and 20 percent respectively.

"We are now actively engaged with the parties to reach a timely conclusion of this transaction," said Roche.

NZ Post's postal services business "made a small loss", with letter volumes continuing their long term decline at a rate of approximately 8 percent over the previous year, although parcel volumes and revenues rose 6.4 percent and 2.9 percent respectively and the company would "actively explore market opportunities to grow our core future business in parcels," Roche said.

While margin growth was difficult in current market conditions, "ongoing investment in processing and delivery technology position it (the postal business) well for the future," he said.

BusinessDesk.co.nz

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