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NZ Post 1H profit drops 19% on reduced Kiwibank contribution

Monday 20th February 2017

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New Zealand Post's first-half profit dropped 19 percent after the sale of almost half its stake in Kiwibank reduced income and as revenue from traditional postal services continued to decline.

Net profit fell to $89 million in the six months ended Dec. 31, from $110 million a year earlier, the state-owned enterprise said in a statement. Revenue dropped 9 percent to $467 million, while expenditure declined 12.7 percent to $446 million. The company is in the fourth year of a five-year turnaround to shrink its business to keep pace with falling mail volumes.

The company sold 47 percent of its Kiwibank stake for $493.5 million in October 2016, which it used to repay $180 million of debt and make a $100 million dividend payment to the Crown, while also booking a $25 million gain. Net profit from Kiwibank dropped 26 percent to $54 million in the first half, which reflects NZ Post reaping 53 percent of the bank's earnings in November and December, compared to 100 percent previously. In the first half, Kiwibank's lending rose 4.4 percent to $17.4 billion, with customer deposits were up 3.9 percent to $15.4 billion.

Chief executive Brian Roche said NZ Post loses between $20 million and $30 million annually from a declining number of letters sent, but the postal business as a whole produced positive earnings, thanks to cost savings and a 7.5 percent uptick in parcel volumes through the first half, driven by online shopping.

Net profit excluding Kiwibank dipped 5.4 percent to $35 million, with profit from postal services turning to a $14 million gain from a loss of $1 million in the same period last year. NZ Post processed two million more parcels in November and December 2016 than in the prior period, while letter volumes fell 9 percent in the six months.

The company has launched new delivery options to keep up with increasing online shopping volumes, including parcel collect and drop-off at supermarkets, bookshops and pharmacies. It opened a new operations centre in Hamilton and will open another in Christchurch by midyear. Its YouShop service, which ships parcels from overseas merchants who don't post to New Zealand, now has 220,000 customers, it said.

Lower revenue was also attributable to foregone revenue from NZ Post's sale of wholly-owned subsidiary Converga to Canon Australia in Nov. 2015, it said. 

The company declared a $2.5 million interim dividend to the Crown.

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