NZ Post half year result below budget despite 10% rise

By NZPA

Thursday 15th March 2007

New Zealand Post, owner of Kiwibank, said today that even though its December half-year net profit rose 10% over a year earlier to $38.2 million it was below budget.

Chief executive John Allen said the result was pleasing, although he acknowledged targets were not met even though the economy had grown substantially faster than forecast.

The state-owned corporation set "stretch" budgets, he said.
The result was still "pleasing" and he was optimistc about the second half which was likely to be similar to the first half.

Revenue rose 9% to $616.7m despite an increasing decline in letter revenue. Domestic mail, which a decade ago made up over 90% of the corporation's revenue, has steepened in decline -- down 2.9% -- and only makes up around half of revenue today.

Kiwibank and Express Couriers, half owned with DHL, a unit of Europe's biggest postal service, Deutsche Post, are the rising stars at NZ Post.

Group expenditure rose almost as fast as revenue to $561.9m. NZ Post is spending $80m over five years upgrading its main mail centres.

The Government's interim dividend will rise from $16.7m to $20.3m.

Allen said innovation, such as the recently introduced electronic gift voucher, Prezzy Card, had offset the decline in traditional revenue.

He said NZ Post had no new or specific plans to further diversify. SOE minister Trevor Mallard recently told SOEs to consider diversifying to help drive economic diversification. Nor were any spin-offs planned.

"However, we will continue to explore growth opportunities and refine how we operate to keep pace with changing markets always with the goal of developing sustainable practices to meet the current and future needs of our customers."

During the period, Kiwibank more than doubled its after-tax profit to $11.4m. The bank now had over half a million customers.

Local and international growth in packets and parcels, stimulated by the global craze for online trading, was helping offset the fall in letter volumes.

"This changing mail mix means delivering larger, heavier items to more mail boxes around the country and this continues to place pressure on the business to manage increasing costs while maintaining a high standard of mail delivery," Allen said.

International mail was also continuing to grow.

Allen said the company expected strong competition across all parts of the business and ongoing pressure on mail volumes in the next six months.

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