2004-05 Annual Report - Australia Post

Performance
Australia Post delivered another
year of record profits in 2004–05.
This result highlights the excellent
performance of the corporation
over recent years as we have
consolidated revenue growth and
continued to focus on reducing
costs through efficiency and
process improvements. The three
core business areas – letters,
retail and agency services,
and parcels and logistics – all
contributed to the corporation’s
revenue growth of $162.4 million.
Revenue growth in the letters
portfolio was 1.2 per cent, a good
result given the modest growth in
domestic letters volume and the
price cap that currently applies to
the basic postage rate. Our focus
on enhancing the value of the
mail supply chain and promoting
the value of paper-based products
has assisted the positive result
within this portfolio.
Increased revenue from parcels
and logistics (of 9.7 per cent) was
again the result of strong growth
from our traditional customers
(deliveries from consumer to
consumer and from business to
consumer) as well as encouraging
growth in the business to
business (B2B) logistics and
distribution segment.
The increase in revenue from the
retail and agency services portfolio
(of 5.1 per cent) can be attributed
to the continued alignment of
retail products to meet customer
demand, combined with a
more targeted marketing and
promotional strategy.
Return on revenue declined
slightly (to 12.1 per cent) from
last year’s record high (of 12.5
per cent) but still remains strong.
This reflects the continuing
productivity improvements
being generated throughout
the network, as well as our
continued focus on reducing
costs. Productivity improvement
of 2.6 per cent this year maintains
the solid gains of recent years
with the five-year cumulative
improvement being four times
the national average. Trading
expenditure increased by 4.2 per
cent, a good result given that
enterprise bargaining agreement
pay increases amounted to
4.7 per cent during the year.
Post’s record before-tax profit
of $524.5 million ensures that
the corporation will continue its
high level of dividend returns
to the Commonwealth. Based
on a revised target dividend
distribution of 75 per cent of
the corporation’s after-tax profit,
dividends payable from the
2004–05 result are expected
to total $286.2 million.
Strategic acquisitions
In 2004–05, Post continued its
growth in the parcels and logistics
market by acquiring third-party
logistics company JR Haulage
Pty Ltd (trading as State
Warehouse and Distribution
Services (SWADS)), as well as
the national courier company
SnapX. SWADS was acquired
to complement our logistics
and warehousing offering to
the B2B market, while SnapX was
acquired to enhance Messenger
Post Couriers’ presence in the
Canberra and Sydney markets.
Capital expenditure
Capital expenditure for the year
(not including the acquisition
of SWADS or SnapX) was
$159.4 million. Investment
focussed on sustaining our
existing core operations with
a significant amount spent to
replace plant and equipment,
including vehicles, unit loading
devices and retail peripherals.
Expenditure on the restructuring
of the large-letter and parcels
networks was also finalised
during the year.
Cash management
Post was able to fund the
acquisition of SWADS and SnapX
from available cash reserves,
resulting in minimal impact on
the corporation’s key balance
sheet and cash flow indicators.
Debt to debt plus equity again
improved during the year (gearing
dropped to 22.6) and interest
cover remains constant at 17.2.
The corporation’s $530 million
long-term debt is now at floating
interest rates as the remaining
$100 million floating to fixed
swaps matured on 25 June 2005.
Financial reporting standards
The corporation is in the process
of transferring its accounting
policies and financial reporting
from a combination of the Finance
Ministers Orders (FMOs) and
Australian Accounting Standards
(AGAAP) to a combination of
FMOs and Australian equivalents
of International Financial
Reporting Standards (A-IFRS).
Included in the notes to the
accounts are the known impacts
of the implementation of
A-IFRS on the opening balance
sheet at 1 July 2004. We are in
the process of completing the
detailed A-IFRS impacts for the
year ended 30 June 2005.
Outlook
The immediate outlook for
Australia Post remains positive.
Domestic letter volume growth
remains modest but is higher than
for most other postal authorities.
Our strategy to position costeffective,
paper-based products
and services as a vital part of
contemporary communication
will be important to future growth
in letters. We have strategies in
place that will encourage stronger
growth from retail and agency
services as well as parcels and
logistics. We will also pursue
further productivity improvements
and build our capability to support
future growth opportunities.
Australia Post Annual Report 2004/05 Report of Operations
Financial results
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