17 October 2009

Australia Post results

The Friday 16 October edition of the Australian Financial Review advises us of some of the highlights of the Australia Post Annual Report, which was tabled in Federal Parliament the day before:

Australia Post has suffered a 40 per cent drop in net profit as it argues the case with the Australian Competition and Consumer Commission to increase the price of basic postage stamps from 55¢ to 60¢.

The government-owned enterprise’s annual report tabled in federal parliament yesterday revealed a net profit of about $260 million in 2008-09, as revenue rose by just 0.5 per cent to $5 billion.


Letter volumes fell by 4.1 per cent and the number of delivery points grew by 200,000.


The corporation has sought to offset the ongoing decline in traditional letter volumes by diversifying its revenue streams.

Revenue in its parcels and logistics business rose by 2.5 per cent, while agency services and retail products grew by 3.2 per cent.

Some observations:

(1) The association of a 40 per cent profit drop with a 4.1 per cent drop in letter volumes sounds to me as though Australia Post is remarkably dependent upon the monopoly part of the business, the part that the Government prevents anyone else from entering, and which finances for Australia Post a huge infrastructure that it can use to attack private operators in other parts of the postal and logistics business.

(2) Whenever anyone pats themselves on the back for revenue growth I want to ask what was the contribution to profit. This is an important question when so much of Australia’s profit comes from the letter mail part of the business, which is sheltered from competition. Just how profitable are the parcels and logistics businesses that compete with the likes of TNT and DHL? Could it be that these parts of the business are cross-subsided by the letter business and the infrastructure it supports? Let us all hope that the ACCC takes a good hard look at that question before it inflicts a rise in the letter rate upon all of us.

A statistic that should be taken with a grain of salt:

Australia Post said that it had met or exceeded its community service obligations including the delivery of 95.5 per cent of domestic letters on time or early, against a target of 94 per cent.

Apart from the fact that a benchmark which permits about one letter in sixteen to be delivered late is hardly a stretch goal, there is the small matter of letters delivered to the wrong address. I get enough letters delivered outside the time parameters (and we are talking Sydney – Melbourne here) and spend enough of my time wandering around the suburb popping wrongly delivered mail into letter-boxes that may not even be in my street, to know that this statistic is hogwash. How would they gather statistics on the percentage of mail delivered to the wrong address? Or doesn’t that matter – as long as it is delivered within the time parameters somewhere, anywhere, it counts as a letter delivered on time?

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