An Post, Ireland’s national postal carrier, has reported a 15.6m (US$17.4m) pre-tax loss in its 2016 Annual Report. Revenues of 825.7m (US$924m) were in line with the previous year (826.1m (US$924m)) due to strong performances by An Post’s subsidiary companies, General Election mail revenue, and a 3% price increase for mail. However, costs grew by 18.4m (US$20.6m) to 839.3m (US$938m) due to one-off costs and the impact of the Labour Court pay increase of 2.5%, costing 8.9m (US$10m) in 2016.
Letter volumes, down 5.2% on 2015, meant that An Post incurred a loss of 41.3m (US$46.2m) in delivering its Universal Service Obligation (USO) in 2016. Post Office revenue declined 2.5m (US$2.8m) on the prior year to 161.8m (US$180m).
Growth from products such as PostFX (+7%) and banking transactions (+4.6%) shows the potential for expanded financial services. The An Post-managed State Savings products attracted strong investment and the fund now exceeds 20bn (US$22bn).
The increasing losses, principally from the decline in mail volumes reflecting global trends, have consumed An Post’s cash reserves. The net cash balance of 26m (US$29m) at year-end was considered insufficient for the company’s medium-term sustainability, as mail volume decline was accelerating and losses for 2017 were projected at circa 50m (US$56m). As a result, An Post has applied for the regulatory price-cap to be removed so prices could increase in line with the European average of 20% to fund the USO.
An Post projects that the yield from the price increase will provide stability for 12-18 months, at which point the company will implement a new strategy to take advantage of global trends. An Post, in partnership with consultancy McKinsey & Company, has developed a long-term strategy focused on two dedicated business units the retail business, and mails and parcels, each with its own plan to close the projected deficits by 2021. Over half of the deficit will be covered by pricing and product growth initiatives, with the remainder addressed through cost-cutting and downsizing initiatives. Key growth areas include the burgeoning parcels market from increased online shopping; premium mail growth especially direct mail; and an increased range of financial products in the retail business. Further details on the proposed strategy will be communicated once the ongoing discussions with stakeholders are concluded.?
Dermot Divilly, chairman, An Post, said, “It is my determination, with my board colleagues, to face the challenges of a changing postal market. I will ensure that the nation has the appropriate postal operations and post office network for the long term. There’s no doubt that challenging and testing times lie ahead for An Post but by harnessing the power of its expertise and brand I remain confident of its future.”
David McRedmond, CEO of An Post, who joined the company in October 2016, said, “The results for 2016 show that the direction of travel for An Post needs to change. The digital world is closing one door with e-substitution of mails and online banking, while opening another into the world’s largest industry of shopping through e-commerce.
“We will price our services appropriately and deliver the best-in-class service in both our mails and post office businesses for customers throughout Ireland. Parcel delivery will be at the core of what we do to ensure that a customer in Ballina has the same global access to goods as a customer in Boston or Barcelona.
“I am confident that we have stabilized the immediate-term finances through the recent price adjustment, and done the detailed work to design sustainable strategies for both the mails and post office businesses. An Post is committed to providing a vital public service and to being a responsible employer, but the business will need to achieve a step-change in costs to ensure its mid- and long-term financial viability. This is not an easy task, but I look forward to engaging with all our stakeholders to transform An Post for the new market realities.”
May 31, 2017