Mail blues in a sea of red

By DANIEL RIORDAN

"They tried, they died - let us pray."

That hardnosed judgment from a top officeholder at National Mail's biggest competitor indicates how tough battling NZ Post has been for the blue mailbox company.

National Mail has conceded defeat and will close next Friday, laying off 200 workers, but leaving its 650 mailboxes behind in the hope a buyer for its network in Auckland and Wellington can be found - however unlikely that may be.

Management said the company was well behind its business targets and pulled the plug to prevent further loss of shareholders' money.

The red ink will be made public soon, as the company is due to report its result for the year to September 30. When it raised $14 million in its March float and Stock Exchange listing, it forecast an annual loss of $5.5 million.

Revenue is running at least two months behind plan, so the reported loss is expected to be much greater.

Shares issued at $1.25, many to staff, were worth 15c yesterday.

Industry sources said National Mail might have got in a few jabs, but it was always mismatched against its state-owned rival.

Chief executive Antony Fowler blamed potential customers' reluctance to move from NZ Post.

He said the forecasts looked reasonable at the time of the float, but "we struggled to convert enthusiastic support into actual customers."

Postal union rep Bill Andersen said the company's prospectus assumptions had proved foolhardy.

"You don't take on a SOE [state-owned enterprise] that way unless you're very sure you'll get those big customers."

But cynics point to the existence of 30 smaller competitors to NZ Post, carving out niche markets. National Mail, they say, erred by taking on the reigning champion head-on, trying to take its most valuable customers in its most profitable markets, the Auckland and Wellington business communities.

Industry sources told the Business Herald that claims in the prospectus were misleading and the company should be called to account for them.

Life has not been easy for NZ Post since deregulation in April 1998.

Although it made $23 million in the year to March 1999 and $30 million in 2000, it says 2001 profits will be down. In the three months to June it lost $3.8 million.

Its monopoly profits are well in the past - $48 million in 1997, $75 million in 1996, $72 million in 1995.

In October, when closing its North Shore Mail Centre, NZ Post national operations manager Bruce Heesterman said electronic mail and commerce had cut into profits.

NZ Post is still top dog by a long way, with a claimed market share of 96.5 per cent, only 2 per cent down on its pre-deregulation figure. Most of the rest is shared among National Mail, Document Exchange, Fastway Post, Pete's Post and NZ Post subsidiary KiwiMail.

For National Mail, that's a long way from the 10 per cent it said it needed to break even and the 20 per cent it hoped to capture by 2002.

DX Mail general manager Mark Brightwell said deregulation was never going to be the sea change some had predicted. NZ Post was already offering a reliable service as a state-owned enterprise and its prices were low.

Fastway Post managing director Peter Barr said NZ Post was a well-run organisation with a lot of good people and an international reputation. "They're a tough nut to crack."

Mr Barr believes National Mail would have done better if it had focused on businesses of small to medium size, which is where Pete's Post has aimed.

Customers of National Mail the Business Herald contacted were positive about the service they received from the company, and were sad to see it go.

The biggest included ASB Bank, electricity lines company Vector, Farmers Trading Company, Work and Income New Zealand, the National Party and Royal & SunAlliance.

Farmers used the company to deliver 40 per cent of its mail, including monthly statements and direct mailouts in Auckland and Wellington.

"There were teething problems, but no more than you'd expect," said Farmers' divisional credit manager, Keith Fox. "They gave us good service and good support."

As did NZ Post, added Mr Fox, highlighting one of the main problems for National Mail. Whatever it delivered to customers, the deeper-pocketed NZ Post was able to match.

National Mail chiefs had little time for the media this week as they administered the company's last rites.

Founder and director Paul Meier, who made his money partnering Suzanne "Natural Glow" Paul in Prestige Marketing, refused to talk. Mr Meier owns 46 per cent of National Mail.

Chairman Rick Flower, whose company, DF Mainland, was organising broker for the float, did not return calls.

Other big shareholders include Ellis Capital, lead manager for the float, with 10.3 per cent, Mr Fowler (7 per cent) and fund manager Armstrong Jones with 6 per cent.

Those shareholders and the roughly 500 others who took a punt on a postal alternative will be hoping they can salvage something from the wreckage.

One analyst estimates the company has around $5 million in cash on hand, worth 18 cents a share.

He said there might also be an opportunity to take advantage of tax losses of the listed shell, and National Mail may yet post itself to another business opportunity.