Couriers, bank help NZ Post

By PAULA OLIVER

The evolution of NZ Post has continued with a solid half-year result built on squeezing the best out of its courier business, more transtasman mail and extra revenue from Kiwibank.

The state-owned enterprise yesterday reported a lift in profit for the six months to December 31 to $21.7 million - up from the previous corresponding period's $19.7 million.

The profit rise came despite a steepening drop in domestic letter volumes, traditionally a core part of NZ Post's business.

Those volumes fell by 3.7 per cent - far more than the recent trend of a 1 per cent fall each year.

Chief executive John Allen described NZ Post's overall result as pleasing, and pointed to growth in parts of the group which were making up for the fall in domestic letter volumes.

NZ Post would not give a financial breakdown of how each of its divisions performed, but Allen said the international mail business was one strand that had picked up the slack.

There was a 14 per cent increase in packets and parcels leaving New Zealand, and traffic was especially busy across the Tasman.

"The reality of transtasman commerce is underpinning a lot of that strength and growth," Allen said.

Another contributor to the profit was the tighter performance of NZ Post's courier business.

The division had previously not performed to the level Allen had wished, and extra effort had gone into it during the first half of the year.

"The efforts have resulted in significant improvements in the financial performance of the group over that period.

"They have been achieved by increasing the prices we have been offering in the market for some customers, and by driving higher levels of efficiency."

NZ Post revealed earlier this month that it was considering selling a half-share of its courier business to German-owned DHL.

The deal, which is still being discussed, would put the courier business into a separate joint-venture company.

NZ Post said it needed to align with a global player to ensure future growth.

But the potential move has raised questions about whether the discussions should be open to other players apart from DHL - and how the Government might react to the sale, given its firm view on not selling state-owned enterprises such as NZ Post.

Yesterday Allen said that the courier business was now giving appropriate financial returns.

Asked if that strengthened his hand in talks with DHL, Allen said: "Clearly a strongly performing business with strongly performing brands and networks is more attractive to prospective partners. To that extent, yes."

But he denied that the extra work that had gone into tightening the courier business was related to the DHL overture.

"No, we've identified the need to lift our game in the courier game for a number of years."

NZ Post was still only talking to DHL, he said, and had "the normal advisers you would expect in these sorts of transactions".

The other part of NZ Post that will play a crucial role in its efforts to combat falling letter volumes is Kiwibank.

The bank is on track to deliver its first profit in the next financial year, and it contributed to an overall lift in revenue.

The fledgling bank also caused some of the lift in expenses for NZ Post, as more people were needed to support its rapid growth.

The NZ Post group now has about 7500 full-time equivalent employees.

Asked how crucial Kiwibank was to NZ Post's future, Allen said that a mixture of price increases, efficiency improvements and growth in some parts of the letter business would join the bank's contribution.

"We expect it [Kiwibank] to become a significant part of the business," Allen said.

He conceded that there was a lot of money to be made in banking - perhaps more than in other parts of NZ Post's business.

"Clearly people have been making a lot of money out of banking.

"For us it is important that we have low cost structures because we want to take a low-price position in the market.

"But there's also good money to be made in other parts of our business."