Steady progress in difficult conditions, An Post Financial Results for 2012.
25 April 2013
- Significant progress on cost reduction
- New Business Growth
- Mail volume decline slowed, mirroring European trend
- Subsidiary turnover increased to €111m
- Strong Post Office retail performance
The An Post Group achieved turnover of €807.3m in 2012, marginally ahead of the previous year’s €806.7m. This was due in part to growth in its subsidiary companies’ revenue to €111m (€80m in 2011), including One Direct and The Gift Voucher Shop, which are performing very strongly in their respective markets and realising the benefits of the company’s ongoing investment and diversification strategy.
Traditional mail volumes declined by a further 5.2 per cent due to a combination of the economic circumstances and a structural decline in postal volumes in general, reflecting increased e-substitution. Revenue was also challenged by the delay in securing Regulator approval for an increase in the standard letter rate. These factors resulted in a Group operating loss of €17.5m (€2.2.m in 2011), the first trading loss incurred by the Company since 2003. ***
While traditional mail volumes have declined 27 per cent since the peak of 2007, the rate of mail volume decline slowed significantly over the year.
Commenting on the 2012 financial results, Donal Connell, Chief Executive of An Post said: “Like postal operators across the globe, we continue to deal with declining core mail volumes, increased electronic substitution and significant uncertainty in the general business environment. Our experience reflects the ongoing difficulties being faced by our business customers across almost all sectors – the trading environment continues to be most challenging.”
“The loss reported will be addressed within the current five year plan. While economic forces continue to be unhelpful, the current strategy of ongoing cost reduction, maximising revenue-generating opportunities across the Group and appropriate pricing adjustment to compensate for the full cost of providing the Universal Service Obligation (USO) will return An Post to acceptable profitability. It will also re-establish the USO on a sustainable financial footing for the longer term benefit of the wider economy,” he said
“The loss incurred by An Post in operating the USO was over €60m last year. This is clearly unsustainable. Postal operators dealing with the particular challenges of the postal market must be able to price products and services according to market forces. The introduction of an appropriate Price Cap Mechanism, linked to the Consumer Price Index with an option/adjustment to incentivise efficient provision of services, is essential to underpin regular, fair and necessary price adjustments in the future,” he added.
Staff Full-Time Equivalent (FTE) numbers were reduced by 349 last year, bringing the total reduction to 1,284 across the core An Post company since January 2009, thus reducing annual labour costs by €53.4m. This is significant progress against the strategic plan which requires a total staff reduction of 2,600 FTEs across all parts of the company by the end of 2016. The phased achievement of this target continues to be a priority issue for management. Staff numbers have increased slightly in the subsidiary companies, in line with budgeted growth and expansion.
The ongoing Change programme has delivered savings of €100m in annualised operating costs since January 2009.
Newly appointed Chairman (Designate), Christoph Mueller, said: “The contribution of a high quality postal service to a modern economy is essential and accepted throughout the world. Declining traditional mail volume has caused many countries to examine the financial model behind the provision of the Universal Service Obligation.”
“I understand that significant change has taken place in An Post over the last number of years and that necessary change programmes are ongoing. My own experience indicates that such change will continue as the business aligns itself with demand and volume in order to remain competitive and meet changing customer demands. Improved flexibility, efficiency, cost effectiveness and innovation will be key elements in the Company’s drive to provide superior customer service across all aspects of the business,” he added.
An Post is now among the world’s best postal companies in terms of service quality and infrastructure standards and despite the recent price increase, the first for six years, remains among the cheapest in Europe.
Investment from the Company’s own resources, without recourse to borrowings or subsidy, continued during 2012, when the installation of latest-generation mails processing technology was completed in the four national mail hubs, as well as the provision of real-time delivery verification equipment to all postal delivery staff. Such investment has been key to An Post securing a number of major international parcel contracts which have the potential to generate further business for the Irish economy.
This investment included consolidating some mails delivery operations at purpose-built or refurbished Delivery Services Units (DSUs) nationwide. This major infrastructural investment brought enhanced facilities for customers and staff as well as key efficiencies for the company.
The Retail division performed strongly with revenue of €169m. Products such as commission-free Sterling and Dollar sales contributed €4.4m, up 13 per cent on 2011. Investments in State Savings products through the Post Office totalled €2.2 billion last year, bringing their total value to €16.2 billion by year end, an increase of €10 billion since 2007.
The company continued to upgrade the retail post office network with a significant programme of improvements to premises and customer facilities, together with several local re-locations to improved premises. A new Post Office opened in Dublin’s Citywest area and planning for new post offices in Letterkenny, Co Donegal and Lucan, Co Dublin got underway, demonstrating the strategy of matching the national post office network to evolving customer retail and lifestyle habits.
The balance sheet includes a pension deficit of €285m (€484m in 2011). As is the case with all defined benefit schemes, An Post has to address funding issues arising from the impact of the global financial crisis. A plan is currently being finalised which includes changes which will enable the scheme to meet the requirements of the Minimum Funding Standard, as laid down by legislation.
Download a copy of our Annual Report 2012 - Commentary
Download a copy of our Annual Report 2012 - Financials
*** An FRS 17 accounting charge in relation to the current deficit in the company’s pension scheme, together with the operating loss, resulted in an after-tax Group loss of €39.4m (€0.3m in 2011).
