Strong An Post results in 2015 despite global mails downturn

28 April 2016

     

• Group revenues remain strong - Solid growth across subsidiary companies 
• Donal Connell announces departure after ten years as Chief Executive

Highlights:

• Strong An Post results in 2015 despite global mails downturn
• Group revenues remain strong - Solid growth across subsidiary companies 
• Donal Connell announces departure after ten years as Chief Executive
• An Post Group revenue reached €826.1m, up from €815.4m in 2014.  
• Core company cumulative staff FTE reduction reaches 1,879 (of 2,600 planned by 2019).
• €100m annualised cost savings achieved. 
• Losses of €32.3m in delivering Universal Service Obligation (€38.2m in 2014); this is an ongoing matter of concern despite having been reduced from a €67.3m loss in 2012.
• State Savings fund now worth €19.5 billion, with inflows of €400 million during 2015 despite the low interest rate environment. 
• Domestic Quality of Service hits all-time high - Next-day mails delivery exceeds 94% target. 
• Mail volumes down 35% from peak in 2007.
• Mail revenue loss since peak compensated by cost reductions, modest price adjustment, new product revenue and strong performance in subsidiaries.

 

 

In 2015 mails revenue totalled €526.2m, up €4.9m (1%) on the prior year. Retail revenue totalled €164.3, marginally down from €166.1m in 2014, due mainly to a fall in the volume of social welfare benefit payments distributed on behalf of the Department of Social Protection. 

2015 saw continued investment in An Post’s mail and retail networks; 43 post offices were completely refurbished – 23 in new locations with improved customer facilities (e.g. parking), while 14 vacant post office contracts were advertised in various parts of the country.  In all 6 post offices closed.  In 17 areas, local mails delivery services were relocated to a purpose-built Delivery Service Unit (DSU).

The Company is developing a new basic payment customer account which will be a transparent, good value, customer-friendly option in the Electronic Funds Transfer (EFT) market.  This innovation has been welcomed by both the Department of Finance and the Department of Social Projection. An Post is in discussion with both Departments regarding funding and the necessary support to bring this product to market.

An Post welcomed the report, issued earlier this year, by the Post Office Network Development Group, under the chairmanship of businessman, Bobby Kerr, which focuses mainly on the further development of Financial and Government Services, White-labelled Products and Social Capital/Enterprise across a re-modelled Post Office network.  The Company will implement initiatives which will enhance its current retail offering, maximise the potential of the Network and deliver value to our customers and the communities we serve.

Subsidiary companies continued to produce strong results in their respective business lines; 2015 revenue reached €122.9m.  UK-based Air Business is performing very well, positioned, as it is, at the forefront of new product development in international mail and mail-related services.  It now accounts for 10 per cent of An Post Group revenue and continues to grow.

Post Insurance (formerly One Direct, now rebranded) continued to grow its business. A Secured Car Loan offering was introduced in conjunction with First Citizen Finance, and the company is extending its underwriter base to increase its market reach.

An Post is a majority shareholder in the Gift Voucher Shop (GVS).  One4all giftcard products dominate the Irish market and GVS continues to make significant progress in the UK market, recently obtaining an e-money licence from the Financial Conduct Authority and becoming a member of the Visa group.  This has enabled the Company to issue its own cards and to introduce new products and services.

In all, the contribution of Subsidiary companies increased by 23% from €13m in 2014 to €16m.
The Pension Scheme continues to meet its obligations as laid down in the Minimum Funding Standard set by the Pensions Authority. The Scheme’s rules have been changed in line with agreements finalised with the An Post Group of Unions in 2014.

Commenting on the 2015 results, Chief Executive Donal Connell said that 2015 was another year of significant challenge and progress as the Company continued to focus on the changing needs of its customers and markets:
“Profit of €8.6 million, compared to €3.3m in 2014, is significant in that we maintained our profitability in the face of a mails volume decline of 2.9%.  Group revenue continues to be very satisfactory at €826.1m.  Our strategy of implementing appropriate pricing and cost efficiency measures in the core business while maintaining high standards of service quality, product innovation and diversification has to-date enabled the Company adequately cope with unprecedented threats and challenges.  However, the medium and longer term issues of safeguarding the USO and sustaining a realistic, high quality Post Office network now require urgent discussion with all Stakeholders, so that the core Company can achieve the necessary level of profitability to ensure its fiscal stability”.

Speaking at the GPO, Chairperson (Designate), Dermot Divilly said that while the mail business remains the largest revenue segment, it now represents 64% of total revenue, down from 74% in 2008. “In response to the ‘new normal’ of declining mail volumes, An Post, like so many other postal companies has strengthened its position in other businesses in Ireland and the UK. While the Company continues to develop opportunities presented by emerging trends in e-commerce, it will have to respond quickly to convert these into new business revenue streams; to-date An Post has been successful in doing so.  While the An Post Group is profitable, the current model whereby the profitable elements (retail and subsidiaries) subsidise the loss-making mails business is, in my view, becoming increasingly unsustainable. This is despite cost reductions resulting in €100m in annualised savings, service quality improvements and revenue increases”.

In a statement this morning, Donal Connell, who joined An Post as Chief Executive in 2006, announced that he plans to leave the Company in the second half of this year when his contract expires.

The Company’s Chairman (Designate), Dermot Divilly said that An Post was grateful for Mr. Connell’s commitment, contribution and leadership over the past ten years.

"Under Donal’s stewardship, An Post has been transformed into a profitable company with a clear strategic direction, a resilient business model as a trusted intermediary, an unrivalled reputation and a much improved cost base, all achieved during a difficult trading period for the business and the Irish economy.   Every aspect of the Customer’s experience - corporate, business and personal clients - has greatly improved during his term.” 

“Against a global background of declining mails volumes over the past decade, An Post has consolidated its position as one of highest quality mails service providers worldwide, with a significantly improved cost base. The Company has also established and grown a significant portfolio of successful and diverse subsidiary companies and is now a major player in Financial Services, including Foreign Exchange, One4all giftcards, worldwide subscription management and fulfillment, as well as home and car insurance.   These businesses continue to increase their contribution to the Company’s profit line,” he added.

“Over the past ten years the Post Office retail network continued to perform strongly, investing in premises, technology and staff training, adding new and innovative services, while competing for, and retaining major government contracts such as Social Welfare payment distribution and State Savings.   Donal Connell formed the consortium which won the recent tender for the National Lottery licence and he assembled and oversaw the team responsible for design, constructing and delivering GPO Witness History, the State’s flagship 1916 Centenary project, an innovative and highly successful visitor and exhibition Centre.”

Mr Connell said that An Post, through its mails business, Post Office network and subsidiary portfolio, has a vital role to play in the Irish economy.

“The Company has a tradition of innovation and is now well positioned to respond quickly to changing market needs and to convert these opportunities into reality.

“I am proud of the progress we have made over the last 10 years in transforming our business for the future, while dealing with difficult economic conditions and an evolving technology environment. To oversee so many streams of activity at the GPO in this momentous year has been a great honour and again, I take great pride in all that the entire An Post team has achieved” he added.

Mr. Connell plans to pursue other business interests in the coming months.

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