A revenue increase of 1.3 per cent to $3.86 billion has been announced by Australia Post in its Parcels and Services business.
While Australia Post’s domestic parcel volumes were largely flat, increasing 0.9 per cent in 1H24, Australians continued to embrace e-commerce highlighting the two-speed nature of the business.
Letter volumes continued their downward trajectory having decreased 11.9 per cent over the past 12 months just as Letters losses were $182.1 million for the half.
With Australians now receiving on average just two letters per week, Australia Post said the continuing structural decline of the Letters business was unstoppable.
In response, Australia Post launched a new next-day delivery service, Australia Post Metro, to retailers in Sydney, Melbourne and Brisbane.
According to the company it reflected changing customer needs and provided greater speed, reliability and convenience.
Australia Post Metro is due to be expanded into other cities during the remainder of FY24.
Overall performance improved, in part, due to a record peak period with almost 100 million parcels delivered across Australia the company said.
Australia Post reported an interim profit of $33.6 million, an increase of $10 million on the prior corresponding period.
However, losses in the Letters business as well as declining customer visits to Post Offices as online services replace over-the-counter transactions, continued to impact the long-term viability of the business.
While Australia Post’s Post26 strategy to simplify the business is starting to deliver financial benefits, significant structural headwinds remain.
Australia Post’s Letters revenue declined by 2.7 per cent to $857.9 million compared to 1H23. This result would have been more than $90 million weaker without the $0.10 increase to the Basic Postal Rate (BPR).
Australia Post has commenced a New Delivery Model trial, which sees Postal Delivery Officers delivering priority mail, express letters and parcels to addresses every day and standard letters and unaddressed mail every second day.
Operationally, this allows posties to deliver more parcels during their rounds, and supports the growing e-commerce sector, while continuing to ensure Australians receive an appropriate letter service aligned with declining volumes.
In August 2023, Australia Post lodged a draft notification with the Australian Competition and Consumer Commission (ACCC), proposing an increase in the Basic Postage Rate (BPR) from $1.20 to $1.50 to help address the rising cost of delivering letters and reducing letter losses.
Last month, after carefully assessing the draft notification, the ACCC published a preliminary view proposing not to object to the increase. Australia Post has now lodged its formal price notification, and this change is subject to finalising regulatory processes. The new price will take effect from 3 April 2024.
Through disciplined cost management, $140.8 million in efficiencies was achieved in 1H24, which included further simplification of the support office, product portfolio and broader network productivity improvements.
Consultation has now been completed on the first phase of the modernisation reforms announced by the Federal Government in December 2023.
While the regulations are yet to be issued, Australia Post expects to see further financial performance improvement once they are implemented. However, further reform is required for Australia Post to become a financially sustainable business.
Group Chief Executive Officer and Managing Director, Paul Graham said while the improved performance in 1H24 was welcome, he cautioned Australia Post is anticipated to record ongoing full year losses.
“I am pleased to see green shoots from the Post26 strategy starting to emerge. We have been very disciplined in managing our costs in a high-inflationary environment, we’re focusing on simplifying our operations and making the changes needed to build a sustainable business,” he said in a statement.
“I’m proud that we delivered a record peak period, and I would like to thank the millions of Australians who placed their trust in Australia Post at Christmas to deliver their gifts around Australia and the world.
“On behalf of the Leadership team and the Board of Australia Post, I would like to thank our 63,000 team members for their dedication and hard work over the record peak period, where almost 100 million parcels were delivered.
“We are in the early stages of the modernisation of Australia Post and now more than 18 months into our Post26 business simplification strategy. Post26 is delivering significant benefits to the business and, subject to approval, I am confident the modernisation reforms announced in December will also strongly enhance the business. We look forward to the continuing support of the Government, union partners and community stakeholders.”
Despite the positive early signs of potential, Graham said there were fundamental structural challenges confronting Australia Post as letters use continued to decline with fewer customers utilising its retail network.
“The New Delivery Model we are trialling will help address the decline in our Letters business, but our outsized retail network will need to be addressed,” said Graham.
“Importantly, Australia Post remains as relevant as ever to the lives of millions of Australians and with our modernisation and simplification journey under way, we are in a stronger position to continue supporting the nation than we were 12 months ago.”