Australia Post has reported group revenue of $3.8 billion for the first half of the 2020FY, an increase of 4 per cent year-on-year, despite letter post revenue falling by 9 per cent.
Australia Post’s parcel and services revenue growth was up almost $300 million or 13 per cent on the same period last year to $2,698 million, underpinned by strong growth in parcels, financial and international services, supporting both business and consumer customers.
Community Post Office revenue also grew 4 per cent reflecting stronger performances in both corporate and licensed stores.
The postal service said that this is the highest revenue growth in over a decade for these services without a major acquisition. The business lines now account for over 70 per cent of group revenue.
However, letter revenue was down 9 per cent and letter losses rose a further $46 million or 112 per cent to a total loss of $87 million for this half. This includes large print post, which covers magazine services.
Australia Post said that although it secured $129 million in efficiencies in the period and has benefited from strong growth in other areas, this still has not fully compensated for the increasing costs supporting the letter service.
Group Chief Executive Officer and Managing Director Christine Holgate said “Our strategy to diversify our business and focus on our customers is working well, evidenced by our record underlying performance.
“However, the costs to operate the letter business continue to rise, as our people are still required to deliver to every home or business every day, process and collect the mail, whilst letter volumes and revenues fall. The 10 cent letter increase in January will support our letters business going forward, but after four years of no increases, it alone will not fully compensate for the losses.”
In its August 2019 submission to the ACCC to increase letter prices, Australia Post pointed to the decline of large print post (under 500 grams) as a significant contributor to the request for a price increase, stating that large print post volumes have declined at an average annual rate of 5.8 per cent since 2007-08, and this decline looks to increase with volumes declining by 10.6 per cent in 2016-17, and by 9.9 per cent in 2017-18.
“These declines reflect the general trends within the magazine and publication industries where magazine and publication subscription (and circulation) rates have declined worldwide,” it said in the submission.
Magazine publishers are a significant contributor to large print postage, and are likely a large contributor to the volume decline. However, postage is a large contributor to magazine production costs, and a 10 per cent increase represents a significant impact to a publication’s bottom line.
The challenges of digital disruption and declining print revenues often mean a more stringent approach to subscriber management, or in some cases, the discontinuation of underperforming print publications.
At this stage, Australia Post said it remains on track to deliver a marginal profit at the full year and is cognisant of the market pressures facing core customers. Australia Post will release its full-year results in August.