World News – AU – When Publishing a Profit Is Not Enough


That there is talk of privatizing Australia Post – following public outcry over its CEO’s spending – underscores the fact that it is a very profitable company that has done a decent job of clearing its way through a collapse in the letter trade triggered by the increasing use of email and texting, and more recently by bushfires and the COVID-19 pandemic

Some might say that anyone could have seen the trend in online shopping and parcel delivery opportunities But words are easy

In the past fiscal year, parcels accounted for more than half of Australia Post’s revenue as the number of parcels shipped via the network soared

Government-owned postal services saw a 7% increase in sales, including a 15% increase in revenue from parcels to $ 5 billion Group profits before tax jumped 30% to $ 54 million dollars for the year ending June 30

The parcel division is largely represented by the StarTrack subsidiary, which has led some to hail former CEO Graeme John, who bought out the express road freight operator founded by Greg Poche in 2003 for 750 million of dollars out of 50: 50 joint venture with Qantas

« At the time, we thought it was a landmark transaction, » said a source close to the board in the early 2000s

« Management acknowledged that the mail would be under pressure, but perhaps not as much as it is today »

But not everyone is so effusive about the acquisition, noting that when Qantas came to sell its half stake to Australia Post nine years later, it did so for around $ 400 million.

Qantas realized the company was not an integral part of its flight and freight operations Yet StarTrack had failed to deliver on its promises of strong growth and there were rumors that the alliance between two shareholders majority had not been easy

StarTrack was largely a B2B operation, but it was the switch to B2C, as shoppers moved from local malls and malls to get online instead, that made the difference for the Australia Post revenue and results, insider says

This arguably enabled Ahmed Fahour, who was CEO of Australia Post for seven years until mid-2017, to increase e-commerce revenue from 45% to 70% between 2010 and 2016

The year Fahour, a former management consultant and senior executive at National Australia Bank, arrived at Australia Post, the government entity recorded a $ 79 million increase in pre-tax profit to $ 332 million dollars

In 2015 Australia Post lost $ 222 million after tax, the first annual loss in more than 30 years At the time, Fahour said it was « alarming » to see the drop rate of regular letters pass to 103 percent from 57% a year earlier, and that losses in its courier business were so large that they had outpaced the profits of the postal group’s packages and retail businesses

In addition, losses are expected to reach $ 6 A disaster of $ 6 billion for taxpayers in a decade, according to a report by the Boston Consulting Group (a former employer of Fahour) prepared for then-Communications Minister Malcolm Turnbull

But by making unpopular decisions including job cuts, price hikes and service cuts, Fahour righted the ship Fahour persuaded Parliament to allow him to hike the price of stamps by 60 ¢ to 70 ¢ then up to $ 1

He also got clearance to introduce controversial two-tier courier service and cut 2,000 jobs.In 2017, he struck a deal to sell Sydney GPO to two Singaporean billionaires for $ 150 million for help speed up recovery

This was facilitated by another cost-cutting decision taken years earlier Starting in 2011, Fahour, now CEO of Latitude Financial Services, decided to take delivery of small packages to external contractors in favor of using the organization’s postal network to deliver packages to the door, according to a source

Despite competition from DHS, FedEx, UPS and Japan Post’s Toll Australia, Australia Post has managed to maintain its share of the B2C parcel delivery market at around 75%

« [Ahmed Fahour] took this company out of a declining and loss-making sector that was its traditional market and created new areas of e-commerce and business that generated profits as a result. But his personal style has had a dramatic impact on how it is judged by the community and the media, ”said BrandMatters consulting chief Paul Nelson in late 2017

Fahour finally resigned in 2017 following a dispute with the federal government over his $ 5-6 million total compensation It was later revealed that he was paid $ 10 8 million His total was 6 $ 8 million in fiscal 2017, softened by $ 4 million in long-term incentives awarded from 2015 to 2016

Fahour was replaced by Christine Holgate, CEO of Blackmores, with a much lower salary He had returned the mail and the parcel carrier to black but left the morale of the staff roughed up

There had always been fears that as a 100% owned subsidiary the parcels business could be split up, but Holgate tried to allay those fears by bringing the mail and parcel divisions together

She decided to lose the blue colors of StarTrack and bring the company back under the name and colors of the Australian Post

In 2018, Holgate launched what a source describes as its most significant contribution to the Australian Post business, Bank @ Post, in which post offices offer banking services

Over 70 Australian banks and financial institutions, including Commonwealth Bank, Westpac and NAB, have signed up, with customers able to meet their banking needs at over 3,500 participating post offices across the country

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« We can become the nation’s bank teller, » Holgate said in an interview with AFR BOSS two years ago The deal meant Australia Post would be paid to provide services to major banks rather than ask a banking license itself

Bank @ Post contributed nearly $ 500 million to Australia Post’s revenue in 2019, although no such figures have been provided this year

The agreements « also allow for a vital investment in our community post offices and will protect and ensure all communities have access to local banking services, » Holgate said in the 2019 annual report

In April, as Australia Post was under financial pressure amid the COVID-19 crisis, the federal government relaxed restrictions on Australia Post to deliver letters every day

On a temporary basis, letters could be delivered to metropolitan areas every two days and the delivery time for intra-state letters was extended to five days

This meant Holgate could move to recycle 2,000 motorcycle posties – almost a quarter of their total number – to deliver packages in vans It was controversial to some, but Holgate insisted that most of the 18 million packages sent each day (think of the increase in online purchases of televisions and office chairs) were too large to be delivered by the traditional motorcycle post

The latest controversy over Holgate’s spending and donating four watches to senior executives may well be its downfall, but Prime Minister Scott Morrison, who has been at the center of public outrage, perhaps should do be careful what he wants

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In a country as large and as sparsely populated as Australia, no privatized post can afford to support this type of service

Australia Post, Christine Holgate, Managing Director

News from around the world – AU – It’s not enough to post a profit



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