THE South African Post Office (SAPO) today reported a pre tax profit of R488.2 million for the year ended March 2009 compared with a profit of R565.0 million in 2008. The 14% decline was a result of higher input costs, especially fuel and salary costs.
This is despite an extremely challenging financial year, which saw turmoil in international financial markets reduce postal revenues and hike input costs, it said.
SAPO has spent R422 million and committed a further R227 million on capital expenditure to lay a solid foundation for improved delivery. This investment brings the company closer to consistently meeting delivery standards and providing excellent customer experience, it said in a statement.
"One of our strategic themes is to ensure that the South African Post Office is an effective arm of service delivery for government, principally by using the network infrastructure for the service and development of the people of South Africa. It is gratifying to be able to be contracted by the government to provide logistical and financial services like the distribution of medical supplies and the payment of social grants to millions of South Africans," said CEO Motshoanetsi Lefoka.
The strong results strengthen the case for improved delivery, it said.
Although profits declined slightly as a consequence of the depressed economy and the drop in postal volumes, SAPO has continued to deliver steadily improving trading profits since its turnaround in 2004.
The year saw a 5.8% decline in mail volumes - the first in seven years. However, to counter the adverse conditions in the trading environment during the past financial year, the Post Office embarked on a strategy of tighter cost controls and improving efficiencies across all its operations as well as exploring potential new revenue streams.
"These positive results achieved at a time of unprecedented turmoil in global markets indicate that the turnaround achieved by the South African Post Office in the past five years has created a sound platform on which to grow further successes," said Lefoka.
"The positive results are a means to the end of improving delivery towards a world class postal, logistics and financial services to all South Africans," added Lefoka.
Revenues for the 2009 financial year were up 8% on the previous year to R5.7bn. Operating expenses were up 10% - higher than last year's 7% - reflecting SAPO's higher cost operating environment. As a result, the profit margin declined from 10.1% in 2008 to 8.1%.
In spite of this, SAPO's total assets increased 13% to R8.7bn.
The highlight of the financial year was the 14% surge in Postbank deposits to R3.3bn and a 13% increase in cash in hand and investments to R6bn.
Cash flows from operating activities also increased 113% to R650 million, reflecting the success of SAPO's new multi-channel business model and its thrust into new revenue-producing business activities such as financial services, logistics and computer-based communication systems.
Lefoka confirmed that Postbank would be corporatised next year as a stand-alone company within the SAPO group in order for it to be better positioned to provide a wider range of accessible, relevant and affordable financial services products to the unbanked and under-serviced citizens of the country.
Postbank is already one of the most widely used service points for Mzansi account holders boasting some 2 million Mzansi accounts – a 50% share of the market.
Other performance measurements achieved by the SAPO in terms of its Universal Service Obligations were the completion of an additional 45 new post office buildings and the renovation of a further 75 post offices – the highest rollout of new and refurbished post offices in a single year. SAPO also created new postal addresses for 1.7 million households.
The new postal addresses and the additional post offices have made it possible for SAPO to serve approximately 67 million customers through its retail network.
"Priorities for the coming year will be intensifying the diversification of postal activities into other revenue generating streams. A key focus in this area would be to take advantage of global trends in the postal service industry and to develop integrated solutions to meet its customers' needs," added Lefoka.
Combating crime remains an important focus area. During the past financial year SAPO experienced an increase in incidents of mail crime, robberies at post offices and hijackings of postal vehicles, although there was a decline in the number of fraud cases reported. Further investment in security and surveillance of vehicles and mail handling facilities should ultimately see a reduction in exposure to crime – as will improved cooperation with staff in combating crime which has already led to an increase in crime reporting through the toll-free crime reporting facility.
In the area of corporate governance, steps were taken to review SAPO's code of conduct and ethics policy and tighten procurement and contract management processes.
Further action will also be taken in the current year to deepen SAPO's commitment to the King III code of good corporate governance and the New Companies Act.
Major challenges for the new financial year will be to balance the need for expanded postal and banking services with cost containment in light of the country's changed economic circumstances without impairing SAPO's commitment to customer service excellence and to the provision of accessible and affordable postal, logistics and financial services to all South Africans.
"While we expect the downturn in the economy to continue into the new financial year with lower GDP growth and higher inflation on imported goods negatively impacting our performance, we remain confident that our focus on reducing costs, improving efficiencies and exploring new revenue streams will yield a reasonable profit in 2010," concluded Lefoka.