This year we have succeeded in delivering another outstanding profit and record service delivery – that's how we continue to build our reputation and earn our customers' trust.

When I speak to people in the Australian business community, their perception is almost always that our letter volumes must be decreasing. While this is certainly true for many postal administrations around the world, Australia Post’s letter volumes have increased once again in 2005/06.

Why are our volumes up while those in the rest of the world are down? The first reason is that our customers experience what independent research confirms: letters are value for money. Letters sell products and services better and collect payments faster than other communications media.

The second reason is that we understand that letters do not “sell themselves” – they need to be actively marketed to help customers improve their business results. These are major strategic differences between Australia Post and many other postal administrations.

Our strategy is different and our letters performance is better, but are these results sustainable? Yes. Personalised mail is a highly effective and influential form of communication. We know it, our customers know it, their customers know it and independent research proves it.

The third reason that our letter volumes have increased is that Australia Post is continually developing new products to help business customers do their business better. Some of the most exciting letters products are coming through our eLetter Solutions division and our newest subsidiary company, PrintSoft. These products enable our customers – from small businesses to not-for-profit organisations to large corporations – to produce short-run mail campaigns, and even one-off letters, with the time and cost efficiencies normally associated with bulk mail.

With 4,462 retail outlets around Australia, Australia Post is a big business made up of many small businesses. We are proud of our retail network and particularly of our 2,975 licensed post offices – they are profitable, they are open to new ideas and they focus on meeting their customers’ needs at a local level.

As a retailer, we think nationally and act locally. We know that successful retailers are active in supply chain and inventory management, and Australia Post is no exception.

The work we are doing in inventory management allows us to better analyse our product mix at a local level and stock the products that match our customers’ buying behaviour shop by shop. Customers are already noticing that our shops are presenting products and services differently by grouping them to meet important needs. Travelling? You can experience our new strategy in action. Australia Post now offers passports, instant passport photos, foreign currency, travellers’ cheques, mobile phones and recharge, mail redirection, even luggage tags. Our approach to retail has moved beyond the traditional to make shopping at Australia Post a simpler and more relevant shopping experience.

Three years ago in my annual report I wrote about our change in strategic thinking to recognise that parcels and logistics was the future business of Post. Last year we had expanded our parcels and logistics business to be just about equal to letters and this year parcels and logistics is the clearly dominant business activity, having grown by 20 per cent year on year.

Our strategic transformation has been achieved by improving operational efficiency, adding competencies, building on our years of experience in managing complex networks, and expanding the scale and scope of our business. We have grown by acquiring Star Track Express in 2004 and SWADS in 2005; by forming joint ventures, such as Sai Cheng Logistics International, with major postal partners like China Post: and by achieving strong revenue performance from new products and new customers. Our work with postal partners is especially important. While the strategy of European post offices has been to compete with each other and their experience has been to lose market share to private sector players, in the Asia–Pacific region we collaborate with other post offices on joint services like Express Courier International and third-party logistics. Our strategy is different because we know that collaboration strengthens the market relevance of post offices, enhances the competitiveness of our products and services and underpins the sustainability of our established domestic businesses.

While we are penetrating new markets overseas, we are strongly committed to our domestic parcels business and we are excited about the many opportunities for growth in Australia. It is our ongoing intention to be a market champion in Australia, while extending our influence globally.

I would like to thank all the people who make Australia Post the best post office in the world – our customers without whose confidence and support our success would not be possible; and all the men and women at Post, including our licensees and contractors, who are responsible for putting our strategies into practice day-to-day and every day. Once again we have proven we can be a profitable commercial business and provide outstanding customer service for all Australians.

In September 2006, I will be retiring from my position as chairman of Australia Post. Looking back on my 18 years as a director and nine years as chairman I am proud to have been directly involved in our transformation to the efficient, profitable and highly respected business that Australia Post is today. These have been exciting and challenging years. I would like to take this opportunity to thank my fellow board members for their staunch support – and to express my appreciation to our Managing Director Graeme John, who is a pleasure to work with, an outstanding chief executive and a transformational leader.

Linda B Nicholls
Chairman