The 2005/06 financial year was an excellent one for Australia Post. We exceeded the challenging targets we set for ourselves and significantly improved on the previous year’s results. An impressive profit of $515.6 million highlights strong growth in our parcels and logistics businesses and ongoing success in driving operating cost efficiencies.

The letters and associated products portfolio and the parcels and logistics portfolio were key contributors to the corporation’s total revenue growth of $204.2 million. Revenue growth in letters and associated services was 2.7 per cent – a significant result given the modest increase in domestic letter volumes and the price cap that currently applies to the basic postage rate. The corporation’s acquisition of the PrintSoft Group further enhanced revenue growth in this portfolio.

Revenue growth in parcels and logistics (18.6 per cent) was again the result of strong growth from existing customers, combined with increases in targeted logistics and distribution segments. The full-year impact of the SWADS acquisition, along with impressive growth in domestic and express parcels – particularly in on-line and mail-order sales – has maintained the momentum of our long-term strategy.

A marginal decline in retail and agency services revenue (1.2 per cent) is the direct result of management focus on improving the quality of revenue. This has been further progressed by a review of the range of retail products and a more targeted marketing and promotional strategy.

Return on revenue increased from 10.9 per cent to 11.4 per cent in 2005/06. This reflects an improvement in the quality of revenue earned, associated with continued productivity improvements throughout the network. These combined factors have increased all of our segment returns. Productivity improvement of 3.7 per cent this year maintained the solid gains of recent years, with the five-year cumulative improvement being well above the national average.

Trading expenditure was constrained to an increase of 4.2 per cent, a reasonable result given the significant pressures on carriage of mail costs (9.0 per cent increase) and driven mainly by efficient management of employee-related costs (1.5 per cent increase).

Post’s before-tax profit of $515.6 million ensures that the corporation will continue its high level of dividend returns to the Commonwealth. Based on a 75 per cent distribution of the corporation’s after tax profit, ordinary dividends payable from the 2005/06 result are expected to total $267.3 million.

The corporation has completed the process of transitioning its accounting policies and financial reporting from Australian Accounting Standards (AGAAP) to Australian Equivalents of International Financial Reporting Standards (A-IFRS). Comparatives for the previous year have been restated accordingly. Last year’s reported result was $524.5 million, which represented a record profit at that time. After restating for A-IFRS this was reduced to $469.8 million. Full details of items affected by this restatement are included in note 32 of the financial statements. In the 2005/06 year Post continued its growth in the letters segment through its acquisition of the PrintSoft Group, which will complement the corporation’s electronic messenger offering to domestic and international markets. Capital expenditure for 2005/06 (not including our acquisition of PrintSoft-related entities) was $230.6 million, an increase of $71.2 million on the previous year. While investment was spread across all portfolios, there was a significant focus on sustaining our core operations through investment to replace plant and equipment and motor vehicles, and mail and delivery centre rationalisation. Investments to provide leverage into new markets continued, particularly in parcels and logistics. Australia Post was able to fund current year acquisitions through available cash reserves, resulting in minimal impact on the corporation’s key balance sheet and cash flow indicators. Debt to debt plus equity again improved during the year (gearing dropped to 18.3) and interest cover remains stable at 17.2 times. The corporation’s $530 million long-term term debt remains at floating interest rates with $230 million due to mature in March 2007.

We do not expect to see significant changes in trading outlook in our three key portfolios in the coming year. The outlook is positive overall, with many opportunities to continue to develop our current strategies.

Positioning cost-effective, paper-based products and services as a vital part of contemporary communication will complement anticipated growth opportunities within the parcels and logistics and the retail and agency services portfolios. Post continues to focus on being an essential partner for domestic parcels and logistics, both within Australia and in the wider Asia–Pacific region, while our retail products and services will be focussed on helping our customers get important things done. We expect that our strategy of building and operating complementary businesses to meet our customers’ needs will continue to deliver long-term value for our stakeholders.

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