In 2005/06, we achieved an excellent result and increased productivity while meeting or exceeding all of our community service obligations.

I am pleased to report that in 2005/06 Australia Post achieved a $515.6 million profit before tax, a 9.7 per cent increase on last year’s result. Revenue also increased, by 4.7 per cent, to a new record of $4.53 billion. We achieved these results while meeting or exceeding all of our community service obligations, as well as exceeding our main service performance target by delivering 95.6 per cent of domestic letters on time or early.

Last year, I announced that profit from our letters business had declined by $56.9 million. This year I am able to report that we have seen a $16.6 million increase in profit from letters. This increase was driven mainly by strong growth in international letters and by the acquisition of PrintSoft.

Our parcels and logistics business has continued its strong growth momentum and achieved an increased profit of $42.8 million this year through significant growth across all products and services.

Retail and agency services put in a solid performance in 2005/06 and, although revenue was down (by $7.9 million compared with last year), produced a $12.5 million increase in profit in a tough retail environment. This was a direct result of a strategy to improve the quality of revenue from our postal outlets.

While we remain strongly committed to our letters business, we are now also reaping the rewards of our concentrated efforts in the parcels business: in 2005/06, for the first time, parcels and logistics surpassed letters in its contribution to earnings before interest and tax. This indicates a shift from Australia Post being primarily a letters business to a stronger focus on parcels and logistics – and we are perfectly placed for this: no other company in Australia can match our parcels and logistics offering.

Counter to a global trend of flattening (and, in some cases, declining) letter volumes, in 2005/06 our letter volumes grew by 0.5 per cent – some 28 million letters. As was the case last year, promotional mail – the area we are putting most emphasis on developing – was our strongest area of growth, with a volume increase of 6 per cent.

I am extremely proud of what we achieved this year but it continues to be increasingly difficult to maintain profits in our letters business. One of the key issues that we will need to address in order to ensure the long-term sustainability of our business is the basic postage rate, which has effectively not changed since 1992. (The 5-cent price rise in 2003 incorporated the cost of GST and provided the corporation with only $0.005 additional income per stamp.) Australia Post is unparalleled in the efficiency of its mail processing and delivery but – no matter how efficient we are, or how many cost-cutting measures we introduce – rising fuel, labour and operational costs seriously threaten our future letters profitability.

It was a year of consolidation for our retail outlets, with the foundations laid for the next stage of our development as a retail trader. As well as extending our range of agency-based services, we are redefining our retail offer to tie in more closely with our customers’ buying behaviour and we expect the benefits of this work to be more fully reflected in next year’s earnings.

We have much to celebrate this year in addition to our financial results.

Last year we laid the foundations of Sai Cheng Logistics, our joint venture with China Post, and the KPG Alliance – our partnership with China Post, Hongkong Post, Japan Post, Korea Post and the United States Postal Service. This year we have seen tangible and exciting results.

We established Sai Cheng Logistics facilities in Shanghai and Shenzhen and set up a freight forwarding operation in Hong Kong to provide our business customers with a seamless supply chain between Australia and China. We also demonstrated our commitment to strengthening the international delivery network through the success of Express Courier International. Our acquisition of PrintSoft (a provider of software solutions for letter and document production), which we announced on 1 July 2005, is a major investment in our future that will help to grow our letters business by combining the convenience of electronic technology with the effectiveness of paper-based communications.

As one of Australia’s largest employers, we recognise that the health and wellbeing of our workforce is fundamental to our business success. In addition to running numerous and extensive staff health programs, we put a strong focus on improving our safety performance throughout the business in 2005/06, resulting in a record lost-time injury frequency rate (LTIFR) per million work hours of 7.6 (compared with 9.6 last year).

We also achieved productivity growth of 3.7 per cent, which brings our cumulative productivity growth over the past five years to 16.7 per cent – three times the national average.

Our success has been made possible through the dedication and commitment of our workforce. In May this year – in a second Staff Attitude Survey – we asked our people for their opinions about Australia Post and their working conditions. Almost 70 per cent of staff participated, a slight increase on the previous year. Our people are having a real say in our future and it has been pleasing to see practical action plans being developed at workplace level throughout the business in response to the results of the first survey.

This year I want to especially thank our Chairman Linda Nicholls, who will be retiring at the end of her term in September 2006 after 18 loyal years’ service to Australia Post.

Linda was appointed to the Australian Postal Commission in 1988, appointed to the Australia Post board in 1989 and became Chairman in 1997. During that time, she has earned the trust and profound respect of the board, our shareholder and the business community for her commitment to the corporation and her ability to deliver Australia Post’s strategies. The outstanding support of the board – and of Linda in particular – has been fundamental to the transformation of our business and our continued success.

I would like to acknowledge the appointment of board member David Mortimer as the new chairman and welcome him to the role. Thanks must also go to our customers, our suppliers and our business partners for their ongoing support. And finally, I would like to thank everyone in the wider Australia Post family – our 45,000-plus staff, contractors and licensees – for helping us to maintain our excellent reputation within the community and to continue to achieve our financial and operational goals.

Graeme T John AO
Managing Director