annual review
2015

Reorienting the New Zealand Post Group to ensure its businesses remain relevant to the markets in which it operates gained momentum in 2014/2015.

our business

“Across the Group we will continue to
look for ways technology can build our
business, reduce costs and give a better
customer experience.”

Our Strategy

The New Zealand Post Group’s strategy is around two business clusters — Mail and Logistics and Financial Services — with the goal of making each financially sustainable and capable of generating their own capital, setting the Group up for a successful future.

We will do this by:

grow
  • Carry more parcels
  • Grow Kiwibank
  • Help our customers find and reach their customers
innovate & serve
  • Improve the way we work
  • Deliver different things in different ways
  • Give our customers more choice about where, when and how they do business with us
lower cost
  • Simplify how we do things
  • Get rid of duplication
  • Be a leaner organisation

Our Values

The New Zealand Post Group always has been and always will be about people. As we go through change, it’s important we have a rock-solid foundation of values, ensuring that we are doing the right thing for all concerned.

Do What’s Right

Do What’s Right is about doing what’s right by our customers and our people. It includes confronting difficult realities and being open about discussing these, having a solution focus, respecting others, and taking personal responsibility for addressing issues. It’s also about being fiscally responsible – don’t just do things the same old way when there’s a better, cheaper and more efficient way of doing them. It’s about being socially responsible, ethical, and sustainable.

One Team

One Team is about working collaboratively across and within the Group. It’s about assuming genuine intent in others, being curious about the business – what we do and how we fit together, taking pride in each other’s achievements, and having each other’s backs.

Make It Easy

Make It Easy is about reducing unnecessary complexity, improving the experience our customers have, and constantly looking to improve the way we deliver our solutions and services.

Raise the Bar

Raise the Bar is about pushing ourselves individually so that collectively we succeed. It’s about taking calculated risks, having high expectations of each other, aiming for excellence, and applying the lessons from our mistakes to continually improve.

The Board of the New Zealand Post Group has considered 11 key issues (material matters) that have significant effects (both positive and negative) on our five-year Delivering our Future strategy, our ability to deliver a sustainable future beyond 2025, and our ability to create value.

These material matters provide a context and direction for everything we do, and are reflected in the capitals covered in this annual report.

?How we identified the material matters: we surveyed senior leaders across the organisation as well as a broad range of external stakeholders.
In addition we also conducted face-to-face interviews with some of those external stakeholders surveyed.

  • How many internal and external stakeholders were surveyed?33 external stakeholders – 19 in 1-on-1 meetings, 14 via a survey. Internally we received 58 survey responses from senior managers. The survey was conducted by NZ Post but responses were anonymous.
  • What were these stakeholders surveyed on?Stakeholders were asked to comment on the material matters identified from 2014 – if they thought they were still relevant and to rate them in terms of impact on the business
  • What were these stakeholders interviewed about?The 19 external stakeholders were not only asked about the material matters but also about NZ Post’s sustainability work and what issues it should focus on. The interviews were conducted by a professional independent research organisation and results were anonymous.
  • What were the main outcomes of the survey and interviews?The stakeholder surveys and interviews facilitated an Improved understanding of what our material matters are and how our stakeholders perceive our business context. The material matters have been discussed with our board and they align with our strategy
digitisation

Digitisation

The growth of digital technologies such as mobile devices that change our customers’ behaviour and the markets we operate in.

finance
expertise
networks
relationships
transformation

Execution of business transformation

Our ability to change our systems and structure without compromising our service delivery.

environment
people
expertise
relationships
customer needs

Responding to changing customer needs

Our ability to offer products and services our customers want.

environment
people
expertise
networks
capital management

Availability and competition for capital

The availability and management of capital needed to fund business programmes.

finance
networks
economic well-being

Economic well-being

The performance of New Zealand’s and global economies –  as they grow, so does our ability to grow.

finance
relationships
talent management

Ability to attract, nurture and retain talent

Ensuring that we attract, nurture and retain the best talent to support business change and growth.

expertise
networks
relationships
regulation

Regulation

Foreseeing and responding to regulation and changes to government policy.

finance
networks
brand reputation

Our brand and reputation

How our brand is seen through the eyes of the public.

finance
environment
people
expertise
networks
relationships
competitor threat

Competitor threat

Our ability, experience and capability to operate in competitive markets where there are few barriers to entry.

finance
expertise
relationships
environmental impacts

Environmental impacts

Changes in the climate such as extreme weather, volatile fuel and energy costs, and dependency on nonrenewable fuels.

finance
environment
relationships
Geopolitical trends

Geopolitical trends

Such as the growth of China and greater freedom of the individual.

finance
expertise
networks
relationships
what our people think will impact our business
what our stakeholders think will impact our business

The New Zealand Post Group’s stakeholders are the driving force behind our success as a business.

Wherever possible we seek the views of our stakeholders in the decisions we make and consult those whose knowledge and expertise will add value to our business. We keep them informed of new developments and updated on how the strategy is performing.

 

Bond holders
Bond holders
How we engage:

We communicate twice a year to report on the financial performance of the NZ Post Group, as published in the Annual and Half-Year Reports.

Government
Government
How we engage:

We engage with government agencies and ministries to ensure we meet various mandates, regulations and agreements, through our Regulatory Affairs and Network Access function.

Our community
Our community
How we engage:

We engage with communities through our Government and Community Relations Manager to maintain a transparent and ongoing dialogue. We also engage through our partnership with Red Cross, helping build community resilience in New Zealand and abroad. Our people are active in our communities through our volunteer programme which gives every employee one day volunteer leave every year. We help kiwi kids stay active through ActivePost, which supports grassroots participation in sports and recreation.

Media
Media
How we engage:

We engage with the media, responding to queries and requests for information, and contacting the media directly when there are updates on our business plan. The media are also invited to attend briefings on key developments and announcements such as the annual financial results.

Credit rating agencies
Credit rating agencies
How we engage:

We engage via updates on specific business events and scheduled management meetings where analysis of financial and strategic performance is undertaken.

Our people
Our people
How we engage:

We actively engage and inform our people of changes we’re going through as well as how we are performing as a group. This is done through communication such as frequent business updates and team briefs. Our people also engage with senior leaders in the organisation through our annual leader roadshows.

The Crown (shareholder)
The Crown
How we engage:

We regularly report to, update and consult with the Crown via our key relationship managers in The Treasury and office of the Minister for State-Owned Enterprises (SOEs) both to comply with our obligations as an SOE and to ensure we actively meet expectations to operate as a sustainable commercial business.

Stock Exchange
Stock Exchange
How we engage:

We communicate our annual and half-year results to the market, as well as any other material that could impact the value of our listed debt securities (bonds, capital notes and covered bonds).

Customers
Customers
How we engage:

We engage with our customers daily through channels such as our branches, online, call centres and relationship managers. We regularly survey our customers to obtain their feedback on our products and services, business changes and future needs. We also have active conversations on social media.

Suppliers
Suppliers
How we engage:

We work closely with suppliers, entering into contracts to document our respective rights and obligations. We have regular meetings with significant suppliers to ensure the goods and services we receive are fit for purpose, and meet our expectations.

New Zealand Post Group

financial services
postal services
our customers
borrowers
senders
investors
receivers
retail network

our strategy

Grow
Innovate & serve
Lower cost
relationshipsnetworksexpertisepeopleenvironmentfinances
Strategies

Click an icon to the left to view our strategy.

Relationships
  • Build digital services that build customer trust and intimacy
  • Targeted sponsorship and community investments
Networks
  • Rationalise the property portfolio
  • Develop an integrated mail and logistics delivery network
  • Develop fit for purpose and differentiated distribution channels
Expertise
  • Delivering a new core banking system
  • Advanced Reserve Bank of NZ accreditation for Kiwibank
People
  • Lift performance and productivity
  • Proactively manage our people talent
  • Maximise engagement and contribution of our diverse workforce
Environment
  • Minimising our carbon footprint
  • Being more energy efficient
  • Reducing waste
Finance
  • Targeted long-term return on equity (ROE) of 12%
  • Maintaining an appropriate credit rating that supports Kiwibank’s needs
  • Revenue growth

our story

relationships

The Group’s ‘relationships’ capital is about our connections with our customers and other stakeholders. In particular it relates to our ability to meet their expectations and deliver value through our interactions.

Connections with our customers are under growing pressure owing to the dramatic growth in new technology and new communication channels. Mail and in-person transactions are being replaced with online and digital equivalents – that enable our customers to contact others, pay their bills and do their shopping wherever and whenever they want to.

This situation presents us with opportunities and challenges. For example, while mail deliveries are declining, online shopping – and therefore parcel deliveries – has brought new and exciting opportunities for our parcels business.

Our challenge is to make every stakeholder experience a positive one and to keep searching for and delivering new and innovative ways of providing physical and digital touchpoints. Only by doing this will we continue to meet our customers’ needs and be the valued ‘first-choice’ partner we want to be.

Enhancing the value of our relationships capital

Our five-year Delivering our Future strategy is based on a commitment to put the customer at the heart of everything we do – and with this in mind we’re making a significant investment in building the value of our relationships capital. For example, Kiwibank is:

  • investing in new technology and systems to engage with customers, particularly those in rural and more isolated parts of the country who don’t have branches nearby. The aim is to provide online and digital services that match as closely as possible to those provided in-branch
  • developing a suite of smart digital solutions and other services to encourage customers to make Kiwibank their ‘main bank’
  • diversifying its customer base by focusing on small-to-medium-sized enterprises, investors and KiwiSaver members, and growing the KiwiAssure insurance business
  • raising awareness of its brand through the ‘Indepen-dance’ campaign, which highlights the bank’s core purpose: Kiwis making Kiwis better off.

We’re also:

  • growing the parcels business by developing partnerships with major shipping and retail businesses in our key international markets of Australia, the United States, the United Kingdom and China. For example, we now have partnerships with global transport specialists as well as leading online retailers
  • developing stronger relationships with smaller online enterprises that send and receive goods via our PostShops. Our aim is to support them as they grow their business and, when they’re ready, connect them to our online international logistics chain and a seamless labelling, fulfilment, tracking and returns service
  • increasing the points of contact for large business customers that regularly use our services to create, print and dispatch personalised mail items. Instead of dealing only with relationship managers they can now talk directly to call centre staff – a move that’s generated excellent feedback on our rapid and efficient response
  • showing customers that our services extend well beyond ‘mail’ through the new ‘You can’ advertising campaign. A television commercial starring Game of Thrones star Charles Dance is supported with customer success stories and case studies.

We’re now planning to launch:

  • an e-commerce platform for offshore ‘e-traders’ and logistics businesses that use our global parcel delivery network. This platform will provide support throughout the delivery chain (including real-time updates on progress), regardless of the nature and number of service providers along the way
  • an online ‘delivery first time’ service to enhance our customers’ parcel delivery experience. It will enable them to specify where and when they want their parcels delivered, authorise deliveries in their absence and get notifications of expected arrival times.

Preserving the value of our relationships capital

During 2014/15 the Group contributed more than $2 million to community initiatives nationwide. At the end of the financial year a number of partnerships ended. We are focussed on ensuring that our sponsorship raises brand awareness while also driving commercial return.

Highlights of the year included the Group’s support of Red Cross’ disaster relief activities in the Asia-Pacific. When Tropical Cyclone Pam struck Vanuatu in March 2015, we set up and promoted a dedicated Kiwibank account to which Kiwis could donate, raising more than $150,000.

New Zealand Post’s partnership with New Zealand Cricket also goes from strength to strength through initiatives such as:

  • the New Zealand Post Junior Cricket Programme, which is introducing the sport to more than 120,000 children at clubs, communities and schools nationwide
  • a primary school programme comprising: a curriculum-aligned course on the basics of batting, bowling and fielding; in-school and after-school programmes; and the New Zealand Post Cup and Shield national primary schools tournament
  • sponsoring the White Ferns to raise awareness of the New Zealand women’s cricket team and inspire young girls to engage, play and stay in the code.

Kiwibank has also strengthened its community partnerships and contributions within the community

  • Providing the capital facility for two microfinance organisations which provide no or low interest loans to those in our communities that would not normally have access to fair finance
  • Creating a budget for localised community investment to bring our purpose of Kiwis making Kiwis better off to life in the regions.
Case Studies: 1

networks

The Group’s ‘networks’ capital comprises the physical systems, infrastructure and assets that make up our nationwide network, from which we provide products and services to our customers.

The value of this capital is being affected by local and international trends and developments, particularly our customers’ increasing use of, and demand for, digital services and the continued decline in letter mail. We processed 627.3 million items of letter mail in 2014/15, a drop of 10.2% from 698.4 million last year and down from 1.1 billion in 2002.

While this trend is expected to continue, we remain committed to providing a nationwide mail and parcels delivery service and maintaining a presence in every New Zealand town. Achieving this has required us to make some major changes to our network and the way we manage, maintain and operate it.

Both the Mail and Logistics and Financial Services sides of the business are developing ‘digital-first’ solutions with Mail and Logistics enabling better customer experiences and convenience over both item sending and receiving at lower cost to the Group. This includes moving transactions to digital channels and developing a network of hosted drop off and collection points in locations easily accessible to our customers. 

Enhancing the value of our networks capital

Introducing alternate-day delivery

In 2014/15 we completed one of the biggest changes for New Zealand Post in the past 170 years: developing and trialling the ‘alternate-day’ delivery service for standard mail, which was implemented from 1 July 2015.

The new service has meant huge change for posties in terms of how they work, schedules and operational processes. However, thanks to comprehensive planning and outstanding teamwork the posties continued to meet their performance target, with at least 95% of all standard mail delivered within three working days.

Integrating mail and courier functions

As part of our drive to be the most competitive parcel business in the country, we’ve made real progress in integrating our mail and parcels businesses. This is enabling us to remove duplication, reduce costs, simplify operations and combine the strengths of both organisations to deliver a great customer experience. Key achievements included:

  • announcing changes to the Group structure and Group Leadership Team accountabilities to better integrate our Mail and Logistics and parcels businesses and operate in a more customer centric way
  • integrating the Post and Parcels leadership and support functions at 14 provincial delivery branches. Today, a single leader at each site is responsible for all the mail and parcels business, supported by an integrated administration/support team
  • successfully conducting in New Plymouth a full operational pilot of battery-powered ‘eco-vehicles’ for delivering letters and parcels. The vehicles will be used to deliver mail and parcels from 1 July. If the pilot is successful we plan to roll out the vehicles nationwide starting from 2016.

We’re now working to integrate the mail and parcels operational and IT systems – a complex task which, once complete, will make the customer experience richer and the teams’ lives easier.

Investing in mail processing

As signalled in last year’s report, we’ve completed the consolidation of all mail processing at three metro mail centres in Auckland, Palmerston North and Christchurch.

We’re also about to begin construction on our new Southern Operations Centre. Located at the Christchurch International Airport, the centre will incorporate the latest automated parcel and packet processing technology, meaning enhanced distribution into and out of the South Island.

Preserving the value of our networks capital

The network transformation project included a new approach to the Group’s retail network, with Kiwibank taking responsibility from 1 July 2014 for managing 138 Group-owned corporate stores (PostShops).

A subsequent review to optimise our network concluded it wasn’t feasible to maintain the full complement of current stores in an owned capacity. Some were no longer fit for purpose or economically viable, while others were no longer in locations that delivered the necessary value or best met the changing needs of their community.

In rare situations a store closure will be unavoidable, but in the majority of cases we will reach agreement with local businesses to provide products and services on our behalf. Through this franchise model, Kiwibank and NZ Post maintain continuity of service for the community and reduce the costs of ownership, while the businesses benefit from being ‘one-stop shops’ for customers, with likely increased foot traffic and revenue.

While these changes have been unsettling, the considerable lead times have enabled a smooth transition process for affected staff. As at 30 June 2015, an additional eight stores had been franchised, leaving Kiwibank responsible for 130. While many will remain corporate stores, the Group will continue to pursue franchise opportunities where appropriate.

Kiwibank is now investing in the physical network to ensure that the stores reflect and meet customers’ changing needs. This is in tandem with its ‘digital first’ programme, which will enable customers to access the services they need where and when they want to.

All these changes have required a massive investment in supporting our people through change – particularly those whose roles have altered or ceased to exist. This is a real credit to initiatives such as Future Zone, management support programmes and a comprehensive engagement strategy that has seen the majority of our people welcome the new direction and a significant number redeployed.

Case Studies: 1 2 3

expertise

The Group’s ‘expertise’ capital refers to the capabilities, experience and knowledge we’ve developed through operating nationwide networks, providing innovative systems and services, and delivering performance excellence. It also encompasses our ability to find and exploit new sources of competitive advantage.

The value of this expertise is ultimately determined by how well the Group responds to market conditions and customer requirements and expectations. Together, these powerful influences are changing our world – and in turn inspiring us to change the way we think, behave and work.

Preserving the value of our expertise capital

The Group has a rich resource of expertise based on decades of performance and a commitment to investing in our people and new products, services and technology. It’s a resource that’s more critical to the business than ever, as market forces and customer preferences steer us more deeply into the digital space.

This is an enormous challenge requiring us to transform our organisation from the one we’ve been – essentially a distributor of products – to the organisation we need to become: a digitally aware, highly responsive and consistently customer-centric enterprise known for innovation and an in-depth understanding of customer needs.

Leading the charge is our ‘digital first’ strategy, an immense investment in personnel, money and intellectual capital through which we aim to achieve a competitive advantage in the mail, parcels and banking businesses. Delivering change on this scale is daunting but exciting, and we’re already making progress.

Unfortunately technical challenges have delayed our plan to enhance our application programme interfaces (APIs) for offshore merchants selling products online and sending them to New Zealand addresses. These APIs integrate our shipping technology with the merchants’ systems, and currently allow them to get accurate shipping prices and produce labels for goods based on those prices. We’re still working to deliver a full purchase-to-fulfilment process that includes real-time shipping and delivery information.

Building a digital bank

Kiwibank has launched a major programme to build its digital capabilities, based on a state-of-the-art IT system and a new and refocused organisational structure. The programme will initially focus on enabling online and device-triggered banking transactions, and extend to cover the suite of lending, investment and insurance services. The aim is to ensure that, whether they’re online, in branch or on the phone, customers get the world-class service they expect from a bank.

Making information-sharing easy

During the year we launched ‘Connect’ (www.connect.co.nz), a secure online data and document vault in which people gather and organise important information and share it with organisations they choose to connect with.

The service has been successfully implemented by StudyLink, enabling students applying for loans to share their key documents online. It’s made a complex process simple and delivered cost and time savings for StudyLink. What’s more, word is spreading: a number of other organisations with similar issues have been in touch to learn more.

Expanding YouShop

In October we extended our YouShop service to one of the world’s biggest online markets: China. Kiwis can now buy from Chinese merchants who don’t ship to New Zealand simply by using YouShop’s Chinese delivery address and parcel-forwarding service. Businesses also benefit, as this offers an alternative shipping method for importing small quantities of product for resale or samples before buying in bulk.

In another development, YouShop in Europe and the United States has introduced parcel consolidation, a new service in which customers can consolidate up to 10 parcels bought from different retailers. We repack them into a single parcel and dispatch them to New Zealand, all for a single shipping cost. While this initially means reduced revenue for the Group, we expect it to encourage more repeat business and word-of-mouth recommendations, as well as reduced network costs.

As at 30 June there were approximately 140,000 registered YouShop users. Our challenge is to understand and use the associated data we receive to identify opportunities to grow the service as an easy way to access brands and product variety that are simply unavailable in New Zealand.
 

Taking businesses to China

To help Kiwi businesses capture a share of the fast-growing Chinese online shopping market we’ve set up an ‘online storefront’ for New Zealand businesses keen to enter the Chinese market.

Part of the Alibaba Group’s hugely popular Tmall Global website (China’s largest online marketplace), the store enables Kiwi businesses to showcase their products to an estimated 361 million Chinese online shoppers, at much lower cost and complexity than doing it on their own.

Our expertise in supply chain management means these Kiwi businesses’ products reach Chinese buyers quickly and efficiently. The site is already providing market access to more than 10 Kiwi brands and it is expected to accommodate 50 Kiwi retail brands by mid-2016.

Enhancing the value of our expertise capital

We’ve been part of the New Zealand community for more than 170 years. We want to stay that way, but we need to do this in a way that enables our customers to interact with us via the digital channels they are increasingly preferring to use.

In the next 12 months we’ll be investing more in the technology and expertise we need to lift our digital profile and transform our organisational headspace, a move away from physical transactions to operating in the cloud.

Case Studies: 1 2

people

The people capital comprises the skills, experience, capabilities and contributions of all our people across the group. The extent to which our people believe in our strategy and direction, both what we are doing and how we are going about our business, will influence how we are making the most of capital. In essence this will influence our ability to attract, engage, retain and motivate our people to deliver our strategy.

We have a diverse range of skills, experience and capabilities, united by a determination and a desire to provide a high quality service to our customers and to care for our people.

We are two years into our five-year transformation plan and this year has arguably seen some of the most significant changes in NZ Post’s history. Over this time we have focused on all our priorities, delivering on our financial performance, ensuring our people are highly engaged, providing a work environment that is safe and free from harm, delivering on our service standards and executing our transformation plans to change the business for a sustainable future.

Protecting the value of our people capital

Our response to this uncertainty as we deliver on our plan reflects the old adage: treat others as you’d like to be treated yourself. This means being open and honest with all our staff, respecting and acknowledging their concerns, and supporting our leaders and their teams in preparing for, implementing and adjusting to change. This approach has been particularly valuable for those who’ve been with us for decades, and as a result have formed strong personal as well as professional connections to the business.

In 2014/15 we focused much of our effort on preparing our mail team for alternate-day delivery. This included holding workshops for leaders who needed help in being ‘match fit for change’ and, through our ‘Future Zone’ programme, providing information, support and services for people whose jobs were changing or would cease to exist. As a result:

  • 120 mail officers and processing team leaders and 421 posties and delivery leaders completed national certificate qualifications that recognise their experience with the Group and arm them with skills and knowledge for future work opportunities
  • 121 people attended retirement seminars
  • 350 people attended CV workshops and 253 attended interview workshops.

Future Zone has proved a winner beyond the organisation too. In March 2015 the Human Resources Institute of New Zealand presented us with the Award for Corporate Social Responsibility – recognition that the programme is not only useful for our people, but also an industry standard for supporting employees through change.

Kiwibank commenced the KB2.0 transformation journey to transform the business and put in place a sustainable and profitable platform to allow delivery of the bank’s purpose of ‘Kiwis making Kiwis better off’. This included moving to a new organisation structure. Support programmes were provided to our people to help them through change as well as to those who left through the restructure processes.

Going forward, the people strategy supports the bank’s progression to be a digital business, being ‘frontline led’, and adopting new ways of working. The people programmes we are investing in over the next three years are centred around the four themes of “Culture”, “Leadership”, “Capability”, and “Productivity and performance”.

Preserving the value of our people capital

The success of initiatives like these is reflected in the results of the 2015 staff engagement survey, in which 6,776 employees told us how connected they felt to the business. The Group-wide engagement level was calculated at 73.2%, a drop of just 0.01% on last year’s 73.3%. Given the upheaval of the past year, this gives us confidence that our team has the resilience to navigate change successfully.

Our health and safety performance has continued to improve. Two years ago the Group-wide lost-time injury frequency rate (which measures the total number of lost-time injuries per million hours worked) was 7.21; this year it reached a record low of 3.5. This dramatic improvement reflects a concerted effort to equip our leaders with health and safety-related knowledge and skills, and the ‘Look After Your Mates’ programme, which stressed the importance of personal responsibility for health and safety in the workplace.

Enhancing our people capital

The coming 12 months will bring more opportunities to focus on the Group’s people capital. Together we’ll begin work on ‘re-setting’ our Group culture – transforming a largely operational and product-based organisation into a modern, agile, adventurous enterprise that’s attuned to its customers’ needs and provides a stimulating, rewarding environment for those willing and prepared to be part of our future.

Case Studies: 1 2

environment

The Group’s ‘environment’ capital comprises the natural and physical resources we use to develop and deliver our products and services, and the way we manage the impacts of use on our organisation and the communities where we work.

The Group has long had a formal commitment to managing, reducing and reporting on our greenhouse gas (GHG) emissions, energy consumption and waste management. We continue to monitor our environmental impacts throughout the supply chain – including at the supplier level – aiming to ensure changes in our business results in us being more efficient with the resources we use, while reducing our impact on the environment.

Enhancing the value of our environment capital

The measurement and reporting of our GHG emissions not only shows us our environmental impact but also helps us measure the efficiency of our operations. Reducing our emissions can reflect a reduction in our costs and an increase in business efficiency.

The Group’s efforts to reduce GHG emissions continue to deliver results, with overall emissions reducing by 5.98% to 113,714 tonnes of carbon dioxide equivalent in 2014/15. This compares with our goal of a 1.5% reduction on 2013/14.

Introducing a new emission measurement model

In July the Group will implement a new approach to reporting on our emissions performance.

Called ‘intensity-based reporting’, the new methodology will provide a better indication of the progress and efficiency gains of discrete groups in the business (delivery functions, Kiwibank and the shared corporate functions). It was developed in consultation with members of the International Post Corporation (IPC) who are already using similar models and will ensure we have a best-practice, globally applicable standard we can use to benchmark our performance.

Reducing fuel consumption

As ground-based fuel use represents the majority (45% or 51,191 tonnes CO2e) of our GHG footprint it continues to be a significant focus for the company. A number of events during 2014/15 brought opportunities to reduce our fuel consumption. They included:

  • the consolidation of our mail processing centres. This has seen an increase in the utilisation of the trucks moving mail and parcels between centres
  • the pilot of battery-powered electric vehicles for mail and parcel deliveries in Taranaki. This will reduce fuel consumption (through having fewer courier vans) and cut greenhouse emissions by approximately 2.4 tonnes a month.

In 2015/16 we plan to:

  • target fuel reductions in our truck fleet by working with our drivers. We will use technology to gather information on consumption and driver behaviour in relation to braking, cornering and speed
  • explore opportunities to deliver more through our vehicle fleet, therefore reducing the intensity of our carbon footprint. For example, utilising the reach of our RuralPost network to carry more newspapers and unaddressed mail as well as letters and parcels.

Reducing waste to landfill and energy consumption

The Group’s ‘reduce, reuse and recycle’ programme remains in full swing. The target of reducing waste to landfill by 9% from the 2011/12 base year by 2015 has been well exceeded, reaching 36% over three years. Our waste index has reduced from 2.59 to 1.85 kg/m2/year.

Meanwhile, our total building energy consumption reduced to 37.4 gigawatt hours (GWh) in 2014/15. This compares with 38.7GWh in 2013/14 and is a 13.95% reduction on the 2011/12 baseline year. The energy efficiency of our buildings was 108 kWh/m2/year compared with 113kWh/m2/year in 2013/14 meaning we have achieved an ongoing increase in our building energy efficiency.

Preserving the value of our environment capital

The Group has recognised the benefits of partnering with others to achieve environmental sustainability and:

  • contributes annual data and progress reports to the IPC’s Environmental Measurement and Monitoring System, which benchmarks postal operators’ environmental management. In 2013 we ranked 16th of the IPC’s 23 participating members, compared with 11th in 2012. We improved our overall score in this period but not as fast as some of the other participating postal organisations
  • supports the four-year ‘Energy Cultures’ research programme led by the University of Otago’s Centre for Sustainability. The project examines habitual patterns of energy use and ways to change them
  • contributes to a number of collaborative projects through the Sustainable Business Council. These include being part of the ‘green precinct’ initiative with Auckland International Airport and Air NZ and the ‘green freight’ working group which aims to find more efficient ways to move freight around the country.
Case Studies: 1

finance

Our finance capital is all about the money side of the business – how we earn it, manage it and spend it, how we increase the Group’s financial value, and how we retain our standing as a prudent, reputable and financially sustainable member of the business community.

In the past couple of years the Group has established a solid cash reserve with which to withstand the decline in letter mail and invest in our strategy for the future. The two major contributors during 2014/15 were an outstanding financial performance from Kiwibank and the AUD$95 million sale of our Australian company Couriers Please to Singapore Post. As a result, we’ve delivered a net profit after tax of $143 million, an increase of 34% on 2013/14. 

The challenge now is to ensure:

  • we invest our capital wisely, whether it’s in ‘right-sizing’ the business, investing in new technology and automated processes, engaging more closely with our customers or partnering with other businesses whose aspirations and capabilities complement our own
  • changes made in the past year (such as the mail processing centre consolidation) and those planned and ready to launch (such as alternate-day delivery, battery-powered delivery vehicles and new technology investments) deliver the financial results needed for sustainable growth
  • we continue to identify and act on new opportunities for business growth, particularly in the digital and technology spheres
  • we’re prepared to make tough decisions to ensure our viability in the marketplace.

Preserving the value of our finance capital

Kiwibank made a major contribution to the Group’s financial result, delivering a profit after tax of $127 million and paying a dividend to New Zealand Post for the very first time, totalling $22 million.

This success largely reflects:

  • strong growth in customer numbers, from 860,000 last year to 903,000
  • the buoyant Auckland home loan market
  • a healthy interest margin (the difference between money paid to depositors and the money earned through lending, as well as actively managing the cost of all sources of funds for the bank), which increased from 1.86% in 2013/14 to 2.12% (or $68 million) this year
  • in addition, the number of Kiwi Wealth KiwiSaver Scheme members has grown (to 137,000) and Kiwibank has become a default KiwiSaver provider, which should see that growth continue.

While these are satisfying results, the challenge for the bank is to now:

  • replace the bank’s ageing core banking platform
  • continue to meet its compliance obligations with the Reserve Bank of New Zealand, Inland Revenue and other international organisations, and under legislation such as the Anti-Money Laundering and Countering Financing of Terrorism Act, the amended Credit Contracts and Consumer Finance Act, and the United States’ Foreign Account Tax Compliance Act.

Enhancing the value of our financial capital

Looking ahead, we must make cash-flow management our number one financial priority. That means considering all options, checking and questioning every financial decision, and responding to change proactively and reactively, while continuing to nurture our staff and serve our customers to the best of our ability.

In the midst of all this change, our credit rating and financial market credibility remain strong. In its most recent credit rating review Standard & Poor’s signalled its continued support for our strategy with an A+ rating, tempering it with a negative outlook to reflect its inherent risks and the need for us to make significant progress in its implementation. A recent Kiwibank AT1 (Additional Tier 1) $150 million capital-raising initiative received strong investor support – a useful indicator of the bank’s standing in the investment marketplace, and an encouraging sign for the future.

Case Studies: 1

our performance

The Group has set a series of targets in our Statement of Corporate intent. This section shows how we have tracked against those targets in the 2014/15 year.

Kiwibank profits
exceed $125m
$200m Hybrid bond
successfully re-marketed
maintained our A+ credit
rating (with S&P)
Kiwibank pays first
dividend to the Group
sale of Couriers
Please ($46m gain on sale)
Download our Financials in the Volume 2 Report here.

Scorecard Targets

2014
Actual 		2015
Actual 		2015
Plan
Shareholder Returns
(a) Total shareholder return 1 % 16.0% 29.0% 0.4%
(b)Dividend yield (excl Kiwibank) % 0.5% 0.4% 0.4%
(c)Return on equity % 10.8% 13.2% 11.8%
(d)Return on equity adjusted % 10.4% 13.4% 11.8%
Profitability/Efficiency
(e)Return on capital employed %  5.5%  6.3%  5.7%
(f)Operating margin % 13.5%  16.4% 14.1%
Leverage and Solvency
(g)Gearing ratio (net) % 86.6%  88.4% 88.2%
(h)Interest cover times  9.7  10.7  10.0
(i)Solvency (Current ratio) times 1.2 1.1  1.2
Good Employer
(j)People engagement index (raw engagement score per the Annual Employee Engagement Survey) % 73.3% 73.2% 74.5%
(k)Lost Time Injury Frequency Rate (lost time injuries per million hours worked) per M 4.2 3.5 3.9
Corporate Responsibility
(l)Standard letter service performance (letters delivered to standard (Testpo Survey)) % 95.1% 95.4% 96.5%
(m)Customer favourability (% who rate NZP as ‘excellent’ or ‘very good’.2) % 36.0% 36.0% 59.0%
(n)Emissions reduction % 6.0%  6.0%  -1.5%

 

[1] FY14 and FY15 Total Shareholders Return include changes in commercial valuation. No changes in the commercial valuation is assumed in the outer plan years.
[2] New methodology introduced in 2009/10. 

5-Year Trend Summary

2015 2014 2013 2012 2011
Operating revenue ($m) 1,643 1,651 1,688 1,309 1,280
Operating expenses ($m) 1,483 1,495 1,623 1,224 1,310
Profit/(loss) before tax ($m) 191 140 122 190 -35
Operating margin before tax (%) 9.7 9.4 3.9 14.5 -2.7
Earnings per share (cents) 74.5 55.7 63.0 88.0 -18.5
Total assets  ($m) 19,217 17,583 16,140 15,851 14,682
Average shareholders’ funds  ($m) 1,078.5 994 878 731 667
Return on Average Shareholders Funds (%) 13.3% 10.8% 13.8% 23.2% -5.3%
Net asset backing per share ($) 6.1 6.2 5.7 5.0 3.37
Average shareholders’ funds to total assets  (%) 5.6 5.7 5.4 4.6 4.5
Interim dividend per share (cents) 1.3 1.3 1.3 1.3 0.9
Final dividend per share (cents) 1.3 1.3 1.3 1.3 0.1

 

our governance

  • NZ Post Group Board – Responsible for the overall direction, objectives and strategies for the Group. The Board monitors the Group’s performance against the strategy in the context of our financial and non-financial capitals.

    Hon Sir Michael CullenKNZMMA, PhD, Chairman — Ohope

    Carol Anne CampbellBCom, CA — Auckland

    Alan Michael DunnMapua

    Julia Cecile HoareBCom, FCA — Auckland

    Richard Ian LeggatBSc — Auckland

    Jackie Marie LloydBA, BCom — Wellington

    Richie SmithMBA — member from 1 May, 2015

    David Stephen WillisBCA (Wgtn), ACA (NZ), ICA (Australia)
  • 
New Zealand Post Finance, Risk & Investment Committee – assists the Board in fulfilling its corporate governance responsibilities relating to the Group’s risk management framework, internal control framework, financial reporting, integrated reporting and internal and external audit activities.
  • New Zealand Post Human Resources Committee – responsible for overseeing the human resources strategy for the Group including its health and safety programme.
  • Kiwibank Board – responsible for setting the direction, objectives, and strategies of the Group’s financial services business.

    Robert Willim Bentley MorrisonBCom, Chairman, Independent Director

    Alison Rosemary GerryMApp, Fin, BMS (Hons), Deputy Chair, Independent Director

    Carol Anne CampbellBCom, CA

    Hon Sir Michael Cullen, KNZMMA, PhD

    Brian Joseph RocheBCA, FCA

    Catherine Maria SavageBCA, CA, Independent Director

    David Stephen Willis(Resigned from board 16 June, 2015)

    Lindsay Megan WrightBCom (Hong Kong), Independent Director
  • Converga Pty Ltd Board – responsible for setting the direction, objectives and strategies of the Converga Group and monitoring performance against these.
  • Express Couriers Limited Board – responsible for setting the direction, objectives and strategies of Express Couriers Limited and monitoring performance against these.
  • Kiwibank Finance, Audit & Disclosure Committee – Responsible for assisting the Kiwibank Board with: external financial reporting; integrity of financial controls and reporting systems; oversight of market risk and liquidity risk; oversight of internal and external audit; review and assessment of capital.
  • Kiwibank Remuneration Committee – responsible for assisting the Kiwibank Board with remuneration strategies, policies and structure, senior executive recruitment and retention policies, and succession planning.
  • Kiwibank Risk, Credit & Compliance Committee – responsible for assisting the Kiwibank Board with: strategic oversight of the risk environment, determining risk appetite, monitoring risk management frameworks, policies and risk profiles, approving credit transactions beyond management delegations.
  • Kiwi Group Holdings Board – responsible for setting the direction, objectives, strategies and monitoring the overall performance of Kiwi Group.
  • Kiwi Insurance Board – responsible for setting the direction, objectives and strategies of Kiwi Insurance and monitoring performance against these.
  • The NZ Home Loan Company Board – responsible for setting the direction, objectives and strategies of the NZ Home Loan Company and monitoring performance against these.
  • GMI General Partner Limited Board – responsible for setting the direction, objectives and strategies of the Group’s wealth businesses and monitoring performance against these.
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