Post Office Annual Report Statement 2013 - 2014

- Post Office takes significant steps towards commercial sustainability, reducing dependence on the taxpayer
- Despite a fall in revenue and a decline in network subsidy of £10m, operating profit before exceptional items increased £13m to £107m
- Over 2,000 branches transformed offering 50,000 more opening hours at end March 2014 and more than 1,000 open on Sundays

The Post Office today (10 July 2014) delivered results for 2013-14. This is the second Annual Report since the Post Office began operating as an independent business, on separating from Royal Mail in April 2012.

In a challenging commercial market, the Post Office reports a £13m increase in operating profit before exceptional items from £94m to £107m (which includes a reduced network subsidy payment).

Revenue & Profit:

• Operating profit before exceptional items increased from £94m to £107m.
• Operating loss for the Crown network reduced from £37m to £26m
• Revenue, including the network subsidy payment, decreased by £55m, to £1,179m
• Revenue, excluding the network subsidy payment, has decreased by £45m to £979m

In November 2013, we announced additional funding enabling our business to expand on plans for a modern, digital and thriving business which is commercially sustainable.

By the end of March 2014, the Post Office had transformed more than 2,000 branches, within a branch network where the total number of branches is more than 11,500, offering customers an extra 50,000 opening hours a week. More than 1,000 Post Office branches are now open on a Sunday.

We have also increased our online presence and continued to grow our position as a challenger brand in the financial services market with a widening product portfolio.

During the year, the Post Office continued to develop new mailing products such as Drop & Go and Self-service Kiosks. With millions of customers using our branches to post, collect, or return items, these innovations ensure we remain the leading UK mails expert, with more face-to-face outlets than all our competitors combined.

Paula Vennells, Chief Executive, said: “Like all organisations, we have had to adapt to prevailing economic conditions and last year especially we faced a challenging industrial relations climate. So it is pleasing to announce that our operating profit before exceptional items has increased as a result of greater cost management that more than offset the decline in revenue and the reduction in the subsidy. At the same time, we have managed to prioritise investment in key transformation programmes as we work towards future financial sustainability.

“In Mails, Telecoms and Government Services, we have put in place the mechanisms which will allow us to build and open up new revenue streams in the future.

“The decline in Mails revenue was, of course, disappointing, but we remain confident that we have the right commercial strategy in place, and importantly the right retail mind-set, to ensure we respond to changing customer requirements.

“The Post Office is an organisation like no other. Our branches contribute enormously to the life and soul of their communities. Customer satisfaction is running at over 95% in our modernised outlets, and opening hours, which have increased by more than 50,000 a week, are proving popular with millions of customers visiting our branches outside traditional opening hours.

“These new modern branches, and our plans to drive the transformation to every corner of the business, underline to our customers the commitment of the Post Office to remain at the heart of our communities, connecting people and providing access to key services into the future.

“None of this is to cloud the reality of what was a challenging year. It is clear we must operate at greater pace than ever before – and focus more on our customers and commercial realities.”

Mails and Retail revenue of £390m represented a year on year decrease of £19m. The respective markets for Mails, Retail products and Lottery are changing rapidly with the growth of ecommerce, intensifying competition and increasing customer demands. Mails revenue was down, driven primarily by a reduction in consumer parcel volumes in an increasingly price-sensitive market and lower stamp sales. Retail revenue decreased by £2m due to the one-off increase in the prior year for collectibles relating to the Diamond Jubilee and the Olympics memorabilia. Revenue from sales of Lottery tickets declined by £1m.

Financial Services revenue decreased by £2m to £279m. However, this masks a transformation in the profile of our financial services business. Traditional products such as bill payments declined, though key contracts were won and retained during the year. However, revenue from Personal Financial Services, which is vital to our strategy of growth and modernisation increased by 15.2%. This was achieved through the broadening of our offer of simple, fair and transparent value for money services, such as market leading mortgages, supported by in-branch mortgage and financial specialists.

Government Services revenue decreased by £18m and revenue from the Drivers and Vehicle Licensing Agency decreased by £14m due mainly to lower fees per transaction. But revenue from Passport Check & Send increased by £2m.

Telecoms: The Post Office is a significant player in the telecoms market with around 450,000 customers in HomePhone and Broadband and the largest network of mobile top-up terminals in the UK. Revenue in Telecoms fell 3.9% from £129m to £124m however we were able to make significant progress in building our infrastructure to enable us to grow customer numbers in future.

Overview & the Future
The modernisation of the Post Office reaches far beyond the changes to our physical branch infrastructure. Investment in our mobile website, a Travel Money Card app, and the next generation of Self-service kiosks for retail and mail services, are just a few examples of how Post Office is creating a dynamic and digital presence.

The Post Office remains the market leader in retail foreign exchange, and we have also entered the Help to Buy, Buy-to-let and Intermediary mortgage market and are trialling current account products – we announced in July that current accounts would be available from over 200 branches across the UK by the end of the September.

Although the last year has highlighted a number of challenges, we remain confident about the future of the Post Office. Our strategy of modernisation, growth and customer excellence is key to achieving this goal.

A link to the full Post Office Report and Accounts can be found at here.

Ends

Issued by:
Post Office Press Office
1st Floor, 148 Old Street,
LONDON
EC1V 9HQ
Tel: 020 7012 3456 (24 hours),
Email: pressoffice@postoffice.co.uk
Twitter: @PostOfficeNews
www.postoffice.co.uk

About Post Office: Post Office Limited has an unrivalled national network of over 11,500 branches across the UK, more than all the high street banks combined, and sits at the heart of many communities across the country. The Post Office has made a commitment to no more branch closure programmes. It provides around 170 different services and products spanning financial services including savings, insurance, loans, mortgages and credit cards. Post Office also offers Government services, telephony, foreign currency, travel insurance and mail services.

It serves around 17 million customers a week and a third all small businesses and 99.7% of people live within three miles of their nearest Post Office outlet. For many rural communities the Post Office is the only retail outlet. Post Offices remain highly valued and trusted and are the focal point for many communities. For more information, visit www.postoffice.co.uk