2010 11 Integrated Annual Report Web

8/2/2019 2010 11 Integrated Annual Report Web

1/140

FUTUREREADYAnnual Report 201011Our financial, social andenvironmental performance


2/140

Australia Post can be very proud of the progress it has madetowards achieving its Future Ready vision. Im genuinelyexcited about the transformation the corporation isundergoing to become a modern postal enterprise that isequipped to grasp the opportunities of the digital economy.

David A Mortimer AO Chairman

About this reportThis year we have integrated our annual report andcorporate responsibility report within one document.

Our 201011 annual report covers our financial, socialand environmental performance and discusses issues

that are important to our broad range of stakeholders.You can read more about our materiality process,

and how we identify significant issues to report,on page 16.

In this report

2 Future Ready4 Year in review6 Chairmans report

7 Managing Director and CEOs report8 Financial report

10 Corporate responsibility report11 Performance summary at a glance

12 About Australia Post14 Our board and executive committee

16 Stakeholder engagement18 Core businesses

20 Letters: A sustainable letters service24 Parcels: Winning in e-commerce28 Retail: Providing trusted services

32 Corporate responsibility34 Supporting our people

38 Investing in communities42 Connecting with our customers46 Managing our environmental impact

51 Financial and statutory reports52 Corporate governance

115 Community service obligations123 Statutory reporting requirements

130 Australia Post the statistics132 Index

134 Glossary135 About this report and assurance statement136 GRI index


3/140

Our trusted brand, customer-focused approach and eParcel online fulfilment and tracking system arekey reasons why multi-channel retailer Gazman selected Australia Post as its parcel delivery partner.

AUSTRALIA POST ANNUAL REPORT 201011 1


4/140

Rebuild the business and achievesustainable growth.

Continue to deliver a reliable andaccessible letters service to theAustralian community.

Grow our share of the e-commercemarket and provide greater customerconvenience and choice for delivery.

Roll out our next-generation retailmodel to provide customers withgreater access, convenienceand choice.

Continue to manage costs, buildour capabilities and support andreward our people.

Established clear andsimple enterprise strategies toguide us to future growth.

Returned to profit growth, deliveringa profit before tax of $332.3 million.

Exceeded our CSOs, with 96 percent of domestic letters deliveredon time or early.

Increased the number of retailoutlets to 4,419.

Reached agreement for, andimplemented, our Fair Work Agreement.

Announced a $20 million FutureSkills program to develop skillsof award-level employees.

Reduced greenhouse gasemissions by 5 per cent.

THE PAST THE PRESENT THE FUTURE

Continuous improvements to theefficiency of our delivery network.

A trusted and iconic Australian brand.

Consistently exceeded ourprescribed performance standards.

An unrivalled retail anddistribution network.

BUT Digital substitution reducing lettervolumes and retail foot traffic.

Traditional revenue declining whilethe cost of servicing an expandingdelivery network is increasing.

FUTURE

READYIn this our first year of Future Ready, I am delighted that we have achievedour main aim of stabilising business performance. Despite the challengesof our rapidly changing marketplace, we have increased profitability, sharpenedour customer focus and exceeded all of our community service standards.

Ahmed Fahour Managing Director and CEO

2 AUSTRALIA POST ANNUAL REPORT 201011


5/140

Stabilising the businessIn 201011, we achieved what we set outto do in the initial phase of Future Ready:we stabilised the business. This has establisheda solid foundation for the next Future Readyphase, which is to rebuild the business.

As proof of our achievements this year,our revenue (up 2.8 per cent on last year)grew faster than our costs (up 1.2 per cent).This was the first time in four years thatour revenue growth outstripped costgrowth. We also returned to profit growth(up 31.3 per cent on last year): with a before-tax

profit of $332.3 million this financial year,compared with profit (before restructuring)of $253.2 million in 200910.

Every day, people throughout our businesshave responded to the challenges facingAustralia Post. Among the many highlightsof this financial year, we signed a new FairWork Agreement which gives our peoplecertainty for their future. Central to theagreement was the announcement of our$20 million Future Skills program, whichoffers targeted training in business andemployability skills to award-level employees.

On 1 July 2010, we implemented ourrestructured business model focused onstrategic business units with profit-and-lossaccountability and supported by lean,high-performing functional business units.In their first full year of operation, our newbusiness units successfully implementeda range of efficiency improvements andcost reduction measures.

During the year, we also established our fourculture pillars safety, accountability, customerfocus and speed of action and launchedseveral programs to ensure that these are

at the heart of our business. The key programswe launched this year are Performance Ready,which drives accountability across thebusiness; and Safety.

In 2010, we launched the Future Ready businesstransformation program, setting an excitingnew direction of customer-driven, sustainablegrowth for Australia Post. During the financialyear, we took great strides in making thatvision a reality as we stabilised the businessand laid solid foundations for a dynamic future.

Until just a few years ago, Australia Post

enjoyed ever-increasing revenue and profits.As Australias population and economy grew,so too did our core business. But over thepast few years, the rapid shifts by consumersto digital communications and transactionssharply eroded our letter volumes andcustomer numbers and began to put stresson the cost base of our traditional mail deliveryinfrastructure. As a result, our profits havefallen to the point where, last financial year,we returned our lowest profit in 20 years.

It was apparent that a new direction wasessential if we were to not only survive but

also thrive in the era of the digital economy.In April 2010, we began stepping boldly inthat new direction under a business renewalprogram that we call Future Ready. It involvestransforming Australia Post so that we areready to tackle the challenges, and embracethe opportunities, of the future.

Of course, we began this change journeywith some enviable strengths and realcompetitive advantages. We are an iconicand trusted brand with unrivalled retailand distribution networks.

Now, as Australia Post brings an even greaterfocus to the needs of twenty-first centurycustomers, we are strengthening our digitalcapabilities and seizing the considerableopportunities that growth in the globale-commerce market presents for our parceldelivery business.

An important part of our plan is themaintenance of our commitment to providinga reliable and accessible service to everyAustralian, wherever they live or work.

Another highlight this year was the boardsendorsement of our new enterprise strategy,which is essentially a Future Ready action plan.It retains Australia Posts three enterprisestrategies established in October 2010:

restoring a self-sustaining letters business

growing our parcels business by winningin e-commerce

building a multi-channel services offerin digital and retail.

Underpinning these strategies are a focuson business efficiency and service quality anda commitment to building the capabilitiesand engagement of our people.

We recognise that putting our customers atthe centre of all that we do will be critical tobecoming Future Ready. So we are refreshingour approach to sales and marketing to bettermeet our customers needs.

The next phase

While there is much to be proud of inthe first year of our transformation program,we cannot lose sight of the fact that weare only part of the way along our journeyof renewal. Theres still much to be done.

Over the next year, there will be a concertedfocus on executing our enterprise strategies.This means enhancing and refining someexisting capabilities and developing new ones.It means identifying new revenue opportunitiesas we respond to customer and market needs.

Our stakeholders are critical to ourachievement of our aspirations. We willdeepen our engagement with them so thattheir expectations inform our priorities andso that they support us on our change journey.

The future holds many challenges for postal

services around the world. Australia Postis embracing change so that we can not onlyovercome those challenges but also graspthe opportunities that lie ahead.

An important part of our plan is the maintenanceof our commitment to providing a reliable and accessibleservice to every Australian, wherever they live or work.

AUSTRALIA POST ANNUAL REPORT 201011 3


6/140

Year in review



7/140

During 201011, Australia Post stabilised its business and laidthe foundations for future growth by balancing the financial,social and environmental imperatives of its operations. This wasa year of change and challenge but also one of achievement.

15,002TONNES LESS GREENHOUSE GASESPRODUCED (TARGET: ACHIEVE 25%REDUCTION BY 2020)

$142.1millionTHE COST OF MEETING OURCOMMUNITY SERVICE OBLIGATIONS

73 %OF AWARD-LEVEL EMPLOYEESVOTED YES FOR OUR NEW FAIRWORK AGREEMENT

$332.3millionPROFIT BEFORE TAX

31%OF NON-HAZARDOUS WASTERECYCLED (TARGET: INCREASETO 70% BY 2016)

$2.9millionIN PUBLIC DONATIONS COLLECTEDTHROUGH OUR OUTLETS

$20millionINVESTED IN OUR FUTURE SKILLSPROGRAM TO PROVIDE SKILLSFOR AWARD-LEVEL EMPLOYEES

96%OF DOMESTIC LETTERSDELIVERED ON TIME OR EARLY(CSO TARGET 94%)

539,035CARTRIDGES AND 7,460 KGOF MOBILE PHONE PRODUCTSCOLLECTED FOR RECYCLING

THROUGH OUR OUTLETS

$458,903DONATED TO CHARITIESTHROUGH OUR WORKPLACEGIVING PROGRAM

29.1%OF OUR EXECUTIVE WORKFORCEIS FEMALE

4,419OUTLETS IN OUR RETAIL NETWORK,UP FOUR ON LAST YEAR

ENVIRONMENT

COMMUNITY

PEOPLE

BUSINESS

YEAR IN REVIEW 5


8/140

The development of new applicationsmaking communications technology moreintuitive, reliable, mobile and user-friendly

is having a huge impact on every areaof our core business. In letters, for example,our volumes continue to fall as consumersand businesses increasingly adopt digitalalternatives. Likewise, in our retail network,customer foot traffic is falling as Australiansshift to online methods of bill payment andbanking. In the parcels marketplace, theInternet is having the opposite effect: drivingvolume growth as consumers increasinglyshop online.

In 200910, we acknowledged that weneeded to change our approach to doing

business in order to remain relevant to ourcustomers and to thrive in the digital era.The manifestation of our new approach isthe Future Ready business renewal program,which we began implementing at thebeginning of this financial year underthe direction of our new chief executive,Ahmed Fahour.

Future Ready in action

I am immensely proud of the progresswe have made this year towards achievingour Future Ready vision. Our priorities for201011 the first year of our change program

involved establishing a new strategic agenda,implementing a new business structure andstabilising our financial performance.

The board endorsed the new Future Readyenterprise strategy in November 2010. Thisstrategy aims to address the many competitivechallenges facing the corporation and harnesscustomer growth opportunities of the digitaleconomy. There are three simple points toour strategy:

1 Restore a self-sustaining letters business.

2 Grow the full-value chain in parcelsand win in e-commerce.

3 Build our trusted multi-channel servicesoffer in retail and digital.

While they sound simple, these strategiesare actually very ambitious. The next greatchallenge for Australia Posts leadership

team is to engage our workforce in all ofthe operational change and new serviceinitiatives underpinning these three strategies.I have every confidence that our talentedteam will implement our strategy successfullyover the coming years.

The other really significant achievement thisyear is the return to profit growth, with ourrevenue growing at a greater rate than ourcost growth (2.8 per cent and 1.2 per centrespectively) for the first time in several years.The turnaround in the financial trajectory ofour business during 201011 was remarkable,

and it has been achieved while maintainingvery high standards of community service.

Importantly, being a Future Ready businessis about much more than bottom-line financialresults. We also have an ongoing commitmentto social and environmental responsibility.We have some fantastic initiatives in placethat ensure that we reduce our environmentalfootprint and give back to the communitiesin which we operate.

A new initiative I am particularly proudof this year is our Reconciliation Action Plan.Launched in February, the plan provides

a long-term commitment to providingsustainable employment opportunitiesto Indigenous Australians.

As a government business enterprisewith a set of community service standards,we remain fully committed to meeting ourtwo primary objectives: (1) earning enoughprofit to ensure the sustainability of ourbusiness while returning an appropriatedividend to our shareholder, and (2) continuingto serve the entire Australian community,from the largest cities to the smallest towns,for many years to come.

Finally, I am excited about the new initiativesour management team is investigating toenhance our service levels and offer customers

greater flexibility and choice for delivery.These initiatives will demonstrate how nimbleand responsive Australia Post has becometo changes in the market, and that we area service leader in parcel delivery in Australia.

My thanks

Id like to pay tribute to Bill Mansfield,who passed away in February this year.Bill made an invaluable contribution to theAustralia Post board since joining in 2008.He will be sadly missed.

Id like to express my sincere thanks tothe many people who have made this yeara success. Management, staff, licensees,franchisees, partners and contractors aroundthe country are making a tremendouscontribution to Australia Posts current stabilityand future growth. I also thank my fellowboard members for their continued supportof me as chairman and their commitmentto the future prosperity of our business.We have much to look forward to.

David A Mortimer AOChairman

Chairmans report

Like postal businesses around the world, Australia Post is nowoperating in a rapidly changing (and increasingly competitive)

marketplace as a result of the generational shift towardselectronic forms of communicating and transacting.

David A Mortimer AO Chairman



9/140

Corebusinesses

Corporate

respo

nsibility

About

AustraliaPost

Financialand

statutoryreports

Yearinreview

Our two goals are to deliver on ourcommunity service obligations (CSOs) andto earn a commercial rate of return for our

shareholder. I am pleased to report that thesehave both been achieved. Delivering on ourCSOs is not easy. I am proud that this year wehave again met our target for domestic letterdelivery (96 per cent on time or early againstour target of 94 per cent) and we have finishedthe year with 4,419 outlets, up four on last year.

Financial performance

After declines in both revenue and profitlast year, we have returned to growth.Trading revenue was $5.0 billion (animprovement of 2.8 per cent on 200910)and we delivered profit before tax of $332.3

million. This is up $79.1 million on last yearsresult of $253.2 million (excluding restructuringcosts). While this is 31.3 per cent higherthan in 2010, it only brings us back into linewith our 2009 profit result. The directionis positive, but there is still much to be done.

Key factors contributing to our positiveprofit result included the additional revenuewe gained from the full-year impact of theincrease in the basic postage rate (from 55to 60 cents), and the strong performanceof our parcels business on the back of onlinetrade and growth in identity and money

transfer services.The increase to the stamp price helped toreduce losses in our reserved letters business,from $250.1 million in 2010 to $91.3 million in2011. However, this was offset by the continueddecline in the volume of domestic addressedletters mailed in Australia (down 3.7 per centthis year), while the cost of servicing Australiasexpanding delivery network continued to rise.

Electronic substitution is having an impactbeyond our letters business; it is alsocontributing to declines in the number ofagency-based bill payment and banking

transactions conducted via our retail network.Another factor that had a detrimental effecton this years results was the strength of theAustralian dollar. Our inbound international

parcels volumes boomed this year as moreconsumers took advantage of the strongAussie dollar to shop offshore, but we

lost money on the delivery of inbound parcelsweighing under 2 kilograms because of thestructure of international payments to usunder the Universal Postal Unions globalrate-setting agreements.

Major achievements

The signing of our new Fair Work Agreementwas a major highlight of this year. It providesan industrial relations framework while werebuild the business and, importantly, givesemployees stability and security for the futureas we continue to carefully manage costsin our loss-making reserved services activities.

The fact that 73 per cent of our people votedyes to the FWA demonstrates that theysupport the Future Ready program and arecommitted to our future success.

Another pleasing aspect of this year was thework we did on revitalising the corporationsculture. We introduced four new culture pillars safety, accountability, customer focus andspeed of action to guide our behaviourand launched a number of programs to startembedding these behaviours in our business.Of particular note is our new Safety strategy,which will guide us towards a world-class

safety culture. The health and wellbeing of ourpeople are a top priority and we are workingvery hard across all areas of the corporation toachieve an injury- and incident-free workplace.

We also clearly articulated our plan forfuture growth with an enterprise strategythat builds on our traditional strengthswhile also embracing the digital economy.The December acquisition of paymentgateway company SecurePay is a perfectexample of how this strategy is alreadydriving decisive action aimed at growth.

Other future-focused initiatives this year

include the launch of our smartphone app,partnerships with eBay and PayPal andthe trial of flexible new service optionssuch as 24/7 parcel collection.

We also conducted a strategic reviewto ensure that we had the right capabilitiesin place to achieve our Future Ready goals.

As a result, we divested two companies iPrint and PrintSoft so that we could focusour resources on achieving our three corestrategies in our letters, parcels andretail businesses.

Overall, it was pleasing to see our commercialnon-reserved services business make a profitof $405.3 million (up 18.7 per cent on last year).This was largely driven by growth in parcelsand trusted services such as financial andidentity services.

Future headwinds

Despite our many achievements this year,we cannot lose sight of the ongoing challengesthat face our business. Digital substitutionwill continue to cause a decline in our lettervolumes and retail foot traffic. Australiastwo-speed economy also means thereis strong growth in sectors such as miningand agriculture, but the services sectors(to which our products and services are morealigned) are growing at a much slower rate.These factors will continue to weigh heavilyon our future results.

Thank you

I extend my thanks to everyone acrossthe corporation, from posties to directors,for embracing the Future Ready businessrenewal program and putting in the hard workto make it a reality. We have now completedthe first year and we are ready to move intothe next phase, which is focused on rebuildingour business. There is hard work ahead of us,but there are great rewards too. I look forwardto another year of achievements in 201112.

Ahmed FahourManaging Director and CEO

Managing Director and CEOs report

I am very proud of what the corporation has achieved in 201011.We have just completed the first year of our Future Ready business

renewal program, which is focused on transforming Australia Postinto a more customer-centric and higher performing enterprise.

Ahmed Fahour Managing Director and CEO

YEAR IN REVIEW 7


10/140

Financial report

Australia Post has made great progress towards stabilisingbusiness performance, despite being faced with some significant

challenges. The continued decline in letter volumes, an uncertaineconomic environment (particularly with regard to the Australianretail sector) and environmental factors, such as the Queenslandfloods, have all had an impact on the corporation.

Performance

Our efforts to improve business performancecontributed to our statutory profit before tax

increase of $229.3 million (from last years$103.0 million).

The improved statutory result is partlyattributable to the restructuring costsrecognised last year. These costs have beenincurred to reposition our business portfoliosto be more responsive to our customersneeds and preferences in a digital economy.Excluding the one-off restructuring costsrecognised in 200910, earnings before taxhave increased by $79.1 million, from $253.2million last year to $332.3 million this year.

The improved earnings were boosted by federaland state election mailings and the increaseto the basic postage rate (BPR). This waspartially offset by the foreign exchange impactson our international inbound postages dueto the strong Australian dollar, and subduedretail conditions.

Revenue from our letters portfolio grew by2.6 per cent, mainly as a result of the five centincrease in the BPR in July 2010. The volumeof addressed domestic letters declined by3.7 per cent this year (but excluding thefederal election showed a 4.6 per cent decline),representing 89 million fewer articles passing

through our network. While an improvementon last years 5.5 per cent contraction, thisis an ongoing challenge as our customerswill continue to move to digital methodsfor communicating and transacting.

Although we remain Australias largest retailnetwork, this year we continued to experiencea decline in the number of customers visitingour outlets. Weak consumer confidence andeconomic uncertainty, especially within the

retail sector, resulted in a decline in revenuefor our retail, agency and merchandise portfolio.We have continued to expand and improve our

proof of identity services through image captureand authentication, and this resulted in anincrease in revenue within identity services.

The strength of the Australian dollar throughout201011 encouraged Australian consumersto purchase from overseas online retailers andthis increased our international inbound parcelvolumes. This, together with a modest increasein domestic volumes, resulted in overall parcelvolume growth of 10.9 per cent.

Dividends

Dividends payable from the 201011 resultare expected to total $173.2 million, whichis in line with a 75 per cent payout ratio ofthe corporations after-tax result. This dividendis well above last years level of $79.1 millionand returns payments broadly to the levelexperienced in 200809.

Cash management

Cash at 30 June 2011 is $101.5 millionhigher than last year. This is due to theenhanced operating cashflow during thecurrent period and the fact that no finaldividend was paid this year for the 200910financial year. These cash levels are adequateto support targeted capital investment andongoing capital maintenance.

In line with the stronger cash position,key gearing metrics have improved withdebt to debt plus equity falling to 23.6 per cent(from 26.4 per cent last year) and interestcover improving to 10.9 times (from 4.6 timesin 200910), which is approximate to200809 levels.

Capital expenditure

As we shift our focus to rebuilding ourbusiness, an assessment of our investment

expenditure was made. Total consolidatedcapital investment expenditure for 201011was $269.3 million. We have continuedto direct approximately half of our annualexpenditure towards the maintenance andreplacement of assets (predominately in ourpostal and retail networks), with the balanceof expenditure being directed towards costreduction initiatives and management systemsto position Australia Post for growth in theparcels market.

Outlook

Although the Australian economy continues

to benefit from a strong and dominantresources sector, consumer confidenceand retail uncertainty will continue toaffect our overall performance.

As we pursue our strategies over thecoming year and adapt to these challenges,Australia Post will begin to rebuild itsbusiness model to underpin new revenuewith sustainable cost structures. We willimplement our parcel strategy to grow marketshare and expand our range of financial andother services delivered through physicaland online channels.



11/140

Mail volumes m

08 5,609.4

09 5,323.4

10 5,145.0

11 5,034.5

07 5,515.8

Profit/(loss) from reserved services $m

-1.7

-69.2

-250.1

-91.3

24

08

09

10

11

07

Labour productivity (illustratingfive-year cumulative growth) %

08 4.0

09 0.8

10 0.8

11 2.5

07 1.4

Declared dividends $m

08 446.2

09 222.4

10 79.1

11 173.2

Ordinary dividend declared

Special dividend declared

07 296.9

Revenue $m

08 4,959.2

09 4,985.3

10 4,870.6

11 5,006.6

07 4,711.1

Revenue $m

Shareholder return on equity %

08 15.4

09 14.1

10 5.7

11 13.4

07 14.2

Capital expenditure $m

08 295.1

09 270.1

10 258.4

11 269.3

07 283.7

Operating profit before tax $m

08 592.2

09 380.9

10 103.0

11 332.3

07 561.7

Corebusinesses

Corporate

respo

nsibility

About

AustraliaPost

Financialand

statutoryreports

Yearinreview

Five-year trends

2007 2008 2009 2010 2011

Mail volumes m 5,515.8 5,609.4 5,323.4 5,145.0 5,034.5

Revenue $m 4,711.1 4,959.2 4,985.3 4,870.6 5,006.6

Return on revenue % 11.9 11.9 7.6 2.1 6.6

Profit before tax $m 561.7 592.2 380.9 103.0 332.3

Profit after income tax $m 400.7 432.2 260.5 89.5 241.2

Profit/(loss) from reserved services $m 24.0 (1.7) (69.2) (250.1) (91.3)

Shareholder return on equity % 14.2 15.4 14.1 5.7 13.4

Return on average operating assets % 19.6 19.4 12.2 3.8 10.9

Debt to debt plus equity % 15.9 15.4 23.3 26.4 23.6

Ordinary dividend declared $m 296.9 334.6 184.0 79.1 173.2

Specia l dividend declared $m 0.0 111.6 38.4 0.0 0.0

Interest cover (times) 18.4 15.6 11.0 4.6 10.9

Cumulative labour productivity % 1.4 4.0 0.8 0.8 2.5

Capita l expenditure $m 283.7 295.1 270.1 258.4 269.3

YEAR IN REVIEW 9


12/140

Corporate responsibility report

Given the Future Ready transformation, this year has beenchallenging and much of our CR program has focused on

supporting our people through the change. Considerable efforthas also gone into reducing our greenhouse gas emissionsto achieve our 2020 carbon reduction target.

201011 highlights

This year marks the end of our three-yearcorporate responsibility (CR) program,

which was launched in 2007. All of theinitiatives established under the programhave been completed or are ongoing.An overview of our major achievementsduring the three-year period is providedon page 33.

A number of new initiatives were launchedto bring about cultural change and engage andequip our people with the skills and capabilitiesthat will be needed to execute our enterprisestrategy successfully. These include FutureSkills, Future Leaders, Performance Readyand our new Safety program, I Am for Zero.

(See pages 34 to 37 for more details.)

We also achieved a significant reduction inour greenhouse gas emissions to a level onpar with the emissions we produced in 2000 more than a decade ago. We are on trackto meet our board-endorsed carbon reductiontarget of 25 per cent by 2020. Reducing ouremissions is now a key performance indicator(KPI) for the CEO and a gateway KPI for allemployees, so each and every one of our people

has a role to play in helping us to achieveour target. (See pages 46 to 49 for moredetails on our environmental performance.)

Meanwhile, we revised our communityengagement strategy to reflect the newstrategic direction of the corporation andensure that we continue to make a positivecontribution to Australian society. This yearwe began implementing the strategy, whichsaw the launch of a new partnership withFoundation House to support their UCan2program to promote social cohesion. We alsoachieved our Workplace Giving participationtarget of 5 per cent and provided a broad rangeof support for communities affected by theQueensland floods. (See pages 38 to 41.)

Challenges this yearThis year, we faced two main challenges.The first was maintaining employeeengagement and morale through significantchange, something that all organisationsface when they embark on a transformationprocess. But we have been proactive inmonitoring this and developing initiativesto support our people.

Achieving our Workplace Giving targetalso proved a challenge as our people madegenerous personal donations to the various

natural disaster relief funds established in thewake of the Queensland and Victorian floods,the Japan and Pacific disaster and the NewZealand earthquake.

Outlook

Work is now underway to review ourCR performance against best practice.The outcomes of this review will be usedin the development of a revised CR strategy,which will determine our long-term approachto monitoring our environmental and socialperformance and managing the various risksand challenges facing our business. The views

of our stakeholders will inform the strategyto ensure that our future approach toCR addresses their needs and concerns.

We will also focus on ensuring that all areasof the corporation not only have a clearunderstanding of our long-term sustainabilitygoals and commitments but also considerthese in their business planning andday-to-day activities.

Stakeholder Council statement

By integrating its annual and corporate responsibility reports this year, Australia Post has demonstrated its commitment to long-termsustainability, from a financial, social and environmental viewpoint.

The council recognises that the corporation is in a major transition period as it adapts its business to respond to the many challengesit faces. With this in mind, we congratulate Australia Post on showing leadership in integrating its reports and providing its stakeholderswith a balanced account of its overall performance this year.

In closing, we believe that the report is a factual representation of the corporations financial, social and environmental performanceand that it is well written and easy to understand. We appreciate that, as part of its Future Ready program, Australia Post is revisitingits CR strategy and we expect to see greater integration across all its business areas as this new approach is implemented over

the coming years.

Australia Post Stakeholder CouncilAugust 2011



13/140

Corebusinesses

Corporate

respo

nsibility

About

AustraliaPost

Financialand

statutoryreports

Yearinreview

Our business

Improved the efficiency of our networkby sequencing more than 3,000 delivery roundsunder our Future Delivery Design program.

The parcels portfolio achieved 5.3 per centrevenue growth.

Sold our 3 millionth gift card and introducednew Australia Post-branded gift and onlineshopping cards.

We are delivering fewer letters to an expandingnetwork of delivery points each year.

Inbound international parcels weighing lessthan 2 kilograms operate at a loss becausethe cost of delivering them outweighs thereimbursement we receive from overseaspostal operators.

Retail foot traffic continues to decline asAustralians send fewer letters and increasinglyuse digital channels for bill payment and banking.

Continue to improve network efficiencyand promote the benefits of physical mail.

Continue to improve our network efficiencyand flexibility, including providing greatercustomer choice for sending andreceiving parcels.

Build our trusted services offering,particularly through further developmentof multi-channel and self-servicecapabilities, and equip stores foronline sellers.

Our people

Launched Performance Ready, to drive a cultureof accountability, and I Am for Zero, to improveour safety culture and performance.

Maintaining staff focus and morale throughthe first year of our transformation.

Embed our culture pillars safety,accountability, customer focus and speedof action with particular focus on safety.

Our communities

Revised our community engagementstrategy to align with our Future Readyenterprise strategy.

Ensuring that we continue to meet the needsof the community as we adapt our businessto the changing marketplace.

Establish new programs and partnershipsto reflect our revised communityengagement strategy.

Our customers

Refocused our sales force to better meetcustomer needs and deliver relevantand valued solutions.

Maintaining customer satisfaction levels througha period of significant change.

Offer our customers sustainableproducts and services and adaptto the changing marketplace.

Our environment

Reduced greenhouse gas emissions by5 per cent during the year.

Finding new strategies to further reduce ourdependence on energy and fuel derived fromnon-renewable sources.

Undertake trials of new building and vehicletechnology to identify long-term strategiesto reduce carbon emissions.

Performance summary at a glance

This first year of our Future Ready renewal program saw achievementsthat had a positive impact not only within the corporation but also on

the communities in which we operate. The corporations transformationcontinues and, while challenges remain, the outlook is very much oneof sustainable, customer-driven growth.

Highlights Challenges Outlook

YEAR IN REVIEW 11


14/140

Australia Post continued to provide an accessible service to Australians,expanding its network of retail outlets to 4,419 this year.

About Australia Post



15/140

Australia Post is a government businessenterprise which operates under theAustralian Postal Corporation Act 1989.

A completely self-funding business, we havea dual responsibility to operate according tosound commercial practice and to meet ourcommunity service obligations (CSOs). Underour CSOs, we are committed to providingan accessible, affordable and reliable lettersservice for all Australians, wherever they reside.

Our profits are used for two purposes. The firstis to return a dividend to our sole shareholder,the federal government. The second is to

reinvest in developing new products, servicesand capabilities so that our business canmeet the changing needs of Australians.

Our vision is to be a trusted services providerfor the real and digital economy. With Australiaslargest retail and distribution network andthe second most trusted brand in Australia

(2011 AMR Reptrak brand reputation study),we are in a good position to achieve this.But we need to develop new capabilities

and a product and service offering that willenable to us to compete in the digital world.Our Future Ready renewal program willenable us to achieve this.

Yearinreview

Corebusinesses

Corporate

respo

nsibility

Financialand

statutoryreports

About

AustraliaPost

Our products and services

Domestic and internationalletter delivery.

On-time international, domestic and

express parcel delivery services.

Trusted financial, governmentand identity services.

Data and customeracquisition services.

Document managementand processing.

Cross-town courier services.

Post office boxes and locked bags.

Collectable stamps, coins andassociated products.

Complementary retail products,

including packaging, stationery,communications, gifts and cards.

Secure business-to-business andbusiness-to-customerpayment gateway.

Our business partners (at 30 June 2011)

Joint ventures

Australian air Express (with Qantas):domestic air linehaul and cargo

terminal operations.

Star Track Express (with Qantas):market-leading road and airdelivery service.

Sai Cheng Logistics International(with China Post): supply chainmanagement and logistics.

Subsidiary companies

SecurePay: secure business-to-business and business-to-customerpayment gateway.

Decipha: mailroom and document

workflow services.Post Logistics Hong Kong: freightforwarding services.

Key facts

We operate 4,419 outlets, including2,552 in rural and remote areas.

We maintain 16,036 street

posting boxes.

We have a diverse workforce ofmore than 33,000 people speaking50 languages.

We consistently exceed ourcommunity service obligations,including letter delivery to98.8 per cent of Australianaddresses five days per week.

Every week we deliver on average97.8 million items to more than10.9 million delivery points.

We are ranked the second mosttrusted brand in Australia.

Having celebrated our bicentenary in2009, we are the oldest continuouslyrunning organisation in Australia.

An iconic and trusted brand

For more than 200 years Australia Post has been an integral part of the community,from the nations largest cities to its smallest towns. Despite a changing world,

we have continued to provide a reliable and accessible letters service to allAustralians. But to remain financially sustainable, we must use our reputationas a trusted services provider to deliver products, services and capabilitiesto achieve growth, well into the future.

Our corporate structure

Strategic business units

Functional business units

Managing Director and CEO

Mail Services Parcel Services Retail Services eServices

Enterprise Salesand Marketing

Finance and BusinessServices

Corporate Affairs (HR)

Australia Post was restructured outside of the reporting period to better align its corporate structure with its enterprise strategy. These changes are reflected in this organisational chart.

ABOUT AUSTRALIA POST 13


16/140

1 David A Mortimer AOBEcon (Hons), FCPA, FAICD

Chairman (non-executive)

David Mortimer has extensive experiencein banking, finance and transportation.He was appointed chairman of Australia Postin September 2006 (current term expires inSeptember 2012) after serving as deputychairman from June 2001. Formerly the managingdirector and CEO of TNT, Mr Mortimer ischairman of Crescent Capital Partners Limited,Leighton Holdings Limited and the DefenceIndustry Innovation Board, and a directorof Petsec Energy Limited and ClaytonUtz Foundation.

2 Mark DarrasLLM, BA, LLB, BEdDeputy Chairman (non-executive)

Mark Darras has significant experience asa senior counsel and human resources executive.A member of the Australia Post board sinceOctober 2008, he was appointed deputychairman in June 2010 (current term expiresin June 2013). Mr Darras previouslyserved as a human resources and strategyexecutive manager with Goodman FielderLimited. He is currently a special counsel

with Sparke Helmore Lawyers and a directorat John Holland Engineering ProprietaryLimited. Mr Darras is also chairman of theAustralia Post Human Resources Committee.

3 Ahmed FahourBEcon (Hons), MBA, FAIM

Managing Director and CEO

Ahmed Fahour has held a number of seniorexecutive positions within the finance andbanking industries in Australia and overseas.He was appointed managing director andCEO of Australia Post in February 2010.He was previously CEO of Citigroup (Australiaand New Zealand), National Australia Bank(Australia) and Gulf Finance Group (Bahrain).Mr Fahour is a senior fellow of the FinancialServices Institute of Australia and chairmanof the Rip Curl Group and the Council forAustralianArab Relations. He is also chairman

of AUX Investments, deputy chairman of SaiCheng Logistics and a director of InternationalPost Corporation (IPC) and MurdochChildrens Research Institute.

4 Penelope Bingham-HallBA (Ind Des), FAICD, SA (Fin)Director (non-executive)

Penelope Bingham-Hall is a company directorwith experience across business, government,the investment community and the media.Appointed to the Australia Post board inMay 2011 (current term expires in May 2014),

she is a former executive general managerstrategy at Leighton Holdings Limited and aformer director of Infrastructure Partnerships

Australia and the Tourism and Transport Forum.Ms Bingham-Hall is currently chairman of

Advocacy Services Australia and a directorat BlueScope Steel Limited, The GlobalFoundation and SCEGGS Darlinghurst Limited.

5 Peter CarneBA, LLB, FAICD, FAIMDirector (non-executive)

Peter Carne has served in both the publicand private sectors and is a former CEO ofthe Queensland Law Society and a formerdirector of Lexon Insurance Proprietary Limitedand Tarong Energy Corporation. Appointed tothe Australia Post board in December 2009

(current term expires in December 2012),Mr Carne is currently the Public Trusteeof Queensland where he is the chairmanof its investment board.

1 2 3 4 5 6 7

Our board and executive committee

Australia Post Board



17/140

Yearinreview

Corebusinesses

Corporate

respo

nsibility

Financialand

statutoryreports

About

AustraliaPost

Ahmed FahourManaging Director and CEO

Richard UmbersExecutive General Manager,eServices & Strategyand Marketing

Christine CorbettExecutive General Manager,Retail Services

Chris BlakeExecutive General Manager,People and Community

Jim MarshallExecutive General Manager,Postal Services & Distributionand Express Services

Ewen StaffordExecutive General Manager,Corporate Services & Finance

6 Ian K WarnerRFD, LLM, FAICD

Director (non-executive)

Ian Warner is a distinguished legal practitionerwith extensive commercial experience.Appointed to the Australia Post board inJune 2001 (current term expires in May 2012),he is a former senior partner of JacksonMcDonald Lawyers in Perth. Mr Warneris currently deputy chairman of AmcomTelecommunications Limited and a director ofCape Bouvard Investments Proprietary Limited.

7 The Hon. Trish WhiteBE, BA, GAICD, FIEAust


Trish White has broad experience in thepublic and private sectors across a numberof industries, including resources and energy,defence, transport and communications.Appointed to the Australia Post board inJuly 2010 (current term expires in July 2013),Ms White is a former cabinet minister andchair of the South Australian ParliamentsEconomic and Finance Committee. She iscurrently the executive strategic adviser forWorley Parsons and a director of the MotorAccident Commission.

Retirements

Margaret Gibson

LLB (Hons), BCom, FCA, FTIA, FAICDDirector (non-executive)

Margaret Gibson is a retired partner ofPricewaterhouseCoopers where she wasa member of the board of partners. Ms Gibsonwas appointed to the Australia Post board inSeptember 2004 and is an external memberof the Australian Taxation Offices AuditCommittee and a director of the RSPCA(Queensland). Ms Gibson retired from theboard in September 2010.

Jennifer SeabrookBCom FAICDDirector (non-executive)

Jennifer Seabrook has held a variety ofsenior executive positions within the financeindustry in her executive career. Appointedto the Australia Post board in July 2010,Ms Seabrook retired from the board in June2011. Currently a special adviser for GreshamPartners Limited, she is also a non-executivedirector of the Bank of Western AustraliaLimited, Export Finance & Insurance Corporation,IRESS Market Technology Limited and IlukaResources Limited.

William MansfieldLLB


William Mansfield passed away in February2011. He was a well-respected practitionerin the industrial relations field who servedas a commissioner of the Australian IndustrialRelations Commission (now Fair Work Australia).Appointed to the Australia Post board inOctober 2008, Mr Mansfield was a formerdirector of Telstra Corporation Limited,CSIRO and Comcare.

Australia Post executive committee



18/140

Stakeholder engagement

Australia Post is an iconic brand with a long history and high levelsof trust among the Australian public. So the community and our

stakeholders have high expectations about what we do and how weconduct our business. We are committed to building strong relationshipswith our stakeholders so that we can understand their needs andexpectations and use those to inform our strategies and activities.

Broadly, Australia Post defines its stakeholdersas employees, customers, regulators,shareholder (the federal government),

suppliers, industry bodies, community groups,the media, opinion leaders and the broaderAustralian community.

Our approach to stakeholder engagement isbased on developing a sound understandingof the views and expectations of individuals,organisations and community representativeswho are critical to helping us achieve our goals.This engagement occurs through a varietyof channels. A summary of the activitiesundertaken this year is provided opposite.

Our stakeholder council

Australia Posts stakeholder council is anexternal advisory body of 12 individuals whoserole is to help us improve our stakeholderengagement and communications.

Council members (a list of whom is availableon our website) offer a range of views and aredrawn from various professions, including small,medium and large business, industrial relations,direct marketing and corporate responsibility(CR) across rural and regional Australia.The council is chaired by an Australia Postboard member, and meetings are attendedby senior Australia Post executives.

As per its charter, the stakeholder councilmet three times during the 201011 financialyear. Members discussed and advised ona number of issues relating to our services,customer communication and corporateresponsibility. The council also conducted aformal review of our CR performance this year,about which there is a statement on page 10.

Stakeholder research

In July 2010, Australia Post commissionedindependent firm Allen Consulting Group to

conduct research that measures our reputationwith key external stakeholders. This includedin-depth interviews and an online survey.

The results provided valuable insights intothe views of our stakeholders, includingtheir satisfaction with Australia Postscommunication and engagement. The researchfound that overall we have a strong or goodreputation with stakeholders across mostof the dimensions of corporate reputation,and this includes comparison with competitorsand peers. However, the research made anumber of observations and identified areas

where improvements could be made.These included:

we perform strongly for products andservices but rate low for innovation

compared with competitors and peers,we have a strong reputation acrossall dimensions except leadership

stakeholders have a high expectationof Australia Post in terms of governanceand they expect more from us.

These findings are being used to reviewour strategy and how we engage andcommunicate with stakeholders.

Materiality

We identify the material issues associatedwith our business and our strategy through aformal materiality assessment, which includesconsultation with stakeholders. Stakeholdersviews are taken into consideration whendeveloping our CR strategy and determiningthe material issues to report on.

To identify material issues for this yearsannual report, we conducted a materialityassessment with support from independent

consultancy Halcrow. To inform this process,we used the results of our 2010 stakeholderresearch, as well as feedback received directlyfrom stakeholders on our 200910 standaloneCR report. As a result of this process, five newindicators were identified for reporting this year.See the GRI table on page 136 for the full listof indicators covered in this report.

Being Future Ready

Critical to Australia Posts Future Readytransformation program is the ability to adaptand improve our approach to stakeholderengagement. This year we began developing

an enterprise-wide approach to stakeholderengagement to help us better understandand coordinate the various stakeholderinteractions across our business.

A number of initiatives are underway tosupport and promote stakeholder engagementthroughout the corporation, including stakeholderand key project mapping, reviewing engagementmethodology and the establishment of a unitdedicated to this critical aspect of our business.We are confident that this will lead to a greaterunderstanding of our stakeholders expectationsof Australia Post and to improved business

and stakeholder outcomes.Our focus next year will be on effectivelyembedding these management processesin the business and establishing anappropriate stakeholder managementsystem to efficiently collect, manageand monitor our engagement activities.

ECONOMIC PERFORMANCE

ENERGY USEGREENHOUSE GAS EMISSIONS

ACCESS TO MAIL

OH&SLOCAL COMMMUNITY IMPACTS

ROAD SAFETYTRANSPORT

FREEDOM OF ASSOCIATION

CORRUPTION

FLEET COMPOSITION WORKFORCE FLEXIBILITY

MATERIAL USE

TRAINING AND EDUCATION

DIVERSITY

PROCUREMENT

LABELLING

MARKETING

PRIVACYPRODUCTS AND SERVICESCOMPLIANCELOCAL ECONOMY EMPLOYMENT

LABOUR RELATIONS

WATER

BIODIVERSITY

Material issues for Australia Post stakeholders



19/140

Yearinreview

Corebusinesses

Corporate

respo

nsibility

Financialand

statutoryreports

About

AustraliaPost

Our stakeholders: who they are 201011 engagement activities

Government

Our shareholder and portfolio ministers.

Federal, state and territory members of parliament.

Commonwealth departments and agencies, local government

and special organisations that oversee portfolios relevant toAustralia Post and its business.

Consultation on our rolling three-year business plan.

Provision of quarterly shareholder briefings.

Participation of senior executives in Senate Estimates hearings.

Provision of reports under the National Greenhouse and Energy Reporting SystemandEnergy Efficiencies Opportunities Act 2006.

Customers

Major corporate and government customers.

Small to medium-sized business customers.

General public who contribute to our successby purchasing our products and services.

Launched Driving Business Online initiative.

Introduced localised sales model based at business centres to work withthe local small-business community.

Conducted industry sector-based workshops to showcase our business solutionsand obtain feedback.

Undertook customer briefing sessions with the managing director and CEO.

Regulators

Federal and state bodies responsible for the

control and supervision of the postal industryand organisational compliance matters.

Notification to ACCC to change bulk business mail services.

Provided a submission to the Productivity Commissions inquiry into the retail sector.

Workforce

Employees, contractors and licensees.

Unions that represent our employees.

Reached agreement for, and implemented, our new Fair Work Agreement.

Gave Future Ready strategy briefings to all staff.

Launched our Safety awareness campaign, I Am for Zero.

Launched Future Skills, a $20 million employee training and development program.

Launched our Reconciliation Action Plan.

Held International Womens Day events for employees across the country.

Regularly delivered Post Journal(Australia Posts employee magazine) to employees,contractors and other key stakeholders.

Conducted Staff Attitude Survey pulse-check.Provided regular management and staff updates on environmental issues, including energyefficiency and carbon reduction program.

Held annual licensed post office conference in major capital cities.

Held a national sales conference for 200-plus members of the sales team.

Suppliers

Manufacturers, packagers, distributors, wholesalers andother providers who generate the goods and/or servicescritical to Australia Posts daily operations and ongoingability to service both residential and business markets.

Continued to engage with suppliers to increase the number covered by our supplier code of conduct.

Wrote to suppliers outlining our Future Ready program.

Industry

Organisations that act as industry peak bodies for the

sectors and markets in which we operate, as well assectors and markets affecting our suppliers and competitors.

Achieved a 3 per cent improvement on last years performance documented

in the international IPC Sustainability Report.Australia Post is a member of several industry groups. A full list is provided on our website(www.auspost.com.au/2011annualreport).

Community groups

A diverse group of non-government organisations (NGOs)involved in an array of social issues, including education,health and welfare, sport, the arts, rural and regionaldevelopment and small business.

Began a refresh of our Community Engagement strategy and framework.

Had ongoing communication with community groups in relation to changes to our network,facilities, products or services.

Launched our SES partnership and continued to support community-based initiatives.

Environmental groups

A diverse group of government and NGOs involved ina range of environmental issues relevant to our business.

Sponsored Banksia Environmental Foundations Peoples Choice Award.

Continued support of initiatives such as MobileMuster and Cartridges 4 Planet Ark.

MediaIndividuals who represent print, broadcast and online mediaorganisations that engage with business and/or consumermarkets and publish and broadcast at the international,national, metropolitan, regional or rural levels.

Developed a comprehensive national and state media relations strategy.

Held media briefings on annual results with the Australia Post chairman and managing directorand CEO.



20/140

Core businesses

Australia Post is enhancing its product and service offeringto better meet the needs of customers in a digital world.



21/140

Yearinreview

Corporate

respo

nsibility

About

AustraliaPost

Financialand

statutoryreports

Corebusinesses

These three strategies are:

Restore a self-sustaining letters business.

Grow the full-value chain in parcels andwin in e-commerce.

Build a trusted multi-channel offerin digital and retail.

These clear and simple strategies arehelping us overcome the challenges facingour business and driving us to seek newrevenue opportunities that respond tocustomer and market needs. Supported byour trusted brand and unrivalled deliverynetwork, we are in a strong position to realisethese strategies over the coming years.

While our primary focus this year has been

on stabilising the corporation and buildinga solid foundation for the next phase ofour Future Ready transformation, which isto rebuild our business, our strategic businessunits have started to execute these strategiesduring 201011.

This year we delivered some excitingnew products and services and we trialleda number of pilot programs designed to furtherimprove customer access, convenience andchoice from third party stores-in-store thatexpand our retail outlets offering through tovarious 24/7 service options (see page 30) and

greater flexibility in our parcel delivery service(see page 27).

A major step towards making our lettersbusiness self-sustaining was the continuationof Future Delivery Design, a multi-faceted

program that has been boosting operationalefficiency and flexibility throughout the deliverynetwork (see page 23). Also pointing to asustainable future for letters was the ongoingsuccess of our businesses that combine thebenefits of physical mail and digital technology(see pages 22 to 23).

This years acquisition of SecurePay is anexample of how Australia Post is positioningitself to capture a share of the e-commercemarket. Providing multi-channel business-to-business and business-to-customer paymentservices, the SecurePay platform is particularly

attractive to small to medium-sizedbusinesses selling goods online (see page 26).Another e-commerce win was our partnershipwith Australias most popular online shoppingdestination, eBay. Several initiatives, includingco-branded satchels and boxes, generatedsubstantial business for Australia Post (seepage 26).

The completion of the first two phasesof the Channel Enablement Point of Saleproject this year greatly improved our ability

to deliver trusted services via multiple channels,making us even more attractive to customersand clients (see page 31). From the launchof Australia Posts smartphone app toa significantly enhanced online shoppingexperience (see pages 29 to 30), we continuedto augment our unrivalled physical reach.

Next year, we will continue to trial newproducts and services and introduce those thatbest suit Australian businesses and consumers.We will look for other opportunities to grow,especially by developing our digital capabilities.Reducing costs is another important focus,

but optimising the performance of our retailand delivery networks is also about enhancingthe quality of our service.

We have now established a stable platformfor growth. Our talented workforce is dedicatedto helping us realise the full potential of ourFuture Ready program so that we can continueto provide valued, trusted and reliable servicesto all Australians today, tomorrow and wellin the future.

A platform for growth

Our Future Ready transformation program is underpinnedby three board-endorsed strategies that will help us rebuild

the corporation and achieve ongoing profit growth.

Our primary focus this year has been on stabilising the corporationand building a solid foundation for the next phase of ourFuture Ready transformation, which is to rebuild our business.

CORE BUSINESSES 19


22/140

Highlights and challenges

With our letter volumes falling again this year,the June 2010 increase in the basic postagerate (BPR) from 55 to 60 cents was themain factor contributing to overall revenuegrowth of 2.6 per cent in the letters portfolio.(Despite the BPR increase, Australias postagerate remains the third cheapest amongOECD countries.)

Once again this year, we met or exceededall of the prescribed CSO performancestandards, including our on-time deliverytarget for domestic letters, bulk mail andinternational inbound letters. (See page 115

for more details.)

The great challenge for our letters businessis to become financially self-sustaining ata time when we are delivering fewer lettersto a wider network of delivery points.

In response to this challenge, we madegreat strides this year in the roll-out of ourFuture Delivery Design program. The programhas improved operational efficiency andreduced costs through a combination ofautomation, process redesign and improvementto network systems. (See page 23.)

Australia Post recognises that the role of

letters in the communications marketplaceis changing and that we must reshape ourletters business to adapt to the realitiesof a digital-enabled world.

Our first enterprise strategy to restorea self-sustaining letters business is allabout adapting our letters operations andour services to align with changing customerand community needs.

The generational shift to digital forms ofcommunicating is the main reason for thedecline in our letter volumes for a thirdconsecutive year in 201011. Over that

three-year period, the number of domesticletters posted in Australia has fallen byaround 12 per cent.

This year alone, addressed domestic letter

volumes fell 3.7 per cent, but this was lessthan in the previous year, when volumes fell5.5 per cent. This year s slower rate of volumedecline can be partly explained by a seriesof major mailings associated with federaland state elections (in NSW and Victoria).

While our letter volumes are falling, ourdelivery network keeps growing as Australiaspopulation expands. This year, around 200,000new addresses were added to our nationwidedelivery network. (See graph opposite.)

Under our community service obligations(CSOs) performance standards, we are

committed to delivering letters five days aweek to 98 per cent of Australian addresses.

We honour these performance standards aspart of our commitment to providing a lettersservice that is accessible to all Australians wherever they reside.

The generational shift to digital forms of communicatingis the main reason for the decline in our letter volumesfor a third consecutive year in 201011.

LETTERS:

A SUSTAINABLE

LETTERS SERVICE

Express Post delivery is a valuable service for ourcustomers, particularly small-to-medium businesses.



23/140

Yearinreview

Corporate

respo

nsibility

About

AustraliaPost

Financialand

statutoryreports

Corebusinesses

Highlights Challenges Outlook

98.8%DELIVERY POINTS SERVICED

FIVE DAYS A WEEK

96.3%ON-TIME DELIVERY

FOR BULK MAIL

96%ON-TIME DELIVERY

FOR DOMESTIC LETTERS

Further improve the efficiencyof our network.

Promote and enhance the benefitsof physical mail and the relationshipbetween print and online.

Make more products available online.

Improved the efficiency of ournetwork by sequencing more than3,000 delivery rounds under our FutureDelivery Design program.

Delivered 96 per cent of domesticletters on time or early.

Delivered 96.3 per cent of bulk mailon time or early.

Serviced more than 98.8 per cent of

Australias delivery points five daysa week.

Unaddressed Mail volumes roseby 12 per cent.

Our Decipha subsidiary enjoyedrevenue growth of 11 per cent.

We are delivering fewer letters.

Our delivery network is expandingeach year as our population grows.

Product and service performance

During 201011, electronic substitutioncontinued to have an impact on our volumes,with the number of addressed domestic letterssent falling by 3.7 per cent. Despite the volumedecline, the increase in the basic postage rateresulted in revenue growth of 3.3 per centfor domestic letters.

Among bulk mail, PreSort volumes declinedby 1.7 per cent while Print Post volumesdeclined by 5.5 per cent.

Due to federal and state elections, UnaddressedMail volumes rose by 12 per cent, resulting in an

increase in revenue of 13 per cent.4.0

4.2

4.4

4.6

4.8

5.0

5.2

5.4

5.6

5.8

5

6

7

8

9

10

11

12

Mail items billions Delivery points millions

2001

02

2002

03

2003

04

2004

05

2005

06

2006

07

2007

08

2008

09

2009

10

2010

11

Trends over a decade: letter volumes against delivery points

CORE BUSINESSES 21


24/140

The decline in international mail volumeswas most pronounced in outward mail(down 11.6 per cent). While this categoryremains profitable, the Australian dollarsstrength continues to reduce revenue frominward items, which was down 4.4 per centthis year. When we deliver inbound mail weare reimbursed by overseas postal servicesaccording to a rate set by the Universal Postal

Union. However, the value of this rate hasreduced as our currency has strengthened.

Despite this challenging environment,both domestically and internationally,our independently monitored and auditeddelivery performance met all targets in201011. One of our key performance standardsunder our community service obligations isthat we must deliver 94 per cent of non-bulkdomestic mail on time. Once again, weexceeded this target in 201011 by delivering96 per cent of domestic letters on time orearly. We also exceeded our targets for theon-time delivery of bulk-lodged business mail

(96.3 per cent) and for international inboundletters (tracking at 93.4 per cent).

Price changes

In June 2011, the Australian Competitionand Consumer Commission announced thatit had no objection to our proposed changes

to some of our reserved letters services usedby businesses. The changes predominantlyrelate to our PreSort letters service. While thisdid include a price increase, a key objectiveof the change was to encourage the use ofthe Off-Peak service by making it more attractiveto customers. These changes came intoeffect on 4 July 2011, just outside of thereporting period.

New service developmentsThroughout 201011, we continued to marketour range of letter products and extend ourmulti-channel delivery options to increaserevenue growth. Among our most significantachievements was the expansion of Send Me,a service that enables consumers to requestsamples, brochures and other advertiserinformation via mobile phone. And we launchedSample Post, a service that has enabled clientssuch as Nestl and Proctor & Gamble to haveaddressed product samples sent to customers.

We relaunched Community Update

mail (a service that enables councils tocommunicate with their constituents withmaximum efficiency and value), which isexpected to deliver additional revenuenext year. We also successfully launchedthe Unaddressed Mail online booking system.

Digital communicationsand data services

Australia Post is capitalising on the ever-expanding capabilities of digital technologyto maintain letters as a convenient, flexibleand effective communication option.

Decipha

Our Decipha subsidiary (www.decipha.com.au)

is a provider of inbound information managementservices, including document imaging, datacapture, automated document categorisation,mailroom management, online forms, andworkflow and electronic archive solutions.

During 201011, Decipha experienced strongrevenue growth of 11 per cent. Highlights

for the year included:

pilots for new clients Telstra, World Visionand Ford

organic growth with major clients, includingWestpac, Suncorp, the Australian TaxationOffice and NAB, through the development

of new projects extending our capabilities in hosted image

and data archiving, advanced documentcategorisation and workflow

improving payment processing securityby making strong progress towardsindependent certification to the PCIDSS (Payment Card Industry DataSecurity Standard).

Letters: A sustainable letters service

FROM ORIGIN TO LETTERBOX

Our Postbillpay service has been the basis of a long and successful partnershipwith Origin Energy. Building on this, in April 2010 Origin Energy invited us to tenderfor the print production of its outbound mail.

Our tender was successful, and we began producing Origins printed materialin South Australia in June 2011. Nationwide roll-out is expected by November.The three-year contract will involve Australia Post preparing some 21 millionarticles each year for Origin.

Key to our successful tender was our ability to offer greater efficiency inprinting, distribution and payment processing. The breadth of our products andservices, both physical and digital, meant that Australia Post was the strategic,whole-of-business partner that Origin was looking for.

We need partners like Australia Post who can help us make a difference to ourcustomers.Christina Wilson, Executive Customer Sales and Operations, Origin Energy.

Despite this challenging environment, both domestically andinternationally, our independently monitored and audited deliveryperformance met all targets in 201011.



25/140

Yearinreview

Corporate

respo

nsibility

About

AustraliaPost

Financialand

statutoryreports

Corebusinesses

First Direct Solutions

First Direct Solutions (FDS) is a division ofAustralia Post that helps businesses attract

and retain customers by giving them accessto accurate and relevant address and profilingdata. It maintains four major databases:Lifestyle, Movers, the Australian AddressReference File and the National Changeof Address File.

FDS (www.fdsolutions.com.au) achieved4.4 per cent revenue growth in 201011.This was due to the strong performanceof our Mail Redirection and Mail Holdingservices, coupled with data collectionincreases of approximately 8.4 per cent.

The divisions primary focus this financialyear was on making the Mail Redirection andMail Hold services available online. Since itslaunch in August 2011 (just after the currentreporting period), households have beenable to go online to lodge and pay for mailredirection or mail hold applications, extendexisting arrangements and notify participatingsuppliers of their change-of-address details.

FDS has improved its capability in deliveringemail campaigns by implementing processesto cleanse recipient lists to maximise thenumber of messages received. The divisionis also offering customers an email

design-and-build service.

eLetter

Australia Posts eLetter mail house(www.auspost.com.au/eletter) offersa comprehensive suite of direct marketingproducts and services that enablebusinesses to reach current and potentialcustomers effectively.

Revenue rose by 5.5 per cent in 201011,with strong returns for innovative solutions

launched in recent years. Premium offeringssuch as eLetter Easy Peel, eLetter Wrap andfull digital colour performed particularly well

as customers migrated towards targeted,high-return direct marketing strategies.

A highlight of the year was our successfultender for Origin Energys mail house solution,which gave us an opportunity to developa whole-of-business approach (see casestudy opposite).

PrintSoft

Following a strategic review as part of theFuture Ready program, a decision was madeto divest PrintSoft. The review identified thatPrintSofts suite of software services was notcore to the Australia Post business. It alsoestablished that there are a number oforganisations in the market that are betteraligned with PrintSofts future strategy.

Objectif Lune International, a company basedin Montreal, Canada, purchased PrintSofton 30 June 2011.

Outlook

In 201112 and beyond, we will focuson returning to a self-sustaining lettersbusiness. Critical to this is the separationof parcels and letters into two profit-and-loss-accountable business units, effective

1 July 2011.

We will continue to invest in technology andsystems that streamline our delivery processesand improve the efficiency and flexibilityof our network.

We also remain committed to promoting thetangible benefits of the physical letter andexpect positive results from this yearsreorganisation of our sales force from stateto industry-aligned teams.

We expect promotional mail to continueto perform well as businesses recognisethat consumers continue to respond

positively to physical communications.

We will make the Off-Peak service moreattractive to customers seeking value formoney, including an update of the indiciato read Surface Mail (this better reflectsthe transport method, which is by roadrather than air).

Future delivery design

Through automation, process redesignand improved network systems, ourmulti-faceted Future Delivery Design

program has been increasingoperational productivity and flexibilityacross our delivery network forseveral years.

During 201011, the program:

further improved round optimisation,reducing posties delivery time by4 per cent

installed proprietary geographicalinformation software that calculatesoptimal delivery rounds and thelabour resources required (more

than 3,000 delivery rounds havenow been sequenced)

delivered phase two of theRecognition Improvement project,in which upgraded software enhancedthe automated recognition of fontsand handwriting on addressed mail.

The roll-out of efficiency initiativesidentified by the Future Delivery Designprogram will continue in 201112.

CORE BUSINESSES 23


26/140

Highlights and challenges

Our parcels portfolio enjoyed 5.3 per centrevenue growth in 201011 a very positiveresult in a highly competitive marketplace.This was largely due to our success inattracting e-commerce customers, and manyof the years highlights centred on enhancingour role in this area.

We improved our position in thee-commerce marketplace by strengtheningour relationship with eBay, acquiring thepayment gateway company SecurePay(read more on page 26), and partneringwith PayPal to launch Driving Business

Online (www.drivingbusinessonline.com.au).This program, which includes a regionalbus roadshow, actively assists Australianbusinesses in reaping the rewards of onlineshoppings global reach.

Our trusted brand, extensive nationwide delivery

infrastructure and global reach mean thatAustralia Post is ready to deliver on its secondenterprise strategy: to grow the full-valuechain in parcels and win in e-commerce.

Access Economics reportHouseholdE-Commerce Activity and Trends in Australia(published in November 2010) estimates thatin Australia alone the value of online purchasesis worth between $19 billion and $24 billiona year, with growth forecast at up to 12 per centper annum for the next few years.

Australia Post is the natural partner fore-commerce in Australia, with millions of

parcels delivered annually on behalf of onlinesellers, both domestically and internationally.

We are ideally positioned to support onlinetraders, from individuals with small, ad hocitems to large enterprises needing fulfilmentservices that reach customers nationwideand around the globe.

This year, we took some important steps

to protect our position as a reliable,cost-effective provider of delivery serviceswell into the future. Our customers needsand expectations are evolving, so we havefocused on giving them more flexible deliveryoptions and greater choice. We have trialledand implemented many new and augmentedproducts and services and formed strategicpartnerships that further enhance our offer.

Building relationships within the broaderpostal industry is crucial to overcoming themany challenges we face in the extremelycompetitive parcels and logistics market.

By working with the Universal Postal Union(UPU) and forging alliances with postalservices, carriers and sellers, we aretackling one of our greatest challenges:the losses incurred by inbound internationalparcels weighing under 2 kilograms becauseof the way we are reimbursed for them.

WINNING IN

E-COMMERCE

PARCELS:

Australia Post is the natural partner for e-commerce in Australia,

with millions of parcels delivered annually on behalf of online sellers,both domestically and internationally.

Business partnerships with small to medium-sized online retailers, likeNadia Watson of Fancy Flats, are critical to the success of our parcels business.



27/140

Yearinreview

Corporate

respo

nsibility

About

AustraliaPost

Financialand

statutoryreports

Corebusinesses

Challenges OutlookHighlights

5.3%REVENUE GROWTH FOR THE

PARCELS PORTFOLIO

96.2%ON-TIME OR EARLY DELIVERY

OF PARCEL POST

99.3%ON-TIME OR EARLY DELIVERY

OF EXPRESS POST

Enhance our role in e-commercethrough even better products,services and partnerships.

Continue to improve our networkefficiency and flexibility, includinggreater customer choice whensending and receiving parcels.

Provide convenient, low-cost deliveryand returns solutions.

Address the losses incurredthrough the delivery of internationalinbound parcels.

The parcels portfolio achieved5.3 per cent revenue growth.

We forged a strong partnership witheBay, attracting considerable businessfrom its 8 million registered Australiansellers through several initiativesduring the year.

We acquired SecurePay, whichprovides multi-channel paymentservices that are particularlyattractive to small to medium-sizedbusinesses selling goods online.

Inbound international parcels weighingless than 2 kilograms operate ata loss because the cost of deliveringthem outweighs the reimbursementwe receive.

US-bound parcels incur higherfreight costs due to aviationsecurity measures.

Other notable achievements during the

year included the launch of Australia Postssmartphone app (see page 29) and thereconfiguration of our joint ventures withQantas, which enables Star Track Expressand Australian air Express to focus on theirrespective strengths in express freight.

Our Enterprise Event Management projectalso continued to deliver major serviceimprovements, through enhancements tomultiple-parcel consignment management,identity capture on delivery and parceltracking infrastructure.

While our international inbound parcel

volumes increased significantly due to thestrong Australian dollar, we lost money onsmall packets as the cost to deliver themis greater than the payment we receive fromoverseas postal organisations. The stricteraviation security measures imposed by theUnited States also created a challengedue to the additional screening processesthat were required for US-bound parcels.

Domestic delivery

After two years of marginal volume decline,our domestic parcels business achievedgrowth in 201011. We maintained ourexcellent service performance, with96.2 per cent of Parcel Post and 99.3 per centof Express Post items delivered on timeor early.

The strong revenue growth in eParcelswas particularly notable, driven bye-commerce market growth for key clients,including eBay, JB Hi-Fi, Deals Direct,Grays Online, Catch of the Day and emerginge-commerce retailers and small to medium-

sized businesses. The eParcel Post Returnsproduct (part of our popular suite of returnsservices) has delivered strong growth withclients such as Apple and Austar.

The revenue growth in eParcels was particularly notable,driven by e-commerce market growth for key clients.

CORE BUSINESSES 25


28/140

International delivery

Our international outbound parcel productenjoyed its most profitable year in 201011,despite substantial external pressures.

We met all of our delivery service targets,including those set by the UPU.

Price and productivity gains offset falls inoutbound volumes that were mainly causedby the strong Australian dollar and subduedglobal economy. Express Courier International,Express Post International and RegisteredPost International all had modest volumedeclines, while Air Mail parcel volumesheld steady.

There was historically high volume growth

for international inbound parcels as Australianconsumers reaped the benefits of buying fromoverseas online retailers. Unfortunately, thisdramatic volume growth was not profitablefor Australia Post. In fact, inward small parcelsoperated at a loss due to the rate at whichwe are reimbursed for deliveries by overseaspostal services. Determined by the UPU,this rate is unfavourable when the Australiandollar is high, particularly for items weighingless than 2 kilograms. Although theseitems are deemed by the UPU to be letters,we deliver them as parcels and they incurhigher costs, from gateway to delivery.

Another challenge during 201011 involvedparcels destined for the United States (US).In November 2010, during the pre-Christmaspeak, the US introduced heightened securityrestrictions on inward parcels at short notice.Specialised X-ray machines and higher freightcosts were among the imposts on Australia Post,necessitating a $9 surcharge on US-boundparcels. The US is currently reviewing thesenew aviation security measures.

Australia Post continues to address suchchallenges in the complex and constantlyevolving international parcels environment.

These include bilateral agreements withthe postal services of our four major tradinglanes (New Zealand, the United Kingdom,the US and China), and partnerships withinternational online retailers that targetparcels at the source.

Strategic partnerships

An important aspect of Australia Postsexpanding role in e-commerce this yearis our partnership with eBay, the nationsmost popular online shopping destination.In July 2010, our Click and Send service wasintegrated into the eBay Australia website

and in December 2010 our co-branded satchelbecame available. When we launched ouronline store within the eBay site in May 2011,some 85,000 of these flat-rate satchelswere ordered in the first 24 hours. The launchof flat-rate co-branded boxes in the first weekin July rounded out a year in which wesignificantly improved our partnershipwith eBay.

Australia Post continues to be a market leaderin last-mile delivery solutions to Australianhouseholds. Our comprehensive last-milecapabilities are also key to partnerships

with intermediaries such as Australian MailServices and source customers like ReadersDigest, and these capabilities will continueto be an important focus in generatingfuture business.

Parcels: Winning in e-commerce

Securing the future

A highlight of 201011 was our

acquisition of SecurePay anAustralian payment gateway companyoffering billing and shopping cartcapability to expand our onlineservices and win in e-commerce.

SecurePay extends Australia Postsmulti-channel capability, allowingbusiness and government customersto provide secure business-to-businessand business-to-consumer paymentservices via the Internet, phone orcustom software.

The SecurePay platform is particularlyattractive to small and medium-sizedonline businesses as it allows them tooffer customers both an online paymentservice and the ability to buy productsand services via a shopping cart ontheir website.

The SecurePay offering complementsour existing Australia Post-brandedonline payment channel, Postbillpay,and positions us to take advantageof the rapid growth of e-commercein Australia.

Established in 1999, SecurePay hasaround 19,000 business customersand offices in Melbourne, Sydneyand Adelaide.



29/140

Yearinreview

Corporate

respo

nsibility

About

AustraliaPost

Financialand

statutoryreports

Corebusinesses

Service trials

In order to offer our customers more choiceand convenience when sending or receivingparcels, we conducted various service trialsduring 201011. These included:

24/7 retail zones featuring parcelcollection lockers for post office boxcustomers and self-service terminalsfor weighing and lodging parcels

dedicated areas in our outlets where onlinetraders can purchase packaging productsand despatch parcels

a 24-hour parcel collection facility at theSt Leonards Delivery Centre in NSW.

These and other trials will continue in 201112.

Joint ventures andassociated companies

AUX Investments

In May 2011, Australia Post and Qantasreconfigured their joint ventures to create

two new express freight businesses withdistinct capabilities. Overseen by holdingcompany AUX Investments, the changesenable each business to focus on keystrengths: Star Track Express has becomea business-to-business road and air service,while Australian air Express will focuson domestic air linehaul and cargoterminal operations.

The reconfiguration of these entities willimprove their value and competitivenessand position them for growth.

Messenger Post Couriers

Messenger Post Couriers (MPC),Australia Posts courier division, enjoyedrevenue growth of 5.0 per cent in 201011.Highlights for the year included extendeddelivery windows (Saturday morning and6am8pm MondayFriday) for its major newclient Optus, and the introduction of a 24/7service for the healthcare industry. This led

to a successful tender for the Red Crossemergency blood service. We also beganproviding point-to-point and scheduledservices for The Alfred Hospital and PeterMacCallum Cancer Centre in Victoria.

During 201112, MPC will relaunch twoservices, making them more customer friendly.The improved ad hoc courier service will offerextended metro delivery reach, later bookingdeadlines and simpler service selec

2010 11 Integrated Annual Report Web

Documents

Transcript of 2010 11 Integrated Annual Report Web