Operating profit increased to €5.8m for the year, an improvement from €5.7m the previous year. Given the economic circumstances of the domestic economy, recording an operating profit is a credible achievement. The Company continues to succeed in reducing its cost base and to react to changes in the market environment.

Turnover

Turnover of €805.1m just exceeded that of the prior year. This is indeed a very satisfactory result. There has been commercial success in generating alternative income streams to offset a decline in traditional mail. 

Mail income contributed €552.4m to turnover, a reduction of €13.3m, 2.3%, from the prior year. This movement is related to a number of variables primarily based on the economic performance of the domestic economy, the number of house completions and general expenditure. In addition there is now a more pronounced impact on mail volumes from e-substitution.

Post office revenue grew during the year as a result of a continued substantial increase in the financial services activity. The value of State Savings over a range of products increased by €3.1billion. The level of transactions carried out in post offices on behalf of clients such as the NTMA, Department of Social Protection, AIB, Western Union, the utility companies and others, increased in the year by €7.5m (4.6%) from €163.9m to €171.4m.  

The Company also added new income streams during the year and growth in insurance and telecoms related products was achieved.

Operating Costs

Group operating costs were €799.3m compared to €798.5m in the prior year. The core An Post Company operating costs were reduced by €26m (3.5%) to €740.4m over the course of the year. This is a very significant cost reduction. 

Wages and salaries declined from €436.5m in 2009 to €422.8m in 2010. This reduction was achieved by reducing the FTE number employed in the Company. By December 2010, a reduction of 331 in the core FTE number required to operate the Company was achieved. This lays the foundation for significant cost savings in the future.

Tangible Fixed Assets

Capital expenditure in the year amounted to €47m, reflecting significant expenditure on buildings, equipment and the transport fleet. There were no significant asset disposals during the year. Further capital investment plans are in place for 2011/12, including investment in the next generation of mail sorting equipment which will enable increased sorting of mail to delivery route level. 

There was investment of €14.6m in the acquisition of new business activities, namely, the insurance broker, One Direct (Ireland) Limited, and the electronic transaction and payment service company, PostPoint Services Limited.

Treasury Policy and Cash Resources

The strong cash position on the balance sheet allows the Company to plan for investment both in capital expenditure and in the implementation of the change programme which will set the foundation for providing world class mail operations into the future.

The primary objective of the treasury function is to ensure the availability of funds for trading activities while optimising the return on available cash resources. The Group’s treasury function operates under Board-approved policy which is reviewed regularly throughout the year.

Pension Schemes

Pension schemes in the Group are accounted for under FRS 17 and show an accounting deficit of €368.5m compared to €403.3m in 2009. In 2010, there was a recovery in the value of the assets of the schemes following a very disappointing experience in 2008/9 arising from the performance of the financial markets. At the end of 2010, the assets of the pension schemes amounted to €1.8billion, representing an increase of €0.2billion over December 2009.

In common with the majority of defined benefit pension schemes, the An Post defined benefit scheme is required to meet the Minimum Funding Standards required by the Pensions Board. Discussions with stakeholders are advanced with a view to formulating an agreed funding plan to address the requirements of the Minimum Funding Standards.

Balance Sheet

The Group balance sheet shows fixed assets of €279.3m, cash balances of €198.1m and a net assets position before pension liability of €323.9m. This provides a stable financial basis on which to implement the Group’s strategy.

Economic Outlook

The domestic economic environment for a national postal operator was adverse in 2010. The Company has adjusted to the circumstance and remains profitable. Actions to reduce cost and further improve efficiency are having a very positive impact. The extension of revenue streams and the addition of new products and services are enabling the Group to cope with a decline in traditional mail. The improvements in the cost base and the income generating developments underway will prove beneficial in the years ahead.