Kiwibank dragging down NZ Post

Kiwibank is dragging down NZ Post and Labour’s plans are to lumber it with a budget and likely to fail insurance company as well. Brian Gaynor at the Herald looks at the parlous state of NZ Post

Why does New Zealand Post continue to flounder while Deutsche Post, the German postal provider, has significantly outperformed the Frankfurt sharemarket in recent years and Royal Mail, the UK mail operator, has just had an extremely successful IPO?

A brief assessment of the three post providers shows that the two European companies have clear e-commerce driven parcel and logistics growth strategies whereas New Zealand Post has been adversely affected by the requirement to contribute substantial capital to Kiwibank, its 100 per cent owned subsidiary.

Around the world postal services are adapting and changing to the new global environment and some very successfully including Deutsche Post and Royal Mil, both successfully listed on the stock exchange and piling on the growth rapidly. Meanwhile in New Zealand.

No one would argue against the importance of parcels but what investments has NZ Post made in this area? What has it done to capture the e-commerce trade?

For example, parcels were mentioned only thirteen times in the group’s 2011 annual report whereas Kiwibank was referred to 197 times.

One of the problems with NZ Post is that Kiwibank is soaking up most of the group’s surplus cash and seems to be squeezing out the traditional postal services.  

Kiwibank was established as a fully owned subsidiary of NZ Post in 2002 because the start-up bank could use over 200 postal outlets to service customers.

However, start-up banks are capital hungry and NZ Post has contributed $360 million of capital to Kiwibank over the past decade, without receiving any dividends. According to NZ Post’s annual report: “Changes in the Reserve Bank’s regulatory requirements and general market growth means that Kiwibank will require further capital. Kiwibank can meet some of this demand itself, while New Zealand Post plans to commit $100 million over the next two years”.

And they have NEVER paid a dividend.

Meanwhile the Crown has contributed capital of only $192 million to NZ Post. Thus NZ Post has had to bridge the gap between the $192 million contributed by the Crown and the $360 million it has had to invest in Kiwibank by selling assets. This includes the sale of New Zealand Post House in Wellington and 35 per cent of Datacom in the June 2013 year. These sales realised over $200 million.

The reality is NZ Post is asset rich but cash poor because Kiwibank, the group’s best performing operation, doesn’t pay a dividend and will require $100 million of additional capital. As a consequence NZ Post does not appear to have invested heavily in its parcel business, which has the best long-term postal growth prospects.

Thus the company has two choices. It can either focus on Kiwibank and let its postal operations decline with more and more branch closures and staff layoffs.

And the other option?

The other alternative is to partially monetise its Kiwibank shareholding by selling a minority stake to the Crown, a trade buyer or through an IPO. This would give NZ Post cash to invest in its parcel business, fund its ongoing commitment to Kiwibank and pay a higher dividend to the Crown.

A partial IPO of Kiwibank makes more commercial sense than a sell-down of Genesis Energy. It would also have a greater chance of success because The Treasury, which has made a terrible mess of the Mighty River Power, Meridian Energy and Air New Zealand sell-downs, would not need to be involved.

Imagine the wailing from the left about that…despite all the evidence around the world to the contrary thy would still oppose this idea. At least we wouldn’t have to listen tot he stupid line about “losing the dividends forever” from Labour…they have never paid one. You can’t lose what has never been given.

  • motorizer

    i could never trust a bank set up by a bunch of socialists that doesnt have much backing. some things kiwis do are great but i really dont think creating kiwi bank is one of them. for everyone who joined, good on you for having a bit of faith, but i just dont see how a small bank from a small nation can survive when the s**t hits the fan in the future when we DONT have a sensible conservative government to put us on the straight and narrow.

  • John

    Hang on a minute, I thought Kiwibank was a raging success and was bringing the “overseas” banks into line, are you saying this is not the case?

    • Whanga_Cynic

      LOL

    • mick le prick

      it has

  • S P

    of course another raging success from “Michael Cullen ” NOT…. who is the NZ Post chairman. Gee his CV is going to ;look great also given his blind stupidity over buying / selling and buying again Kiwirail.
    All of this mismanagement and he still manages to snare a knighthood , even though he didn’t believe in them and abolished them until his name came up and them of course they are ok again !!!!!

    • thor42

      Bwahahahaha…… Oh how **SWEET** it is to see something Cullen is involved with going tits-up!
      Not just “involved with” but HEAD of!

      It’s like a replay of election night 2008. What a *great* night that was, seeing the she-beast crying.

  • kohibruce

    The Kiwibank / NZ Post marriage is looking like a buggers muddle – not too surprising given the marriage’s genesis.

  • boristhefrog

    Gaynor’s analysis is right… Selling a minority stake in Kiwibank, say around 25% – 30% by issuing new shares would give it the capital it needs and would allow NZ Post to sell down some of its shareholding, if it wanted, to boost its own capital reserves…

    However, to say that Treasury wouldn’t be involved is naive in the extreme… Treasury would be in there boots and all… and making a meal of it….

  • Stuarts.burgers

    The Jim Anderton vanity project that is Kiwi Bank is just like the Emporers new clothes a crock of Shi*t ( sorry Lesley) [spell check working but corrections not]

    • mick le prick

      Rubbish its the one thing that idiot got right

  • Patrick

    Sell it lock stock & barrel – just to see the reaction of that old socialist bludger Anderton

  • blokeintakapuna

    Best part about what ever is done is that Cullen will have to front it.

    Labour will choke, cough and splutter if Cullen has to front a MOM IPO.

    The stage managed faux outrage from Labour to Cullen will be very interesting to see indeed!

    • S P

      I can’t stand Cullen and i refuse to call him Sir !!!!
      His arrogant ” I know best ” attitude knows no bounds. His performance as a ” Finance minister and company chairman ” is appalling and could only be got away with in the public sector.
      He can only function when an economy / business is going gangbusters ( all without his help ) and he still manages to shag up the surpluses / profits..
      NZ Post now needs some help ( times are obviously tough ) and he will have no bloody idea what to do ……. except maybe call Aunty Helen and her response will be ” don’t worry Cully just keep blaming national and the economy. After all it can’t possibly be our fault.
      Why don’t you just buggar off Cully and spend the remainder of your years polishing your ” gong”

  • worksux

    Maybe if Kiwi bank offered a reason to change banks they might get more traction,

  • mick le prick

    I hate Jim Anderton as much as i hate that dyke Heeelllen But to Jims credit Kiwibank has been one of the best things he has done.
    Kiwibank has a easy to use website and their mobile app leads the other in the dust. Plus it keeps the Aussie shit banks honest.

    • CheesyEarWax

      I doubt that. Aussie banks are still making making shit loads of money. Don’t think they worry one bit.

      • mick le prick

        but we have the choice support the greedy Aussie banks or Kiwibank…gotta lave choice

  • baw

    I moved to Kiwibank when the ANZ shut down National bank. It was not that they were doing anything wrong, I just wanted a local bank.

    One of the reasons that Kiwibank is successful is that it is NZ owned. This has been an attractive selling point for customers. Now if you tried to sell it off many customers would leave. I would consider leaving.

    Try this in your partial privatization sale. -Buy Kiwibank and watch as your customers leave the bank.

    By the way I support the Air NZ sale.

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