Outgoing An Post chief predicts ongoing fall in post volumes

Retiring An Post chief executive Donal Connell has said traditional mail volumes will be 50 per cent below their 2007 peak in less than five years.

Mr Connell’s tenure has been marked by a fundamental shift in the business as consumers migrate to digital communications, known in the industry as e-substitution. He said he expects the trend to continue with mail volumes declining by about 3 per cent annually for the foreseeable future.

The loss in mail revenue has been partially offset by a pick- up in online trade, cost reductions and price increases, Mr Connell noted.

“It has been a challenging time given the economy and e-substitution but I think the company has responded well.”

Mr Connell, who will step down after 10 years in the second half of 2016, believes his biggest achievement has been maintaining the quality of service amid such transformation.

The company hit a long- standing target of 94 per cent next-day mail delivery for the first time last year.

This has been achieved against a backdrop of massive cost savings with the company letting go close to 1,900 full- time equivalents since 2009 with another 700 due to leave by 2019.

About €100 million has been removed from An Post’s annual cost base.

The company’s latest annual numbers show revenue grew by €11 million to €826 million in 2015 while profit more than doubled to €8.6 million.

The loss in delivering its Universal Service Obligation (USO), which requires it to collect and deliver post nationwide, was €32.3 million, down from €38 million the previous year and €67.3 million in 2012.

Speaking to The Irish Times, Mr Connell acknowledged that this was one of the biggest challenges facing the business but said a change to the USO, while offering a possible cost saving, would damage the group's reputation and ultimately hit revenue.

“If you were to restructure the service you could certainly take more cost out, but I think you would hit the revenue line because you’re not offering as good or as comprehensive a service to the customer.”

Mr Connell was also keen to highlight the strong performances of An Post’s subsidiaries, including the Gift Voucher Shop, whose One4all vouchers dominate the market.

Perhaps the biggest flop of his tenure was the ill-fated Postbank, a joint venture with Belgian bank Fortis, which aimed to capture a significant portion of the Irish mortgage and retail banking market, but came on the scene just as the financial crisis hit. An Post closed the operation in 2010 following the collapse of Fortis.

“If we hadn’t exited when we did we could have more of an exposure to the property market here at the very peak,” he said.

Another issue has been the low take-up in customers using the new Eircode system, which is understood to be in the single- digit percentages.

“We expect to see more general usage once they start to appear on government, departmental and utility mailings,” Mr Connell said.

An Post maintains a network of 1,150 rural and urban post offices - 250 lower than the 2007 peak. Last year six were closed while local mail delivery services were relocated to a delivery service unit in 17 mainly rural areas.

“The bottom 400-500 post offices – in revenue terms – are more of a community service than a business,” he said. “There will continue to be closures,” he said, noting it is becoming harder to fill the vacancies “as there is often not that much money in it”.