IRELAND’S NATIONAL MAIL service is in need of a dramatic overhaul, according to An Post’s incoming chairman.

Dermot Divilly, the organisation’s designated chairman, said that while An Post Group is currently profitable, “the present model, whereby the profitable retail and other group businesses subsidise the loss‑making mails business is, in my view, becoming increasingly unsustainable”.

He also said that if Ireland “wishes to maintain a post office network of a comparable size into the future, given its historical, community and social value, a radical rethink of the funding and business model is required”.

Divilly’s comments were made as part of An Post’s annual report, published today, which showed the organisation had shed 279 outlets from its postal network over the past decade.

Last year it had 51 company-owned post offices and 1079 contract outlets, compared to a total of 1,409 An Post outlets and sub-post offices in 2005.

The report also reveals:

• The organisation made an operating profit of €5.2 million, up from €2.4 million in 2014, although pension interest of €9.6 million and additional tax charges mean that it made a full year loss of €2.4 million, down from €5.5 million in 2014. 
• Revenue for all An Post’s divisions rose by just over €10 million to €826.1 million. Turnover at the organisation’s mail division, its main operating arm, rose by 1% to just over €526 million.
• The firm’s retail sector had revenues of €164.3 million while group subsidiaries, such as its Post Insurance business, delivered revenues of €123 million.
• This was despite a 2.9% drop in the volume of mail. An Post’s total mail volume has now fallen by more than a third since its peak in 2007.

Post office box in Dublin city centre Leah Farrell Leah Farrell

The profitability in the company’s mail arm was attributed to “implementing appropriate pricing and cost efficiency”.

Reform

However, incoming chairman Divilly warned that An Post is in need of reform.

“In response to the ‘new normal’ of declining mail volumes, An Post, like so many other postal companies has strengthened its position in other businesses in Ireland and the UK,” he said.

“While the company continues to develop opportunities presented by emerging trends in e-commerce, it will have to respond quickly to convert these into new business revenue streams.”

He added: “While the An Post Group is profitable, the current model whereby the profitable elements, retail and subsidiaries, subsidise the loss-making mails business is, in my view, becoming increasingly unsustainable.

“This is despite cost reductions resulting in €100m in annualised savings, service quality improvements and revenue increases. A radical rethink of the funding and business model is required.”

Businessman Divilly was approved as An Post’s chairman in December. However, as the company is a semi-state, Divilly cannot be officially appointed until he is ratified by an Oireachtas committee, which cannot happen until a new government is formed.

He is set to replace former Aer Lingus chief executive Christoph Mueller, who stepped down as An Post chairman last year.

Written by Paul O’Donoghue and posted on Fora, a new business publication for Irish startups and SMEs.

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