Media Statement - Australia Post

Media Statement
25 September 2014
Australia Post notes the release of the Senate Inquiry report into the
performance, importance and role of Australia Post in Australian communities
and its operations in relation to Licensed Post Offices (LPOs). We are currently
reviewing the findings.
We recognise our Licensees form an important part of our network and
acknowledge that they face the same challenges of declining letter volumes and
customer foot traffic as the rest of the Australia Post network. We have
consistently stated our absolute commitment to maintaining our extensive post
office network.
Australia Post also notes an independent review into the commercial
performance of licensees as part of the Inquiry confirms there are no systemic
issues with the financial viability of the LPO network. This report, commissioned
by Australia Post at the request of the Committee, shows that a series of new
payments by Australia Post are directly benefiting licensees. Please find the
report attached to the bottom of this release.
In consultation with LPO representative groups, we have proactively introduced a
series of initiatives that in total contribute an additional $40 million to the
viability of LPOs on top of the $339 million paid annually. These include:
•
•
•
•
•
•
The introduction of additional payments for scanning and delivering
parcels
A 16.7 per cent increase in payments related to the delivery function that
LPOs perform
Bringing forward Post Office box renewal payments by 2 months to assist
with licensee cash flows
Rural sustainability package – an increase to the minimum payment to
post office operators, new point of sale technology funded by Australia
Post and removal of technology transaction fees, aimed particularly at
country and rural operators
Increases to over the counter bill payment and banking commission rates
New payments such as the PO Box establishment fee and MyPost
Concession Account.
We look forward to working with the Government as it considers the Committee’s
recommendations.
-
For further information, please contact:
National Media Line
03 9106 6666
ends
-
Australia Post
Licensed Post Office
assessments
Executive summary
16 July 2014
Australia Post LPO assessment
Disclaimer
No reliance by any party other than Australian Postal Corporation (Australia Post)
The basis of preparation of the attached report is discussed in the letter and Important Notice on the following pages.
The attached report should not be regarded as suitable for use by any person or persons other than Australia Post.
If you are a party other than Australia Post, KPMG:
■ owes you no duty (whether in contract or in tort or under statute or otherwise) with respect to or in connection with the attached report or any part thereof.
■ will have no liability to you for any loss or damage suffered or costs incurred by you or any other person arising out of or in connection with the provision to you of
the attached report or any part thereof, however the loss or damage is caused, including, but not limited to, as a result of negligence.
If you are a party other than Australia Post and you choose to rely upon the attached report or any part thereof, you do so entirely at your own risk.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
1
Advisory
ABN: 51 194 660 183
147 Collins Street
Melbourne VIC 3000
Australia
16 July 2014
Private & Confidential
Mr Russell Ramey
General Manager of Retail Services
Australian Postal Corporation
111 Bourke Street
Melbourne VIC 3000
We note the individual LPO data will remain anonymous to Australia Post and only identified by
sample characteristics i.e. Metro/Standalone/Large LPO.
In addition to the information received from Licensee’s we received the following information from
Australia Post:
■ FY12, FY13 and FY14 payments to LPOs by category;
■ LPO visitation and mail volume data;
■ background regarding key revenue initiatives introduced by Australia Post during FY14.
Dear Russell
Please note the Licensees have not yet read a copy of their respective assessment to confirm factual
accuracy.
Australia Postal Corporation (Australia Post)
Licensed Post Office assessments
Distribution
We have been engaged by Australia Post to undertake an assessment of the commercial
performance of the Licensed Post Office (LPO) network by sampling LPOs which are
representative of the LPO network. Our work has been performed in accordance with the terms of
reference outlined in Section 1 and 2 of Work Order #4503132436 dated 12 May 2014.
This report is solely to assist Australia Post in connection with its assessment of the LPOs and for
Australia Post’s information. This report is not to be used for any other purpose or distributed to any
other person, except as set out in our Work Order, or as otherwise agreed by us in writing. We
acknowledge Australia Post’s intention to distribute this report to Minister Turnbull and the Senate
Committee for the ‘Inquiry into the performance of Australia Post and Licensed Post Offices’. We
note that this report can not be released to any other party without KPMG’s express written consent.
Procedures
Th k you ffor th
Thank
the opportunity
t it tto assist
i t you and
d we llookk forward
f
d to
t discussing
di
i our report.
t
Our work commenced in June 2014 and this report was completed on 16 July 2014. Unless
otherwise noted, we have not undertaken to update this report for events or circumstances arising
after that date.
Yours faithfully
Scope of work
Information
An excell template
A
l andd information
i f
i request was developed
d l d andd agreedd with
i h Australia
A
li Post.
P
KPMG
was responsible for randomly sampling the LPOs to be representative of the network. KPMG was
also responsible for collating the information and liaising with the Licensees. We have noted
throughout our report instances where Licensee’s have not provided sufficient data.
George S
Svinos
inos
Partner
KPMG
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International, a Swiss cooperative.
Liability limited by a scheme approved under Professional Standards Legislation.
IMPORTANT NOTICE
Limitations
The responsibility for determining the adequacy or otherwise of our terms of reference is that of Australia Post.
Our terms of reference comprise an advisory engagement which is not subject to Australian, or any other, auditing or assurance standards and consequently no conclusions intended
to convey assurance are expressed. Had we performed additional procedures, or an audit or review, other matters might have come to our attention that would have been included in
this report.
No KPMG person has assumed any responsibility for the management or direction of the affairs of Australia Post or its licensees. The sole responsibility for which remains with the
directors and management of Australia Post or its licensees (as relevant).
The information presented in this report is based on that made available to us in the course of our work. We have indicated within the report where insufficient data was provided by
licensees. The findings and recommendations in this report are given in good faith but, in the preparation of this report, we have relied upon and assumed, without independent
verification, the accuracy, reliability and completeness of the information made available to us in the course of our work, and have not sought to establish the reliability of the
information by reference to other evidence. Any findings or recommendations contained within this report are based upon our reasonable professional judgement based on the
information that is available from the sources indicated
indicated. Should the assumptions change then the findings and recommendations contained in this report may no longer be
appropriate. Accordingly, we do not confirm, underwrite or guarantee that the outcomes referred to in this report will be achieved.
We have not compiled, examined or applied other procedures to any prospective financial information in accordance with Australian, or any other, auditing or assurance standards.
Accordingly, this report does not constitute an expression of opinion as to whether any forecast or projection of the licensees will be achieved, or whether assumptions underlying any
forecast or projection of the licensees are reasonable. We do not warrant or guarantee any statement in this report as to the future prospects of the licensees.
There will usually be differences between forecast or projected and actual results
results, because events and circumstances frequently do not occur as expected or predicted,
predicted and those
differences may be material.
Electronic distribution
Responsibility for the security of any electronic distribution of this report remains the responsibility of Australia Post and KPMG accepts no liability if the report is, or has been, altered
in any way by any person.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
3
Australia Post LPO assessment
Glossary
Adjusted ROI
Return on Investment calculated as operating profit (excluding
owners salaries, interest and depreciation) as a percentage of
LPO-specific
LPO
specific acquisition price. This is consistent with industry
practice.
LPO
Licensed Post Office
MIL
Metro/In-conjunction/Large LPO
MIS
Metro/In-conjunction/Small LPO
MSL
Metro/Standalone/Large LPO
MSS
Metro/Standalone/Small LPO
CAGR
Compound annual growth rate
Comparable sample
40 LPOs with sufficient financial information from FY12 to FY14
to undertake like for like analysis across key metrics
Extended sample
47 LPOs with sufficient financial information across FY13 and
FY14 to facilitate like for like analysis across key metrics
NIL
Non-metro/In-conjunction/Large LPO
NIS
Non-metro/In-conjunction/Small LPO
FY11A
Year ended 30 June 2011 actual
NSL
Non-metro/Standalone/Large LPO
FY12A
Year ended 30 June 2012 actual
NSS
Non-metro/Standalone/Small
Non
metro/Standalone/Small LPO
FY13A
Year ended 30 June 2013 actual
Operating profit
FY14A
Year ended 30 June 2014 actual
Operating profit excluding owners salaries, depreciation and
interest
FY14A+F
Year ending 30 June 2014 including actual and forecast (9
months actual to 31 March 2014 and 3 months forecast to 30
June 2014
ROI sample
34 LPOs with sufficient information to calculate return on
investment
Q4 FY14
3 months ending 30 June 2014
FY15F
Year ending 30 June 2015 forecast
Host business
The non Australia Post business operated by an In-conjunction
LPO (e.g. newsagency or pharmacy)
In-conjunction LPO
An LPO whose principal business is the Host business (i.e. a
newsagency or pharmacy) and is co-located with a Post
business (as advised by Australia Post)
Large/Small LPO
LPOs ranked by turnover relative to the entire LPO population
(as advised by Australia Post)
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
4
Australia Post LPO assessment
Contents
I t d ti
Introduction
and
d background
b k
d
5
Key observations
9
LPO analysis
y
– Comparable
p
sample
p
12
In-conjunction LPO analysis
20
LPO analysis – Extended sample
22
Adjusted Return on Investment (ROI) analysis
25
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
5
Australia Post LPO assessment
Introduction and background
SCOPE OF WORK
SOURCES OF INFORMATION
BASIS OF PREPARATION
LIMITATIONS IN SCOPE
Our scope of work was defined by Australia
Post and includes:
A statistically random sample of LPOs was
selected by KPMG across 8 categories.
■ assessment of the commercial
performance of a sample of
approximately 50 LPOs;
In the majority of instances, Licensees
populated a financial template including key
financial and performance metrics.
In order to reflect comparable analysis we
have analysed those LPOs where the data
is complete for FY12, FY13 and FY14 YTD
information.
Our analysis and interaction with Licensees
was desktop in nature given the timing and
scope of our engagement. We have had at
least one discussion with each Licensee.
In determining the above we have:
■ establishment of financial measurement
criteria and related templates;
25 Licensees (47%) verified the validity of
f
provided by submitting a
their information
signed declaration as at the date of this
report. A further 21 Licensees (40%) have
provided financial information to verify their
LPO’s data as at the date of this report.
Verification is being sought from the
remaining 7 Licensees
Licensees.
No audit has been undertaken in relation to
the information presented.
■ analysis of Licensee historical financial
performance;
■ assessment of Licensee forecast
financial information;
■ preparation of a comparison report and
conclusions;
■ provision of a summary report to LPOs.
Australia Post has provided reference data
relating to payments to Licensees,
customer visitation and letter volumes.
The scope of work dictates LPOs included
p and their financial information
in the sample
will remain anonymous to Australia Post
(both for reporting purposes and verbally).
■
utilised actual FY12 and FY13 data
where possible;
■
annualised performance for FY12 and
FY13 whereby greater than 6 months of
data was provided;
■
annualised FY14 YTD data to derive
FY14 fforecastt performance;
f
■
utilised FY13 data as a basis for FY14
data for two LPOs;
■
excluded owners salaries, depreciation,
interest and one off/personal expenses
to determine store operating profit on a
comparable basis.
The FY15 forecast is based on various
scenarios as outlined on page 17.
Annualising FY14 YTD financial
f
information
f
to determine a forecast for FY14 may not
be truly representative of the annual
position.
Licensees had the choice to participate in
p
the
this assessment which impacted
participation rate and therefore our sample
size.
Accurate assessment of the viability of
individual Australia Post LPOs and/or the
wider LPO population would require further
analysis and interaction with the Licensees
in order to ascertain the personal financial
position and details regarding other (non
Australia Post related) business activities.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
6
Australia Post LPO assessment
Key insights
Australia Post’s
Licensed Post Office
Network
The agreement which governs the relationship between Australia Post and individual Licensees is the Licensed Post Office Agreement (LPO Agreement)
which is a contract with an indefinite term and no defined territory.
Prospective Licensees are advised to undertake research,
research speak to existing Licensees and to seek independent legal
legal, accounting and business advise
before signing the LPO Agreement.
Licensees have an option to terminate their license at no cost under their LPO Agreement.
An active secondary market exists for the sale of LPOs. 270 (or 9.4%) transfers occurred during FY13 which is consistent with other large franchise
networks.
Australia Post has no involvement in determining acquisition prices in the LPO secondary market which are based on the prospective Licensees view of
historical and forecast performance of the LPO. An approval process in relation to the incoming Licensee is undertaken by Australia Post.
Prospective licensees are provided with a schedule of the fees and commissions paid by Australia Post prior to acquiring an LPO.
Licensees derive their income from a combination of Australia Post fees and commissions and the sale of product (either Australia Post or third party
product).
Australia Post provides support to their LPO network including training, coaching support and access to help desk facilities.
Licensees have the autonomy to manage their business and sell any type of post or non-post products and services within the guidelines of the LPO
Agreement.
Key insights
Average LPO Comparable operating profit (excluding owners salaries, depreciation and interest) has increased from $75k to $77k at a CAGR of 1.7%
from FY12 to FY14. This increase has occurred, despite a reduction in letter volumes and visitation over the corresponding period.
A consistent revenue performance and marginal uplift in gross profit dollars has exceeded the growth in store expenses from FY12 to FY14. A number of
i iti ti
initiatives
were iintroduced
t d
db
by A
Australia
t li P
Postt d
during
i FY14 tto assist
i t lilicensee performance.
f
Comparable LPO revenue growth of 0.4% between FY12 and FY14 compares favourably with other retail networks. Revenue from newspaper and books
retailing and convenience store retailing declined at a CAGR of 7.1% and 2.6% respectively between FY12 and FY14.
Comparable Licensee operating profit is increasing for Metro and Large Licensees (CAGR of 5.4% and 3.1% respectively from FY12 to FY14) and
reducing for Non-metro and Small Licensees (negative CAGR of 5.1% and 2.8% respectively from FY12 to FY14). The Non-metro and Small LPOs
represents 38% of the entire LPO network.
The various FY15 forecast scenarios analysed predict an average operating profit for Comparable Licensees ranging from $76k to $86k. The consistency
of historical and forecast financial information provides evidence that on average, the Comparable Licensees should remain profitable in the near term.
Despite this, the individual category performance will differ based on historical trends.
The sample of LPOs (34 who submitted requisite data) are generating an average Adjusted ROI of 22%. The franchise industry typically targets an ROI of
between 20% and 25% (excluding owners salaries).
2 out of the 47 extended LPOs (or 4%) generated an operating loss (excluding owners salaries) in FY13
FY13. Under
Under-performing
performing stores represent up to 10% of
the population in any large retail or franchise network.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
7
Australia Post LPO assessment
LPO sampling and characteristics
LPO sampling
LPO sample types
Note
1
2
Sample type
Description
Information comparable for FY12
FY12-FY14
FY14
C
Comparable
bl sample
l
Add: LPOs with non-comparable FY12-FY14 information
3
Information comparable for FY13-FY14
Extended sample
Add: LPOs with missing/insufficient information
4
Complete sample
Add: LPOs with inadequate data for any year
LPOs
40
7
47
6
53
2
55
300
2,865
Financial information
f
received
Submissions
LPOs randomly selected and contacted by KPMG
Australia Post Licensee network
LPO sample breakdown by category
Category
Metro
Non-metro
Total
Standalone
In-conjunction
Total
Large
Small
Total
Metro/Standalone/Large
Metro/Standalone/Small
Metro/In-conjunction/Large
Metro/In-conjunction/Small
Non-metro/Standalone/Large
Non-metro/Standalone/Small
Non-metro/In-conjunction/Large
j
Non-metro/In-conjunction/Small
Total
Comparable
l
sample
20
20
40
28
12
40
21
19
40
8
7
3
2
8
5
2
5
40
50%
50%
70%
30%
53%
48%
20%
18%
8%
5%
20%
13%
5%
13%
%
Extended
sample
l
22
25
47
32
15
47
24
23
47
8
8
3
3
9
7
4
5
47
47%
53%
68%
32%
51%
49%
17%
17%
6%
6%
19%
15%
9%
11%
%
Complete
sample
l
25
28
53
35
18
53
26
27
53
8
10
4
3
9
8
5
6
53
47%
53%
66%
34%
A random sample of 300 LPOs was derived across eight sub-categories as identified in the
table opposite.
opposite From this random sample,
sample 55 submissions were received
received.
Note 1: Australia Post determined a target sample size of 50 LPOs (based on an initial
target of 40 which was suggested by the Senate inquiry). A Comparable sample of 40
LPOs have been assessed on a like-for-like basis from FY12 to FY14. Refer to pages 13 to
19. The Comparable sample represents a confidence level of 84.2% based on an LPO
network of 2,865.
Note 2: Seven additional submissions had insufficient financial information in FY12 and
accordingly, were not used in the Comparable sample above. These additional LPOs have
been included in the assessment of the Extended sample of 47 (i.e. comparable
assessment for FY13 and FY14). Refer to pages 23 and 24.
Note 3: Six further submissions had missing or insufficient financial information between
FY12 and FY14 and are currently excluded from this analysis.
analysis These additional LPOs will
be provided a summary report along with all LPOs in the Extended sample.
Note 4: Two other submissions were received, however, have been excluded due to the
LPO not providing at least one full year of information, i.e. the LPO was acquired part way
through FY14.
Sub-category
Sub
category analysis
49%
51%
Analysis of the performance of the sub-categories has been undertake for five of the eight
sub-categories. Three of the eight sub-categories (MIL, MIS and NIL) have been excluded
from this analysis on the basis of a sample of three LPOs or less.
15%
19%
8%
6%
17%
15%
9%
11%
%
Whilst targeting the sub-categories evenly, Licensees had the choice to participate in this
assessment and accordingly, the participation rate varied. On that basis, the analysis is
undertaken on the information received and is not intended to represent a statistical
sample at the sub-category level.
Source: KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
8
Australia Post LPO assessment
Contents
Introduction and background
5
Key observations
9
LPO analysis – Comparable sample
12
In-conjunction LPO analysis
20
LPO analysis – Extended sample
22
Adjusted Return on Investment (ROI) analysis
25
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
9
Australia Post LPO assessment
Key observations
The operating performance of
Comparable Licensees has marginally
improved
p
over the period
p
from FY12 to
FY14.
Average LPO Operating profit has increased from $75k to $77k at a CAGR of 1.7% from FY12 to FY14. A consistent revenue performance
and marginal uplift in gross profit dollars exceeded the growth in store expenses from FY12 to FY14.
Thi growth
This
th iin operating
ti profit
fit occurred
d despite
d
it a reduction
d ti in
i domestic
d
ti lletter
tt volumes
l
and
d LPO visitation
i it ti across the
th corresponding
di period.
i d
Management of LPO expenses appears
to be the key lever to improving LPO
profitability for the Comparable
Licensees.
Revenue performance of the LPOs was constant from FY12 to FY14 and is expected to increase in FY15 largely as a result of initiatives
introduced by Australia Post during FY14.
The Comparable Licensees generated
an average operating profit (excluding
owners salaries) of $77k in FY14.
The Comparable Licensees average operating profit (excluding owners salaries) of $77k is above the Australian full time average wage of
$73k and the Australian full time median wage (based on the 2011 Census) of $57k. This excludes any allowance for interest, debt
amortisation or other personal commitments.
The containment of LPO expenses appears to be the key challenge for Licensees whereby expenses grew at a CAGR of 2
2.0%
0% between
FY12 and FY14. LPO expense data varied across the population and an opportunity exists to assist Licensees with KPI management in
order to support them in managing their expense base.
We have not been provided with sufficient data regarding the Licensees other business interests and/or private commitments to determine
whether this is an adequate return for each Licensee.
We note the average Comparable Licensee operating profit (excluding owners salaries) for Large and Small Licensees was $116k and
$35k respectively in FY14.
The FY15 forecast operating profit
scenarios define a range of outcomes
from a decline of 1.3% ($76k) to an
increase 11.7% ($86k) from FY14
levels.
The various forecast scenarios for FY15 predict an average operating profit for Comparable Licensees ranging from $76k to $86k
$86k.
LPO p
performance within each category
g y
varies with Metro/Standalone/Large
LPOs outperforming other categories.
Comparable
p
Licensee operating
p
gp
profit is increasing
g for Metro and Large
g Licensees ((CAGR of 5.4% and 3.1% respectively
p
y from FY12 to
FY14) and reducing for Non-metro and Small Licensees (negative CAGR of 5.1% and 2.8% respectively from FY12 to FY14).
All scenarios outlined indicate that on average, the LPO Comparable sample performance will be profitable in FY15.
The Metro/Standalone/Large category experienced a CAGR increase in operating profit of 7.2% from FY12 to FY14.
The Non-metro category experienced a reduction in revenue and an increase in expenses from FY12 and FY14.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
10
Australia Post LPO assessment
Key observations (cont.)
LPOs are generating an average
Adjusted ROI (based on FY13
operating
p
g profit
p
excluding
g owners
salaries) of 22% which is in line with
the industry benchmark of 20%-25%.
The sample of LPOs (34 who submitted acquisition data) are generating an average Adjusted ROI of 22%. The franchise industry typically
targets an Adjusted ROI of between 20% and 25% (excluding owners salaries).
LPO’s acquired
LPO’
i d pre 2008 average an Adjusted
Adj t d ROI off 25% as compared
d to
t those
th
acquired
i d postt 2008 who
h generate
t an average Adjusted
Adj t d
ROI of 19%.
Large LPO’s generated an Adjusted ROI of 24% and Small LPO’s generated an Adjusted ROI of 17%.
The profitability of the LPO network
compares favourably to many large
retail networks.
2 out of the 47 extended LPOs (or 4%) generated an operating loss (excluding owners salaries) in FY13. Under-performing stores
represent up to 10% of the population in any large retail or franchise network. Australia Post compares favourably on this basis.
It has not been possible to establish
any reliable or comparable measure of
viability in relation to the individual
LPOs or the wider LPO population.
The consistency of historical and forecast financial information provides evidence that the LPO network should continue to remain
profitable in the near term.
Accurate assessment of the viability of individual Australia Post LPOs and/or the wider LPO population would require further analysis and
interaction with the Licensees in order to ascertain the personal financial position and details regarding other (non Australia Post related)
business activities.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
11
Australia Post LPO assessment
Contents
Introduction and background
5
Key observations
9
LPO analysis – Comparable sample
12
In-conjunction LPO analysis
20
LPO analysis – Extended sample
22
Adjusted Return on Investment (ROI) analysis
25
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
12
Australia Post LPO assessment
LPO operating profit – Comparable LPOs
Comparable Licensee operating profit increased from $75k in FY12 to $77k in FY14 at a CAGR of 1.7%
Average LPO operating profit (excluding owners salaries)
90
FY12-FY14 CAGR: 1.7%
75
75
77
81
Comments
Average LPO operating profit (excluding owners salaries) has increased from $75k in FY12
to $77k in FY14 at a CAGR of 1.7%. This excludes interest, debt amortisation and other
personal commitments.
25%
80
20%
70
$000
60
Operating profit margin as a percentage of revenue has increased from 22.8% in FY12 to
23.2% in FY14.
15%
50
40
The consistent revenue performance and marginal uplift in gross margin performance
across the sample has exceeded the growth in store expenses.
10%
30
20
The average operating profit ranges from $35k for Small LPOs to $116k for Large LPOs.
We have not been provided with sufficient data to determine whether this is an adequate
return. We note that $77k is above both the average full time Australian wage of $73k and
median full time wage of $57k
$57k.
5%
10
0
0%
FY12
FY13
FY14A+F
FY15F
The FY15 base case forecast (reflected opposite) is based on historical performance data.
Forecast revenue growth of 3% reflects the FY14 actual growth rate of Australia Post
payments to Licensees of 4.9% reduced to 3% to reflect the proportion of non-Australia
Post revenue. Forecast expenses grow at 2.0% and reflect the Licensees CAGR from
FY12 to FY14. Refer to page 17 for a range of sensitivities for FY15.
Average operating profit (excluding owners' salaries)
Average operating margin (excluding owners' salaries) (RHS)
Source: LPO information and KPMG analysis
Letter volumes and post office visitation
FY12A
FY13A
FY14A
CAGR
(FY12-FY14)
3.8
n/a
3.6
(5.3%)
3.4
(5.6%)
(5.4%)
n/a
108.0
n/a
107.7
n/a
215.7
n/a
101.6
(5.9%)
103.7
(3.7%)
205.3
(4.8%)
94.7
(6.8%)
99.9
(3.6%)
194.7
(5.2%)
(6.3%)
n/a
(3.7%)
n/a
(5.0%)
n/a
Domestic addressed letter volumes (billions)
Letter volumes
Year on year movement
Post office visitation (millions)
Corporate Post Office
Year on year movement
Licensed Post Office(a)
Year on year movement
Total Post Office
Year on year movement
The average LPO operating profit (excluding owners salaries) increased to $77k despite a
decline in letter volumes and customer visitation.
Analysis of individual LPO operating profit (Extended sample) for FY13 and FY14 is
outlined on pages 23 and 24.
Note : (a) Licensed post office includes LPO, franchise and community service agents
Source: Australia Post LPO payments data
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KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
13
Australia Post LPO assessment
Revenue performance – Comparable LPOs
Comparable Licensee revenue remained broadly flat during FY12-FY14 and is expected to increase in FY15 following the uplift in Australia
Post’s basic postage rate in April 2014
Average LPO revenue performance
Average revenue per LPO has remained flat at $329k in FY12 and $332k between FY13
and FY14. This includes both payments to Licensees from Australia Post and revenue
generated from the sale of other product by Licensees. Approximately 45% of the
Comparable licensee revenue is sourced from non-Australia Post product.
FY12-FY14 CAGR: 0.4%
400
350
Comparable Licensee revenue
329
332
342
332
300
Th constant
The
t t revenue performance
f
for
f our Comparable
C
bl sample
l iis b
below
l
th
the growth
th iin
payments made by Australia Post to Licensees (FY12-FY14 CAGR of 1.8%). Australia
Post payment data includes full year actual FY14 information whereas the Licensee data
provided includes part year FY14 financial information which has been annualised.
Accordingly, the Licensee FY14 forecast is less likely to reflect the uplift from the basic
postage rate increase and or other initiatives introduced by Australia Post during FY14.
$000
250
200
150
100
50
The base revenue forecast for FY15 is expected to increase by 3%, largely reflective of an
increase in the basic postage rate in April 2014. The detail supporting this assumption and
other revenue and expense sensitivities is outlined on page 17.
0
FY12
FY13
FY14A+F
FY15F
Source: LPO information and KPMG analysis
The constant LPO revenue performance compares favourably with comparable retail
networks. Revenue from newspaper & book retailing and convenience store retailing
declined at a CAGR of 7
7.1%
1% and 2
2.6%
6% respectively between FY12 and FY14
FY14.
Total LPO revenue (per Australia Post records)
Australia Post payments to LPOs
LPO revenue analysis
$000
Comparable sample
Year on year growth rate
LPO population
Year on year growth rate
FY12
FY13
FY14A
CAGR
(FY12-FY14)
5,941
5
941
n/a
323,088
n/a
6,009
6
009
1.2%
323,504
0.1%
6,158
6
158
2.5%
339,213
4.9%
1.8%
1
8%
n/a
2.5%
n/a
Source: Australia Post LPO payments data and KPMG analysis
The growth in FY14 LPO revenue (per Australia Post records) of $15.7 million or 4.9% to
$339.2 million (across the entire Licensee network) is due to a number of initiatives
introduced by Australia Post over the past 6 months, including:
■ stamp basic
b i postage rate iincrease iin A
Aprilil 2014
2014;
■ rural spend initiatives;
■ introduction of new payments;
■ concession card admin fee.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
14
Australia Post LPO assessment
Gross margin performance – Comparable LPOs
Comparable Licensee gross margin dollars grew from an average of $159k in FY12 to $165k in FY14 at a CAGR of 1.9%
Comparable Licensee gross margin
Average LPO gross margin performance
180
160
159
FY12-FY14 CAGR: 1.9%
165
160
170
50%
140
120
$000
60%
40%
100
Average gross margin increased between from $159k (or 48.3%) in FY12 to $165k (or
49.7%) at a CAGR of 1.9%
The growth in gross margin dollars (CAGR of 1.9%) exceeds the revenue performance
between FY12 and FY14.
30%
80
20%
60
40
10%
20
0
0%
FY12
FY13
FY14A+F
FY15F
Average revenue
Average gross margin % (RHS)
Source: LPO information and KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
15
Australia Post LPO assessment
Expense performance – Comparable LPOs
Comparable Licensee expenses increased at a CAGR of 2.0% from FY12 to FY14
Average LPO total expenses (excluding owners salaries)
FY12-FY14 CAGR: 2.0%
100
90
Comparable Licensee expenses
86
85
25%
80
70
Owners salaries have been excluded from this analysis due to the variability in this
expense across the sample and to ensure comparability of data.
20%
60
$000
Average total expenses (excluding owners salaries) have increased from $85k in FY12 to
$88k in FY14 or a CAGR of 2.0% which is broadly in line with CPI increases.
30%
89
88
Expenses as a percentage of revenue have increased from 25.8% in FY12 to 26.5% of
revenue in FY14.
15%
50
40
LPO expenses grew by a CAGR of 2.0% as compared to revenue growth of 0.4%. This
suggests Licensees may have not been able to contain expense growth in line with
revenue performance and/or reflects changes in Licensee accounting treatment of
expenses Although in certain instances information regarding accounting treatment
expenses.
changes has been provided, further analysis is required in order to determine the
underlying cause of the increase in expenses.
10%
30
20
5%
10
0
0%
FY12
FY13
Average expenses
FY14A+F
FY15F
Instances were identified where the year on year movement in expenses were not
comparable and are subject to further verification.
Average expenses as % sales (RHS)
Source: LPO information and KPMG analysis
Comparable Licensee expenses by category
Rent has increased at a CAGR of 3.4% from FY12 to FY14 and is largely a noncontrollable expense due to the existence of lease agreements.
Comparable LPO sample - Average expenses
$000
Salaries and wages (staff)
Rent
Admin and other overheads
Average expenses
FY12
40.2
20.4
23.9
84.5
FY13
40.9
20.9
23.8
85.6
FY14A F
FY14A+F
42.4
21.8
23.8
88.0
CAGR (%)
2.7%
3.4%
-0.3%
2.0%
Salaries and wages have increased at a CAGR of 2.7% from FY12 to FY14 and are
considered to be controllable expenses. Salaries have increased from FY12 to FY14
despite the consistent revenue performance over the corresponding period
period.
Admin and other overheads have remained flat from FY12 to FY14.
Source: LPO information and KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
16
Australia Post LPO assessment
Operating profit – FY15 scenarios – Comparable LPOs
Based on a number of sensitivities, Comparable Licensee operating profit for FY15 ranges from an average of $76k (1.3% decline from
FY14) to $86k (11.7% increase from FY14)
F
Forecast
t FY15 operating
ti profit
fit sensitivities
iti iti
90
80
75
75
77
81
Comments
86
82
76
78
70
The high case (scenario 4) increases FY15 operating profit by 11.7% and assumes
revenue growth of 6.0% (estimated FY15 revenue growth to include the full year impact of
th b
the
basic
i postage
t
rate
t iincrease)) and
d expense growth
th off 2
2.0%
0% iin liline with
ith hi
historical
t i l
averages.
60
$000
The FY15 forecast base case increases operating profit by 5.2% from FY14 levels and
assumes that FY15 revenue and expenses remain in line with historical averages.
50
40
The low case (scenario 2) reduces FY15 operating profit by 1.3% and assumes constant
revenue performance (in line with FY12 to FY14 performance) and expense growth of
2.0% in line with historical averages.
30
20
10
FY15F (S4)
FY15F (S3)
FY15F (S2)
FY15F (S1)
FY15F (Base)
FY14A+F
FY13
FY12
0
The sensitivities have been applied across the Comparable Licensee sample based on the
average across the sample. As outlined on the following slide, the Metro and Large
categories have improved from FY12 to FY14 and the Non-metro and Small categories
have declined from FY12 to FY14.
Source: LPO information and KPMG analysis
SCENARIO
REVENUE
ASSUMPTION
EXPENSE
ASSUMPTION
Base case
3.0%
2.0%
Revenue – Actual FY14 growth rate of Australia Post payments to Licensees of 4.9% reduced to 3% to reflect the proportion of non-Australia Post revenue
Expenses - Total expense CAGR for Comparable LPO sample from FY12 to FY14 (40 Licensees)
1
3 0%
3.0%
C
Constant
Revenue – Actual FY14 growth rate of Australia Post payments to Licensees of 4
4.9%
9% reduced to 3% to reflect the proportion of non-Australia
non Australia Post revenue
Expenses – Expenses in line with FY14 on the basis of lower postage volumes and declining visitation
2
0.4%
2.0%
3
0.4%
Constant
4
6.0%
2.0%
EXPLANATION
Revenue - CAGR for Comparable LPO sample from FY12 to FY14 (40 Licensees)
Expenses - CAGR for Comparable LPO sample from FY12 to FY14 (40 Licensees)
Revenue - CAGR for Comparable LPO sample from FY12 to FY14 (40 Licensees)
Expenses – Expenses in line with FY14 on the basis of lower postage volumes and declining visitation
Revenue – Estimated FY15 revenue growth on the basis of a full year impact of the basic postage rate increase
Expenses - CAGR for Comparable LPO sample from FY12 to FY14 (40 Licensees)
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
17
Australia Post LPO assessment
Operating profit by LPO type – Comparable LPOs
Comparable Licensee operating profit is increasing for Metro and Large Licensees and reducing for Non-metro and Small Licensees
Comparable LPO sample - Category performance
Average revenue
$000
# of
LPOs
Metro
N
Non-metro
t
Total
Standalone
In-conjunction
Total
Large
Small
Total
20
20
40
28
12
40
21
19
40
Average expenses
FY12
FY13
FY14F
497
162
501
163
508
157
329
377
218
332
380
219
332
379
224
329
475
168
332
475
173
332
473
177
329
332
332
FY12FY14F
CAGR (%)
1.1%
(1 7%)
(1.7%)
0.4%
0.2%
1.3%
0.4%
(0.3%)
2.7%
0.4%
Average operating profit
FY12
FY13
FY14F
129
40
131
40
132
44
85
100
47
86
101
50
88
104
51
85
117
49
86
115
53
88
116
57
85
86
88
FY12FY14F
CAGR (%)
1.2%
4 8%
4.8%
2.0%
1.7%
3.7%
2.0%
(0.4%)
8.1%
2.0%
FY12
FY13
FY14F
96
54
95
54
106
48
75
80
62
75
80
63
77
83
65
75
109
37
75
111
34
77
116
35
75
75
77
FY12FY14F
CAGR (%)
5.4%
(5.1%)
(5
1%)
1.7%
1.6%
2.1%
1.7%
3.1%
(2.8%)
1.7%
Source: LPO information and KPMG analysis
Metro and Non-metro – average LPO operating profit
Average Metro LPO operating profit has increased by a CAGR
of 5.4% whereby the Non-metro average LPO has reduced by
a CAGR of 5.1% from FY12 to FY14. We note that more
products and services are offered at the Metro locations.
The decline in performance of the Non-metro and Small LPO
categories is largely driven by a higher growth in expenses
when compared to the revenue decline. The Non-metro and
Small LPOs represents 38% of the entire LPO network.
network
100
96
Large
140
106
120
95
109
60
54
54
48
116
40
80
60
37
40
20
34
35
FY13
FY14A+F
20
FY12
FY13
FY14A+F
FY14A
F
FY12
FY13
Source: LPO information and KPMG analysis
FY14A+F
FY14A
F
FY12
FY13
FY14A+F
FY12
Source: LPO information and KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
111
Small
100
80
$000
0s
The Large LPOs average operating profit increased by a
CAGR of 3.1% from FY12 to FY14 whereby the Small LPOs
average operating profit reduced by a CAGR of 2.8% over the
corresponding period.
Non-metro
Metro
120
Large and Small – average LPO operating profit
$000
0s
Comments
18
Australia Post LPO assessment
Average operating profit by category – Comparable LPOs
Large/Metro/Standalone LPOs are the most profitable category of LPO
Comparable LPO sample - Sub-category performance
Average revenue
$000
# of
LPOs
Metro / Standalone / Large
Metro / Standalone / Small
Metro / In-conjunction / Large
Metro / In-conjunction / Small
Non-metro / Standalone / Large
Non-metro / Standalone / Small
Non-metro / In-conjunction / Large
Non-metro / In-conjunction / Small
Average
8
7
3
2
8
5
2
5
40
Average expenses
FY12
FY13
FY14F
683
317
na
na
297
98
na
50
683
331
na
na
295
100
na
52
680
348
na
na
281
93
na
51
329
332
332
FY12FY14F
CAGR (%)
(0.2%)
4 8%
4.8%
na
na
(2.7%)
(2.2%)
na
0.9%
0.4%
Average operating profit
FY12
FY13
FY14F
188
94
na
na
69
21
na
20
187
101
na
na
64
22
na
24
185
107
na
na
69
26
na
28
85
86
88
FY12FY14F
CAGR (%)
(0.7%)
6 6%
6.6%
na
na
0.2%
10.7%
na
18.3%
2.0%
FY12
FY13
FY14F
123
51
na
na
89
38
na
20
125
44
na
na
89
40
na
17
141
55
na
na
79
35
na
14
75
75
77
FY12FY14F
CAGR (%)
7.2%
3 4%
3.4%
na
na
(5.7%)
(5.0%)
na
(16.1%)
1.7%
Source: LPO information and KPMG analysis
Comments
A lack
l k off representation
i iin three
h
off the
h eight
i h categories
i lled
d to our exclusion
l i off those
h
categories from the above analysis.
The Metro/Standalone/Large category has outperformed other categories and achieved a
CAGR increase in operating profit of 7.2%.
Two out of the five categories experienced an increase in revenue from FY12 to FY14.
Four out of the five categories experienced an increase in expenses from FY12 to FY14.
Two out of the five categories experienced an increase in operating profit from FY12 to
FY14. 15 out of the 40 Comparable Licensees experienced an increase in operating profit
from FY12 to FY14.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
19
Australia Post LPO assessment
Contents
Introduction and background
5
Key observations
9
LPO analysis – Comparable sample
12
In-conjunction LPO analysis
20
LPO analysis – Extended sample
22
Adjusted Return on Investment (ROI) analysis
25
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
20
Australia Post LPO assessment
LPO performance - In-conjunction sample
The Australia Post business only represents a small proportion of the In-conjunction business for revenue, however the proportion of
operating profit was more even between the Australia Post and the Host business
In-conjunction LPOs – Proportion of LPO revenue and operating profit
In-conjunction LPOs - FY13 Australia Post proportion of revenue and operating profit
General store
Newsagency
Newsagency
General Store
General Store
General Store
Newsagency
Cafe
Newsagency
LPO number
General store
2,000
1,800
1,600
1,400
1 200
1,200
1,000
800
600
400
200
0
General store
$000
FY13 revenue mix – In-conjunction LPOs
20 NIL 47 NIS 04 MIL 19 NIS 13 NIL 31 NIS 11 NIS 14 NIL 03 MIS 12 NIL 35 NIS
Post - Total revenue
In-conjunction - Total revenue
Source: LPO information and KPMG analysis
FY13 operating profit – In-conjunction LPOs
47
04
19
13
31
11
14
03
12
35
Comments
18 In-conjunction LPOs participated in this assessment (complete sample). Of the 18
LPOs, financial information for the In-conjunction (or non Australia Post LPO) business
was received from 11 Licensees.
Ten out of the eleven In-conjunction businesses recorded higher revenue for the Host (or
non LPO) business.
Seven out of the eleven In-conjunction businesses recorded a higher operating profit for
the Host (or
( non LPO)
O) business.
250
200
We note that varying methods of allocation of costs between the Australia Post business
and the Host business were noted by the Licensees.
150
$000
20
Australia Post revenue (%)
7% 2% 50% 12% 7% 4% 5% 15% 21% 48%
31%
A t li P
Australia
Postt operating
ti profit
fit (%) 30% 14% 73% (3%) 11% 62% 27% 104% 42% 48% (204%)
100
50
0
(50)
20 NIL 47 NIS 04 MIL 19 NIS 13 NIL 31 NIS 11 NIS 14 NIL 03 MIS 12 NIL 35 NIS
Post - Store contribution
Source: LPO information and KPMG analysis
In-conjunction
j
- Store contribution
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
21
Australia Post LPO assessment
Contents
Introduction and background
5
Key observations
9
LPO analysis – Comparable sample
12
In-conjunction LPO analysis
20
LPO analysis – Extended sample
22
Adjusted Return on Investment (ROI) analysis
25
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
22
Australia Post LPO assessment
Operating profit by LPO – Extended LPO sample
Two LPOs from the extended LPO sample generated an operating loss (excluding owners salaries) in FY13 and FY14
343
293
243
193
143
93
43
(7)
(57)
120%
100%
80%
60%
40%
20%
0%
FY14A+F
Average FY13
Average FY14
MSS
01 M
3 NIL
13
19 NIS
35 NIS
39 MIS
47 NIS
34 M
MSS
53 N
NSL
08 N
NSS
48 M
MSS
11 NIS
07 N
NSS
30 N
NSS
12
2 NIL
31 NIS
21 M
MSS
03 MIS
46 M
MSS
06 N
NSS
45 M
MSS
32 N
NSL
09 N
NSS
10 N
NSS
23 M
MSS
20
0 NIL
18 M
MSL
14
4 NIL
05 N
NSL
51 N
NSL
27 N
NSL
54 N
NSL
49 N
NSL
28 N
NSS
36 N
NSL
50 M
MSL
02 M
MSS
04 MIL
16 M
MSL
40 MIS
29 M
MSL
52 N
NSL
FY13
43 M
MSL
15 M
MSL
25 M
MSL
38 MIL
MSL
24 M
(20)%
37 MIL
$0
000
LPO operating profit – FY13A & FY14A+F
Store contribution margin (RHS)
Source: LPO information and KPMG analysis
Comments
Average LPO operating profit (excluding owners salaries) is $71k in FY13 for the extended
LPO sample. This is expected to increase to $73k in FY14. There are 24 Large and 23
Small LPOs in the extended LPO sample.
Licensees advise that operating profit is often applied against outstanding debt obligations
and/or the Licensee drawings. We have been unable to substantiate the quantum of these
bli ti
for
f the
th extended
t d d LPO sample.
l
obligations
Two out of the 47 LPOs (or 4%) generated an operating loss (excluding owners salaries).
In any large retail or franchise network under-performing stores represent up to 10% of the
population. Australia Post compares favourably on this basis.
The Non-metro/Small LPOs generate higher gross margins as the majority of their revenue
is service related which generates a high gross margin compared to product revenue.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
23
Australia Post LPO assessment
Revenue mix by LPO – Extended LPO sample
Licensees generate revenue from a combination of Australia Post and other product sources. The more profitable LPOs provider a broader
range of services
Postage
Financial Services & ID
Retail Merchandise
Delivery
Mail Processing
Subsidies & Top-ups
Non-Australia Post Revenue
Operating Profit
31 NIS
11 NIS
47 NIS
7N
NSS
35 NIS
3 MIS
3 NIL
13
8N
NSS
30 N
NSS
9N
NSS
14
4 NIL
1M
MSS
6N
NSS
12
2 NIL
0 NIL
20
19 NIS
10 N
NSS
39 MIS
MSS
46 M
27 N
NSL
28 N
NSS
32 N
NSL
5 NSL
MSS
48 M
51 N
NSL
49 N
NSL
18 M
MSL
54 N
NSL
23 M
MSS
53 N
NSL
52 N
NSL
21 M
MSS
34 M
MSS
36 N
NSL
16 M
MSL
15 M
MSL
45 M
MSS
4 MIL
MSS
2M
38 MIL
40 MIS
43 M
MSL
50 M
MSL
25 M
MSL
37 MIL
29 M
MSL
450
400
350
300
250
200
150
100
50
0
(50 )
24 M
MSL
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
(200 )
LPO operatin
ng profit ($000)
LPO reve
enue ($000)
FY13 LPO
O revenue mix and operating profit
f
Source: Australia Post LPO payments data, LPO information and KPMG analysis
Comments
LPO revenue generated from non-Australia Post service or product represents
approximately 45% of total revenue.
Material financial services revenue is more evident in the top revenue quartile of LPOs
whilst the lower revenue LPOs are skewed towards delivery services revenue.
The more profitable LPOs reflect a broader mix of revenue by category.
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
24
Australia Post LPO assessment
Contents
Introduction and background
5
Key observations
9
LPO analysis – Comparable sample
12
In-conjunction LPO analysis
20
LPO analysis – Extended sample
22
Adjusted Return on Investment (ROI) analysis
25
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
25
Australia Post LPO assessment
Adjusted Return on Investment – ROI sample
LPOs are generating an average Adjusted ROI (based on FY13 operating profit) of 22% which is within the target industry benchmark
Adjusted Return on Investment (ROI)
A large number of Licensees achieved a
relatively consistent Adjusted ROI ranging from
5% to 25%
1,050
880
140%
120%
$000
710
100%
80%
540
A selection of Licensees paid well below
average for their LPO and are generating
strong
t
returns
t
60%
370
40%
200
20%
30
0%
(140)
(20)%
Post only cost
Average acquisition cost (Post only)
ROI FY13 (%)
Average ROI FY13 (%) (RHS)
Source: LPO information and KPMG analysis
Comments
Adjusted ROI vs year of acquisition
Adjusted ROI has been calculated on the basis of FY13 operating profit (excluding
owners salaries. Interest and depreciation) as a percentage of acquisition prices
regardless of the year of purchase.
Adjusted return on investment
Number in
sample
Average
Adjusted ROI
LPOs are generating an average Adjusted ROI of 22% based on a sample of 34 LPOs.
The franchise industry benchmark for Adjusted ROI is between 20% and 25%.
Year
Pre-2008
18
25%
Licensees paid an average of $346k for their LPO between 1992 and 2013. Prices
varied between $23k and $928k.
2008 and later
Total
16
34
19%
22%
LPOs acquired before 2008 are generating an average Adjusted ROI (average of 25%)
which is above the average Adjusted ROI of LPOs acquired in 2008 or later (average of
19%).
Source: LPO information and KPMG analysis
© 2014 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation
26
© 2014 KPMG, an Australian partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All
rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG
International.
The KPMG name, logo and “cutting through complexity” are registered
trademarks or trademarks of KPMG International
International.

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