TRANSFORMING From one world to another
THE POSTAL WORLD AND AN POST € TURNOVER NUMBER OF MAIL PARCEL 2017 EMPLOYEES DECLINE GROWTH GLOBAL € 392 bn 2 , 780 , 000 5 – 10 % 10 – 14 % POSTAL SECTOR IRISH € 900 m 9 , 500 8 % 20 % POSTAL SECTOR
AN POST CAN PLAY A MAJOR STRATEGIC ROLE FOR THE IRISH GOVERNMENT > Provider of essential services to citizens including ~ 2 m letters each day delivered to 2 . 2 m delivery points > Backbone for Irish business in a world where E-Commerce is a huge part of the economy with 30 m parcels delivered last year > Financially signifjcant enterprise Revenue of >€ 800 m > Large employer for the state with ~ 9 , 500 employees (FTEs) > Major player in Financial Services with € 20 bn of State Savings administered
AN POST CONTINUES TO FACE VERY SIGNIFICANT CHALLENGES Significant challenges include: Headwinds from trends in postal industry continued digital 1 . substitution of mail and decline in cash Challenging starting-point given structurally higher cost 2 . base than competitors Fundamental economic challenges in Ireland including 3 . low mail volume, high number of delivery points and high cost per FTE
CFO ROLE PART OF A TEAM IDENTIFY PROBLEMS AND OPPORTUNITIES, PROPOSE SOLUTIONS UNDERSTAND ORGANISATION AND CHANGE IDENTIFY VALUE UNDERSTAND OTHER FUNCTIONS AND SUPPORT CONSTRUCTIVE INVESTMENT RESULTS
FROM ONE COMPANY TO TWO WORLD CLASS STRATEGY-LED BUSINESSES Peter Quinn Pat Knight Debbie Byrne David McRedmond Aoife Beirne Garret Bridgeman Human Resources Managing Director Chief Executive Chief of Staff Managing Director Chief Financial Director An Post Retail Offjcer An Post Mails & Parcels Offjcer
CFO ROLE PART OF A TEAM IDENTIFY PROBLEMS AND OPPORTUNITIES, PROPOSE SOLUTIONS UNDERSTAND ORGANISATION AND CHANGE IDENTIFY VALUE UNDERSTAND OTHER FUNCTIONS AND SUPPORT CONSTRUCTIVE INVESTMENT RESULTS
OVERALL WE PROJECT THE ADDRESSED MAILBAG WILL DECLINE BY 33 % BETWEEN 2017 AND 2027 , AT A CAGR OF - 4 . 0 % W e expect an overal decline of - 4 . 0 % per annum > Addressed Mail volume forecast between 2018 and 2027 , millions between 2017 and 2027 for total inland addressed mail volumes. > Ceadunas letters , which constitutes more than half of total mail volumes, is expected to decline at - 3 . 4 % per annum over the forecast period. > Stamped letter is expected to decline at - 3 . 1 % per annum . > Metered letter is expected to decline at - 5 . 7 % per annum , driven by e-substitution and product substitution into stamped and Ceadunas letters. > Other segments continue to decline due to e-substitution and price increases. Period Growth Rate CAGR 2001 – 07 3 . 2 % CAGR 2007 – 16 - 4 . 3 % 2016 – 17 - 13 . 9 % 2017 – 18 - 0 . 4 % 2018 – 19 - 5 . 7 % CAGR 2017 – 27 - 4 . 0 % Source: An Post RMS data, PwC forecasts
MAILS AND PARCELS KEY ISSUE – MAIL VOLUME DECLINE CHALLENGE OPPORTUNITY > F alling Mail Usage > Pricing > Traditional Work Practices > Add Value Service > Geographic Challenge > E-Commerce
POST OFFICE RETAIL KEY ISSUE – REPURPOSING NETWORK CHALLENGE OPPORTUNITY > F alling Cash Transactions > Franchise Model > Substitution with EFT > New Contract > Relevance > Financial Services > Reducing Footfall > E-Commerce > Expensive Infrastructure > Government Services
CFO ROLE PART OF A TEAM IDENTIFY PROBLEMS AND OPPORTUNITIES, PROPOSE SOLUTIONS UNDERSTAND ORGANISATION AND CHANGE IDENTIFY VALUE UNDERSTAND OTHER FUNCTIONS AND SUPPORT CONSTRUCTIVE INVESTMENT RESULTS
EVOLVING IRISH OPERATIONAL CONTEXT FROM GOVERNMENT DEPARTMENT TO SEMI-STATE ORGANISATION STRUCTURE P&T Semi-State and Next Phase private companies ? An Post An Post RTÉ RTÉ Telecom Eireann eir ROLE OF CFO P&T Semi-State and Next Phase private companies Strategy and Bookkeeper Financial Controller Economics
SAME SECTOR – RADICAL DIFFERENT PERFORMANCE GLOBALLY, ONLY A FEW COMMERCIALLY SUSTAINABLE OPERATORS ARE GENERATING CONSISTENT POSITIVE EBIT COMMERCIALLY SUSTAINABLE Operators who have delivered operational transformation and/or diversifjcation LOW PERFORMING A large number of operators with mail volume decline directly translating into profjt erosion, while alternative business model not yet found or not yet yielding
CFO ROLE PART OF A TEAM IDENTIFY PROBLEMS AND OPPORTUNITIES, PROPOSE SOLUTIONS UNDERSTAND ORGANISATION AND CHANGE IDENTIFY VALUE UNDERSTAND OTHER FUNCTIONS AND SUPPORT CONSTRUCTIVE INVESTMENT RESULTS
BUSINESS OPPORTUNITIES POWER OF BRAND ASSOCIATION 2018 2009 d a r t C G i f BOUGHT SOLD € 9 m € 105 m OTHER BUSINESS OPPORTUNITIES UK based Postal Sector Specialist Insurance Intermediary based in Athlone Data
CFO ROLE PART OF A TEAM IDENTIFY PROBLEMS AND OPPORTUNITIES, PROPOSE SOLUTIONS UNDERSTAND ORGANISATION AND CHANGE IDENTIFY VALUE UNDERSTAND OTHER FUNCTIONS AND SUPPORT CONSTRUCTIVE INVESTMENT RESULTS
BRAND EVOLUTION INVESTING TO GROW FROM ONE WORLD TO COMPETING IN MANY FROM TO > A mails company that ‘does’ parcels An expert FS and E-Commerce services company > Peripheral Central, inclusive, of the people > Part of Irish life Part of my life, customer centred > Staid, of the past Contemporary, progressive, innovative > Average, passive Expert, confjdent, decisive > Only choice, monopoly Preferred choice, competitive
CFO ROLE PART OF A TEAM IDENTIFY PROBLEMS AND OPPORTUNITIES, PROPOSE SOLUTIONS UNDERSTAND ORGANISATION AND CHANGE IDENTIFY VALUE UNDERSTAND OTHER FUNCTIONS AND SUPPORT CONSTRUCTIVE INVESTMENT RESULTS
SKILL SET OF THE CFO KEY CHANGES IN MIND SET FROM TO Accounts and budget > Economic strategy and 5 – 10 year plans Measuring performance > Identifying value Business plans > Strategy Finance > Economics Function > Competence Own competency > Financial skills teacher for rest of team Internal perspective of control > External perspective – Value add – Capital Markets – Stakeholder Role
STRATEGY LEADS TO SUSTAINABLE PROFITS Profjt Profjt Price Effjciency New Products Mail Wage Do € 25 m € 25 m € 25 m € 10 m € 35 m Decline Infmation Nothing € 40 m € 10 m € 25 m
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