Wellington, Sept 23 NZPA - New Zealand Post defended the closure or reduction in services at a handful of stores as it reported a fall in full year net profit to $71.8 million.

The state owned enterprise's result for the year to the end of June compares with $110.2m a year earlier, and for the first time results from its banking division accounted for more than half the annual total.

New holding company Kiwi Group Holdings, which includes Kiwibank, had a net profit of $51m, up 41 percent from $36.8m a year earlier.

In contrast, the Postal Services business, which includes the retail network, reported a fall in earnings to $25.4m from $67.3m in 2007/08. In the latest year total addressed mail volumes fell 6.7 percent, or more than 65m items.

During the financial year, three new PostShops, which include Kiwibank, were opened, 18 were refurbished and five were closed or had service levels reduced.

At June 30, there were 953 outlets in NZ Post's retail network, of which 326 were PostShops.

That compared with a commitment to 880 outlets, including 240 PostShops, in the organisation's deed of understanding.

Acting group chief executive Sam Knowles said the retail network had been in the news lately because of PostShop closures.

"What I want to illustrate here ... is that these closures are not about any sort of cutdown or lack of commitment.

"They are in fact quite the opposite, the outcome of reinvestment in an organisation that's reasonably confident with its postal offers and its banking offers, and needs to improve its representation in the community," Mr Knowles said.

This year the level of change would be greater than in the past year because more investment was being made.

"Although we're confident that we're actually increasing the level of service, the people who will get the new level of services are a different constituency from those losing the old level."

Chairman Jim Bolger said if NZ Post was not delivering banking services through the postal network, it would have to reduce the network.

"The success of Kiwibank has meant that we can make the investments we're talking about in the retail network in a manner that would simply have been impossible if we hadn't had Kiwibank."

Mr Knowles said NZ Post was looking for generally subdued growth this year.

NZ Post was expecting the financial year's profit to be higher than last year's, but the environment remained challenging, he said.

"I guess we're seeing a little bit of the signs of a bit of spring growth coming through, green shoots, but it's not nearly as long as my lawn yet, so it's got a long way to go."

While Postbank was becoming a larger part of the business, the size of the rest of NZ Post's earnings in the latest year was also a result of cyclical impacts.

"So I don't think you'll necessarily see the balance that you're seeing now in the future," Mr Knowles said

While he expected the bank would probably account for the larger proportion of profit in 2009/10, he would expect to see an improvement proportionately of the non-banking business.

"We are at a cyclical low in our postal business and courier businesses, but the bank will continue to grow."

Mr Bolger said that normalised earnings, after adjusting for various one-off items, amounted to $77.2m, a 16 percent decline on a normalised 2007/08 result of $91.9m.

The adjustments include restructuring costs, mainly within Postal Services, of $11.0m compared to $3.8m last year, a $5.2m adjustment for proceeds from the partial sale of the Australian courier business associated with the creation of the new Australian courier joint venture with DHL, compared to $24.8m last year, and various accounting adjustments of $4.2m compared to $5.5m last year.

The result reflected lower revenues due to declining economic activity, as well as substantial costs incurred in the challenging economic environment, Mr Bolger said.

These included higher bad debt provisioning for Kiwibank of $12.2m, compared with $2.9m in the previous financial year.

Mr Bolger said dividends of $6.9m were payable, compared with $23.5m in the previous year.

Operating revenue was down 2.8 percent to $1.25 billion.