Wellington, March 12 NZPA - The New Zealand Post Group reported a flat half-year net profit, as its banking services segment continued to grow in importance while its postal services faltered.

The state owned enterprise made a net profit of $52.8 million in the six months to December on revenue from operations of $656.2 million. Group profit before tax declined 6.7 percent to $69.9m.

The interim dividend being paid to the Government is being cut to $6.9m, compared to $16.9m for the corresponding previous half year.

Letter volumes were down about 6 percent, with the decline across domestic and international letters and unaddressed mail. The company said the fall off was caused by electronic substitution, economic climate, and competition.

Group chief executive John Allen said he was confident the group could create a sustainable postal business, but it had to reflect changes in the way customers were using NZ Post services.

Ideas being considered included ending Sunday collections from street letter posting boxes, with little mail being posted on Sundays while the costs of collecting from the thousands of boxes around the country were significant, Mr Allen said.

The company was also looking at whether the street boxes were in the right places, whether the current numbers of boxes were needed, and whether they needed to be cleared as often as they were now.

Net profit from the postal services segment fell to $31.3m for the half year from $46.1m the year earlier, while subsidiary Kiwibank's net profit rose to $25.8m from $22.7m.

Mr Allen said the result for the postal segment also included areas such as retail and corporate costs, and could not be extrapolated to indicate the performance of the postal business on its own.

He acknowledged the postal business was "very challenging" but said NZ Post was confident it could sustain the level of profitability of that business about its current level.

"What you see is the strength of the Kiwibank result and the continuing contribution and growth of Kiwibank, offsetting the challenge which we are seeing in our traditional postal business."

That was something the group had been positioning for for a long time with its diversification strategy.

In the next year or so, he expected the banking services segment to become more profitable than postal services, but the organisation would not be changing its name, Mr Allen said

"What we are endeavouring to do is build a balanced portfolio of businesses."

A lot of thought and investment was going into the postal, retail, data and express couriers businesses to ensure they could grow and be sustained.

"That's why we won't be ditching the brand, because this won't be just Kiwibank, this will be a portfolio of successful businesses."

Mr Allen said he was not expecting a dividend from Kiwibank in the next three years.

"We are looking still at continuing growth and that requires continuing investment, and as a consequence of that I wouldn't expect in the next three years, anyway, that there'd be a dividend," he said.

"Of course, we will be looking for a return from Kiwibank at an appropriate time."

Chief financial officer Peter Schuyt said the capital appreciation and value of Kiwibank was a far better option for NZ Post than to "suck dividends out and effectively put a cap on its ability to grow".

NZ Post also today registered a prospectus for an offer of up to $200m in unsecured, subordinated, interest-bearing notes.

Mr Allen said $75m of the funds would be used to repay some existing debt that was maturing, while some would be for investment in Kiwibank, and a residual amount would be held to pursue opportunities for growth.

"In the current market there is significant opportunity, really in all parts of our business, for us to continue to invest and grow, and we want to ensure that we're in a position to enable us to do that."

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