MaltaPost plc on Tuesday released its results for the group’s financial year ending 30th September 2023, posting a pre-tax profit of €2.3 million, a significant increase from the €637,000 recorded in the same period last year.
The increase in profitability was largely a result of a 26 per cent rise in revenue to €39.6 million (2022: €31.5 million), particularly fuelled by an increase in the company’s international business activity.
Postal revenue accounted for 87 per cent of total revenue, with the rest of the balance coming from the provision of non-postal services such as document management, bill collection and financial services.
The group’s total expenses were also on the rise, going up by 20 per cent to €37.1 million (2022: €30.8 million), yet the Board of Directors stated that this was in line with expectations following the increase in revenue.
The most significant cost drivers were increased business activity, coupled with higher cost of terminal dues and the general impact of inflation. One notable change in expenses was a decrease in employee costs of 2.4 per cent, dropping to €15.1 million from the €15.4 million that was recorded in the same period last year.
Due to these results, MaltaPost has reported earnings of €0.02 per nominal share of €0.125, higher than the €0.004 that were registered last year.
Commenting on the results, Chairman Joseph Said said that during the period under review, the postal sector emerged from the challenges brought by the aftermath of the COVID-19 pandemic and the emergence of the war in Ukraine. This made MaltaPost’s financial year one of “adjustment to industry challenges and realities”.
“A year of further changes in consumer and business behaviour resulting from an inflationary economic environment, tight labour markets and where consumers experienced a cost-of-living squeeze,” he added.
He affirmed that the postal company’s profitability would have improved further had it not been for the losses it incurred to fulfil a number of services within the Universal Service Obligation (USO) in Malta, “mainly, though not exclusively, concerning local letter mail”.
The USO aims to ensure that postal services are available to end-users in Malta at an “affordable” price. As the sole licensed Universal Service Provider of postal service in Malta, MaltaPost is tasked with collecting and delivering mail to every address in the country.
The company has repeatedly reiterated that this is an “unfair financial burden”, and has sent multiple requests to the Malta Communications Authority (MCA) for a revision of tariffs related to the USO. Earlier this year, the company received approval to charge higher tariffs, thus allowing it to continue fulfilling the USO without suffering financial losses.
“As matters stand today, MaltaPost continues to carry an unfair financial burden especially in the case of delivery of local mail. Despite the recent tariff adjustments, the domestic postal service tariffs in Malta remain the lowest in Europe,” Mr Said continued in the annual report.
He clarified that the company “is not seeking state aid”, but it “should not be expected to subsidise certain loss-making services”.
Due to “persistently rising labour costs” related to the USO, Mr Said has confirmed that MaltaPost is “in discussions” with the MCA over the establishment of an Automated Tariff Adjustment Mechanism. This would create a price cap per postal service falling under the USO, and once implemented should “go a long way to ensure that MaltaPost does not suffer financially to deliver any service provided under the USO”.
He also highlighted that MaltaPost has made significant investment in IT and to ensure it meets its ESG obligations. This includes the use of over 120 electric vehicles that reduce emissions by “significant margins” in its last mile delivery.
“We strongly believe that the group shall continue to be resilient when faced with the evolving economic and market realities. We shall remain alert and agile to respond to sensible business opportunities that arise, so as to further strengthen shareholder value year after year,” Mr Said stated.
MaltaPost CEO Joseph Gafa’ described the financial year as one of “business transformation”, with the company making a number of changes to its last-mile delivery process through the aforementioned initiatives, as well as a number of others.
“Improving productivity by the optimisation of our last-mile delivery profile, while also boosting parcel volumes, are among our major priorities. To cope with the year-on-year diminishing letter mail volumes, we are also reorganising the last-mile delivery by combining letter mail and select parcel delivery, into one stream,” he explained.
With regards to the financial results, he pointed out that the MCA’s tariff revisions were “tardy and did not adequately compensate for the losses incurred to deliver select postal services”. Mr Gafa’ said that some of the services covered by the USO are still “loss-making” as the tariffs to date “simply do not cover the full cost of providing them”.
He added that the obligations of the USO have “for years been conditioned by the year-on-year decline” in the domestic, inbound, and outbound traditional letter mail volumes, a decline that was “further accelerated” during this year, especially through the presence of various initiatives from entities to increase digitisation and e-substitution.
“We see opportunities to gain further market share in reverse-logistics through partnerships with international consolidators and retailers, while enhancing our cross-border offering to better align ourselves to current market expectations," Mr Gafa’ stated.
Turning to the labour market, he remarked that MaltaPost is one of Malta’s largest employers, and “over 25 per cent of staff” are non-Maltese speakers. Mr Gafa’ said that MaltaPost is facing “challenges” to recruit within an intensely competitive labour market, even though it is meeting work-life balance expectations and improving its remuneration packages on an annual basis.
Looking ahead, Mr Gafa’ said that MaltaPost is “positively optimistic” that despite various macroeconomic challenges the postal industry faces, e-commerce traffic will continue to steadily increase over the coming five years.
“The group remains determined to provide a satisfactory return to its shareholders, a quality service to its customers, and fair and reasonable working conditions to all its staff. We are also confident of the group’s financial prospects going forward,” he added.
Both the Chairman and the CEO expressed gratitude to MaltaPost’s Board of Directors, management and team, as well as shareholders for their support, commitment, and trust, respectively.
Main Image:
