Mail decline changes NZ Post

ROB STOCK
Last updated 05:00 01/12/2013
Brian Roche
CAMERON BURNELL/Fairfax NZ
''ROCKY" ROCHE: NZ Post chief executive Brian Roche has a reputation as a ‘‘fixer’’.

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New Zealand Post chief executive Brian Roche says some people contact him out of the blue over the on-going massive restructuring of the postal services to cope with dramatic falls in mail volumes.

But when they express their view about the ongoing programme to close three out of six mail processing centres and 50 satellite offices along with around 1000 posties being made redundant, they invariably do it online rather than by post.

"When people comment about the changes we are making, they will send me emails rather than letters, which I find ironic," says Roche, who has a reputation as a "fixer" and was brought in to reshape NZ Post.

The decline in the mail is dramatic (see graph), with people sending fewer letters and instead preferring to email, text or phone. This trend began in earnest in 2002 and has only been partly offset by the rise in parcel delivery as people buy more online. NZ Post's current infrastructure is built to deliver over a billion mail items a year, yet it handled just 771.5m of them in the past financial year.

Generally those who decry the changes believe the postal services should be run as a public service, effectively cross-subsidised by its wholly-owned subsidiary, Kiwibank, Roche says.

"Cross subsidisation is something we do not think is sustainable. We want each of our businesses - the courier business, the bank, the postal business - to provide contributions to profits," Roche says.

There is a requirement on state-owned enterprises to make a return for the government, he says. The National government has had a focus recently on owning businesses that are fit for sale.

While it is inconceivable that the postal service would ever be privatised - "It's part of the social fabric of the country", according to Roche - the same may not always be said of the other businesses NZ Post owns.

That means the postal business needs to be able to stand alone.

Roche, 58, took over the NZ Post hotseat in 2009, tasked with transforming the institution. That involves not only right-sizing NZ Post, but also building Kiwibank and developing new businesses like its online directory and community business, Localist.

He is a man with an eye to history and enjoys being involved with events and occupations which define the nation and contribute to nation-building.

When a partner at Coopers& Lybrand, the forerunner of PwC, he spent years on secondment to the Prime Minister's office. He worked under former prime ministers, David Lange, Geoffrey Palmer and Jim Bolger, an experience which taught him much about the workings of power, provided invaluable contacts, and widened his interests.

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He has been involved in a number of Treaty of Waitangi settlements including as the Crown's chief negotiator on the giant Ngai Tahu claim, and had his champagne moment as project manager and chairman of the Rugby World Cup 2011 bid when it secured hosting rights for the tournament that ended 24 years of hurt for Kiwi rugby fans.

That experience was unique, he says, and it was particularly gratifying that many thought the bid was mission impossible. "Most of my friends and most of New Zealand thought we had not a chance in hell of securing the hosting rights."

While Roche's career trajectory clearly takes some smarts, he says a person's intellect is not what defines them or earns their reputation. He numbers his best executive traits as his ability to relate to others and, unusually, his humanity.

Although nicknamed "Rocky", Roche denies he's seen as a tough guy or that it relates to his physique.

"If anything I'm more on the hobbit side of things," he said. Rather it's a play on words as his surname translates to rock in French.

"People don't think I'm tough. I think I am seen as being very focused, and very humane," he says.

But Roche doesn't find driving change personally burdensome, even with the scale of redundancies that has been involved so far.

"I am really respectful of the impact of those changes, but I am comfortable in my mind of the necessity for these changes."

And, he feels the responsibility rests on more shoulders than just his own. NZ Post is no "CEO cult", he says, with strong support from the board and shareholder.

He believes the majority of the public understand and support the need to modernise. "We have a job to do, and we will do it," he says.

It's not just posties losing their jobs. Middle management has been slimmed, and NZ Post reorganised as a leaner, flatter group of businesses able to change rapidly.

The humble postie riding past your house on a bicycle will increasingly be replaced by vans driving around accompanied by runners jogging alongside delivering letters and parcels. Roche knows this trend will be seen as a markers in New Zealand's history, a moment akin to the disappearance of the milkman.

Will this be the last round of rationalisation and redundancies?

It depends on how low mail volumes fall, but Roche notes the rising penetration of smartphones as likely to put further pressure on letter volumes.

"We don't know that number, but we know there's a number out there," Roche said.

NZ Post isn't the only big project on Roche's plate. Next year marks the centenary of the start of the war to end all wars. Roche is chairman of New Zealand's First World War Centenary Panel which includes Sir Peter Jackson, Dame Anne Salmond, and Dr Monty Soutar among its members.

"The reason I was interested in that was it (WW1) helped define our nationhood and how we look on the World," he says."The World War One centenary will be a significant event for the country, and give us a chance to reflect on our place in the world."

Kiwibank, while owned by NZ Post, has national significance as well in being a significant locally-owned player in the sector dominated by Australian-owned retail banks.

Whereas once NZ Post looked like a postal service with a bit of a bank on the side, that position has reversed.

The bank, including its KiwiSaver and insurance businesses, are where much of NZ Post's growth ambitions lie, though digital communications (including facilitating websites for small businesses, Localist and the RealMe digital identity verification system) and its courier businesses are also potential drivers of growth.

Kiwibank's importance is demonstrated in NZ Post Group's financial results over the past four years.

After tax profits for the group, including Kiwibank, were $120.2 million (2012-13), $169.7m (2011-12), -$35.6m (2010-11) and $1.3m (2009-10). Kiwibank's profits in those years were $97m, $79m, $21m, and $46m.

"It (Kiwibank) is currently valued at way more than a billion," Roche says.

Not bad, he points out for a bank which has so far had $360m injected into it by NZ Post, but even that hasn't changed some people's minds.

"There are some people who firmly believe it should not exist," he says.

Roche is not one of them, but accepts political debate over Kiwibank's future is likely to intensify again soon.

NZ Post plans to use the $200m proceeds from the sale of New Zealand Post House in Wellington and the divestment of its 35 per cent stake in Datacom fund Kiwibank's growing capital requirements.

"That will give us adequate time to deal with the shareholder on whether we can source capital from them," Roche says.

And that discussion will give politicians of all hues something to debate in the run-up to next year's general election.

Could that mean a partial sell-down via a private capital injection?

Roche admits one of the options NZ Post looked at for the once-troubled Localist, was to bring in an outside shareholder.

Considering such a move for Kiwibank would be a political question, he said diplomatically. "That would be a government decision."

- Sunday Star Times

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