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EXPANSION: People queue at the Parkview Post Office in Johannesburg. Picture: THE TIMES
THE South African Post Office (Sapo) expects to make further losses in the current financial year and only envisages a return to profitability after 2018, says group CEO Mark Barnes.
Barnes, who took over the running of the crippled company in January, said in Sapo’s annual report tabled in Parliament on Monday that the early results of its turnaround strategy had been "disappointing".
A key factor was restoring customer confidence, which took a battering during a prolonged strike in 2014 and the nondelivery of post.
"If the backlog in revenues cannot be made up fairly early in the three-year plan period, then the Post Office will have little choice but to rationalise the cost base, simply in order to survive," Barnes writes. "The 2016-17 financial year is expected to remain tough with losses that may even exceed those of the past year."
Barnes says Sapo will only return to financial stability if postal volumes return to pre-2014 strike levels and if it benefits from a "significant growth" in revenues from government business.
"The Post Office’s courier, parcels and logistics business operating through CFG (the Courier and Freight Group) continued to be decimated during the 2015-16 financial year to the point that it will be required to be incorporated into the Post Office as a division, in order to ensure its economic survival, avoid liquidation and save the jobs of the hundreds of employees who work there.
"CFG now finds itself operating in an extremely competitive, albeit growing, market segment and the Post Office’s parcels business will be relaunched during the 2017-18 year," Barnes said.
Since the end of March (year-end), CFG was placed under provisional liquidation and Sapo was looking to purchase it with the aim of building a strong courier business.
Despite its challenges, Barnes is convinced that Sapo, with more than 1,500 branches and 800 agencies throughout the country has a strong foothold in the market.
Since March, it has received a R650m capital injection from the state and has used a further government guarantee to raise debt financing of R2.7bn to pay for past liabilities, fund continuing losses and invest R1.5bn in capital projects over the next three years.
Sapo subsidiary Postbank was granted approval by the South African Reserve Bank to establish a bank.
The company received a qualified audit opinion from the auditor-general because of serious deficiencies in its asset register, which could affect the losses it has reported on. Several other deficiencies in its finances also contributed to the negative finding.
Sapo made a total loss of R1.1bn last year compared with a loss of R1.5bn in 2014-15. The auditor-general noted that it was not generating sufficient revenue to finance its high cost base.
"These conditions along with other matters indicate the existence of a material uncertainty that may cast significant doubt on the entity’s ability to operate as a going concern."
Revenue declined to R4.7bn (R5bn). Investigations into fraud and theft amounting to R11m were under way, the Post Office said in the report.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
More losses in store for the Post Office
THE South African Post Office (Sapo) expects to make further losses in the current financial year and only envisages a return to profitability after 2018, says group CEO Mark Barnes.
Barnes, who took over the running of the crippled company in January, said in Sapo’s annual report tabled in Parliament on Monday that the early results of its turnaround strategy had been "disappointing".
A key factor was restoring customer confidence, which took a battering during a prolonged strike in 2014 and the nondelivery of post.
"If the backlog in revenues cannot be made up fairly early in the three-year plan period, then the Post Office will have little choice but to rationalise the cost base, simply in order to survive," Barnes writes. "The 2016-17 financial year is expected to remain tough with losses that may even exceed those of the past year."
Barnes says Sapo will only return to financial stability if postal volumes return to pre-2014 strike levels and if it benefits from a "significant growth" in revenues from government business.
"The Post Office’s courier, parcels and logistics business operating through CFG (the Courier and Freight Group) continued to be decimated during the 2015-16 financial year to the point that it will be required to be incorporated into the Post Office as a division, in order to ensure its economic survival, avoid liquidation and save the jobs of the hundreds of employees who work there.
"CFG now finds itself operating in an extremely competitive, albeit growing, market segment and the Post Office’s parcels business will be relaunched during the 2017-18 year," Barnes said.
Since the end of March (year-end), CFG was placed under provisional liquidation and Sapo was looking to purchase it with the aim of building a strong courier business.
Despite its challenges, Barnes is convinced that Sapo, with more than 1,500 branches and 800 agencies throughout the country has a strong foothold in the market.
Since March, it has received a R650m capital injection from the state and has used a further government guarantee to raise debt financing of R2.7bn to pay for past liabilities, fund continuing losses and invest R1.5bn in capital projects over the next three years.
Sapo subsidiary Postbank was granted approval by the South African Reserve Bank to establish a bank.
The company received a qualified audit opinion from the auditor-general because of serious deficiencies in its asset register, which could affect the losses it has reported on. Several other deficiencies in its finances also contributed to the negative finding.
Sapo made a total loss of R1.1bn last year compared with a loss of R1.5bn in 2014-15. The auditor-general noted that it was not generating sufficient revenue to finance its high cost base.
"These conditions along with other matters indicate the existence of a material uncertainty that may cast significant doubt on the entity’s ability to operate as a going concern."
Revenue declined to R4.7bn (R5bn). Investigations into fraud and theft amounting to R11m were under way, the Post Office said in the report.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.