Financial Overview

The operating profit of €31.2m achieved in 2008 is an increase of €2.1m on the prior year operating profit. The operating margin improved from 3.3% in 2007 to 3.7% in 2008 mainly as a result of effective management control of costs. The Group profit for the year was €33.2m after a tax charge of €6.7m.

		2008	2007
Turnover (excluding share of joint venture turnover)	€m	850.0	876.0
Operating profit	€m	31.2	29.1
Profit after tax	€m	33.2	43.3
Operating profit margin		3.7%	3.3%
Net assets excluding pension liability	€m	383.8	369.1
Net (liabilities)/assets including pension liability	€m	(198.5)	254.8
Average full time equivalent (FTE) number of staff employed		10,970	11,054
Letters core revenue index (2003 : 100)		110.3	112.7
Number of delivery points	millions	2.184	2.131

Turnover

Turnover decreased from €876m to €850m in 2008. This reduction reflects the downward pressure on mail volumes, the election generated mail in the 2007 comparatives and the disposal of two subsidiary companies during 2007 together with the transfer of the Postpoint and One Direct businesses to the joint venture company, Postbank Ireland Limited.

In the mails business volumes declined by 2%, arising mainly in the second half of the year, reflecting the deterioration in the economy.

Turnover in the retail business grew as a result of increased transaction volumes.

Operating Costs

Wages, salaries and postmasters’ costs amounted to €547m compared to €535m in 2007. This represents an increase of 2.2% which is less than the increase in wage rates during the year arising from the implementation of National Wage Agreements combined with certain productivity payments payable under collective agreements. This reflects the success in maintaining control over labour costs during 2008.

The implementation of the Collection and Delivery change programme in delivery offices has laid the foundations for significant cost savings in the future.

Other operating costs amounted to €220m. This represents a reduction of 6.4% after adjustment for the impact of subsidiaries sold. This reduction represents a considerable achievement and has been realised whilst continuing to invest in marketing, with particular emphasis on the An Post brand.

Tangible Fixed Assets

Capital expenditure in the year amounted to €39m reflecting significant expenditure on buildings and equipment to support the mails business and more extensive capital investment plans are in place for 2009. The programme of renewal for the transport fleet continued with 750 replacement vehicles acquired during 2008. There were no significant asset disposals during the year.

Treasury Policy and Cash Resources

Net cash flow from operating activities amounted to €44m. This strong operating cash performance has built up the resources required to invest both in capital expenditure and in the implementation of the change programme which will set the foundation for providing world class mail operations into the future.

The Group’s treasury function operates under a Board-approved policy which is low-risk and nonspeculative. The primary objective of the treasury function is to ensure the availability of funds for trading activities while optimising the return on available cash resources.

Pension Schemes

Pension schemes in the Group are accounted for under FRS 17 and show an accounting deficit of €582m compared to €114m in 2007. The assets of the pension schemes amount to €1.4billion. The defined benefit pension schemes are subject to actuarial review on a three year cycle. The most recent actuarial valuations were carried out at 1 January, 2008 using the attained age method and are sufficient to cover 100% of the accrued liabilities. Since 1 January, 2008 there has been a decline in the market value of the scheme assets. Discussions amongst all of the interested parties have commenced with a view to establishing a considered plan to address the deficit.

Balance Sheet

The Group balance sheet shows fixed assets of €211m, cash balances of €350m and a net assets position before pension liability of €384m. The Group’s balance sheet provides a stable financial foundation on which to base the implementation of its strategy.

Economic Outlook

Towards the latter half of 2008 and continuing into 2009, the economic climate in the country has deteriorated. Activity in the mails business reacts to the economic activity and there has been a consequent decline in the mails revenue being generated. Actions to mitigate this impact include vigorous cost control and further efficiency improvements. The full extent of the economic downturn continues to be monitored and the business will react to this as the circumstances dictate.