Group turnover for the year was €806.7m. A Group operating profit of €2.2m was generated. Achieving these results in a challenging domestic economy is very credible.

Turnover

Turnover for 2011 was €806.7m. This is slightly ahead of the prior year and is a considerable success. Mail income contributed €535.3m (3 per cent down on the prior year) and is the single largest source of revenue for the Group.

Mail revenue is subject to a number of influences. Volumes are reducing due to the performance of the domestic economy, e-substitution and a reduction in house completions.

There has however, been an increase in volumes driven by internet fulfilment and Direct Mail Services. 2011 also saw one-off mailings to facilitate the general and presidential election process.

Revenue in the retail network was in line with the prior year at €171.6m. The value of State Savings reached €14.1 billion by the end of December 2011, an increase of €1.4 billion on the prior year. Other new retail income streams showed encouraging growth including Foreign Exchange for both Dollars and Sterling; and the addition of agency services for AIB, NIB and other finance and utility providers.

Turnover in subsidiary companies reached €84m, an increase of 24 per cent in the year. Adding to the revenue streams is very much in line with Group Strategy.

The operating profit earned from business ventures such as PostPoint, The Gift Voucher Shop, One Direct Insurance, all of which benefit significantly from their association with the An Post brand and network, forms an increasingly important cornerstone of the financial plan for the Group.

Operating Costs

In line with postal operations in other jurisdictions, the reduction in operating costs is an important strategic objective.

Operating Costs within the core An Post Company were reduced by €25.4m. The last three years has seen a reduction of €78m from the annual operating cost base. 2011 represents a further year of progress in this regard. Overall costs of €804.5m were up on the prior year by €5.2m, as the Group increased its subsidiary activity and facilitated two national election processes.

Typically labour represents 70 per cent of the cost base in postal administrations. The reduction of Full Time Equivalents (FTE) is therefore a central element of our cost reduction programme. The average number of staff FTEs reduced by a further 300 FTEs during 2011.

Pension Schemes

The Group pension scheme accounted for under FRS17 shows an accounting deficit of €483.6m. The asset base is €1.76 billion.

In common with the majority of defined benefit pension schemes, the An Post deferred benefit scheme is required to meet the Minimum Funding Standards required by the Pensions Board. Discussions are advanced with stakeholders to formulate an agreed plan to address the requirements of the Minimum Funding Standards.

Fixed Assets

Capital expenditure in 2011 amounted to €36m. There were no significant asset disposals during the year. There are plans for further capital spending of the same magnitude in 2012 including completing investment in the next generation of mail sorting equipment.

There was an investment of €3.3m in a UK-based business, Quadrant Subscription Services, which specialises in servicing publishing houses. This additional activity will be managed in the Group’s successful UK based Air Business subsidiary. It represents further expansion in value-added mail related activity.

Balance Sheet and Cash Resources

The Group balance sheet shows fixed assets of €291m, cash balances of €150m and a net asset position before pension liability of €319m. The Group operates a treasury strategy to ensure the availability of funds for trading while optimising the return on cash resources under a Board approved policy.

Economic Outlook

The core activity of providing the national postal service is likely to continue to face a challenging economic climate. This, combined with a structural decline in parts of the postal industry worldwide, makes for a challenging business environment.

However, diversifying revenue streams, continued cost reductions and improved efficiencies and quality of service, are equipping the Company to deal with this business environment. The Group looks forward to maintaining a strong position in 2012 and beyond.