The turnaround at Australia Post from a $222 million loss to a $36 million full-year profit on Friday will go down as a classic MBA case study in getting the most out of a crisis.
The turnaround was driven largely by job cuts, sharp price hikes and the introduction of a two-speed mail service. But it is also a story of managing the public message to help deliver such universally unpopular changes. It was a strategy in full view on Friday.
"I want to be proud like all our employees right now that we have made Australia Post sustainable again," chief executive Ahmed Fahour said.
"It is not over, we have so much work to do in front of us but I am really pleased to tell the Australian taxpayer that we have shielded them from that $6 billion taxpayer loss that was imminent. And on top of that we now have a thriving, successful ecommerce business."
Fahour uses crisis
Mr Fahour is a former Boston Consulting executive who is all too familiar with the classic turnaround strategy of using a crisis, pushing through change and emerging out the other side with a successful turnaround story.
Letters continue to decline in record numbers and Mr Fahour has not been shy about talking up the crisis, warning Parliament and the media in recent years the "clock is ticking", "we are at crisis point" and the "business is disappearing before our eyes".
Fahour even had his old employer Boston prepare a report which forecast the business would post a cumulative $6.6 billion loss over the next 10 years and $12.1 billion in its letters business unless drastic changes were made.
Last financial year, when the business posted its first annual loss in more than 30 years, the financial numbers were stacked with a $190 million provision for redundancies and other restructuring costs, which the union claimed made the results look worse than they really were.
Mr Fahour used the crisis to announce 900 job cuts and successfully convinced the government and competition regulator to change Australia Post's service standards to allow it to introduce a two-speed mail service and increase the price of basic stamps first from 60c to 70c and then up to $1.
The Australian Financial Review also revealed in May Australia Post plans to sell its colonial-era GPOs across Australia's seven capitals for more than $300 million.
Big reveal
Friday's return to profit is the black-letter day Mr Fahour has been waiting for. Revenue is up 3 per cent to $6.6 billion and parcels business StarTrack grew 8 per cent despite increased international competition from the likes of DHL and Toll, which was bought by Japan Post for $6 billion last year.
Meanwhile, the increase in stamp price and two-speed mail service has stemmed the losses in Post's problematic letters business.
"While the letters business is in structural decline, we have reduced our forecast cumulative losses from around $5 billion to $1.5 billion over the next five years," said former National Australia Bank executive Mr Fahour.
He has lost a number of his senior executive team along the way including REA CEO Tracey Fellows, Myer CEO Richard Umbers and right-hand man Ewen Stafford, but fortunately his turnaround story is beginning to stack up.
