Mr. John Daly:

An Post thanks the committee for the invitation to attend the meeting today to speak on this important matter. I am the retail operations director and I am accompanied by Mr. Liam O'Sullivan, who is our mails operation director. We apologise on behalf of our new chief executive, Mr. David McRedmond, who could not attend due to a long-standing commitment.

Our appearance here is timely given the change in Government responsibilities for the national post office network, now under the Department of Arts, Heritage, Regional, Rural and Gaeltacht Affairs. It is also a time of continuing global trends, impacting all postal administrations worldwide, of increasing significant technical substitution and e-commerce. This is impacting greatly on both the mails and retail businesses of An Post, as it is on all our fellow postal administrations.

Over recent years, we have had a number of interactions with the transport and communications committee, and much of what is said here is similar to what was said at those committee meetings. An Post maintains a greater service and presence in urban and rural communities than all other commercial or Government bodies. Through our mails network, with 7,620 collection and delivery staff, we deliver 2.5 million mail items every day to 2.1 million homes and businesses. We deliver mail to all households every working day, often the only interaction some customers have with another person. In recent years we have invested heavily in both our mails and post office networks. In 2015, for example, 43 of our post offices were upgraded and 23 new locations and 14 new post office contracts were awarded in various parts of the country. In 17 areas, local mail services were relocated to a purpose-built or purpose-fitted delivery service unit, providing top-quality modern customer and operational facilities, including ample safe parking and van loading facilities, cost-efficient lighting and heating and customer post office box and IT facilities.

The size of the post office network continues to be crucial for our commercial agenda. Its very scale allows us to service our customers' needs throughout the country. This scale is also a major factor in our retaining and winning more business. The reach of our network has attracted business as diverse as bill payment and banking services for major organisations to provision of social welfare payments, savings, foreign exchange and retail products such as Postmobile and gift vouchers. Using geodirectory data, we can see that 99% of addresses in the country are within 10 km of a post office and 93% within 5 km in rural areas. Our contract with the Department of Social Protection specifies that outlets must be available within 3 km of 95% of customers in an urban area and 15 km in a rural area. The post office network comfortably exceeds these requirements.

The post office network is the largest retail network in Ireland. We handle circa 120 million transactions annually, with some 1.7 million customer visits to post offices each week. We have 1,131 offices nationwide, 51 of which are operated directly by An Post, the remainder being run by independent retailers, that is, postmasters as contractors. Postmasters are paid based on the business they perform. We run this network in a business environment that is tough for all participants. All our business lines operate in a very difficult marketplace with many competitors and, critically, are increasingly open to electronic substitution.

It might be useful if I highlight some changes between the present day and the last date on which I presented to an Oireachtas committee in March 2014. This should clearly illustrate the business context in which we now operate. The mails business has continued to decline in this period, due in the main to the global trend of electronic substitution. This can be seen in actions by our major customers, such as the utilities and financial institutions, which now seek to reduce their use of the postal system through electronic statements and discounts to customers. Since March 2014, we have seen a decline of more than 11% in core mail usage. Since the peak of mail, reached in 2007, we have seen a 38% decline. We have seen growth in online shopping, which has to some extent increased the levels of our parcels business. This is a growth area we intend to pursue, but it must be noted that this business is very price competitive.

In March 2014, we had 750,000 weekly Department of Social Protection, DSP, customers. This has now fallen to 625,000, a decline of 17%. This was caused, first, by a decline of 30% in the number of jobseeker payments as people, thankfully, gained employment. We saw a reduction of 5% in pension payments due to the very low number of new pensioners choosing the post office option for their payments. Similarly, we saw child benefit payments decline by 16%. In the same period we have seen our bill payment business decline by 20% due to the loss of some key corporate customers plus a general decline in utility bill payments as customers choose to pay by direct debit for convenience but also to get discounted utility bills. We have seen good growth in some traditional as well as new business streams introduced in recent years. Our State savings business continues to grow, with now in excess of €20 billion of customer savings, and we have significant plans to enhance these services over the coming years. We have seen increases in our banking services with AIB and we added Ulster Bank as a customer in 2015. The foreign exchange business has been a big success since being introduced in 2011, and we continue to see good growth each year. We have both a foreign exchange cash and card business. Our One4all gift vouchers and Postmobile businesses have also seen good growth.

We continue to look for new business activities, and I am pleased to advise the committee that we will introduce a new payment account in the first quarter of next year. This will have all the features of a normal bank account, apart from a chequebook and overdraft facility. We have also introduced a court fines payment business and we will shortly add the national lottery service to all post offices nationwide. We have introduced many new mail service initiatives in recent years. Many of these are in the area of online shopping, with such initiatives as our DeliveryBox product and our AddressPal service. This service enables customers to purchase products at reduced postage cost from UK websites and is proving very popular, with now more than 38,000 registered users. In the coming weeks, we will also launch Post Logistics, a freight service which will enable SMEs throughout Ireland to access European markets readily.

Overall, though, the reduction in the core mails, DSP and bill payment business has meant that business levels at post offices have reduced by 11% since 2014, and this level of decline is expected to continue. While the new forward-thinking business activities are very welcome and necessary, they do not make up for the reductions in the core business streams. I also highlight that Government business continues to be the dominant activity in post offices, making up 62% of the income earned. No company could sustain this level of business and income reductions without making the necessary changes and cost reductions.

A large cost to An Post is the post office network. The fact remains that we continue to have very many unsustainable post offices, where the income earned from customer activity does not match the cost of operating the offices. Along with all costs from the company, this has to be addressed. The company has not to date had any policy of closing post offices, only examining an office if the postmaster chooses to retire or resign or, unfortunately, in some cases is deceased. The committee may be aware that in the event that we consider the closure of a post office, we undertake a consultation process whereby we invite submissions from local interested parties on the need to retain a post office in the locality. The submissions received to date range from no submissions at all to significant levels of interest. We evaluate the submissions received and reach a final decision on whether to re-advertise the post office contract or close the office. Since March 2014, we have closed 16 offices, which is 1.4% of the network in numbers but 0.2% in business terms. This is in the context of the 11% reduction in business previously outlined.

The committee will also be aware that we have been involved in the post office network development group, an exercise with Mr. Bobby Kerr looking at the post office network of the future. We expect Mr. Kerr to make his final recommendations in the coming weeks, which will include proposals on segmentation of the post office network and some protection proposals for rural post offices. His recommendations will be dependent on Government support for the rural post offices if they are to survive into the future. An Post is also part of the post office hubs working group led by the Minister of State, Deputy Michael Ring. This group is examining what other services, in a social and Government context, could be provided in post offices. The company is supportive of both these initiatives.

Much of the network was developed at a time when Ireland was a very different place and, like so many organisations, it has not been immune to the huge social and economic changes in the country. The company supports initiatives on supporting rural communities but is of the view that this is an issue for Government and local communities themselves rather than commercial entities such as An Post. Our extensive range of services can continue to be provided in rural communities, as long as a sustainable business model can be found. Over the years, local communities have changed significantly the manner in which they do their business. Increasing numbers of citizens choose to do their business online or through bank accounts or mobile phones.

They also pass many local shops to do their shopping at large shopping centres and towns. As illustrated earlier, they do less and less business at their local post office. This is also impacting on many of the shops that happen to be co-located with our post offices. All rural retail units are experiencing significantly reduced footfall numbers due to the actions of the people in the community.

We will continue to investigate the provision of more products and services using our leading post-office-counter technology. We also believe we have a big part to play in increasing the level of financial inclusiveness in urban and rural areas. The introduction of our own payment account will be a first step in that area. Many of those without bank accounts currently use the post office as their preferred location for the management of their finances. This includes collecting their Department of Social Protection entitlements; paying their bills, many on a part-payment basis; saving through the post office savings bank for important family events such as first holy communions, Christmas etc.; topping up their phones; buying gift vouchers as presents; getting foreign exchange requirements when travelling abroad; and using our postal money order, sterling draft and Western Union services if they want to send money either nationally or abroad. Many people are still worried about bank charges and direct debits, and by using our services many citizens manage their money efficiently in a cost-effective manner.

We continually look at our service standards and the standard of our post offices. I am sure many members have seen significant improvements in many offices in recent years. We undertake mystery shopping on a monthly basis at 300 of our busiest offices, which is done on our behalf by an internationally recognised organisation in this field. In recent years we have seen an increase in the scores given for customer service. This is further evidence of the strength of the post office network and the level of trust and satisfaction our customers place in us.

We welcome the huge level of good will towards the post office network and are heartened by the level of support for the post office network in Dáil debates. We particularly welcome the Government's support, illustrated by the establishment of the Bobby Kerr and Minister of State, Deputy Ring, initiatives.

We are very aware of the challenges facing communities and businesses in rural areas. We recognise that difficult decisions that impact on local communities have to be taken at times. We believe that a national policy for rural communities needs to be developed. This might result in extended services including post offices services being available at fewer locations. We are ready, as always, to work with Government, postmasters, our customers and business partners to generate extra business for our post offices and to identify a financially sustainable model to ensure the success of the national post office network. We have submitted some slides showing the key activities in our mail and post office business.