Hildegarde Naughton (Galway West, Fine Gael)
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I propose that, at the conclusion of the meeting, the select committee briefly discuss in private session possible dates for meetings in September. Is that agreed? Agreed.

I remind members to switch off mobile telephones. The purpose of the meeting is to engage with the chairperson designate of An Post, Mr. Dermot Divilly, to discuss the approach Mr. Divilly proposes to take if and when he is appointed to the role and his views on the challenges facing the organisation. Members invariably have a strong interest in An Post, in particular its network of post offices nationwide. We are aware that Mr. Bobby Kerr led a team which completed a report on the future of the post office network late last year. In addition, the former Joint Committee on Transport and Communications produced a report on the future of the network in 2013.

Members will be aware of the Government decision of May 2011 which introduced new arrangements for the appointment of persons to State boards and bodies. Reference to this arrangement is also made in the Department of Public Expenditure and Reform guidelines on appointments to State boards of November 2014. The 2016 programme for Government suggests that nominees to chairs of State boards be required to have their nominations ratified by the relevant Oireachtas committee prior to appointment. The select committee welcomes the opportunity to meet the chairperson designate of An Post to hear his views and trusts that this meeting will provide greater transparency to the process of appointments to State boards and bodies.

On behalf of the select committee, I welcome Mr. Dermot Divilly. I draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they give to the committee. However, if witnesses are directed by the Chairman to cease giving evidence in relation to a particular matter and continues to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. The witness is directed that only evidence connected with the subject matter of these proceedings is to be given and he is asked to respect the parliamentary practice to the effect that, where possible, he should not criticise or make charges against any persons or entity by name or in such a way as to make him, her or it identifiable. I also advise Mr. Divilly that any submission or opening statement he makes to the committee will be published on the committee website after the meeting.

Members are reminded of a long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable.

As members have received a copy of Mr. Divilly's opening statement via e-mail, he may wish to provide a brief outline of his statement, although I will leave the decision to Mr. Divilly.

Mr. Dermot Divilly:

I will go through my presentation as it will settle me in to the meeting.

Hildegarde Naughton (Galway West, Fine Gael)
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That is fine.

Mr. Dermot Divilly:

I thank the select committee for the invitation to come before it today. I was honoured to have been asked some time ago by the then Minister for Communications, Energy and Natural Resources, Mr. Alex White, to become chairperson designate of An Post. An Post is a company with a fine heritage and a strong and trusted brand. A recent RepTrak survey found that An Post is yet again the public sector company with the best reputation in Ireland.

I will give the select committee some background information on my career to date and, in particular, my specific experience relevant to this position. I was born and raised in the west where I attended secondary school. I attended University College Dublin where I graduated with a first class honours degree in agricultural science. I immediately completed a masters in business administration in Trinity College Dublin and was one of the first agricultural graduates to secure an MBA. That was a long time ago.

I joined the Industrial Development Authority, IDA, after graduating for two years and, thereafter, went into private industry as marketing and sales director of Gateaux, which in those days was a large exporter of cakes to Marks & Spencer and other such shops. In my late 20s I was appointed chief executive officer of Thorn Domestic Appliances and served as CEO of a number of other companies, including Toyota and Coal Distributors, over the following decade.

In 1993, I completed a management buy-out of Allegro limited which was Ireland’s largest distributor of grocery products at the time. The arrival of Tesco in the late 1990s and its central distribution model, which sought to bypass distributors, had a serious impact on Allegro but I successfully managed the transition for shareholders and the company continues to trade successfully.

For the past 15 years, I have been operating as a private equity investor in a wide range of private companies in Ireland and the United Kingdom. I have done this on a hands-on basis, in other words, I have not only put in money but have been an executive chairman of the companies in question. I have gained considerable experience in doing this and the investments have been reasonably successful.

In addition to my investments, since 1993 I have been a non-executive director of SIAC limited, a private family company, and was vice chairman of the company, which was one of the largest construction companies in Ireland. SIAC built many of the roads traversing the country, including the motorway from Dublin to Galway. I also served as a non-executive director of Hibernian plc, which was subsequently bought by Aviva Ireland. I was appointed chairman of the company's insurance business and I resolved its pension issue very satisfactorily. I have broad experience of boards, corporate governance, shareholders and pensions across diverse industries, from finance to logistics. These roles brought with them the need for an in-depth knowledge of industrial relations, marketing, financial management and strategic planning. I hope to be able to bring this general, specific and diverse experience to An Post.

As members will be aware, An Post posted reasonably good results at the end of April last. Despite many challenges, the company recorded a turnover of €826 million and made an operating profit of €5.2 million, which was €2.6 million higher than the previous year. This is a credit to the thousands of An Post employees, who number in excess of 9,860.

While the traditional mail business remains the largest revenue segment for An Post, it now represents 59% of total revenue, down from 69% in 2008. In response to the new normal of declining mail volumes, which declined by 34% between 2008 and 2015 and are projected to continue, the company has strengthened its position in other businesses both in Ireland and the UK. It also continues to develop opportunities presented by emerging trends in e-commerce. An Post is a significant player in financial services, gift cards, subscription management and fulfilment, and insurance. These businesses continue to increase their contribution to the profit line.

Growth in online sales will increase demand for domestic and international deliveries, creating further opportunities for the postal industry in general and An Post in particular. The company will have to respond quickly to changing market needs if it is to convert these opportunities into reality. To date, it has been successful in doing so.

While the An Post group is profitable, the current model whereby profitable retail and other group businesses subsidise loss-making businesses is becoming increasingly unsustainable and needs to be addressed urgently while the company is financially healthy.

The key issue here relates to the cost of providing the universal service obligation. The universal service obligation entails the provision of a five-day, next-day delivery of mail to every premises in the country. This, in itself, is loss-making, albeit that the company has been successful in reducing these losses through modest price increases and significant cost savings in the mails business. The company is now coming to the end of large-scale change within this aspect of its operations. This has implications for the provision of this service, given that, if the same five-day delivery service configuration is to be maintained, an alternative funding model is needed. This will involve the company continuing to reduce its cost base and pricing will have to increase to the average European level of 80 cent in the immediate term. In the medium term, the service specification - in other words, the delivery profile - will have to be reviewed if further major cost reductions are to be achieved.

The post office retail network continues to perform satisfactorily despite the unique challenges it faces. Government business makes up 74% of total post office revenue and is responsible for significant customer footfall within the network. The importance of this element of our business was highlighted in the Government-sponsored report chaired by Mr. Bobby Kerr. The report recognises the issues facing the network. It highlights some opportunities and makes a number of recommendations, which the company will consider and implement in its planning cycle. Notwithstanding this, our retail network has a unique reach within our diffuse population. Retail shopping patterns are changing and the move to a cashless society is continuing. All in all, if we, as a country, wish to maintain a post office network which matches the needs of modern-day commuters and customers, given its historical, community and social value, a radical rethink of the funding and business model is required. In my view, there needs to be deep engagement with all stakeholders, including the Government, in order to optimise commercial business opportunities as the company further transforms itself and restores an acceptable level of sustainable profitability, especially in the traditional core mail business.

In conclusion, I wish to reiterate that despite major cost reductions of close to €100 million in annualised savings, service quality improvements up to a standard of 98% and revenue increases due to innovation in product and service delivery, the mail business model needs to be addressed to enable it to maintain a level of profitability suitable for normal variations in revenue due to market movements. This should happen sooner rather than later; we should not proceed on the same basis that currently exists.

Ensuring that An Post is in a sustainable financial position will be the primary objective of my tenure as chairman of An Post. It will involve a combination of price adjustments and ongoing cost reduction, as well as further development of our portfolio of subsidiaries. I have outlined a number of big challenges facing An Post and I look forward to dealing with these and other strategic issues facing the company. In doing so, I look forward to working with the board, the chief executive, the management and the staff as they continue to deal with these difficult market challenges. I expect An Post to continue to adapt its structures and resources to face this challenging business reality. I thank the committee for giving me the opportunity to speak and I welcome any questions.

Hildegarde Naughton (Galway West, Fine Gael)
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I thank Mr. Divilly for his statement. As he is aware, there is a lot of concern about the rural post office network. Will he expand on the Kerr report and outline what services he would see the post office network using? How best could this committee support Mr. Divilly in his role with regard to the future of the post office network? Mr. Divilly made reference to the five-day, next-day delivery service and the concerns regarding the profitability and sustainability of that service. What rate per letter does he think needs to be charged in order to make that service profitable? If it is not feasible to increase the charge, are there other measures that could be considered?

Mr. Dermot Divilly:

I regard the financial position as the key because everything else flows from that. Mail has declined by 34% and is declining by about 5% per annum. For every 1% decline, that is €4 million or €5 million in turnover, so it is quite significant. We have to adapt the company to that new low level, which is largely outside our control. With e-business and other changes, people are not writing letters like they used to. Our big customers are the utility companies and the banks and they are driving everybody online. Therefore, it is not just a once-off challenge; it is a rolling situation and every year, the turnover will decline.

I see it as a very big challenge that requires a transformation of the company, and that is where I see the viability.

I understand rural Ireland very well and I grew up in rural Ireland. There is no immediate wish whatsoever on my part or the part of the existing management to reduce the number of post offices. Six post offices closed last year and in all cases it was because they could not get an alternative. I know the common view - I had it myself - that there was a drive to close post offices. That is not a major factor in the financial stability of the business; it is much more a question of the deliveries. We are a very large employer, by any standard, given we are up near 10,000 staff, and we have the cost of that on a declining turnover.

There is not one silver bullet, in my opinion, and I am quite experienced at this because I have done it and am quite confident I can do it with the help of the management. It is a question of adapting one's costs. It is like the time of austerity, when we all had to adapt. We have to adapt our costs and we have to get some further increase in price to the European average, which I mentioned. There are very few things in Ireland which are below the European average but the letter delivery system, through a large rural network, is one of the few. In addition, we have to sell more through our post offices.

To give the committee an idea of the position, 26% of post offices account for 60% to 70% of the turnover, so it is very biased towards the bigger post offices. The bigger post offices have a greater capability to sell insurance. We are now one of the bigger operators in currency, which is quite an achievement as this was traditionally dominated by the banks. We sell gift cards and have subsidiaries in that area. We sell a lot of products, but there are only so many of those we can sell, and they are often sold only in the larger outlets because the smaller outlets cannot do that. Therefore, the larger outlets are probably subsidising the smaller outlets.

We are absolutely committed to implementing what was recommended in the report by Mr. Bobby Kerr. There is a steering committee in place at present and we will implement that report. It is absolutely in line with our thinking that we must drive more turnover, reduce our costs and get more revenue for our product. Those are the three things we-----

Hildegarde Naughton (Galway West, Fine Gael)
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What is the status of the current account facility? There is much talk about it.

Mr. Dermot Divilly:

It is huge. If I would say anything, we have probably been slow on that. Some 1.1 million people visit the post office every week, which is a colossal amount of footfall and is vital for us. There is nothing new in all of this and other countries have done the same. New Zealand made this transformation in the 1990s and it is a country much like ours. A book was published, which I gave to the new Minister, which shows the issues are the same; for example, it has a large countryside and few cities. Britain has had to adapt in other ways.

The current account is absolutely central. The Department of Social Protection has written to people telling them it wants them to transfer their money into a bank account, which would be into one of the pillar banks. We must get the current accounts open and we need to get on with that.

Hildegarde Naughton (Galway West, Fine Gael)
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What are the main challenges to progressing the issue of the current account?

Mr. Dermot Divilly:

The main problem is that people probably do not want to pay the charges for opening an account. It is a question of who is going to pay for that. Although I am not involved in the detail, there are discussions with the Department of Social Protection to get some kind of a satisfactory solution. That is probably the main issue, but it is well under way. A trial of this will run in quarter 4, which is October, November and December. It will be a simple account in the beginning. The account holder will have a debit card on which he or she can withdraw money anywhere in the world and make debit transfers. This is the majority of banking done by most people. We are not trying to be complicated. Hopefully, in the future, we will be able to give loans and so on. This is critical, in my view, because it is transactional, and that is what we are good at. We are not high street traders. We are good at this and there is trust there.

I have not spoken much about the brand, and perhaps I should have. It struck me how respected the brand is and how liked it is. The people have a good feeling about it. For example, I feel we can do a lot more on insurance, and I have a background in that. I believe people would buy insurance from An Post. Perhaps we would have to sell it a different way, but there is no question that people would feel An Post will continue in business, whereas there has been some fallout in other areas.

There are a lot of opportunities. It is a three-pronged approach entailing cost, driving new business and making sure the mail business is tight and efficient.

Brian Stanley (Laois, Sinn Fein)
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I welcome Mr. Divilly. He was appointed on 2 February by the then Minister, Alex White, but democracy-----

Mr. Dermot Divilly:

It got in the way again. I was here the morning the Taoiseach went upstairs-----

Brian Stanley (Laois, Sinn Fein)
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I welcome the opportunity to meet Mr. Divilly and to speak with him. Regarding the universal service obligation, USO, in his presentation he mentioned the five-day next-day delivery. In the long term, and I heard his previous answer-----

Mr. Dermot Divilly:

I think in the short term there is no-----

Brian Stanley (Laois, Sinn Fein)
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In the medium or long term, does Mr. Divilly see that as being sustainable? Would he be of a mind that the cost of postage may need to increase to pay for the loss-making part of it? It is a major concern in rural areas that we would lose that next day delivery.

Mr. Dermot Divilly:

It is the last man standing.

Brian Stanley (Laois, Sinn Fein)
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That is one question in the long term. The other issue is the cost of the USO. When Mr. Divilly comes back to me, he might answer a couple of short questions, including his long-term view of the USO and what the actual cost to the company was in 2015. He also mentioned a deeper engagement with all stakeholders, including Government and the Oireachtas.

Mr. Dermot Divilly:

And the unions.

Brian Stanley (Laois, Sinn Fein)
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I ask Mr. Divilly to give a brief explanation of that.

Could he also comment on the basic payments account and how he sees it working, given his commercial background? It is one of the things in the Kerr report that is noted as a major plank of trying to build a sustainable network. Also, in terms of the changes to the company overall, Mr. Divilly mentioned that we cannot proceed on the same basis. What further changes does he see in terms of An Post and its subsidiaries?

Mr. Dermot Divilly:

There are a few questions. One has to be absolutely realistic regarding the USO. At present, even if one wished to change it, that is not on the cards. There has been a great deal of discussion on rural-proofing and all of that, but even apart from that I understand exactly the point. The only person some people may see in the day is the postman. That is very important. The only issue I have about that is who pays for it. The cost of the USO last year was €35 million. That is not a lot, out of €1 billion. Maybe I should not be saying that. An Post has never got any subsidy towards it yet it has kept its head above water in providing the service.

Regarding my point on deeper engagement, that has commenced. I have already started talking to the Department and all the various people. It is a question of who pays for it. My job will be to have An Post financially sound and in a good position to pay its own way. That hole will get bigger if I do not do something about it. However, it will be constructive engagement. It will not be through the media but will entail dialogue with the relevant people. There is a good understanding of the issues. People want the five-day week and I will work with them on that to find a solution.

The current account is very important but today anything in financial services is incredibly slow because of regulation. I am not faulting regulation, because I was there through the thick of it - I am approved by the Central Bank and so on - but it takes time, unfortunately. I come from a sector where we want to get everything done tomorrow and we can find that frustrating, but we will get that current account. We are well on the way to it. We are running it in a trial section now in the autumn. Hopefully next year that will be active. Everybody who visits the post office should have an account. That will make a big difference.

If we do not do that, then people who traditionally go to the post office, who tend to be older, will not have a reason to visit us as we cannot sell them something. It is vital that is done. We have to think outside the box. We have the biggest retail network in the country. There has to be value in that.

I am not in here moaning about the challenge. The challenges are real, but every industry is going through challenges and we have to adapt. If there are over 1,100 retail outlets throughout the country, we have to make them work. That is the way I would approach that.

Deputy Stanley's other question related to changes to the company. I used to run the coal business in Ireland and one Minister, Mary Harney, wiped us out. She did the right thing, but it was not very pleasant at the time. I would never allow that to happen again. I would be prepared for that. My motto is that we prepare for the future and adapt. The future is fairly predictable - it is going to decline. Everything tells us that.

Then there is another side of the business that has great potential, that is, the parcels. We all know that retailing is going online. Maybe 10% of the total business is going online. One can see it. It is a very competitive business, as distinct from the letters business. That is key, as far as I am concerned. We have to maintain a bigger share of that market. That is critical because it is our natural heartland and it not anybody else's. I want us to own a large portion of that. It is a critical business. There are many competitors in the business now, but we have to adapt. We have to give a service that is very competitive pricewise, but people also expect if they order today that the item will be delivered tomorrow at a particular time.

There is a lot going on. Most companies in Ireland, whether private, public or banks, face big challenges. They have to get on with it and if they do not, they die. I do not know if that answers all Deputy Stanley's questions.

Brian Stanley (Laois, Sinn Fein)
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On the current account, Mr. Divilly said the company is going for it and is going to do it, if I heard him correctly. Could he give a timescale for that?

Mr. Dermot Divilly:

We are starting the trial in the last quarter. I might be out by a month or two, but it will be in October or November. We hope to roll it out next year.

James Lawless (Kildare North, Fianna Fail)
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I have a number of questions. Does the Chair want to take them all in one go?

Hildegarde Naughton (Galway West, Fine Gael)
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How many?

James Lawless (Kildare North, Fianna Fail)
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Four or five.

Hildegarde Naughton (Galway West, Fine Gael)
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We will see how we go. Mr. Divilly can stop Deputy Lawless if there are too many questions.

Mr. Dermot Divilly:

I will make a signal and Deputy Lawless can stop for air, if needs be.

James Lawless (Kildare North, Fianna Fail)
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I welcome Mr. Divilly to the committee and congratulate him on his appointment to the position. He was not the only one who got a new job in February but did not get the chance to do it until a few months later. A number of us were caught in a bind as things worked out. Thankfully we are all here now, so all is well that ends well. I have a couple of questions about the post office network and operations and Mr. Divilly's plans.

On his own position, Mr. Divilly's CV is very impressive. In his statement he mentioned various positions he had held. I think he was an investor but also an executive chairperson or director in a number of companies at different stages. How many boards is he currently serving on?

Mr. Dermot Divilly:

At the moment I am chairman of the Personal Injuries Board. I went into that two years ago and I appointed a new managing director and that is going very well. I am also on the board of one private company, Caterhire Limited, which is my own company. Apart from that, I am not on any other boards.

James Lawless (Kildare North, Fianna Fail)
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Mr. Divilly is on two other boards. Are they executive positions?

Mr. Dermot Divilly:

No.

James Lawless (Kildare North, Fianna Fail)
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They are non-executive.

Mr. Dermot Divilly:

It sometimes seems like an executive position, but it is not.

James Lawless (Kildare North, Fianna Fail)
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That is fine.

My next question relates to the operation of An Post and the adaptation of technology and the challenges technology brings about. I think Mr. Divilly may have alluded to it in the last answer. Drone technology is now being used in the US for deliveries. Amazon, in particular, is experimenting, at any rate, with drones. Colleagues in my office tell me one can now order a parcel - I have not done it yet and did not know one could - from Amazon and have it shipped to a Parcel Motel facility in Northern Ireland, which then initiates a second run delivered to collection points in the Republic of Ireland.

Apparently, many people are doing this now as a way to avoid postage-----

Mr. Dermot Divilly:

We provide that service as well. If one has an address in the UK, there is a device to have the parcel delivered in Ireland. That seems to be working effectively. We do Amazon's deliveries in Ireland. Technology is coming down the road, however, which will have a big effect on us. This is also good because we can be involved in all those deliveries. E-commerce is a big thing.

James Lawless (Kildare North, Fianna Fail)
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Absolutely.

Mr. Dermot Divilly:

I do not think there are drones flying around the west of Ireland or anywhere yet.

James Lawless (Kildare North, Fianna Fail)
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I do not think so - not yet. That would involve another air traffic regulation.

Mr. Dermot Divilly:

It would be controversial.

James Lawless (Kildare North, Fianna Fail)
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Absolutely, and it would need to be regulated, but it is a matter of the challenges posed by parcel delivery services.

Sticking to the area of opportunities for An Post, as a politician, I am very familiar - too familiar sometimes - with having to disseminate literature and how to reach mass markets. It is one thing in a town in which there are many different houses side by side; it is in rural areas that one has to engage the postal service. It strikes me - again, I have noticed this acutely as a politician - that the cost of postage and stamps has soared in recent years. However, there may be opportunity in that as well because there are direct marketing opportunities. I think Post Plus and other services-----

Mr. Dermot Divilly:

They are doing quite good work in that area. They will have to do so because that is where the big volumes are. It surprised me to learn that private postage only accounts for 10% of overall postage volume. The big volume is from the banks and utility companies. Last year, Eircom carried out a big direct mail. We have teams of people engaged in that. That is the future.

James Lawless (Kildare North, Fianna Fail)
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I advocate further investment and resources into that area because it is an opportunity and a challenge for An Post.

On a different note, the Irish Postmasters Union published a six-point plan recently. Much of it goes back to comments already made about the importance of retention of the rural post office network and the types of services that can be obtained through the post office, moving into banking services and even what I think is called white labelling, certain other services, as a single point of contact. What are Mr. Divilly's views on the Irish Postmasters Union six-point plan?

Mr. Dermot Divilly:

I welcome it. I am absolutely convinced, as I said, of the three-pronged approach. We must move products through it. Financial services is the big key. The three or four big pillar banks are withdrawing from towns around rural areas and the Government cannot influence that. We must work with those banks to step into their shoes in parts. We are already there. For example, we work very closely with AIB. At AIB branches, cheques can be lodged or cashed and so on. We need to take that to a more added-value level. The post offices are by and large transactional. We need to get up that chain a little. There is no reason we cannot provide micro-loans and similar services in the future. We have good services but we need to move more quickly.

Eamon Ryan (Dublin Bay South, Green Party)
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I wish Mr. Divilly the best of luck. Has he been working in his role during the past four months? I presume he has. He was not waiting for this-----

Mr. Dermot Divilly:

Unfortunately, I have. I assumed that-----

Eamon Ryan (Dublin Bay South, Green Party)
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That is good because what he is relating to us is informed by that experience, which helps us. I wish the company the best of luck. It is an excellent company and, as Mr. Divilly said, is one that is trusted, which is not an insignificant issue in terms of-----

Mr. Dermot Divilly:

Very few institutions are trusted in Ireland.

Eamon Ryan (Dublin Bay South, Green Party)
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An Post has been trusted over generations. Families worked not only in the core postal business, but also in the shops and outlets. Those postmasters have a very valuable commodity, namely, public trust and recognition in the State. However, as much as he says the environment is challenging, I can think of no other company whose core business is guaranteed to decline by 5% per annum. We must start preparing for real cliff drops because some of the banks are now competing with new Internet banking mechanisms, which do not perform any postal functions, and will start taking a huge amount of customers and business. At some point very soon - within a timeframe of five to ten years - we cannot expect that 90% of letters will come, as Mr. Divilly says, from utilities and banks if we are to lose one or two of those customers-----

Mr. Dermot Divilly:

Already this year, Irish Water, for example, has been a big loss to us. I know it has been a loss in many other respects. I think losses will come, as the Deputy said, in big drops.

Eamon Ryan (Dublin Bay South, Green Party)
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Exactly.

Mr. Dermot Divilly:

Once one bank reduces its use of postal services-----

Eamon Ryan (Dublin Bay South, Green Party)
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They all do it.

Mr. Dermot Divilly:

-----the other banks will follow immediately. Representatives from Bank of Ireland, with whom I had discussions recently, told me that 70% of its business is now digital.

Eamon Ryan (Dublin Bay South, Green Party)
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We must, therefore, prepare not for a 5% drop some year but possibly for a 20% drop sometime in the next five to ten years.

Mr. Dermot Divilly:

I think it will be even sooner.

Eamon Ryan (Dublin Bay South, Green Party)
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God help us then. It will be very difficult to manage the company.

Mr. Dermot Divilly:

Very difficult.

Eamon Ryan (Dublin Bay South, Green Party)
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If I understand him correctly, Mr. Divilly is saying that there are two major areas for growth and opportunity. One is the financial services sector, in those offices - that trust, that network, that money - and the transactional capability. The second is parcel delivery-----

Mr. Dermot Divilly:

Yes, we need to step up on that.

Eamon Ryan (Dublin Bay South, Green Party)
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Am I right in interpreting that they are the two big potential growth areas he identified?

Mr. Dermot Divilly:

Parcel delivery, definitely, because I see that as absolutely core to our business. Too much of the parcel delivery business has escaped us already, but we still need to provide it. When I say financial services, I talk pretty loosely. The currency has been a great success. We do all the NTMA business and the savings business and we take in all their money and so on. However, there is no silver bullet. We are going up two steps and probably coming down three at a time sometimes.

Eamon Ryan (Dublin Bay South, Green Party)
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Are they connected in a way? An Post's core business is in the network and delivery system, not necessarily in the retail outlets. I cannot remember how many of the retail outlets An Post manages. It is a very small number.

Mr. Dermot Divilly:

Yes, only 20 or 30. Again, the statistics show that roughly 66% of our business is accounted for by 25% of the companies involved, that is, the top 300 companies. By definition, they are also the people most able to do that. They have the facilities, the people and the scale to do it.

Eamon Ryan (Dublin Bay South, Green Party)
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The development opportunity is, to a certain extent, at the customer end. It is in the retail outlets. In a sense, the retail outlets carry on much of the financial transaction business referred to by Mr. Divilly. Similarly, does he envisage that the retail outlets will have a significant role in the parcel business? Are they part of the distribution system - in that new parcel system - or are they an ancillary part of that expansion of parcel delivery services?

Mr. Dermot Divilly:

It differs. In the city regions there are dedicated people delivering parcels but in rural Ireland there is a big plus. If one considers Dingle, for instance, there may be one parcel to be delivered there. For any of our competitors, that is a very expensive drive. However, we have a presence in that area so we can do very well there. It is very competitive in the city, but we have to provide services there too.

Eamon Ryan (Dublin Bay South, Green Party)
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I agree. I considered this when I was the Minister with responsibility for this area. I was very concerned about and interested in it.

Mr. Dermot Divilly:

I know that.

Eamon Ryan (Dublin Bay South, Green Party)
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I recall an incident in Ballingeary of a post office being shut down. It has reopened within a Spar, I think. I had a particular interest in this because I know the area very well and was trying to see how we could make it work in a village such as Ballingeary, a small village in west Cork. I think the future must be in that post office, retail shop, financial services centre and parcel delivery centre. Particularly in rural Ireland, it is about using the existing distribution network to service all those needs and possibly many others. For example, if there is that network involving someone driving from Macroom to Ballingeary - I am keeping it very local - could that be part of a rural transport system? If there is a van going down a road, why would we not consider it as being part of a rural transport system? If we start thinking that in five or ten years all new vehicles will have a dual capability of carrying passengers as well as parcels, it starts making-----

Mr. Dermot Divilly:

The Deputy is starting to move into Uber territory or something.

Eamon Ryan (Dublin Bay South, Green Party)
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Why not?

Mr. Dermot Divilly:

One thing we are considering is a trial whereby we would ship small volumes of product abroad for SMEs or exporters and aggregate that because we have knowledge in that regard. Deputy Eamon Ryan is absolutely right that one must be absolutely open-minded to everything because there is no one thing that will solve this for us and, as he says, there will be cliffs. They will be like steps of a staircase at times and will come pretty quickly, but I will be encouraging this approach.

Eamon Ryan (Dublin Bay South, Green Party)
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I have two more questions and my first question is on the new system. The distribution system is part of a very complex range of services. The village post office is the centre that provides a range of Government services, financial services, the Internet, parcel and other services, and also shipping stuff in and out in order that small businesses in the community have a good access point to the rest of the world. Small businesses can trade on the Internet and we are not just buying in everything from Manchester. In that world I imagine the one difficulty is deciding a role for the big central sorting office, particularly for letter post.

Mr. Dermot Divilly:

They are very automated.

Eamon Ryan (Dublin Bay South, Green Party)
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What is An Post's level of communication with the unions in terms of a role for sorting offices?

Mr. Dermot Divilly:

I was very impressed with the big sorting offices. They are very automated and read addresses. A lot of progress has been made. As many as 4,500 of our 9,000 staff work on the delivery side in small local sorting offices. That is where the big thing is and it is very much dominated by fulfilling the universal service obligation, USO. There has been quite significant restructuring of sorting, and I think it has been done well.

Eamon Ryan (Dublin Bay South, Green Party)
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I was once involved in closing down the post bank which was set up.

Mr. Dermot Divilly:

Yes, I know.

Eamon Ryan (Dublin Bay South, Green Party)
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A slight shiver travelled down my spine when I heard Mr. Divilly talk about An Post moving into the lending area.

Mr. Dermot Divilly:

I know.

Eamon Ryan (Dublin Bay South, Green Party)
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I remember a similar twinkle in someone's eye when he or she mentioned an aspect of An Post getting into that space, and even mortgage lending. God help us, we saw how that ended.

Mr. Dermot Divilly:

The timing was awful, was it not?

Eamon Ryan (Dublin Bay South, Green Party)
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What skills, as much as those people are really trusted and are very good custodians within the community-----

Mr. Dermot Divilly:

It is only the big offices that one could do it in but lending is not on the agenda at the moment. It is cash withdrawal, ATM, cards, direct debits, budgeting and that type of low level stuff. Perhaps there will be co-operation between the credit unions and An Post. We are open to all of that type of thing. In many ways we will probably align with people and do different things. The future is an open book. There is no preset. If one wants to survive and prosper one must be very open.

Eamon Ryan (Dublin Bay South, Green Party)
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Last week, a survey showed that only 5% of the public use their Eircode on letter post.

Mr. Dermot Divilly:

Yes, less than 5%.

Eamon Ryan (Dublin Bay South, Green Party)
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Of the commercial operators, the people that An Post must compete with in the delivery system, only 4% use the Eircode. Has Mr. Divilly any sense from An Post as to whether the use of the code has been a success or what benefits or otherwise it has brought?

Mr. Dermot Divilly:

The Deputy probably knows a lot about this matter having been a Minister for communications. He will know that it was very much the Department and Capita that ran the initiative. At this moment in time there is certainly co-operation by An Post because that was requested and I would think that they are working towards same. The Deputy will know that the scheme was set up around the post office deliveries. The scheme is not that relevant to An Post at the moment because of the small number of people using the code.

Eamon Ryan (Dublin Bay South, Green Party)
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As I recall, there was a hope that savings would be made but then that was disputed. Originally, An Post said the scheme would cost An Post.

Mr. Dermot Divilly:

If usage increased it would help sequencing on the roadways and that kind of thing. At the moment the volumes are so small that it is not that relevant. It is an infrastructural project. I know from experience that such projects have a slow start but over time it will work out fine.

Eamon Ryan (Dublin Bay South, Green Party)
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Does Mr. Divilly think there is a concern in FMCG, from his experience of running many businesses, that the numbers are not memorable. The number connects to post office sorting offices rather than counties and have four random numbers. Therefore, the numbers are so random that people will never be able to remember them.

Mr. Dermot Divilly:

I was not around when that was being done so I shall leave that question.

Hildegarde Naughton (Galway West, Fine Gael)
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Does Deputy Bríd Smith have any questions? No. I wish to ask a question on Eircodes. Has Eircode made An Post's business any easier? Mr. Divilly has stated that the sorting centres are very efficient and effective.

Mr. Dermot Divilly:

Technology has surpassed Eircode and allows addresses to be read. As Deputy Ryan has said, less than 5% of people use their Eircode number. Usage of Eircode is slowly growing.

People's experience is that it is an investment for the future and it will take time.

Hildegarde Naughton (Galway West, Fine Gael)
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I thank Mr. Divilly for coming here this evening for a worthwhile debate. On behalf of the select committee, I wish him well. His experience in business makes him very well qualified for his role, especially at such a critical time for An Post. I propose that we forward the transcript of today's discussion to the Minister for Communications, Energy and Natural Resources for his information and consideration. Is that agreed? Agreed. I propose that we go into private session to discuss housekeeping matters. Is that agreed? Agreed.