Mailpac exceeds profit forecast in early bonanza

Courier company Mailpac Group Limited wrapped up 2020 with earnings of $443 million on revenues of $1.7 billion, levels the company did not expect to reach until a year or two from now.

Mailpac, which listed on the junior stock market in late 2019 as a start-up, had advised prospective buyers of the stock to expect profits to rise to $422 million at year ending December 2022, and revenue to be around $1.62 billion. But with the pandemic pushing commercial activity online, the company was a natural beneficiary from the growth in business that the shift sparked for courier and delivery services, and led to Mailpac achieving its financial targets two years earlier than projected.

The company is already $400 million ahead of its 2020 revenue forecast, which was projected at $1.3 billion, and nearly $130 million ahead of the $317 million of projected profit – a bonanza that the was directly attributable to the unimagined social-distancing requirements associated with the COVID-19 pandemic, the partnership Mailpac inked with retailer PriceSmart, plus investments made by Mailpac to grow the company’s offerings and market share.

“Consumers that had never experienced the value of online shopping had no choice but to leverage the utility of ordering items online and have them delivered ... to their homes,” said Executive Chairman Khary Robinson in a statement to shareholders published in the company’s newly released annual report.

“We believe that customer exposure to online shopping in 2020 has redefined Mailpac forever,” said Robinson. “Firstly, the pandemic has created a fundamental shift in the way consumers will shop in the future, and Mailpac is well positioned to continue growing by efficiently serving this evolving consumer market.”

Going into year 2020 as a new company that emerged from the reorganisation of Robinson’s courier business in preparation for an IPO and listing, Mailpac entered the arena after investing nearly $280 million in fixed assets and technology. Its capex last year was less than $9 million, but the company also spent and additional $18 million on works in progress, its cash flow show.

Robinson noted in the annual report that Mailpac has been investing in scaling up the business and “is poised to expand in volume, scale and geography”. The company closed the year with $283 million of cash that could help support its initiatives.

This week, he told the Financial Gleaner that Mailpac is “still in discussions with a broad group to figure out the right opportunity”; and that for now the focus is on technology to improve customer experience and operational efficiencies, a wider selection of products through Mailpac Local that are delivered straight to customers’ doors, the expansion of the local delivery service, and promotion of the new prepaid Mailpac ePay MasterCard as a payment option.

Mailpac also acquired its first electric vehicle, which the chairman said surpassed company tests on its handling of local roads during customer deliveries.

“Though it is difficult to differentiate the growth that came from the effect of the pandemic versus the organic growth we experienced, the team at Mailpac has worked feverishly to continue to differentiate ourselves in the ever-growing and highly competitive e-commerce market,” said Robinson.

“In fact, in just the past 15 months, Mailpac has enacted several initiatives to enhance and enable growth,” he said of the company that was incorporated in September 2019 but comprises operations that have been run by Robinson for a decade.

Mailpac’s stock is up 1.86 per cent so far this week and has gained nearly 32 per cent year to date at $3.67 per share.

karena.bennett@gleanerjm.com