Armaguard sees AusPost as part of solution to save cash services

Linfox Armaguard believes Australia Post will have to be part of a solution to continue to supply cash to banks and businesses around the country.

Armguard now controls 90 per cent of the cash-in-transit industry, charged with refilling the nation’s ATMs. Picture: Daniel Bowen

Linfox Armaguard, the “highly unprofitable” cash transport monopoly, believes Australia Post will have to be part of a solution to continue to supply cash to banks and businesses around the country, its chief executive said.

The Reserve Bank of Australia is engaged in negotiations with the company, the big four banks and Australia Post to try to come up with a solution, as a sharp fall in the use of cash has hit Armaguard’s revenues while costs escalate.

Chief executive Mick Cronin said Armaguard was seeking a capital injection as it would haemorrhage $192m in coming years as it was locked into an unsustainable three-year merger commitment to keep supplying cash to banks and businesses around Australia at capped prices.

“We support the cash industry in this country,” Mr Cronin said. But contrary to expectations, a 40 per cent drop in the use of cash during the Covid pandemic never bounced back.

Experiences in other countries in Latin America and Europe such as in Germany, where people had gone back to using cash after the pandemic, had given Armaguard hope that some level of cash usage would return.

“Not in this country,” Mr Cronin told a parliamentary inquiry examining bank closures in regional communities. “People just aren’t using cash enough.”

Cash is only used in about 12 per cent of all transactions now, down from 50 per cent 10 to 15 years ago, he said, as more use digital banking services instead. The high cost of living is also seeing people hoard cash and use it even less for day to day transactions.

After its merger last year with Prosegur, Armguard now controls 90 per cent of the cash-in-transit industry, charged with refilling the nation’s ATMs.

But the situation has become unsustainable as bank branch closures also meant businesses were exiting the outback towns Armaguard was forced to keep servicing with cash.

“If we go there five days a week because we have to … then as businesses leave, our revenue drops but we are still going five days a week because we’ve committed to that in the undertaking.

“And therein lies our problem as a business,” he said.

About $55m in cost savings from merging will help, and the business has also tried to cut costs in any way possible, including asking drivers to take pay caps for the next three years. But given the dramatic fall in revenue, those measures aren’t enough.

“Now the industry needs to come up with a solution,” Mr Cronin said. He said Armaguard was in constant communications with Australia Post and that it recognised there were security issues around getting involved in what is a very “infrastructure-heavy” industry.

“It was recognised in the meeting run by (RBA) governor (Michele) Bullock that Australia Post has a role to play and they’re getting drawn into the process,” he said.

Armaguard has asked a “request in general” for financial assistance to that forum, as it expects to haemorrhage $192m over the next three years, including $30m in one-off restructuring costs, and about $80m in investments in critical infrastructure such as trucks, cash-carrying equipment and security systems.