February 2015 Half Year Group Results FY 2015 Investor Relations - PowerPoint PPT Presentation

February 2015 Half Year Group Results FY 2015 Investor Relations Presentation New Zealand Post Group: New Zealand Post Limited.

HALF YEAR RESULTS Page 2 Half Year Results Presentation

Headline numbers H1 2015 H1 2014 NZ$m change (31 Dec 2014) (31 Dec 2013)  19m Revenue from operations 879 860  23m Expenditure 784 761  4m Operating profit 95 99  29m NPAT (reported) 100 71 adjustments* (16) 0  13m NPAT (underlying) 84 71  89m Total equity 1,252 1,163  1,022m 18,004 16,977 Total assets  41m Net debt 159 200 * For the sale of Couriers Please, write-down of Converga, mark-to-market costs Page 3 Half Year Results Presentation

Highlights of the year so far... Integrated deliver agent and process innovation programmes gain approval in principle and initial funding Strategic Responsibility of all corporate retail stores transfers to Kiwibank E-Commerce brand launched to promote the benefits of our end-to-end management of business logistics and delivery processes New delivery vehicle trials in Auckland to test multi-product capacity and capability Operational Kiwibank new operating model up and running YouShop expanded into its third market, China, via a deal with China Post The Connect digital platform takes early steps with successful document flow management for Study Link (part of Ministry of Social Development) Successful sale process for CouriersPlease for A$95m produced a $47m gain on sale Portfolio Successful re-marketing of our $200m retail hybrid bond, saving c. $3.6m of interest costs per annum Page 4 Half Year Results Presentation

Profitability Kiwibank providing the bulk of the underlying earnings uplift Underlying profitability trend Underlying NPAT of $84m primarily 200 reflects the strong performance from financial services, as well as the 150 incremental positive changes to the core 100 postal business and cost-out 50 programmes across the entire Group 0 2010 2011 2012 2013 2014 H1 2015 Interim dividend of $2.5m for the half -50 Underlying NPAT Reported NPAT H1 year reflects the need to conserve capital Source: NZP whilst strategic initiatives take effect H1 $m 2010 2011 2012 2013 2014 2015 Reported NPAT 1 (36) 170 121 107 100 Christchurch 20 earthquake Property depreciation 72 14 51 31 and impairments Restructuring costs - 8 6 14 14 Investment gains - 35 (96) (75) 3 (47) Underlying NPAT 73 41 80 111 124 84 Half Year Results Presentation Page 5

Balance sheet Stable capital management NZP debt maturity (as at 31 December 2014) 250 Core debt levels remain stable and 200 supportive of the Group’s long term 150 strategy of employing capital in the transformation of the business 100 Hybrid notes successfully re-marketed in 50 November 2014 reducing the coupon from 0 7.5% to 6.35% 2014 2016 2039 Commercial paper Wholesale bond Hybrid bond Potential and undrawn lines of liquidity Source: NZP total $310m in addition to the Crown Facility/ uncalled capital facility of $300m Programme size Drawn Strong demand for NZ Post commercial Instrument (NZDm) (NZDm) Maturity Pricing paper with an average margin of 15bp Cash advance 100 0 1-2 years n/a over BKBM Commercial paper 200 40 < 94 days ~3.50% NZP Bonds 200 150 Nov-16 5.225% NZP Hybrid Notes 200 200 Nov-39 6.35% Page 6 Half Year Results Presentation

Strategy update Our strategy remains on track Our strategy is to ensure that the two core business clusters of the Group remain relevant to the markets within which they operate, are self-sufficient in terms of capital independence and ultimately create sustainable value for the shareholder and key stakeholders alike: The ‘Big 3’ focus areas over the medium term for the Mail & Logistics are (i) frequency changes to standard mail (ii) process innovation and (iii) exploring new ways of delivery Embedding the changes made to Kiwibank’s operating and distribution models will help maintain Financial Services’ positive momentum We continue to successfully operate in a competitive environment and in markets that are rapidly changing. Page 7 Half Year Results Presentation

KEY PERFORMANCE INDICATORS Page 8 Half Year Results Presentation

Mail volumes Volumes forecast to accelerate from current 8.4% p.a. decline 1000m 900m Mail volumes – millions of items 800m 700m 600m 500m International Outbound International Inbound 400m Domestic Bulk 300m Domestic Full Rate 200m 100m 0m FY10 FY11 FY12 FY13 FY14 FY15 Q2F FY16 Q2F Page 9 Half Year Results Presentation

Parcel volumes Steady growth especially from international markets 70m 60m Parcel volumes – millions of items Main driver: International 50m 40m 30m International Outbound International Inbound 20m Domestic NZPost 10m Domestic ECL 0m FY10 FY11 FY12 FY13 FY14 FY15 Q2F FY16 Q2F Page 10 Half Year Results Presentation

Kiwibank - net interest margin Market and funding price opportunities boost margins Average net interest margin 2.25% Net interest income: interest 2.00% bearing assets 1.75% 1.50% 1.25% 1.00% 2010 2011 2012 2013 2014 H1 2015 Page 11 Half Year Results Presentation

SEGMENTAL PERFORMANCE Page 12 Half Year Results Presentation

Mail & Logistics Reported NPAT Change from H1 FY2014  $7m Mail & Logistics $31m Letter volume declines of 36 million items (9.8%) compared with the same six-month period in FY14 were in keeping with entrenched systemic shifts in sender behaviour (approx 8.4% on a rolling 12 month basis) Consequently, the revenue mix of postal services products within the Mail & Logistics business continues to move in favour of parcels (49%), widening the gap on letters (39%) by 3 percentage points since June 2014 Page 13 Half Year Results Presentation

Financial Services Reported NPAT Change from H1 FY2014 Banking Services  $19m $71m (per Disclosure Statement) Non-Banking Services  $1m (mostly Wealth & Insurance) $2m The financial services businesses of Kiwibank performed well, enjoying the trend of higher net interest margins, boosting revenue 28% from H1 FY2014 Lending growth improved throughout the period, up nearly 3% since June 2014 Customers now 880,000 (equates to 11.8% main bank market share) Strong performances from the Wealth division Page 14 Half Year Results Presentation

Investments Performance Converga continues to concentrate on landing new business while containing costs to achieve their Converga Group revised full year targets, following the loss of a major (including Speedscan) customer. An impairment of goodwill has been taken to reflect this event. Exceeded expectations in the delivery of higher Reachmedia (50% owned) urban advertising volumes, despite the loss of two larger retailers. H1 earnings 28% ahead of last year. Page 15 Half Year Results Presentation

Contact Details DDI: +64 4496 4923 Mobile: +64 27 706 6485 Email: kevin.hastings@nzpost.co.nz Investor Centre http://www.nzpost.co.nz/about-us/investor-centre Page 16 Half Year Results Presentation

Disclaimer This presentation provides information in summary form only and is not intended to be complete. This presentation may contain information (including information derived from publicly available sources) that has not been independently verified by New Zealand Post. Some statements in this presentation are forward ‐ looking statements regarding future events and the future financial performance of New Zealand Post. These statements can be identified by the use of forward ‐ looking terminology such as ‘may’, ‘will’, expect’, ‘anticipate’, ‘estimate’, ‘continue’, ‘plan’, ‘intend’, ‘believe’ or other similar words. No representation, warranty or assurance (express or implied) is given or made in relation to any forward looking statement by any person (including New Zealand Post). In particular, no representation, warranty or assurance (express or implied) is given that the occurrence of the events expressed or implied in any forward looking statements in this presentation will actually occur. Actual results, performance or achievement may vary materially from any projections and forward looking statements and the assumptions on which those statements are based. Given these uncertainties, no reliance should be placed on the fairness, accuracy, completeness or reliability of the information contained in this presentation. The forward ‐ looking statements in this document speak only as of the date of this presentation. To the maximum extent permitted by law, New Zealand Post and its respective directors, officers, employees or advisors do not accept any liability for any errors, omissions or loss (including because of negligence or otherwise) arising, directly or indirectly, from any use of this presentation or information contained in this presentation. Page 17 Half Year Results Presentation