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

New Zealand Post Group: New Zealand Post Limited.

Half Year Group Results FY 2015

February 2015

Investor Relations Presentation

HALF YEAR RESULTS

Half Year Results Presentation Page 2

Headline numbers

NZ$m H1 2015 (31 Dec 2014) H1 2014 (31 Dec 2013) change

Revenue from operations 879 860  19m Expenditure 784 761  23m Operating profit 95 99  4m NPAT (reported) 100 71  29m adjustments* (16) NPAT (underlying) 84 71  13m Total equity 1,252 1,163  89m Total assets 18,004 16,977  1,022m Net debt 159 200  41m

Half Year Results Presentation

* For the sale of Couriers Please, write-down of Converga, mark-to-market costs

Page 3

Highlights of the year so far...

Half Year Results Presentation

Strategic

Integrated deliver agent and process innovation programmes gain approval in principle and initial funding Responsibility of all corporate retail stores transfers to Kiwibank

Operational

E-Commerce brand launched to promote the benefits of our end-to-end management

• f business logistics and delivery processes

New delivery vehicle trials in Auckland to test multi-product capacity and capability 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)

Portfolio

Successful sale process for CouriersPlease for A$95m produced a $47m gain on sale Successful re-marketing of our $200m retail hybrid bond, saving c. $3.6m of interest costs per annum

Page 4

Underlying profitability trend

Source: NZP

Profitability

Underlying NPAT of $84m primarily reflects the strong performance from financial services, as well as the incremental positive changes to the core postal business and cost-out programmes across the entire Group Interim dividend of $2.5m for the half year reflects the need to conserve capital whilst strategic initiatives take effect

Half Year Results Presentation

$m 2010 2011 2012 2013 2014 H1 2015 Reported NPAT 1 (36) 170 121 107 100 Christchurch earthquake 20 Property depreciation and impairments 72 14 51 31 Restructuring costs

• 8

6 14 14 Investment gains

• 35

(96) (75) 3 (47) Underlying NPAT 73 41 80 111 124 84

Kiwibank providing the bulk of the underlying earnings uplift

• 50

50 100 150 200 2010 2011 2012 2013 2014 H1 2015 Underlying NPAT Reported NPAT

Page 5

H1

Instrument Facility/ Programme size (NZDm) Drawn (NZDm) Maturity Pricing Cash advance 100 1-2 years n/a 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%

Balance sheet

Half Year Results Presentation

Stable capital management

Core debt levels remain stable and supportive of the Group’s long term strategy of employing capital in the transformation of the business Hybrid notes successfully re-marketed in November 2014 reducing the coupon from 7.5% to 6.35% Potential and undrawn lines of liquidity total $310m in addition to the Crown uncalled capital facility of $300m Strong demand for NZ Post commercial paper with an average margin of 15bp

• ver BKBM

Page 6 NZP debt maturity (as at 31 December 2014)

Source: NZP 50 100 150 200 250 2014 2016 2039 Commercial paper Wholesale bond Hybrid bond

Strategy update

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.

Half Year Results Presentation Page 7

Our strategy remains on track

KEY PERFORMANCE INDICATORS

Half Year Results Presentation Page 8

0m 100m 200m 300m 400m 500m 600m 700m 800m 900m 1000m FY10 FY11 FY12 FY13 FY14 FY15 Q2F FY16 Q2F International Outbound International Inbound Domestic Bulk Domestic Full Rate

Mail volumes

Half Year Results Presentation

Volumes forecast to accelerate from current 8.4% p.a. decline

Mail volumes – millions of items Page 9

0m 10m 20m 30m 40m 50m 60m 70m FY10 FY11 FY12 FY13 FY14 FY15 Q2F FY16 Q2F International Outbound International Inbound Domestic NZPost Domestic ECL

Parcel volumes

Half Year Results Presentation

Steady growth especially from international markets

Parcel volumes – millions of items

Main driver: International

Page 10

Kiwibank - net interest margin

Half Year Results Presentation

Market and funding price opportunities boost margins

Net interest income: interest bearing assets Page 11

1.00% 1.25% 1.50% 1.75% 2.00% 2.25% 2010 2011 2012 2013 2014 H1 2015

Average net interest margin

SEGMENTAL PERFORMANCE

Half Year Results Presentation Page 12

Mail & Logistics

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

Half Year Results Presentation Page 13

Reported NPAT Change from H1 FY2014

Mail & Logistics $31m  $7m

Financial Services

Half Year Results Presentation

Reported NPAT Change from H1 FY2014

Banking Services (per Disclosure Statement) $71m  $19m Non-Banking Services (mostly Wealth & Insurance) $2m  $1m

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

Investments

Half Year Results Presentation

Performance

Converga Group (including Speedscan) Converga continues to concentrate on landing new business while containing costs to achieve their revised full year targets, following the loss of a major

• customer. An impairment of goodwill has been

taken to reflect this event. Reachmedia (50% owned) Exceeded expectations in the delivery of higher urban advertising volumes, despite the loss of two larger retailers. H1 earnings 28% ahead of last year.

Page 15

Contact Details

Half Year Results Presentation Page 16

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

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

• r 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.

Half Year Results Presentation Page 17