New Zealand Post Group: New Zealand Post Limited. 2013 REVIEW Page - - PowerPoint PPT Presentation

New Zealand Post Group: New Zealand Post Limited.

Investor Presentation

Forsyth Barr Investor Update

November 2013

2013 REVIEW

Investor Relations Presentation - November 2013 Page 2

Headline results

FY 2013 FY 2012 Variance Revenue 1,688 1,309 379 Expenditure 1,623 1,224 399 Reported EBIT 148 205

• 57

One off impacts (15) 90

• 105

Operating EBIT 163 115 48 Reported NPAT 121 170

• 49

One off impacts 10 90

• 80

Operating NPAT 111 80 31 Total Equity 1,089 959 130 Net debt 186 393

• 207

Page 3 Investor Relations Presentation - November 2013

Highlights of 2013

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Strategic

Changes to Deed of Understanding proposed to Government and opened to public submission. Full scale economic cost modelling of the business completed with results being used to influence future strategic decisions Reorganisation of internal business units into Mail and Communications; and Channels and Digital Planned closure of 3 out of 6 national mail processing centres in Wellington, Dunedin and Hamilton Retail Transformation Project progressed with the first new retail stores resulting opened on the North Shore just after financial year end

Operational

First full year of ECL and CouriersPlease ownership – strong performance particularly from the NZ business Re-forged business alliance with Australia Post, including winning back trans Tasman parcel volumes Integrated delivery agent model trialled in Tauranga with results being used to inform future integration strategy between letters and parcels Sequence sorting end-to-end process launched - over 5 million pre-sorted mail items in the first month YouShop launched allowing customers to create a US postal address and use NZ Post to deliver from the US to New Zealand homes – over 40,000 sign ups to date RealMe identity platform partnership with the Department of Internal Affairs went live

Portfolio

Sale of 35% stake in Datacom to the NZ Superfund for $142m Sale of NZ Post House and Courier Post House – total proceeds of $92m Sale of ECL’s subsidiary Roadstar to Transport International Limited Air Post assets moved to ECL control and the remaining assets to be amalgamated back in the Group Converga’s NZ and Australian operations have all been brought under one umbrella

Operating NPAT trend

Source: NZP

Profitability

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2008 2009 2010 2011 2012 2013

Reported NPAT

110.2 71.8 1.3

• 35.6

169.7 120.9

Christchurch earthquake

20.4

Property depreciation and other writedowns

• 72.3

13.6 2.8

Restructuring & Impairments

3.8 11

• 8.1

6.3 47.9

Property & Investment gains

• 74.8

Employee Related Provision

14.4

Australian courier divestment gains

• 24.8
• 5.2
• 35.2
• 96.2

Operating NPAT 89.2 77.6 73.6 41.7 79.8 111.2

• 50
• 25

25 50 75 100 125 150 175

2006 2007 2008 2009 2010 2011 2012 2013

$m

Operating NPAT Reported NPAT

Operating NPAT increased from $80m to $111m, driven by:

─ 100% consolidation of ECL and CouriersPlease holdings vs. last year, in addition to a strong performance from ECL ─ A strong performance from Kiwibank driven by strong net interest income and bad debts reversal

Reported NPAT is $121m, down from last year’s $170m due to:

─ The absence of the one off gain on sale from ECL and CPH of $96m ─ Benefit of Datacom and NZP House gain on sale of $75m ─ Restructuring and impairment costs of $48m

Dividend declared of $5m, allowing for re- investment in the business

Continued improvement in operating NPAT

Strengthened balance sheet

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Instrument Facility (NZDm) Drawn (NZDm) Maturity Coupon Cash advance 100 1-2 years n/a Commercial paper 200 30 < 94 days ~2.80% NZP Bonds 200 150 Nov-16 5.225% NZP Hybrid Notes 200 200 Nov-39 7.50%

The sale proceeds from the Datacom and property sales have primarily been used to pay down debt – a total of $159m has been repaid this year:

─ The $54m of drawings under the ECL facility were paid down in full in March and the facility closed ─ The aircraft owned by AirPost was sold to ECL and the USD facility of US$4m was also closed ─ CP on issue has been paid down from $130m to $30m

Hybrid bonds first re-set date in November 2014 with a 1% step up margin – the option to remarket the bonds at this time is being considered Undrawn liquidity lines of $320m in addition to the Crown uncalled capital facility of $300m

NZP debt maturity (at 30 June 2013)

Source: NZP 50 100 150 200 250 2013 2016 2039 Commercial paper Wholesale bond Hybrid bond

NZP funding lines (at 30 June 2013)

OUR PLAN TO 2018

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The shape of NZ Post

Division Description

Mail & Logistics

Mail Parcels Digital Platforms

Financial services

Kiwibank Kiwi Wealth and Kiwi Insurance New Zealand Home Loans

Investor Relations Presentation - November 2013

Brand Highlights

NZ Post is now focused on two key business clusters:

Page 8

Deed of Understanding

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An updated Deed was announced on 23 October enabling NZ Post to respond to systemic changes to the core postal business From 1 July 2015 we will have implemented:

─ A reduction to a 3 day delivery frequency for metropolitan areas ─ A reduction to a 5 day delivery frequency for rural areas ─ 6 day a week Premium mail service (not prescribed in the Deed)

We have greater flexibility in the composition and definition of our store network:

─ A store network of at least 880 points of presence (no change to the number, but can include a self-service kiosk) ─ At least 240 service points (versus traditional postal outlets) where personal assistance is available and bill payments can be made as required

Five year strategy

Building on the announcement of a new Deed, we have publically released the key initiatives that will drive our strategic direction for the next 5 years This strategy redefines the traditional business model as well as affirming our support and growth of Kiwibank and the Wealth and Insurance businesses To grow, innovate and serve our customers better, we are:

─ Restructuring the cost curve ─ Transforming the business ─ Continuing to integrate our networks

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Transforming the business

Strategic initiatives touch upon most parts of the Group from Delivery, Retail, and Parcels to Financial Services, within the following themes: – A substantially lower cost business model - this includes moving from predominantly fixed cost to variable cost structures, removing duplication, simplifying and right-sizing capacity – Innovation around technology, focusing on creation of a lower cost

• perating platform; IT as an enabler for our customers to do business with

us, and leveraging existing capability to provide choice in communication delivery – Innovation around user preferences, particularly in the parcels/goods market, to remain competitive and capture growth opportunities At a Group level – rightsizing the corporate support function

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An integrated group network

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 Standard and Premium services

(not letters and parcels)

 End-to-end solutions  Integrated single view of the customer

What will change by 2018

Key points of difference include:

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2013



2018

Predominantly physical customer access & delivery points Mix of online/mobile & physical customer access & delivery points Multiple points of sales/service contact Single point of sales/service contact 1-3 day over-serviced standard offering 4 day delivery service standard (std mail) value based pricing 6 day delivery frequency 3/5 day delivery frequency 139 corporate owned stores 50 corporate owned stores Proliferation of IT applications (247) Simplified IT; cost reduced by $26m/annum Largely fixed labour cost Largely variable labour cost

Retail transformation in progress

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Seven of eight new-format branches on the North Shore have been transformed, with the last one due for completion by the end of November this year New format stores focus on:

─ Kiwibank customer acquisition & sales ─ NZ Post transactions and product lodgement including simplified sending solutions and bill pay kiosks

Kiwibank will manage c. 50 high growth stores with other retail outlets managed by NZ Post, primarily within an agency or hosted business arrangement Ultimate intention is for NZ Post not to own any retail stores unless strategically important

APPENDICES

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Key Financial Metrics

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2008 2009 2010 2011 2012 2013 Profitability

Revenue 1,290.0 1,253.8 1,204.2 1266.8 1,309.4 1,687.8 Operating profit 114.4 90.4 24.4

• 30.0

85.8 65.2 Profit before tax 136.8 93.5 34.1

• 34.6

190.1 122.2 Profit after tax 110.2 71.8 1.3

• 35.6

169.7 120.9 Extraordinary items 21.0 (5.8) (72.3) (77.3) (89.9) (9.7) Normalised PBT 115.8 99.3 106.4 42.7 100.2 137.5 Normalised PAT 89.2 77.6 73.6 41.7 79.8 111.2

Balance Sheet

Kiwibank banking assets 7,138 10,259 12,141 13,753 14,575 15,024 Total assets 8,037 11,304 13,075 14,682 15,851 16,140 Kiwibank banking liabilities 6,778 9,799 11,457 13,075 13,861 14,048 Total liabilities 7,370 10,635 12,243 13,888 14,892 15,050 Total voting equity 667 669 539 686 813 942 Preference shares

• 147

147 146 147

Key Performance Indicators

Investor Relations Presentation - November 2013 Page 17

2008 2009 2010 2011 2012 2013 Core Post

Domestic postal volumes millions of items 951 887 843 805 751 697 International postal volumes millions of items 101 99 96 102 84 75 Postal delivery points millions 1.869 1.886 1.893 1.905 1.910 1,914 Standard letter service performance % 96.5 94.4 95.9 95.5 93.9 93.2

Store network

PostShops 325 326 307 287 280 277 PostCentres 656 627 626 609 614 604

Couriers

Road on time performance %

• 95.6

95.7 95.0 92.8 90.7 Air on time performance %

• 89.4

88.5 87.0 83.0 78.8

Kiwibank Banking Group

Tier 1 capital (%) % 8.3 7.7 9.8 9.0 10.4 10.4 Growth in Banking Group assets (%) % 50.1 27.4 18.0 13.0 6.0 3.1 Main bank market share % 6.1 7.3 7.8 8.2 9.0 10.3

Employees

Kiwibank Banking Group FTE's 871 934 953 1,030 1,024 1,189 Postal Group FTE's 8,752 8,088 7,757 6,838 7,328 8,543 Lost time injury frequency rate per 1,000,000 hours worked 17.15 9.70 7.44 6.27 5.64 7.20

Contact Details

Investor Relations Presentation - November 2013 Page 18

Mark Yeoman

Chief Financial Officer DDI: +64 4496 4099 Mobile +64 21 778 404 Email: mark.yeoman@nzpost.co.nz

Rhiannon McKinnon

Corporate Finance Manager DDI: +64 4496 4096 Mobile: +64 212 488 882 Email: rhiannon.mckinnon@nzpost.co.nz

Kevin Hastings

Investor Relations 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 NZP. Some statements in this presentation are forward‐looking statements regarding future events and the future financial performance of NZP. 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 NZP). 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, NZP and its respective directors, officers, employees or advisors do not accept any liability for any errors,

• missions or loss (including because of negligence or otherwise) arising, directly or indirectly, from any use of this presentation or information

contained in this presentation.

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