November 2013 Investor Presentation Forsyth Barr Investor Update New Zealand Post Group: New Zealand Post Limited.
2013 REVIEW Page 2 Investor Relations Presentation - November 2013
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 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 Strategic 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 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 Operational 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 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 Portfolio 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 Page 4 Investor Relations Presentation - November 2013
Profitability Continued improvement in operating NPAT Operating NPAT trend Operating NPAT increased from $80m to 175 $111m, driven by: 150 125 ─ 100% consolidation of ECL and 100 CouriersPlease holdings vs. last year, in $m 75 addition to a strong performance from ECL 50 25 ─ A strong performance from Kiwibank driven by 0 2006 2007 2008 2009 2010 2011 2012 2013 -25 strong net interest income and bad debts -50 reversal Source: NZP Operating NPAT Reported NPAT 2008 2009 2010 2011 2012 2013 Reported NPAT is $121m, down from last year’s $170m due to: 110.2 71.8 1.3 -35.6 169.7 120.9 Reported NPAT Christchurch 20.4 ─ earthquake The absence of the one off gain on sale from Property depreciation ECL and CPH of $96m - - 72.3 13.6 2.8 and other writedowns Restructuring & ─ Benefit of Datacom and NZP House gain on 3.8 11 - 8.1 6.3 47.9 Impairments sale of $75m Property & Investment -74.8 gains ─ Restructuring and impairment costs of $48m Employee Related 14.4 Provision Australian courier Dividend declared of $5m, allowing for re- -24.8 -5.2 - 35.2 -96.2 divestment gains investment in the business Operating NPAT 89.2 77.6 73.6 41.7 79.8 111.2 Page 5 Investor Relations Presentation - November 2013
Strengthened balance sheet The sale proceeds from the Datacom and NZP funding lines (at 30 June 2013) property sales have primarily been used to pay Facility Drawn down debt – a total of $159m has been repaid Instrument (NZDm) (NZDm) Maturity Coupon this year: Cash advance 100 0 1-2 years n/a ─ The $54m of drawings under the ECL facility were Commercial paper 200 30 < 94 days ~2.80% paid down in full in March and the facility closed NZP Bonds 200 150 Nov-16 5.225% ─ The aircraft owned by AirPost was sold to ECL and NZP Hybrid Notes 200 200 Nov-39 7.50% the USD facility of US$4m was also closed ─ CP on issue has been paid down from $130m to NZP debt maturity (at 30 June 2013) $30m 250 200 Hybrid bonds first re-set date in November 2014 150 with a 1% step up margin – the option to 100 remarket the bonds at this time is being 50 considered 0 2013 2016 2039 Undrawn liquidity lines of $320m in addition to Commercial paper Wholesale bond Hybrid bond Source: NZP the Crown uncalled capital facility of $300m Page 6 Investor Relations Presentation - November 2013
OUR PLAN TO 2018 Page 7 Investor Relations Presentation - November 2013
The shape of NZ Post NZ Post is now focused on two key business clusters: Brand Highlights Division Description Mail Mail & Parcels Logistics Digital Platforms Kiwibank Financial Kiwi Wealth and Kiwi Insurance services New Zealand Home Loans Page 8 Investor Relations Presentation - November 2013
Deed of Understanding 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 Page 9 Investor Relations Presentation - November 2013
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 Page 10 Investor Relations Presentation - November 2013
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 operating 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 Page 11 Investor Relations Presentation - November 2013
An integrated group network Standard and Premium services (not letters and parcels) End-to-end solutions Integrated single view of the customer Page 12 Investor Relations Presentation - November 2013
What will change by 2018 Key points of difference include: 2013 2018 Predominantly physical customer access & Mix of online/mobile & physical customer access delivery points & delivery points Multiple points of sales/service contact Single point of sales/service contact 4 day delivery service standard (std mail) 1-3 day over-serviced standard offering 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 Page 13 Investor Relations Presentation - November 2013
Retail transformation in progress 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 Page 14 Investor Relations Presentation - November 2013
APPENDICES Page 15 Investor Relations Presentation - November 2013
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