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NZ Post Group Report Solid Half Year Profit

For Immediate Release 16 March 2006

NEW ZEALAND POST GROUP REPORT SOLID HALF YEAR PROFIT OF $34.7 MILLION

Increased profit from Kiwibank and good growth in international mail volumes contributed to New Zealand Post Group recording an unaudited net profit after tax of $34.7 million for the six months ending 31 December 2005.

This compares with $40.4 million profit after tax for the same 6 month period in 2004. The difference in part reflects the 2004 gain on sale of $6 million from the Christchurch Mail, and the partial divestment in 2004 of Express Couriers Limited, which means that New Zealand Post now records only half of after tax profit for that business.

Operating revenue for the half year was $565.4 million, compared with $618.0 million for same period in 2004. Operating expenditure was $519.9 million as opposed to $559.2 million last year. The New Zealand Post Board declared an interim dividend of $16.7 million for the six months to December 2005.

Chief Executive John Allen said that the result was a solid one for the Group and achieved in a challenging economic environment.

“A tough six months for our Postal Services Group saw domestic mail volumes fall 1.8%. This is largely as a result of the changing mix of mail, electronic substitution, customers consolidating their communications and some customers postponing their marketing due to a flattening economy.

“However, it was pleasing to note that international outbound mail volumes increased 3.1% for the six months to 31 December 2005 when compared to the same period in 2004.

“To ensure the sustainability of the business and that we continue to meet our customers’ needs in the future we advised during the period that we would be installing new technology in our mail centres, redesigning roles and processes and updating postcodes. This programme is of critical importance for the Group.

“A growth in after tax profit from $2.5 million to $5.4 million for Kiwibank, positive performance from the Datamail Group and solid financial results from ECL are evidence of the importance of the Group’s diversification strategy, particularly given the decline in domestic mail volumes for the period.

“Over the period Kiwibank saw home loans increase 35% to $2.5 billion, retail deposits increased 24% to $1.6 billion and 12 business banking centres are now operating in seven cities. We have built a solid platform to grow this business and are confident that Kiwbank will continue to prosper, delivering better service, better interest rates, lower fees and new services to an increasing customer base.”

During the period the Group sold its 33 store Books and More franchise to Paper Plus Limited and entered into a preferred ‘hosting’ agreement which has the potential to provide customers with greater access to banking and postal services.

Other notable events over the six months included the ECN Group increasing its shareholding of Australian eCommerce company Tedis from 52.6% to 100%, the Electoral Enrolment Centre enrolling 95.2% of the estimated eligible population in time for the General Election in September and a range of new stamps and coins that celebrated the films King Kong and The Chronicles of Narnia.

Mr Allen said that despite the challenging economic environment and increased pressure on the core product – mail, the New Zealand Post Group was confident of a sound full year result.

“We are seeing the historic seasonality of our business changing as a result of the diversification strategy that is taking shape. As a result we expect to see the performance of the business over the second half of the year to have increasing influence on the full year results.

“It is important that over this second half year period, particularly in light of the flattening economy, that we continue to manage costs tightly, however we will look to progress growth opportunities through our banking and payment, and Datamail businesses as well as through the ECL joint venture with DHL. Additionally, a focus of the Postal Services business will be the continued implementation of new processing technology in sites around the country and the communication of new postcodes to New Zealanders later this year.”

ENDS

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