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Post Group Achieves Solid Profit

12 September 2006

Post Group Achieves Solid Profit In Challenging Year

The New Zealand Post Group has today announced a net after-tax profit of $68.7 million for the year ended 30 June 2006.

Chief Executive John Allen says the result, in a "challenging business environment", was a solid improvement of 17% on the previous year's comparative result of $58.6 million (excluding the gain of the partial divestment of Express Couriers Limited (ECL) in 2005).

"Rising fuel prices, a tight labour market, increasing competition in key market segments and continuing changes in the way customers use our letter services have combined to make this a challenging year for the New Zealand Post Group.

"The financial result reflects the efforts of people throughout the business to respond to our changing customer requirements, work to contain costs, and identify and pursue strategic opportunities for growth."

Mr Allen says the Group's diversification strategy is proving effective with strong performances from Kiwibank, Datamail Group and international postal business.

"Kiwibank performed particularly well, more than doubling its after tax profit to $15.8 million from $7.2 million in 2004/05. This result was driven by growth in Kiwibank customer numbers, home loans and deposits."

Growth in Kiwibank's retail deposits reflects the launch of the new 'online' deposit account, while business banking continues to grow as the number of specialised business banking centres increase.

Datamail Group also performed well ahead of the previous year, with the recent purchase of Moore Gallagher's mailhouse business providing a platform for further growth in the future.

The Group's postal business had a mixed year. International postal business performed well, driven by increased direct marketing and magazine distribution into New Zealand. However the domestic postal business faced rising fuel prices, increasing labour costs and a 2.3% decline in mail volumes.

"Our response has been to change the way we work in the postal services business, introducing new technology and processes to ensure we meet our customers' needs in the future.

"The successful launch of the new postcode and addressing standards to customers is also a key part of our investment in the future - recently 46% of people surveyed by New Zealand Post knew their new postcode," Mr Allen says.

Operating revenue for the year was $1,114 million. Revenue increased 4.5% over the previous year (excluding the effects of the partial sale of ECL in 2004/05) with growth driven by Kiwibank loan, deposit and customer growth, international inbound mail and new revenues from Moore Gallagher.

Operating expenditure for the year totalled $1,019 million, a 3.3% comparative increase on the 2004/05 year (excluding the effects of ECL). Expenses were influenced by higher personnel costs such as annual wage increases and new jobs within Kiwibank, and higher fuel costs.

Total assets increased by $1,228 million to $3,734 million reflecting strong growth in Kiwibank, revaluation of Post Properties and acquisitions during the year.

The 2005/06 result enables New Zealand Post to return a total dividend to the Government - as sole shareholder - of $27.7 million. The company also paid $26.3 million in tax.

New Zealand Post Board Chairman Jim Bolger says this takes the amount paid in taxes and dividends by New Zealand Post since corporatisation to over $1 billion.

"This reflects the tremendous value the organisation has made to the economic wellbeing of this country over the past almost 20 years. In addition, New Zealand Post continues to strive to provide a range of efficient, cost effective services to support businesses and communities throughout the country to thrive and prosper."

Mr Allen says diversification - and an international focus - remained essential to New Zealand Post in 2005/06 and will continue to do so in the future. "The diverse range of businesses now under the New Zealand Post Group umbrella enables the company at large to offer services across the broad spectrum of postal, data, banking, data-management, express and logistics businesses."

FINANCIAL PERFORMANCE 2005/06 2004/05

Operating revenue $1,114.3m $1,208.9m* Operating expenditure $1,019.2m $1,044.7m* Net surplus including gain on ECL $68.7m $137.2m*

Net surplus excluding gain on ECL $68.7m $58.6m Final dividend including special dividend $11.0m $30.9m Final dividend excluding special dividend $11.0m $7.9m Issued and paid-up capital $192.2m $192.2m Total equity $534.1m $483.4m

* Includes gain on partial divestment of Express Couriers Limited (ECL) and effects of change in accounting treatment

ENDS

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