NEW ZEALAND POST GROUP HALF YEAR REPORT FOR THE PERIOD ENDED 31 DECEMBER 2017 F.22

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1 NEW ZEALAND POST GROUP HALF YEAR REPORT FOR THE PERIOD ENDED F

2 CONTENTS 1 Directors statement 3 Interim Consolidated Statement of Profit or Loss and Other Comprehensive Income 4 Interim Consolidated Statement of Changes in Equity 5 Interim Consolidated Statement of Financial Position 7 Interim Consolidated Statement of Cash Flows 8 Notes to the Interim Consolidated Financial Statements 17 Independent Review Report 21 Directory $6m NET PROFIT AFTER TAX $452m REVENUE FROM OPERATIONS $2.5m INTERIM DIVIDEND $1,769m TOTAL ASSETS $1,290m TOTAL EQUITY

3 Directors statement HALF YEAR REPORT FOR THE SIX MONTHS TO New Zealand Post Limited and subsidiaries half year report for the six months to NZ Post - Tukurau Aotearoa is pleased that our transformation to be New Zealand s delivery partner for a digital world, has made positive and continued progress. Our delivery and logistics capabilities grew, as did our credibility with customers as we demonstrated our expertise both in New Zealand and internationally. Customer service options became part of our every-day language, as our people repeatedly put into practice examples of delivering what people care about. Whilst market conditions may have been very challenging, we are proud of what we have achieved and are confident of our ability to achieve growth. Developing and enhancing customer relationships was a particular highlight. During the busy Christmas months when customers expect more from us, this year through our planning, preparation and enhanced service delivery they saw a very positive difference. They have told us repeatedly, that this allowed them to concentrate on their business and not be concerned about our reliability. Of particular note for this Peak festive season were our amazing NZ Post people, who with safety in mind, consistently and repeatedly did the best they could for our customers. In further developing our business model for mail, parcels and logistics, we continued to work on our three focus areas for delivering value: grow, innovate & serve, and lower cost. Additionally, in response to customer expectations in an interconnected and global world, we also recognised that our value creation story is changing - and must change - to support a thriving New Zealand. During the period we saw some of our largest business customers choose online communication channels over letters. Acknowledging that this is an international and existing trend, we saw it accelerate and exceed our forecasts in this six-month period. We want to provide reassurance of our commitment to providing these services, as we know how valued they are. Grow Growing our parcels services, both domestically and internationally, as part of establishing e-commerce partnerships was a priority. The popularity of online shopping and e-commerce saw parcel volumes increase by 9.9%, compared to the same period the previous year. Operating in a highly competitive and global market, we made further investments both in our network capability and ability to respond to rapidly changing customer expectations for convenience. To exceed our customers expectations over the Christmas period, we focused our resources and provided enhanced customer service to support parcel volume growth when our network is at its busiest. As part of this we took on additional resource which included 13 line-haul trucks and operating an additional 737 aircraft. During December we processed over 38.9 million items and saw over six million visits to our website. Of particular note, on our busiest day in December we processed over 330,000 parcels, an increase of 15% from the previous seasonal record. Our mail services continued to undergo significant change as our largest sending customers continued to send fewer letters. We have all now come to expect online forms of communication in our every-day lives. In the six-month period to 31 December 2017, we delivered 38 million fewer letters compared to the same period last year, a decline of 13.8%. Innovate and Serve During these six months we continued to innovate as we harnessed capability to anticipate and respond to our customers needs. NZ Post s success will be determined by the ability to integrate our parcel services with excellent customer experiences in order to be the e-commerce partner of choice. We trialed New Zealand s first market delivery subscription service with Shipmate. The trial found that the service appealed to a dedicated group of online shoppers, and we are continuing to explore ways to offer choice and service options. We are also furthering our digital ambitions to improve the experience of sending and receiving parcels. As customers embraced our current parcel sending and receiving options in even greater numbers, we are confident this is the right strategy. Continuing with our long and proud heritage of providing postal services remained important to NZ Post. We acknowledge that these are valued and essential community services, and our PostShops can and do act as important meeting places. Taking into account our government obligations for over 880 over-the-counter points of presence, we continued to develop partnerships with local businesses which in many cases offer more convenient locations. We have a responsibility to future generations that they too will be able to access these services, and we are continuing to develop and secure financially sustainable ways to allow this to happen. Lower Cost Throughout more communities our combined parcel and letters delivery model, using our Paxster electric vehicles, became commonplace. We are very proud that as New Zealand s largest roadworthy electric vehicle fleet, they offer benefits to our customers, our business and also to the environment. Targeting better efficiency in letter and parcel processing we continued our investment in technology. While this work is proving challenging given its complexity, we are beginning to see some return and anticipate that benefits will accelerate in the next 2-3 years. What we can say is that already over 70% of our delivery people are now spending the bulk of their time outside delivering rather than inside sorting mail. 1

4 Directors statement continued HALF YEAR REPORT FOR THE SIX MONTHS TO The challenging market conditions and competitive Christmas season have acted as important reminders of our responsibility for careful cost management. We need to be financially sustainable and costs will remain an ongoing part of our focus. Outlook We remain confident in the progress of our transformation and our ability to take advantage of opportunities for growth. Our commitment to providing a sustainable letters business for New Zealand remains a priority. To do this, however, we accept and know we must make further changes to maintain our service levels. Having had the honour and privilege of winning the Supreme Award at the 2017 NZI Sustainable Business Network awards, we are also now looking forward to furthering our social and environment sustainability ambitions and engraining them in our core day-to-day business operations. Financial Performance The NZ Post Group s after tax profit for the six months to December 2017 was $6m. This compares with $89m for the same period last year. Kiwi Group Holdings (KGH) contributed $19m to the result ($54m for the comparable period last year*). The remainder of the Group made a loss of $13m. NZ Post revenue of $452m for the six months ended was down on revenue of $467m for the same period to 31 December The drop is attributable to the decline in letter volumes, not fully offset by growth in the parcel business. Expenditure increased by $22m to $468m, mostly attributable to supporting growth in parcels. Dividend An interim dividend of $2.5m was declared. SUMMARY OF FINANCIAL PERFORMANCE $ millions 6 months ended 31 Dec 2017 () 6 months ended 31 Dec 2016 () Revenue from operations Expenditure Net (loss)/profit after tax excluding KGH (13) 35 Net profit from KGH* Net profit after tax 6 89 Share capital Total equity 1,290 1,382 * The net profit from KGH for the prior period includes 100% of net profit to 31 October 2016 and the Group s 53% share of net profit for 1 November to 31 December The net profit from KGH for the current period is the Group s 53% share of net profit for the half year. Balance Sheet The Statement of Financial Position of the Group remains stable and liquidity is supportive of the future goals of the business. The Group s credit rating remains at A+ with a stable outlook. The investment in KGH continues to be equity accounted and the Group s share of earnings for the period has brought the carrying value of the 53% investment up to $878m at. Jane Taylor Chair, New Zealand Post 22 February, NEW ZEALAND POST GROUP HALF YEAR REPORT 2017

5 Interim Consolidated Statement of Profit or Loss and Other Comprehensive Income Note 31 December 2016 Revenue from operations Expenditure Operating (loss) / profit (16) 21 Financial instruments at fair value net loss (3) Share of net profit of jointly controlled entities 5(c) Profit before interest and income tax from continuing operations 3 30 Finance costs (net) 2 5 Profit before income tax from continuing operations 1 25 Income tax (credit) / expense (5) 3 Profit for the period after interest and taxation from continuing operations 6 22 Profit after tax from discontinued operations 42 Gain on sale of investment in subsidiary 25 Profit for the period 6 89 Attributable to: Owners of New Zealand Post Limited 6 89 Other comprehensive income Items that may be reclassified subsequently to profit or loss: Other comprehensive income arising from discontinued operations 9 Share of other comprehensive income of jointly controlled entities 10(b) 2 8 Total other comprehensive income net of tax 10(b) 2 17 Total comprehensive income net of tax Total comprehensive income for the period attributable to: Continuing operations 8 30 Discontinued operations 76 The above interim consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes on pages

6 Interim Consolidated Statement of Changes in Equity Note Fully Paid Ordinary Shares Other Reserves Retained Earnings Noncontrolling Interest Total Balance at 1 July (9) 1, ,293 Profit for the period Other comprehensive income 10(b) Total comprehensive income for the period Other movements Transfer between revaluation reserve and retained earnings (4) 4 De-recognition of reserves on partial sale of KGH 10(b) De-recognition of non-controlling interest (42) (42) Reclassification to profit or loss on close out of hedged item 7 7 Other (4) (4) Transactions with Owners Dividends paid to shareholders (3) (3) Balance at 31 December 2016 () ,154 1,382 Balance at 1 July ,057 1,285 Profit for the period 6 6 Other comprehensive income 10(b) 2 2 Total comprehensive income for the period Other movements Transfer between revaluation reserve and retained earnings (2) 2 Transactions with Owners Dividends paid to shareholders (3) (3) Balance at () ,062 1,290 The above interim consolidated statement of changes in equity should be read in conjunction with the accompanying notes on pages NEW ZEALAND POST GROUP HALF YEAR REPORT 2017

7 Interim Consolidated Statement of Financial Position AS AT Note 30 June 2017 audited ASSETS Current assets Cash and cash equivalents Short term deposits Assets held for sale 9 9 Trade and other receivables Inventories 9 8 Derivative financial assets 8 9 Loans to related parties 2 2 Tax receivable 1 Other current assets 9 7 Total current assets Non-current assets Trade and other receivables 8 18 Property, plant and equipment Intangible assets Deferred tax asset 11 5 Investment properties 3 3 Loans to related parties Investment in KGH 5(a) Total non-current assets 1,372 1,347 Total assets 1,769 1,818 The above interim consolidated statement of financial position should be read in conjunction with the accompanying notes on pages

8 Interim Consolidated Statement of Financial Position continued AS AT Note 30 June 2017 audited LIABILITIES Current liabilities Trade and other payables Provisions Borrowings Derivative financial liabilities Total current liabilities Non-current liabilities Trade and other payables Provisions 4 5 Loans from related parties Borrowings Total non-current liabilities Total liabilities EQUITY Ordinary parent shareholders' equity Share capital Retained earnings 1,062 1,057 Other reserves 10(b) Total equity attributable to parent shareholder 1,290 1,285 Total equity and liabilities 1,769 1,818 The Board of Directors of New Zealand Post Limited authorised these financial statements for issue on 22 February Jane Taylor Chair Carol Campbell Director The above interim consolidated statement of financial position should be read in conjunction with the accompanying notes on pages NEW ZEALAND POST GROUP HALF YEAR REPORT 2017

9 Interim Consolidated Statements of Cash Flows 31 December 2016 Cash flows from operating activities Receipts from customers Other interest received 8 9 Payments to suppliers and employees (440) (433) Net payments to agencies (9) (4) Other interest paid (8) (11) Income tax received 1 1 Net operating cash flows from discontinued operations (197) Net cash flows from operating activities (3) (180) Cash flows from investing activities Sale of property, plant and equipment 1 6 Purchase of intangible software assets (12) (5) Purchase of property, plant and equipment (13) (24) Sale / (purchase) of short term deposits 90 (194) Sale of investment in subsidiary net of cash (2) Investment in jointly controlled entities (90) Net investing cash flows from discontinued operations (26) Net cash flows from investing activities 66 (335) Cash flows from financing activities Issue of borrowings Repayment of borrowings (75) (232) Dividends paid to New Zealand Post Limited shareholders (3) (3) Net financing cash flows from discontinued operations 202 Net cash flows from financing activities (58) 17 Net increase / (decrease) in cash held 5 (498) Cash at the beginning of the period - continuing operations Cash at the beginning of the period - discontinued operations 517 Cash at the end of the period Composition of cash Cash and cash equivalents Total cash and cash equivalents The above interim consolidated statements of cash flows should be read in conjunction with the accompanying notes on pages

10 Notes to the Interim Consolidated Financial Statements BASIS OF PREPARATION NOTE 1. REPORTING ENTITY AND STATUTORY BASE The interim condensed consolidated financial statements ( interim financial statements ) presented are for New Zealand Post Limited (the Company or NZ Post ) and its subsidiaries (together the Group ) for the half year ended. The Group accounts for joint ventures using the equity method. The Group provides a full range of packaging and delivery of mail products and logistical and courier services. On 31 October 2016 the Group sold 47% of its investment in Kiwi Group Holdings Limited ( KGH ). Detailed disclosures of the transaction are included in the Annual Report for the year ended 30 June The Company is incorporated and domiciled in New Zealand. The address of its registered office is New Zealand Post House, 7 Waterloo Quay, Wellington, New Zealand, NOTE 2. BASIS OF ACCOUNTING Note 2(a) Basis of preparation The interim consolidated financial statements: have been prepared in accordance with generally accepted accounting practice in New Zealand (NZ GAAP) and the requirements of the State-Owned Enterprises Act The Group is a for-profit entity for the purposes of NZ GAAP. These financial statements comply with NZ IAS 34 Interim Financial Reporting and IAS 34 Interim Financial Reporting and consequently, do not include all the information required for full financial statements. These interim financial statements should be read in conjunction with the Annual Report for the year ended 30 June 2017; have been prepared using historical cost, as modified by the revaluation of certain assets and liabilities at fair value. The accrual basis of accounting has been used; and are presented in New Zealand dollars and all values are rounded to the nearest million dollars unless otherwise stated. The Company is a FMC Reporting Entity under the Financial Markets Conduct Act 2013 ( FMCA ). Note 2(b) Comparative numbers The Group has changed the presentation of the segment note (refer to Note 3). KGH was previously shown as a separate segment however, due to the partial sale in October 2016, the lines of reporting to the Chief Operating Decision Maker changed and KGH is now considered to be part of the Investment segment. Note 2(c) Critical accounting judgements, estimates and assumptions In the process of applying the Group s accounting policies, management has made a number of judgements and applied estimates of future events. Significant judgements made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 30 June Management has considered the operating loss for the period and the potential impact on the impairment assessment for nonfinancial assets, there has been no material change to the judgements, assumptions and sensitivities disclosed in Note 19 to the consolidated financial statements for the year ended 30 June Note 2(d) Accounting policies The same accounting policies and methods of computation are followed in these financial statements as those applied in the Group s latest audited financial statements for the year ended 30 June Note 2(e) Financial risk management The Group s activities expose it to a variety of financial risks: market risk (including financing risk, interest rate risk and currency risk), credit risk and liquidity risk. The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group s annual financial statements for the year ended 30 June There have been no changes in risk management policies since 30 June NEW ZEALAND POST GROUP HALF YEAR REPORT 2017

11 Notes to the Interim Consolidated Financial Statements continued FINANCIAL PERFORMANCE NOTE 3. Basis of segmentation SEGMENT INFORMATION The same reportable segments are disclosed in these interim financial statements as those disclosed in the Group s latest audited annual report for the year ended 30 June Half year ended Post Investments Total External revenue Total segment revenue from operations Segment (loss) / profit before interest and income tax (16) 19 3 Segment (loss) / profit (13) 19 6 Half year ended 31 December 2016 (reclassified) Post Investments Total External revenue Total segment revenue from operations Segment profit before interest and income tax Segment profit NOTE 4. EXPENDITURE 31 December 2016 Included in Expenditure is: Contracted delivery services Salaries and wages Other personnel costs Property and operating costs Computer expenses Payment services Property operational outgoings Production costs Depreciation Amortisation of intangibles 6 4 Repairs and maintenance 6 7 Professional services 5 6 Other operating lease and rental costs 5 4 Marketing expenses 4 5 Cost recovery (14) (19) 9

12 Notes to the Interim Consolidated Financial Statements continued OPERATING ASSETS AND LIABILITIES NOTE 5. JOINTLY CONTROLLED ENTITIES Note 5(a) Summarised statement of financial position of KGH 30 June 2017 audited Assets Cash and cash equivalents Due from related parties Due from financial institutions Available-for-sale financial assets 1,148 1,474 Loans and advances 18,007 17,795 Derivative financial instruments Property, plant and equipment Intangible assets Deferred taxation Other assets Total assets 20,514 20,741 Liabilities Due to financial institutions Due to related parties Deposits and other borrowings 15,935 15,957 Derivative financial instruments Debt securities issued 2,170 2,258 Current tax liability 3 10 Other liabilities Subordinated debt Total liabilities 19,016 19,286 Net assets 1,498 1,455 Group's carrying value of KGH Total identifiable net assets of KGH 1,498 1,455 Share of investment 53% 53% Group's share of identifiable net assets Group's share of goodwill and other additional intangible assets at 31 October Accumulated amortisation on other additional intangible assets (8) (6) Adjustment for impairment on intangible assets with nil fair value in the purchase price allocation Carrying value of the Group's investment in KGH NEW ZEALAND POST GROUP HALF YEAR REPORT 2017

13 Notes to the Interim Consolidated Financial Statements continued NOTE 5. JOINTLY CONTROLLED ENTITIES continued Note 5(b) Reconciliation of Group s carrying value of KGH 30 June 2017 audited Carrying value Fair value of the Group's investment in KGH at 31 October Purchase of redeemable preference shares 131 Share of net profit of KGH 29 Share of other comprehensive income of KGH 8 Group's carrying value of KGH as at 30 June Carrying value Group's opening carrying value of KGH at 1 July Share of net profit of KGH 19 Share of other comprehensive income of KGH 2 Group's carrying value of KGH as at

14 Notes to the Interim Consolidated Financial Statements continued NOTE 5. Note 5(c) JOINTLY CONTROLLED ENTITIES continued Summarised statement of profit or loss and other comprehensive income of KGH for the period 6 months ended 2 months ended 31 December 2016 Interest income Interest expense (239) (77) Net gains on financial instruments at fair value 5 3 Gross fee income Direct fee expenses (54) (12) Total operating income Operating expenses (224) (66) Profit before impairment, taxation and finance costs Impairment losses on loans and advances (2) 2 Other impairment losses (11) Profit before taxation and finance costs Finance costs (8) (3) Profit before taxation Income tax expense (15) (8) Profit after taxation Group's total 53% share of profit Adjustment on consolidation to Group's share of net profits (5) Group's total 53% share of profit after taxation KGH other comprehensive income 3 15 Group's 53% share of other comprehensive income 2 8 Group's share of net profits of KGH Group's share of net profits of Reach Media Limited Total share of net profit of jointly controlled entities NEW ZEALAND POST GROUP HALF YEAR REPORT 2017

15 Notes to the Interim Consolidated Financial Statements continued NOTE 5. JOINTLY CONTROLLED ENTITIES continued Note 5(d) KGH capital commitments 30 June 2017 audited Capital commitments 8 9 Group's 53% share of commitments 4 5 Note 5(e) KGH contingencies KGH held insurance policies at the date of the Kaikoura earthquake that provided cover for material damage and business interruption. It is probable that the policies will enable KGH to obtain a reimbursement for various costs incurred as a result of the earthquake. However, there is insufficient information to form a reliable estimate of the financial effect (30 June 2017: same). There are no material contingent liabilities to disclose as at (30 June 2017: nil). NOTE 6. PROPERTY, PLANT AND EQUIPMENT Acquisition and disposal of property, plant and equipment During the half year ended the Group acquired property, plant and equipment with a carrying value of $15m (31 December 2016: $14m) and disposed of property, plant and equipment with a carrying value of $2m (31 December 2016: $5m). NOTE 7. FAIR VALUE Note 7(a) Fair value of financial assets and liabilities The estimated fair values of the Group s financial assets and liabilities which differ from their carrying values are noted below. Carrying amount Estimated fair value Carrying amount 30 June 2017 audited Estimated fair value 30 June 2017 audited Financial liabilities Borrowings The carrying values of the following financial instruments are a reasonable approximation of fair value because they are short-term in nature: cash and cash equivalents, short term deposits, trade receivables, and trade payables. 13

16 Notes to the Interim Consolidated Financial Statements continued NOTE 7. FAIR VALUE continued Note 7(b) Fair value measurement Level 1 Level 2 Level 3 Total Assets at fair value Investment properties 3 3 Land and buildings Derivative financial assets 8 8 Loans to related parties Total financial assets at fair value Liabilities Derivative financial liabilities Borrowings (carried at amortised cost) Loans from related parties Total financial liabilities at fair value June 2017 audited Assets at fair value Investment properties 3 3 Land and buildings Derivative financial assets 9 9 Loans to related parties Total financial assets at fair value Liabilities Derivative financial liabilities Borrowings (carried at amortised cost) Loans from related parties Total financial liabilities at fair value There have been no transfers between levels 1 to 3 during the period (year ended 30 June 2017: no transfers). NOTE 8. CAPITAL AND OTHER COMMITMENTS 30 June 2017 audited Capital expenditure commitments Total capital expenditure committed to at reporting date but not provided for in the financial statements NEW ZEALAND POST GROUP HALF YEAR REPORT 2017

17 Notes to the Interim Consolidated Financial Statements continued FINANCING NOTE 9. Funding activities BORROWINGS The following provides information about borrowings issued and repaid during the periods presented: Commercial Paper At $10m (30 June 2017: $65m) of commercial paper was on issue. During the half year ended $20m (year ended 30 June 2017: $125m) of commercial paper was issued and $75m (year ended 30 June 2017: $100m) was repaid. New Zealand Post Group Finance Subordinated Notes The subordinated notes of $199m (30 June 2017: $199m) are part of the Group s core debt and have a maturity date of 15 November 2039 (30 June 2017: same). NOTE 10. EQUITY Note 10(a) Ordinary Share Capital During the half year ended $2.5m of dividends were paid to New Zealand Post shareholders (half year ended 31 December 2016: $2.5m). Note 10(b) Other reserves The following table shows a breakdown of the statement of financial position line item other reserves and the movements in these reserves. Property Revaluation Reserve Available For Sale Reserve Cash Flow Hedge Reserve Total Balance at 1 July (2) Share of other comprehensive income of jointly controlled entities Other comprehensive income Other movements Transfer between revaluation reserve and retained earnings (2) (2) Balance at () 26 (1) Property Revaluation Reserve Available For Sale Reserve Cash Flow Hedge Reserve Total Balance at 1 July (52) (9) Market movements gross (4) Deferred tax 1 (6) (5) Share of other comprehensive income of jointly controlled entities (2) 10 8 Other comprehensive income (5) Other movements Transfer between revaluation reserve and retained earnings (4) (4) De-recognition of reserves on partial sale of KGH (8) Reclassification to profit and loss on close-out of hedged item 7 7 Balance at 31 December 2016 () 28 (2)

18 Notes to the Interim Consolidated Financial Statements continued OTHER DISCLOSURES NOTE 11. RELATED PARTIES The Company has related party transactions with its jointly controlled entities and with key management personnel. There have been no material changes in the nature or amount of related party transactions for the Group since 30 June NOTE 12. CONTINGENCIES Contingent assets are disclosed only if it is probable that the benefit will be realised. Contingent liabilities are disclosed unless likelihood of an outflow of resources is remote. The following contingencies have not been accrued in the financial statements. The amounts disclosed are the maximum potential losses, excluding the effects of tax. The Group is subject to additional claims, contingencies and investigations incurred in the normal course of business. Apart from those listed below, the Directors are not aware of any significant exposure to the Group. Guarantees New Zealand Post I. The Company has agreed to provide up to $40m of capital to Kiwi Group Holdings Limited if required to allow completion of a project to replace the core banking system. If the capital is called upon, the Company will subscribe for ordinary shares in KGH and will make transfers to the other shareholders in the relative proportions of their shareholdings at that time for nil consideration. As part of a review of the transformation strategy of Kiwibank ( the Bank ), the Kiwibank Board is in the process of reviewing this project. While the review has not been completed at, based on the work done to date, the Kiwibank Board considers it highly unlikely that the current delivery path of the core banking system project will meet key transformational objectives of the Bank and therefore the current project will not proceed without significant changes in the delivery path. It is therefore uncertain whether any of the $40m will be called upon. No provision has been made at 31 December 2017 as an amount payable cannot be reliably measured and the timing of any payment is uncertain. II. The Company had previously guaranteed the payment obligations of Kiwibank Limited under a deed poll guarantee. The guarantee was withdrawn on 28 February 2017 and does not apply to any new payment obligations entered into after that date. Payment obligations entered into on or before 28 February 2017 remain under the guarantee until maturity. The value of payment obligations that remain covered by the guarantee at is as follows: 30 June 2017 audited Retail deposits 2,937 6,147 Wholesale deposits Foreign currency accounts 1,478 2,701 Total guaranteed payment obligations 4,445 8,890 NOTE 13. EVENTS OCCURRING AFTER REPORTING DATE The Board of New Zealand Post Limited has declared a final dividend of $2.5m ($0.01 per fully paid share) which will be paid on 29 March NEW ZEALAND POST GROUP HALF YEAR REPORT 2017

19 Independent review report To the Directors of New Zealand Post Limited The Auditor-General is the auditor of New Zealand Post Limited ( NZ Post ) and the entities it controlled as at or from time-to-time during the period (the Group ). The Auditor- General has appointed me, Michele Embling, using the staff and resources of PwC, to carry out the annual audit of NZ Post, including the half year review, on his behalf. Report on the Interim Consolidated Financial Statements We have reviewed the accompanying interim consolidated financial statements of the Group on pages 3 to 16 which comprise the interim consolidated statement of financial position as at 31 December 2017, and the interim consolidated statement of profit or loss and other comprehensive income, the interim consolidated statement of changes in equity and the interim consolidated statement of cash flows for the six month period ended on that date, and selected explanatory notes. Review Conclusion Based on our review, nothing has come to our attention that causes us to believe that these interim consolidated financial statements of the Group are not prepared, in all material respects, in accordance with New Zealand Equivalent to International Accounting Standard 34 Interim Financial Reporting (NZ IAS 34) and International Accounting Standard 34 Interim Financial Reporting (IAS 34). The review was completed on 22 February 2018, and is the date at which our review conclusion is expressed. Directors responsibility for the Interim Consolidated Financial Statements The Directors of NZ Post (the Directors ) are responsible on behalf of the Group for the preparation and presentation of these interim consolidated financial statements in accordance with NZ IAS 34 and IAS 34 and for such internal controls as the Directors determine are necessary to enable the preparation of interim consolidated financial statements that are free from material misstatement, whether due to fraud or error. Our responsibility Our responsibility is to express a conclusion on the accompanying interim consolidated financial statements based on our review. We conducted our review in accordance with the New Zealand Standard on Review Engagements 2410 Review of Financial Statements Performed by the Independent Auditor of the Entity (NZ SRE 2410). NZ SRE 2410 requires us to conclude whether anything has come to our attention that causes us to believe that the interim consolidated financial statements, taken as a whole, are not prepared in all material respects, in accordance with NZ IAS 34 and IAS 34. As the auditors of NZ Post, NZ SRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial statements. PricewaterhouseCoopers, The Terrace, PO Box 243, Wellington 6140, New Zealand T: +64 (4) , F: +64 (4) , 17

20 A review of interim consolidated financial statements in accordance with NZ SRE 2410 is a limited assurance engagement. The auditor performs procedures, primarily consisting of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards on Auditing (New Zealand). Accordingly, we do not express an audit opinion on these interim consolidated financial statements. Independence In completing our review we followed the independence requirements of the Auditor-General, which incorporate the independence requirements of the External Reporting Board. We are independent of the Group. Our firm carries out other services for the Group in the areas of other assurance services, tax compliance services and other advisory services. The provision of these other services has not impaired our independence. In addition, certain partners and employees of our firm may deal with the Group on normal terms within the ordinary course of trading activities of NZ Post and the Group. These matters have not impaired our independence. Other than in our capacity as auditor acting on behalf of the Auditor-General, these assignments and any dealings within the ordinary course of trading activity, we have no relationship with or interests in the Group. Who we report to This report is made solely to NZ Post s Directors, as a body. Our review work has been undertaken so that we might state to NZ Post s Directors those matters which we are required to state to them in our review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Directors, as a body, for our review procedures, for this report, or for the conclusion we have formed. Michele Embling On behalf of the Auditor-General Wellington, New Zealand PricewaterhouseCoopers 18 NEW ZEALAND POST GROUP HALF YEAR REPORT 2017

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23 Directory Board of Directors (as at ) Chairman Deputy Chair Members Senior Leadership Team Chief Executive Officer General Manager, People, Culture and Communications Executive General Manager, Global Business Development General Manager, Customer Solutions and Marketing Chief Data and Technology Officer General Manager, Channels and Distribution General Counsel COO Customer Service Delivery General Manager, Customer Experience Transformation Chief Financial Officer Jane Taylor Jackie Lloyd Carol Campbell Richard Dellabarca Alan Dunn Julia Hoare Richard Leggat Richie Smith David Walsh Jo Avenell Sohail Choudry Bryan Dobson Geri Ellis Janet Selwood Malcolm Shaw Mark Stewart Brendan Thawley John van Woerkom For further information about the contents of this report, please contact: New Zealand Post Group Communications Private Bag Wellington Mail Centre Lower Hutt 5045 New Zealand Telephone: Facsimile: post.communications@nzpost.co.nz For Customer Service Inquiries, please call or customersupport@nzpost.co.nz Bankers Bank of New Zealand Limited Auditor Michele Embling assisted by PricewaterhouseCoopers, Wellington, on behalf of the Auditor-General. Registered Office Ground Floor, New Zealand Post House 7 Waterloo Quay, Wellington New Zealand 21

24 This report is printed on FSC certified paper which is Elemental Chlorine Free and sourced from sustainable forests. It has been produced under ISO environmental management systems.