Post Office results for the six months ended 29 September 2013

- Interim results follow launch of strategic plan, 'Securing the Future'
- Strategy of modernization, growth and customer excellence key to accelerating growth
- Financial Services and Telecoms revenue increases year on year
- Challenging six months but cautious optimism

The Post Office has today announced interim results for the six months up until 29 September. This follows the announcement last week of ‘Securing the Future’, the strategy to build a commercially sustainable, multi-channel business with a strong social purpose by 2020. The strategy outlined plans to secure the future of the Post Office network through a modernization programme which meets customers’ changing needs, and also maintains the number of branches at over 11,500.

Paula Vennells, Chief Executive Officer said “Like many high street retailers, this has been a challenging six months for the Post Office but we are cautiously optimistic that the economic climate is improving and we are well positioned to take advantage of the increased levels of consumer confidence.

“It is now eighteen months since the Post Office began operating independently of Royal Mail. The Post Office is going through a period of great change and innovation. We are resolute in our determination to build a flourishing modern business but one that remains the bedrock of communities across the country. Since the start of 2012, 1,400 branches have been modernized offering a new customer experience with extended opening hours totaling over 34,000 extra hours a week.”

Ms Vennells continued: “We are committed to delivering a financially sustainable Post Office. This will be achieved through the expansion of our four product groups, Mails and Retail, Telecoms, Government Services and Financial Services. In early May 2013, we launched the successful pilot of three current accounts and increased the number of Mortgage Specialists in our branches. By building on these areas and introducing further innovation the Post Office is becoming established as a recognized and trusted alternative to the major UK banks.”

Financial Performance:

Revenue decreased from £604 million in the first six months of 2012-13 to £583 million in the six months to 29 September 2013. During this period the Network Subsidy Payment reduced from £103 million to £100 million, consistent with the Government Funding Agreement, and this will reduce further in 2014/15.

Other operating costs have decreased by £15 million to £422 million mainly due to lower sales volumes. Operating profit before exceptional items (including the Network Subsidy Payment) has fallen from £61 million to £53 million.

Key performance figures – six months ended 29 September 2013

• Turnover decreased from £501 million in the first six months of the prior year to £483 million this half year with encouraging growth in the Financial Services and Telecoms businesses more than offset by decline in the Mails and Retail and Government Services businesses
• Revenue declined by £21 million, including a £3 million reduction in the Network Subsidy Payment
• Financial Services revenue in the first half of the year increased by £1 million to £139 million (2012 - £138 million)
• Personal Finance revenue rose by 23% driven by strong growth in savings products (particularly Growth Bonds and Reward Saver) and the growth of the new mortgage products
• Telecoms revenue increased by £2 million to £65 million (2012 - £63 million) following the introduction of more attractive HomePhone and Broadband packages last year
• Government Services revenue declined by £9 million due to a lower volume and rate per transaction for DVLA motoring work and a reduction in the number of active Post Office Card Accounts (POCA)
• Mails and Retail revenue decreased by £12 million driven primarily by lower consumer parcel volumes and lower stamp volumes. In addition retail revenue dropped compared to last half year as the comparative figures includes revenue from collectibles relating to the Diamond Jubilee and Olympics memorabilia. There was also a fall in the sales of lottery tickets.

Overview and the future

Although the last six months have highlighted a number of challenges, we remain confident about the future. Our strategy of modernization, growth and customer excellence is key to achieving this goal. On 27 November 2013 the Government announced an additional funding agreement for the Post Office, providing funding of £640 million for 2015–16 to 2017–18.

We have also continued to work with the Stakeholders Forum to define our public purpose. This work has seen us engage the public through a major research programme, the results of which we expect to announce next year.

We continue to broaden our new services such as Click and Collect and Drop and Go and will look at other initiatives to ensure we are equipped to offer our customers access to the services they need.

We remain confident that our strong relationship with Royal Mail, underpinned by a mutually beneficial contractual agreement, provides a strong foundation for many years to come. We are combining this with an ambitious strategy in other areas which will ensure a thriving Post Office business in the years ahead.

Basis of preparation

The information shown in this publication is unaudited and does not constitute statutory financial statements. These interim condensed consolidated financial statements for the half year ended 29 September 2013 have been prepared in accordance with IAS 34, ‘Interim Financial Reporting’ as adopted by the European Union. This report should be read in conjunction with the Group’s Annual Report and Financial Statements 2012-13, which have been prepared in accordance with IFRSs as adopted by the European Union.

Cautionary statement

Where this trading update contains forward looking statements, these are made by the Director in good faith based on the information available to them at the time of their approval of this report. This statement should be treated with appropriate caution due to the inherent uncertainties underlying any such forward looking information.

Registers Office & Corporate Website

Post Office Limited, 148 Old Street, London, EC1V 9HQ. Registered No: 2154540

www.postoffice.co.uk

Contact- Nina Arnott