South African Post Office

Agenda Opening remarks Chairperson Annual report presentation Strategy Mandate Challenges Financial performance of 2006/2007 FY Outlook for 2007/2008 FY Interim YTD September 07 results Conclusion Questions

Our Strategy

Vision & Mission

5 Key strategic themes

Customer value delivery system

Our Mandate

We deliver, whatever it takes Shareholders mandate Provision of a universal service at an affordable price and acceptable standard Reduce the cost of doing business Financial sustainability Promote growth in small and medium business sectors Promote broad based black economic empowerment Balance of business performance versus socio economic developmental objectives Corporate governance and related issues of accountability, reporting, responsibility Meeting the conditions of our license agreement ……improvement of the quality of life of our people

We deliver, whatever it takes Corporate governance Restructured and reconstituted SAPO board. Robust oversight of all functions Determining strategies Terms of reference of board committees Demarcation of roles, functions and powers of board and executives of the company Discharge of mandate of shareholder Social responsibility

Challenges

Governance Report Given the magnitude of the work involved SAPO commissioned Deloitte to undertake a corporate governance review. The report now presented is structured as follows: 1991 - 1998; the initial commercialization era 1999 - 2001; the strategic management partner era 2001 - 2004; the restructuring & transformation era 2005 – 2006 ; the repositioning era

SAPO staff numbers TBVC incorporated

Summary Corporate Governance challenges at SAPO and management related failures can be traced back to the manner in which commercialization was effected as well as the failure of the Strategic Management Partner to effect a turnaround; The shareholder mandate to the board in 2002, the promulgation and implementation of the PFMA and increased shareholder activism yielded very positive results for SAPO; Financial turnaround was also achieved when comparing SAPO’s operating loss of R865 million in 2001 to a profit of R486 million in 2006/07. The depositors’ funds have now been ring-fenced and all liabilities are adequately covered;

Summary Shareholder oversight to be enhanced to ensure that improvements gained at SAPO are maintained. This will be effected by amongst others, review of shareholder compacts and articles of association, implementation of board charters. The skills mix of the current board is also geared towards achieving shareholder mandate, continuous positive corporate governance practices, profitability as well as ensuring a positive environment for all stakeholder's including labour. Despite numerous challenges during the last 16 years, SAPO managed to achieve a remarkable transformation and financial turnaround. The good news not communicated appropriately.

We deliver, whatever it takes Revenue diversification Infrastructure investment Property IT Corporate governance Reviewed delegation of authority Procapex and Procurement committee New materiality of framework Reviewed procurement policy Reviewed our contract management Reimplementation of SAP with new processes.

2006/07 Financial results

Group portfolio

Increasing our footprint – Retail outlets

Increasing our footprint 47 new post offices 48 outlets relocated 1.9 million addresses Implementation GPS system Providing a Universal service

Revenue diversification Introduction of E-Postal solutions Renewal of motor vehicle licences Traffic fine payments CIPRO collections BEE share options Media 24 (Phutuma Nathi) BEE share options for 2007/08 Asonge Share Scheme Offer (NEF) Johannesburg metro retail bonds

Significant achievements Mail operations Mail volumes increased by 7% Worldwide postal revenue increased by 3,3% Delivery standards – 92,4% Supply chain management Procurement policies & procedures reviewed BBBEE – R626m BEE accreditations with Empowerlogic Postbank 21% growth in accounts (4,6m) 78% growth in Mzansi accounts (1,5m) 13% capital growth (R2,6b) 74% growth in Mzansi capital (R468m) Debit card functionality

Significant achievements Financial statements 5th consecutive year unqualified audit report Converted to IFRS 2005/06 FY Rated by UPU number 14 globally ito financial performance 2005/06 Financially sound balance sheet The Post Office’s annual report for the 2006/2007 financial year has won the first prize in State Entity category of the Annual Report Awards.

Financial perspective only UPU benchmarking 14 81 2005/6 101 2004/5 2003/4 114 110 119 Financial perspective only

Profit from trading operations Group R470 million 85% Post Office R468 million 51% Courier Freight Group (R7 million) loss 88% Docex R9 million 231%

* Adjusted for pension asset Financial overview Trading profit R470 million 85% P/Y R254 million Profit before tax R507 million 59% P/Y R319 million* * Adjusted for pension asset Revenue R5,079 million 9% P/Y R4,656 million Expenses R4,609 million 5% P/Y R4,402 million

Financial overview Total assets R6,867 million 21% P/Y R5,667 million NAV R1,233 million 41% P/Y R874 million Postbank deposits R2,603 million 13% P/Y R2,297 million Cash equivalents R4,580 million 39% P/Y R3,289 million

Group income statement

Courier Freight Group

Docex

Group balance sheet

Group cash flow

Trading profit margin +4% 80% growth

ROA (trading profit) +2% 40% growth

Cost to income ratio

Trading profit history (R’m) +85%

Depositors funds (R’m) +13%

Total assets history (R’m) +21%

Group cash & cash equivalents (R’m) +39%

Post Office cash & cash equivalents (R’m) +114%

Revenue / expenses

Revenue segments

Capital expenditure – R301m Property infrastructure R151m IT infrastructure R135m R15m Other capex

Subsidy

Outlook for 2007/08

Focus for 2007/08 Delivering on superior financial performance 17% improvement in trading profit Top line growth of 7% Investment in our Infrastructure – R922 million Property infrastructure - R542 million Increasing our footprint IT infrastructure and systems – R326 million People management Building a high performance organisation Skilled and motivated employees

Focus for 2007/08 Corporate governance Shareholders mandate Restructured and reconstituted SAPO board. Elimination of fraud and corruption Shareholders mandate Provision of a universal service at an affordable price and acceptable standard Financial sustainability Corporate governance and related issues of accountability, reporting, responsibility Investing and developing our employees

Outlook for 2007-08 FY (R’m) +7% +6% +17%

Capital expenditure – R892m Property infrastructure R520m IT infrastructure R326m R46m Other capex

Future capex investment (R’m)

Capex summary

Projected Cash flow incl. borrowings

Interim results

Financial overview Trading profit R284 million 40% Net profit 20% Total assets R7 211 million 5% Cash equivalents R4 972 million 9%

Subsidy YTD

Achievements 932 495 addresses rolled out 15 new post offices 11 post offices upgraded Delivery standards – 90% Proportion conversion of temp staff in Retail to permanent staff Financial sustainability

Conclusion

Conclusion Technology, customer needs and regulatory changes continue to create a challenging environment Service delivery and universal service to remain key areas of focus Revenue diversification to be embarked on as a matter of strategic priority Strengthen internal capability & competence Investment in Property and IT infrastructure Brand positioning & creation of sustainable growth and value

End of Presentation