1. South African Post Office

2. 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

3. Our Strategy

4. Vision & Mission

5. 5 Key strategic themes

6. Customer value delivery system

7. Our Mandate

8. 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

9. 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

10. Challenges

11. 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:
; the initial commercialization era
; the strategic management partner era
; the restructuring & transformation era
2005 – 2006 ; the repositioning era

12. SAPO staff numbers
TBVC incorporated

13. 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;

14. 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.

15. 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.

16. 2006/07
Financial results

17. Group portfolio

18. Increasing our footprint – Retail outlets

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

20. 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

21. 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

22. 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.

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

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

25. * 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

26. 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

27. Group income statement

28. Courier Freight Group

29. Docex

30. Group balance sheet

31. Group cash flow

32. Trading profit margin
+4%
80% growth

33. ROA (trading profit)
+2%
40% growth

34. Cost to income ratio

35. Trading profit history (R’m)
+85%

36. Depositors funds (R’m)
+13%

37. Total assets history (R’m)
+21%

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

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

40. Revenue / expenses

41. Revenue segments

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

43. Subsidy

44. Outlook for 2007/08

45. 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

46. 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

47. Outlook for FY (R’m)
+7%
+6%
+17%

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

49. Future capex investment (R’m)

50. Capex summary

51. Projected Cash flow incl. borrowings

52. Interim results

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

54. Subsidy YTD

55. 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

56. Conclusion

57. 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

58. End of Presentation