Preliminary Results Presentation May 2011

1. Preliminary Results Presentation May 2011 1

2. Agenda • Introduction Guy Buswell • Financials Steven Glew • Business Review Guy Buswell • Current Trading and Outlook Guy Buswell • Questions

3. Introduction • Revenues up across Mail, Parcels and Courier businesses despite a challenging year • Margins impacted by: • subdued b2b volumes • change in mix • adverse December weather • Strategy focused on innovation and cost reduction • New products and services making good progress • Balance sheet remains strong, final dividend maintained

4. Steven GlewGroup Finance Director

5. Summarised Income Statement

6. Divisional Summary Year to 31 March

7. Mail Year to 31 March Continued revenue growth but pressure on margin

8. Parcels Year to 31 March Decline in margin largely weather and mix related

9. Courier Year to 31 March Good revenue growth with margin returning to more normal levels

10. Pallets Year to 31 March Strong cost management more than offset revenue decline

11. Cash Flow Further strong cash inflow from operations

12. Capital Expenditure Continued investment in network and systems

13. Balance Sheet At 31 March

14. Net cash and debtors 17.4 15.7 9.5 Net cash £m 6.2 Days Sales Outstanding -0.1 2007 2008 2009 2010 2011 DSO: 41.1 32.9

15. Dividend Year to 31 March Dividend maintained – cover appropriate

16. Guy BuswellChief Executive Officer

17. Strategy • Continuing to enhance our market-leading, low cost network • Driving down cost, increasing efficiency and investing in IT infrastructure • Introducing innovative new products and services to expand the markets available to us and increase our share of those markets All underpins our position as a major player in our chosen markets

18. Mail market – regulation • Royal Mail privatisation Bill largely completed passage through Parliament • Expected to become an Act by the Summer • Postcomm → Ofcom • New universal service bill amendment – restricts end-to-end competition

19. Mail market – pricing review • Price increases to all mail users, effective May 2011 • Retail prices up c15% • Access prices up c20% • Access headroom reduced – no real impact • We remain highly competitive

20. Mail business well placed to evolve • Good levels of new business and further volumes from existing relationships during the year • Successfully increasing our range of customers • Competitive landscape developing • Working with our customers and Royal Mail to develop new products and services • Innovation remains key to expanding our available market

21. Average daily volumes in March 2011 were more than double those a year ago • Building significant revenues, with over 4,000 customers • Effective tool for a wide range of customers, makes it a very strong platform for new product development • Good pipeline of new opportunities imail items per month May 2009 Apr 2011

22. c£1.5bn potential market • Fastest growing sector of the postal market driven by online shopping • Steady start, now handling up to 20,000 packets per night • Next phase to widen service offering to attract SME market

23. Parcels performance & backdrop • Revenues up, but margins impacted by: • subdued underlying volumes • change in mix • snow disruption during peak trading period • Market linked to general economic conditions • Pricing environment remains competitive • e-commerce becoming a key driver

24. Parcels well placed • Excellent service levels and strong brand leading to new customer wins • Bringing forward plans to reduce fixed cost base • Investment in IT infrastructure • New internet platform • Innovation – targeting a wide range of customers

25. Parcels: Retail Logistics • Over £1,000m* market - a good growth opportunity for the business • Making progress with a number of major retailers now trading with us • Scope to extend the range of services we provide to key customers * UK Mail estimate

26. Launch of ipostparcels.com this summer to offer online parcel delivery directly to consumers • Potential market of over £300m* and forecast to continue growing at c10% per annum • Designed to be highly accessible and easy to use • Focused on gaining prominent web presence * UK Mail estimate

27. Courier & Pallets • Courier: • Continued growth in revenues • Margins impacted by cost of establishing extended capability within the wider group • Revitalised sales management structure • Focus on national contracts and high service levels • Adds to our ability to offer a fully integrated proposition and supports product development across the group • Pallets: • Small revenue decline reflects economic conditions • Margin and profit enhancement through improved efficiency and reduced costs • Focused on opportunities in sectors best placed to benefit as economy recovers

28. Current trading & outlook • Our plans based on the assumption that economic conditions will remain tough throughout the current financial year • Continued focus on cost reduction and innovation to drive profitable revenue growth • Opportunities remain in a challenging Mail market • Parcels business in an increasingly strong competitive position • Trading in the early weeks in line with expectations

29. Summary • Strong presence in all of our chosen markets • Unrivalled efficiency within our integrated low-cost network • Product innovation – increasing available markets and our share of those markets • Strong balance sheet and cash generation • Dividend maintained

30. Disclaimer statement • This presentation contains certain forward-looking statements, which have been made by the directors in good faith based on the information available to them up to the time of the approval of this presentation and such information should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

31. Mail Price Increase Revenue & Margin Impact Appendix 1 Example: